United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-KSB

[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934

      For the Fiscal Year Ended March 31, 2005

[_]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

      For the transition period from _________ to __________

                         Commission File Number: 0-49711

                          NEW ENGLAND BANCSHARES, INC.
                 (Name of small business issuer in its charter)

        United States                                   04-3693643
(State or other jurisdiction of             (I.R.S. Employer identification No.)
incorporation or organization)

660 Enfield Street, Enfield, Connecticut                  06082
(Address of principal executive offices)                (Zip Code)

                    Issuer's telephone number: (860) 253-5200
          Securities registered Section 12(b) of the Exchange Act: None
       Securities registered pursuant to Section 12(g)of the Exchange Act:

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

      Check whether the issuer (1) 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 contained in this form, and no disclosure will be
contained, to the best of the 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.
                                     ---

      The issuer's revenues for its most recent fiscal year were approximately
$10,994,000.

      The aggregate market value of the voting and non-voting common equity held
by non-affiliates was $16,284,528, based upon the closing price of $16.98 as
quoted on the OTC Bulletin Board for June 2, 2005. Solely for purposes of this
calculation, the shares held by Enfield Mutual Holding Company and the directors
and officers of the issuer are deemed to be held by affiliates.

      As of June 2, 2005, the issuer had 2,257,651 shares of common stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

           Portions of the Proxy Statement for the 2005 Annual Meeting
               of Stockholders are incorporated by reference into
                          Part III of this Form 10-KSB

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


<PAGE>
<TABLE>
<CAPTION>
                                                        INDEX
<S>                                                                                                            <C>

                                                                                                              Page
PART I

Item 1.  Description of Business................................................................................1

Item 2.  Description of Property...............................................................................25

Item 3.  Legal Proceedings 25

Item 4.  Submission of Matters to a Vote of Security Holders...................................................26


PART II

Item 5.  Market for Common Equity, Related Stockholder Matters and
         Small Business Issuer Purchases of Equity Securities..................................................26

Item 6.  Management's Discussion and Analysis or Plan of Operation.............................................26

Item 7.  Consolidated Financial Statements.....................................................................36

Item 8.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .................65

Item 8A. Controls and Procedures ..............................................................................65

Item 8B. Other Information ....................................................................................65


PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a)
         of the Exchange Act...................................................................................65

Item 10. Executive Compensation................................................................................66

Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters........66

Item 12. Certain Relationships and Related Transactions........................................................67

Item 13. Exhibits..............................................................................................68

Item 14. Principal Accountant Fees and Services................................................................68

Signatures.....................................................................................................69

</TABLE>


<PAGE>

This Annual Report on Form 10-KSB contains certain forward-looking statements
which are based on certain assumptions and describe the Company's future plans,
strategies and expectations. These forward-looking statements may be identified
by the use of such words as "believe," "expect," "intend," "anticipate,"
"estimate," "project," or similar expressions. The Company's ability to predict
results or the actual effect of future plans or strategies is inherently
uncertain. Factors which could have a material adverse effect on the Company's
operations include, but are not limited to, changes in: interest rates, general
economic conditions, legislative/regulatory changes, monetary and fiscal
policies of the U.S. Government, including policies of the U.S. Treasury and the
Federal Reserve Board, the quality and composition of our loan and investment
portfolios, demand for loan products, deposit flows, competition, demand for
financial services in the Company and Enfield Federal's market area and
accounting principles and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. The Company does not undertake -- and
specifically disclaims any obligation -- to publicly release the result of any
revisions that may be made to any forward-looking statements to reflect events
or circumstances after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.

                                     PART I

Item 1.  DESCRIPTION OF BUSINESS

General

      New England Bancshares, Inc., headquartered in Enfield, Connecticut, is a
federal corporation formed on June 4, 2002 for the purpose of acquiring all of
the common stock of Enfield Federal Savings and Loan Association concurrent with
its mutual holding company reorganization (New England Bancshares and Enfield
Federal are sometimes collectively referred to as the "Company," unless the
context requires individual identification). As part of the reorganization, New
England Bancshares issued 1,127,431 shares of common stock to Enfield Mutual
Holding Company and sold 922,444 shares of common stock to the public, for gross
proceeds of $9.2 million. Approximately $6.8 million of those proceeds were
contributed to Enfield Federal. So long as Enfield Mutual Holding Company
exists, it will own at least 50.1% of the voting stock of New England
Bancshares.

      New England Bancshares' sole business activity is the ownership of all of
Enfield Federal's capital stock. The Company has no significant liabilities. New
England Bancshares does not transact any material business other than through
its subsidiary, Enfield Federal. Accordingly, information set forth in this
report, including the consolidated financial statements and related financial
data, relates primarily to Enfield Federal. New England Bancshares is subject to
the regulation, supervision and examination of the Office of Thrift Supervision.

      Enfield Federal operates as a community-oriented financial institution.
Enfield Federal is regulated by the Office of Thrift Supervision. Enfield
Federal's deposits have been federally insured by the Federal Deposit Insurance
Corporation since 1938 and are currently insured by the Federal Deposit
Insurance Corporation under the Savings Association Insurance Fund. Enfield
Federal has been a member of the Federal Home Loan Bank System since 1933.

      On December 12, 2003, Enfield Federal acquired Windsor Locks Community
Bank, FSL (the "Acquisition"). Neither Enfield Federal nor the Company was
required to pay any consideration directly to any affiliated party, including
Windsor Locks Community Bank's members, in the Acquisition. However, the Company
was required to issue additional shares of common stock to Enfield Mutual
Holding Company in an amount equal to the value of Windsor Locks Community Bank
as determined by an independent appraisal, which amounted to 171,355 shares.

      The Acquisition was accounted for using the purchase method of accounting.
Accordingly, the assets acquired and liabilities assumed have been recorded by
the Company at their fair values at the consummation date. During the appraisal
process, an identifiable intangible asset of $886,000 was calculated and is
being amortized to expense over a period of 10 years. Goodwill resulting from
the Acquisition totaled $1.1 million and will be analyzed for impairment on at
least an annual basis. Financial statement amounts for Windsor Locks are
included in the Company's consolidated financial statements beginning on the
acquisition date.

                                       1
<PAGE>

Company's Website and Availability of Securities and Exchange Commission Filings

      The Company's internet website is www.enfieldfederal.com. The Company
                                        ----------------------
makes available free of charge on or through its website its annual reports on
Forms 10-KSB, quarterly reports on Forms 10-QSB, current reports on Forms 8-K
and any amendments to these reports filed or furnished pursuant to the
Securities and Exchange act of 1934, as soon as reasonably practicable after the
Company electronically files such material with, or furnishes it to, the
Securities and Exchange Commission. Except as specifically incorporated by
reference into this annual report, information on our website is not a part of
this annual report.

Market Area

      The Company conducts its operations through its main office and two other
branch offices in Enfield and its branch offices in Broad Brook, Manchester,
Suffield and Windsor Locks, Connecticut. The Company's deposits are gathered
from, and its lending activities are concentrated primarily in, the towns and
the communities contiguous to its branch offices.

      Enfield is a largely suburban town located along the Massachusetts border
in the north-central part of the state in Hartford County, Connecticut. Enfield
is approximately 10 miles from and is midway between the cities of Hartford,
Connecticut and Springfield, Massachusetts, and is two hours from both Boston
and New York City. Enfield is near Interstate 91, the major north-south highway
that runs directly through the heart of New England. The region serves as the
governmental and financial center of Connecticut. Hartford County has a
diversified mix of industry groups, including insurance and financial services,
manufacturing, service, government and retail. The major employers in the area
include several prominent international and national insurance and manufacturing
companies, such as Aetna, Inc., The Hartford Financial Services Group, Inc.,
Travelers Property Casualty Corp., United Technologies Corp., Stanley Works,
Lego Toys, Hallmark Cards, as well as many regional banks and the Connecticut
State Government.

Competition

      The Company faces intense competition both in making loans and attracting
deposits. As of June 30, 2004, the most recent date for which data is available
from the Federal Deposit Insurance Corporation, the Company held approximately
0.8% of the deposits in Hartford County, which was the 12th largest share of
deposits out of 30 financial institutions in the county. North-central
Connecticut has a high concentration of financial institutions and financial
services providers, many of which are branches of large money centers,
super-regional and regional banks which have resulted from the consolidation of
the banking industry in New England. Many of these competitors have greater
resources than does the Company and may offer products and services that the
Company does not provide.

      The Company's competition for loans comes from commercial banks, savings
institutions, mortgage banking firms, credit unions, finance companies,
insurance companies and brokerage and investment banking firms. The Company's
most direct competition for deposits has historically come from commercial
banks, savings banks, savings and loan associations, credit unions and mutual
funds. The Company 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.

                                       2
<PAGE>


Lending Activities

      Loan Portfolio Composition. The following table sets forth the composition
of the Company's loan portfolio in dollar amounts and as a percentage of the
portfolio at the dates indicated.

<TABLE>
<CAPTION>
                                                                       At March 31,
                                ----------------------------------------------------------------------------------------
                                        2005                   2004                  2003                   2002
                                --------------------  ---------------------  --------------------   --------------------
                                            Percent                Percent               Percent                Percent
                                  Amount    Of Total    Amount     Of Total    Amount    Of Total     Amount    Of Total
                                ---------  ---------  ---------   ---------  ---------  ---------   ---------  ---------
                                                              (Dollar amounts in thousands)

<S>                            <C>         <C>        <C>         <C>        <C>        <C>        <C>        <C>
Mortgage loans:
 Redisential Loans
  One- to four-family (1).....  $  88,774      66.08% $  80,999       65.82% $  63,726      67.17%  $  56,625      69.50%
  Multi-family................      6,621       4.93      6,789        5.52      5,256       5.54       5,348       6.56
 Commercial real estate.......     22,166       16.5     17,475        14.2     13,378       14.1      10,222      12.55
 Construction loans...........     10,309       7.68     10,324        8.39      4,625       4.87       2,436       2.99
                                ---------  ---------  ---------   ---------  ---------  ---------   ---------  ---------
   Total mortgage loans.......    127,870      95.19    115,587       93.93     86,985      91.68      74,631       91.6
Consumer loans................      1,132       0.84      1,467        1.19      1,629       1.72       2,066       2.54
Commercial loans..............      5,332       3.97      6,004        4.88      6,262        6.6       4,777       5.86
                                ---------  ---------  ---------   ---------  ---------  ---------   ---------  ---------
   Total loans................    134,334     100.00%   123,058      100.00%    94,876     100.00%     81,474     100.00%
                                           =========              =========             =========              =========

Deferred loan origination
 fees, net....................       (340)                 (353)                  (287)                  (233)
Allowance for loan losses.....     (1,437)               (1,301)                (1,008)                  (773)
                                ---------             ---------              ---------              ---------
   Total loans, net...........  $ 132,557             $ 121,404              $  93,581              $  80,468
                                =========             =========              =========              =========
<CAPTION>
                                    At March 31,
                                ---------------------
                                        2001
                                ---------------------
                                             Percent
                                 Amount      Of Total
                                ---------   ---------
                            (Dollar amounts in thousands)
<S>                            <C>          <C>
Mortgage loans:
 Redisential Loans
  One- to four-family (1).....  $  52,228       77.67%
  Multi-family................      5,347        7.95
 Commercial real estate.......      5,947        8.84
 Construction loans...........         --          --
                                ---------   ---------
   Total mortgage loans.......     63,522       94.46
Consumer loans................      1,565        2.33
Commercial loans..............      2,160        3.21
                                ---------   ---------
   Total loans................     67,247      100.00%
                                            =========

Deferred loan origination
 fees, net....................       (272)
Allowance for loan losses.....       (603)
                                ---------
   Total loans, net...........  $  66,372
                                =========
=============================================================================================================
</TABLE>

(1)   Includes $9.6 million, $8.4 million, $7.5 million, $5.6 million and $2.7
      million of home equity loans at March 31, 2005, 2004, 2003, 2002 and 2001,
      respectively.

            Loan Maturity. The following table shows the remaining contractual
      maturity of the Company's total loans at March 31, 2005. The table does
      not include the effect of future principal prepayments. Demand loans
      having no stated schedule of repayments and no stated maturity are
      reported as due in one year or less.

<TABLE>
<CAPTION>
                                                                              At March 31, 2005
                                        --------------------------------------------------------------------------------------
                                         One- to
                                          Four-       Multi-   Commercial                                              Total
                                         Family       Family   Real Estate  Construction    Consumer    Commercial     Loans
                                        --------------------------------------------------------------------------------------
                                                                                (In Thousands)
<S>                                     <C>          <C>          <C>          <C>          <C>          <C>          <C>
Amounts due in:
   One year or less ...............     $    568     $     --     $  2,206     $ 10,115     $    169     $  1,471     $ 14,529
   More than one year to five years        2,522          188          472           25          832        1,303        5,342

   More than five years ...........       85,684        6,433       19,488          169          131        2,558      114,463
                                        --------     --------     --------     --------     --------     --------     --------
      Total amount due ............       88,774     $  6,621       22,166       10,309     $  1,132     $  5,332     $134,334
                                        ========     ========     ========     ========     ========     ========     ========
</TABLE>

                                       3
<PAGE>

      The following table sets forth, at March 31, 2005, the dollar amount of
loans contractually due after March 31, 2006, and whether such loans have fixed
interest rates or adjustable interest rates.

                                                    Due After March 31, 2006
                                              ----------------------------------
                                               Fixed      Adjustable      Total
                                              --------    ----------    --------
                                                              (In Thousands)
      Mortgage loans:
         Residential loans:
            One- to four- family ..........   $ 72,543     $ 15,663     $ 88,206
            Multi-family ..................      2,045        4,576        6,621
         Commercial real estate ...........      4,567       15,393       19,960
         Construction loans ...............         --          194          194
                                              --------     --------     --------
               Total mortgage loans .......     79,155       35,826      114,981
      Consumer loans ......................        963           --          963
      Commercial loans ....................      2,280        1,581        3,861
                                              --------     --------     --------
                     Total loans ..........   $ 82,398     $ 37,407     $119,805
                                              ========     ========     ========


      Loan Originations and Sales. The Company's mortgage lending activities are
conducted by its salaried loan representatives operating at its main office in
Enfield. The Company underwrites all loans that it originates under its loan
policies and procedures which model those of Fannie Mae and Freddie Mac. The
Company originates both adjustable-rate and fixed-rate mortgage loans. Its
ability to originate fixed- or adjustable-rate loans is dependent upon the
relative customer demand for such loans, which is affected by the current and
expected future level of interest rates. The Company is primarily a portfolio
lender, originating substantially all of its loans for investment. The Company
did not sell any loans in fiscal years 2005, 2004 and 2003.

      The following table sets forth the Company's loan originations, principal
repayments and other loan activities for the periods indicated:

<TABLE>
<CAPTION>
                                                       For the Fiscal Year Ended March 31,
                                                    ---------------------------------------
                                                       2005           2004           2003
                                                    ---------      ---------      ---------
                                                                (In Thousands)
<S>                                                 <C>            <C>            <C>
Beginning balance, loans, net .................     $ 121,404      $  93,581      $  80,468
                                                    ---------      ---------      ---------
   Originations:
      Mortgage loans:
         Residential loans:
            One- to four-family ...............        19,232         26,181         20,943
            Multi-family ......................           704          2,163          2,216
         Commercial real estate ...............         6,012          3,765          4,739
         Construction loans ...................        18,872         12,913          5,289
                                                    ---------      ---------      ---------
               Total mortgage loans ...........        44,820         45,022         33,187
      Consumer loans ..........................           382            556            674
      Commercial loans ........................         1,872            741          1,539
                                                    ---------      ---------      ---------
               Total loan originations ........        47,074         46,319         35,400
Obtained through merger .......................            --         16,399             --
Deduct:
       Principal loan repayments and other, net       (35,926)       (34,788)       -22,282
       Loan charge-offs, net of recoveries ....             5           (107)            -5
                                                    ---------      ---------      ---------
Ending balance, loans, net ....................     $ 132,557      $ 121,404      $  93,581
                                                    =========      =========      =========
</TABLE>

      One- to Four-Family Loans. The Company's primary lending activity is to
originate loans secured by one- to four-family residences located in its primary
market area. At March 31, 2005, 82.42% of its one- to four-family loans were
fixed-rate and 17.58% were adjustable-rate.


                                       4
<PAGE>

      The Company originates fixed-rate fully amortizing loans with maturities
ranging between 10 and 30 years. Management establishes the loan interest rates
based on market conditions. The Company offers mortgage loans that conform to
Fannie Mae and Freddie Mac guidelines, as well as jumbo loans, which presently
are loans in amounts over $359,650.

      The Company also currently offers adjustable-rate mortgage loans, with an
interest rate based on the one- year Constant Maturity Treasury Bill index,
which adjust annually from the outset of the loan or which adjust annually after
a three-, five- or ten-year initial fixed period and with terms of up to 30
years, with the majority of adjustable rate loans adjusting after a five-year
period. Interest rate adjustments on such loans are generally limited to no more
than 2% during any adjustment period and 6% over the life of the loan.

      Adjustable-rate mortgage loans help reduce the Company's exposure to
changes in interest rates. There are, however, credit risks resulting from the
potential of increased costs to be paid by borrowers due to changed rates.
During periods of rising interest rates the risk of default on adjustable-rate
mortgage loans increases as a result of repricing and the increased payments
required to be paid by borrowers. In addition, although adjustable-rate mortgage
loans allow the Company to increase the sensitivity of its asset base to changes
in interest rates, the extent of this interest sensitivity is limited by the
annual and lifetime interest rate adjustment limits. Because of these
considerations, the Company has no assurance that yields on adjustable-rate
mortgage loans will be sufficient to offset increases in its cost of funds
during periods of rising interest rates. The Company believes these risks, which
have not had a material adverse effect on it to date, generally are less than
the risks associated with holding fixed-rate loans in its portfolio in a rising
interest rate environment.

      The Company offers its full-time employees who satisfy certain criteria
and its general underwriting standards fixed- and adjustable-rate mortgage loans
with reduced interest rates which are currently 50 basis points below the rates
offered to Enfield Federal's other customers. The employee mortgage rate
normally ceases upon termination of employment. Upon termination of the employee
mortgage rate, the interest rate reverts to the contract rate in effect at the
time that the loan was extended. All other terms and conditions contained in the
original mortgage and note continue to remain in effect. As of March 31, 2005,
the Company had $2.5 million of employee mortgage rate loans, or 1.86% of total
loans.

      Home Equity Loans and Lines of Credit. The Company offers home equity
loans and home equity lines of credit, both of which are secured by
owner-occupied one- to four-family residences. At March 31, 2005, home equity
loans and equity lines of credit totaled $9.6 million, or 7.16% of Enfield
Federal's total loans. Additionally, at March 31, 2005, the unadvanced amounts
of home equity lines of credit totaled $1.5 million. Home equity loans are
offered with fixed rates of interest and with terms up to 15 years. Home equity
lines of credit are offered with adjustable rates of interest which are indexed
to the prime rate as reported in The Wall Street Journal. Interest rate
adjustments on home equity lines of credit are limited to a maximum of 18% or 6%
above the initial interest rate, whichever is lower.

      The procedures for underwriting home equity loans and lines of credit
include an assessment of the applicant's payment history on other debts and
ability to meet existing obligations and payments on the proposed loans. We will
offer home equity loans with maximum combined loan-to-value ratios of 90%,
provided that loans in excess of 80% will be charged a higher rate of interest.
A home equity line of credit may be drawn down by the borrower for an initial
period of 10 years from the date of the loan agreement. During this period, the
borrower has the option of paying, on a monthly basis, either principal and
interest or only interest. If not renewed, the borrower has to pay back the
amount outstanding under the line of credit over a term not to exceed 10 years,
beginning at the end of the 10-year period.

      Multi-Family and Commercial Real Estate Loans. The Company originates
multi-family and commercial real estate loans that are generally secured by five
or more unit apartment buildings and properties used for business purposes such
as small office buildings, industrial facilities or retail facilities primarily
located in the Company's primary market area. The Company's multi-family and
commercial real estate loans may be made with terms of up to 25 years and are
offered with interest rates that are fixed or adjust periodically and are
generally indexed to the five-year FHLB classic advance rate plus a margin of
225 to 325 basis points.


                                       5
<PAGE>

      Loans secured by multi-family and commercial real estate properties
generally involve larger principal amounts and a greater degree of risk than
one- to four-family residential mortgage loans. Because payments on loans
secured by multi-family and commercial real estate properties are often
dependent on the successful operation or management of the properties, repayment
of such loans may be affected by adverse conditions in the real estate market or
the economy. The Company seeks to minimize these risks through its underwriting
standards. To monitor cash flows on income properties, the Company requires
borrowers and loan guarantors, if any, to provide annual financial statements on
multi-family and commercial real estate loans. In reaching a decision on whether
to make a multi-family or commercial real estate loan, the Company considers the
net operating income of the property, the borrower's expertise, credit history
and profitability and the value of the underlying property. In addition, with
respect to commercial real estate rental properties, the Company will also
consider the term of the lease and the quality of the tenants. The Company has
generally required that the properties securing these real estate loans have
debt service coverage ratios (the ratio of earnings before debt service to debt
service) of at least 1.20X. Environmental surveys are generally required for
commercial real estate loans over $250,000.

      Construction Loans. The Company originates construction loans to
individuals for the construction and acquisition of personal residences. At
March 31, 2005, residential construction loans amounted to $3.8 million, or
2.86% of total loans. At March 31, 2005, the unadvanced portion of these
construction loans totaled $1.4 million. The Company's residential mortgage
construction loans generally provide for the payment of interest only during the
construction phase, which is usually 12 months. At the end of the construction
phase, the loan converts to a permanent mortgage loan.

      The Company makes construction loans for commercial development projects.
The projects include multi-family, apartment, small industrial, retail and
office buildings. These loans generally have an interest-only phase during
construction, which is usually 12 months, then convert to permanent financing.
Disbursements of funds are at the sole discretion of Enfield Federal and are
based on the progress of construction. At March 31, 2005, commercial
construction loans totaled $6.5 million, or 4.84% of total loans. At March 31,
2005, the unadvanced portion of these construction loans totaled $9.6 million.

      Construction and development financing is generally considered to involve
a higher degree of credit risk than long-term financing on owner-occupied real
estate. Risk of loss on a construction loan depends largely upon the accuracy of
the initial estimate of the value of the property at completion of construction
compared to the estimated cost (including interest) of construction and other
assumptions. If the estimate of construction cost proves to be inaccurate, the
Company may be required to advance funds beyond the amount originally committed
to protect the value of the property. Additionally, if the estimate of value
proves to be inaccurate, the Company may be confronted with a project, when
completed, having a value which is insufficient to assure full repayment.

      Commercial Loans. At March 31, 2005, the Company had $5.3 million in
commercial loans which amounted to 3.97% of total loans. In addition, at such
date, the Company had $1.5 million of unadvanced commercial lines of credit. The
Company makes commercial business loans primarily in its market area to a
variety of professionals, sole proprietorships and small businesses. Commercial
lending products include term loans, revolving lines of credit and Small
Business Administration guaranteed loans. Commercial loans and lines of credit
are made with either variable or fixed rates of interest. Variable rates are
based on the prime rate as published in The Wall Street Journal, plus a margin.
Fixed rate business loans are generally indexed to the two-, five- or ten-year
FHLB amortizing advance rate, as corresponds to the term of the loan, plus a
margin of up to 350 basis points. The Company generally does not make unsecured
commercial loans.

      Unlike residential mortgage loans, which generally are made on the basis
of the borrower's ability to make repayment from his or her employment or other
income, and which are secured by real property whose value tends to be more
easily ascertainable, commercial loans are of higher risk and typically are made
on the basis of the borrower's ability to make repayment from the cash flow of
the borrower's business. As a result, the availability of funds for the
repayment of commercial loans may depend substantially on the success of the
business itself. Further, any collateral securing such loans may depreciate over
time, may be difficult to appraise and may fluctuate in value. The Company seeks
to minimize these risks through its underwriting standards.

      Consumer Loans. The Company offers fixed-rate automobile loans for new or
used vehicles with terms of up to 66 months and loan-to-value ratios of up to
90% of the lesser of the purchase price or the retail value shown in


                                       6
<PAGE>

the NADA Car Guide. At March 31, 2005, automobile loans totaled $586,000, or
0.44% of the Company's total loans and 51.77% of consumer loans. For the fiscal
year ended March 31, 2005, the Company originated $188,000 of automobile loans.

      Other consumer loans at March 31, 2005 amounted to $546,000, or 0.40% of
the Company's total loans and 48.23% of consumer loans. These loans include
secured and unsecured personal loans. Personal loans generally have a
fixed-rate, a maximum borrowing limitation of $10,000 and a maximum term of four
years. Collateral loans are generally secured by a passbook account or a
certificate of deposit at the Company.

      Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of loans that are unsecured or secured by rapidly
depreciating assets such as automobiles. In these cases, any repossessed
collateral for a defaulted consumer loan may not provide an adequate source of
repayment of the outstanding loan balance as a result of the greater likelihood
of damage, loss or depreciation. The remaining deficiency often does not warrant
further substantial collection efforts against the borrower beyond obtaining a
deficiency judgment. In addition, consumer loan collections depend on the
borrower's continuing financial stability and, thus, are more likely to be
adversely affected by job loss, divorce, illness or personal bankruptcy.

      Loan Approval Procedures and Authority. The Company's lending policies and
loan approval limits are recommended by senior management of Enfield Federal and
reviewed and approved by the Executive Committee of the board of directors of
Enfield Federal. Certain individuals are assigned lending authorities based on
his or her experience and capability.

Asset Quality

      One of the Company's key operating objectives has been and continues to be
the achievement of a high level of asset quality. This is accomplished by
setting sound credit standards for new loan originations and following careful
loan administration procedures. These practices and relatively favorable
economic and real estate market conditions have resulted in a low level of
nonperforming assets in recent years. These factors have helped strengthen the
Company's financial condition.

