UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996

                           COMMISSION FILE NO. 0-11786

                              VILLAGE BANCORP, INC.

             (Exact name of Registrant as specified in its charter)

         CONNECTICUT                             06-1076844
(State or other jurisdiction of                 (IRS Employer
incorporation or organization)              Identification Number)

       25 PROSPECT STREET    RIDGEFIELD, CONNECTICUT   06877
       (Address of principal executive offices and Zip Code)

Registrant's telephone number, including area code    (203) 438-9551

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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 [  ]

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

            CLASS                      OUTSTANDING AT OCTOBER 31, 1996
-------------------------------      -------------------------------------------
 COMMON STOCK, $3.33 PAR VALUE                   951,617 SHARES


<PAGE>






                              VILLAGE BANCORP, INC.

                                TABLE OF CONTENTS

                                                                        PAGE NO.
                                                                        --------

PART  I.  FINANCIAL INFORMATION:

     ITEM 1.  Financial Statements

         Condensed Consolidated Balance Sheets
           September 30, 1996 and December 31, 1995 (unaudited) ........    1

         Condensed Consolidated Statements of Income For The
           Three Months Ended September 30, 1996 and 1995 (unaudited)
           Nine Months Ended September 30, 1996 and 1995 (unaudited)  ..    2

         Condensed Consolidated Statements of Cash Flows For The
           Nine Months Ended September 30, 1996 and 1995 (unaudited)  ..    3

         Notes to Condensed Consolidated Financial Statements
           (unaudited) .................................................    4

     ITEM 2.  Management's Discussion and Analysis of Financial
              Condition  and  Results of  Operations ...................    8

PART II.  OTHER INFORMATION:

     ITEM 1.  Legal Proceedings ........................................   12

     ITEM 2.  Changes in Securities ....................................   12

     ITEM 3.  Defaults Upon Senior Securities ..........................   12

     ITEM 4.  Results of votes of Security Holders .....................   12

     ITEM 5.  Other Information ........................................   12

     ITEM 6.  (a).  Exhibits ...........................................   12

              (b).  Reports on Form 8-K ................................   12


SIGNATURES .............................................................   13



<PAGE>




VILLAGE BANCORP, INC.
--------------------------------------------------------------------------------


PART  I. - FINANCIAL INFORMATION







<PAGE>




VILLAGE BANCORP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
-------------------------------------------------

ASSETS                                          Sept. 30, 1996  Dec. 31, 1995
------                                          --------------  -------------
                                               (In thousands, except share data)

Cash and due from banks                           $   8,746      $   9,125
Federal funds sold                                    3,150          8,200
                                                  ---------      ---------
Total cash and cash equivalents                      11,896         17,325

Securities:

  Available-for-sale (at fair value)                 12,924         20,482
  Held-to-maturity (market value of
  $17,496 at Sept. 30, 1996 and $14,294 at
  December 31, 1995)                                 17,666         14,080

Loans, net of deferred loan fees - Note C           125,222        119,591
Allowance for loan losses                            (1,242)        (1,311)
                                                  ---------      ---------
Loans - net                                         123,980        118,280

Loans held for sale                                     150            552
Bank premises and equipment - net                     1,522          1,550
Accrued interest and other assets                     3,232          2,008
                                                  ---------      ---------

TOTAL ASSETS                                      $ 171,370      $ 174,277
                                                  =========      =========


LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Deposits:

    Noninterest bearing                           $  16,802      $  17,265
    Interest bearing                                137,705        141,274
                                                  ---------      ---------
    Total deposits                                  154,507        158,539

Accrued interest payable                              1,099          1,161
Other liabilities                                       883            429
                                                  ---------      ---------

    Total liabilities                               156,489        160,129
                                                  ---------      ---------

Stockholders' Equity:

