U.S. SECURITIES AND EXCHANGE COMMISSION

                           WASHINGTON, D. C. 20549

                                 FORM 10-KSB

            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE ACT OF 1934

                For the fiscal year ended September 30, 2001

                       Commission File No.: 000-27997

                    WESTBOROUGH FINANCIAL SERVICES, INC.
               (Name of small business issuer in its charter)

            Massachusetts                            04-3504121
   (State or other jurisdiction of                (I.R.S. Employer
   incorporation or organization)                Identification No.)

            100 E. Main Street, Westborough, Massachusetts 01581
                  (Address of principal executive offices)

                               (508) 366-4111
                         (Issuer's Telephone Number)

    Securities registered pursuant to section 12(g) of the Exchange Act:

                             Title of each class
                   Common Stock, par value $0.01 per share

      Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.  Yes   X    No
              -----     -----

      Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this Form 10-KSB.  [X]

      The revenues for the issuer's fiscal year ended September 30, 2001
are $15,679,000.

      State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which
the common equity was sold, as of a specified date within the last 60 days.
On December 11, 2001: $8,324,841.

      State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.  The Company
had 1,581,374 shares outstanding as of December 28, 2001.

                     DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the Annual Report to Shareholders for the year ended
September 30, 2001 are incorporated by reference into Part II of this Form
10-KSB.

      Portions of the Proxy Statement for the 2002 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Form 10-
KSB.

Transitional Small Business Disclosure Format (check one): Yes       No   X
                                                               -----    -----


<PAGE>


                              TABLE OF CONTENTS

                                                                  Page
                                                                  ----

FORWARD LOOKING STATEMENTS                                         (i)

PART I                                                              1
ITEM 1.  BUSINESS                                                   1
ITEM 2.  DESCRIPTION OF PROPERTY                                   38
ITEM 3.  LEGAL PROCEEDINGS                                         39
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS       39

PART II                                                            39
ITEM 5.  MARKET FOR THE COMPANY COMMON STOCK AND RELATED
         STOCKHOLDER MATTERS                                       39
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS                       39
ITEM 7.  FINANCIAL STATEMENTS                                      39
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE                       40

PART III                                                           40
ITEM 9.  DIRECTORS AND PRINCIPAL OFFICERS                          40
ITEM 10. EXECUTIVE COMPENSATION                                    40
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT                                            40
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS            40
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K                          40

SIGNATURES                                                         42


<PAGE>


Forward Looking Statements

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

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

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

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


<PAGE>  i


PART I

ITEM 1.     BUSINESS

General

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

      The Company's principal business is its investment in the Bank.  The
Bank is headquartered in Westborough, Massachusetts and its deposits are
insured by the Federal Deposit Insurance Corporation (the "FDIC") up to the
applicable legal limits and by the Depositors Insurance Fund.  As a
Massachusetts stock savings bank, the Bank is examined by the Division of
Banks for the Commonwealth of Massachusetts (the "Division") and the FDIC.
The Bank currently serves primarily in the towns of Westborough,
Northborough and Shrewsbury, Massachusetts.  The Bank has been, and intends
to continue to be, a community-oriented financial institution offering a
variety of financial services to meet the needs of the communities it
serves. The Bank attracts retail deposits from the general public and
invests those funds primarily in loans secured by first mortgages on owner-
occupied, one- to four-family residences.

      Unless otherwise indicated, the information presented in this Annual
Report on Form 10-KSB represents the consolidated activity of the Company
and its subsidiary for the fiscal year ended September 30, 2001.

      At September 30, 2001, total assets were $225.7 million, deposits
were $185.1 million and total stockholders' equity was $26.9 million.

Market Area

      The Bank is a community- and customer-oriented retail bank offering
traditional deposit products, residential and commercial real estate
mortgage loans and, to a lesser extent, consumer and commercial loans. The
Bank operates five full service-banking offices located in the towns of
Westborough, Northborough and Shrewsbury, Massachusetts.  The Bank also
operates a non-public, self-contained office at the "Willows," a retirement
community located in Westborough.  Together, these offices serve the Bank's
"primary market area" consisting of Westborough, Northborough, Shrewsbury,
Grafton, Southborough and Hopkinton, Massachusetts. The Bank's deposits are
gathered from the general public in these towns and the surrounding
communities.  The Bank's lending activities are concentrated primarily in
the towns where it has offices, as well as in the town of Grafton,
Massachusetts.  These towns are located in east central Massachusetts, near
the central Route 495 belt.

      The Bank's market area has grown steadily to achieve a blend of
industry, office parks and residences.  The town of Westborough is
approximately 12 miles east of Worcester and 29 miles west of Boston,
located at the junction of major interstate highways constructed in the
1950s and 1960s.  The convenient access provided by Routes 20, 9, I-90 and
I-495 has contributed to the diverse economic base consisting of a retail
and commercial section, and a high-tech manufacturing section.

      Among the largest industries in the Bank's market area are financial
services, health services, high tech and utilities.

      Public transportation within the Bank's market area is expanding with
the addition of two new mass transit stations.  The Massachusetts Bay
Transportation Authority recently completed construction of a station in
Grafton and has plans to construct a station in Westborough.  These
stations will provide


<PAGE>  1


direct access to Worcester and Boston for residents in the Bank's market
area.  Since 1980, the Bank's primary market area has experienced increases
in both population and households as individuals and families moved from
urban areas surrounding Boston to more outlying areas with lower cost and
newer housing stock.

      The Bank anticipates that its future growth opportunities will be
influenced by the growth and stability of the statewide and regional
economies, other demographic population trends and the competitive
environment. The Bank believes that it has developed lending products and
marketing strategies to address the diverse credit-related needs of the
residents in its market area.

Business Strategy

      Historically, 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.  At September 30, 2001,  80.6% of the Bank's loan portfolio
consisted of one- to four-family residential first mortgage loans, with
relatively few commercial real estate or commercial loans in its portfolio.
In recent years, the Bank has adopted a growth-oriented strategy that has
focused on expanding its product lines and services, providing expanded
delivery systems for its customers and extending its branch network.  The
Bank believes that this business strategy is best for its long-term success
and viability, and complements its existing commitment to high quality
customer service.  In connection with the Bank's overall growth strategy,
it seeks to:

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

      In order to create a platform for the accomplishment of the Bank's
goals, the Bank has begun to make significant investments in its physical
infrastructure and human and technological resources.  In particular, the
Bank is expanding and renovating its main office.  The total cost of this
expansion and renovation is estimated to be approximately $2.2 million and
it is scheduled to be completed in February 2002.  The Bank also has a
deposit on land in Shrewsbury for the relocation of its current Maple
Avenue branch in that town.  No formal estimates or contracts have been
entered into for this branch relocation.  Such investments have been and,
in the future, will be necessary to ensure that adequate resources are in
place to offer increased products and services.  As a result, for a period
of time, the Bank expects operating expenses to increase and net income to
be adversely impacted.  The Bank believes, however, that its long-term
profitability should improve as it realizes the benefits of diversified
product lines and market share growth.


<PAGE>  2


Lending Activities

      General.  The Bank originates loans through its offices located in
Westborough, Massachusetts and the surrounding communities. The principal
lending activities of the Bank are the origination and purchase of first
mortgage loans for the purpose of purchasing or refinancing owner-occupied,
one- to four-family residential properties.  To a lesser extent, the Bank
also originates commercial real estate loans, consumer loans and commercial
loans.

      The following table sets forth the composition of the Bank's loan
portfolio in dollar amounts and percentages at the dates indicated.

<TABLE>
<CAPTION>

                                                                        At September 30,
                             ------------------------------------------------------------------------------------------------------
                                    2001                 2000                 1999                 1998                 1997
                             ------------------   ------------------   ------------------   ------------------   ------------------
                                       Percent              Percent              Percent              Percent              Percent
                              Amount   of Total    Amount   of Total    Amount   of Total    Amount   of Total    Amount   of Total
                             ------------------------------------------------------------------------------------------------------
                                                                     (dollars in thousands)


                          <c>        <c>       <c>        <c>       <c>        <c>        <c>       <c>        <c>       <c>
Real estate loans:
  Fixed rate mortgages       $ 53,431    39.42%   $ 47,964    41.68%   $52,674     56.12%    $47,239    55.81%    $29,450    40.64%
  Variable rate mortgages      55,859    41.21%     52,233    45.38%    30,485     32.48%     27,384    32.36%     33,812    46.66%
  Commercial                   13,149     9.70%      6,309     5.48%     3,198      3.41%      2,743     3.24%      2,915     4.02%
  Home equity lines of
   credit                       6,931     5.11%      4,027     3.50%     3,598      3.83%      3,918     4.63%      3,859     5.33%
                             ------------------------------------------------------------------------------------------------------
    Total real estate loans   129,370    95.44%    110,533    96.04%    89,955     95.84%     81,284    96.04%     70,036    96.65%
                             ------------------------------------------------------------------------------------------------------

Consumer loans:
  Personal                      1,196     0.88%        911     0.79%       571      0.61%        858     1.01%      1,069     1.48%
  Deposit secured                 652     0.48%        676     0.59%       651      0.69%        676     0.80%        557     0.77%
  Home improvement                759     0.56%        118     0.10%       199      0.21%        132     0.16%         73     0.10%
                             ------------------------------------------------------------------------------------------------------
    Total consumer loans        2,607     1.92%      1,705     1.48%     1,421      1.51%      1,666     1.97%      1,699     2.35%
                             ------------------------------------------------------------------------------------------------------

Commercial loans:
  Commercial lines of
   credit                       1,783     1.32%      1,403     1.22%     1,029      1.10%        599     0.71%        293     0.40%
  Commercial installment        1,795     1.32%      1,450     1.26%     1,457      1.55%      1,087     1.28%        437     0.60%
                             ------------------------------------------------------------------------------------------------------
    Total commercial loans      3,578     2.64%      2,853     2.48%     2,486      2.65%      1,686     1.99%        730     1.00%
                             ------------------------------------------------------------------------------------------------------
Total loans                   135,555   100.00%    115,091   100.00%    93,862    100.00%     84,636   100.00%     72,465   100.00%
                                        ======               ======               ======               ======               ======
Adjusted by:
  Due to borrowers on
   incomplete loans              (480)                (543)             (1,013)               (1,570)              (1,177)
  Net deferred loan costs         136                  120                 122                   109                   78
  Net premium (discount)
   on purchased loans             662                 (235)                  0                     0                    0
  Allowance for loan loss        (916)                (874)               (879)                 (827)                (786)
                             --------             --------             -------               -------              -------
  Net loans                  $134,957             $113,559             $92,092               $82,348              $70,580
                             ========             ========             =======               =======              =======
</TABLE>


<PAGE>  3


      Residential Mortgage Loans.  The Bank's primary lending emphasis is
the origination of first mortgage loans secured by one- to four-family
properties that serve as the primary or secondary residence of the owner.
As of September 30, 2001, loans on one- to four-family residential
properties accounted for 80.6% of the Bank's total loan portfolio.

      Most of the Bank's loan originations are from existing or past
customers, members of the Bank's local communities or referrals from local
real estate agents, attorneys and builders.  The Bank believes that its
branch network, particularly as it expands, is a significant source of new
loan generation.

      The Bank currently offers loans that conform to underwriting
standards specified by Fannie Mae ("conforming loans") and also originates
non-conforming loans, as described below.  These loans may be fixed-rate
one- to four-family mortgage loans or adjustable-rate one- to four-family
mortgage loans with maturities of between 5 and 30 years.  The non-
conforming loans generally follow Fannie Mae guidelines except that the
loan amount exceeds Fannie Mae guidelines' maximum limit of $275,000. The
average size of the Bank's first mortgage loans originated during the year
ended September 30, 2001 and the year ended September 30, 2000 was $187,000
and $181,000, respectively.  The average size of the Bank's first mortgage
loans was $108,000  at September 30, 2001.  The Bank is an approved
seller/servicer for Fannie Mae.  From time to time, the Bank has sold loans
in the secondary market although such sales have been infrequent.  The
loans that the Bank sells are all fixed-rate mortgage loans with terms of
30 years.  Such loans, however, continue to be serviced by the Bank.

      The Bank's originations of first mortgage loans amounted to $20.9
million in fiscal year 2001, $17.2 million in fiscal year 2000 and $31.3
million in fiscal year 1999.  A significant number of the Bank's first
mortgage loan originations have been the result of refinancing of its
existing loans due to the relatively low interest rate levels over the past
three years.

      The Bank offers a variety of Adjustable Rate Mortgages ("ARMs") and
fixed-rate one- to four-family mortgage loans with maximum loan-to-value
ratios that depend on the type of property and the size of loan involved.
The loan-to-value ratio is the loan amount divided by the appraised value
of the property.  The loan-to-value ratio is a measure commonly used by
financial institutions to determine exposure to risk.  The majority of the
Bank's loans on owner-occupied one- to four-family homes are originated
with a loan-to-value ratio of 80% or less.  For first-time home buyers, the
Bank has made loans on owner-occupied one- to four-family homes with a
loan-to-value ratio of up to 95%.  In such cases, the borrower is required
to obtain mortgage insurance.

      The Bank currently offers fixed-rate mortgage loans with terms of 15,
20, 25 and 30 years secured by one- to four-family residences.  The Bank
prices its interest rates on fixed-rate loans to be competitive in light of
market conditions.

      The Bank currently offers a variety of ARM loans secured by one- to
four-family residential properties that initially adjust after one year,
three years, five years, seven years, or ten years.  After the initial
adjustment period, ARM loans adjust on an annual basis.  The ARM loans that
the Bank currently originates have a maximum 30 year amortization period
and are subject to the same loan-to-value ratios applicable to fixed-rate
mortgage loans described above.  The interest rates on ARM loans fluctuate
based upon a fixed spread above the average yield on United States treasury
securities and generally are subject to a maximum increase of 2% per
adjustment period and a limitation on the aggregate adjustment of 6% over
the life of the loan.  The Bank originated $13.6 million and $14.0 million
of one- to four-family ARM loans in the years ended September 30, 2001 and
2000, respectively.  During the year ended September 30, 2001, the Bank
also purchased $5.7 million residential adjustable-rate loans from a local
bank.  These loans are being serviced by the seller and are located within
the Bank's market area. At September 30, 2001,  41.2% of the Bank's total
loans consisted of ARM loans, from 45.4% at September 30, 2000.

      The volume and types of ARM loans the Bank originates or purchases
have been affected by the level of market interest rates, competition,
consumer preferences and the availability of funds. Although the Bank will
continue to offer ARM loans, it cannot guarantee that it will be able to
originate or purchase


<PAGE>  4


a sufficient volume of ARM loans to increase or maintain the proportion
that these loans bear to its total loans.

      The retention of ARM loans in the Bank's loan portfolio helps reduce
its exposure to increases in interest rates.  However, ARM loans can pose
credit risks different from the risks inherent in fixed-rate loans,
primarily because as interest rates rise, the underlying payments of the
borrower may rise.  This increases the potential for default.