      Delinquent Loans and Foreclosed Assets. The Company's policies require
that management monitor the status of the loan portfolio and report to the
Executive Committee of the board of directors on a monthly basis. These reports
include information on delinquent loans and foreclosed real estate, and the
Company's actions and plans to cure the delinquent status of the loans and to
dispose of the foreclosed property.

      Reports listing all delinquent accounts are generated and reviewed by
management on a monthly basis and the Executive Committee performs a monthly
review of all loans or lending relationships delinquent 90 days or more and all
real estate owned. The procedures taken by the Company with respect to
delinquencies vary depending on the nature of the loan, period and cause of
delinquency and whether the borrower is habitually delinquent.

      Federal regulations and the Company's Asset Classification Policy require
that the Company utilize an internal asset classification system as a means of
reporting problem and potential problem assets. The Company has incorporated the
Office of Thrift Supervision's internal asset classifications as a part of its
credit monitoring system. The Company currently classifies problem and potential
problem assets as "Substandard," "Doubtful" or "Loss." An asset is considered
"Substandard" if it is inadequately protected by the current net worth and
paying capacity of the obligor or of the collateral pledged, if any.
"Substandard" assets include those characterized by the "distinct possibility"
that the insured institution will sustain "some loss" if the deficiencies are
not corrected. Assets classified as "Doubtful" have all of the weaknesses
inherent in those classified "Substandard" with the added characteristic that
the weaknesses present make "collection or liquidation in full," on the basis of
currently existing facts, conditions and values, "highly questionable and
improbable." Assets classified as "Loss" are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted. Assets which do not
currently expose the insured institution to sufficient risk to warrant
classification in one of the aforementioned categories but possess weaknesses
are required to be designated "Special Mention."

      When an insured institution classifies one or more assets, or portions
thereof, as Substandard or Doubtful, it is required to establish a general
valuation allowance for loan losses in an amount deemed prudent by management.


                                       7
<PAGE>

General valuation allowances represent loss allowances which have been
established to recognize the losses inherent in the loan portfolio that are both
probable and reasonably estimable, but which, unlike specific allowances, have
not been allocated to particular problem assets. When an insured institution
classifies one or more assets, or portions thereof, as Loss, it is required
either to establish a specific allowance for losses equal to 100% of the amount
of the asset so classified or to charge off such amount.

      A savings institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by the
Office of Thrift Supervision which can order the establishment of additional
general or specific loss allowances. The Office of Thrift Supervision, in
conjunction with the other federal banking agencies, has adopted an interagency
policy statement on the allowance for loan and lease losses. The policy
statement provides guidance for financial institutions on both the
responsibilities of management for the assessment and establishment of adequate
allowances and guidance for banking agency examiners to use in determining the
adequacy of general valuation guidelines. Generally, the policy statement
recommends that institutions have effective systems and controls to identify,
monitor and address asset quality problems; that management has analyzed all
significant factors that affect the collectibility of the portfolio in a
reasonable manner; and that management has established acceptable allowance
evaluation processes that meet the objectives set forth in the policy statement.
Although management believes that, based on information currently available to
it at this time, its allowance for loan losses is at a level required by
generally accepted accounting principles, actual losses are dependent upon
future events and, as such, further additions to the level of allowances for
loan losses may become necessary.

      On a quarterly basis, the Company's Executive Committee classifies the
Company's assets and the board of directors reviews the results of the reports.
The Company classifies assets in accordance with the management guidelines
described above.

      The following table sets forth the Company's classified assets at March
31, 2005.

<TABLE>
<CAPTION>
                                        Loss                 Doubtful            Substandard          Special Mention
                                  ------------------    ------------------    ------------------    ------------------
                                  Number                Number                Number                Number
                                   of      Principal     of      Principal     of      Principal     of      Principal
                                  Loans     Balance     Loans     Balance     Loans     Balance     Loans     Balance
                                  ------    --------    ------    --------    ------    --------    ------    --------
                                                               (Dollars in Thousands)
<S>                              <C>       <C>         <C>       <C>         <C>        <C>         <C>       <C>
Residential loans:
   One- to four-family ......         --         --          1     $   47          4     $  652          5     $  454
Commercial real estate loans          --         --         --         --         --         --          3        659
Consumer loans ..............         --         --         --         --         --         --          1          5
                                  ------     ------     ------     ------     ------     ------     ------     ------

      Total .................         --         --          1     $   47          4     $  652          9     $1,118
                                  ======     ======     ======     ======     ======     ======     ======     ======
</TABLE>



                                       8
<PAGE>

      The following table sets forth the delinquencies in the Company's loan
portfolio as of the dates indicated.

<TABLE>
<CAPTION>
                                                   At March 31, 2005                                 At March 31, 2004
                                 ---------------------------------------------------------------------------------------------------
                                       30-89 Days             90 Days or More            30-89 Days               90 Days or More
                                 ----------------------    ----------------------   ----------------------     ---------------------
                                 Number       Principal    Number       Principal   Number       Principal     Number      Principal
                                  of           Balance      of           Balance     of           Balance       of          Balance
                                 Loans        of Loans     Loans        of Loans    Loans        of Loans      Loans       of Loans
                                 ------       ---------    ------       ---------   ------       ---------     ------      ---------
                                                                          (Dollars in Thousands)

<S>                                  <C>       <C>              <C>      <C>             <C>       <C>              <C>     <C>
Mortgage loans:
   Residential loans:
      One- to four-family ....       23        $2,038           2        $  420          31        $1,949           4       $  253
      Multi-family ...........       --            --          --            --          --            --           2          266
   Commercial real estate ....        2           102          --            --          --            --           2          155
   Construction loans ........        1           250          --            --          --            --          --           --
                                 ------        ------      ------        ------      ------        ------      ------       ------
          Total mortgage loans       26         2,390           2           420          31         1,949           8          674
Consumer loans ...............        1             3          --            --           7            49           2           10
Commercial loans .............       --            --          --            --          --            --           1          528
                                 ------        ------      ------        ------      ------        ------      ------       ------
          Total ..............       27        $2,393           2        $  420          38        $1,998          11       $1,212
                                 ======        ======      ======        ======      ======        ======      ======       ======
Delinquent loans to loans (1)                    1.78%                     0.31%                     1.63%                    0.99%

</TABLE>

                                                 At March 31, 2003
                                 -----------------------------------------------
                                      30-89 Days              90 Days or More
                                 ---------------------    ----------------------
                                 Number       Principal    Number      Principal
                                  of           Balance      of          Balance
                                 Loans        of Loans     Loans       of Loans
                                 ------       ---------    ------      ---------
                                               (Dollars in Thousands)
Mortgage loans:
   Residential loans:
      One- to four-family ....       33       $2,231            2       $  122
      Multi-family ...........       --           --           --           --
   Commercial real estate ....        2          159           --           --
   Construction loans ........       --           --           --           --
                                 ------       ------       ------       ------
          Total mortgage loans       35        2,390            2          122
Consumer loans ...............        6           41            2           14
Commercial loans .............       --           --           --           --
                                 ------       ------       ------       ------
          Total ..............       41       $2,431            4       $  136
                                 ======       ======       ======       ======
Delinquent loans to loans (1)                   2.55%                     0.14%

--------------------------------------------------------------------------------

      (1)   Loans are presented before the allowance for loan losses.

      Nonperforming Assets and Impaired Loans. The following table sets forth
information regarding non-accrual loans, other real estate owned and impaired
loans. The Company did not have any troubled debt restructurings at the dates
presented.

<TABLE>
<CAPTION>
                                                                         At March 31,
                                                       -----------------------------------------------
                                                        2005      2004      2003      2002       2001
                                                       -------   -------   -------   -------   -------
                                                                        (Dollars in Thousands)
<S>                                                    <C>       <C>       <C>       <C>       <C>
Non-accruing loans:
   Mortgage loans:
      Residential loans:
           One- to four-family ...................     $   464   $   182   $    81   $   201   $   669
                                                       -------   -------   -------   -------   -------
           Multi-family ..........................          --        72        --        --        --
      Commercial real estate .....................          --       155       159        --        --
                                                       -------   -------   -------   -------   -------
         Total mortgage loans ....................         464       409       240       201       669
   Consumer loans ................................          --        --        --        --        --
   Commercial loans ..............................          --       528        --        --        --
                                                       -------   -------   -------   -------   -------
            Total nonaccrual loans ...............         464       937       240       201       669
Other real estate owned ..........................          --        --        --        --       270
                                                       -------   -------   -------   -------   -------
            Total nonperforming assets ...........     $   464    $  937   $   240   $   201   $   939
                                                       =======   =======   =======   =======   =======
Impaired loans ...................................     $    --    $  755   $   159   $   --    $   100
Accruing loans 90 days or more past due ..........          --       411         5       --         --
Allowance for loan losses as a percent of loans(1)        1.07%     1.06%     1.07%     0.95%     0.90%
Allowance for loan losses as a percent
   of nonperforming loans (2) ....................      309.70%   138.85%   420.00%   384.58%    90.13%
Nonperforming loans as a percent of loans (1)(2) .        0.35%     0.76%     0.25%     0.25%     1.00%
Nonperforming assets as a percent of total assets         0.22%     0.46%     0.15%     0.15%     0.76%

</TABLE>

--------------------------------------------------------------------------------
(1)   Loans are presented before allowance for loan losses.
(2)   Nonperforming loans consist of all loans 90 days or more past due and
      other loans which have been identified by Enfield Federal as presenting
      uncertainty with respect to the collectibility of interest or principal.

      Interest income that would have been recognized for the year ending March
31, 2005 had non-accrual loans been performing in accordance with their original
terms amounted to $6,000, none of which was recognized in interest income.

      The Company generally stops accruing income when interest or principal
payments are 90 days in arrears. However, secured consumer loans are written
down to realizable value and unsecured loans are charged-off upon reaching 120
or 180 days past due depending on the type of loan. The Company may stop
accruing income on such loans earlier than 90 days when it considers the timely
collectibility of interest or principal to be doubtful. The


                                       9
<PAGE>

Company may continue accruing interest income beyond 90 days if the loan is well
secured and the Company determines that the ultimate collection of all principal
and interest is not in doubt.

      When the Company designates nonaccrual loans, the Company reverses all
outstanding interest that it had previously credited. If the Company receives a
payment on a nonaccrual loan, the Company may recognize a portion of that
payment as interest income, if it determines that the ultimate collectibility of
principal is no longer in doubt. However, such loans would remain on nonaccrual
status. Generally, the Company may return a nonaccrual loan to accrual status
if: (1) none of the borrower's obligations have been charged off; (2) the
borrower has resumed paying the full amount of scheduled contractual interest
and principal payments; (3) principal and interest payments are less than 90
days past due; (4) there is a sustained period of payment (generally six months)
by the borrower; and (5) all principal and interest amounts contractually due
(including arrearages) are reasonably assured of repayment within a reasonable
period of time.

      All nonaccrual multi-family and commercial real estate and commercial
loans are classified as impaired loans. Impaired loans are individually assessed
to determine whether the carrying value exceeds the fair value of the collateral
or the present value of the undiscounted cash flows produced by the underlying
collateral. Smaller balance homogeneous loans, such as residential mortgage
loans and consumer loans, are collectively evaluated for impairment.

      Foreclosed real estate consists of property the Company has acquired
through foreclosure or by deed in lieu of foreclosure. Foreclosed real estate
properties are initially recorded at the lower of the recorded investment in the
loan or fair value. Thereafter, the Company carries foreclosed real estate at
fair value less estimated selling costs. At March 31, 2005 and 2004, the Company
had no foreclosed real estate.

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

<TABLE>
<CAPTION>
                                                                       At or For the Fiscal Year
                                                                            Ended March 31,
                                                    ------------------------------------------------------------
                                                      2005          2004         2003         2002         2001
                                                    -------       -------      -------      -------      -------
                                                                        (Dollars in Thousands)
<S>                                                 <C>           <C>          <C>          <C>          <C>
Balance at beginning of period ................     $ 1,301       $ 1,008      $   773      $   603      $   472
                                                    -------       -------      -------      -------      -------
Provision for loan losses .....................         131           240          240          200          194
Charge-offs:
   Mortgage loans:
      Residential loans:
         One- to four-family ..................          --            --           --           --           76
         Multi-family .........................          83            42           --           --           --
   Consumer loans .............................          16            --           12           30            1
   Commercial loans ...........................          --            65           --           --           --
                                                    -------       -------      -------      -------      -------
      Total charge-offs .......................          99           107           12           30           77
                                                    -------       -------      -------      -------      -------
Recoveries:
   Mortgage loans:
      Residential loans:
         One- to four-family ..................          --            --           --           --           14
         Multi-family .........................          80            --           --           --           --
   Consumer loans .............................           2            --            7           --           --
   Commercial loans ...........................          22            --           --           --           --
                                                    -------       -------      -------      -------      -------
      Total Recoveries ........................         104            --            7           --           14
                                                    -------       -------      -------      -------      -------
Net (recoveries) charge-offs ..................          (5)          107            5           30           63
                                                    -------       -------      -------      -------      -------
Allowance obtained through merger .............          --           160           --           --           --
                                                    -------       -------      -------      -------      -------
Balance at end of period ......................     $ 1,437       $ 1,301      $ 1,008      $   773      $   603
                                                    =======       =======      =======      =======      =======
Ratio of net charge-offs during the period to
   average loans outstanding during the period           -%          0.10%        0.01%        0.04%        0.10%
Allowance for loan losses as a percent of .....        1.07%         1.06%        1.07%        0.95%        0.90%
loans (1)
Allowance for loan losses as a percent of
   nonperforming loans (2) ....................      309.70%       138.85%      420.00%      384.58%       90.13%

-----------------------------------------------------------------------------------------------------------------
</TABLE>

                                       10
<PAGE>

(1)   Loans are presented before allowance for loan losses.
(2)   Nonperforming loans consist of all loans 90 days or more past due and
      other loans which have been identified by the Company as presenting
      uncertainty with respect to the collectibility of interest or principal.

      Allocation of Allowance for Loan Losses. The following tables set forth
the Company's allowance for loan losses in each of the categories listed at the
dates indicated and the percentage of loans in each category to total loans.

<TABLE>
<CAPTION>
                                                                              At March 31,
                                       --------------------------------------------------------------------------------------------
                                                 2005                             2004                              2003
                                       --------------------------       --------------------------       --------------------------
                                                       Percent of                       Percent of                       Percent of
                                                        Loans in                         Loans in                         Loans in
                                                          Each                             Each                             Each
                                                        Category                         Category                         Category
                                                        to Total                         to Total                         to Total
                                         Amount           Loans           Amount           Loans           Amount           Loans
                                       ----------      ----------       ----------      ----------       ----------      ----------
                                                                          (Dollars in Thousands)
<S>                                    <C>                  <C>         <C>                  <C>         <C>                  <C>
Mortgage loans:
   Residential loans:
      One- to four-family .........    $      401           66.08%      $      389           65.82%      $      381           67.17%
      Multi-family ................            27            4.93              134            5.52              116            5.54
   Commercial real estate .........           637            16.5              368            14.2              329            14.1
   Construction loans .............           235            7.68              180            8.39               50            4.87
Consumer loans ....................            20            0.84               15            1.19               23            1.72
Commercial loans ..................           117            3.97              215            4.88              109             6.6
                                       ----------      ----------       ----------      ----------       ----------      ----------
    Total allowance for loan losses    $    1,437          100.00%      $    1,301          100.00%      $    1,008          100.00%
                                       ==========      ==========       ==========      ==========       ==========      ==========
<CAPTION>
                                                                At March 31,
                                       -----------------------------------------------------------
                                                  2002                            2001
                                       --------------------------       --------------------------
                                                       Percent of                       Percent of
                                                        Loans in                         Loans in
                                                          Each                             Each
                                                        Category                         Category
                                                        to Total                         to Total
                                         Amount           Loans           Amount           Loans
                                       ----------      ----------       ----------      ----------
                                                           (Dollars in Thousands)
<S>                                    <C>                  <C>         <C>                  <C>

Mortgage loans:
   Residential loans:                  $      292           69.50%      $      347           77.67%
      One- to four-family .........            89            6.56               76            7.95
      Multi-family ................           252           12.55              111            8.84
   Commercial real estate .........            39            2.99               --               -
   Construction loans .............            18            2.54               27            2.33
Consumer loans ....................            83            5.86               42            3.21
Commercial loans ..................    ----------      ----------       ----------      ----------
                                       $      773          100.00%      $      603          100.00%
    Total allowance for loan losses    ==========      ==========       ==========      ==========
</TABLE>

      The Company maintains an allowance for loan losses to absorb losses
inherent in the existing portfolio. When a loan, or portion thereof, is
considered uncollectible, it is charged against the allowance. Recoveries of
amounts previously charged-off are added to the allowance when collected. The
adequacy of the allowance for loan losses is evaluated on a regular basis by
management. A provision for loan losses is charged to earnings based on
management's judgment of the amount necessary to maintain the allowance at a
level adequate to absorb losses.

      Analysis and Determination of the Allowance for Loan Losses. The Company
maintains an allowance for loan losses to absorb losses inherent in the existing
portfolio. When a loan, or portion thereof, is considered uncollectible, it is
charged against the allowance. Recoveries of amounts previously charged-off are
added to the allowance when collected. The adequacy of the allowance for loan
losses is evaluated on a regular basis by management. A provision for loan
losses is charged to earnings based on management's judgment of the amount
necessary to maintain the allowance at a level adequate to absorb losses.

      The Company's methodology for assessing the appropriateness of the
allowance for loan losses consists of specific allowances for identified problem
loans and a general valuation allowance on the remainder of the loan portfolio.
Although the Company determines the amount of each element of the allowance
separately, the entire allowance for loan losses is available for the entire
portfolio.

      Specific Allowances for Identified Problem Loans. The Company establishes
an allowance on identified problem loans based on factors including, but not
limited to: (1) the borrower's ability to repay the loan; (2) the type and value
of the collateral; (3) the Company's collateral position; and (4) the borrower's
repayment history.

      General Valuation Allowance on the Remainder of the Portfolio. The Company
also establishes a general allowance by applying loss factors to the remainder
of the loan portfolio to capture the inherent losses associated with the lending
activity. Loss factors are calculated for each loan type and the different loan
classification groupings within the loan types. The loss factors are determined
based on the Company's historical loss experience, delinquency trends and
management's evaluation of the collectibility of the loan portfolio. Based on
management judgment the Company may adjust the loss factors due to: (1) changes
in lending policies and procedures; (2) changes in existing general economic and
business conditions affecting our primary market area; (3) credit quality
trends; (4) collateral value; (5) loan volumes and concentrations; (6) seasoning
of the loan portfolio; (7) recent loss experience in particular segments of the
portfolio; (8) duration of the current business cycle; and (9) bank regulatory
examination results. Loss factors are reevaluated quarterly to ensure their
relevance in the current real estate environment.


                                       11
<PAGE>

      There may be other factors that may warrant the Company's consideration in
maintaining the allowance at a level required by generally accepted accounting
principles. Although the Company believes that it has established and maintained
the allowance for loan losses at such a level, future additions may be necessary
if economic, real estate and other conditions differ substantially from the
current operating environment.

      In addition, the Office of Thrift Supervision, as an integral part of its
examination process, periodically reviews the Company's loan and foreclosed real
estate portfolios and the related allowance for loan losses and valuation
allowance for foreclosed real estate. The Office of Thrift Supervision may
require the Company to 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 Company's results of operations.

      The Company's allowance for loan losses increased $136,000 from March 31,
2004 to $1.4 million or 1.07% of total loans at March 31, 2005. For the years
ended March 31, 2005 and 2004, the Company increased its allowance for loan
losses through provisions for loan losses of $131,000 and $240,000,
respectively, based on its evaluation of the items discussed above. Management
believes that to the best of its knowledge, the allowance for loan losses covers
all known losses and inherent losses in the current loan portfolio at March 31,
2005. To determine the adequacy of the allowance, the Company looks at
historical trends in the growth and composition of its loan portfolio and the
amount of non-performing loans and net charge-offs among other factors. The most
significant risk trends over the last two years are the growth of the Company's
commercial and multi-family real estate and construction loan portfolios, which
contain higher loss potential than one-to four-family residential mortgages.

Investment Activities

      The board of directors reviews and approves the Company's investment
policy on an annual basis. The Company's board of directors is responsible for
establishing policies for conducting investment activities, including the
establishment of risk limits. The board of directors reviews the Company's
investment portfolio and reviews investment transactions on a monthly basis and
is responsible for ensuring that the day-to-day management of the investment
portfolio is conducted by qualified individuals. The board has directed the
President and Chief Executive Officer to implement the investment policy based
on the board's established guidelines as reflected in the written investment
policy, and other established guidelines, including those set periodically by
the Asset Liability Management Committee. The President and Chief Executive
Officer presents the board of directors with potential investment strategies and
investment portfolio performance reports, at least on a monthly basis.

      The Company's investment portfolio is primarily viewed as a source of
liquidity. The Company's policy is to invest funds in assets with varying
maturities that will result in the best possible yield while maintaining the
safety of the principal invested and assist in managing interest rate risk. The
Company's investment portfolio management policy is designed to:

      (1)   enhance profitability by maintaining an acceptable spread over the
            cost of funds;

      (2)   absorb funds when loan demand is low and infuse funds into loans
            when loan demand is high;

      (3)   provide both the regulatory and the operational liquidity necessary
            to conduct the day-to-day business activities of the Company;

      (4)   provide a degree of low-risk, quality assets to the balance sheet;

      (5)   provide a medium for the implementation of certain interest rate
            risk management measures intended to establish and maintain an
            appropriate balance between the sensitivity to changes in interest
            rates of: (i) interest income from loans and investments, and (ii)
            interest expense from deposits and borrowings;

      (6)   have collateral available for pledging requirements;

      (7)   generate a favorable return on investments without undue compromise
            of other objectives; and


                                       12
<PAGE>

      (8)   evaluate and take advantage of opportunities to generate tax-exempt
            income when appropriate.

      In determining its investment strategies, the Company considers the
interest rate sensitivity, yield, credit risk factors, maturity and amortization
schedules, collateral value and other characteristics of the securities to be
held. The Company also considers the secondary market for the sale of assets and
the ratings of debt instruments in which it invests and the financial condition
of the obligors issuing such instruments.

Investment Portfolio

      Federally-chartered thrifts 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
financial institutions, overnight and short term loans to other banks, corporate
debt instruments, and Fannie Mae and Freddie Mac equity securities. The
Company's investments primarily fall into four major categories:

      (1)   U.S. agency obligations;

      (2)   collateralized mortgage obligations and mortgage-backed securities;

      (3)   municipal obligations; and

      (4)   equity investments.

      With respect to municipal obligations, the Company's investment policy
provides that all municipal issues must be rated investment grade or higher to
qualify for its portfolio. If any such municipal issues in the Company's
investment portfolio are subsequently downgraded below the minimum requirements,
it is the Company's general policy to liquidate the investment.

      Generally accepted accounting principles require that securities be
categorized as either "held-to-maturity," "trading securities" or
"available-for-sale," based on management's intent as to the ultimate
disposition of each security. Debt securities may be classified as
"held-to-maturity" and reported in financial statements at amortized cost only
if the reporting entity has the positive intent and ability to hold those
securities to maturity. Securities that might be sold in response to changes in
market interest rates, changes in the security's prepayment risk, increases in
loan demand or other similar factors cannot be classified as "held-to-maturity."
Debt and equity securities held for current resale are classified as "trading
securities." These securities are reported at fair value, and unrealized gains
and losses on the securities would be included in earnings. Debt and equity
securities not classified as either "held-to-maturity" or "trading securities"
are classified as "available-for-sale." These securities are reported at fair
value, and unrealized gains and losses on the securities are excluded from
earnings and reported, net of deferred taxes, as a separate component of equity.
All of the Company's securities are currently classified as
"available-for-sale."

      The following table sets forth certain information regarding the amortized
cost and fair value of the Company's securities at the dates indicated.

<TABLE>
<CAPTION>
                                                                                       At March 31,
                                                           --------------------------------------------------------------------
                                                                    2005                   2004                   2003
                                                           -------------------    ---------------------   ---------------------
                                                           Amortized     Fair     Amortized      Fair     Amortized     Fair
                                                              Cost       Value       Cost        Value       Cost       Value
                                                           --------------------------------------------------------------------
                                                                                      (In Thousands)
<S>                                                        <C>                                 <C>         <C>         <C>
Investments in available-for-sale securities:
      U.S. government and federal agencies ..............  $           $ 20,719                $ 12,826    $  7,175    $  7,226
                                                             21,129                $ 12,742
      Municipal securities ..............................     5,995       5,897       3,831       3,864         818         824
      Corporate securities ..............................       546         559         754         794         853         863
      Mortgage-backed securities ........................    12,963      12,893      18,246      18,372      21,683      21,810
      Marketable equity securities ......................    12,952      12,834      12,020      11,971      15,233      15,224
                                                           --------    --------    --------    --------    --------    --------
            Total .......................................    53,585      52,902      47,593      47,827
      Money market mutual funds included in cash
        and cash equivalents ............................    (6,317)     (6,317)     (5,518)     (5,518)     (7,879)     (7,879)
                                                           --------    --------    --------    --------    --------    --------
           Total ........................................  $ 47,268    $ 46,585    $ 42,075    $ 42,309    $ 37,883    $ 38,068
                                                           ========    ========    ========    ========     =======    ========
</TABLE>


                                       13
<PAGE>

      The aggregate amortized cost basis and fair value of securities of issuers
which exceeded 10% of stockholders' equity were as follows as of March 31, 2005:

                                         Amortized
                                            Cost                 Fair
                                           Basis                 Value
                                          --------              -------
                                                  (In Thousands)
                    Issuer
      --------------------------------
      Asset Management Fund                $12,350              $12,232

      The following table sets forth the Company's securities activities for the
periods indicated.