    Common stock, par value $3.33 per share;
      authorized - 2,000,000 shares, issued
      and outstanding, 951,617 at Sept. 30,
      1996 and 950,317 at December 31, 1995           3,169          3,165
    Additional paid-in capital                        7,993          7,982
    Retained earnings                                 3,765          2,960
    Net unrealized (loss) gain on available-
      for-sale securities, net of tax                   (46)            41
                                                  ---------      ---------

    Total stockholders' equity                       14,881         14,148
                                                  ---------      ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $ 171,370      $ 174,277
                                                  =========      =========


SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                      - 1 -


<PAGE>




VILLAGE BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME - (UNAUDITED)
---------------------------------------------------------
<TABLE>
<CAPTION>

                                                THREE MONTHS ENDED    NINE MONTHS ENDED
                                                    SEPT. 30,             SEPT. 30,
                                                 1996      1995        1996       1995
                                                 ----      ----        ----       ----
                                                (In thousands, except per share data)
<S>                                             <C>        <C>        <C>        <C>    
INTEREST INCOME:

    Loans, including fees                       $2,633     $2,665     $7,836     $7,512
    Investment securities:
      Taxable                                      456        386      1,465      1,229
      Tax-exempt                                    33         28         92         84
    Federal funds sold                              43        140        227        300
                                                 -----      -----      -----      -----

    Total interest income                        3,165      3,219      9,620      9,125

INTEREST EXPENSE ON DEPOSITS                     1,170      1,282      3,727      3,370
                                                 -----      -----      -----      -----

NET INTEREST INCOME                              1,995      1,937      5,893      5,755

PROVISION FOR LOAN LOSSES                           30         75         90        180
                                                 -----      -----      -----      -----

NET INTEREST INCOME AFTER PROVISION

    FOR LOAN LOSSES                              1,965      1,862      5,803      5,575
                                                 -----      -----      -----      -----

OTHER INCOME:

    Security gains/(losses) - net                   (7)        (8)        (5)        (2)
    Other operating income                         124        118        371        383
                                                 -----      -----      -----      -----
    Total other income                             117        110        366        381
                                                 -----      -----      -----      -----

OTHER EXPENSES:

    Salaries and employee benefits                 768        714      2,274      2,261
    Net occupancy                                  136        137        431        406
    Furniture and equipment                         67         69        202        211
    Data processing services                       137        129        398        358
    Regulatory assessments                           1         (5)         3        129
    Printing, stationery and supplies               46         56        126        157
    Other operating expenses                       419        299        984        830
                                                 -----      -----      -----      -----
    Total other expenses                         1,574      1,399      4,418      4,352
                                                 -----      -----      -----      -----

INCOME BEFORE PROVISION FOR INCOME TAXES           508        573      1,751      1,604
PROVISION FOR INCOME TAXES                          50        255        480        685
                                                 -----      -----      -----      -----

NET INCOME                                      $  458     $  318     $1,271     $ 919
                                                ======     ======     ======     =====

PER SHARE DATA - Note E:

Cash dividends declared                         $  .17     $  .11     $  .49     $  .33
Net income                                      $  .48     $  .34     $ 1.34     $  .97
Number of shares outstanding                    951,617    946,633    951,617    946,633

</TABLE>


SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                      - 2 -


<PAGE>




VILLAGE BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (UNAUDITED)
-------------------------------------------------------------

                                                     Nine Months Ended Sept. 30,
                                                              1996       1995
                                                              ----       ----
OPERATING ACTIVITIES:                                          (In thousands)

Net income                                                 $  1,271    $    919
Adjustments to reconcile net income to net cash
 provided by operating activities:

    Provision for loan losses                                    90         180
    Provision for depreciation and amortization                 183         194
    (Accretion) amortization of investment security
    (premiums) discounts - net                                 (224)       (118)
    Net decrease in deferred loan fees                           (8)        (51)
    (Decrease) increase in interest payable                     (62)        737
    (Increase) decrease in accrued int. and other assets     (1,159)        193
    Increase in other liabilities                               454          71
    Origination of loans for sale                            (6,428)     (2,016)
    Proceeds from sales of loans                              6,830       1,891
                                                           --------    --------