      The Bank's home equity lines of credit, which totaled $6.9 million,
or 5.1% of total loans at September 30, 2001, are adjustable-rate loans
secured by a first or second mortgage on owner-occupied one- to four-family
residences located in the Bank's market area.  Interest rates on home
equity credit lines are based upon the "prime rate" as published in the
"Money Rates" section of the Wall Street Journal (the "index") with a
minimum monthly principal payment of one-half of 1% of the outstanding
principal balance of the loan.  The maximum credit line available is equal
to (i) the lesser of $250,000 or 80% of the Bank's appraisal of the
property, or (ii) 50% of the tax assessment on the property. In each case,
these amounts are reduced by the first mortgage balance.  Such loans also
have a maximum term of 15 years.  The underwriting standards applicable to
these loans generally are the same as one- to four-family first mortgage
loans, except that the combined loan-to-value ratio, including the balance
of the first mortgage, cannot exceed 80% of the appraised value of the
property.

      In conjunction with the Bank's residential mortgage lending, the Bank
offers construction loans to the future occupants of single family homes.
At September 30, 2001, $1.3 million of the Bank's total loan portfolio
consisted of gross residential construction loans.  Unadvanced funds on
these loans amounted to $463 thousand at September 30, 2001.  These loans
typically have a term of twelve months and are structured to become permanent
loans upon the completion of construction.  All such loans are secured by
first liens on the property and are subject to a maximum loan-to-value ratio
of 80%, which is based upon the anticipated value of the property.  During
the construction period, the interest rate for construction loans to
individuals is equal to the index.  Loans involving construction financing
present a greater risk than loans for the purchase of existing homes since
collateral values and construction costs can only be estimated at the time
the loan is approved.

      Commercial Real Estate Loans.  Origination of loans secured by
commercial real estate is a growing area of lending for the Bank.  At
September 30, 2001, commercial real estate mortgage loans totaled $13.1
million, or 9.7% of total loans.  These loans are generally secured by
office buildings, condominiums, retail establishments and churches located
within the Bank's market area.

      The Bank's commercial real estate loans are offered on a fixed- and
adjustable-rate basis.  Typical terms for such loans provide for a maximum
seven-year re-pricing term with a 20 year amortization and a balloon
payment in five to seven years, and a market interest rate, based upon the
index, as adjusted to reflect inherent risk factors.  Loans on commercial
properties are also subject to a maximum loan-to-value ratio of 80% for the
acquisition of the property and 75% for refinancing of the property.

      Pursuant to the Bank's underwriting standards, a number of factors
are considered before a commercial real estate loan is made.  The Bank
evaluates qualifications and financial condition of the borrower, including
credit history, profitability and managerial experience, as well as the
appraised value and condition of the underlying property.  Factors that the
Bank considers in evaluating the underlying property include the net
operating income of the mortgaged property before debt service and
depreciation, the debt service coverage ratio (the ratio of operating
income to debt service) and, as noted above, the ratio of the loan amount
to the appraised value of the property.

      Loans secured by commercial real estate properties are generally
larger and involve a greater degree of credit risk than one- to four-family
residential mortgage loans.  Such loans typically involve large balances to
single borrowers or groups of related borrowers.  Because payments on loans
secured by commercial real estate properties are often dependent on the
successful operation or management of the properties, repayment of such
loans may be subject to adverse conditions in the real estate market or


<PAGE>  5


the economy.  If the cash flow from the project decreases, or if leases are
not obtained or renewed, the borrower's ability to repay the loan may be
impaired.

      The Bank's real estate loan portfolio also includes construction
loans to builders and developers of residential properties within the
Bank's market area.  At September 30, 2001, $484 thousand consisted of
gross commercial construction loans.  Unadvanced funds on these loans
amounted to approximately $17 thousand at September 30, 2001.

      Construction loans to builders typically are in amounts equal to 70%
of the completed appraised value.  Construction loans generally have up to
twelve months with a fixed interest rate based upon the index plus a
margin.  In addition to securing the loan with the property under
construction, the Bank generally obtains personal guarantees from the
borrower.  The proceeds of such loans are disbursed after certification by
in-house personnel that specified stages of construction have been
completed.

      Construction lending is generally considered to carry a higher level
of risk than permanent mortgage financing because of the uncertainty of the
value of the collateral upon completion.  Repayment of such loans is also
dependent upon the successful completion of the project and can be
adversely affected by market conditions and other factors not within the
control of the Bank or the borrower.  The Bank seeks to control such risks
by tying the amount of the loan advanced to a predetermined construction
schedule, with appropriate inspections by local authorities, in order to
ensure that loan proceeds are applied appropriately.

      Consumer Loans.  At September 30, 2001, $2.6 million, or 1.9 % of the
Bank's total loans, consisted of consumer loans such as personal, deposit
secured and fixed-rate home improvement loans.  Consumer loans generally
have shorter terms to maturity, which reduces the Bank's exposure to
changes in interest rates.  Consumer loans also carry higher rates of
interest than do one- to four-family residential mortgage loans.  In
addition, the Bank believes that offering consumer loan products helps to
expand and create stronger ties to the Bank's existing customer base by
increasing the number of customer relationships and providing cross-
marketing opportunities.

      The Bank's personal loans consist of unsecured loans to individuals
and secured loans for the purchase of new and used automobiles.  The Bank's
unsecured loans have a maximum term of 48 months. The terms of the Bank's
automobile loans generally are determined by the age and condition of the
vehicle.  At September 30, 2001, the Bank's personal loans totaled $1.2
million, or 0.9% of total loans.

      The Bank also makes loans secured by deposit accounts up to 90% of
the amount of the depositor's savings account balance.  The rate for such
loans is 2.0% higher than the rate paid on regular savings accounts and
3.0% higher than the rate paid on term deposits.  Deposit secured loans
totaled $0.7 million, or  0.5% of total loans at September 30, 2001.

      The Bank offers fixed-rate home improvement loans in amounts equal to
that available for home equity credit line loans as discussed above.  These
loans are secured by owner-occupied one- to four-family residences for
terms of up to 10 years.  At September 30, 2001, these loans totaled $0.8
million, or  0.6% of total loans.  Interest rates on fixed-rate home
improvement loans are periodically set by the Bank's Loan Committee,
consisting of the Bank's President, Treasurer and a Senior Loan Officer,
after consultation with the Executive Committee and are based on market
conditions.  The underwriting terms and procedures applicable to these
loans are substantially the same as for the Bank's home equity credit line
loans.

      Commercial Loans.  The Bank recently has made a commitment to small
business lending by developing certain products and services for the small-
and medium-sized businesses located in the Bank's market area.  Such
services are designed to give business owners borrowing opportunities for,
among other things, modernization, inventory, equipment, consolidation and
working capital.  In addition, the Bank has tailored certain products and
services, such as its business checking accounts and treasury and tax loan
service, to better serve the needs of local businesses.  The Bank also is
an approved lender of the Small Business Administration.  At September 30,
2001, $3.6 million, or 2.6%, of the Bank's total


<PAGE>  6


loans consisted of commercial loans.  The Bank expects that commercial
loans will comprise a growing portion of its total loan portfolio in the
future.

      Commercial loans generally are limited to terms of five years or
less.  Substantially all commercial loans have variable interest rates tied
to the prime rate.  Whenever possible, the Bank collateralizes these loans
with a lien on business assets and equipment and the personal guarantees of
the borrower's principal officers (a lien may also be placed on one's
primary residence).

      The Bank's commercial services are administered by the Bank's loan
department.  The Bank has an experienced commercial loan officer with
considerable commercial lending expertise, including many years of banking
experience in Massachusetts and personal ties to Westborough.  The Bank
also intends to add additional qualified employees as market conditions
warrant.  Assisting the commercial loan officer is a commercial loan
administrator and a commercial loan credit analyst.

      Commercial loans generally are considered to involve a higher degree
of risk than residential mortgage loans because the primary collateral may
be in the form of intangible assets and/or inventory subject to market
obsolescence.  Commercial loans also may involve relatively large loan
balances to single borrowers or groups of related borrowers, with the
repayment of such loans typically dependent on the successful operation and
income stream of the borrower.  Such risks can be significantly affected by
economic conditions.  In addition, commercial lending ordinarily requires
substantially greater oversight efforts compared to residential real estate
lending.  To minimize these risks, the Bank conducts periodic reviews of
the commercial loan portfolio to ensure adherence to underwriting standards
and policy requirements.

      Origination of Loans.  The Bank's lending activities are conducted
through its main and branch offices.  The Bank's ability to originate loans
is dependent upon the relative customer demand for fixed-rate or
adjustable-rate mortgage loans, which is affected by the current and
expected future levels of interest rates.


<PAGE>  7


      The following table sets forth information with respect to
originations, sales of loans and principal payments for the periods
indicated.

<TABLE>
<CAPTION>

                                                           For the Year Ended September 30,
                                               --------------------------------------------------------
                                                 2001        2000        1999        1998        1997
                                               --------------------------------------------------------
                                                                    (In thousands)


                                            <c>         <c>         <c>         <c>         <c>
Loans, net:

Balance outstanding beginning of period        $113,559    $ 92,092    $ 82,348    $ 70,580    $ 65,243
                                               --------------------------------------------------------

Originations and Purchased Loans:
  Mortgage loans:
    Residential                                  20,892      17,194      31,280      32,346      25,928
    Commercial                                    7,023       4,453       1,583         476       3,217
    Home equity lines of credit                   7,326       2,611       3,198       3,397       3,187
                                               --------------------------------------------------------
      Total mortgage originations                35,241      24,258      36,061      36,219      32,332
  Commercial loans                                5,085       2,705       1,987       1,438         865
  Consumer loans                                  1,956       3,382       1,825       1,275         904
                                               --------------------------------------------------------
      Total originations                         42,282      30,345      39,873      38,932      34,101
                                               --------------------------------------------------------

  Purchased loans                                 9,484      12,791           0           0           0
                                               --------------------------------------------------------

Less:
  Principal repayments, unadvanced
   funds and other, net                         (30,326)    (21,674)    (30,077)    (26,780)    (28,548)
  Sale of mortgage loans, principal balance           0           0           0        (269)       (120)
  Provision for loan losses                         (48)          0         (45)        (39)        (96)
  Net loan charge-off (recoveries)                    6           5          (7)         (2)          0
  Transfers to foreclosed real estate                 0           0           0         (74)          0
      Total deductions                          (30,368)    (21,669)    (30,129)    (27,164)    (28,764)
                                               --------------------------------------------------------
  Net loan activity                              21,398      21,467       9,744      11,768       5,337
                                               --------------------------------------------------------
      Loans, net, end of period                $134,957    $113,559    $ 92,092    $ 82,348    $ 70,580
                                               ========================================================
</TABLE>


<PAGE>  8



      The following table presents, as of September 30, 2001, the dollar
amount of all loans due after September 30, 2002, and whether such loans
have fixed or adjustable interest rates.

<TABLE>
<CAPTION>

                                  Due After September 30, 2002
                               ---------------------------------
                                Fixed     Adjustable     Total
                               ---------------------------------
                                        (In thousands)


                            <c>         <c>          <c>
Fixed rate mortgages           $52,721     $     0      $ 52,721
Variable rate mortgages              0      46,533        46,533
Commercial mortgage loans        3,782         970         4,752
Home equity lines of credit        157           0           157
Consumer loans                   1,702           0         1,702
Commercial loans                 1,143           0         1,143
                               ---------------------------------
      Total loans              $59,505     $47,503      $107,008
                               =================================
</TABLE>


<PAGE>  9


      Loan Commitments.  The Bank generally makes loan commitments to
borrowers not exceeding 45 days.  At September 30, 2001, the Bank had $4.5
million in loan commitments outstanding, primarily for the origination of
one- to four-family residential real estate loans, commercial loans and
commercial real estate loans.  Unadvanced funds on home equity lines of
credit and commercial lines of credit at September 30, 2001 represented
$8.3 million and $1.9 million, respectively.

      Loan Solicitation.  Loan originations are derived from a number of
sources, including the Bank's existing customers, referrals, realtors,
advertising and "walk-in" customers at the Bank's offices.

      Loan Administration.  The Bank's lending policies provide that the
Bank's Loan Committee has authority to approve one- to four-family mortgage
loans in amounts up to $500,000.  One- to four-family mortgage loans in
excess of $500,000 require the approval of the Bank's Executive Committee.
Commercial real estate loans in amounts up to $850,000 may be approved by
the Loan Committee.  All other commercial real estate loans must be
approved by the Executive Committee.  Commercial and consumer loans in
amounts up to $150,000 may be approved by the Bank's President, Treasurer
or Senior Loan Officers.  Together, these individuals also may approve
commercial and consumer loans in amounts up to $600,000.

      The following generally describes the Bank's current lending
procedures.  Upon receipt of a completed loan application from a
prospective borrower, the Bank orders a credit report and verifies certain
other information.  If necessary, the Bank obtains additional financial or
credit related information.  The Bank requires an appraisal for all
mortgage loans, except for some loans made to refinance existing mortgage
loans.  Appraisals are performed by a licensed or certified third-party
appraisal firms and are reviewed by the Bank's lending department.  The
Bank requires title insurance on all mortgage loans, except for home equity
credit lines and fixed-rate home improvement loans.  For these loans, the
Bank requires evidence of previous title insurance.  The Bank requires
borrowers to obtain hazard insurance and may require borrowers to obtain
flood insurance prior to closing.  For properties with a private sewage
disposal system, the Bank also requires evidence of compliance with
applicable law.  Further, the Bank requires borrowers to escrow funds on a
monthly basis together with each payment of principal and interest to a
mortgage escrow account from which the Bank makes disbursements for items
such as real estate taxes, flood insurance and private mortgage insurance
premiums, if required.

      Interest rates charged by the Bank on all loans are primarily
determined by competitive loan rates offered in its market area and
interest rate costs of the source of funding for the loan. The Bank may
charge an origination fee on new mortgage loans.  The origination fees, net
of direct origination costs, are deferred and amortized into income over
the life of the loan. At September 30, 2001, the amount of net deferred
loan origination costs was $136,000.

      Loan Maturity and Re-pricing.  The following table sets forth certain
information as of September 30, 2001 regarding the dollar amount of loans
maturing in the Bank's portfolio based on their contractual terms to
maturity.  Demand loans having no stated schedule of repayments and no
stated maturity, and overdrafts are reported as due in one year or less.
Adjustable and floating rate loans are included in the period in which
interest rates are next scheduled to adjust rather than the period in which
they contractually mature, and fixed-rate loans are included in the period
in which the final contractual repayment is due.  This table does not
include prepayments on scheduled principal amortizations.