<TABLE>
<CAPTION>
                                                    At and For the Fiscal Year Ended March 31,
                                                       --------------------------------
                                                         2005        2004        2003
                                                       --------    --------    --------
                                                                (In Thousands)

<S>                                                   <C>         <C>         <C>
Mortgage-related securities:
Mortgage-related securities, beginning of period (1)   $ 18,372    $ 21,810    $ 24,034
Purchases ..........................................      8,952      16,272      28,201
Sales ..............................................     (1,896)     (1,529)     (1,425)
Obtained through merger ............................         --       2,895          --
Repayments and prepayments .........................    (12,219)    (20,888)    (28,968)
Decrease in net premium ............................       (157)       (187)       (122)
(Decrease) increase in net unrealized gain .........       (159)         (1)         90
                                                       --------    --------    --------
Net decrease in mortgage-related securities ........     (5,479)     (3,438)     (2,224)
                                                       --------    --------    --------
Mortgage-related securities, end of period (1) .....   $ 12,893    $ 18,372    $ 21,810
                                                       ========    ========    ========

Investment securities:
Investment securities, beginning of period (1) .....   $ 23,937    $ 16,258    $ 12,131
Purchases ..........................................     17,973      23,033      12,150
Sales ..............................................     (4,713)    (10,406)     (5,894)
        Obtained through merger ....................         --       4,074          --
Maturities .........................................     (2,808)     (9,054)     (2,349)
Increase (decrease) in net premium .................         18         (18)        (50)
(Decrease) increase in net unrealized gain .........       (715)         50         270
                                                       --------    --------    --------
Net increase in investment securities ..............      9,755       7,679       4,127
                                                       --------    --------    --------
Investment securities, end of period (1) ...........   $ 33,692    $ 23,937    $ 16,258
                                                       ========    ========    ========
</TABLE>

(1)   At fair value.

                                       14
<PAGE>

            Investment Portfolio Maturities. The table below sets forth certain
      information regarding the carrying value, weighted average yields and
      contractual maturities of the Company's available-for-sale securities,
      excluding marketable equity securities, at March 31, 2005. Municipal
      securities are not presented on a tax equivalent basis.

<TABLE>
<CAPTION>
                                      Within One Year One To Five Years  Five To Ten Years      After Ten Years         Total
                                     ---------------- -----------------  -------------------- ------------------ ------------------
                                             Weighted          Weighted             Weighted            Weighted           Weighted
                                    Carrying  Average Carrying  Average  Carrying   Average   Carrying  Average  Carrying   Average
                                      Value    Yield   Value     Yield     Value      Yield     Value    Yield     Value     Yield
                                     -------- ------- --------- -------- ---------- --------- --------- -------- --------- --------
                                                                    (Dollars in Thousands)
<S>                                  <C>               <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C>
Available-for-sale securities: (1)
     U.S. Government and
         Federal agencies ........   $    --     --%   $ 2,100    3.74%    $ 9,449    4.37%    $ 9,170    4.86%    $20,719    4.52%
     Municipal securities ........        --     --         --      --       2,764     3.4       3,133    3.74       5,897    3.58
     Corporate securities ........       101   4.06         --      --          --      --         458    4.26         559    4.22
     Mortgage-backed securities ..        --     --          7    7.14         391    4.88      12,495    4.65      12,893    4.66
                                     -------           -------             -------             -------             -------
         Total ...................   $   101   4.06%   $ 2,107    3.75%    $12,604    4.17%    $25,256    4.61%    $40,068    4.42%
                                     =======           =======             =======             =======             =======
</TABLE>
--------------------------------------------------------------------------------

(1)   At fair value.

Other Activities

      To be more competitive and have the capacity to deepen its relationships
with existing customers and attract new customers, the Company expanded its
nontraditional delivery channels and products by affiliating with Infinex
Financial Group, a third party registered broker-dealer. The Company negotiated
an agreement with Infinex whereby Infinex will maintain an office at the
Company's main banking office and will offer to the Company's customers a
complete range of nondeposit investment products, including mutual funds, debt,
equity and government securities, retirement accounts, insurance products and
annuities. The Company receives a portion of the commissions generated by
Infinex from sales to customers.

Sources of Funds

      Retail deposits, scheduled amortization and prepayments of loan principal
and mortgage-backed securities, borrowings and funds provided by operations are
the Company's primary sources of funds for use in lending, investing and for
other general purposes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources."

      Deposits. The Company offers a variety of deposit products to meet the
needs of retail and business customers. The Company currently offers
noninterest-bearing demand accounts, interest-bearing demand accounts (NOWs),
savings passbook and statement accounts, money market accounts, Christmas club
accounts and certificates of deposits. Deposit products are developed to meet
the needs of the Company's targeted markets.

      Deposit flows are influenced by a number of factors including:

      (1)   general and local economic conditions;

      (2)   the perceived strength of the stock and stock mutual fund market;

      (3)   prevailing interest rates; and

      (4)   competition.


                                       15
<PAGE>

      Deposit Distribution. The following table sets forth the average balances
of deposit accounts, the distribution of the Company's average deposit accounts
for the periods indicated and the weighted average interest rates on each
category of deposits presented. Averages for the periods presented utilize daily
balances.

<TABLE>
<CAPTION>
                                                                 For the Fiscal Year Ended March 31,
                                   -------------------------------------------------------------------------------------------------
                                                2005                             2004                             2003
                                   ------------------------------   -----------------------------    -------------------------------
                                              Percent                          Percent                          Percent
                                              of Total                         of Total                         of Total
                                   Average    Average    Average    Average    Average    Average    Average    Average    Average
                                   Balance    Deposits    Rate      Balance    Deposits    Rate      Balance    Deposits    Rate
                                   --------   --------   --------   --------   --------  --------    --------   --------   --------
                                                                        (Dollars in Thousands)
<S>                                <C>            <C>               <C>            <C>               <C>            <C>
Demand deposits .................  $ 12,504       7.61%        --%  $  7,792       5.61%       --%   $  4,790       3.97%        --%
Savings accounts ................    55,280      33.65       0.61     46,001      33.11       0.71     38,826      32.15       1.20
NOW accounts ....................     7,020       4.27       0.24      5,306       3.82       0.30      4,490       3.72       0.47
Money market accounts ...........     6,532       3.98       1.00      6,177       4.45       1.02      3,879       3.21       1.42
                                   --------   --------              --------   --------              --------   --------
      Total .....................    81,336      49.51       0.52     65,276      46.99       0.62     51,985      43.05       1.04
                                   --------   --------              --------   --------              --------   --------
Certificate accounts (1):
   Less than six months .........    10,904       6.64       1.06     10,399       7.49       1.20      1,384       1.15       1.52
   Over six through twelve months    21,652      13.18       1.34     20,855      15.01       1.70     28,545      23.64       2.40
   Over twelve through thirty-
      six months ................    27,429      16.70       2.29     22,649      16.30       2.56     23,761      19.68       3.87
   Over thirty-six months .......    22,956      13.97       4.72     19,736      14.21       5.21     15,064      12.48       5.87
                                   --------   --------              --------   --------              --------   --------
      Total certificate accounts     82,941      50.49       2.55     73,639      53.01       2.83     68,754      56.95       3.65
                                   --------   --------              --------   --------              --------   --------
      Total average deposits ....  $164,277     100.00       1.54%  $138,915     100.00%      1.79%  $120,739     100.00%      2.53%
                                   ========   ========              ========   ========              ========   ========
</TABLE>
------------------------------
(1)   Includes retirement accounts such as IRA accounts.

      Deposit Flow. The following table summarizes the deposit activity of the
Company for the periods indicated.

                                            For the Fiscal Year Ended March 31,
                                           ------------------------------------
                                             2005           2004         2003
                                             ----           ----         ----
                                                      (In Thousands)

Net (withdrawals) deposits .............   $ (2,334)     $ (3,341)     $ 10,613
Deposits acquired through merger .......         --        34,357            --
Interest credited on deposit accounts...      2,535         2,821         3,342
                                           --------      --------      --------
Total increase in deposit accounts .....   $    201      $ 33,837      $ 13,955
                                           ========      ========      ========



      At March 31, 2005, the Company had $16.5 million in certificate accounts
in amounts of $100,000 or more maturing as follows:

                                                                     Weighted
Maturity Period                                         Amount     Average Rate
---------------                                       ----------   ------------
                                                       (Dollars in Thousands)

Three months or less.............................     $    4,400       3.04%
Over three through six months....................          1,398       2.19
Over six through twelve months...................          3,210       1.72
Over twelve months...............................          7,537       3.61
                                                      ----------
         Total...................................          6,545       2.97%
                                                      ==========


                                       16
<PAGE>

      Certificate Account Balances by Rates. The following table presents by
various rate categories, the amount of certificate accounts outstanding at the
dates indicated and the periods to maturity of the certificate accounts
outstanding at March 31, 2005.

<TABLE>
<CAPTION>
                             Period to Maturity from March 31, 2005                At March 31,
                         --------------------------------------------     -------------------------------
                                        One       Two to       Over
                         Less Than     to Two      Three       Three
                          One Year     Years       Years       Years       2005        2004        2003
                         ---------    -------     -------     -------     -------     -------     -------
                                                           (In Thousands)
<S>                     <C>         <C>         <C>         <C>         <C>         <C>         <C>
Certificate accounts:
     0 to 2.00% .....     $37,724     $ 2,876     $    --     $    --     $40,600     $49,304     $20,283
   2.01 to 3.00% ....       2,046       5,800       1,647         127       9,620       7,860      25,011
   3.01 to 4.00% ....         199       2,750       3,114      13,161      19,224      10,062       5,600
   4.01 to 5.00% ....         289         533       3,399       3,601       7,822       4,389       3,674
   5.01 to 6.00% ....          79         138         181          --         398       1,587       5,397
   6.01 to 7.00% ....       3,462          --          --          --       3,462       9,412       9,358
   Greater than 7.00%         116          --          --          --         116         108          --
                          -------     -------     -------     -------     -------     -------     -------
      Total .........      43,915     $12,097     $ 8,341     $16,889     $81,242     $82,722     $69,323
                          =======     =======     =======     =======     =======     =======     =======
</TABLE>

      Federal Home Loan Bank Advances. The Company may obtain advances from the
Federal Home Loan Bank of Boston upon the security of the common stock it owns
in the Federal Home Loan Bank and its qualifying residential mortgage loans and
mortgage-backed securities, provided certain standards related to
creditworthiness are met. These advances are made pursuant to several credit
programs, each of which has its own interest rate and range of maturities.
Federal Home Loan Bank advances are generally available to meet seasonal and
other withdrawal of deposit accounts and to permit increased lending. At March
31, 2005, the Company had available lines of credit with the Federal Home Loan
Bank totaling approximately $43.7 million.

      The following table sets forth certain information regarding the Company's
borrowed funds during the periods indicated.

<TABLE>
<CAPTION>
                                                                            At or For the Years
                                                                              Ended March 31,
                                                                     ---------------------------------
                                                                      2005          2004        2003
                                                                     -------      -------      -------
                                                                          (Dollars in Thousands)
<S>                                                                  <C>          <C>          <C>

Federal Home Loan Bank advances:
   Average balance outstanding .................................     $10,791      $ 8,055      $ 7,195
   Maximum amount outstanding at any month-end during the period      15,749       10,030        8,243

   Balance outstanding at end of period ........................      15,620        9,926        8,142
   Weighted average interest rate during the period ............        3.69%        4.00%        4.04%
   Weighted average interest rate at end of period .............        3.76%        3.73%        3.98%

</TABLE>

Personnel

      As of March 31, 2005, Enfield Federal had 52 full-time employees and 10
part-time employees. The employees are not represented by a collective
bargaining unit and Enfield Federal believes its relationship with its employees
is good.

                           REGULATION AND SUPERVISION

General

      As savings and loan holding companies, New England Bancshares and Enfield
Mutual Holding Company are required by federal law to file reports with and
otherwise comply with, the rules and regulations, of the Office of Thrift
Supervision. Enfield Federal, as a federal savings association, is subject to
extensive regulation, examination and supervision by the Office of Thrift
Supervision, as its primary federal regulator, and the Federal Deposit


                                       17
<PAGE>

Insurance Corporation, as its deposit insurer. Enfield Federal is a member of
the Federal Home Loan Bank System and, with respect to deposit insurance, of the
Savings Association Insurance Fund managed by the Federal Deposit Insurance
Corporation. Enfield Federal must file reports with the Office of Thrift
Supervision and the Federal Deposit Insurance Corporation concerning its
activities and financial condition in addition to obtaining regulatory approvals
prior to entering into certain transactions such as mergers with, or
acquisitions of, other savings institutions. The Office of Thrift Supervision
and/or the Federal Deposit Insurance Corporation conduct periodic examinations
to test Enfield Federal's safety and soundness and compliance with various
regulatory requirements. This regulation and supervision establishes a
comprehensive framework of activities in which an institution can engage and is
intended primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such regulatory requirements and policies, whether by the Office of
Thrift Supervision, the Federal Deposit Insurance Corporation or the Congress,
could have a material adverse impact on Enfield Mutual Holding Company, New
England Bancshares, Enfield Federal and their operations.

      Certain of the applicable regulatory requirements are referred to below.
This description of statutory provisions and regulations applicable to savings
institutions and their holding companies does not purport to be a complete
description of such statutes and regulations and their effect on Enfield Mutual
Holding Company, New England Bancshares and Enfield Federal and is qualified in
its entirety by reference to the actual statutes and regulations involved.

Federal Banking Regulation

      Business Activities. The activities of federal savings associations are
governed by federal law and regulations. These laws and regulations delineate
the nature and extent of the activities in which federal associations may
engage. In particular, certain lending authority for federal associations, e.g.,
commercial, non-residential real property loans and consumer loans, is limited
to a specified percentage of the institution's capital or assets.

      Loans-to-One-Borrower Limitations. Enfield Federal is generally subject to
the same limits on loans to one borrower as a national bank. With specified
exceptions, Enfield Federal's total loans or extensions of credit to a single
borrower cannot exceed 15% of Enfield Federal's unimpaired capital and surplus.
Enfield Federal may lend additional amounts up to 10% of its unimpaired capital
and surplus, if the loans or extensions of credit are fully-secured by
readily-marketable collateral. At March 31, 2005, Enfield Federal's loans-to-one
borrower limitation was $4.0 million and Enfield Federal's largest aggregate
outstanding balance of loans to one borrower was $2.2 million.

      QTL Test. Under federal law, Enfield Federal must comply with the
qualified thrift lender, or "QTL" test. Under the QTL test, Enfield Federal is
required to maintain at least 65% of its "portfolio assets" in certain
"qualified thrift investments" in at least nine months of the most recent
12-month period. "Portfolio assets" means, in general, Enfield Federal's total
assets less the sum of:

      (1)   specified liquid assets up to 20% of total assets;

      (2)   goodwill and other intangible assets; and

      (3)   the value of property used to conduct Enfield Federal's business.

      "Qualified thrift investments" includes various types of loans made for
residential and housing purposes, investments related to such purposes,
including certain mortgage-backed and related securities, and loans for
personal, family, household and certain other purposes up to a limit of 20% of
Enfield Federal's portfolio assets. Recent legislation broadened the scope of
"qualified thrift investments" to include 100% of an institution's credit card
loans, education loans and small business loans. Enfield Federal may also
satisfy the QTL test by qualifying as a "domestic building and loan association"
as defined in the Internal Revenue Code of 1986 (the "Code").

      If Enfield Federal fails the QTL test it must either operate under certain
restrictions on its activities or convert to a bank charter. Enfield Federal met
the QTL test at March 31, 2005, and in each of the prior 12 months, and,
therefore, qualifies as a thrift lender.


                                       18
<PAGE>

      Capital Requirements. Office of Thrift Supervision regulations require
Enfield Federal to meet three minimum capital standards:

      (1)   a tangible capital ratio requirement of 1.5% of total assets, as
            adjusted under the Office of Thrift Supervision regulations;

      (2)   a leverage ratio requirement of 3% of core capital to adjusted total
            assets, if a savings association has been assigned the highest
            composite rating of 1 under the Uniform Financial Institutions
            Ratings System (the minimum leverage capital ratio for any other
            depository institution that does not have a composite examination
            rating of 1 is 4%, unless a higher leverage capital ratio is
            warranted by the particular circumstances or risk profile of the
            depository institution) and is not anticipating or expecting
            significant growth and have well-diversified risks; and

      (3)   a risk-based capital ratio requirement of 8% of core and
            supplementary capital to total risk-weighted assets of which at
            least half must be core capital.

      In determining compliance with the risk-based capital requirement, Enfield
Federal must compute its risk-weighted assets by multiplying its assets and
certain off-balance sheet items by risk-weights, which range from 0% for cash
and obligations issued by the United States Government or its agencies to 100%
for consumer and commercial loans, as assigned by the Office of Thrift
Supervision capital regulation based on the risks that the Office of Thrift
Supervision believes are inherent in the type of asset.

      Tangible capital is defined, generally, as common stockholders' equity
(including retained earnings), certain non-cumulative perpetual preferred stock
and related surplus and minority interests in equity accounts of fully
consolidated subsidiaries, less intangibles (other than certain mortgage
servicing rights) and investments in and loans to subsidiaries engaged in
activities not permissible for a national bank. Core capital is defined
similarly to tangible capital, but core capital also includes certain qualifying
credit card relationships. Supplementary capital currently includes cumulative
and other perpetual preferred stock, mandatory convertible securities,
subordinated debt and intermediate preferred stock and the allowance for loan
and lease losses. In addition, up to 45% of unrealized gains on
available-for-sale equity securities with a readily determinable fair value may
be included in supplementary capital. The allowance for loan and lease losses
includable in supplementary capital is limited to a maximum of 1.25% of
risk-weighted assets, and the amount of supplementary capital that may be
included as total capital cannot exceed the amount of core capital.

      The Office of Thrift Supervision also has authority to establish
individual minimum capital requirements in appropriate cases upon a
determination that an institution's capital level is or may become inadequate in
light of the particular circumstances. At March 31, 2005, Enfield Federal met
each of its capital requirements.

      The following table presents the Association's capital position at March
31, 2005.

                                                  OTS Minimum
                                              Capital Requirements
                                              --------------------
                         Actual     Ratio      Actual      Ratio
                         ------     -----      ------      -----
Tangible ...........     $24,995    11.79%     $ 3,180     1.5%
Core (Leverage).....     $24,995    11.79%     $ 8,479     4.0%
Risk-based .........     $26,404    23.43%     $ 9,016     8.0%

      Standards For Safety and Soundness. The Office of Thrift Supervision has
adopted a set of guidelines prescribing safety and soundness standards. These
guidelines establish general standards relating to internal controls and
information systems, internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth, asset quality, earnings
standards and compensation, fees and benefits. In general, the guidelines
require appropriate systems and practices to identify and manage the risks and
exposures specified in the guidelines. If the Office of Thrift Supervision
determines that an institution fails to meet any standard prescribed by the
guidelines, it may require the institution to submit and implement an acceptable
plan to achieve compliance with the standard.


                                       19
<PAGE>

      Limitation on Capital Distributions. Office of Thrift Supervision
regulations impose limitations upon all capital distributions by a savings
institution, including cash dividends, payments to repurchase its shares and
payments to stockholders of another institution in a cash-out merger. Under the
regulation, an application to and the prior approval of the Office of Thrift
Supervision is required prior to any capital distribution if the institution
does not meet the criteria for "expedited treatment" of applications under
Office of Thrift Supervision regulations (i.e., generally, examination ratings,
including safety and soundness, compliance and Community Reinvestment Act, in
the two top categories), the total capital distributions for the calendar year
exceed net income for that year plus the amount of retained net income for the
preceding two years, the institution would be undercapitalized following the
distribution or the distribution would otherwise be contrary to a statute,
regulation or agreement with Office of Thrift Supervision. If an application is
not required, the institution must still provide prior notice to Office of
Thrift Supervision of the capital distribution if the institution, like Enfield
Federal, is a subsidiary of a holding company. If Enfield Federal's capital fell
below its regulatory requirements or the Office of Thrift Supervision notified
it that it was in need of more than normal supervision, its ability to make
capital distributions could be restricted. In addition, the Office of Thrift
Supervision could prohibit a proposed capital distribution by any institution,
which would otherwise be permitted by the regulation, if the Office of Thrift
Supervision determines that such distribution would constitute an unsafe or
unsound practice.

      Assessments. Savings institutions are required to pay assessments to the
Office of Thrift Supervision to fund the agency's operations. The general
assessments, paid on a semi-annual basis, are computed upon the savings
institution's total assets, including consolidated subsidiaries, as reported in
the institution's latest quarterly thrift financial report. The assessments paid
by Enfield Federal for the year ended March 31, 2005 totaled $55,000.

      Prompt Corrective Regulatory Action. The Office of Thrift Supervision is
required to take certain supervisory actions against undercapitalized
institutions, the severity of which depends upon the institution's degree of
undercapitalization. Generally, a savings institution that has a ratio of total
capital to risk weighted assets of less than 8%, a ratio of Tier 1 (core)
capital to risk-weighted assets of less than 4% or a ratio of core capital to
total assets of less than 4% (3% or less for institutions with the highest
examination rating) is considered to be "undercapitalized." A savings
institution that has a total risk-based capital ratio less than 6%, a Tier 1
capital ratio of less than 3% or a leverage ratio that is less than 3% is
considered to be "significantly undercapitalized" and a savings institution that
has a tangible capital to assets ratio equal to or less than 2% is deemed to be
"critically undercapitalized." Subject to a narrow exception, the Office of
Thrift Supervision is required to appoint a receiver or conservator within
specified time frames for an institution that is "critically undercapitalized."
The regulation also provides that a capital restoration plan must be filed with
the Office of Thrift Supervision within 45 days of the date a savings
institution receives notice that it is "undercapitalized," "significantly
undercapitalized" or "critically undercapitalized." Compliance with the plan
must be guaranteed by any parent holding company. In addition, numerous
mandatory supervisory actions become immediately applicable to an
undercapitalized institution, including, but not limited to, increased
monitoring by regulators and restrictions on growth, capital distributions and
expansion. The Office of Thrift Supervision could also take any one of a number
of discretionary supervisory actions, including the issuance of a capital
directive and the replacement of senior executive officers and directors.

      Enforcement. The Office of Thrift Supervision has primary enforcement
responsibility over savings institutions and has the authority to bring action
against the institution and all "institution-affiliated parties," including
stockholders, and any attorneys, appraisers and accountants who knowingly or
recklessly participate in wrongful action likely to have an adverse effect on an
insured institution. Formal enforcement action may range from the issuance of a
capital directive or cease and desist order to removal of officers or directors,
receivership, conservatorship or termination of deposit insurance. Civil
penalties cover a wide range of violations and can amount to $25,000 per day, or
$1.0 million per day in especially egregious cases. The Federal Deposit
Insurance Corporation has the authority to recommend to the Director of the
Office of Thrift Supervision that enforcement action be taken with respect to a
particular savings institution. If action is not taken by the Director, the
Federal Deposit Insurance Corporation has authority to take such action under
certain circumstances. Federal and state law also establishes criminal penalties
for certain violations.

      Insurance of Deposit Accounts. Enfield Federal is a member of Savings
Association Insurance Fund. The Federal Deposit Insurance Corporation has
established a risk-based assessment system for determining the deposit insurance
assessments to be paid by insured depository institutions. Under the assessment
system, the Federal Deposit Insurance Corporation assigns an institution to one
of three capital categories based on the institution's


                                       20
<PAGE>

examination rating and other supervisory financial information. An institution's
assessment rate depends on the capital category and supervisory category to
which it is assigned. Assessment rates currently range from 0% of assessable
deposits for an institution in the highest category (i.e., well-capitalized and
financially sound, with no more than a few minor weaknesses) to 0.27% of
assessable deposits for an institution in the lowest category (i.e.,
undercapitalized and substantial supervisory concern). The Federal Deposit
Insurance Corporation is authorized to raise the assessment rates as necessary
to maintain the insurance fund reserve ratio.

      In addition, all Federal Deposit Insurance Corporation insured
institutions are required to pay assessments to the Federal Deposit Insurance
Corporation to fund interest payment on bonds issued by the Financing
Corporation, an agency of the federal government established to recapitalize the
predecessor to the Savings association Insurance Fund. These assessments will
continue until the Financing Corporation bonds mature in 2017.

      Enfield Federal's total assessment paid for the 2005 fiscal year
(including the Financing Corporation assessment) was $24,000. The Federal
Deposit Insurance Corporation has authority to increase insurance assessments. A
significant increase in Savings Association Insurance Fund insurance premiums
would likely have an adverse effect on the operating expenses and results of
operations of the association. Management cannot predict what insurance
assessment rates will be in the future.

      Insurance of deposits may be terminated by the Federal Deposit Insurance
Corporation 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
Federal Deposit Insurance Corporation or the Office of Thrift Supervision. The
management of Enfield Federal does not know of any practice, condition or
violation that might lead to termination of deposit insurance.

      Transactions with Related Parties. Enfield Federal's authority to engage
in transactions with its "affiliates" (e.g., any company that controls or is
under common control with an institution, including New England Bancshares and
Enfield Mutual Holding Company) is limited by federal law. In general, these
transactions must be on terms which are as favorable to Enfield Federal as
comparable transactions with non-affiliates. In addition, certain types of these
transactions are restricted to an aggregate percentage of Enfield Federal's
capital. Collateral in specified amounts must usually be provided by affiliates
to receive loans from Enfield Federal. The purchase of low quality assets from
affiliates is generally prohibited. In addition, the Office of Thrift
Supervision regulations prohibit a savings association from lending to any of
its affiliates that is engaged in activities that are not permissible for bank
holding companies and from purchasing the securities of any affiliate, other
than a subsidiary.

      The Sarbanes-Oxley Act generally prohibits loans by the Company to its
executive officers and directors. However, that act contains a specific
exception for loans by Enfield Federal to its executive officers and directors
in compliance with federal banking laws. Under such laws, Enfield Federal's
authority to extend credit to executive officers, directors and 10% stockholders
("insiders"), as well as entities such persons control, is limited. Among other
things, these provisions require that extensions of credit to insiders be made
on terms that are substantially the same as, and follow credit underwriting
procedures that are not less stringent than, those prevailing for comparable
transactions with unaffiliated persons and that do not involve more than the
normal risk of repayment or present other unfavorable features. There is an
exception for loans made pursuant to a benefit or compensation program that is
widely available to all employees of the institution and does not give
preference to insiders. There are also certain limitations on the amount of
credit extended to insiders, individually and in the aggregate, which limits are
based, in part, on the amount of Enfield Federal's capital. In addition,
extensions of credit in excess of certain limits must be approved by Enfield
Federal's board of directors.