Net cash provided by operating activities                       947       2,000
                                                           --------    --------

INVESTING ACTIVITIES:

Proceeds from sales of available-for-sale securities          2,177       5,335
Proceeds from maturities of avail.-for-sale securities       13,732       2,483
Proceeds from maturities of held-to-maturity securities       5,775       9,819
Purchases of available-for-sale securities                   (8,207)    (10,614)
Purchases of held-to-maturity securities                     (9,433)       (347)
Net increase in loans                                        (5,782)    (14,352)
Purchases of premises and equipment                            (155)       (154)
                                                           --------    --------

Net cash used in investing activities                        (1,893)     (7,830)
                                                           --------    --------

FINANCING ACTIVITIES:

Net (decrease) increase in deposits                          (4,032)      5,888
Cash dividends                                                 (466)       (312)
Net proceeds from issuance of common stock                       15           3
                                                           --------    --------

Net cash (used in) provided by financing activities          (4,483)      5,579
                                                           --------    --------

DECREASE IN CASH AND CASH EQUIVALENTS                        (5,429)       (251)
                                                           --------    --------

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                 17,325      12,893
                                                           --------    --------

CASH AND CASH EQUIVALENTS, END OF PERIOD                   $ 11,896    $ 12,642
                                                           ========    ========

SUPPLEMENTAL CASH FLOW DISCLOSURES:

    Interest paid on deposits                              $  3,789    $  2,633
    Income tax payments, net of refunds of $149                 579         615
    Change in net unrealized (loss) gain on
     available-for-sale securities, net of tax                  (87)        139

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                      - 3 -


<PAGE>




VILLAGE BANCORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
------------------------------------------------------------------

NOTE A - BASIS OF PRESENTATION

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  reflect all  adjustments  necessary,  consisting  only of
normal recurring accruals, to present fairly the financial position, the results
of  operations,  cash flows and the  changes in  financial  position  of Village
Bancorp, Inc. ("Company") for the periods presented. In preparing such financial
statements, management is required to make estimates and assumptions that effect
the reported  amounts.  Actual  results  could differ  significantly  from these
estimates.

The Company's  consolidated financial statements include the accounts of Village
Bancorp,  Inc. and its wholly owned  subsidiary The Village Bank & Trust Company
("Village")  and have  been  prepared  in  accordance  with  generally  accepted
accounting  principles  and conform with  predominant  practices used within the
banking industry.

Village is engaged in the  business  of  commercial  banking and  operates  four
branch banking offices in Fairfield and Litchfield counties in Connecticut,  and
is principally engaged in lending and deposit gathering  activities within these
counties.

While management believes that the disclosures  presented are adequate so as not
to make  the  information  misleading,  it is  suggested  that  these  financial
statements be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's 1995 annual report.

In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial  Accounting  Standards  ("SFAS") No. 123,  "Accounting for Stock-Based
Compensation."  SFAS No. 123 establishes a fair value based method of accounting
for  stock-based  compensation  plans  and  encourages,  but does  not  require,
entities  to  adopt  that  method  in  place  of the  provisions  of  Accounting
Principles  Board  Opinion  ("APB")  No.  25,  "Accounting  for Stock  Issued to
Employees," for all arrangements  under which employees  receive shares of stock
or other equity  instruments of the employer or the employer incurs  liabilities
to  employees  in  amounts  based on the price of the  stock.  SFAS No. 123 also
establishes  fair value as the  measurement  basis for  transactions in which an
entity  acquires  goods or services  from  non-employees  in exchange for equity
instruments.  The  accounting  provisions  of SFAS  No.  123 are  effective  for
transactions  entered into after December 15, 1995.  Effective  January 1, 1996,
the Company adopted SFAS No. 123 and has decided that it will continue measuring
compensation cost for employee stock  compensation  plans in accordance with the
provisions of APB No. 25.