<PAGE>  10


<TABLE>
<CAPTION>

                                                                           At September 30, 2001
                                         -----------------------------------------------------------------------------------------
                                                                                      Home
                                                         Variable     Commercial     Equity
                                          Fixed Rate       Rate       Mortgage      Lines of    Consumer    Commercial     Total
                                         Mortgages(1)    Mortgages      Loans        Credit       Loans        Loans       Loans
                                         -----------------------------------------------------------------------------------------
                                                                               (In thousands)


                                        <c>            <c>           <c>         <c>          <c>          <c>         <c>
Amounts due:
  Within one year                          $   230        $ 9,326       $ 8,397     $ 6,774      $  905       $2,435      $ 28,067
  One to three years                           452          6,934           117         148         501          133         8,285
  Over three to five years                     860         12,479           971           9       1,201          776        16,296
  Over five to ten years                     7,839         22,947         1,010           0           0          234        32,030
  Over ten to twenty years                  42,202          4,173         2,648           0           0            0        49,023
  Over twenty years                          1,368              0             6           0           0            0         1,374
                                           ---------------------------------------------------------------------------------------
      Loans, gross                         $52,951        $55,859       $13,149     $ 6,931      $2,607       $3,578       135,075
                                           =========================================================================
  Net deferred loan origination costs                                                                                          136
  Net premium on purchased loans                                                                                               662
  Allowance for loan losses                                                                                                   (916)
                                                                                                                          ---------
      Loans, net                                                                                                          $134,957
                                                                                                                          ========

<FN>
--------------------
<F1>  Net of unadvanced loan funds
</FN>
</TABLE>

      Non-Performing Assets, Asset Classification and Allowances for
Losses.  Management and the Loan Committee perform a monthly review of all
delinquent loans.  One of the primary tools the Bank uses to manage and
control problem loans is the Bank's "Watch List."  This list identifies all
of the loans or commitments that are considered to have characteristics
that could result in loss to the Bank if not properly supervised.  The list
is managed by the Loan Committee, which, together with the Executive
Committee, meets periodically to discuss the status of the loans on the
Watch List and to add or delete loans from the list. At September 30, 2001,
the Bank had no loans more than 90 days past due and had $0.9 million and
$1.1 million in assets classified as pass and substandard, respectively.
No assets were classified as special mention, doubtful or loss.

      The Bank had no non-performing assets at September 30, 2001 and 2000.


<PAGE>  11


      The following table presents information regarding non-accrual
mortgage and consumer and other loans, accruing loans delinquent 90 days or
more, and foreclosed real estate as of the dates indicated.  At September
30, 2001, 2000, 1999, 1998 and 1997, the Bank had no non-accrual loans.

<TABLE>
<CAPTION>

                                                                        At September 30,
                                                              ------------------------------------
                                                              2001    2000    1999    1998    1997
                                                              ------------------------------------
                                                                     (Dollars in thousands)


                                                           <c>     <c>     <c>     <c>     <c>
Non-accrual first mortgage loans                              $  0    $  0    $  0    $  0    $  0
Non-accural consumer and other loans                             0       0       0       0       0
Accruing loans delinquent 90 days or more                        0       0       0      55       0
      Total non-performing and delinquent loans                  0       0       0      55       0
Foreclosed real estate, net                                      0       0       0      74      19
                                                              ------------------------------------
      Total non-performing assets and delinquent loans        $  0    $  0    $  0    $129    $ 19
                                                              ====================================

Non-performing and delinquent loans to total loans            0.00%   0.00%   0.00%   0.06%   0.00%
Non-performing assets and delinquent loans to total assets    0.00%   0.00%   0.00%   0.08%   0.01%
</TABLE>

      At September 30, 2001, the Bank was aware of 9 borrowers in an
aggregate amount of $610 thousand that are not currently classified as non-
accrual or 90 days past due but which may be so classified in the near
future because of concerns over the borrowers' ability to comply with
repayment terms.

      Loans are placed on non-accrual status when they are 90 days past due
or, in the opinion of management, the collection of principal and interest
is doubtful.  When the Bank designates loans as non-accrual loans, it
reverses outstanding interest that it previously recognized to income.  The
Bank may recognize income in the period that its collects it when the
ultimate collectibility of principal is no longer in doubt.  The Bank
returns a non-accrual loan to accrual status when none of its principal or
interest is past due or when it otherwise becomes well secured and in the
process of collection.

      Impaired loans generally are individually assessed to determine
whether a loan's carrying value is not in excess of the fair value of the
collateral or the present value of the loan's cash flows.  Groups of
smaller balance loans, however, are collectively evaluated for impairment.
Accordingly, the Bank does not separately identify individual consumer
loans for impairment disclosures.  The Bank had no loans classified as
impaired at September 30, 2001, 2000 and 1999, respectively.  In addition
at September 30, 2001, 2000 and 1999, the Bank had no loans classified as
troubled debt restructurings, as defined in SFAS No. 15.

      Foreclosed real estate consists of property the Bank acquired through
foreclosure or deed in lieu of foreclosure.  Foreclosed real estate
properties are initially recorded at the lower of the investment in the
loan or fair value.  Thereafter, the Bank carries foreclosed real estate at
fair value less estimated selling costs, net of a valuation allowance
account established through provisions charged to income, which result from
the ongoing periodic valuations of foreclosed real estate properties.


<PAGE>  12


      Allowance for Loan Losses.  The following table presents the activity
in the Bank's allowance for loan losses at or for the dates indicated.

<TABLE>
<CAPTION>

                                              At or for the Year Ended September 30,
                                         -------------------------------------------------
                                          2001      2000      1999         1998       1997
                                         -------------------------------------------------
                                                       (Dollars in thousands)


                                      <c>       <c>       <c>          <c>        <c>
Balance at beginning of period           $ 874     $ 879     $  827       $  786     $ 690
Provision for loan losses                   48         0         45           39        96
Charge-off:
  Mortgage loans                             0         0          0            0         0
  Commercial Loans                           0         0          0            0         0
  Consumer loans                           (10)       (6)        (6)           0        (2)
      Total charge-offs                    (10)       (6)        (6)           0        (2)
Recoveries                                   4         1         13            2         2
                                         -------------------------------------------------
Balance at end of period                 $ 916     $ 874     $  879       $  827     $ 786
                                         =================================================

Net charge-offs/(recoveries) for
 the period                              $   6     $   5     $   (7)      $   (2)    $   0

Ratio of net charge-offs/(recoveries)
 to average loans outstanding
 during the period                       0.005%    0.005%    -0.008%      -0.003%    0.000%

Allowance for loan losses as a
 percent of total loans before the
 allowance for loan losses                0.67%     0.76%      0.95%        0.99%     1.10%

Allowance for loan losses as a
 percent of non-performing loans          0.00%     0.00%      0.00%     1503.64%     0.00%
</TABLE>

      The allowance for loan losses is a valuation account that reflects
the Bank's evaluation of the losses inherent in its loan portfolio.  The
Bank maintains the allowance through provisions for loan losses that it
charges to income. The Bank charges losses on loans against the allowance
for loan losses when it believes the collection of loan principal is
unlikely.

      The Bank establishes the provision for loan losses after considering
the results of its review of delinquency and charge-off trends, the amount
of the allowance for loan losses in relation to the total loan balance,
loan portfolio risk characteristics and regulatory guidance.  The Bank has
applied this process consistently, and the Bank has made minimal changes in
the assumptions used.

      As part of the Bank's analysis, each month the Bank prepares an
allowance for loan loss worksheet. This worksheet categorizes the entire
loan portfolio by certain risk characteristics such as loan type,
guarantees associated with a group of loans and payment status.  Loans with
known potential losses are categorized separately.  The Bank assigns
potential loss factors to the categories on the basis of its assessment of
each category's status and the potential risk inherent in that type of
lending.  The Bank uses this worksheet, together with loan portfolio
balances and delinquency reports, to evaluate the adequacy of the allowance
for loan losses.  Other key factors the Bank considers in this process are
national, state and local economic considerations, trends in charge-off
recovery, past and current trends in delinquency, trends in watch list
activity, and trends in loan concentration.


<PAGE>  13


      Although the management of the Bank believes that it has established
and maintained the allowance for loan losses at adequate levels, future
additions may be necessary if economic and other conditions in the future
differ substantially from the current operating environment.

      In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's loan and
foreclosed real estate portfolios and the related allowance for loan losses
and valuation allowance for foreclosed real estate.  The FDIC, in
conjunction with the other federal banking agencies, has adopted an inter-
agency policy statement on allowance for loan losses and lease losses.  The
policy statement provides guidance for financial institutions on both the
responsibilities of management for their assessment and establishment of
adequate allowances and guidance for banking agency examiners to use in
determining the adequacy of general valuation guidelines.  While the Bank
believes that it has established an adequate allowance for loan losses,
there can be no assurance that regulators, including the FDIC and the
Commissioner of Banks for the Commonwealth of Massachusetts, may require
the Bank to materially increase the allowance for loan losses or the
valuation allowance for foreclosed real estate based on their judgments of
information available to them at the time of their examination, thereby
adversely affecting the Bank's financial condition and earnings at that
time.

      The following table presents the Bank's allocation of the allowance
for loan losses by loan category and the percentage of loans in each
category to total loans at the dates indicated.

<TABLE>
<CAPTION>

                                                                     At September 30,
                                    ---------------------------------------------------------------------------------
                                              2001                        2000                        1999
                                    -------------------------   -------------------------   -------------------------
                                                   Percent of                  Percent of                  Percent of
                                                    Loans in                    Loans in                    Loans in
                                       Dollar       Category       Dollar       Category       Dollar       Category
                                       Amount       to Total       Amount       to Total       Amount       to Total
                                    (in thous.)       Loans     (in thous.)       Loans     (in thous.)       Loans
                                    ---------------------------------------------------------------------------------
                                                                  (Dollars in thousands)


                                    <c>          <c>            <c>          <c>            <c>          <c>
Real estate-mortgage:
  Residential(1)                       $165          85.74%        $347          90.56%       $279           92.43%
  Commercial                             39           9.70%         212           5.48%        176            3.41%
Commercial                              606           2.64%          70           2.48%         60            2.65%
Consumer                                 28           1.92%         163           1.48%        149            1.51%
Unallocated                              78           0.00%          82           0.00%        215            0.00%
                                       ---------------------------------------------------------------------------
      Total Allowance
       for loan losses                 $916         100.00%        $874         100.00%       $879          100.00%
                                       ===========================================================================

<CAPTION>

                                                       At September 30,
                                    -----------------------------------------------------
                                              1998                        1997
                                    -------------------------   -------------------------
                                                   Percent of                  Percent of
                                                    Loans in                    Loans in
                                       Dollar       Category       Dollar       Category
                                       Amount       to Total       Amount       to Total
                                    (in thous.)       Loans     (in thous.)       Loans
                                    -----------------------------------------------------
                                                   (Dollars in thousands)


                                    <c>          <c>            <c>          <c>
Real estate-mortgage:
  Residential(1)                       $309          92.80%        $253          92.63%
  Commercial                            184           3.24%         289           4.02%
Commercial                              103           1.99%          39           1.00%
Consumer                                 24           1.97%          27           2.35%
Unallocated                             207           0.00%         178           0.00%
                                       -----------------------------------------------
      Total Allowance
       for loan losses                 $827         100.00%        $786         100.00%
                                       ===============================================

<FN>
--------------------
<F1>  Includes home equity lines of credit and construction loans.
</TABLE>


<PAGE>  14


Investment Activities

      The Company's Board of Directors reviews and approves the investment
policy on an annual basis.  The President and Treasurer, as authorized by
the Board, implement this policy.  Management reports securities
transactions to the Board for review and approval on a monthly basis.

      The investment policy is designed primarily to manage the interest
rate sensitivity of the Bank's assets and liabilities, to generate a
favorable return without incurring undue interest rate and credit risk, to
complement the Bank's lending activities and to provide and maintain
liquidity within established guidelines. In establishing investment
strategies, the Bank considers its interest rate sensitivity, the types of
securities to be held, liquidity and other factors. Massachusetts-chartered
savings banks have authority to invest in various types of assets,
including U.S. Treasury obligations, securities of various federal
agencies, mortgage-backed securities, certain certificates of deposit of
insured banks and savings institutions, certain bankers' acceptances,
repurchase agreements, loans of federal funds, and, subject to certain
limits, corporate debt and equity securities, commercial paper and mutual
funds.

      As part of the investment strategy, the Bank also engages in a
"covered call" program in which it writes options on securities it holds.
The sale of a covered call conveys the right, but not the obligation, to
the buyer to buy a particular security held by the Bank at a particular
price up to a certain expiration date. The sale is "covered" because the
Bank holds the security in its portfolio.  Under this program, the Bank
writes options only on publicly traded securities it owns.  However, the
Bank is willing to have the securities called if an option is written and
exercised.

      At September 30, 2001 and September 30, 2000, the Bank's liquidity
ratio was 63.3% and 70.4%, respectively. For information regarding the
carrying values, yields and maturities of the Bank's investment securities
and mortgage-backed securities, see "Carrying Values, Yields and
Maturities" further on in this section.

      At September 30, 2001,  the U.S. Government and federal agency
securities portfolio totaled $11.7 million. This portfolio consists
primarily of securities with maturities of one to five years.  Some of the
agency debentures are callable and call provisions vary following a minimum
holding period.  The Bank generally does not purchase structured notes, and
at September 30, 2001, there were no structured notes in the Bank's
portfolio.

      At September 30, 2001, the portfolio of other debt obligations
totaled $29.1 million.  The Bank's policy generally requires that
investment in corporate debt obligations be limited to corporate bonds with
an "A" rating or better by at least one nationally recognized rating
service at the time of purchase.

      The fair market value of the marketable equity securities portfolio
totaled $5.8 million at September 30, 2001.  These securities consisted of
$2.5 million of common stock, $0.3 million of preferred stock and $3.0
million of rated trust preferred securities issued by financial service
corporations.  Under the Bank's investment policy, the aggregate amount of
common stock that it may purchase may not exceed 13% of its total
investment portfolio.  The Bank's policy also has limitations against
acquiring concentrations of such securities in any one issuer or industry.
The Bank purchases marketable equity securities as growth investments that
can provide the opportunity for capital appreciation that is taxed on a
more favorable basis than operating income.  There can be no assurance that
investment in marketable equity securities will appreciate in value and,
therefore, such investments involve higher risk than U.S. Government or
federal agency securities.  Aggregate purchases of marketable equity
securities totaled $0.4 million, $3.4 million and $8.2 million for the
years ended September 30, 2001, 2000 and 1999.  At September 30, 2001, pre-
tax net unrealized loss on marketable equity securities amounted to $1.1
million.


<PAGE>  15


      Unless otherwise noted with respect to certain securities or required
by regulators or accounting standards, the Bank classifies securities
available for sale at the date of purchase.  Available for sale securities
are reported at fair market value.  The Bank currently has no securities
classified as trading.  During fiscal year 2001, the Bank sold investment
securities in the aggregate amount of $19.2 million.