      Community Reinvestment Act. Under the Community Reinvestment Act ("CRA"),
as implemented by Office of Thrift Supervision regulations, Enfield Federal has
a continuing and affirmative obligation 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 Enfield Federal nor
does it limit its discretion to develop the types of products and services that
it believes are best suited to its particular community, consistent with the
CRA. The CRA requires the Office of Thrift Supervision, in connection with its
examination of Enfield Federal, to assess Enfield Federal's record of meeting
the credit needs of its community and to take the record into account in its
evaluation of certain applications by Enfield Federal. The CRA also requires all
institutions to make public disclosure of their CRA ratings. Enfield Federal
received a "Satisfactory" CRA rating in its most recent examination.


                                       21
<PAGE>

      Federal Home Loan Bank System. Enfield Federal is a member of the Federal
Home Loan Bank of Boston, which is one of the 12 regional Federal Home Loan
Banks making up the Federal Home Loan Bank System. Each Federal Home Loan Bank
provides a central credit facility primarily for its member institutions.
Enfield Federal is required to acquire and hold shares of capital stock in the
Federal Home Loan Bank of Boston in an amount equal to the greater of 1% of the
aggregate principal amount of its unpaid residential mortgage loans,
home-purchase contracts and similar obligations or 5% of outstanding advances.
Enfield Federal was in compliance with this requirement with an investment in
the capital stock of the Federal Home Loan Bank of Boston at March 31, 2005 of
$1.1 million. Any advances from a Federal Home Loan Bank must be secured by
specified types of collateral and all long term advances may be obtained only
for the purpose of providing funds for residential housing finance.

      The Federal Home Loan Banks have been required to provide funds for the
resolution of insolvent thrifts and to contribute funds for affordable housing
programs. These requirements could reduce the amount of earnings that the
Federal Home Loan Banks can pay as dividends to their members and could also
result in the Federal Home Loan Banks imposing a higher rate of interest on
advances to their members. If dividends were reduced, or interest on future
Federal Home Loan Bank advances increased, Enfield Federal's net interest income
would be affected. Recent legislation has changed the structure of the Federal
Home Loan Banks' funding obligations for insolvent thrifts, revised the capital
structure of the Federal Home Loan Banks and implemented entirely voluntary
membership for Federal Home Loan Banks. Management cannot predict the effect
that these changes may have with respect to its Federal Home Loan Bank
membership.

Federal Reserve System

      Under Federal Reserve Board regulations, Enfield Federal is required to
maintain noninterest-earning reserves against its transaction accounts. The
Federal Reserve Board regulations generally require that reserves of 3% must be
maintained against aggregate transaction accounts of $47.6 million or less,
subject to adjustment by the Federal Reserve Board, and reserves of 10%, subject
to adjustment by the Federal Reserve Board, against that portion of total
transaction accounts in excess of $47.6 million. The first $7.0 million of
otherwise reservable balances, subject to adjustment by the Federal Reserve
Board, are exempted from the reserve requirements. Enfield Federal is in
compliance with these requirements.

Holding Company Regulation

      General. New England Bancshares and Enfield Mutual Holding Company are
savings and loan holding companies within the meaning of federal law. As such,
these companies are registered with the Office of Thrift Supervision and are
subject to Office of Thrift Supervision regulations, examinations, supervision
and reporting requirements. In addition, the Office of Thrift Supervision has
enforcement authority over New England Bancshares and Enfield Mutual Holding
Company and the non-savings institution subsidiaries. Among other things, this
authority permits the Office of Thrift Supervision to restrict or prohibit
activities that are determined to be a serious risk to the subsidiary savings
institution.

      Restrictions Applicable to Mutual Holding Companies. Pursuant to federal
law, a mutual holding company, such as Enfield Mutual Holding Company, may
generally engage in the following activities: (1) investing in the stock of a
savings association; (2) acquiring a mutual association through the merger of
such association into a savings association subsidiary of such holding company
or an interim savings association subsidiary of such holding company; (3)
merging with or acquiring another holding company, one of whose subsidiaries is
a savings association; and (4) any activity approved by the Federal Reserve
Board for a bank holding company or financial holding company or previously
approved by Office of Thrift Supervision for multiple savings and loan holding
companies. Recent legislation, which authorized mutual holding companies to
engage in activities permitted financial holding companies, expanded the
authorized activities. Financial holding companies may engage in a broad array
of financial service activities, including insurance and securities.

      Federal law prohibits a savings and loan holding company, including a
federal mutual holding company, directly or indirectly, or through one or more
subsidiaries, from acquiring more than 5% of the voting stock of another savings
institution or savings and loan holding company, without prior written approval
of the Office of Thrift Supervision. In evaluating applications by holding
companies to acquire savings institutions, the Office of


                                       22
<PAGE>

Thrift Supervision considers the financial and managerial resources and future
prospects of the company and institution involved, the effect of the acquisition
on the risk to the deposit insurance funds, the convenience and needs of the
community and competitive factors.

      The Office of Thrift Supervision is prohibited from approving any
acquisition that would result in a multiple savings and loan holding company
controlling savings institutions in more than one state, except: (1) the
approval of interstate supervisory acquisitions by savings and loan holding
companies, and (2) the acquisition of a savings institution in another state if
the laws of the state of the target savings institution specifically permit such
acquisitions. The states vary in the extent to which they permit interstate
savings and loan holding company acquisitions.

      Although savings and loan holding companies are not currently subject to
specific capital requirements or specific restrictions on the payment of
dividends or other capital distributions, federal regulations do prescribe such
restrictions on subsidiary savings institutions. Enfield Federal must notify the
Office of Thrift Supervision 30 days before declaring any dividend to New
England Bancshares. In addition, the financial impact of a holding company on
its subsidiary institution is a matter that is evaluated by the Office of Thrift
Supervision and the agency has authority to order cessation of activities or
divestiture of subsidiaries deemed to pose a threat to the safety and soundness
of the institution.

      Stock Holding Company Subsidiary Regulation. The Office of Thrift
Supervision has adopted regulations governing the two-tier mutual holding
company form of organization and mid-tier stock holding companies that are
controlled by mutual holding companies. Under these rules, a stock holding
company subsidiary, such as New England Bancshares, holds all the shares of the
mutual holding company's savings association subsidiary and issues the majority
of its own shares to the mutual holding company parent. The stock holding
company subsidiary is permitted to engage in activities that are permitted for
its mutual holding company parent subject to the same restrictions and
conditions.

      Acquisition of Control. Under the Federal Change in Bank Control Act
("CIBCA"), a notice must be submitted to the Office of Thrift Supervision if any
person (including a company), or group acting in concert, seeks to acquire
"control" of a savings and loan holding company or savings association. An
acquisition of "control" can occur upon the acquisition of 10% or more of the
voting stock of a savings and loan holding company or savings association or as
otherwise defined by Office of Thrift Supervision. Under the CIBCA, the Office
of Thrift Supervision has 60 days from the filing of a complete notice to act,
taking into consideration certain factors, including the financial and
managerial resources of the acquirer and the anti-trust effects of the
acquisition. Any company that so acquires control would then be subject to
regulation as a savings and loan holding company.

                           FEDERAL AND STATE TAXATION

Federal Taxation

      General. New England Bancshares and Enfield Federal report their
consolidated taxable income on a fiscal year basis ending March 31, using the
accrual method of accounting and are subject to federal income taxation in the
same manner as other corporations. The following discussion of tax matters is
intended only as a summary and does not purport to be a comprehensive
description of the tax rules applicable to New England Bancshares and Enfield
Federal. The Company is not currently under audit nor has it ever been audited
by the Internal Revenue Service. Enfield Mutual Holding Company files its own
separate federal income tax return.

      Distributions. To the extent that the Company makes "non-dividend
distributions" to stockholders, such distributions will be considered to result
in distributions from its unrecaptured tax bad debt reserve as of December 31,
1987 (the "base year reserve"), to the extent thereof and then from the
Company's supplemental reserve for losses on loans, and an amount based on the
amount distributed will be included in the Company's income. Non-dividend
distributions include distributions in excess of the Company's current and
accumulated earnings and profits, distributions in redemption of stock and
distributions in partial or complete liquidation. Dividends paid out of the
Company's current or accumulated earnings and profits will not be included in
the Company's income.


                                       23
<PAGE>

      The amount of additional income created from a non-dividend distribution
is equal to the lesser of the 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 some situations,
approximately one and one-half times the non-dividend distribution would be
includable in gross income for federal income tax purposes, assuming a 34%
federal corporate income tax rate. The Company does not intend to pay dividends
that would result in the recapture of any portion of the bad debt reserves.

      Corporate Alternative Minimum Tax. The Code imposes a tax on alternative
minimum taxable income at a rate of 20%. Only 90% of alternative minimum taxable
income can be offset by alternative minimum tax net operating loss carryovers of
which the Company currently has none. Alternative minimum taxable income is also
adjusted by determining the tax treatment of certain items in a manner that
negates the deferral of income resulting from the regular tax treatment of those
items. Alternative minimum tax is due when it exceeds the regular income tax.
The Company has not had a liability for a tax on alternative minimum taxable
income during the past five years.

      Elimination of Dividends. New England Bancshares may exclude from its
income 100% of dividends received from Enfield Federal as a member of the same
affiliated group of corporations.

State Taxation

      New England Bancshares and Enfield Federal file Connecticut income tax
returns on a consolidated basis. Generally, the income of financial institutions
in Connecticut, which is calculated based on federal taxable income, subject to
certain adjustments, is subject to Connecticut tax. The Company is not currently
under audit with respect to its Connecticut income tax returns and its state tax
returns have not been audited for the past five years. Enfield Mutual Holding
Company files its own separate state income tax return.



                                       24
<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY

      The Company currently conducts its business through seven full-service
banking offices and one administrative office. The net book value of the
Company's properties or leasehold improvements was $2.1 million at March 31,
2005.

                                                    Original
                                      Leased or    Year Leased   Date of Lease
Location                                Owned      or Acquired    Expiration
                                      ---------    -----------   -------------

Executive/Branch Office(1):
660 Enfield Street
Enfield, Connecticut.................   Leased        2005           2005

Administrative Office:
630 Enfield Street
Enfield, Connecticut.................   Leased        2000          2005(2)

Branch Offices:
268 Hazard Avenue
Enfield, Connecticut.................   Owned         1962             --

54 Hazard Avenue
Enfield, Connecticut.................   Leased        1994         Month to
                                                                     Month
112 Mountain Road
Suffield, Connecticut................   Leased        1988           2008

23 Main Street
Manchester, Connecticut..............   Owned         2002             --

124 Main Street
Broad Brook, Connecticut.............   Owned         2003             --

20 Main Street
Windsor Locks, Connecticut...........   Leased        2002           2012

------------------------------------------------------------------------------

(1)   On November 24, 2004, the Association, the wholly-owned subsidiary of New
      England Bancshares, Inc., entered into a 25-year lease for a building that
      is being constructed to house its new headquarters. Once the new main
      office is completed, the Association will allow its leases on 660 Enfield
      Street and 630 Enfield Street to expire and will vacate these offices.
(2)   Enfield Federal has an option to renew this lease for one additional
      five-year term.

ITEM 3.  LEGAL PROCEEDINGS

      Periodically, there have been various claims and lawsuits involving
Enfield Federal, such as claims to enforce liens, condemnation proceedings on
properties in which Enfield Federal holds security interests, claims involving
the making and servicing of real property loans and other issues incident to
Enfield Federal's business. In the opinion of management, after consultation
with the Company's legal counsel, no such pending claims or lawsuits are
expected to have a material adverse effect on the financial condition or
operations of the Company, taken as a whole. The Company is not a party to any
material pending legal proceedings.


                                       25
<PAGE>

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

      No matters were submitted to a vote of security holders during the fourth
quarter of the year ended March 31, 2005.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
         SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

      The Company's common stock is quoted on the OTC Bulletin Board under the
symbol "NEBS." According to the records of its transfer agent, the Company had
approximately 271 stockholders of record as of June 2, 2005. This number does
not reflect stockholders who hold their shares in "street name." The following
table sets forth the high and low bid information for the Company's common stock
for each of the fiscal quarters in the two-year period ended March 31, 2005.


                                          High            Low          Dividends
                                        --------        --------       ---------
Fiscal 2005:

    Fourth Quarter.................      $20.50          $17.50          $0.05
    Third Quarter..................       20.70           17.80             --
    Second Quarter.................       23.95           16.75             --
    First Quarter..................       19.25           17.55             --
Fiscal 2004:
    Fourth Quarter.................      $22.25          $18.10             --
    Third Quarter..................       20.25           17.50             --
    Second Quarter.................       18.99           15.30             --
    First Quarter..................       16.25           14.50             --

      The Company did not repurchase any of its common shares during the quarter
ended March 31, 2005.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

      Management's discussion and analysis of financial condition and results of
operations is intended to assist in understanding the financial condition and
results of operations of the Company. The information contained in this section
should be read in conjunction with the consolidated financial statements and
accompanying notes contained in this report.

General

      The Company's results of operations depend primarily on net interest
income, which is the difference between the interest income earned on its
interest-earning assets, such as loans and securities, and the interest expense
on its interest-bearing liabilities, such as deposits and borrowings. The
Company also generates noninterest income primarily from fees and service
charges. Gains on the sales of securities is another source of noninterest
income. The Company's noninterest expenses primarily consist of employee
compensation and benefits, occupancy expense, advertising, data processing,
professional fees and other operating expenses.

      The Company's results of operations may also be affected significantly by
economic and competitive conditions in its market area and elsewhere, including
those conditions that influence market interest rates, government policies and
the actions of regulatory authorities. Future changes in applicable laws,
regulations or government policies may materially impact the Company.
Furthermore, because the Company's lending activity is concentrated in loans
secured by real estate located in Northern Hartford County, Connecticut,
downturns in the regional economy could have a negative impact on the Company's
earnings.


                                       26
<PAGE>

Management Strategy

      The Company's business strategy is to operate as an independent financial
institution dedicated to serving the needs of both retail and commercial
customers in its market area. Its business consists principally of attracting
retail deposits from the general public and using these funds to originate
mortgage loans secured by one- to four-family residences located primarily in
Northern Hartford County, Connecticut. In recent years, in addition to mortgage
lending, the Company has adopted a growth oriented strategy that has focused on
increased emphasis on multi-family and commercial real estate loans,
construction loans and consumer loans, particularly home equity loans and lines
of credit.

      In connection with its overall growth strategy, the Company seeks to:

      (1)   continue to emphasize its commercial and consumer lending portfolios
            as a means to increase the yield on and diversify its loan
            portfolio;

      (2)   emphasize the origination of adjustable-rate loans or fixed-rate
            loans with shorter durations and sell longer term fixed-rate
            mortgage loans in the secondary market to decrease its exposure to
            interest rate risk;

      (3)   diversify and grow deposits, with a particular emphasis on
            transaction and money market deposits;

      (4)   expand its retail banking franchise and increase the number of
            households served within its market area;

      (5)   increase fee income by performing ongoing reviews of the
            profitability on the various lines of business it offers and by
            growing transaction accounts;

      (6)   continue to focus on recently acquired technology as a means to
            promote operating efficiencies;

      (7)   maintain its "well capitalized" status while utilizing excess
            capital as business opportunities present themselves;

      (8)   enhance return on equity by increasing its asset base and net
            income; and

      (9)   maintain its proactive community position and assist in community
            housing projects and fund- raising for underprivileged members of
            the community.

      To be more competitive and have the capacity to deepen its relationships
with existing customers and attract new customers, the Company expanded its
nontraditional delivery channels and products by affiliating with a third party
registered broker-dealer. The third party broker-dealer maintains an office at
the Company's main banking office and offers to the Company's customers a
complete range of nondeposit investment products, including mutual funds, debt,
equity and government securities, retirement accounts, insurance products and
annuities.

Critical Accounting Policies

      The Company considers accounting policies involving significant judgments
and assumptions by management that have, or could have, a material impact on the
carrying value of certain assets or income to be critical accounting policies.
The Company considers the allowance for loan losses to be a critical accounting
policy.

      Allowance for Loan Losses. The allowance for loan losses is the amount
estimated by management as necessary to cover losses inherent in the loan
portfolio at the balance sheet dates and involves a high degree of judgment. The
allowance is established through the provision for loan losses, which is charged
to income. The material estimates underlying the allowance for loan loss
includes: loss exposure at default; collateral value; borrower's ability to
repay the loan; and loss factors utilized in the allowance calculation.


                                       27
<PAGE>

      The Company maintains an allowance for loan losses to absorb losses
inherent in the existing portfolio. When a loan, or portion thereof, is
considered uncollectible, it is charged against the allowance. Recoveries of
amounts previously charged-off are added to the allowance when collected. The
adequacy of the allowance for loan losses is evaluated on a regular basis by
management. Factors considered in evaluating the adequacy of the allowance
include previous loss experience, current economic conditions and their effect
on borrowers and the market area in general, and the performance of individual
credits in relation to the contract terms. The provision for loan losses charged
to earnings is based on management's judgment of the amount necessary to
maintain the allowance at a level adequate to absorb losses. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the adequacy of the Company's allowance for loan losses. The
agencies may require the Company to record adjustments to the allowance based on
its examination. An increase to the allowance required to be made by one of the
regulatory agencies would negatively impact the Company's earnings. In addition,
a large loss could severely deplete the allowance and require the Company to
replenish the allowance, which would negatively impact the Company's earnings.

      The allowance for loan losses increased 10.5% from March 31, 2004 to March
31, 2005. This increase was caused by the 9.2% increase in gross loans and the
shift of the loan portfolio to commercial loans from one- to four-family
residential loans. The commercial real estate portfolio increased 26.8% while
the one- to four-family portfolio increased 9.6%. Offsetting these factors was
an increase in asset quality as non-accruing loans declined 50.5% and the ratio
of delinquent loans to loans decreased from 2.62% at March 31, 2004 to 2.09% at
March 31, 2005.


                                       28
<PAGE>

      Average Balance Sheets. The following table sets forth certain information
relating to the Company for the periods indicated. The average yields and costs
are derived by dividing income or expense by the average balance of
interest-earning assets or interest-bearing liabilities, respectively, for the
periods shown. Average balances are derived from average daily balances.

<TABLE>
<CAPTION>
                                                                       For the Fiscal Years Ended March 31,
                                                      ------------------------------------------------------------------
                                                                    2005                                2004
                                                      -------------------------------     ------------------------------
                                                                              Average                            Average
                                                      Average                  Yield/     Average                 Yield/
                                                      Balance      Interest     Rate      Balance     Interest     Rate
                                                      -------      --------   -------     -------     --------   -------
                                                                                (Dollars in Thousands)
<S>                                                   <C>           <C>         <C>       <C>           <C>        <C>
Assets:
 Federal funds sold, interest-bearing
  deposits and marketable
  equity securities .............................     $ 18,667      $   434     2.32%     $ 11,328      $  196     1.73%
 Investments in available-for-sale
  securities, other than mortgage-backed
  and mortgage-related securities (1) ...........       30,724        1,289     4.20        21,032         563     2.68
 Mortgage-backed and mortgage-related
  securities ....................................       15,840          604     3.81        21,641         953     4.40
 Federal Home Loan Bank stock ...................        1,025           33     3.22           877          24     2.74
 Loans, net (2) .................................      125,567        7,943     6.33       103,386       7,086     6.85
                                                      --------      -------               --------      ------
   Total interest-earning assets ................      191,823       10,303     5.37       158,264       8,822     5.57
                                                                    -------                             ------
 Noninterest-earning assets .....................       11,356                              11,167
 Cash surrender value of life insurance .........        3,818                               3,644
                                                      --------                            --------
   Total assets .................................     $206,997                            $173,075
                                                      ========                            ========

Liabilities and Stockholders' Equity:
 Deposits:
  Savings accounts ..............................     $ 55,280      $   337     0.61%     $ 46,001      $  328     0.71%
  NOW accounts ..................................        7,020           17     0.24         5,306          16     0.30
  Money market accounts .........................        6,532           65     1.00         6,177          63     1.02
  Certificate accounts ..........................       82,941        2,115     2.55        73,639       2,087     2.83
                                                      --------      -------               --------      ------
   Total deposits ...............................      151,773        2,534     1.67       131,123       2,494     1.90
 Federal Home Loan Bank advances ................       10,791          398     3.69         8,055         322     4.00
 Advanced payments by borrowers for taxes and
  insurance .....................................          643            8     1.24           451           7     1.55
 Securities sold under agreements to repurchase .        2,549           46     1.80           439           5     1.14
                                                      --------      -------               --------      ------
   Total interest-bearing liabilities ...........      165,756        2,986     1.80       140,068       2,828     2.02
                                                                    -------                             ------
 Demand deposits ................................       12,504                               7,792
 Other liabilities ..............................          775                                 694
                                                      --------                            --------
   Total liabilities ............................      179,035                             148,554
 Stockholders' Equity ...........................       27,962                              24,521
                                                      --------                            --------
   Total liabilities and stockholders' equity ...     $206,997                            $173,075
                                                      ========                            ========
 Net interest income/net interest rate spread (3)                   $ 7,317     3.57%                   $5,994     3.55%
                                                                    =======     ====                    ======     ====
 Net interest margin (4) ........................                               3.81%                              3.79%
                                                                                ====                               ====
 Ratio of interest-earning assets
  to interest-bearing liabilities ...............       115.73%                             112.99%
                                                      ========                            ========

<CAPTION>
                                                       For the Fiscal Years Ended March 31,
                                                      --------------------------------------
                                                                      2003
                                                      --------------------------------------
                                                                                     Average
                                                      Average                        Yield/
                                                      Balance         Interest        Rate
                                                      -------         --------       -------
                                                                (Dollars in Thousands)
<S>                                                   <C>              <C>            <C>
Assets:
 Federal funds sold, interest-bearing
  deposits and marketable
  equity securities .............................     $  8,783         $  122         1.39%
 Investments in available-for-sale
  securities, other than mortgage-backed
  and mortgage-related securities (1) ...........       14,999            477         3.18
 Mortgage-backed and mortgage-related
  securities ....................................       25,338          1,243         4.91
 Federal Home Loan Bank stock ...................          820             29         3.54
 Loans, net (2) .................................       86,869          6,518         7.50
                                                      --------         ------
   Total interest-earning assets ................      136,809          8,389         6.13
                                                                       ------
 Noninterest-earning assets .....................        9,236
 Cash surrender value of life insurance .........        3,471
                                                      --------
   Total assets .................................     $149,516
                                                      ========

Liabilities and Stockholders' Equity:
 Deposits:
  Savings accounts ..............................     $ 38,826         $  465         1.20%
  NOW accounts ..................................        4,490             21         0.47
  Money market accounts .........................        3,879             55         1.42
  Certificate accounts ..........................       68,754          2,510         3.65
                                                      --------         ------
   Total deposits ...............................      115,949          3,051         2.63
 Federal Home Loan Bank advances ................        7,195            291         4.04
 Advanced payments by borrowers for taxes and
  insurance .....................................          309              4         1.29
 Securities sold under agreements to repurchase .           --             --           --
                                                      --------         ------         ----
   Total interest-bearing liabilities ...........      123,453          3,346         2.71
                                                                       ------
 Demand deposits ................................        4,790
 Other liabilities ..............................          464
                                                      --------
   Total liabilities ............................      128,707
 Stockholders' Equity ...........................       20,809
                                                      --------
   Total liabilities and stockholders' equity ...     $149,516
                                                      ========
 Net interest income/net interest rate spread (3)                      $5,043         3.42%
                                                                       ======         ====
 Net interest margin (4) ........................                                     3.69%
                                                                                      ====
 Ratio of interest-earning assets
  to interest-bearing liabilities ...............       110.82%
                                                      ========
</TABLE>

--------------------------------------------------------------------------------
(1)   Reported on a tax equivalent basis, using a 34% tax rate.

(2)   Amount is net of deferred loan origination costs, undisbursed proceeds of
      construction loans in process, allowance for loan losses and includes
      non-accruing loans. The Company records interest income on non-accruing
      loans on a cash basis. Loan fees are included in interest income.

(3)   Net interest rate spread represents the difference between the weighted
      average yield on interest-earning assets and the weighted average cost of
      interest-bearing liabilities.

(4)   Net interest margin represents net interest income as a percentage of
      average interest-earning assets.


                                       29
<PAGE>

      Rate/Volume Analysis. The following table presents the extent to which
changes in interest rates and changes in the volume of interest-earning assets
and interest-bearing liabilities have affected the Company's interest income and
interest expense during the periods indicated. Information is provided in each
category with respect to: (i) changes attributable to changes in volume (changes
in volume multiplied by prior rate); (ii) changes attributable to changes in
rate (changes in rate multiplied by prior volume); and (iii) net change. The
changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.