                                      - 4 -


<PAGE>




VILLAGE BANCORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
------------------------------------------------------------------

SFAS No. 114,  "Accounting for Impairment of a Loan," as amended by SFAS No. 118
"Accounting  by Creditors  for  Impairment  of a Loan - Income  Recognition  and
Disclosures,"  which was adopted by the Company as of January 1, 1995,  requires
recognition  of an  impairment  of a loan when it is  probable  that  either the
principal  and/or  interest are not  collectible in accordance with the terms of
the  loan  agreement.  Adoption  of  these  statements  did  not  result  in any
adjustment to the allowance for loan losses as of January 1, 1995.

The recorded investment in loans that are considered to be impaired at September
30, 1996 was $380,000. Included in this amount is $380,000 of impaired loans for
which specific valuation allowances of $89,000 have been established. During the
first nine months of 1996 the average recorded  investment in impaired loans was
approximately  $486,000.  No interest  income was recognized on impaired  loans,
either on the accrual or on the cash basis method of interest recognition.

Loans are placed on nonaccrual status when management  believes that interest or
principal on such loans may not be  collected in the normal  course of business.
Interest payments  received on loans in nonaccrual status are applied,  based on
management's  judgment as to the  collectibility of loan principal,  either as a
reduction of principal or as interest income.  At September 30, 1996, the amount
of both nonaccrual loans and nonperforming assets was $631,000.

NOTE B - SECURITIES

The amortized cost and the approximate fair values of securities were as follows
(in thousands):

                                                   September 30, 1996
                                      ------------------------------------------
                                      Amortized       Unrealized          Fair
                                        Cost       Gain      (Loss)       Value
                                       -------    -------    -------     -------
SECURITIES HELD-TO-MATURITY

U.S. Treasury securities               $10,167    $    39    $  (170)    $10,036
U.S. Government agency                   4,944         12        (70)      4,886
Mortgage-backed securities of
  U.S. Government agencies                  65          1       --            66
Obligations of states and
  political subdivision                  2,490         41        (23)      2,508
                                       -------    -------    -------     -------
TOTAL                                  $17,666    $    93    $  (263)    $17,496
                                       =======    =======    =======     =======

SECURITIES AVAILABLE-FOR-SALE

U.S. Treasury securities               $12,394    $     7    $   (76)    $12,325
Mortgage-backed securities of
  U.S. Government agencies                 564       --          (14)        550
Other                                       49       --         --            49
                                       -------    -------    -------     -------
TOTAL                                  $13,007    $     7    $   (90)    $12,924
                                       =======    =======    =======     =======



                                      - 5 -


<PAGE>


VILLAGE BANCORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
(Continued)
------------------------------------------------------------------

                                                   December 31, 1995
                                      ------------------------------------------
                                      Amortized       Unrealized          Fair
                                        Cost       Gain      (Loss)       Value
                                       -------    -------    -------     -------
SECURITIES HELD-TO-MATURITY

U.S. Treasury securities               $ 6,054    $   124    $    (1)    $ 6,177
Mortgage-backed securities of
  U.S. Government agencies               5,582         59         (8)      5,633
Obligations of states and
  political subdivision                  2,444         53        (13)      2,484
                                       -------    -------    -------     -------
TOTAL                                  $14,080    $   236    $   (22)    $14,294
                                       =======    =======    =======     =======


SECURITIES AVAILABLE-FOR-SALE

U.S. Treasury securities               $16,325    $    56    $  --       $16,381
Mortgage-backed securities of
  U.S. Government agencies               4,029         28        (14)      4,043
Other                                       59       --           (1)         58
                                       -------    -------    -------     -------
TOTAL                                  $20,413    $    84    $   (15)    $20,482
                                       =======    =======    =======     =======

At  September  30, 1996 and December  31, 1995  securities  with a book value of
$892,000 and $614,000,  respectively, were pledged to secure public deposits and
for other purposes as required by law and banking regulation.