      At September 30, 2001, the Bank's mortgage-backed securities, all of
which were classified as available for sale, totaled $17.7 million, or 7.9%
of total assets and had a weighted average yield of 6.27%. The Bank
generally purchases mortgage-backed securities as a means to deploy excess
liquidity at more favorable yields than other investment alternatives.  In
addition, mortgage-backed securities generate positive interest rate
spreads with minimal administrative expense and lower the Bank's overall
credit risk due to the fact that they are directly or indirectly insured or
guaranteed.   Purchases of mortgage-backed securities may decline in the
future if the Bank experiences an increase in demand for one- to four-
family mortgage loans. The Bank did not sell any of its mortgage-backed
securities during fiscal year 2001.

      Mortgage-backed securities generally yield less than the loans that
underlie such securities because of the cost of payment guarantees or
credit enhancements that reduce credit risk.  However, mortgage-backed
securities are more liquid than individual mortgage loans and may be used
to collateralize the Bank's borrowings.  In general, mortgage-backed
securities issued or guaranteed by GNMA, Fannie Mae and Freddie Mac are
weighted at no more than 20% for risk-based capital purposes, compared to
the 50% risk-weighting assigned to most non-securitized residential
mortgage loans.

      While mortgage-backed securities carry a reduced credit risk as
compared to whole loans, they remain subject to the risk of a fluctuating
interest rate environment.  Along with other factors, such as the
geographic distribution of the underlying mortgage loans, changes in
interest rates may alter the prepayment rate of those mortgage loans and
affect both the prepayment rates and value of mortgage-backed securities.

      The following table presents activity in the Bank's investment
securities portfolio, including FHLB stock for the periods indicated:

<TABLE>
<CAPTION>

                                            For the Year Ended September 30,
                                            --------------------------------
                                              2001        2000        1999
                                            --------------------------------
                                                 (Dollars In Thousands)


                                         <c>         <c>         <c>
Beginning balance                           $ 70,119    $64,457     $ 60,107
  Purchases                                   26,696     19,101       26,868
  Maturities                                 (10,310)    (5,102)      (3,750)
  Sales and calls                            (19,531)    (5,446)     (11,491)
  Principal repayments                        (3,205)    (3,304)      (5,012)
  Premium and discount amortization, net          32         29          (79)
  Recognition of expired options                  16        425          352
  Change in net unrealized gains/(losses)      1,697         61       (2,538)
  Write-down                                       0       (102)           0
                                            --------------------------------
Ending balance                              $ 65,514    $70,119     $ 64,457
                                            ================================
</TABLE>


<PAGE>  16


      The following table sets forth certain information regarding the

amortized cost and fair value of the Bank's securities at the dates
indicated.

<TABLE>
<CAPTION>

                                                               At September 30,
                                     --------------------------------------------------------------------
                                             2001                    2000                    1999
                                     --------------------    --------------------    --------------------
                                     Amortized     Fair      Amortized     Fair      Amortized     Fair
                                        Cost       Value        Cost       Value        Cost       Value
                                     --------------------------------------------------------------------
                                                            (Dollars in thousands)


                                   <c>         <c>         <c>         <c>         <c>         <c>
Debt securities:
  U.S. Government obligations         $ 2,099     $ 2,108     $10,574     $10,585     $12,084     $12,178
  Federal agency obligations            9,130       9,571      12,622      12,251      10,632      10,314
  Banking and finance obligations      18,542      19,478      10,982      10,930       6,501       6,433
  Other bonds and obligations           9,260       9,590      16,203      16,063      13,649      13,469
                                     --------------------------------------------------------------------
      Total debt securities            39,031      40,747      50,381      49,829      42,866      42,394
                                     --------------------------------------------------------------------
Mortgage-backed and mortgage-
 related securities:
  FHLMC                                 2,276       2,361       1,427       1,555       1,189       1,195
  FNMA                                 11,788      12,150       4,633       4,505       5,597       5,506
  GNMA                                  1,459       1,469       2,273       2,138       2,719       2,714
  Other                                 1,698       1,763       2,089       2,058       2,608       2,538
                                     --------------------------------------------------------------------
  Total mortgage-backed and
   mortgage-related securities         17,221      17,743      10,422      10,256      12,113      11,953
                                     --------------------------------------------------------------------
Asset-backed securities                   119         120         314         311         630         626
Marketable equity securities            6,927       5,804       8,680       8,820       8,640       8,634
FHLB stock                              1,100       1,100         903         903         850         850
                                     --------------------------------------------------------------------
      Total Securities                $64,398     $65,514     $70,700     $70,119     $65,099     $64,457
                                      ===================================================================
</TABLE>


<PAGE>  17


      The following table sets forth the amortized cost and fair value of
the Bank's mortgage-backed and mortgage-related securities, all of which
were classified as available for sale at the dates indicated.

<TABLE>
<CAPTION>

                                                                          At September 30,
                                  -------------------------------------------------------------------------------------------------
                                               2001                             2000                             1999
                                  ------------------------------   ------------------------------   -------------------------------
                                  Amortized   Percent of   Fair    Amortized   Percent of   Fair    Amortized   Percent of   Fair
                                     Cost     Total (1)    Value      Cost     Total (1)    Value      Cost     Total (1)    Value
                                  -------------------------------------------------------------------------------------------------
                                                                        (Dollars in thousands)


                                <c>          <c>       <c>       <c>          <c>       <c>       <c>          <c>       <c>
Mortgage-backed and
 mortgage-related securities:
  FHLMC                            $ 2,276       13.22%   $ 2,361   $ 1,427       13.69%   $ 1,555   $ 1,189        9.81%   $ 1,195
  FNMA                              11,788       68.45%    12,150     4,633       44.45%     4,505     5,597       46.21%     5,506
  GNMA                               1,459        8.47%     1,469     2,273       21.81%     2,138     2,719       22.45%     2,714
  Other                              1,698        9.86%     1,763     2,089       20.05%     2,058     2,608       21.53%     2,538
                                   ---------------------------------------------------------------------------------------------
    Total Mortgage-backed and
     mortgage-related securities   $17,221      100.00%   $17,743   $10,422      100.00%   $10,256   $12,113      100.00%   $11,953
                                   =============================================================================================

<FN>
--------------------
<F1>  Based on amortized cost
</FN>
</TABLE>


<PAGE>  18


      Carrying Values, Yields and Maturities.  The table below presents
information regarding the carrying values, weighted average yields and
contractual maturities of investment securities and mortgage-backed
securities at September 30, 2001.  Mortgage-backed securities are presented
by issuer.  Yields on tax exempt obligations were not computed on a tax
equivalent basis.

<TABLE>
<CAPTION>

                                                                       At September 30, 2001
                                 --------------------------------------------------------------------------------------------------
                                                         More than           More than
                                                          One Year           Five Years          More than
                                  One Year or Less      to Five Years       to Ten Years         Ten Years             Total
                                 ------------------  ------------------  ------------------  ------------------  ------------------
                                           Weighted            Weighted            Weighted            Weighted            Weighted
                                 Carrying  Average   Carrying  Average   Carrying  Average   Carrying  Average   Carrying  Average
                                  Amount    Yield     Amount    Yield     Amount    Yield     Amount    Yield     Amount    Yield
                                 --------------------------------------------------------------------------------------------------
                                                                       (Dollars in thousands)


                               <c>        <c>     <c>         <c>     <c>         <c>     <c>         <c>     <c>         <c>
Debt securities:
  U.S. Government obligations     $2,108     6.22%   $     0        0    $     0        0    $     0        0    $ 2,108     6.22%
  Federal agency obligations         259     6.52%     2,108     6.41%     7,204     6.60%         0        0      9,571     6.55%
  Banking and finance obligations  1,276     6.41%    17,659     6.66%       543     7.12%         0        0     19,478     6.66%
  Other bonds and obligations        502     6.38%     8,249     6.56%       839     3.97%         0        0      9,590     6.32%
                                  ------             -------             -------             -------             -------
      Total debt securities        4,145     6.32%    28,016     6.61%     8,586     6.37%         0        0     40,747     6.53%
                                  ------             -------             -------             -------             -------
Mortgage-backed and mortgage-
 related securities:
  FHLMC                                0        0        887     5.67%         0        0      1,474     6.30%     2,361     6.07%
  FNMA                               139     7.17%     1,037     5.81%     3,589     6.16%     7,385     6.33%    12,150     6.25%
  GNMA                                 0        0          0        0          0        0      1,469     6.02%     1,469     6.02%
  Other                                0        0          0        0        169     6.63%     1,594     6.94%     1,763     6.91%
                                  ------             -------             -------             -------             -------
  Total mortgage-backed and
   mortgage-related securities       139     7.17%     1,924     5.75%     3,758     6.19%    11,922     6.37%    17,743     6.27%
                                  ------             -------             -------             -------             -------
Asset-backed securities                0        0        120     5.47%         0        0          0        0        120     5.47%
                                  ------             -------             -------             -------             -------
      Total debt securities       $4,284     6.34%   $30,060     6.55%   $12,344     6.32%   $11,922     6.37%   $58,610     6.45%
                                  ===============================================================================================
</TABLE>


<PAGE>  19


Deposit Activity and Other Sources of Funds

      General.  Deposits, scheduled amortization and prepayments of loan
principal and mortgage-backed securities, maturities and calls of
investments securities and funds provided by operations are the Bank's
primary sources of funds for use in lending, investing and for other
general purposes.  The Bank also utilizes borrowed funds from the FHLB  to
fund certain loans in connection with the Bank's management of the interest
rate sensitivity of its assets and liabilities, as well as for other
general purposes.

      Deposits.  The Bank offers a variety of deposit accounts having a
range of interest rates and terms. The Bank currently offers regular
savings deposits, NOW accounts, personal and business demand accounts,
money market accounts and certificates of deposit.  The Bank also offers
Individual Retirement Accounts ("IRAs"), which at September 30, 2001
totaled $9.2 million.

      Deposit flows are influenced significantly by general and local
economic conditions, changes in prevailing interest rates, pricing of
deposits and competition.  The Bank's deposits are primarily obtained from
areas surrounding its offices, and the Bank relies primarily on paying
competitive rates, service and long-standing relationships with customers
to attract and retain these deposits.  The Bank also has developed deposit
products to attract and retain individual and commercial depositors.  One
such product is a tiered-rate savings account in which deposits over
certain amounts earn interest at higher rates.  Other programs involve the
introduction of commercial deposit products tailored to small- and medium-
sized businesses, such as the Bank's business and commercial checking
accounts.  The Bank does not use brokers to obtain deposits.

      When the Bank determines its deposit rates, it considers local
competition, U.S. Treasury securities offerings and the rates charged on
other sources of funds.  Core deposits (defined as total savings accounts,
NOW accounts, money market accounts and demand accounts) represented 65.6%
of total deposits on September 30, 2001.  At September 30, 2001,
certificates of deposit with remaining terms to maturity of less than one
year amounted to $52.4 million.

      The following table presents the Bank's deposit activity for the
periods indicated.

<TABLE>
<CAPTION>

                                       For the Years Ended September 30,
                                       ----------------------------------
                                         2001         2000         1999
                                       ----------------------------------
                                             (Dollars In Thousands)


                                    <c>          <c>          <c>
Beginning balance                      $163,405     $150,111     $135,962
  Net deposits                           15,817        8,069        9,341
  Interest paid on deposit accounts       5,876        5,225        4,808
                                       ----------------------------------
Ending Balance                         $185,098     $163,405     $150,111
                                       ==================================
Total increase in deposit accounts     $ 21,693     $ 13,294     $ 14,149
Percentage increase                       13.28%        8.86%       10.41%
</TABLE>


<PAGE>  20


      At September 30, 2001, the Bank had $14.4 million in certificates of
deposit with balances of $100,000 and over maturing as follows:

<TABLE>
<CAPTION>

                                                At September 30, 2001
                                                ----------------------
                                                              Weighted
                                                              Average
                                                 Amount         Rate
                                                ----------------------
                                                (Dollars in thousands)

      
                                       <c>            <c>
      Maturity Period:
        Three months or less                    $ 5,469        5.52%
        Over three months through six months      2,492        5.13%
        Over six months through 12 months         3,300        4.83%
        Over 12 months                            3,178        4.80%
                                                -------
      Total                                     $14,439        5.14%
                                                =======
</TABLE>

      The following table presents the distribution of the Bank's deposit
accounts at the dates indicated by dollar amount and percent of portfolio,
and the weighted average interest rate on each category of deposits.

<TABLE>
<CAPTION>

                                                                             At September 30,
                                       --------------------------------------------------------------------------------------------
                                                    2001                           2000                           1999
                                       -----------------------------   ----------------------------   -----------------------------
                                                            Weighted                       Weighted                       Weighted
                                                 Percent     Average            Percent     Average            Percent     Average
                                                 of total    Nominal            of total    Nominal            of total    Nominal
                                        Amount   deposits     Rate     Amount   deposits     Rate     Amount   deposits     Rate
                                       -------------------------------------------------------------------------------------------
                                                                          (Dollars in thousands)


                                    <c>        <c>         <c>     <c>        <c>         <c>     <c>        <c>         <c>
Non-interest bearing accounts          $ 17,496     9.45%     0.00%   $ 15,475     9.47%     0.00%   $ 11,236     7.48%     0.00%
NOW accounts                             18,178     9.82%     0.50%     15,281     9.35%     0.50%     13,132     8.75%     0.50%
Savings accounts:
  Regular                                35,890    19.39%     2.20%     32,339    19.79%     2.40%     29,985    19.98%     2.53%
  Tiered-rate                            44,286    23.93%     2.82%     38,808    23.75%     4.52%     37,167    24.76%     3.85%
                                       -----------------              -----------------              -----------------
      Total savings accounts             80,176    43.32%     2.54%     71,147    43.54%     3.56%     67,152    44.74%     3.26%
                                       -----------------              -----------------              -----------------
Money market deposit accounts             5,494     2.97%     1.97%      5,868     3.59%     2.17%      6,619     4.41%     2.17%
                                       -----------------              -----------------              -----------------
      Total non-certificate accounts    121,344    65.56%     1.84%    107,771    65.95%     2.54%     98,139    65.38%     2.45%
                                       -----------------              -----------------              -----------------
Certificates of deposit accounts:
  Due within 1 year                      52,378    28.30%     5.02%     44,049    26.96%     5.47%     42,905    28.58%     4.89%
  Over 1 year through 3 years            11,370     6.14%     5.00%     11,578     7.09%     5.84%      9,043     6.02%     5.20%
  Over 3 years                                6     0.00%     4.88%          7     0.00%     4.91%         24     0.02%     4.88%
                                       -----------------              -----------------              -----------------
      Total certificate accounts         63,754    34.44%     5.02%     55,634    34.05%     5.55%     51,972    34.62%     4.94%
                                       -----------------              -----------------              -----------------
      Total deposits                   $185,098   100.00%     2.94%   $163,405   100.00%     3.56%   $150,111   100.00%     3.31%
                                       =========================================================================================
</TABLE>



<PAGE>  21


      Borrowings.  The Bank borrows funds from the FHLB for use in
connection with its management of the interest rate sensitivity of its
assets and liabilities, as well as to fund certain loans and for other
general purposes.  These advances are collateralized by certain of the
Bank's mortgage loans and by its investment in the stock of the FHLB.  The
maximum amount that the FHLB will advance to its members, including the
Bank, fluctuates from time to time in accordance with FHLB policies.  At
September 30, 2001, the Bank had $12.0 million in outstanding advances from
the FHLB and had the capacity to increase that amount to $78.7 million
based on the Bank's available qualified collateral.  The Bank expects to
continue to borrow from the FHLB.