<TABLE>
<CAPTION>
                                                               Fiscal Year Ended March 31, 2005     Fiscal Year Ended March 31, 2004
                                                                          Compared to                         Compared to
                                                                      Fiscal Year Ended                   Fiscal Year Ended
                                                                        March 31, 2004                      March 31, 2003
                                                               --------------------------------     --------------------------------
                                                                Increase (Decrease)                 Increase (Decrease)
                                                                      Due to                               Due to
                                                                -------------------                 -------------------
                                                                 Rate        Volume       Net         Rate       Volume       Net
                                                                -------     -------     -------     -------     -------     -------
                                                                                           (In Thousands)
<S>                                                             <C>         <C>         <C>         <C>         <C>         <C>
Interest-earning assets:
  Federal funds sold, interest-bearing
   deposits and marketable equity securities ...............    $    83     $   155     $   238     $    34     $    40     $    74
  Investments in available-for-sale securities,
   other than mortgage-backed and
   mortgage-related securities .............................        401         325         726         (56)        142          86
  Mortgage-backed and mortgage-related
   securities ..............................................       (116)       (233)       (349)       (120)       (170)       (290)
  Federal Home Loan Bank stock .............................          5           4           9          (7)          2          (5)
  Loans, net (1) ...........................................       (480)      1,337         857        (474)      1,042         568
                                                                -------     -------     -------     -------     -------     -------
     Total interest-earning assets .........................       (107)      1,588       1,481        (623)      1,056         433
                                                                -------     -------     -------     -------     -------     -------
Interest-bearing liabilities:
  Savings accounts .........................................        (23)         32           9        (252)        115        (137)
  NOW accounts .............................................         (2)          3           1         (10)          5          (5)
  Money market accounts ....................................         (1)          3           2          (7)         15           8
  Certificates accounts ....................................       (108)        136          28        (620)        197        (423)
  Federal Home Loan Bank advances ..........................        (22)         98          76          (3)         34          31
  Advanced payments by borrowers for taxes
   and insurance ...........................................         (1)          2           1           1           2           3
  Securities sold under agreements to repurchase ...........          4          37          41          --           5           5
                                                                -------     -------     -------     -------     -------     -------
     Total interest-bearing liabilities ....................       (153)        311         158        (891)        373        (518)
                                                                -------     -------     -------     -------     -------     -------
Increase in net interest income ............................    $    46     $ 1,277     $ 1,323     $   268     $   683     $   951
                                                                =======     =======     =======     =======     =======     =======
</TABLE>

--------------------------------------------------------------------------------
(1)   Amount is net of deferred loan origination costs, undisbursed proceeds of
      construction loans in process, allowance for loan losses and includes
      non-accruing loans. The Company records interest income on non-accruing
      loans on a cash basis. Loan fees are included in interest income.

Comparison of Financial Condition at March 31, 2005 and March 31, 2004

      Total assets increased $10.0 million, or 4.94%, from $203.2 million at
March 31, 2004 to $213.2 million at March 31, 2005. The increase in total assets
was primarily due to an increase in net loans of $11.2 million and a $4.4
million increase in securities, partially offset by a $3.1 million decrease in
cash and cash equivalents and a $2.5 million decrease in interest-bearing time
deposits with other banks. Total liabilities increased $9.2 million primarily
due to increases in borrowings and securities sold under agreements to
repurchase of $5.7 million and $3.5 million, respectively. Total stockholders'
equity at March 31, 2005 was $28.4 million, an increase of $845,000 from $27.6
million at March 31, 2004.

      Investment securities available-for-sale increased by $4.4 million at
March 31, 2005 as compared to March 31, 2004, primarily due to purchases of
short-to medium-term securities. The securities portfolio is comprised primarily
of mortgage-backed securities, including collateralized mortgage obligations,
U.S. government and federal agency securities and municipal securities.
Interest-bearing time deposits with other banks decreased $2.5 million at


                                       30
<PAGE>

March 31, 2005 as compared to March 31, 2004 as these funds were used to fund
loan growth. The Company obtained $8.8 million of these assets in the merger
with Windsor Locks Community Bank, FSL.

      Net loans increased $11.2 million, or 9.2%, to $132.6 million at March 31,
2005 due primarily to a $4.7 million increase in commercial real estate loans
and a $7.8 million increase in one-to four-family loans. The Company continues
to focus on non one-to four-family residential mortgages, with the percentage of
one-to four-family loans to total loans decreasing from 77.67% at March 31, 2001
to 66.08% at March 31, 2005. Over that same time period total loans have
increased 99.76% to $134.3 million at March 31, 2005.

      Total deposits increased $201,000 from $162.8 million at March 31, 2004 to
$163.0 million at March 31, 2005. The deposit mix also changed favorably as
certificates of deposit, which tend to pay higher rates, decreased $1.5 million
and its percentage of total deposits decreased from 50.8% at March 31, 2004 to
49.8% at March 31, 2005. Non interest-bearing deposits increased $2.5 million,
or 22.8%, increasing its percentage of total deposits to 8.3% at March 31, 2005
from 6.8% at March 31, 2004 due in part to the Company's focus on increasing its
commercial customer base.

      The $3.5 million increase in repurchase agreements was also due to the
commercial customer focus. Customer funds are swept into the repurchase accounts
on a daily basis above a predetermined target balance. This type of account
enables the Company to retain a larger customer's deposit while having it
protected against the $100,000 FDIC insurance limit.

      At March 31, 2005 and 2004, FHLB borrowings amounted to $15.6 million and
$9.9 million, respectively. During fiscal 2005, the Company received $8.5
million in proceeds from new FHLB borrowings, partially offset by principal
payments of $2.8 million. These borrowings had an average cost of 3.69% during
the year ended March 31, 2005, as compared to 4.00% for the prior year.

      Total stockholders' equity at March 31, 2005 was $28.4 million. The
$845,000 increase in equity was primarily due to net income of $1.2 million in
the current year and a $265,000 increase in equity for ESOP shares released and
stock-based compensation, partially offset by a $560,000 decrease in the
accumulated other comprehensive income.

Nonperforming Assets

      Nonperforming assets were $464,000, or 0.22% of total assets, at March 31,
2005 compared to $937,000, or 0.46% of total assets at March 31, 2004, a
decrease of $473,000. The balance at March 31, 2005 was comprised of three loans
secured by one-to four-family real estate. Nonperforming assets are comprised of
nonaccrual loans and real estate acquired by foreclosure or a similar conveyance
of title.

Market Risk

      Interest rate risk, including mortgage prepayment risk, is by far the most
significant non-credit risk to which the Company is exposed. Interest rate risk
is the sensitivity of income to changes in interest rates. Changes in interest
rates, as well as fluctuations in the balance and duration of assets and
liabilities, affect net interest income, the Company's primary source of
revenue. The ongoing monitoring and management of this risk is an important
component of the Company's asset/liability management process which is governed
by policies established by the Company's Board of Directors that are reviewed
and approved annually. The board of directors delegates responsibility for
carrying out the asset/liability management policies to the Company's management
Asset Liability Committee ("ALCO"). In this capacity, ALCO develops guidelines
and strategies impacting the Company's asset/liability management-related
activities based upon estimated market risk sensitivity, policy limits and
overall market interest rate level trends.

      The Company manages the interest rate sensitivity on its interest-bearing
liabilities and interest-earning assets in an effort to minimize the adverse
effects of changes in the interest rate environment. Deposit accounts typically
react more quickly to changes in market interest rates than mortgage loans
because of the shorter maturities of deposits. As a result, sharp increases in
interest rates may adversely affect the Company's earnings while


                                       31
<PAGE>

decreases in interest rates may beneficially affect the Company's earnings. To
reduce the potential volatility of the Company's earnings, the Company has
sought to improve the match between asset and liability maturities and rates,
while maintaining an acceptable interest rate spread. Also, the Company attempts
to manage its interest rate risk through: its investment portfolio; an increased
focus on multi-family and commercial real estate lending, which emphasizes the
origination of shorter-term adjustable-rate loans; and efforts to originate
adjustable-rate residential mortgage loans. The Company currently does not
participate in hedging programs, interest rate swaps or other activities
involving the use of off-balance sheet derivative financial instruments.

      ALCO utilizes a model that estimates the change in the Company's net
portfolio value ("NPV") in response to a range of assumed changes in market
interest rates. NPV is the present value of cash flows from assets, liabilities
and off-balance sheet items. ALCO is not aware of any trends that would
significantly affect the timing or amount of the expected cash flows utilized in
the NPV model. Currently, the model estimates the effect on NPV of instantaneous
and permanent 100, 200 and 300 basis point increases and a 100 basis point
decrease in market interest rates. Historically, the model included a 300 basis
point decreases in market interest rates; however given the recent low level of
interest rates and the low probability of interest rate declines, this scenario
was not calculated.

      The table below sets forth, as of March 31, 2005, the estimated changes in
the Company's NPV that would result from the designated instantaneous changes in
interest rates.

                                                   Estimated Increase /
                                                    (Decrease) in NPV
              Changes in                         ----------------------
            Interest Rates       Estimated
            (basis points)          NPV           Amount        Percent
            --------------       ---------       --------       -------
                                  (Amounts in thousands)

                 +300             $25,164        $(11,400)        (31)%
                 +200              29,156          (7,408)        (20)%
                 +100              33,116          (3,448)         (9)%
                   0               36,564              --          --
                 -100              37,972           1,408           4%
                 -200              37,571           1,007           3%

      The preceding analysis does not represent a Company forecast and should
not be relied upon as being indicative of expected operating results. These
hypothetical estimates are based upon numerous assumptions including, among
others, the nature and timing of interest rate levels, yield curve shape,
prepayments on loans and securities, deposit decay rates. The analysis does not
include any actions the Company might take in response to changes in interest
rates.

      Certain shortcomings are inherent in the methodology used in the NPV
computation. Modeling changes in NPV requires making certain assumptions which
may or may not reflect the manner in which actual yields and costs will respond
to changes in market interest rates. In this regard, the NPV table presented
above assumes that the composition of the interest sensitive assets and
liabilities existing at the beginning of a period will remain constant over the
period measured and a particular change in interest rates is reflected uniformly
across the yield curve regardless of the duration or repricing of specific
assets and liabilities. Accordingly, although the NPV measurements provide an
indication of the Company's interest rate risk exposure at a particular point in
time, such measurements are not intended to and do not provide a precise
forecast of the effect of changes in market interest rates on the Company's net
interest income and will differ from actual results.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED MARCH 31, 2005 AND MARCH 31,
2004

      For the year ended March 31, 2005, net income was $1.2 million, or $0.55
and $0.54 per basic and diluted share, respectively, an increase of $371,000, or
45.4%, compared to net income of $817,000 for the previous year. The improvement
was the result of increased net interest and dividend income and noninterest
income that more than offset the increase in noninterest expense. The net
interest margin was 3.81% for fiscal 2005 and 3.79% for the prior


                                       32
<PAGE>

year. Noninterest income reached $805,000, an increase of $212,000, or 35.8%,
from the previous year. Noninterest expense increased $888,000 primarily due to
the acquisition of Windsor Locks Community Bank, FSL, during fiscal year 2004.

Net Interest and Dividend Income

      Net interest and dividend income totaled $7.2 million for the year ended
March 31, 2005, an increase of $1.3 million or 21.2%. This resulted mainly from
a $33.6 million increase in average interest-earning assets during the year. The
Company's interest rate spread and net interest margin stayed relatively flat
from the year ended March 31, 2004 to March 31, 2005. The decline in interest
rates during the first half of the year resulted in a 20 basis point decline in
the average yield on average interest-earning assets as homeowners refinanced
their higher interest rate loans to lower interest rate loans. At the same time
repricing of the average interest-bearing liabilities decreased the average rate
by 22 basis points. The growth of $33.6 million in average earning assets for
the year ended March 31, 2005 outpaced the growth in average interest-bearing
liabilities of $25.7 million as average non interest-bearing demand deposits
increased $4.7 million.

Provision for Loan Losses

      The provision for loan losses are changes to earnings to bring the total
allowance for losses to a level considered by management as adequate to provide
for estimated losses inherent in the loan portfolio. The size of the provision
for each year is dependent upon many factors, including loan growth, net
charge-offs, changes in the composition of the loan portfolio, delinquencies,
management's assessment of loan portfolio quality, the value of collateral and
general economic factors.

      The Company recorded a $131,000 and $240,000 provision for loan losses in
the years ended March 31, 2005 and 2004, respectively. The decrease in the
provision was caused primarily by lower net loan charge-offs for fiscal year
2005 compared to fiscal year 2004 and a reduction in non-performing assets,
partially offset by loan growth and the Company's continued emphasis on
generally higher-risk commercial real estate and construction loans.

      Although management utilizes its best judgment in providing for losses,
there can be no assurance that the Company will not have to change its
provisions for loan losses in subsequent periods. Management will continue to
monitor the allowance for loan losses and make additional provisions to the
allowance as appropriate.

Noninterest Income

      Noninterest income increased $212,000, or 35.8%, from $593,000 for fiscal
2004 to $805,000 for fiscal 2005. Service charges on deposit accounts increased
$205,000, or 81.7%, for the year ended March 31, 2005 and was attributable
primarily to Enfield Federal offering an Overdraft Privilege product. Net gains
on sales and calls of securities were $44,000 for the year ended March 31, 2005
compared to $105,000 for the previous year due to fewer sales in fiscal 2005.
Gains from the sale of securities are subject to market and economic conditions
and, as a result, there can be no assurance that gains reported in prior periods
will be achieved in the future. The $71,000 increase in other income was due
primarily to commissions received by Enfield Federal from Infinex Financial
Group, a third party registered broker-dealer, due to increased sales in fiscal
2005.

Noninterest Expense

      Noninterest expense increased $888,000 to $6.1 million for the year ended
March 31, 2005. The increase in salaries and employee benefits of $656,000 over
the prior year was the result of staff additions in connection with the
expansion of the retail franchise and the additional staff due to the
acquisition of Windsor Lock Community Bank in fiscal 2004, and normal salary and
wage increases. The Bank's product expansion initiatives in the current year
caused data processing expense to increase $72,000 or 35.5%, for the year ended
March 31, 2005 compared to March 31, 2004.


                                       33
<PAGE>

Income Taxes

      Income tax expense for the year ended March 31, 2005 increased to $630,000
from $309,000 in the previous year. The increase was primarily due to the
increase in income before taxes. The effective tax rate increased from 27.4% for
the year ended March 31, 2004 to 34.7% for the year ended March 31, 2005 as a
result of a lower percentage of non-taxable income to total income in fiscal
2005 compared to the previous year.

Liquidity and Capital Resources

      The term "liquidity" refers to the Company's ability to generate adequate
amounts of cash to fund loan originations, deposit withdrawals and operating
expenses. Liquidity management is both a daily and long-term function of
business management. The Company's primary sources of liquidity are deposits,
scheduled amortization and prepayments of loan principal and mortgage-related
securities, funds provided by the Company's operations and, to a much lesser
extent, Federal Home Loan Bank borrowings and securities sold under agreements
to repurchase. The Company can borrow funds from the Federal Home Loan Bank
based on eligible collateral of loans and securities.

      The Company's most liquid assets are cash and cash equivalents and
interest-bearing deposits. The levels of these assets are dependent on the
Company's operating, financing, lending and investing activities during any
given period. At March 31, 2005, cash and cash equivalents totaled $16.5 million
and interest-bearing deposits with other banks totaled $5.9 million. Securities
classified as available-for-sale, which provide additional sources of liquidity,
totaled $46.6 million at March 31, 2005. At March 31, 2005, the Company had
outstanding borrowings of $15.6 million with the Federal Home Loan Bank with a
total borrowing capacity of $43.7 million. The Company monitors its liquidity
position frequently and anticipates that it will have sufficient funds to meet
its current funding commitments.

      Loan repayment and maturing investment securities are a relatively
predictable source of funds. However, deposit flows, calls of investment
securities and prepayments of loans and mortgage-backed securities are strongly
influenced by interest rates, general and local economic conditions and
competition in the marketplace. These factors reduce the predictability of the
timing of these sources of funds. Total deposits were $163.0 million at March
31, 2005, a $201,000 increase from the $162.8 million balance at March 31, 2004.

      The Company's primary investing activities are the origination of loans
and the purchase of mortgage and investment securities. During the years ended
March 31, 2005 and 2004, the Company originated loans of approximately $47.1
million and $46.3 million, respectively. Additionally, at March 31, 2005 and
March 31, 2004, the Company had loan commitments to borrowers of approximately
$2.1 million and $3.1 million, respectively, and available home equity, and
unadvanced lines of credit and construction loans of approximately $14.0 million
and $6.2 million, respectively. Management anticipates that it will have
sufficient funds available to meet its current loan commitments. Certificates of
deposit that are scheduled to mature in one year or less from March 31, 2005
totaled $43.9 million. The Company relies primarily on competitive rates,
customer service and long-standing relationships with customers to retain
deposits. Based upon the Company's historical experience with deposit retention,
management believes that, although it is not possible to predict future terms
and conditions upon renewal, a significant portion of such deposits will remain
with the Company. Purchases of mortgage and investment securities totaled $27.5
million for the year ended March 31, 2005, and $38.5 million for the year ended
March 31, 2004.

      Enfield Federal is well-capitalized. At March 31, 2005 and March 31, 2004,
Enfield Federal exceeded each of the applicable regulatory capital requirements.
Enfield Federal's Tier 1 capital represented 22.2% and 22.6% of risk-weighted
assets at March 31, 2005 and March 31, 2004, respectively, which exceeds the
well capitalized requirements of 6.0%. At March 31, 2005 and March 31, 2004,
respectively, Enfield Federal had a risk-based total capital of $26.4 million
and $24.9 million, a risk-based capital ratio of 23.4% and 23.8%, which
significantly exceeded the applicable well capitalized requirements of 10.0%.

      Management is not aware of any known trends, events or uncertainties that
will have or are reasonably likely to have a material effect on the Company's
liquidity, capital or operations, nor is management aware of any current


                                       34
<PAGE>

recommendation by regulatory authorities which, if implemented, would have a
material effect on the Company's liquidity, capital or operations.

Contractual Obligations

      The following table sets forth, at March 31, 2005, the dollar amount of
the Company's contractual obligations and their subsequent time period:

<TABLE>
<CAPTION>
                                                      Payments Due by Period
                                   ------------------------------------------------------------
                                                              One to     Three to
                                               Less than      Three        Five      More than
                                    Total       One Year      Years        Years     Five Years
                                   ------------------------------------------------------------
                                                         (In thousands)
<S>                                <C>          <C>          <C>          <C>          <C>
Long-Term Debt Obligations(1)      $15,620      $ 2,008      $ 5,517      $ 5,089      $ 3,006
Operating Lease Obligations            244           86           82           38           38
Purchase Obligations(2)                278          278           --           --           --
                                   -------      -------      -------      -------      -------
   Total                           $16,142      $ 2,372      $ 5,599      $ 5,127      $ 3,044
                                   =======      =======      =======      =======      =======
</TABLE>

(1)   Includes Federal Home Loan Bank advances.

(2)   Amount is due to broker for a security purchased, not yet settled.

Off-Balance Sheet Arrangements

      In addition to the normal course of operations, we engage in a variety of
financial transactions that, in accordance with generally accepted accounting
principles, are not recorded in our financial statements. These transactions
involve, to varying degrees, elements of credit, interest rate, and liquidity
risk. Such transactions are used primarily to manage customers' requests for
funding and take the form of loan commitments, lines of credit, and letters of
credit.

      For the year ended March 31, 2005, the Company engaged in no off-balance
sheet transactions reasonably likely to have a material effect on its financial
condition, results of operations, or cash flows.

Recent Accounting Pronouncements

      For a summary of recent accounting pronouncements see Item 7 of this Form
10-KSB.

Impact of Inflation and Changing Prices

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


                                       35
<PAGE>

ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS

               [LETTERHEAD OF SHATSWELL, MacLEOD & COMPANY, P.C.]

The Board of Directors
New England Bancshares, Inc.
Enfield, Connecticut

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------

We have audited the consolidated balance sheets of New England Bancshares, Inc.
and Subsidiary as of March 31, 2005 and 2004, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of New
England Bancshares, Inc. and Subsidiary as of March 31, 2005 and 2004, and the
results of their operations and their cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.


                                          /s/ SHATSWELL, MacLEOD & COMPANY, P.C.
                                          SHATSWELL, MacLEOD & COMPANY, P.C.
West Peabody, Massachusetts
April 21, 2005


                                       36
<PAGE>

                   NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY
                   -------------------------------------------

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------

                             March 31, 2005 and 2004
                             -----------------------
                             (Dollars In Thousands)
                             ----------------------

<TABLE>
<CAPTION>
ASSETS                                                                        2005            2004
------                                                                      ---------       ---------
<S>                                                                         <C>             <C>
Cash and due from banks                                                     $   4,412       $   8,421
Interest-bearing demand deposits with other banks                                 240             170
Federal funds sold                                                              5,575           5,570
Money market mutual funds                                                       6,317           5,518
                                                                            ---------       ---------
           Total cash and cash equivalents                                     16,544          19,679
Interest-bearing time deposits with other banks                                 5,902           8,450
Investments in available-for-sale securities (at fair value)                   46,585          42,309
Federal Home Loan Bank stock, at cost                                           1,126           1,008
Loans, net of the allowance for loan losses of $1,437 as of
   March 31, 2005 and $1,301 as of March 31, 2004                             132,557         121,404
Premises and equipment, net                                                     2,067           2,643
Accrued interest receivable                                                       896             788
Deferred income taxes, net                                                        852             337
Cash surrender value of life insurance                                          3,905           3,736
Identifiable intangible assets                                                    775             864
Goodwill                                                                        1,090           1,090
Other assets                                                                      903             860
                                                                            ---------       ---------
           Total assets                                                     $ 213,202       $ 203,168
                                                                            =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:
   Noninterest-bearing                                                      $  13,562       $  11,041
   Interest-bearing                                                           149,429         151,749
                                                                            ---------       ---------
           Total deposits                                                     162,991         162,790
Advanced payments by borrowers for taxes and insurance                            644             536
Federal Home Loan Bank advances                                                15,620           9,926
Securities sold under agreements to repurchase                                  4,244             788
Due to broker                                                                     278             806
Other liabilities                                                                 986             728
                                                                            ---------       ---------
           Total liabilities                                                  184,763         175,574
                                                                            ---------       ---------
Stockholders' equity:
   Preferred stock, par value $.01 per share; 1,000,000 shares
     authorized; none issued                                                       --              --
   Common stock, par value $.01 per share; 10,000,000 shares
     authorized; 2,257,651 shares issued as of March 31, 2005 and 2004             23              23
   Paid-in capital                                                             12,547          12,465
   Retained earnings                                                           17,125          15,985
   Unearned ESOP shares, 51,664 shares as of March 31, 2005 and
     59,040 shares as of March 31, 2004                                          (517)           (590)
   Unearned shares, stock-based incentive plan, 21,853 shares
     as of March 31, 2005 and 29,137 as of March 31, 2004                        (322)           (432)
   Accumulated other comprehensive (loss) income                                 (417)            143
                                                                            ---------       ---------
           Total stockholders' equity                                          28,439          27,594
                                                                            ---------       ---------
           Total liabilities and stockholders' equity                       $ 213,202       $ 203,168
                                                                            =========       =========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       37
<PAGE>

                   NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY
                   -------------------------------------------

                        CONSOLIDATED STATEMENTS OF INCOME
                        ---------------------------------

                   For the Years Ended March 31, 2005 and 2004
                   -------------------------------------------

                (Dollars In Thousands, Except Per Share Amounts)
                ------------------------------------------------

<TABLE>
<CAPTION>
                                                                                  2005         2004
                                                                                 -------      -------
<S>                                                                              <C>          <C>
Interest and dividend income:
   Interest and fees on loans                                                    $ 7,943      $ 7,086
   Interest on debt securities:
     Taxable                                                                       1,560        1,349
     Tax-exempt                                                                      219          117
   Dividends on Federal Home Loan Bank stock                                          33           24
   Interest on federal funds sold, interest-bearing deposits and dividends
     on marketable equity securities                                                 434          196
                                                                                 -------      -------
           Total interest and dividend income                                     10,189        8,772
                                                                                 -------      -------
Interest expense:
   Interest on deposits                                                            2,534        2,494
   Interest on advanced payments by borrowers for taxes and insurance                  8            7
   Interest on Federal Home Loan Bank advances                                       398          322
   Interest on securities sold under agreements to repurchase                         46            5
                                                                                 -------      -------
           Total interest expense                                                  2,986        2,828
                                                                                 -------      -------
           Net interest and dividend income                                        7,203        5,944
Provision for loan losses                                                            131          240
                                                                                 -------      -------
           Net interest and dividend income after provision for loan losses        7,072        5,704
                                                                                 -------      -------
Noninterest income:
   Service charges on deposit accounts                                               456          251
   Gain on securities and interest-bearing time deposits, net                         44          105
   Increase in cash surrender value of life insurance policies                       149          152
   Other income                                                                      156           85
                                                                                 -------      -------
           Total noninterest income                                                  805          593
                                                                                 -------      -------
Noninterest expense:
   Salaries and employee benefits                                                  3,595        2,939
   Occupancy and equipment expense                                                   850          818
   Advertising and promotion                                                         159          148
   Professional fees                                                                 224          232
   Data processing expense                                                           275          203
   Stationery and supplies                                                            86           91
   Amortization of identifiable intangible assets                                     89           22
   Other expense                                                                     781          718
                                                                                 -------      -------
           Total noninterest expense                                               6,059        5,171
                                                                                 -------      -------
           Income before income taxes                                              1,818        1,126
Income taxes                                                                         630          309
                                                                                 -------      -------
           Net income                                                            $ 1,188      $   817
                                                                                 =======      =======

Earnings per share:
   Basic                                                                         $  0.55      $  0.40
                                                                                 =======      =======
   Diluted                                                                       $  0.54      $  0.39
                                                                                 =======      =======
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       38
<PAGE>

                  NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY
                  -------------------------------------------

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
           ----------------------------------------------------------

                  For the Years Ended March 31, 2005 and 2004
                  -------------------------------------------
                (Dollars In Thousands, Except per Share Amounts)
                ------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                 Unearned
                                                                                                  Shares
                                                                                                   Stock-    Accumulated
                                                                                      Unearned     Based        Other
                                                        Common    Paid-in  Retained     ESOP     Incentive  Comprehensive
                                                         Stock    Capital  Earnings    Shares       Plan    (Loss) Income    Total
                                                       --------  --------  --------   --------   ---------  -------------  --------
<S>                                                    <C>       <C>       <C>        <C>        <C>          <C>          <C>
Balance, March 31, 2003                                $     21  $  9,055  $ 15,168   $   (664)  $   (543)    $    113     $ 23,150
ESOP shares released                                         --        47        --         74         --           --          121
Issuance of 171,355 shares of common stock
  related to acquisition of Windsor Locks Community
  Bank, FSL, net of costs                                     2     3,348        --         --         --           --        3,350
Tax benefit relating to stock-based incentive plan           --        15        --         --         --           --           15
Compensation cost for stock-based incentive plan             --        --        --         --        111           --          111
Comprehensive income:
  Net income                                                 --        --       817         --         --           --           --
  Net change in unrealized holding gain on
     available-for-sale securities, net of tax effect        --        --        --         --         --           30           --
                Comprehensive income                         --        --        --         --         --           --          847
                                                       --------  --------  --------   --------   --------     --------     --------
Balance, March 31, 2004                                      23    12,465    15,985       (590)      (432)         143       27,594
ESOP shares released                                         --        69        --         73         --           --          142
Tax benefit relating to stock-based incentive plan           --        13        --         --         --           --           13
Compensation cost for stock-based incentive plan             --        --        --         --        110           --          110
Dividends paid ($0.05 per share)                             --        --       (48)        --         --           --          (48)
Comprehensive income:
  Net income                                                 --        --     1,188         --         --           --           --
  Net change in unrealized holding gain on
     available-for-sale securities, net of tax effect        --        --        --         --         --         (560)          --
                Comprehensive income                         --        --        --         --         --           --          628
                                                       --------  --------  --------   --------   --------     --------     --------
Balance, March 31, 2005                                $     23  $ 12,547  $ 17,125   $   (517)  $   (322)    $   (417)    $ 28,439
                                                       ========  ========  ========   ========   ========     ========     ========
</TABLE>

Reclassification disclosure for the years ended March 31:

<TABLE>
<CAPTION>
                                                                    2005         2004
                                                                    -----       -----
<S>                                                                 <C>         <C>
Net unrealized (losses) gains on available-for-sale securities      $(874)      $ 154
Reclassification adjustment for realized gains in net income          (43)       (105)
                                                                    -----       -----
   Other comprehensive (loss) income before income tax effect        (917)         49
Income tax benefit (expense)                                          357         (19)
                                                                    -----       -----
   Other comprehensive (loss) income, net of tax                    $(560)      $  30
                                                                    =====       =====
</TABLE>

Accumulated other comprehensive (loss) income as of March 31, 2005 and 2004
consists of net unrealized holding (losses) gains on available-for-sale
securities, net of taxes.