NOTE C - LOANS

                                                Sept. 30, 1996     Dec. 31, 1995
                                                --------------     -------------
                                                         (In thousands)

Real estate                                      $ 102,659           $  96,384
Commercial and financial                            11,335              12,892
Installment and consumer credit                     11,467              10,562
Deferred loan fees                                    (239)               (247)
                                                 ---------           ---------
                                                                    
TOTAL                                            $ 125,222           $ 119,591
                                                 =========            =========
                                                                 

NOTE D - STANDBY LETTERS OF CREDIT

On September 30, 1996, standby letters of credit totaled $2,551,000.

NOTE E - STOCKHOLDERS' EQUITY

    An $.11  per  share  cash  dividend  was  distributed  February  3,  1995 to
stockholders  of record on January 23, 1995. An $.11 per share cash dividend was
distributed May 5, 1995 to stockholders of record on April 26, 1995. An $.11 per
share cash dividend was distributed  August 4, 1995 to stockholders of record on
July 25, 1995.

                                      - 6 -


<PAGE>


VILLAGE BANCORP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
(Continued)
------------------------------------------------------------------

    A $.15  per  share  cash  dividend  was  distributed  February  2,  1996  to
stockholders  of record on January 19, 1996. A $.17 per share cash  dividend was
distributed  May 3, 1996 to stockholders of record on April 25, 1996. A $.17 per
share cash dividend was distributed  August 2, 1996 to stockholders of record on
July 25, 1996.

NOTE F - PENDING BUILDING

    The Bank announced plans to build a three-story, 17,000 square foot building
on Parcel 3 of the Danbury  Redevelopment  Area on National  Place,  in Danbury,
Connecticut.  All  necessary  approvals  to build and open this office have been
received.  Construction has begun with completion  estimated to occur midyear of
1997.  The first floor will contain a branch banking office with the back office
deposit operations department occupying the second floor.




                                      - 7 -


<PAGE>




VILLAGE BANCORP, INC.

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS
--------------------------------------------------------------------------------

GENERAL

    Village Bancorp,  Inc. ("Company") through its only subsidiary,  The Village
Bank & Trust Company  ("Village")  had total assets of $171,370,000 on September
30, 1996 in  comparison  to total assets of  $174,277,000  on December 31, 1995.
This is a decrease of $2,907,000 or 1.7%.

    For the three month periods ended September 30, 1995 and 1996, the Company's
net income  increased from $318,000 for the 1995 period to $458,000 for the 1996
period.  Net interest  income  increased  $58,000 (3.0%) from $1,937,000 for the
1995 period to $1,995,000 for the 1996 period.

    For the nine month periods ended  September 30, 1995 and 1996, the Company's
net income  increased  from $919,000 for the 1995 period to  $1,271,000  for the
1996 period.  Net interest income increased  $138,000 (2.4%) from $5,755,000 for
the 1995 period to $5,893,000 for the 1996 period.

ASSETS AND RELATED INCOME ANALYSIS  (Nine Month Comparison)

    Loans  outstanding  on September 30, 1996 totaled  $125,222,000  which is an
increase of $5,631,000 (4.7%) from the $119,591,000  outstanding at December 31,
1995.  This  increase  in loans is  primarily  due to an increase in loan demand
coupled with an increased  marketing  effort by the Bank. Loan income  increased
$324,000  (4.3%) from  $7,512,000 for the 1995 period to $7,836,000 for the 1996
period.  This increase is due to an increase in average  outstanding  loans from
$115,822,000 in the 1995 period to $120,469,000 in the 1996 period, coupled with
a slight  increase in the  average  rate earned from 8.65% in the 1995 period to
8.67% in the 1996 period.

    Securities,  which consist of  securities  held-to-maturity  and  securities
available-for-sale,  decreased  $3,972,000  (11.5%) from $34,562,000 at December
31, 1995 to  $30,590,000  at September  30, 1996.  Securities  income  increased
$244,000  (18.6%) from  $1,313,000  in the period  ending  September 30, 1995 to
$1,557,000  in the 1996  period.  This  increase  was due to an  increase in the
average dollar amount of securities held, from $28,220,000 in the 1995 period to
$35,823,000 in the 1996 period,  offset by a decrease in the average rate earned
from 6.20% in the 1995 period to 5.80% in the 1996 period.