      The following table presents certain information regarding the Bank's
borrowed funds at or for the periods ended on the dates indicated.

<TABLE>
<CAPTION>

                                                At or for the
                                            Years Ended September 30,
                                          ------------------------------
                                            2001        2000        1999
                                          ------------------------------
                                              (Dollars in thousands)


                                       <c>         <c>         <c>
Federal Home Loan Bank advances:
  Average balance outstanding             $16,178     $ 5,335     $3,198
  Maximum amount outstanding at any
   month-end during the period            $16,500     $16,500     $4,000
  Balance outstanding at end of period    $12,000     $16,500     $4,000
  Weighted average interest rate
   during the period                         6.51%       5.60%      5.22%
  Weighted average interest rate
   end of period                             6.65%       6.44%      5.09%
</TABLE>


<PAGE>  22


Selected Financial Ratios and Other Data

      The following information in the table are selected financial ratios
and other data for the Company for the periods indicated:

<TABLE>
<CAPTION>

                                                                     At or for the
                                                               Years Ended September 30,
                                                            -------------------------------
                                                               2001        2000       1999
                                                            -------------------------------


                                                         <c>           <c>        <c>
Selected Financial Ratios and Other Data(1)

Performance Ratios:
  Return on average assets                                       0.64%      0.68%      0.89%
  Return on average equity                                       5.49%      5.70%      7.56%
  Average equity to average assets                              11.69%     11.88%     11.73%
  Equity to total assets at end of period                       11.93%     12.00%     11.04%
  Average interest rate spread                                   2.93%      3.19%      3.01%
  Net interest margin(2)                                         3.53%      3.73%      3.54%
  Average interest-earning assets to
   average interest-bearing liabilities                        117.68%    116.88%    117.12%
  Total operating expense to average assets                      3.20%      3.16%      2.81%
  Efficiency ratio(3)                                           77.74%     77.11%     67.81%

Regulatory Capital Ratios:(4)
  Total risk-based capital                                      19.38%     21.73%     21.15%
  Tier 1 risk-based capital                                     18.70%     20.99%     20.24%
  Regulatory tier 1 leverage capital                            11.51%     12.82%     11.40%

Asset Quality Ratios:
  Non-performing loans as a percent of loans                     0.00%      0.00%      0.00%
  Non-performing assets as a percent to total assets             0.00%      0.00%      0.00%
  Allowance for loan losses as a percent to total
   loans before the allowance for loan losses                    0.67%      0.76%      0.95%

Number of:
  Full-service offices(5)                                           5          5          5
  Full-time equivalent employees                                   70         69         60

Share Data:(6)
  Basic number of weighted average shares outstanding       1,540,518         NA         NA
  Dilutive number of weighted average shares outstanding    1,550,588         NA         NA
  Basic earnings per share                                      $0.91         NA         NA
  Dilutive earnings per share                                   $0.90         NA         NA
  Dividends declared per share                                  $0.20         NA         NA

<FN>
--------------------
<F1>  Asset Quality Ratios and Regulatory Capital Ratios are end of period
      ratios.
<F2>  Net interest margin represents net interest income as a percentage of
      average interest-earning assets.
<F3>  The efficiency ratio represents the ratio of operating expenses
      divided by the sum of net interest income and other income.
<F4>  Ratios are based on consolidation
<F5>  The number of full-service offices shown does not include the Bank's
      branch at the Willows or the Operations Center.
<F6>  Share data for previous periods is not applicable since the Company
      converted to a stock company on February 15, 2000.
</FN>
</TABLE>


<PAGE>  23


Competition

      The Bank faces significant competition both in making loans and
attracting deposits.  The Bank's service area of central Massachusetts has
a high concentration of financial institutions, many of which are branches
of large money center and regional banks that have resulted from the
consolidation of the banking industry in Massachusetts and surrounding
states.  Some of these competitors have greater resources than the Bank
does and may offer services that the Bank does not provide.

      The Bank's competition for loans comes principally from commercial
banks, savings institutions, mortgage banking firms, credit unions, finance
companies, mutual funds, insurance companies and brokerage and investment
banking firms.  The Bank's most direct competition for deposits has
historically come from commercial banks, savings banks, savings and loan
associations and credit unions.  The Bank faces additional competition for
deposits from short-term money market funds and other corporate and
government securities funds and from brokerage firms and insurance
companies. The Bank  expects competition to increase in the future as a
result of legislative, regulatory and technological changes and the
continuing trend of consolidation in the industry.

Employees

      At September 30, 2001, the Bank had  58 full-time and 19 part-time
employees.  None of the Bank's employees is represented by a collective
bargaining agreement.  Management of the Bank believes that it enjoys
excellent relations with its personnel.

Subsidiary Activities

      Eli Whitney Security Corporation.  Eli Whitney Security Corporation
is a wholly-owned subsidiary of the Bank.  Eli Whitney was established in
1995 as a Massachusetts security corporation for the purpose of buying,
selling and holding investment securities on its own behalf and not as a
broker.  The income earned on Eli Whitney's investment securities is
subject to a significantly lower rate of state tax than that assessed on
income earned on investment securities maintained by the Bank.  At
September 30, 2001, Eli Whitney had total assets of $14.5 million,
virtually all of which were in investment securities.

      One Hundredth Security Corporation.  One Hundredth Security
Corporation is a wholly-owned subsidiary of the Bank established in 1993.
One Hundredth is also a Massachusetts security corporation that was formed
for the purpose of buying, selling and holding investment securities on its
own behalf and not as a broker.  The income earned on One Hundredth
investment securities is subject to a significantly lower rate of state tax
than that assessed on income earned on investment securities maintained by
the Bank.  At September 30, 2001, One Hundredth had total assets of $23.6
million, virtually all of which were in investment securities.

      The Hundredth Corporation.  The Hundredth Corporation is a wholly-
owned subsidiary of the Bank. The Hundredth Corporation was established in
1991 for the investment in real or personal property. At September 30,
2001, The Hundredth Corporation had total assets of $31,938.


<PAGE>  24


FEDERAL AND STATE TAXATION

Federal Taxation

      General.  The following discussion is intended only as a summary and
does not purport to be a comprehensive description of the tax rules
applicable to the Bank, the MHC or the Company.  For federal income tax
purposes, the Bank reports income on the basis of a taxable year ending
September 30, using the accrual method of accounting, and the Bank is
generally subject to federal income taxation in the same manner as other
corporations.  The Bank and the Company constitute an affiliated group of
corporations and, therefore, are eligible to report their income on a
consolidated basis. Because the MHC owns less than 80% of the common stock
of the Company, it is not a member of such affiliated group and reports its
income on a separate return.

      Bad Debt Reserves.  The Bank, as a "small bank" (one with assets
having an adjusted tax basis of $500 million or less) is permitted to
maintain a reserve for bad debts and to make, within specified formula
limits, annual additions to the reserve which are deductible for purposes
of computing its taxable income. Pursuant to the Small Business Job
Protection Act of 1996, the Bank is now recapturing (taking into income)
over a multi-year period a portion of the balance of its bad debt reserve
as of September 30, 1996.

      Distributions.  To the extent that the Bank makes non-dividend
distributions to shareholders, such distributions will be considered to
result in distributions from the Bank's base year reserve, i.e., its
reserve as of April 30, 1988, to the extent thereof and then from its
supplemental reserve for losses on loans, and an amount based on the amount
distributed will be included in the Bank's taxable income.  Non-dividend
distributions include distributions in excess of the Bank's current and
accumulated earnings and profits, distributions in redemption of stock and
distributions in partial or complete liquidation.  However, dividends paid
out of the Bank's current or accumulated earnings and profits, as
calculated for federal income tax purposes, will not constitute non-
dividend distributions and, therefore, will not be included in the Bank's
income.

      The amount of additional taxable income created from a non-dividend
distribution is equal to the lesser of the Bank's base year reserve and
supplemental reserve for losses on loans or an amount that, when reduced by
the tax attributable to the income, is equal to the amount of the
distribution.  Thus, in certain situations, approximately one and one-half
times the non-dividend distribution would be includible in gross income for
federal income tax purposes, assuming a 34% federal corporate income tax
rate.  The Bank does not intend to pay dividends that would result in the
recapture of any portion of its bad debt reserves.

      Elimination of Dividends; Dividends Received Deduction.  The Company
may exclude from its income 100% of dividends received from the Bank as a
member of the same affiliated group of corporations. Because the MHC is not
be a member of such affiliated group, it does not qualify for such 100%
dividends exclusion, but is entitled to deduct 80% of the dividends it
receives from the Company so long as it owns more than 20% of the Company's
common stock.


<PAGE>  25


State Taxation

      The Bank files Massachusetts Savings Institution income tax returns.
Generally, the income of savings institutions in Massachusetts, which is
calculated based on federal taxable income, subject to certain adjustments,
is subject to Massachusetts tax. The Bank is not currently under audit with
respect to its Massachusetts income tax returns and its state tax returns
have not been audited for the past five years.

      The Company is required to file a Massachusetts income tax return and
is generally subject to a state income tax rate that is the same tax rate
as the tax rate for savings institutions in Massachusetts.  However, if the
Company meets certain requirements, it may be eligible to elect to be taxed
as a Massachusetts Security Corporation, which would allow the Company to
be taxed at a rate that is currently lower than income tax rates for
savings institutions in Massachusetts.

REGULATION

General

      The Bank is a Massachusetts-chartered stock savings bank, and its
deposit accounts are insured up to applicable limits by the Bank Insurance
Fund (the "BIF") of the FDIC and by the Depositors Insurance Fund.  The
Bank is subject to extensive regulation, examination and supervision by the
Commonwealth of Massachusetts Division of Banks (the "Division") as its
primary corporate regulator, and by the FDIC as the deposit insurer.  The
Bank must file reports with the Division and the FDIC concerning its
activities and financial condition, and it must obtain regulatory approval
prior to entering into certain transactions, such as mergers with, or
acquisitions of, other depository institutions and opening or acquiring
branch offices.  The Division and the FDIC conduct periodic examinations to
assess the Bank's compliance with various regulatory requirements.  This
regulation and supervision establishes a comprehensive framework of
activities in which a savings bank can engage and is intended primarily for
the protection of the deposit insurance fund and depositors.  The Bank is
also a member of the FHLB and is subject to certain regulation by the Board
of the Federal Reserve System.

      The MHC and the Company, as bank holding companies controlling the
Bank are subject to the Bank Holding Company Act of 1956, as amended (the
"BHCA"), and the rules and regulations of the Federal Reserve Board (the
"FRB") under the BHCA and to the provisions of the Massachusetts General
Laws applicable to savings banks and other depository institutions and
their holding companies (the "Massachusetts banking laws") and the
regulations of the Division under the Massachusetts banking laws applicable
to bank holding companies.  The MHC and the Company are required to file
reports with, and otherwise comply with the rules and regulations of the
FRB and the Division.  The Company is required to file certain reports
with, and otherwise comply with, the rules and regulations of the
Securities and Exchange Commission under the federal securities laws.  Any
change in such laws and regulations, whether by the Division, the FDIC, or
the FRB, or through legislation, could have a material adverse impact on
the MHC, the Company and the Bank, and their operations and stockholders.

Financial Services Modernization Legislation

      The Gramm-Leach-Bliley Financial Services Modernization Act of 1999
(the "GLB Act") was signed into law on November 12, 1999 and became
effective March 11, 2000.  This federal legislation was intended to
modernize the financial services industry by establishing a comprehensive
framework to permit affiliations among commercial banks, insurance
companies, securities firms and other financial service providers.

      As a result of the GLB Act, bank holding companies who have elected
to be regulated as a financial holding company are now permitted to engage
in a wider variety of financial activities than permitted under prior law,
particularly with respect to insurance and securities activities. In
addition, in a change from prior law, financial holding companies are in a
position to be owned, controlled or acquired


<PAGE>  26


by any company engaged in financially-related activities. On October 23,
2000, the MHC and the Company elected to be regulated as financial holding
companies.

Massachusetts Banking Regulation

      Activity Powers.  The Bank derives its lending, investment and other
activity powers primarily from the applicable provisions of the
Massachusetts banking laws and its related regulations.  Under these laws
and regulations, savings banks, including the Bank, generally may, invest
in (a) real estate mortgages; (b) consumer and commercial loans; (c)
specific types of debt securities, including certain corporate debt
securities and obligations of federal, state and local governments and
agencies; (d) certain types of corporate equity securities; and (e) certain
other assets.

      A savings bank may also invest pursuant to a "leeway" power that
permits investments not otherwise permitted by the Massachusetts banking
laws.  "Leeway" investments must comply with a number of limitations on the
individual and aggregate amounts of "leeway" investments.  A savings bank
may also exercise trust powers upon approval of the Division.
Massachusetts savings banks may also exercise any power and engage in any
activity permissible for national banks in accordance with regulations
adopted by the Division with respect to such power or activity .  The
exercise of lending, investment and activity powers are limited by federal
law and the related regulations. See "Federal Banking Regulation --
Activity Restrictions on State-Chartered Banks" below.

      Community Reinvestment Act.  The Bank is also subject to provisions
of the Massachusetts banking laws that, like the provisions of the federal
Community Reinvestment Act ("CRA"), impose continuing and affirmative
obligations upon a banking institution organized in Massachusetts to serve
the credit needs of its local communities ("Massachusetts CRA").  The
obligations of the Massachusetts CRA are similar to those imposed by the
CRA, with the exception of the assigned exam ratings.  Massachusetts
banking law provides for an additional exam rating of "high satisfactory"
in addition to the federal CRA ratings of "outstanding," "satisfactory,"
"needs to improve" and "substantial noncompliance."  The Division has
adopted regulations to implement the Massachusetts CRA that are based on
the CRA.  See "Federal Banking Regulation -- Community Reinvestment Act."
The Division is required to consider a bank's Massachusetts CRA rating when
reviewing the bank's application to engage in certain transactions,
including mergers, asset purchases and the establishment of branch offices
or automated teller machines, and provides that such assessment may serve
as a basis for the denial of any such application.  The Massachusetts CRA
requires the Division to assess a bank's compliance with the Massachusetts
CRA and to make such assessment available to the public.  The Bank's most
recent Massachusetts CRA rating, received by letter, dated March 22, 1999,
from the Division was a rating of "Satisfactory."