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       39
<PAGE>

                   NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY
                   -------------------------------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------

                   For the Years Ended March 31, 2005 and 2004
                   -------------------------------------------
                                 (In Thousands)
                                 --------------

<TABLE>
<CAPTION>
                                                                                            2005           2004
                                                                                          --------       --------
<S>                                                                                       <C>            <C>
Cash flows from operating activities:
   Net income                                                                             $  1,188       $    817
   Adjustments to reconcile net income to net cash provided by operating activities:
     Net accretion of fair value adjustments                                                   (85)           (21)
     Amortization of securities, net                                                           195            322
     Gain on securities and interest-bearing time deposits, net                                (44)          (105)
     Provision for loan losses                                                                 131            240
     Change in deferred loan origination fees                                                  (13)            66
     Depreciation and amortization                                                             290            298
     Disposal of property and equipment                                                         --              2
     Increase in accrued interest receivable                                                  (112)          (171)
     Deferred income tax benefit                                                              (158)           (43)
     Increase in cash surrender value life insurance policies                                 (149)          (152)
     Increase in prepaid expenses and other assets                                             (23)          (123)
     Amortization of identifiable intangible assets                                             89             22
     Increase (decrease) in accrued expenses and other liabilities                             204           (204)
     Compensation cost for stock-based incentive plan                                          110            111
     ESOP shares released                                                                      142            121
                                                                                          --------       --------

   Net cash provided by operating activities                                                 1,765          1,180
                                                                                          --------       --------

Cash flows from investing activities:
   Purchases of available-for-sale securities                                              (27,453)       (38,499)
   Proceeds from sales of available-for-sale securities                                      6,609         11,935
   Proceeds from maturities of available-for-sale securities                                15,029         29,942
   Cash and cash equivalents acquired from Windsor Locks Community Bank, FSL
     net of expenses paid of $225                                                               --          3,601
   Loan originations and principal collections, net                                         (9,599)       (11,732)
   Purchases of loans                                                                       (1,786)            --
   Recoveries of loans previously charged off                                                  104             --
   Proceeds from maturities of interest-bearing time deposits with other banks               2,298            291
   Purchases of interest-bearing time deposits with other banks                               (100)            --
   Proceeds from sales of interest-bearing time deposits with other banks                      295             --
   Capital expenditures                                                                       (235)           (54)
   Proceeds from sales of premises and equipment                                               568             --
   Purchases of Federal Home Loan Bank stock                                                  (118)            --
   Investment in life insurance policies                                                       (20)           (19)
                                                                                          --------       --------

   Net cash used in investing activities                                                   (14,408)        (4,535)
                                                                                          --------       --------
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       40
<PAGE>

                   NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY
                   -------------------------------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------

                   For the Years Ended March 31, 2005 and 2004
                   -------------------------------------------
                                 (In Thousands)
                                 --------------
                                   (continued)

<TABLE>
<CAPTION>
                                                                                 2005           2004
                                                                               --------       --------
<S>                                                                            <C>            <C>
Cash flows from financing activities:
   Net increase in demand deposits, NOW and savings accounts                      1,779          2,624
   Net decrease in time deposits                                                 (1,481)        (3,120)
   Net increase in advanced payments by borrowers for taxes and insurance           108            185
   Proceeds from Federal Home Loan Bank long-term advances                        8,500          3,000
   Principal payments on Federal Home Loan Bank long-term advances               (2,806)        (1,216)
   Net increase in securities sold under agreements to repurchase                 3,456            598
   Payments of cash dividends on common stock                                       (48)            --
                                                                               --------       --------

   Net cash provided by financing activities                                      9,508          2,071
                                                                               --------       --------

Net decrease in cash and cash equivalents                                        (3,135)        (1,284)
Cash and cash equivalents at beginning of year                                   19,679         20,963
                                                                               --------       --------
Cash and cash equivalents at end of year                                       $ 16,544       $ 19,679
                                                                               ========       ========

Supplemental disclosures:
   Interest paid                                                               $  2,959       $  2,821
   Income taxes paid                                                                496            352
   Due to broker                                                                    278            806
   Transfer of software from premises and equipment to other assets                  --             50

Acquisition of Windsor Locks Community Bank:
   Assets acquired
     Cash and cash equivalents                                                 $     --       $  3,826
     Interest-bearing time deposits with other banks                                 --          8,759
     Investments in available-for-sale securities                                    --          6,969
     Federal Home Loan Bank stock, at cost                                           --            188
     Loans, net of allowance for loan losses                                         --         16,399
     Premises and equipment, net                                                     --            355
     Other assets                                                                    --            215
     Identifiable intangible assets                                                  --            886
                                                                               --------       --------
                                                                                     --         37,597
                                                                               --------       --------
   Liabilities assumed
     Deposits                                                                        --         34,357
     Securities sold under agreements to repurchase                                  --            190
     Other liabilities                                                               --            565
                                                                               --------       --------
                                                                                     --         35,112
                                                                               --------       --------

   Net assets acquired                                                               --          2,485
                                                                               --------       --------

   Acquisition costs                                                                 --          3,575
                                                                               --------       --------

   Goodwill                                                                    $     --       $  1,090
                                                                               ========       ========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       41
<PAGE>

                   NEW ENGLAND BANCSHARES, INC. AND SUBSIDIARY
                   -------------------------------------------

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

                   For the Years Ended March 31, 2005 and 2004
                   -------------------------------------------

NOTE 1 - NATURE OF OPERATIONS
-----------------------------

New England Bancshares, Inc. (the "Company") is a federally chartered holding
company formed on June 4, 2002 for the purpose of acquiring all of the common
stock of Enfield Federal Savings and Loan Association (the "Association")
concurrent with its reorganization from a mutual savings institution to the
mutual holding company form of organization. The reorganization was consummated
on June 4, 2002. In connection with the reorganization, the Company sold 922,444
shares of its common stock, par value $0.01 per share, in a subscription
offering and issued 1,127,431 shares to Enfield Mutual Holding Company, raising
approximately $8.5 million, net of costs. Approximately $6.8 million of those
proceeds were contributed to the Association. The Company is a majority owned
subsidiary of Enfield Mutual Holding Company, a federally chartered mutual
holding company.

The Association is a federally chartered stock savings and loan association
which was incorporated in 1916 and is headquartered in Enfield, Connecticut. The
Association operates its business from seven banking offices located in
Connecticut. The Association is engaged principally in the business of
attracting deposits from the general public and investing those deposits in
residential and commercial real estate loans, and in consumer, construction,
commercial and small business loans.

NOTE 2 - ACCOUNTING POLICIES
----------------------------

The accounting and reporting policies of the Company and its subsidiary conform
to accounting principles generally accepted in the United States of America and
predominant practices within the banking industry. The consolidated financial
statements of the Company were prepared using the accrual basis of accounting.
The significant accounting policies of the Company are summarized below to
assist the reader in better understanding the consolidated financial statements
and other data contained herein.

      USE OF ESTIMATES:

      The preparation of consolidated financial statements in conformity with
      accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the
      reported amounts of assets and liabilities and disclosure of contingent
      assets and liabilities at the date of the consolidated financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Actual results could differ from those estimates.

      BASIS OF PRESENTATION:

      The accompanying consolidated financial statements include the accounts of
      the Company and the Association. All significant intercompany accounts and
      transactions have been eliminated in the consolidation.

      CASH AND CASH EQUIVALENTS:

      For purposes of reporting cash flows, cash and cash equivalents include
      cash on hand, cash items, due from banks, interest bearing demand deposits
      with other banks, federal funds sold and money market mutual funds. Cash
      and due from banks as of March 31, 2005 and 2004 includes $345,000 and
      $123,000, respectively, which is subject to withdrawals and usage
      restrictions to satisfy the reserve requirements of the Federal Reserve
      Bank.


                                       42
<PAGE>

      SECURITIES:

      Investments in debt securities are adjusted for amortization of premiums
      and accretion of discounts computed so as to approximate the interest
      method. Gains or losses on sales of investment securities are computed on
      a specific identification basis.

      The Company classifies debt and equity securities into one of two
      categories: available-for-sale or held-to-maturity. In general, securities
      may be classified as held-to-maturity only if the Company has the positive
      intent and ability to hold them to maturity. All other securities must be
      classified as available-for-sale.

            --    Available-for-sale securities are carried at fair value on the
                  consolidated balance sheets. Unrealized holding gains and
                  losses are not included in earnings but are reported as a net
                  amount (less expected tax) in a separate component of
                  stockholders' equity until realized.

            --    Held-to-maturity securities are measured at amortized cost in
                  the consolidated balance sheets. Unrealized holding gains and
                  losses are not included in earnings or in a separate component
                  of capital. They are merely disclosed in the notes to the
                  consolidated financial statements.

      Declines in the fair value of held-to-maturity and available-for-sale
      securities below their cost that are deemed to be other than temporary are
      reflected in earnings as realized losses.

      LOANS:

      Loans receivable that management has the intent and ability to hold until
      maturity or payoff, are reported at their outstanding principal balances
      adjusted for amounts due to borrowers on unadvanced loans, any
      charge-offs, the allowance for loan losses and any deferred fees or costs
      on originated loans, or unamortized premiums or discounts on purchased
      loans.

      Interest on loans is recognized on a simple interest basis.

      Loan origination, commitment fees and certain direct origination costs are
      deferred and the net amount amortized as an adjustment of the related
      loan's yield by the interest method. Deferred amounts are recognized for
      fixed rate loans over the contractual life of the related loans. If the
      loan's stated interest rate varies with changes in an index or rate, the
      effective yield used by the Association for amortization is the index or
      rate that is in effect at the inception of the loan. Home equity line
      deferred fees are recognized using the straight-line method over the
      period the home equity line is active, assuming that borrowings are
      outstanding for the maximum term provided in the contract.

      Residential real estate loans are generally placed on nonaccrual when
      reaching 90 days past due or in process of foreclosure. All closed-end
      consumer loans 90 days or more past due and any equity line in the process
      of foreclosure are placed on nonaccrual status. Secured consumer loans are
      written down to realizable value and unsecured consumer loans are
      charged-off upon reaching 120 or 180 days past due depending on the type
      of loan. Commercial real estate loans and commercial business loans and
      leases which are 90 days or more past due are generally placed on
      nonaccrual status, unless secured by sufficient cash or other assets
      immediately convertible to cash. When a loan has been placed on nonaccrual
      status, previously accrued and uncollected interest is reversed against
      interest on loans. A loan can be returned to accrual status when
      collectibility of principal is reasonably assured and the loan has
      performed for a period of time, generally six months.


                                       43
<PAGE>

      Cash receipts of interest income on impaired loans are credited to
      principal to the extent necessary to eliminate doubt as to the
      collectibility of the net carrying amount of the loan if the total of such
      credits reduces the carrying amount of the loan to an amount less than the
      collateral value. Some or all of the cash receipts of interest income on
      impaired loans is recognized as interest income if the remaining net
      carrying amount of the loan is deemed to be fully collectible. When
      recognition of interest income on an impaired loan on a cash basis is
      appropriate, the amount of income that is recognized is limited to that
      which would have been accrued on the net carrying amount of the loan at
      the contractual interest rate. Any cash interest payments received in
      excess of the limit and not applied to reduce the net carrying amount of
      the loan are recorded as recoveries of charge-offs until the charge-offs
      are fully recovered.

      ALLOWANCE FOR LOAN LOSSES:

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

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

      A loan is considered impaired when, based on current information and
      events, it is probable that the Association will be unable to collect the
      scheduled payments of principal or interest when due according to the
      contractual terms of the loan agreement. Factors considered by management
      in determining impairment include payment status, collateral value, and
      the probability of collecting scheduled principal and interest payments
      when due. Loans that experience insignificant payment delays and payment
      shortfalls generally are not classified as impaired. Management determines
      the significance of payment delays and payment shortfalls on a
      case-by-case basis, taking into consideration all of the circumstances
      surrounding the loan and the borrower, including the length of the delay,
      the reasons for the delay, the borrower's prior payment record, and the
      amount of the shortfall in relation to the principal and interest owed.
      Impairment is measured on a loan by loan basis for commercial and
      construction loans by either the present value of expected future cash
      flows discounted at the loan's effective interest rate, the loan's
      obtainable market price, or the fair value of the collateral if the loan
      is collateral dependent.

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

      PREMISES AND EQUIPMENT:

      Premises and equipment are stated at cost, less accumulated depreciation
      and amortization. Cost and related allowances for depreciation and
      amortization of premises and equipment retired or otherwise disposed of
      are removed from the respective accounts with any gain or loss included in
      income or expense. Depreciation and amortization are calculated
      principally on the straight-line method over the estimated useful lives of
      the assets. Estimated lives are 10 to 50 years for buildings and premises
      and 3 to 20 years for furniture, fixtures and equipment. Expenditures for
      replacements or major improvements are capitalized; expenditures for
      normal maintenance and repairs are charged to expense as incurred.


                                       44
<PAGE>

      OTHER REAL ESTATE OWNED AND IN-SUBSTANCE FORECLOSURES:

      Other real estate owned includes properties acquired through foreclosure
      and properties classified as in-substance foreclosures in accordance with
      Statement of Financial Accounting Standards ("SFAS") No. 15, "Accounting
      by Debtors and Creditors for Troubled Debt Restructuring." These
      properties are carried at the lower of cost or estimated fair value less
      estimated costs to sell. Any writedown from cost to estimated fair value
      required at the time of foreclosure or classification as in-substance
      foreclosure is charged to the allowance for loan losses. Expenses incurred
      in connection with maintaining these assets, subsequent writedowns and
      gains or losses recognized upon sale, are included in other expense.

      In accordance with SFAS No. 114, "Accounting by Creditors for Impairment
      of a Loan," the Company classifies loans as in-substance repossessed or
      foreclosed if the Company receives physical possession of the debtor's
      assets regardless of whether formal foreclosure proceedings take place.

      INCOME TAXES:

      The Company recognizes income taxes under the asset and liability method.
      Under this method, deferred tax assets and liabilities are established for
      the temporary differences between the accounting basis and the tax basis
      of the Company's assets and liabilities at enacted tax rates expected to
      be in effect when the amounts related to such temporary differences are
      realized or settled.

      EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN:

      In connection with its Executive Supplemental Retirement Plan, the Company
      established a Rabbi Trust to assist in the administration of the plan. The
      accounts of the Rabbi Trust are consolidated in the Company's financial
      statements. Any available-for-sale securities held by the Rabbi Trust are
      accounted for in accordance with SFAS No. 115. Until the plan benefits are
      paid, creditors may make claims against the trust's assets if the Company
      becomes insolvent.

      EARNINGS PER SHARE ("EPS"):

      Basic EPS is computed by dividing income available to common stockholders
      by the weighted-average number of common shares outstanding for the
      period. Diluted EPS reflects the potential dilution that could occur if
      securities or other contracts to issue common stock were exercised or
      converted into common stock or resulted in the issuance of common stock
      that then shared in the earnings of the entity. The Company had 15,000
      anti-dilutive shares at March 31, 2005. There were no anti-dilutive shares
      at March 31, 2004. Anti-dilutive shares are stock options with
      weighted-average exercise prices in excess of the weighted-average market
      value for the same period. Unallocated common shares held by the
      Association's employee stock ownership plan are not included in the
      weighted-average number of common shares outstanding for purposes of
      calculating both basic and diluted EPS.

      FAIR VALUES OF FINANCIAL INSTRUMENTS:

      SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
      requires that the Company disclose the estimated fair value for its
      financial instruments. Fair value methods and assumptions used by the
      Company in estimating its fair value disclosures are as follows:

      Cash and cash equivalents: The carrying amounts reported in the balance
      sheet for cash and cash equivalents approximate those assets' fair values.

      Interest-bearing time deposits with other banks: Fair values of
      interest-bearing time deposits with other banks are estimated using
      discounted cash flow analyses based on current rates for similar types of
      deposits.

      Securities (including mortgage-backed securities): Fair values for
      securities are based on quoted market prices, where available. If quoted
      market prices are not available, fair values are based on quoted market
      prices of comparable instruments.


                                       45
<PAGE>

      Loans receivable: For variable-rate loans that reprice frequently and with
      no significant change in credit risk, fair values are based on carrying
      values. The fair values for other loans are estimated using discounted
      cash flow analyses, using interest rates currently being offered for loans
      with similar terms to borrowers of similar credit quality.

      Accrued interest receivable: The carrying amount of accrued interest
      receivable approximates its fair value.

      Deposit liabilities: The fair values disclosed for demand deposits (e.g.,
      interest and non-interest checking, passbook savings and money market
      accounts) are, by definition, equal to the amount payable on demand at the
      reporting date (i.e., their carrying amounts). Fair values for fixed-rate
      certificates of deposit are estimated using a discounted cash flow
      calculation that applies interest rates currently being offered on
      certificates to a schedule of aggregated expected monthly maturities on
      time deposits.

      Advanced payments by borrowers for taxes and insurance: The carrying
      amounts of advance payments by borrowers for taxes and insurance
      approximate their fair values.

      Federal Home Loan Bank advances: The fair value of Federal Home Loan Bank
      advances was determined by discounting the anticipated future cash
      payments by using the rates currently available to the Company for debt
      with similar terms and remaining maturities.

      Securities sold under agreements to repurchase: The carrying amount
      reported on the consolidated balance sheet for securities sold under
      agreements to repurchase maturing within ninety days approximate its fair
      value. Fair values of other securities sold under agreements to repurchase
      are estimated using discounted cash flow analyses based on the current
      rates for similar types of borrowing arrangements.

      Due to broker: The carrying amounts of due to broker approximate their
      fair values.

      Off-balance sheet instruments: The fair value of commitments to originate
      loans is estimated using the fees currently charged to enter similar
      agreements, taking into account the remaining terms of the agreements and
      the present creditworthiness of the counterparties. For fixed-rate loan
      commitments and the unadvanced portion of loans, fair value also considers
      the difference between current levels of interest rates and the committed
      rates. The fair value of letters of credit is based on fees currently
      charged for similar agreements or on the estimated cost to terminate them
      or otherwise settle the obligation with the counterparties at the
      reporting date.

      STOCK-BASED COMPENSATION:

      At March 31, 2005, the Company has a stock-based incentive plan which is
      described more fully in Note 12. The Company accounts for the plan under
      the recognition and measurement principles of Accounting Principles Board
      Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and
      related Interpretations. Effective as of the beginning of the first
      interim or annual reporting period that begins after December 15, 2005,
      SFAS No. 123 (revised 2004), "Share-Based Payment," requires all entities
      to adopt a fair value based method of accounting for employee stock
      compensation plans, whereby compensation cost is measured at the grant
      date based on the value of the award and is recognized over the service
      period, which is usually the vesting period. However, until its effective
      date, SFAS No. 123 (revised 2004) allows an entity to continue to measure
      compensation cost for those plans using the intrinsic value based method
      of accounting prescribed by APB No. 25, "Accounting for Stock Issued to
      Employees," whereby compensation cost is the excess, if any, of the quoted
      market price of the stock at the grant date (or other measurement date)
      over the amount an employee must pay to acquire the stock. Stock options
      issued under the Company's stock-based incentive plan have no intrinsic
      value at the grant date, and under Opinion No. 25 no compensation cost is
      recognized for them.


                                       46
<PAGE>

      The following table illustrates the effect on net income if the Company
      had applied the fair value recognition provisions of SFAS No. 123 (revised
      2004) to stock-based employee compensation for the years ended March 31:

<TABLE>
<CAPTION>
                                                                                      2005            2004
                                                                                     ------          -----
                                                                       (Amounts in thousands, except earnings per share)
<S>                                                                                  <C>             <C>
      Net income, as reported                                                        $1,188          $ 817
      Deduct: Total stock-based employee compensation expense
        determined under fair value based method for all stock options
        granted, net of related tax effects                                            (120)           (88)
                                                                                     ------          -----
      Pro forma net income                                                           $1,068          $ 729
                                                                                     ======          =====

      Earnings per share:
        Basic - as reported                                                          $ 0.55          $0.40
        Basic - pro forma                                                            $ 0.49          $0.36
        Diluted - as reported                                                        $ 0.54          $0.39
        Diluted - pro forma                                                          $ 0.48          $0.35
</TABLE>

      RECENT ACCOUNTING PRONOUNCEMENTS:

      In April 2003, the Financial Accounting Standards Board ("FASB") issued
      SFAS No. 149, "Amendment of Statement No. 133 on Derivative Instruments
      and Hedging Activities" ("SFAS No. 149"), which amends and clarifies
      financial accounting and reporting for derivative instruments, including
      certain derivative instruments embedded in other contracts and for hedging
      activities under SFAS No. 133, "Accounting for Derivative Instruments and
      Hedging Activities." This Statement (a) clarifies under what circumstances
      a contract with an initial net investment meets the characteristic of a
      derivative, (b) clarifies when a derivative contains a financing
      component, (c) amends the definition of an underlying to conform to
      language used in FASB Interpretation No. 45, "Guarantor's Accounting and
      Disclosure Requirements for Guarantees, Including Indirect Guarantees of
      Indebtedness of Others," and (d) amends certain other existing
      pronouncements. The provisions of SFAS No. 149 are effective for contracts
      entered into or modified after June 30, 2003. There was no material impact
      on the Company's consolidated financial statements on adoption of this
      Statement.

      In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
      Financial Instruments with Characteristics of both Liabilities and Equity"
      ("SFAS No. 150"). This Statement establishes standards for the
      classification and measurement of certain financial instruments with
      characteristics of both liabilities and equity. SFAS No. 150 requires that
      certain financial instruments that were previously classified as equity
      must be classified as a liability. Most of the guidance in SFAS No. 150 is
      effective for financial instruments entered into or modified after May 31,
      2003, and otherwise is effective at the beginning of the first interim
      period beginning after June 15, 2003. This Statement did not have any
      material effect on the Company's consolidated financial statements.

      In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
      Variable Interest Entities" ("FIN 46"), in an effort to expand upon and
      strengthen existing accounting guidance that addresses when a company
      should include in its financial statements the assets, liabilities and
      activities of another entity. In December 2003, the FASB revised
      Interpretation No. 46, also referred to as Interpretation 46 (R) ("FIN
      46(R)"). The objective of this interpretation is not to restrict the use
      of variable interest entities but to improve financial reporting by
      companies involved with variable interest entities. Until now, one company
      generally has included another entity in its consolidated financial
      statements only if it controlled the entity through voting interests. This
      interpretation changes that, by requiring a variable interest entity to be
      consolidated by a company only if that company is subject to a majority of
      the risk of loss from the variable interest entity's activities or
      entitled to receive a majority of the entity's residual returns or both.
      The Company is required to apply FIN 46(R), to all entities subject to it
      no later than the end of the first reporting period ending after March 15,
      2004. However, prior to the required application of FIN 46(R) the Company
      shall apply FIN 46 or FIN 46(R) to those entities that are considered to
      be special-purpose entities


                                       47
<PAGE>

      as of the end of the first fiscal year or interim period ending after
      December 15, 2003. The adoption of this interpretation did not have a
      material effect on the Company's consolidated financial statements.

      In December 2003, the FASB issued SFAS No. 132 (revised 2003), "Employers'
      Disclosures about Pensions and Other Postretirement Benefits - an
      amendment of SFAS No. 87, SFAS No. 88 and SFAS No. 106" ("SFAS No. 132
      (revised 2003)"). This Statement revises employers' disclosures about
      pension plans and other postretirement benefit plans. It does not change
      the measurement or recognition of those plans required by SFAS No. 87,
      "Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting
      for Settlements and Curtailments of Defined Benefit Pension Plans and for
      Termination Benefits," and SFAS No. 106, "Employers' Accounting for
      Postretirement Benefits Other Than Pensions." This Statement retains the
      disclosure requirements contained in SFAS No. 132, "Employers' Disclosures
      About Pensions and Other Postretirement Benefits," which it replaces. It
      requires additional disclosures to those in the original SFAS No. 132
      about assets, obligations, cash flows and net periodic benefit cost of
      defined benefit pension plans and other defined benefit postretirement
      plans. This Statement is effective for financial statements with fiscal
      years ending after December 15, 2003 and interim periods beginning after
      December 15, 2003. Adoption of this Statement did not have a material
      impact on the Company's consolidated financial statements.