                                      - 8 -


<PAGE>


VILLAGE BANCORP, INC.

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS (Continued)
--------------------------------------------------------------------------------

The Company holds securities  held-to-maturity until maturity and does not trade
them.  Securities  classified as  available-for-sale  are used to compensate for
liquidity forecasting deviations.

    Federal funds sold decreased  $5,050,000 (61.6%) from $8,200,000 at December
31,  1995 to  $3,150,000  at  September  30,  1996.  Federal  funds sold  income
decreased  $73,000 (24.3%) from $300,000 for the 1995 period to $227,000 for the
1996  period,  primarily  due  to  a  decrease  in  the  average  dollar  amount
outstanding from $6,803,000 in the 1995 period to $5,726,000 in the 1996 period,
coupled with a decrease in the average rate earned from 5.88% in the 1995 period
to 5.29% for the 1996 period.

LIABILITIES AND RELATED EXPENSE ANALYSIS  (Nine Month Comparison)

    Deposits decreased  $4,032,000 (2.5%) from $158,539,000 at December 31, 1995
to $154,507,000 at September 30, 1996.  Interest on deposits  increased $357,000
(10.6%) from  $3,370,000  for the 1995 period to $3,727,000 for the 1996 period.
This increase was primarily attributable to an increase in the average rate paid
from  3.10% in the 1995  period  to 3.18% in the 1996  period,  coupled  with an
increase in the average  outstandings  from  $144,730,000 for the 1995 period to
$156,299,000 for the 1996 period.

    Data processing  services expense  increased  $40,000 (11.2%) primarily as a
result of utilization of new services coupled with increased volumes.

    Other operating expense increased $154,000 (18.6%) from $830,000 in the 1995
period to $984,000 in the 1996  period,  primarily as a result of an increase in
the legal and professional fees category.

ASSETS AND RELATED INCOME ANALYSIS (Three Month Comparison)

    Loans outstanding  increased $6,897,000 (5.8%) during the three month period
ended  September  30,  1996.  This  compares  to a $46,000  increase in the 1995
period. Loan income decreased $32,000 (1.2%) from $2,665,000 for the 1995 period
to  $2,633,000  for the 1996 period.  This  decrease is due to a decrease in the
average  rate earned from 8.86% for the 1995 period to 8.58% for the 1996 period
offset by an increase in the average outstanding loans from $120,320,000 for the
1995 period to $122,734,000 for the 1996 period.

    Securities,  which consist of  securities  held-to-maturity  and  securities
available-for-sale,  decreased  $1,915,000  (5.9%)  during  the 1996  period  as
compared to an increase of $7,181,000 (32.3%) for

                                      - 9 -


<PAGE>


VILLAGE BANCORP, INC.

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS (Continued)
--------------------------------------------------------------------------------

the 1995 period.  Securities  income increased from $414,000 for the 1995 period
to $489,000  for the 1996  period,  primarily  as a result of an increase in the
average dollar amount of securities held from $26,748,000 for the 1995 period to
$32,980,000 for the 1996 period, offset by a decrease in the average rate earned
from 6.19% for the 1995 period to 5.93% for the 1996 period.

    Federal funds sold  decreased  $5,450,000  (63.4%) during the 1996 period as
compared to a decrease of $7,800,000 (62.9%) for the 1995 period.  Federal funds
sold  income  decreased  $97,000  (69.3%)  from  $140,000  in the 1995 period to
$43,000 in the 1996  period  primarily  as a result of a decrease in the average
dollar amount  outstanding  from  $9,869,000  for the 1995 period as compared to
$3,244,000  for the 1996 period  coupled  with a decrease  in the  average  rate
earned of 5.67% for the 1995 period as compared to 5.30% for the 1996 period.