      Loans-to-One-Borrower Limitations.  With specified exceptions, the
total obligations of a single borrower to a Massachusetts-chartered savings
bank may not exceed 20% of the savings bank's surplus account.  A savings
bank may lend additional amounts up to 100% of the bank's surplus account
if secured by collateral meeting the requirements of the Massachusetts
banking laws.  The Bank currently complies with applicable loans-to-one-
borrower limitations.

      Loans to a Bank's Insiders.  Provisions of the Massachusetts banking
laws prohibit a savings bank from making a loan or otherwise extending
credit to any of its officers and directors or trustees and prohibits any
such officer, director or trustee from borrowing, otherwise becoming
indebted, or becoming liable for a loan or other extension of credit by
such bank to any other person except for any of the following loans after
approval by a majority of the all of the members of the Bank's Executive
Committee, excluding any member involved in such loan or extension of
credit: (a) loan or extension of credit, secured or unsecured, to an
officer of the bank in an amount not exceeding $20,000; (b) loan or
extension of credit intended or secured for educational purposes to an
officer of the bank in an amount not exceeding $75,000; (c) loan or
extension of credit secured by a mortgage on residential real estate to be
occupied in whole or in part by the officer to whom the loan or extension
of credit is made, in an amount not exceeding $275,000; or (d) loan or
extension of credit to a director or trustee of the bank who is not also an
officer of the bank in an amount permissible under the bank's loan-to-one
borrower limit.  See "Massachusetts Banking Regulation, Loans-to-One
Borrower Limitations" above.  No such loan may


<PAGE>  27


be granted with an interest rate or on other terms that are preferential in
comparison to loans granted to persons not affiliated with the savings
bank.

      Dividends.  Under the Massachusetts banking laws, a stock savings
bank may, subject to several limitations, declare and pay a dividend on its
capital stock, which is the bank's common stock and any preferred stock,
out of the bank's net profits.  A dividend may not be declared, credited or
paid by a stock savings bank so long as there is any impairment of capital
stock.  No dividend may be declared on the bank's common stock for any
period other than for which dividends are declared upon preferred stock,
except as authorized by the Commissioner of Banks of the Commonwealth of
Massachusetts (the "Commissioner"). The approval of the Commissioner is
also required for a stock savings bank to declare a dividend, if the total
of all dividends declared by the savings bank in any calendar year shall
exceed the total of its net profits for that year combined with its
retained net profits of the preceding two years, less any required transfer
to surplus or a fund for the retirement of any preferred stock.

      In addition, federal law may also limit the amount of dividends that
may be paid by the Bank.  See " - Federal Banking Regulation - Prompt
Corrective Action" below.

      Examination and Enforcement.  The Division is required to
periodically examine savings banks at least once every calendar year or at
least once each 18 month period if the savings bank qualifies as well
capitalized under the prompt corrective action provisions of the Federal
Deposit Insurance Act.  See " - Federal Banking Regulation - Prompt
Corrective Action" below.  The Division may also examine a savings bank
whenever the Division deems an examination expedient.  If the Division
finds, after an inquiry, that any trustee, director or officer of a savings
bank has, among other things, violated any law related to such bank or has
conducted the business of such bank in an unsafe or unsound manner, the
Division may take various actions that could result in the suspension or
removal of such person as an officer, director or trustee of the savings
bank.  If the Division determines that, among other things, a savings bank
has violated its charter or any Massachusetts law or is conducting its
business in an unsafe or unsound manner or is in an unsafe or unsound
condition to transact its banking business, the Division may take
possession of the property and business of the savings bank and may, if the
facts warrant, initiate the liquidation of the bank.

Federal Banking Regulation

      Capital Requirements.  FDIC regulations require BIF-insured banks,
such as the Bank, to maintain minimum levels of capital.  The FDIC
regulations define two tiers, or classes, of capital.

      Tier 1 capital is comprised of the sum of common stockholders' equity
(excluding the unrealized appreciation or depreciation, net of tax, from
available-for-sale securities), non-cumulative perpetual preferred stock
(including any related surplus) and minority interests in consolidated
subsidiaries, minus all intangible assets (other than qualifying servicing
rights), and any net unrealized loss on marketable equity securities.

      The components of Tier 2 capital currently include cumulative
perpetual preferred stock, certain perpetual preferred stock for which the
dividend rate may be reset periodically, mandatory convertible securities,
subordinated debt, intermediate preferred stock, allowance for possible
loan losses and up to 45% of pretax net unrealized holding gains on
available for sale equity securities with readily determinable market
values.  Allowance for possible loan losses includible in Tier 2 capital is
limited to a maximum of 1.25% of risk-weighted assets. Overall, the amount
of Tier 2 capital that may be included in total capital cannot exceed 100%
of Tier 1 capital.

      The FDIC regulations establish a minimum leverage capital requirement
for banks in the strongest financial and managerial condition, with a
rating of 1 (the highest examination rating of the FDIC for banks) under
the Uniform Financial Institutions Rating System, of not less than a ratio
of 3.0% of Tier 1 capital to total assets.  For all other banks, the
minimum leverage capital requirement is 4.0%, unless a higher leverage
capital ratio is warranted by the particular circumstances or risk profile
of the depository institution.


<PAGE>  28


      The FDIC regulations also require that savings banks meet a risk-
based capital standard.  The risk-based capital standard requires the
maintenance of a ratio of total capital (which is defined as the sum of
Tier 1 capital and Tier 2 capital) to risk-weighted assets of at least 8%
and a ratio of Tier 1 capital to risk-weighted assets of at least 4%.  In
determining the amount of risk-weighted assets, all assets, plus certain
off balance sheet items, are multiplied by a risk-weight of 0% to 100%,
based on the risks the FDIC believes are inherent in the type of asset or
item.

      The federal banking agencies, including the FDIC, have also adopted
regulations to require an assessment of an institution's exposure to
declines in the economic value of a bank's capital due to changes in
interest rates when assessing the bank's capital adequacy.  Under such a
risk assessment, examiners will evaluate a bank's capital for interest rate
risk on a case-by-case basis, with consideration of both quantitative and
qualitative factors.  According to the agencies, applicable considerations
include the quality of the bank's interest rate risk management process,
the overall financial condition of the bank and the level of other risks at
the bank for which capital is needed.  Institutions with significant
interest rate risk may be required to hold additional capital.  The
agencies also issued a joint policy statement providing guidance on
interest rate risk management, including a discussion of the critical
factors affecting the agencies' evaluation of interest rate risk in
connection with capital adequacy.

      The following table shows the Bank's leverage ratio, its Tier 1 risk-
based capital ratio, and its total risk-based capital ratio, at September
30, 2001:

<TABLE>
<CAPTION

                                            As of September 30, 2001
                             -----------------------------------------------------
                             Regulatory                 Regulatory
                              Capital     Percent of     Capital        Percent of
                               Amount     Assets (1)    Requirements      Assets
                             -----------------------------------------------------
                                             (Dollars in thousands)


                            <c>          <c>            <c>             <c>
Total risk-based capital       $24,323      18.15%         $10,720         8.00%
Tier 1 risk-based capital      $23,407      17.47%         $ 5,360         4.00%
Tier 1 leverage capital        $23,407      10.48%         $ 8,933         4.00%

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

      At September 30, 2001, the Bank was considered "well capitalized"
under FDIC guidelines.

      Activity Restrictions on State-Chartered Banks.  Section 24 of the
Federal Deposit Insurance Act, as amended (the "FDIA"), which was added by
the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), generally limits the activities and investments of state-
chartered FDIC insured banks and their subsidiaries to those permissible
for federally-chartered national banks and their subsidiaries, unless such
activities and investments are specifically exempted by Section 24 or
consented to by the FDIC.

      Section 24 provides an exception for investments by a bank in common
and preferred stocks listed on a national securities exchange or the shares
of registered investment companies if: (a) the bank held such types of
investments during the 14-month period from December 31, 1990 through
November 26, 1991; (b) the state in which the bank is chartered permitted
such investments as of December 31, 1991; and (c) the bank notifies the
FDIC and obtains approval from the FDIC to make or retain such investments.
Upon receiving such FDIC approval, an institution's investment in such
equity securities will be subject to an aggregate limit up to the amount of
its Tier 1 capital.  The Bank received approval from the FDIC to retain and
acquire such equity investments subject to a maximum permissible investment
equal to the lesser of 100% of the Bank's Tier 1 capital or the maximum
permissible amount specified by the Massachusetts banking laws.  Section 24
also provides an exception for majority owned


<PAGE>  29


subsidiaries of a bank, but Section 24 limits the activities of such
subsidiaries are limited to those permissible for a national bank,
permissible under Section 24 of the FDIA and the FDIC regulations issued
pursuant thereto, or as approved by the FDIC.

      Before making a new investment or engaging in a new activity not
permissible for a national bank or otherwise permissible under Section 24
of the FDIC regulations thereunder, an insured bank must seek approval from
the FDIC to make such investment or engage in such activity.  The FDIC will
not approve the activity unless the bank meets its minimum capital
requirements and the FDIC determines that the activity does not present a
significant risk to the FDIC insurance funds.  Certain activities of
subsidiaries that are engaged in activities permitted for national banks
only through a "financial subsidiary" are subject to additional
restrictions.

      Enforcement.  The FDIC has extensive enforcement authority over
insured savings banks, including the Bank.  This enforcement authority
includes, among other things, the ability to assess civil money penalties,
to issue cease and desist orders and to remove directors and officers.  In
general, these enforcement actions may be initiated in response to
violations of laws and regulations and to unsafe or unsound practices.

      The FDIC is required, with certain exceptions, to appoint a receiver
or conservator for an insured state bank if that bank is "critically
undercapitalized."  For this purpose, "critically undercapitalized" means
having a ratio of tangible capital to total assets of less than 2%.  The
FDIC may also appoint a conservator or receiver for a state bank on the
basis of the institution's financial condition or upon the occurrence of
certain events, including: (a) insolvency (whereby the assets of the bank
are less than its liabilities to depositors and others); (b) substantial
dissipation of assets or earnings through violations of law or unsafe or
unsound practices; (c) existence of an unsafe or unsound condition to
transact business; (d) likelihood that the bank will be unable to meet the
demands of its depositors or to pay its obligations in the normal course of
business; and (e) insufficient capital or the incurring or likely incurring
of losses that will deplete substantially all of the institution's capital
with no reasonable prospect of replenishment of capital without federal
assistance.

      Deposit Insurance.  Pursuant to FDICIA, the FDIC established a system
for setting deposit insurance premiums based upon the risks a particular
bank or savings association posed to its deposit insurance funds.  Under
the risk-based deposit insurance assessment system, the FDIC assigns an
institution to one of three capital categories based on the institution's
financial information, as of the reporting period ending six months before
the assessment period.  The three capital categories are (1) well
capitalized, (2) adequately capitalized and (3) undercapitalized.  With
respect to the capital ratios, institutions are classified as well
capitalized, adequately capitalized or undercapitalized using ratios that
are substantially similar to the prompt corrective action capital ratios
discussed below.  The FDIC also assigns an institution to supervisory
subgroup based on a supervisory evaluation provided to the FDIC by the
institution's primary federal regulator and information that the FDIC
determines to be relevant to the institution's financial condition and the
risk posed to the deposit insurance funds which may include information
provided by the institution's state supervisor.

      An institution's assessment rate depends on the capital category and
supervisory category to which it is assigned.  Under the final risk-based
assessment system, there are nine assessment risk classifications to which
different assessment rates are applied or combinations of capital groups
and supervisory subgroups.  Assessment rates for deposit insurance
currently range from 0 basis points to 27 basis points.  The capital and
supervisory subgroup to which an institution is assigned by the FDIC is
confidential and may not be disclosed.  A bank's rate of deposit insurance
assessments will depend upon the category and subcategory to which the bank
is assigned by the FDIC.  Any increase in insurance assessments could have
an adverse effect on the earnings of insured institutions, including the
Bank.

      Under the Deposit Insurance Funds Act of 1996 (the "Funds Act"), the
assessment base for the payments on the bonds (the "FICO bonds") issued in
the late 1980's by the Financing Corporation to recapitalize the now
defunct Federal Savings and Loan Insurance Corporation was expanded to
include, beginning January 1, 1997, the deposits of BIF-insured
institutions, such as the Bank. The annual rate of


<PAGE>  30


assessments for the payments on the FICO bonds for the quarter period
beginning on July 1, 2001 was 0.0188% for BIF-assessable deposits.

      Under the FDIA, the FDIC may terminate the insurance of an
institution's deposits upon a finding that the institution has engaged in
unsafe or unsound practices, is in an unsafe or unsound condition to
continue operations or has violated any applicable law, regulation, rule,
order or condition imposed by the FDIC.  The Bank's management does not
know of any practice, condition or violation that might lead to termination
of deposit insurance.

      Transactions with Affiliates of the Bank.  Transactions between an
insured bank, such as the Bank, and any of its affiliates is governed by
Sections 23A and 23B of the Federal Reserve Act.  An affiliate of a bank is
any company or entity that controls, is controlled by or is under common
control with the bank.  Currently, a subsidiary of a bank that is not also
a depository institution is not treated as an affiliate of the bank for
purposes of Sections 23A and 23B, but the FRB has proposed a comprehensive
regulation implementing Sections 23A and 23B, which could establish certain
exceptions to this policy.  Sections 23A and 23B (1) limit the extent to
which the bank or its subsidiaries may engage in "covered transactions"
with any one affiliate to an amount equal to 10% of such bank's capital
stock and retained earnings, and limit on all such transactions with all
affiliates to an amount equal to 20% of such capital stock and retained
earnings, and (2) require that all such transactions be on terms that are
consistent with safe and sound banking practices.  The term "covered
transaction" includes the making of loans, purchase of assets, issuance of
guarantees and other similar types of transactions.  Further, most loans by
a bank to any of its affiliates must be secured by collateral in amounts
ranging from 100 to 130 percent of the loan amounts.  In addition, any
covered transaction by a bank with an affiliate and any purchase of assets
or services by a bank from an affiliate must be on terms that are
substantially the same, or at least as favorable, to the bank as those that
would be provided to a non-affiliate.

      Prohibitions Against Tying Arrangements.  Banks are subject to the
prohibitions of 12 U.S.C. 1972 on certain tying arrangements.  A depository
institution is prohibited, subject to certain exceptions, from extending
credit to or offering any other service, or fixing or varying the
consideration for such extension of credit or service, on the condition
that the customer obtain some additional service from the institution or
certain of its affiliates or not obtain services of a competitor of the
institution.

      Uniform Real Estate Lending Standards.  Pursuant to FDICIA, the
federal banking agencies adopted uniform regulations prescribing standards
for extensions of credit that are secured by liens on interests in real
estate or made for the purpose of financing the construction of a building
or other improvements to real estate.  Under the joint regulations adopted
by the federal banking agencies, all insured depository institutions must
adopt and maintain written policies that establish appropriate limits and
standards for extensions of credit that are secured by liens or interests
in real estate or are made for the purpose of financing permanent
improvements to real estate.  These policies must establish loan portfolio
diversification standards, prudent underwriting standards (including loan-
to-value limits) that are clear and measurable, loan administration
procedures, and documentation, approval and reporting requirements.  The
real estate lending policies must reflect consideration of the Interagency
Guidelines for Real Estate Lending Policies that have been adopted by the
federal bank regulators.