      In December 2004, the FASB issued SFAS No. 123 (revised 2004),
      "Share-Based Payment" ("SFAS 123R"). This Statement revises FASB Statement
      No. 123, "Accounting for Stock Based Compensation" and supersedes APB
      Opinion No. 25, "Accounting for Stock Issued to Employees," and its
      related implementation guidance. SFAS 123R requires that the cost
      resulting from all share-based payment transactions be recognized in the
      consolidated financial statements. It establishes fair value as the
      measurement objective in accounting for share-based payment arrangements
      and requires all entities to apply a fair-value based measurement method
      in accounting for share-based payment transactions with employees except
      for equity instruments held by employee share ownership plans. This
      Statement is effective for the Company as of the beginning of the first
      interim or annual reporting period that begins after December 15, 2005.
      The additional annual compensation cost for the Company's stock options
      outstanding at March 31, 2005 that is expected to be recognized in fiscal
      year 2007, as a result of the adoption of SFAS No. 123R, is approximately
      $143,000 before taxes. SFAS 123R will have no material effect on the
      Company's financial condition or cash flows.

      ADVERTISING COSTS:

      It is the Company's policy to expense advertising costs as incurred.
      Advertising and promotion expense is shown as a separate line item in the
      consolidated Statements of Income.


                                       48
<PAGE>

NOTE 3 - INVESTMENTS IN AVAILABLE-FOR-SALE SECURITIES
-----------------------------------------------------

Debt securities have been classified in the consolidated balance sheets
according to management's intent. The amortized cost of securities and their
approximate fair values are as follows as of March 31:

<TABLE>
<CAPTION>
                                                         Amortized        Gross         Gross
                                                            Cost        Unrealized    Unrealized      Fair
                                                            Basis         Gains         Losses        Value
                                                         ---------      ----------    ----------     --------
                                                                            (In Thousands)
<S>                                                       <C>            <C>           <C>           <C>
March 31, 2005:
   Debt securities issued by the U.S. Treasury
     and other U.S. government corporations and
     agencies                                             $ 21,129       $      6      $    416      $ 20,719
   Debt securities issued by states of the United
     States and political subdivisions of the states         5,995             12           110         5,897
   Corporate debt securities                                   546             13            --           559
   Mortgage-backed securities                               12,963             60           130        12,893
   Marketable equity securities                             12,952             --           118        12,834
                                                          --------       --------      --------      --------
                                                            53,585             91           774        52,902
   Money market mutual funds included in
     cash and cash equivalents                              (6,317)            --            --        (6,317)
                                                          --------       --------      --------      --------
                                                          $ 47,268       $     91      $    774      $ 46,585
                                                          ========       ========      ========      ========

March 31, 2004:
   Debt securities issued by the U.S. Treasury
     and other U.S. government corporations and
     agencies                                             $ 12,742       $    108      $     24      $ 12,826
   Debt securities issued by states of the United
     States and political subdivisions of the states         3,831             34             1         3,864
   Corporate debt securities                                   754             40            --           794
   Mortgage-backed securities                               18,246            180            54        18,372
   Marketable equity securities                             12,020             --            49        11,971
                                                          --------       --------      --------      --------
                                                            47,593            362           128        47,827
   Money market mutual funds included in
     cash and cash equivalents                              (5,518)            --            --        (5,518)
                                                          --------       --------      --------      --------
                                                          $ 42,075       $    362      $    128      $ 42,309
                                                          ========       ========      ========      ========
</TABLE>

Mortgage-backed securities are insured or issued by Ginnie Mae, Freddie Mac and
Fannie Mae or private issuers, substantially all of which are backed by
fixed-rate mortgages.

The scheduled maturities of available-for-sale debt securities were as follows
as of March 31, 2005:

                                                                       Fair
                                                                       Value
                                                                       -----
                                                                  (In Thousands)
Due within one year                                                   $   101
Due after one year through five years                                   2,100
Due after five years through ten years                                 12,213
Due after ten years                                                    12,761
Mortgage-backed securities                                             12,893
                                                                      -------
                                                                      $40,068
                                                                      =======

Proceeds from sales of available-for-sale securities for the year ended March
31, 2005 were $6.6 million. Gross realized gains on those sales amounted to
$41,000 and no gross realized losses were recognized. Proceeds from sales


                                       49
<PAGE>

of available-for-sale securities for the year ended March 31, 2004 were $11.9
million. Gross realized gains on those sales amounted to $87,000 and no gross
realized losses were recognized. The tax expense applicable to these net
realized gains in the years ended March 31, 2005 and 2004 amounted to $16,000
and $34,000, respectively.

The aggregate amortized cost basis and fair value of securities of issuers which
exceeded 10% of stockholders' equity were as follows as of March 31, 2005:

                                                        Amortized
                                                           Cost            Fair
                                                           Basis          Value
                                                        ---------        -------
                                                              (In Thousands)
                  Issuer
         ---------------------

         Asset Management Fund                           $12,350         $12,232

As of March 31, 2005 and 2004, securities with carrying amounts of $6.8 million
and $2.0 million, respectively, were pledged to secure securities sold under
agreements to repurchase.

The aggregate fair value and unrealized losses of securities that have been in a
continuous unrealized-loss position for less than twelve months and for twelve
months or more, and are not other than temporarily impaired, are as follows as
of March 31, 2005:

<TABLE>
<CAPTION>
                                                   Less than 12 Months       12 Months or Longer             Total
                                                  ---------------------     ---------------------     ---------------------
                                                    Fair     Unrealized      Fair      Unrealized      Fair      Unrealized
                                                   Value       Losses        Value       Losses        Value       Losses
                                                  -------    ----------     -------    ----------     -------    ----------
                                                                                (In Thousands)
<S>                                               <C>          <C>          <C>          <C>          <C>          <C>
Debt securities issued by the U.S. Treasury
   and other U.S. government corporations
   and agencies                                   $17,010      $   291      $ 3,025      $   125      $20,035      $   416
Debt securities issued by states of the
   United States and political subdivisions
   of the states                                    3,862           86          487           24        4,349          110
Corporate debt securities                             101           --           --           --          101           --
Mortgage-backed securities                          6,713           93        2,089           37        8,802          130
Marketable equity securities                           --           --        6,518          118        6,518          118
                                                  -------      -------      -------      -------      -------      -------
       Total temporarily impaired securities      $27,686      $   470      $12,119      $   304      $39,805      $   774
                                                  =======      =======      =======      =======      =======      =======
</TABLE>

Management has assessed the 136 securities which are classified as
available-for-sale and in an unrealized loss position at March 31, 2005 and
determined the decline in fair value below amortized cost to be temporary. In
making this determination management considered the period of time the
securities were in a loss position, the percentage decline in comparison to the
securities' amortized cost, the financial condition of the issuer and the
Company's ability and intent to hold these securities until their fair value
recovers to their amortized cost. Management believes the decline in fair value
is primarily related to the historically low interest rate environment and not
to the credit deterioration of the individual issuer.


                                       50
<PAGE>

NOTE 4 - LOANS
--------------

Loans consisted of the following as of March 31:

                                                      2005               2004
                                                    ---------         ---------
                                                         (In Thousands)
Mortgage loans:
   Residential loans:
     One-to-four family                             $  88,774         $  80,999
     Multi-family                                       6,621             6,789
   Commercial real estate                              22,166            17,475
   Construction loans                                  10,309            10,324
                                                    ---------         ---------
           Total mortgage loans                       127,870           115,587
Consumer loans                                          1,132             1,467
Commercial loans                                        5,332             6,004
                                                    ---------         ---------
                                                      134,334           123,058
Deferred loan origination fees, net                      (340)             (353)
Allowance for loan losses                              (1,437)           (1,301)
                                                    ---------         ---------
           Loans, net                               $ 132,557         $ 121,404
                                                    =========         =========

Certain directors and executive officers of the Company and companies in which
they have significant ownership interest were customers of the Association
during the year ended March 31, 2005. Total loans to such persons and their
companies amounted to $2.7 million as of March 31, 2005. During the year ended
March 31, 2005, principal payments totaled $1.3 million and principal advances
amounted to $2.4 million.

Changes in the allowance for loan losses were as follows for the years ended
March 31:

                                                           2005           2004
                                                          -------       -------
                                                              (In Thousands)
Balance at beginning of period                            $ 1,301       $ 1,008
Provision for loan losses                                     131           240
Allowance acquired through business combination                --           160
Recoveries of loans previously charged off                    104            --
Loans charged off                                             (99)         (107)
                                                          -------       -------
Balance at end of period                                  $ 1,437       $ 1,301
                                                          =======       =======

The following table sets forth information regarding nonaccrual loans and
accruing loans 90 days or more overdue as of March 31:

                                                              2005         2004
                                                            -------      -------
                                                               (In Thousands)
Nonaccrual loans                                            $   464      $   937
                                                            =======      =======

Accruing loans which are 90 days or more overdue            $    --      $   411
                                                            =======      =======


                                       51
<PAGE>

Information about loans that met the definition of an impaired loan in Statement
of Financial Accounting Standards No. 114 was as follows as of March 31:

<TABLE>
<CAPTION>
                                                                              2005                     2004
                                                                     -----------------------   -----------------------
                                                                     Recorded     Related      Recorded     Related
                                                                     Investment   Allowance    Investment   Allowance
                                                                     In Impaired  For Credit   In Impaired  For Credit
                                                                     Loans        Losses       Loans        Losses
                                                                     -----------  ----------   -----------  ----------
                                                                                    (In Thousands)
<S>                                                                  <C>          <C>          <C>          <C>
Loans for which there is a related allowance for credit losses       $    --      $    --      $   755      $   149

Loans for which there is no related allowance for credit losses           --           --           --           --
                                                                     -------      -------      -------      -------

           Totals                                                    $    --      $    --      $   755      $   149
                                                                     =======      =======      =======      =======

Average recorded investment in impaired loans during the
   year ended March 31                                               $   206                   $   299
                                                                                               =======

Related amount of interest income recognized during the time,
   in the year ended March 31 that the loans were impaired

           Total recognized                                          $    55                   $    11
                                                                                               =======
           Amount recognized using a cash-basis method
              of accounting                                          $    55                   $    11
                                                                                               =======
</TABLE>

NOTE 5 - PREMISES AND EQUIPMENT, NET
------------------------------------

The following is a summary of premises and equipment as of March 31:

                                                          2005            2004
                                                        -------         -------
                                                            (In Thousands)
Land                                                    $   189         $   268
Buildings and building improvements                       1,327           2,172
Furniture, fixtures and equipment                         1,534           1,505
Leasehold improvements                                      384             380
                                                        -------         -------
                                                          3,434           4,325
Accumulated depreciation and amortization                (1,367)         (1,682)
                                                        -------         -------
                                                        $ 2,067         $ 2,643
                                                        =======         =======


                                       52
<PAGE>

NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS
---------------------------------------------

The changes in the carrying amounts of goodwill and other intangibles for the
years ended March 31, 2005 and 2004 were as follows:

                                                                    Core Deposit
                                                      Goodwill       Intangibles
                                                      --------       -----------
                                                             (In Thousands)
Balance, March 31, 2003                                $   --           $   --
Recorded during the year                                1,090              886
Amortization expense                                       --              (22)
                                                       ------           ------

Balance, March 31, 2004                                 1,090              864
Amortization expense                                       --              (89)
                                                       ------           ------

Balance, March 31, 2005                                $1,090           $  775
                                                       ======           ======

Estimated annual amortization expense of identifiable intangible assets is as
follows:

                                                              (In thousands)
Years Ended March 31,
         2006                                                      $ 89
         2007                                                        89
         2008                                                        89
         2009                                                        89
         2010                                                        89
         Thereafter                                                 330
                                                                   ----
                  Total                                            $775
                                                                   ====

A summary of acquired identifiable intangible assets is as follows as of March
31, 2005:

                              Gross Carrying      Accumulated      Net Carrying
                                  Amount         Amortization         Amount
                              --------------     -------------     ------------
                                                 (In Thousands)
Core deposit intangibles           $886              $(111)            $775

There was no impairment recorded in fiscal years 2005 and 2004 based on
valuations at March 31, 2005 and 2004.

NOTE 7 - DEPOSITS
-----------------

The aggregate amount of time deposit accounts in denominations of $100,000 or
more was $16.5 million and $14.2 million as of March 31, 2005 and 2004,
respectively. Deposits greater than $100,000 are not federally insured.

For time deposits as of March 31, 2005, the scheduled maturities for each of the
following five years ended March 31, are:

                                                          (In Thousands)
                   2006                                       $43,915
                   2007                                        12,097
                   2008                                         8,341
                   2009                                        11,300
                   2010                                         5,589
                   Fair value adjustment                          168
                                                              -------
                     Total                                    $81,410
                                                              =======


                                       53
<PAGE>

Deposits from related parties held by the Company as of March 31, 2005 and 2004
amounted to $1.0 million and $1.9 million, respectively.

NOTE 8 - FEDERAL HOME LOAN BANK ADVANCES
----------------------------------------

Advances consist of funds borrowed from the Federal Home Loan Bank of Boston
(the "FHLB").

Maturities of advances from the FHLB for the years ending after March 31, 2005
are summarized as follows:

                                                          AMOUNT
                                                          ------
                                                      (In Thousands)
                  2006                                    $ 2,008
                  2007                                      2,969
                  2008                                      2,548
                  2009                                      2,039
                  2010                                      3,050
                  Thereafter                                3,006
                                                          -------
                                                          $15,620
                                                          =======

Amortizing advances are being repaid in equal monthly payments and are being
amortized from the date of the advance to the maturity date on a direct
reduction basis.

Borrowings from the FHLB are secured by a blanket lien on qualified collateral,
consisting primarily of loans with first mortgages secured by one-to four-family
properties and other qualified assets.

At March 31, 2005, the interest rates on FHLB advances ranged from 2.67% to
4.25%. At March 31, 2005, the weighted average interest rate on FHLB advances
was 3.76%.

NOTE 9 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
-------------------------------------------------------

The securities sold under agreements to repurchase as of March 31, 2005 are
securities sold, primarily on a short-term basis, by the Company that have been
accounted for not as sales but as borrowings. The securities consisted of
collateralized mortgage obligations. The securities were held in the Company's
safekeeping account under the control of the Company and pledged to the
purchasers of the securities. The purchasers have agreed to sell to the Company
substantially identical securities at the maturity of the agreements.

NOTE 10 - INCOME TAXES
----------------------

The components of income tax expense are as follows for the years ended March
31:

                                                        2005           2004
                                                        ----          -----
                                                           (In Thousands)
Current:
   Federal                                              $ 608         $ 266
   State                                                  180            86
                                                        -----         -----
                                                          788           352
                                                        -----         -----
Deferred:
   Federal                                               (129)          (38)
   State                                                  (29)           (5)
                                                        -----         -----
                                                         (158)          (43)
                                                        -----         -----
     Total income tax expense                           $ 630         $ 309
                                                        =====         =====


                                       54
<PAGE>

The reasons for the differences between the statutory federal income tax rate
and the effective tax rates are summarized as follows for the years ended March
31:

<TABLE>
<CAPTION>
                                                                                  2005          2004
                                                                                  ----          ----
<S>                                                                               <C>           <C>
Federal income tax at statutory rate                                              34.0%         34.0%
Increase (decrease) in tax resulting from:
   Nontaxable interest income                                                     (4.1)         (3.5)
   Nontaxable life insurance income                                               (2.8)         (4.7)
   Other adjustments                                                               2.1          (3.1)
State tax, net of federal tax benefit                                              5.5           4.7
                                                                                  ----          ----
     Effective tax rates                                                          34.7%         27.4%
                                                                                  ====          ====
</TABLE>

The Company had gross deferred tax assets and gross deferred tax liabilities as
follows as of March 31:

<TABLE>
<CAPTION>
                                                                                 2005          2004
                                                                               -------       -------
                                                                                  (In Thousands)
<S>                                                                            <C>           <C>
Deferred tax assets:
   Excess of allowance for loan losses over tax bad debt reserve               $   558       $   507
   Deferred loan origination fees                                                  133           137
   Net unrealized holding loss on available-for-sale securities                    266            --
   Deferred compensation                                                           224           183
   Other                                                                            21            --
                                                                               -------       -------
           Gross deferred tax assets                                             1,202           827
                                                                               -------       -------

Deferred tax liabilities:
   Net unrealized holding gain on available-for-sale securities                     --           (91)
   Premises and equipment, principally due to differences in depreciation          (81)         (100)
   Net mark-to-market adjustments                                                 (269)         (270)
   Other                                                                            --           (29)
           Gross deferred tax liabilities                                         (350)         (490)
                                                                               -------       -------
Net deferred tax assets                                                        $   852       $   337
                                                                               =======       =======
</TABLE>

Based on the Company's historical and current pretax earnings and anticipated
results of future operations, management believes the existing net deductible
temporary differences will reverse during periods in which the Company will
generate sufficient net taxable income, and that it is more likely than not that
the Company will realize the net deferred tax assets existing as of March 31,
2005.

Legislation was enacted in 1996 to repeal most of Section 593 of the Internal
Revenue Code pertaining to how a qualified savings institution calculates its
bad debt deduction for federal income tax purposes. This repeal eliminated the
percentage-of-taxable-income method to compute the tax bad debt deduction. Under
the legislation, the recapture of the pre-1988 tax bad debt reserves has been
suspended and would occur only under very limited circumstances. Therefore, a
deferred tax liability has not been provided for this temporary difference. The
Company's pre-1988 tax bad debt reserves, which are not expected to be
recaptured, amount to $3.3 million. The potential tax liability on the pre-1988
reserves for which no deferred income taxes have been provided is approximately
$1.3 million as of March 31, 2005.

On December 12, 2003, the Company completed the acquisition of Windsor Locks
Community Bank, FSL as described in Note 19. As part of the acquisition the
Company recorded a net deferred tax asset of approximately $49,000 for ordinary
timing differences and a net deferred tax liability of approximately $270,000
for mark-to-market adjustments required under purchase accounting rules.

NOTE 11 - BENEFIT PLANS
-----------------------

The Association has a noncontributory defined benefit trusteed pension plan
through the Financial Institutions Retirement Fund covering all eligible
employees. The Company contributed $267,000 and $366,000 to the plan


                                       55
<PAGE>

during the years ended March 31, 2005 and 2004, respectively. The Association's
plan is part of a multi-employer plan for which detail as to the Association's
relative position is not readily determinable.

The Association established the Enfield Federal Savings and Loan Association
Director Fee Continuation Plan to provide the directors serving on the board as
of the date of the plan's implementation with a retirement income supplement.
The plan has six directors. Participant-directors are entitled to an annual
benefit, as of their Retirement Date, equal to $1,000 for each full year of
service as a director from June 1, 1995, plus $250 for each full year of service
as a director prior to June 1, 1995, with a maximum benefit of $6,000 per year
payable in ten annual installments. The retirement plan's liability is $149,000
and $139,000 as of March 31, 2005 and 2004, respectively. The Association has
funded the plan through the purchase of life insurance policies under which the
Association is the beneficiary. The annual cost of the retirement plan that was
charged to expense during the years ended March 31, 2005 and 2004 was $16,000.

The Association sponsors a 401(k) Plan whereby the Association matches 50% of
the first 6% of employee contributions. During the years ended March 31, 2005
and 2004 the Association contributed $51,000 and $45,000, respectively under
this plan. Effective February 1, 2002, the Association amended the 401(k) Plan
in its entirety into the Enfield Federal Savings and Loan Association Employees'
Savings & Profit Sharing Plan and Trust (the "401(k) Plan"), under which
participants in the 401(k) Plan are permitted to direct that all or part of
their interest in the 401(k) Plan be invested in shares of the common stock of
the Company.

The Association provided term life insurance for two former employees and has
agreed to provide the insurance until they attain the age of 65. The Association
is not a beneficiary under the policies. The annual premium was approximately
$5,000 for the year ended March 31, 2004. One former employee reached the age of
65 during the year ended March 31, 2003 and the other during the year ended
March 31, 2004, and the post-retirement benefits have been terminated.

The Association also provided limited medical benefits to two early retirees and
their spouses meeting certain service requirements and only during the period in
which they were 62 to 65 years old. No other early retirees will be provided
this benefit. The accumulated post retirement benefit obligation was immaterial
as of March 31, 2004. The expense of these benefits to the Association for the
year ended March 31, 2004 was approximately $13,000. One early retiree reached
the age of 65 during the year ended March 31, 2003, and the other during the
year ended March 31, 2004, and the post-retirement benefit for these individuals
have been terminated.

The Association has an Executive Supplemental Retirement Plan Agreement and a
Life Insurance Endorsement Method Split Dollar Plan Agreement for the benefit of
the President of the Association. The plan provides the President with an annual
retirement benefit equal to approximately $173,000 over a period of 180 months.
Following the initial 180 month period, certain additional amounts may be
payable to the President until his death based on the performance of the life
insurance policies that the Association has acquired as an informal funding
source for its obligation to the President. The income recorded on the life
insurance policy amounted to $145,000 and $149,000 for the years ended March 31,
2005 and 2004, respectively. A periodic amount is being expensed and accrued to
a liability reserve account during the President's active employment so that the
full present value of the promised benefit will be expensed at his retirement.
The expense of this plan to the Association for the years ended March 31, 2005
and 2004 was $95,000 and $83,000, respectively. The cumulative liability for
this plan is reflected in other liabilities on the consolidated balance sheets
as of March 31, 2005 and 2004 in the amounts of $410,000 and $315,000,
respectively.

The Association formed a Rabbi Trust for the Executive Supplemental Retirement
Plan. The Trust's assets consist of split dollar life insurance policies. The
cash surrender values of the policies are reflected as an asset on the
consolidated balance sheets. As of March 31, 2005 and 2004, total assets in the
Rabbi Trust were $3.7 million and $3.6 million, respectively.

The Association adopted the Enfield Federal Savings & Loan Association
Supplemental Executive Retirement Plan (SERP), effective June 4, 2002. The SERP
provides restorative payments to executives designated by the Board of Directors
who are prevented by certain provisions of the Internal Revenue Code from
receiving the full benefits contemplated by other benefit plans. The Board of
Directors has designated the President to participate in the Plan.


                                       56
<PAGE>

The Company and the Association entered into an employment agreement with its
President. The employment agreement provides for the continued payment of
specified compensation and benefits for specified periods. The agreement also
provides for termination of the executive for cause (as defined in the
agreements) at any time. The employment agreement provides for the payment,
under certain circumstances, of amounts upon termination following a "change in
control" as defined in the agreement. The agreement also provides for certain
payments in the event of the officer's termination for other than cause and in
the case of voluntary termination.

The Association maintains change in control agreements with several employees.
The agreements are renewable annually. The agreements provide that if
involuntary termination or, under certain circumstances, voluntary termination
follows a change in control of the Association, the employee would be entitled
to receive a severance payment equal to a percentage of his "base amount," as
defined under the Internal Revenue Code. The Association would also continue
and/or pay for life, health and disability coverage for a period of time
following termination.

NOTE 12 - STOCK COMPENSATION PLAN
---------------------------------

In 2003, the Company adopted the New England Bancshares, Inc. 2003 Stock-Based
Incentive Plan (the "Plan") which includes grants of options to purchase Company
stock and awards of Company stock.

The number of shares of common stock reserved for grants and awards under the
Plan is 200,000, consisting of 142,857 shares for stock options and 57,143
shares for stock awards. All employees and outside directors of the Company are
eligible to participate in the Plan.

The Plan defines the stock option exercise price as the fair market value of the
Company stock at the date of the grant. The Company determines the term during
which a participant may exercise a stock option, but in no event may a
participant exercise a stock option more than ten years from the date of grant.
The stock options granted in fiscal 2005 and 2003 vest in installments over five
years.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for stock option grants in the year ended March 31, 2005. No
options were granted in fiscal year 2004.

Dividend yield                                                       0.12%
Expected life                                                     10 years
Expected volatility                                                  23.9%
Risk-free interest rate                                              4.75%

A summary of the status of the Plan as of March 31, 2005 and 2004 and changes
during the years then ended is presented below:

<TABLE>
<CAPTION>
                                                              2005                            2004
                                                  ----------------------------    ---------------------------
                                                              Weighted-Average               Weighted-Average
                                                  Shares       Exercise Price     Shares      Exercise Price
                                                  ------      ----------------    ------     ----------------
<S>                                               <C>               <C>           <C>              <C>
Outstanding at beginning of year                  92,568            $15.15        92,568           $15.15
Granted                                           17,000             19.25            --
Forfeited                                         (2,000)            15.15            --
Expired                                               --                              --
                                                 -------                          ------
Outstanding at end of year                       107,568            $15.80        92,568           $15.15
                                                 =======                          ======

Options exercisable at year-end                   36,227                          18,514
Weighted-average fair value of options
   granted during the year                                          $ 8.85                             --
</TABLE>


                                       57
<PAGE>

The following table summarizes information about fixed stock options outstanding
as of March 31, 2005:

<TABLE>
<CAPTION>
                        Options Outstanding                                        Options Exercisable
   ---------------------------------------------------------------        ----------------------------------
       Number             Weighted-Average                                   Number
    Outstanding              Remaining            Weighted-Average         Exercisable      Weighted-Average
   as of 3/31/05          Contractual Life         Exercise Price         as of 3/31/05      Exercise Price
   -------------          ----------------        ----------------        -------------      ----------------
<S>                           <C>                      <C>                    <C>                <C>
       90,568                 7.9 years                $15.15                 36,227             $15.15
       15,000                 9.1 years                 19.35                     --                 --
        2,000                 9.9 years                 18.50                     --                 --
      -------                                                                 ------
      107,568                 8.1 years                 15.80                 36,227              15.15
      =======                                                                 ======
</TABLE>

Under the Plan, common stock of the Company may be granted at no cost to
employees and outside directors of the Company. Plan participants are entitled
to cash dividends and to vote such shares. Restrictions limit the sale or
transfer of these shares during a five-year period whereby the restrictions
lapse on 20% of these shares annually. Upon issuance of shares of restricted
stock under the Plan, unearned compensation equivalent to the market value at
the date of grant is charged to the capital accounts and subsequently amortized
to expense over the five-year restriction period. The Company determines the
date on which the stock awards granted to a participant vest and any terms or
conditions which must be satisfied prior to the vesting of any stock award. In
February 2003, 36,421 shares were awarded under the Plan. The awards vest in
installments over five years. The compensation cost that has been charged
against income for the granting of stock awards under the plan was $110,000 and
$111,000 for the years ended March 31, 2005 and 2004, respectively.