LIABILITIES AND RELATED EXPENSE ANALYSIS (Three Month Comparison)

    Deposits decreased  $1,274,000 (.8%) during the 1996 period as compared to a
decrease  of  $2,818,000  (1.9%)  for the  1995  period.  Interest  on  deposits
decreased  $112,000 (8.7%) from $1,282,000 for the 1995 period to $1,170,000 for
the 1996  period.  This  decrease  is mainly  attributable  to a decrease in the
average  rate paid  from  3.38% in the 1995  period to 3.06% in the 1996  period
offset by an increase in the average dollar amount outstanding from $151,933,000
for the 1995 period to $153,030,000 for the 1996 period.

LIQUIDITY

    Liquidity  is the  ability to provide  funds for loan  requests,  unexpected
deposit  outflows and meeting other recurring  financial  obligations.  Cash and
cash  equivalents at September 30, 1996 were $11,896,000 or 6.9% of total assets
as compared to  $17,325,000  or 9.9% of total assets at December  31, 1995.  The
Bank also maintains excess stored liquidity reserves to compensate for liquidity
forecasting  deviations.  These  reserves  are  comprised  of  investment  grade
securities  that are  highly  marketable  and  liquid.  The  primary  source  of
liquidity,  cash and due from banks and federal  funds sold,  have  historically
surpassed the liquidity needs of the Company.  Management  closely  monitors the
Bank's  liquidity/cash  flow  position  and does not  anticipate  any  liquidity
problems in the future.

                                     - 10 -


<PAGE>


VILLAGE BANCORP, INC.

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS (Continued)
--------------------------------------------------------------------------------

PROVISION FOR LOAN LOSSES

The provision  for loan losses is closely  monitored by management to maintain a
provision and an allowance  that is considered  adequate.  There is no assurance
that the Bank will not be required to make future  adjustments  to the allowance
in response to changing economic conditions or regulatory examinations.

CAPITAL RESOURCES

    The table  below  lists the  minimum  capital  requirements  along  with the
Company's capital position at September 30, 1996:

  Capital                    Minimum  Capital        Company's Capital
 Standard                      Requirement                Position
 --------                    ----------------        -----------------

Total capital to risk
 weighted assets                 8.00%                    14.78%

Stockholders' equity to
 risk weighted assets            4.00%                    13.64%

Leverage ratio                3.0 - 5.0%                   8.81%























                                     - 11 -


<PAGE>


VILLAGE BANCORP, INC.
--------------------------------------------------------------------------------

PART  II. - OTHER INFORMATION


<PAGE>


VILLAGE BANCORP, INC.
--------------------------------------------------------------------------------

PART II.  -  OTHER INFORMATION

Item 1.  Legal Proceedings                       Not Applicable

Item 2.  Changes in Securities                   Not Applicable

Item 3.  Defaults Upon Senior Securities         Not Applicable

Item 4.  Results of Votes of Security Holders    Not Applicable

Item 5.  Other Information                       Not Applicable

Item 6.  Exhibits and Reports on Form 8-K

     (a)  Exhibits - None

     (b)  Reports on Form 8-K - The Company's adoption of a Stockholders  Rights
          Plan was reported on Form 8-K which was filed on  September  19, 1996.
          No other  reports  on Form 8-K were filed for the three  month  period
          ended September 30, 1996.


                                     - 12 -


<PAGE>






                                   SIGNATURES

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

                                               Village Bancorp, Inc.
                                        ----------------------------------------
                                                  (Registrant)

Date:  November 13, 1996            /s/ Robert V. Macklin
      -------------------               ----------------------------------------
                                        Robert V. Macklin, President and
                                        Chief Executive Officer

Date:  November 13, 1996             /s/ James R. Umbarger
      -------------------                ---------------------------------------
                                         James R. Umbarger, Executive Vice
                                         President and Chief Financial Officer

                               - 13 -