      The Interagency Guidelines, among other things, require a depository
institution to establish internal loan-to-value limits for real estate
loans that are not in excess of the following supervisory limits:

      *     for loans secured by raw land, the supervisory loan-to-value
            limit is 65% of the value of the collateral;
      *     for land development loans (i.e., loans for the purpose of
            improving unimproved property prior to the erection of
            structures), the supervisory limit is 75%;
      *     for loans for the construction of commercial, multi-family or
            other non-residential property, the supervisory limit is 80%;


<PAGE>  31


      *     for loans for the construction of one- to four-family
            properties, the supervisory limit is 85%; and
      *     for loans secured by other improved property (e.g., farmland,
            completed commercial property and other income-producing
            property including non-owner occupied, one- to four-family
            property), the limit is 85%.

      Although no supervisory loan-to-value limit has been established for
owner-occupied, one- to four-family and home equity loans, the Interagency
Guidelines state that for any such loan with a loan-to-value ratio that
equals or exceeds 90% at origination, an institution should require
appropriate credit enhancement in the form of either mortgage insurance or
readily marketable collateral.

      Community Reinvestment Act.  Under the Community Reinvestment Act,
any insured depository institution, including the Bank, has a continuing
and affirmative obligation consistent with its safe and sound operation to
help meet the credit needs of its entire community, including low- and
moderate-income neighborhoods.  The CRA does not establish specific lending
requirements or programs for financial institutions nor does it limit an
institution's discretion to develop the types of products and services that
it believes are best suited to its particular community.  The CRA requires
the FDIC, in connection with its examination of a savings bank, to assess
the depository institution's record of meeting the credit needs of its
community and to take such record into account in its evaluation of certain
applications by such institution, including applications for additional
branches and acquisitions.

      Among other things, the current CRA regulations replace the prior
process-based assessment factors with a new evaluation system that rates an
institution based on its actual performance in meeting community needs.  In
particular, the current evaluation system focuses on three tests: (1) a
lending test, to evaluate the institution's record of making loans in its
service areas; (2) an investment test, to evaluate the institution's record
of investing in community development projects, affordable housing, and
programs benefiting low or moderate income individuals and businesses; and
(3) a service test, to evaluate the institution's delivery of services
through its branches, ATMs and other offices.

      For a small bank, which is a bank with less than $250 million in
assets in the year prior to the CRA examination, such as the Bank, the CRA
assessment will be based on: (a) the bank's loan-to-deposit ratio; (b) the
percentage of the bank's loans and any other appropriate lending related
activities located in the bank's assessment areas; (c) the bank's record of
lending to, and other appropriate lending related activities for borrowers
of different income levels and businesses and farms of different sizes; (d)
the geographic distribution of the bank's loans; and (e) the bank's record
in acting in response to written complaints about the bank's performance in
helping to meet the credit needs of its assessment areas.

      The CRA requires the FDIC to provide a written evaluation of an
institution's CRA performance utilizing a four-tiered descriptive rating
system and requires public disclosure of an institution's CRA rating.  The
Bank received a "satisfactory" rating in its CRA examination conducted by
the FDIC on March 1, 1999.

      Safety and Soundness Standards.  Pursuant to the requirements of
FDICIA, as amended by the Riegle Community Development and Regulatory
Improvement Act of 1994, each federal banking agency, including the FDIC,
has adopted guidelines establishing general standards relating to internal
controls, information and internal audit systems, loan documentation,
credit underwriting, interest rate exposure, asset growth, asset quality,
earnings, and compensation, fees and benefits.  In general, the guidelines
require, among other things, appropriate systems and practices to identify
and manage the risks and exposures specified in the guidelines.  The
guidelines prohibit excessive compensation as an unsafe and unsound
practice and describe compensation as excessive when the amounts paid are
unreasonable or disproportionate to the services performed by an executive
officer, employee, director, or principal stockholder.

      In addition, the FDIC adopted regulations to require a bank that is
given notice by the FDIC that it is not satisfying any of such safety and
soundness standards to submit a compliance plan to the FDIC.  If, after
being so notified, a bank fails to submit an acceptable compliance plan or
fails in any material


<PAGE>  32


respect to implement an accepted compliance plan, the FDIC may issue an
order directing corrective and other actions of the types to which a
significantly undercapitalized institution is subject under the "prompt
corrective action" provisions of FDICIA.  If a bank fails to comply with
such an order, the FDIC may seek to enforce such an order in judicial
proceedings and to impose civil monetary penalties.

      Prompt Corrective Action.  FDICIA also established a system of prompt
corrective action to resolve the problems of undercapitalized institutions.
The FDIC, as well as the other federal banking regulators, adopted
regulations governing the supervisory actions that may be taken against
undercapitalized institutions.  The regulations establish five categories,
consisting of "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized."  The FDIC's regulations defines the five capital
categories as follows.  Generally, an institution will be treated as "well
capitalized" if its ratio of total capital to risk-weighted assets is at
least 10%, its ratio of Tier 1 capital to risk-weighted assets is at least
6%, its ratio of Tier 1 capital to total assets is at least 5%, and it is
not subject to any order or directive by the FDIC to meet a specific
capital level.  An institution will be treated as "adequately capitalized"
if its ratio of total capital to risk-weighted assets is at least 8%, its
ratio of Tier 1 capital to risk-weighted assets is at least 4%, and its
ratio of Tier 1 capital to total assets is at least 4% (3% if the bank
receives the highest rating under the Uniform Financial Institutions Rating
System) and it is not a well-capitalized institution.  An institution that
has total risk-based capital of less than 8%, Tier 1 risk-based-capital of
less than 4% or a leverage ratio that is less than 4% (or less than 3% if
the institution is rated a composite "1" under the Uniform Financial
Institutions Rating System) will be treated as "undercapitalized."  An
institution that has total risk-based capital of less than 6%, Tier 1
capital of less than 3% or a leverage ratio that is less than 3% will be
treated as "significantly undercapitalized," and an institution that has a
tangible capital to assets ratio equal to or less than 2% would be deemed
to be "critically undercapitalized."

      The severity of the action authorized or required to be taken under
the prompt corrective action regulations increases as a bank's capital
decreases within the three undercapitalized categories.  All banks are
prohibited from paying dividends or other capital distributions or paying
management fees to any controlling person if, following such distribution,
the bank would be undercapitalized.  The FDIC is required to monitor
closely the condition of an undercapitalized bank and to restrict the
growth of its assets.  An undercapitalized bank is required to file a
capital restoration plan within 45 days of the date the bank receives
notice that it is within any of the three undercapitalized categories, and
the plan must be guaranteed by any parent holding company.  The aggregate
liability of a parent holding company is limited to the lesser of: (a) an
amount equal to the five percent of the bank's total assets at the time it
became "undercapitalized," and (b) the amount that is necessary (or would
have been necessary) to bring the bank into compliance with all capital
standards applicable with respect to such bank as of the time it fails to
comply with the plan.  If a bank fails to submit an acceptable plan, it is
treated as if it were "significantly undercapitalized."  Banks that are
significantly or critically undercapitalized are subject to a wider range
of regulatory requirements and restrictions.

      The FDIC has a broad range of grounds under which it may appoint a
receiver or conservator for an insured depositary bank.  If one or more
grounds exist for appointing a conservator or receiver for a bank, the FDIC
may require the bank to issue additional debt or stock, sell assets, be
acquired by a depository bank holding company or combine with another
depository bank.  Under FDICIA, the FDIC is required to appoint a receiver
or a conservator for a critically undercapitalized bank within 90 days
after the bank becomes critically undercapitalized or to take such other
action that would better achieve the purposes of the prompt corrective
action provisions.  Such alternative action can be renewed for successive
90-day periods.  However, if the bank continues to be critically
undercapitalized on average during the quarter that begins 270 days after
it first became critically undercapitalized, a receiver must be appointed,
unless the FDIC makes certain findings that the bank is viable.

      Loans to a Bank's Insiders.  A bank's loans to its executive
officers, directors, any owner of 10% or more of its stock (each, an
"insider") and any of certain entities affiliated to any such person (an
insider's related interest) are subject to the conditions and limitations
imposed by Section 22(h) of the Federal Reserve Act and the FRB's
Regulation O thereunder.  Under these restrictions, the aggregate amount of
the loans to any insider and the insider's related interests may not exceed
the loans-to-one-borrower limit applicable to national banks, which is
comparable to the


<PAGE>  33


loans-to-one-borrower limit applicable to the Bank's loans.  See
"Massachusetts Banking Regulation - Loans-to-One Borrower Limitations."
All loans by a bank to all insiders and insiders' related interests in the
aggregate may not exceed the bank's unimpaired capital and unimpaired
retained earnings.  With certain exceptions, loans to an executive officer,
other than loans for the education of the officer's children and certain
loans secured by the officer's residence, may not exceed the lesser of  (1)
$100,000 or (2) the greater of $25,000 or 2.5% of the bank's capital and
unimpaired retained earnings.  Regulation O also requires that any proposed
loan to an insider or a related interest of that insider be approved in
advance by a majority of the Board of Directors of the bank, with any
interested director not participating in the voting, if such loan, when
aggregated with any existing loans to that insider and the insider's
related interests, would exceed either (1) $500,000 or (2) the greater of
$25,000 or 5% of the bank's unimpaired capital and retained earnings.
Generally, such loans must be made on substantially the same terms as, and
follow credit underwriting procedures that are not less stringent than,
those that are prevailing at the time for comparable transactions with
other persons.  An exception is made for extensions of credit made pursuant
to a benefit or compensation plan of a bank that is widely available to
employees of the bank and that does not give any preference to insiders of
the bank over other employees of the bank.

      In addition, provisions of the BHCA prohibit extensions of credit to
a bank's insiders and their related interests by any other institution that
has a correspondent banking relationship with the bank, unless such
extension of credit is on substantially the same terms as those prevailing
at the time for comparable transactions with other persons and does not
involve more than the normal risk of repayment or present other unfavorable
features.

Federal Home Loan Bank System

      The Bank is a member of the FHLB, which is one of 12 regional Federal
Home Loan Banks, that administers the home financing credit function of
savings institutions. Each FHLB serves as a reserve or central bank for its
members within its assigned region. It is funded primarily from proceeds
derived from the sale of consolidated obligations of the Federal Home Loan
Bank System. It makes loans or advances to members in accordance with
policies and procedures, established by the board of directors of the FHLB,
which are subject to the oversight of the Federal Housing Finance Board.
All advances from the FHLB are required to be fully secured by sufficient
collateral as determined by the FHLB. In addition, all long-term advances
are required to provide funds for residential home financing.

      As a member, the Bank is required to purchase and maintain stock in
the FHLB.  At September 30, 2001, the Bank was in compliance with this
requirement.

Federal Reserve System

      Under FRB regulations, the Bank is required to maintain noninterest-
earning reserves against its transaction accounts (primarily NOW and
regular checking accounts).  The FRB regulations generally require that
reserves of 3% must be maintained against aggregate transaction accounts of
$37.3 million or less (subject to adjustment by the FRB) and an initial
reserve of $1.284 million plus 10% (subject to adjustment by the FRB
between 8% and 14%) against that portion of total transaction accounts in
excess of $42.8 million.  The first $5.5 million of otherwise reservable
balances (subject to adjustments by the FRB) are exempted from the reserve
requirements.  The Bank is in compliance with the foregoing requirements.
Because required reserves must be maintained in the form of either vault
cash, a noninterest-bearing account at a Federal Reserve Bank or a pass-
through account as defined by the FRB, the effect of this reserve
requirement is to reduce the Bank's interest-earning assets.

Holding Company Regulation

      Federal Regulation.  The MHC and the Company are governed as bank
holding companies under the BHCA.  Bank holding companies are subject to
examination, regulation and periodic reporting under the BHCA, as
administered by the FRB.  The FRB has adopted capital adequacy guidelines
for bank holding companies on a consolidated basis substantially similar to
those of the FDIC for the Bank.  As of


<PAGE>  34


September 30, 2001, the Company's total capital and Tier 1 capital ratios
for the MHC and the Company exceed these minimum capital requirements.

      Regulations of the FRB provide that a bank holding company must serve
as a source of strength to any of its subsidiary banks and must not conduct
its activities in an unsafe or unsound manner.  Under the prompt corrective
action provisions of FDICIA, a bank holding company parent of an
undercapitalized subsidiary bank would be directed to guarantee, within
limitations, the capital restoration plan that is required of such an
undercapitalized bank.  See "- Federal Banking Regulation - Prompt
Corrective Action" above.  If the undercapitalized bank fails to file an
acceptable capital restoration plan or fails to implement an accepted plan,
the FRB may prohibit the bank holding company parent of the
undercapitalized bank from paying any dividend or making any other form of
capital distribution without the prior approval of the FRB.

      As bank holding companies, the MHC and the Company are required to
obtain the prior approval of the FRB to acquire all, or substantially all,
of the assets of any bank or bank holding company.  Prior FRB approval are
required for the MHC or the Company to acquire direct or indirect ownership
or control of any voting securities of any bank or bank holding company if,
after giving effect to such acquisition, it would, directly or indirectly,
own or control more than 5% of any class of voting shares of such bank or
bank holding company.

      A bank holding company is required to give the FRB prior written
notice of any purchase or redemption of its outstanding equity securities
if the gross consideration for the purchase or redemption, when combined
with the net consideration paid for all such purchases or redemptions
during the preceding 12 months, will be equal to 10% or more of the
company's consolidated net worth.  The FRB may disapprove such a purchase
or redemption if it determines that the proposal would constitute an unsafe
and unsound practice, or would violate any law, regulation, FRB order or
directive, or any condition imposed by, or written agreement with, the FRB.
Such notice and approval is not required for a bank holding company that
would be treated as "well capitalized" under applicable regulations of the
FRB, that has received a composite "1" or "2" rating at its most recent
bank holding company inspection by the FRB, and that is not the subject of
any unresolved supervisory issues.

      In addition, a bank holding company that has elected to be regulated
as a financial holding company under the GLB Act, such as the Company and
the MHC, may generally engage in securities, insurance and other activities
that are financial in nature or incidental to a financial activity.  In
order to have qualified to be a financial holding company, each of the bank
holding companies' depository institution subsidiaries must have been "well
capitalized," "well managed," have at least a "satisfactory" CRA rating at
its most recent examination and have filed a certification with the FRB
that it elects to become a financial holding company.

      Under the Federal Deposit Insurance Act, depository institutions are
liable to the FDIC for losses suffered or anticipated by the FDIC in
connection with the default of a commonly controlled depository institution
or any assistance provided by the FDIC to such an institution in danger of
default.  This law would have potential applicability if the MHC or the
Company ever acquired as a separate subsidiary a depository institution in
addition to the Bank.