Upon a change in control as defined in the Plan, options held by participants
will become immediately exercisable and shall remain exercisable until the
expiration of the term of the option, regardless of whether the participant is
employed or in service with the Company; and all stock awards held by a
participant will immediately vest and any further restrictions lapse.

NOTE 13 - EMPLOYEE STOCK OWNERSHIP PLAN
---------------------------------------

On June 4, 2002, the date the reorganization was consummated, the Association
implemented the Enfield Federal Savings and Loan Association Employee Stock
Ownership Plan (the "ESOP") effective as of January 1, 2002. On June 4, 2002,
the ESOP purchased 73,795 shares of the common stock of the Company. To fund the
purchases, the ESOP borrowed $738,000 from the Company. The borrowing is
currently at an interest rate of 4.75% and is to be repaid in ten equal
installments of $93,000 commencing on December 31, 2002 through December 31,
2011. In addition, dividends paid on unreleased shares are used to reduce the
principal balance of the loan. The collateral for the borrowing is the common
stock of the Company purchased by the ESOP. Contributions by the Association to
the ESOP are discretionary; however, the Association intends to make annual
contributions to the ESOP in an aggregate amount at least equal to the principal
and interest requirements on the debt. The shares of stock of the Company are
held in a suspense account until released for allocation among participants. The
shares will be released annually from the suspense account and the released
shares will be allocated among the participants on the basis of the
participant's compensation for the year of allocation compared to all other
participants. As any shares are released from collateral, the Company reports
compensation expense equal to the current market price of the shares and the
shares will be outstanding for earnings-per-share purposes. The shares not
released are reported as unearned ESOP shares in the capital accounts section of
the balance sheet. ESOP expense for the years ended March 31, 2005 and 2004 was
$140,000 and $130,000, respectively.

The ESOP shares as of March 31 were as follows:

                                                       2005           2004
                                                     --------      ----------
Allocated shares                                       20,784          14,060
Unreleased shares                                      51,664          59,040
                                                     --------      ----------
Total ESOP shares                                      72,448          73,100
                                                     ========      ==========

Fair value of unreleased shares                      $919,512      $1,298,880
                                                     ========      ==========


                                       58
<PAGE>

NOTE 14 - REGULATORY MATTERS
----------------------------

The Company, as a savings and loan holding company, is not subject to capital
requirements. The Association is subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory - and possibly
additional discretionary - actions by regulators that, if undertaken, could have
a direct material effect on the Association's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Association must meet specific capital guidelines that involve
quantitative measures of its assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. Capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Association to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier 1 capital (as defined in the regulations) to
risk-weighted assets (as defined), of Core capital (as defined) to adjusted
tangible assets (as defined) and Tangible capital (as defined) to Tangible
assets (as defined). Management believes, as of March 31, 2005, that the
Association meets all capital adequacy requirements to which it is subject.

As of March 31, 2005, the most recent notification from the Office of Thrift
Supervision categorized the Association as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well capitalized
the Association must maintain minimum total risk-based, Tier 1 risk-based, Core
and Tangible capital ratios as set forth in the table. There are no conditions
or events since that notification that management believes have changed the
Association's category.

The Association's actual capital amounts and ratios are also presented in the
table.

<TABLE>
<CAPTION>
                                                                                                            To Be Well
                                                                                                        Capitalized Under
                                                                                 For Capital            Prompt Corrective
                                                               Actual         Adequacy Purposes         Action Provisions
                                                         ----------------     -----------------         -----------------
                                                         Amount     Ratio    Amount        Ratio        Amount       Ratio
                                                         ------     -----    ------        -----        ------       -----
                                                                             (Dollar Amounts in Thousands)
<S>                                                     <C>         <C>      <C>          <C>          <C>        <C>
As of March 31, 2005:

   Total Capital (to Risk Weighted Assets)              $26,404     23.43%   $9,016       >/= 8.0%     $11,270    >/= 10.0%

   Tangible Capital (to Tangible Assets)                 24,995     11.79     3,180       >/= 1.5          N/A         N/A

   Core Capital (to Adjusted Tangible Assets)            24,995     11.79     8,479       >/= 4.0       10,599     >/= 5.0

   Tier 1 Capital (to Risk Weighted Assets)              24,995     22.18       N/A           N/A        6,762     >/= 6.0

As of March 31, 2004:

   Total Capital (to Risk Weighted Assets)               24,892     23.83     8,357       >/= 8.0       10,446    >/= 10.0

   Tangible Capital (to Tangible Assets)                 23,591     11.74     3,015       >/= 1.5          N/A         N/A

   Core Capital (to Adjusted Tangible Assets)            23,591     11.74     8,039       >/= 4.0       10,049     >/= 5.0

   Tier 1 Capital (to Risk Weighted Assets)              23,591     22.58       N/A           N/A        6,268     >/= 6.0
</TABLE>

The Association will not be able to declare or pay a cash dividend on, or
repurchase any of its common stock, if the effect thereof would cause the
regulatory capital of the Association to be reduced below the amount required
under OTS rules and regulations.


                                       59
<PAGE>

NOTE 15 - EARNINGS PER SHARE (EPS)
----------------------------------

Reconciliation of the numerators and denominators of the basic and diluted per
share computations for net income are as follows:

<TABLE>
<CAPTION>
                                                                   Income           Shares      Per-Share
                                                                 (Numerator)     (Denominator)    Amount
                                                                 -----------     -------------    ------
                                                                (In Thousands)
<S>                                                                 <C>            <C>            <C>
Year ended March 31, 2005
   Basic EPS
     Net income and income available to common stockholders         $1,188         2,172,272      $0.55
     Effect of dilutive securities options                              --            47,245
                                                                    ------         ---------
   Diluted EPS
     Income available to common stockholders and
       assumed conversions                                          $1,188         2,219,517      $0.54
                                                                    ======         =========

Year ended March 31, 2004
   Basic EPS
     Net income and income available to common stockholders         $  817         2,037,769      $0.40
     Effect of dilutive securities options                              --            52,416
                                                                    ------         ---------
   Diluted EPS
     Income available to common stockholders and
       assumed conversions                                          $  817         2,090,185      $0.39
                                                                    ======         =========
</TABLE>

NOTE 16 - COMMITMENTS AND CONTINGENT LIABILITIES
------------------------------------------------

The Company is obligated under non-cancelable operating leases for banking
premises and equipment expiring between fiscal year 2006 and 2013. The total
minimum rental due in future periods under these existing agreements is as
follows as of March 31, 2005:

           Year Ended March 31                          (In Thousands)
           -------------------
                  2006                                        $ 86
                  2007                                          42
                  2008                                          40
                  2009                                          20
                  2010                                          18
                  Thereafter                                    38
                                                              ----
                    Total minimum lease payments              $244
                                                              ====

Certain leases contain provisions for escalation of minimum lease payments
contingent upon increases in real estate taxes and percentage increases in the
consumer price index. Certain leases contain options to extend for periods from
one to five years. The total rental expense amounted to $123,000 and $125,000
for the years ended March 31, 2005 and 2004, respectively.

On November 24, 2004, the Association, the wholly-owned subsidiary of New
England Bancshares, Inc., entered into a 25-year lease for a building that is
being constructed to house its new headquarters. The lease will begin upon
completion of construction of the building and the occupancy by the Association.
The exact amount of annual rent to be paid by the Association under the lease
will be a function of the total cost of the construction of the building,
subject to routine annual increases.

NOTE 17 - FINANCIAL INSTRUMENTS
-------------------------------

The Company is party to financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to originate loans, standby letters of
credit and unadvanced funds on loans. The instruments involve, to varying
degrees, elements of credit risk


                                       60
<PAGE>

in excess of the amount recognized in the balance sheets. The contract amounts
of those instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.

The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for loan commitments and standby letters
of credit is represented by the contractual amounts of those instruments. The
Company uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.

Commitments to originate loans are agreements to lend to a customer provided
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation of the borrower. Collateral held varies, but may
include secured interests in mortgages, accounts receivable, inventory,
property, plant and equipment and income-producing properties.

Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance by a customer to a third party. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. As of March 31, 2005 and 2004, the
maximum potential amount of the Company's obligation was $10,000 for financial
and standby letters of credit. The Company's outstanding letters of credit
generally have a term of less than one year. If a letter of credit is drawn
upon, the Company may seek recourse through the customer's underlying line of
credit. If the customer's line of credit is also in default, the Company may
take possession of the collateral, if any, securing the line of credit.

The following are carrying amounts and estimated fair values of the Company's
financial assets and liabilities as of March 31:

<TABLE>
<CAPTION>
                                                                        2005                        2004
                                                               -----------------------     ----------------------
                                                               Carrying     Estimated      Carrying    Estimated
                                                                Amount      Fair Value      Amount     Fair Value
                                                                ------      ----------      ------     ----------
                                                                                  (In Thousands)
<S>                                                            <C>           <C>           <C>           <C>
Financial assets:
   Cash and cash equivalents                                   $ 16,544      $ 16,544      $ 19,679      $ 19,679
   Interest-bearing time deposits with other banks                5,902         6,002         8,450         8,813
   Available-for-sale securities                                 46,585        46,585        42,309        42,309
   Federal Home Loan Bank stock                                   1,126         1,126         1,008         1,008
   Loans, net                                                   132,557       131,683       121,404       125,697
   Accrued interest receivable                                      896           896           788           788

Financial liabilities:
   Deposits                                                     162,991       162,981       162,790       163,854
   Advanced payments by borrowers for taxes and insurance           644           644           536           536
   FHLB advances                                                 15,620        15,310         9,926        10,095
   Securities sold under agreements to repurchase                 4,244         4,249           788           799
   Due to broker                                                    278           278           806           806
</TABLE>

The carrying amounts of financial instruments shown in the above tables are
included in the consolidated balance sheets under the indicated captions.
Accounting policies related to financial instruments are described in Note 2.


                                       61
<PAGE>

The notional amounts of financial instrument liabilities with off-balance sheet
credit risk are as follows as of March 31:

                                                         2005          2004
                                                       -------       -------
                                                          (In Thousands)
Commitments to originate loans                         $ 2,147       $ 3,101
Standby letters of credit                                   10            10
Unadvanced portions of loans:
   Construction                                         11,067         3,268
   Home equity                                           1,464         1,380
   Commercial lines of credit                            1,489         1,564
                                                       -------       -------
                                                       $16,177       $ 9,323
                                                       =======       =======

There is no material difference between the notional amounts and the estimated
fair values of the off-balance sheet liabilities.

NOTE 18 - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
---------------------------------------------------------

Most of the Company's business activity is with customers located within
Connecticut. There are no concentrations of credit to borrowers that have
similar economic characteristics. The majority of the Company's loan portfolio
is comprised of loans collateralized by real estate located in the state of
Connecticut.

NOTE 19 - ACQUISITION OF WINDSOR LOCKS COMMUNITY BANK, FSL
----------------------------------------------------------

On December 12, 2003, the Association acquired Windsor Locks Community Bank, FSL
("Windsor Locks") (the "Acquisition"). Neither the Association nor the Company
was required to pay any consideration directly to any affiliated party,
including Windsor Locks Community Bank's members, in the merger. However, the
Company was required to issue an additional 171,355 shares of its common stock
to Enfield Mutual Holding Company, which was equal to the value of Windsor Locks
determined by an independent appraisal. There were $225,000 in expenses related
to the Acquisition.

The Acquisition was accounted for using the purchase method of accounting.
Accordingly, the assets acquired and liabilities assumed have been recorded by
the Company at their fair values at the consummation date. During the appraisal
process, an identifiable intangible asset of $886,000 was calculated and is
being amortized to expense over a period of 10 years. Goodwill resulting from
the Acquisition totaled $1.1 million and will be analyzed for impairment on at
least an annual basis. Financial statement amounts for Windsor Locks are
included in the Company's consolidated financial statements beginning on the
acquisition date.

NOTE 20 - RECLASSIFICATION
--------------------------

Certain amounts in the prior year have been reclassified to be consistent with
the current year's statement presentation.


                                       62
<PAGE>

NOTE 21 - PARENT COMPANY ONLY FINANCIAL STATEMENTS
--------------------------------------------------

The following financial statements are for the Company (Parent Company Only) and
should be read in conjunction with the consolidated financial statements of the
Company.

                          NEW ENGLAND BANCSHARES, INC.
                          ----------------------------
                              (Parent Company Only)

                                 Balance Sheets
                                 --------------
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                               March 31,
                                                                                         --------------------
ASSETS                                                                                     2005         2004
------                                                                                   -------      -------
<S>                                                                                      <C>          <C>
Cash on deposit with Enfield Federal Savings and Loan Association                        $ 1,001      $ 1,030
Investment in subsidiary, Enfield Federal Savings and Loan Association                    26,489       25,737
Loan to ESOP                                                                                 541          605
Accrued interest receivable                                                                    6            7
Due from subsidiary                                                                          431          215
                                                                                         -------      -------
           Total assets                                                                  $28,468      $27,594
                                                                                         =======      =======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Other liabilities                                                                        $    29      $    --
Stockholders' equity                                                                      28,439       27,594
                                                                                         -------      -------
           Total liabilities and stockholders' equity                                    $28,468      $27,594
                                                                                         =======      =======
</TABLE>

                          NEW ENGLAND BANCSHARES, INC.
                          ----------------------------
                              (Parent Company Only)

                              Statements of Income
                              --------------------
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                          For the Years Ended
                                                                                                March 31,
                                                                                         ---------------------
                                                                                           2005          2004
                                                                                         -------       -------
<S>                                                                                      <C>           <C>
Interest income                                                                          $    28       $    31
Other expense                                                                                102            86
                                                                                         -------       -------
Loss before income tax benefit and equity in undistributed net income of subsidiary          (74)          (55)
Income tax benefit                                                                           (25)          (19)
                                                                                         -------       -------
Loss before equity in undistributed net income of subsidiary                                 (49)          (36)
Equity in undistributed net income of subsidiary                                           1,237           853
                                                                                         -------       -------
Net income                                                                               $ 1,188       $   817
                                                                                         =======       =======
</TABLE>


                                       63
<PAGE>

                          NEW ENGLAND BANCSHARES, INC.
                          ----------------------------
                              (Parent Company Only)

                            Statements of Cash Flows
                            ------------------------
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                       For the Years Ended
                                                                                             March 31,
                                                                                      ---------------------
                                                                                        2005          2004
                                                                                      -------       -------
<S>                                                                                   <C>           <C>
Cash flows from operating activities:
   Net income                                                                         $ 1,188       $   817
   Adjustments to reconcile net income to net cash used in operating activities:
     Decrease in accrued interest receivable                                                1             1
     Increase in due from subsidiary for income taxes receivable                          (25)          (19)
     Increase in other liabilities                                                         28            --
     Undistributed net income of subsidiary                                            (1,237)         (853)
                                                                                      -------       -------

   Net cash used in operating activities                                                  (45)          (54)
                                                                                      -------       -------

Cash flows from investing activities:
   Principal payments received on loan to ESOP                                             64            61
                                                                                      -------       -------

   Net provided by investing activities                                                    64            61
                                                                                      -------       -------

Cash flows from financing activities:
   Payment of cash dividends on common stock                                              (48)           --
                                                                                      -------       -------

   Net cash used in financing activities                                                  (48)           --
                                                                                      -------       -------

Net (decrease) increase in cash and cash equivalents                                      (29)            7
Cash and cash equivalents at beginning of year                                          1,030         1,023
                                                                                      -------       -------
Cash and cash equivalents at end of year                                              $ 1,001       $ 1,030
                                                                                      =======       =======
</TABLE>


                                       64
<PAGE>

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

      None.

ITEM 8A. CONTROLS AND PROCEDURES

      The Company's management, including the Company's principal executive
officer and principal financial officer, have evaluated the effectiveness of the
Company's "disclosure controls and procedures," as such term is defined in Rule
13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended,
(the "Exchange Act"). Based upon their evaluation, the principal executive
officer and principal financial officer concluded that, as of the end of the
period covered by this report, the Company's disclosure controls and procedures
were effective for the purpose of ensuring that the information required to be
disclosed in the reports that the Company files or submits under the Exchange
Act with the Securities and Exchange Commission (the "SEC") (1) is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and (2) is accumulated and communicated to the Company's
management, including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure.

ITEM 8B. OTHER INFORMATION

      None.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

Directors

      The information relating to the directors of the Company is incorporated
herein by reference to the sections captioned "Corporate Governance--Directors'
Compensation" and "Proposal 1 - Election of Directors" in the Company's Proxy
Statement for the 2005 Annual Meeting of Stockholders.

Executive Officers

      Certain executive officers of the Association also serve as executive
officers of the Company. The day-to-day management duties of the executive
officers of the Company and Association relate primarily to their duties as to
the Association. The executive officers are elected annually and hold office
until their successors have been elected and qualified or until they are removed
or replaced. The executive officers of the Company currently are as follows:

<TABLE>
<CAPTION>
Name                     Age(1)                         Position(s)
-----------------        ------   ----------------------------------------------------------------
<S>                       <C>     <C>
David J. O'Connor         58      President, Chief Executive Officer and Director of New England
                                      Bancshares and Enfield Federal
John F. Parda             56      Senior Vice President and Senior Loan Officer of Enfield Federal
Scott D. Nogles           35      Senior Vice President and Chief Financial Officer of New England
                                      Bancshares and Enfield Federal
</TABLE>

----------
(1)   As of March 31, 2005.

      David J. O'Connor. Mr. O'Connor has been the Chief Executive Officer,
President and Director of Enfield Federal since 1999 and of New England
Bancshares since 2002. Mr. O'Connor also served as the Company's and Enfield
Federal's Chief Financial Officer from 1999 to April 2004. Mr. O'Connor has over
30 years of banking


                                       65
<PAGE>

experience in New England. Before joining Enfield Federal, he was the Executive
Vice President, Treasurer and Chief Financial Officer of The Berlin City Bank, a
community bank in New Hampshire.

      John F. Parda. Mr. Parda joined Enfield Federal in 1999 as Vice President
and Senior Loan Officer. He was named Senior Vice President and Senior Loan
Officer in 2001. Mr. Parda has over 30 years of diversified banking experience
with Connecticut financial institutions. Before joining Enfield Federal, he was
a Vice President and Commercial Loan Officer with the former First International
Bank, now a subsidiary of UPS Capital, a lender specializing in government
guaranteed loans.

      Scott D. Nogles. Mr. Nogles joined New England Bancshares and Enfield
Federal in 2004 as Senior Vice President and Chief Financial Officer. Before
joining Enfield Federal, he was Vice President and Chief Financial Officer of
Luzerne National Bank in Luzerne, Pennsylvania from 2003 to 2004. For the three
years prior to 2003 Mr. Nogles worked in senior accounting positions for Asian
Bank, Silicon Power Corporation and ThinAir Apps, a software development
company. Mr. Nogles has an MBA from the University of Connecticut and is a CPA.

Compliance with Section 16(a) of the Exchange Act

      Reference is made to the cover page of this report and to the section
captioned "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's Proxy Statement for the 2005 Annual Meeting of Stockholders.

Disclosure of Financial Expert

      The information relating to disclosure of a financial expert of the
Company's Audit Committee is incorporated by reference to the section captioned
"Corporate Governance--Committees of the Board of Directors--Audit Committee" in
the Company's Proxy Statement for the 2005 Annual Meeting of Stockholders.

Disclosure of Code of Ethics and Business Conduct

      For information concerning the Company's code of ethics, the information
contained under the section captioned "Corporate Governance--Code of Business
Conduct" in the Company's Proxy Statement for the 2005 Annual Meeting of
Stockholders is incorporated by reference. A copy of the code of ethics and
business conduct is available, without charge, upon written request to Nancy L.
Grady, Corporate Secretary, New England Bancshares, Inc., 660 Enfield Street,
Enfield, Connecticut 06082.

ITEM 10. EXECUTIVE COMPENSATION

      The information regarding executive compensation is incorporated herein by
reference to the sections captioned "Corporate Governance - Directors'
Compensation" and "Executive Compensation" in the Company's Proxy Statement for
the 2005 Annual Meeting of Stockholders.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

      The information relating to security ownership of certain beneficial
owners and management is incorporated herein by reference to the section
captioned "Stock Ownership" in the Company's Proxy Statement for the 2005 Annual
Meeting of Stockholders.


                                       66
<PAGE>

      Additionally, the information about the Company's equity compensation
plans is contained below.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Plan category                 Number of securities         Weighted-average exercise    Number of securities
                              to be issued upon exercise   price of outstanding         remaining available for
                              of outstanding options,      options, warrants and        future issuance under
                              warrants and rights          rights                       equity compensation plans
                                                                                        (excluding securities
                                                                                        reflected in column (a))
                              (a)                          (b)                          (c)
--------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                          <C>                          <C>
Equity compensation
plans approved by                       107,568                      $15.80                       33,289
security holders
--------------------------------------------------------------------------------------------------------------------
Total                                   107,568                      $15.80                       33,289
--------------------------------------------------------------------------------------------------------------------
</TABLE>

      The Company does not maintain any equity compensation plans that have not
been approved by security holders.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information relating to certain relationships and related transactions
is incorporated herein by reference to the section captioned "Transactions with
Management" in the Company's Proxy Statement for the 2005 Annual Meeting of
Stockholders.


                                       67
<PAGE>

ITEM 13. EXHIBITS

      3.1      Charter of New England Bancshares, Inc. (1)

      3.2      Bylaws of New England Bancshares, Inc. (2)

      4.0      Specimen stock certificate of New England Bancshares, Inc. (1)

      10.1     Form of Enfield Federal Savings and Loan Association Employee
               Stock Ownership Plan and Trust(1)

      10.2     Employment Agreement by and among Enfield Federal Savings and
               Loan Association, New England Bancshares, Inc. and David J.
               O'Connor (3)

      10.3     Form of Enfield Federal Savings and Loan Association Employee
               Severance Compensation Plan(1)

      10.4     Enfield Federal Savings and Loan Association Employee Savings &
               Profit-Sharing Plan and Adoption Agreement (1)

      10.5     Enfield Federal Savings and Loan Association Executive
               Supplemental Retirement Plan, as amended (1)

      10.6     Form of Enfield Federal Savings and Loan Association Supplemental
               Executive Retirement Plan(1)

      10.7     Form of Enfield Federal Savings and Loan Association Director Fee
               Continuation Plan (1)

      10.8     Split Dollar Arrangement with David J. O'Connor (1)

      10.9     New England Bancshares, Inc. 2003 Stock-Based Incentive Plan (4)

      10.10    Change in Control Agreement by and among Enfield Federal Savings
               and Loan Association, New England Bancshares, Inc. and John F.
               Parda (5)

      10.11    Change in Control Agreement by and among Enfield Federal Savings
               and Loan Association, New England Bancshares, Inc. and Scott D.
               Nogles (5)

      10.12    Lease agreement with Troiano Professional Center, LLC

      23.0     Consent of Shatswell, MacLeod & Company, P.C.

      31.1     Rule 13a-14(a) /15d-14(a) Certification of Chief Executive
               Officer

      31.2     Rule 13a-14(a) /15d-14(a) Certification of Chief Financial
               Officer

      32.1     Section 1350 Certification of Chief Executive Officer

      32.2     Section 1350 Certification of Chief Financial Officer

      ----------
      (1)   Incorporated by reference into this document from the Company's Form
            SB-2, Registration Statement filed under the Securities Act of 1933,
            Registration No. 333-82856.

      (2)   Incorporated by reference into this document from the exhibits to
            the Quarterly Report on Form 10-QSB for the Quarter Ended December
            31, 2003.

      (3)   Incorporated herein by reference into this document from the
            exhibits to the Quarterly Report on Form 10-QSB for the quarter
            ended June 30, 2002.

      (4)   Incorporated herein by reference into this document from the
            appendix to the proxy statement filed on December 2, 2002.

      (5)   Incorporated by reference into this document from the exhibits to
            the Quarterly Report on Form 10-QSB for the quarter ended June 30,
            2004.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

      The information relating to the Company's principal accountant fees and
services is incorporated herein by reference to the section captioned "Proposal
2--Ratification of Independent Auditors" in the Company's Proxy Statement for
the 2005 Annual Meeting of Stockholders.


                                       68
<PAGE>

                                   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.

                                        New England Bancshares, Inc.


Date: June 28, 2005                     By: /s/ David J. O'Connor
                                            ------------------------------------
                                            David J. O'Connor
                                            President, Chief Executive Officer
                                            and Director

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

<TABLE>
<S>                                                       <C>
/s/ David J. O'Connor                                     /s/ Scott D. Nogles
-----------------------------------------------------     ------------------------------------------------
David J. O'Connor, President, Chief Executive             Scott D. Nogles, Senior Vice President and Chief
   Officer and Director (principal executive officer)       Financial Officer (principal financial and
                                                            accounting officer)

Date: June 28, 2005                                       Date: June 28, 2005

/s/ Peter T. Dow                                          /s/ Lucien P. Bolduc
-----------------------------------------------------     ------------------------------------------------
Peter T. Dow, Chairman of the Board                       Lucien P. Bolduc, Director

Date: June 28, 2005                                       Date:  June 28, 2005

/s/ William C. Leary                                      /s/ Myron J. Marek
-----------------------------------------------------     ------------------------------------------------
William C. Leary, Director                                Myron J. Marek, Director

Date: June 28, 2005                                       Date: June 28, 2005

/s/ Dorothy K. McCarty                                    /s/ Richard K. Stevens
-----------------------------------------------------     ------------------------------------------------
Dorothy K. McCarty, Director                              Richard K. Stevens, Director

Date:  June 28, 2005                                      Date: June 28, 2005

/s/ Richard M. Tatoian, Esq.
-----------------------------------------------------
Richard M. Tatoian, Esq., Director

Date: June 28, 2005
</TABLE>


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