      Massachusetts Regulation.  Under the Massachusetts banking laws, a
company owning or controlling two or more banking institutions, including a
savings bank, is regulated as a bank holding company.  The term "company"
is defined by the Massachusetts banking laws similarly to the definition of
"company" under the BHCA.  Each Massachusetts bank holding company must:
(a) obtain the approval of the Massachusetts Board of Bank Incorporation
before engaging in certain transactions, such as the acquisition of more
than 5% of the voting stock of another banking institution; and (b) must
register, and file certain reports, with the Division and is subject to
examination by the Division.  The MHC or the Company will become a
Massachusetts bank holding company if they acquire a second banking
institution and hold and operate it separately from the Bank.


<PAGE>  35


Acquisition of the Company

      Under federal law, no person may acquire control of the Company or
the Bank without first obtaining, as summarized below, approval of such
acquisition of control by the FRB.

      Federal Restrictions.  Under the federal Change in Bank Control Act,
any person (including a company), or group acting in concert, seeking to
acquire 10% or more of the outstanding shares of the Company's common stock
will be required to submit prior notice to the FRB, unless the FRB has
found that the acquisition of such shares will not result in a change in
control of the Company. Under the BHCA, the FRB has 60 days within which to
act on such notices, taking into consideration certain factors, including
the financial and managerial resources of the acquiror, the convenience and
needs of the communities served by the Company and the Bank, and the anti-
trust effects of the acquisition.  Under the BHCA, any company would be
required to obtain prior approval from the FRB before it may obtain
"control," within the meaning of the BHCA, of the Company.  The term
"control" is defined generally under the BHCA to mean the ownership or
power to vote 25% more of any class of voting securities of an institution
or the ability to control in any manner the election of a majority of the
institution's directors.  An existing bank holding company would require
FRB approval prior to acquiring more than 5% of any class of voting stock
of the Company.

      Massachusetts Restrictions.  Under the Massachusetts banking laws,
the prior approval of the Division is required before any person may
acquire a Massachusetts bank holding company, such as the Company.  For
this purpose, the term "person" is defined broadly to mean a natural person
or a corporation, company, partnership, or other forms of organized
entities.  The term "acquire" is defined differently for an existing bank
holding company and for other companies or persons.  A bank holding company
will be treated as "acquiring" a Massachusetts bank holding company if the
bank holding company acquires more than 5% of any class of the voting
shares of the bank holding company.  Any other person will be treated as
"acquiring" a Massachusetts bank holding company if it acquires ownership
or control of more than 25% of any class of the voting shares of the bank
holding company.


<PAGE>  36


Dividend Waivers by the MHC

      Any dividend declared by the Company that is waived by the MHC will
be subject to the following general restrictions:

      Massachusetts Restrictions.  Under applicable Massachusetts
regulations, a mutual holding company may not waive any dividends to be
paid by any of its subsidiary institutions if any shares of the stock to
which the waiver would apply is held by an insider (any officer, director,
or corporator of the mutual holding company or a subsidiary banking
institution) or a stock benefit plan of the mutual holding company unless
prior written notice of the waiver has been given to the Division and the
Division does not object to the waiver.  The Division may not object to a
dividend waiver notice if: (a) the waiver would not be detrimental to the
safe and sound operation of the subsidiary banking institution, and (b) the
board of trustees of the mutual holding company expressly determines, as
evidenced by a resolution of the board of trustees, that such waiver is
consistent with the trustees' fiduciary duties to the mutual members of the
mutual holding company.

      Federal Restrictions.  In connection with its approval of the
Reorganization, the FRB imposed certain conditions on the waiver by the MHC
of dividends paid on the common stock by the Company.  Specifically, the
FRB requires the MHC obtain prior approval of the FRB before the MHC may
waive any dividends from the Company.  In addition, the terms of the FRB
approval of the Reorganization provides that any dividends waived by the
MHC will not be available for payment to its public stockholders of the
Company (i.e., stockholders except for the MHC) or may be excluded from the
Company's capital for purposes of calculating dividends payable to the
public stockholders.  Moreover, the Company is required to maintain the
cumulative amount of dividends waived by the MHC in a restricted capital
account that would be added to the liquidation account established in the
reorganization.  This amount is not available for distribution to public
stockholders.  The restricted capital account and liquidation account
amounts would not be reflected in the Company's financial statements, but
would be considered as a notional or memorandum account of the Company.
These accounts would be maintained in accordance with the laws, rules,
regulations and policies of the Division and the plan of reorganization.
In addition, if the MHC converted to stock form in the future, (commonly
referred to as a second-step conversion), any waived dividends would reduce
the percentage of the converted company's shares of common stock issued to
public stockholders in connection with any such transaction.

      The MHC has not waived dividends declared by the Company.  If the MHC
decides that it is in its best interest to waive a particular dividend to
be paid by the Company and the FRB approves such waiver, then the Company
will pay such dividend only to its public stockholders.  The amount of the
dividend waived by the MHC would be treated in the manner described above.
The MHC's decision as to whether or not to waive a particular dividend will
depend on a number of factors, including the MHC's capital needs, the
investment alternatives available to the MHC as compared to those available
to the Company, and the possibility of regulatory approvals.  The Company
cannot guarantee: (1) the MHC will waive dividends paid by the Company; (2)
that if the application is made to waive a dividend, that the FRB will
approve such dividend waiver request; or (3) what conditions might be
imposed by the Federal Reserve Board on any dividend waiver.

Federal Securities Laws

      The Company's common stock issued in the stock offering was
registered with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").  The Company is therefore subject to the
information, proxy solicitation, insider trading restrictions and other
requirements of the SEC under the Exchange Act.  The Company is also
required to file annual, quarterly and periodic reports with the SEC.


<PAGE>  37


ITEM 2.     DESCRIPTION OF PROPERTY

      The Company conducts its business at the main office of the Bank and
its six retail banking offices, five of which are full service branches.
As of September 30, 2001, the properties and leasehold improvements owned
by the Company and the Bank had an aggregate net book value of $1.5
million.

<TABLE>
<CAPTION>

                                     Original Date                          Deposits
                        Leased or      Leased or      Date of Lease     at September 30,
Location                  Owned        Acquired        Expiration             2001
----------------------------------------------------------------------------------------
                                                                         (In thousands)


                      <c>            <c>           <c>                   <c>
Main Office:
  100 E. Main Street     Owned          06/10/75      N/A                   $ 69,866
  Westborough, MA

Branch Offices:
  33 W. Main Street      Owned          05/01/54      N/A                   $ 35,994
  Westborough, MA

  53 W. Main Street      Owned          07/01/81      N/A                   $ 49,075
  Northborough, MA

  19 Maple Avenue        Leased         12/01/95      11/30/00              $ 18,939
  Shrewsbury, MA

  Shaw's Supermarket     Leased         05/01/99      04/30/04              $  5,163
  Shrewsbury, MA

Other Offices:
  The Willows(1)         Leased         08/01/87      Tenant at Will        $  6,061
  One Lyman Street
  Westborough, MA

  Operations Center      Leased         01/01/98      Tenant at Will               0
  176 E. Main Street
  Westborough, MA
                                                                            --------
      Total Deposits                                                        $185,098

<FN>
--------------------
<F1>  This office provides limited retail banking services to the residents
      of the Willows.  It is not open to the general public and maintains
      restricted operating hours.
</FN>
</TABLE>


<PAGE>  38


ITEM 3.     LEGAL PROCEEDINGS

      Although the Bank and the Company, from time to time, are involved in
various legal proceedings in the normal course of business, there are no
material legal proceedings to which the Bank or the Company, its directors
or its officers is a party or to which any of its property is subject as of
the date of this Form 10-KSB.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended September
30, 2001.

PART II

ITEM 5.     MARKET FOR THE COMPANY COMMON STOCK AND RELATED STOCKHOLDER
            MATTERS

      Information relating to the market for the Company's common equity,
related stockholder matters and payment of dividends by the Company appears
in the 2001 Annual Report to Shareholders, which is attached to this Form
10-KSB as Exhibit 13, and is incorporated herein by reference.

ITEM 6.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

      Certain of the above-captioned information appears under
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" in the 2001 Annual Report to Shareholders, which is attached to
this Form 10-KSB as Exhibit 13, and is incorporated herein by reference.

ITEM 7.     FINANCIAL STATEMENTS

      The following information appearing in the Company's 2001 Annual
Report to Shareholders, which is attached to this Form 10-KSB as Exhibit
13, is incorporated herein by reference.

      Annual Report Section                          Pages in Annual Report
      ---------------------                          ----------------------

      Report of Independent Auditors                          F-1

      Consolidated Balance Sheets as of                       F-2
      September 30, 2001 and 2000

      Consolidated Statements of Income for the
      Years Ended September 30, 2001, 2000 and 1999           F-3

      Consolidated Statements of Changes in
      Stockholders' Equity for the Years Ended
      September 30, 2001, 2000 and 1999                       F-4

      Consolidated Statements of Cash Flows for the
      Years Ended September 30, 2001, 2000 and 1999           F-5

      Notes to the Consolidated Financial Statements          F-7


<PAGE>  39


ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

      There has been no Current Report on Form 8-K filed within 24 months
prior to the date of the most recent financial statements reporting a
change of accountants and/or reporting disagreements on any matter of
accounting principle or financial statement disclosure.

PART III

ITEM 9.     DIRECTORS AND PRINCIPAL OFFICERS OF THE BANK AND THE COMPANY

      The information relating to directors and executive officers of the
Company is incorporated herein by reference to the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on January 31,
2002, a copy of which will be filed not later than 120 days after the close
of fiscal year.

ITEM 10.    EXECUTIVE COMPENSATION

      The information relating to executive compensation is incorporated
herein by reference to the Company's Proxy Statement for the Annual Meeting
of Shareholders to be held on January 31, 2002, a copy of which was filed
with the SEC on December 28, 2001.

ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The information relating security ownership of certain beneficial
owners and management is incorporated herein by reference to the Company's
Proxy Statement for the Annual Meeting of Shareholders to be held on
January 31, 2002, a copy of which was filed with the SEC on December 28,
2001.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information relating to certain relationships and related
transactions is incorporated herein by reference to the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on January 31,
2002, a copy of which was filed with the SEC on December 28, 2001.

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K

      (a)  Exhibits.

      The following exhibits are either filed as part of this report or are
incorporated herein by reference:

      2.1      Plan of Reorganization from Mutual Savings Bank to Mutual
               Holding Company and Stock Issuance Plan of Westborough
               Savings Bank*

      3.1      Articles of Organization of Westborough Financial Services,
               Inc.*

      3.2      Bylaws of Westborough Financial Services, Inc.*

      3.3      Articles of Organization of The Westborough Bank*

      3.4      Bylaws of The Westborough Bank*


<PAGE>  40


      3.5      Charter of Westborough Bancorp, MHC*

      3.6      Bylaws of Westborough Bancorp, MHC*

      3.7      Amendment to Article IV of the Articles of Organization of
               Westborough Financial Services, Inc. filed on December 26,
               2000 as Exhibit A to the Proxy Statement (File No.
               000-27997) is incorporated herein by reference.

      4.1      Articles of Organization of Westborough Financial Services,
               Inc. (See Exhibit 3.1)

      4.2      Bylaws of Westborough Financial Services, Inc. (See
               Exhibit 3.2)

      4.3      Form of Stock Certificate of Westborough Financial Services,
               Inc.*

     10.1(a)   Form of Employee Stock Ownership Plan of Westborough
               Financial Services, Inc.*

     10.1(b)   Form of ESOP Trust Agreement*

     10.2      Form of Executive Employment Agreement, by and between
               Joseph F. MacDonough and Westborough Financial Services,
               Inc.*

     10.3      Form of Executive Employment Agreement, by and between John
               L. Casagrande and Westborough Financial Services, Inc.*

     10.4      Westborough Financial Services, Inc. 2001 Stock Option Plan
               filed on December 26, 2000 as Exhibit C to the Proxy
               Statement (File No. 000-27997) is incorporated herein by
               reference.

     10.5      Westborough Financial Services, Inc. 2001 Recognition and
               Retention Plan filed on December 26, 2000 as Exhibit D to
               the Proxy Statement (File No. 000-27997) is incorporated
               herein by reference.

     10.6      Form of Officers' Deferred Compensation Plan of Westborough
               Financial Services, Inc.

     21.1      Subsidiaries of the Registrant*

     23.1      Consent of Wolf & Company, P.C.

--------------------
*     Incorporated herein by reference Registration Statement on Form SB-2
      (Registration No. 333-80075), as filed with the Securities and
      Exchange Commission on June 4, 1999, as amended.

      (b)   Reports on Form 8-K.

None.


<PAGE>  41


                                 SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                  WESTBOROUGH FINANCIAL SERVICES, INC.

                                  By: /s/ Joseph F. MacDonough
                                  -------------------------------------
                                  President and Chief Executive Officer
                                  (Duly Authorized Representative)

In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

             Name                         Title                     Date
             ----                         -----                     ----

/s/ Walter A. Kinell, Jr.        Chairman of the Board        December 28, 2001
-----------------------------    of Directors
Walter A. Kinell, Jr.

/s/ Joseph F. MacDonough         President, Chief Executive   December 28, 2001
-----------------------------    Officer and Director
Joseph F. MacDonough             (Principal Executive and
                                 Operating Officer)

/s/ Nelson P. Ball               Director                     December 28, 2001
-----------------------------
Nelson P. Ball

/s/ Edward S. Bilzerian          Director                     December 28, 2001
-----------------------------
Edward S. Bilzerian

/s/ David E. Carlstrom           Director                     December 28, 2001
-----------------------------
David E. Carlstrom

/s/ John L. Casagrande Senior    Vice President,              December 28, 2001
-----------------------------    Treasurer, Clerk and
John L. Casagrande               Director (Principal
                                 Financial and
                                 Accounting Officer)

/s/ William W. Cotting, Jr.      Director                     December 28, 2001
-----------------------------
William W. Cotting, Jr.

/s/Robert G. Daniel              Director                     December 28, 2001
-----------------------------
Robert G. Daniel

/s/ Earl W. Hutt                 Director                     December 28, 2001
-----------------------------
Earl W. Hutt

/s/ Robert A. Klugman            Director                     December 28, 2001
-----------------------------
Robert A. Klugman


<PAGE>  42


/s/ Roger B. Leland              Director                     December 28, 2001
-----------------------------
Roger B. Leland

/s/ Paul F. McGrath              Director                     December 28, 2001
-----------------------------
Paul F. McGrath

/s/ Charlotte C. Spinney         Director                     December 28, 2001
-----------------------------
Charlotte C. Spinney

/s/ Phyllis A. Stone             Director                     December 28, 2001
-----------------------------
Phyllis A. Stone

/s/ James E. Tashjian            Director                     December 28, 2001
-----------------------------
James E. Tashjian

/s/ Daniel G. Tear               Director                     December 28, 2001
-----------------------------
Daniel G. Tear


<PAGE>  43