UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


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


                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997


                           COMMISSION FILE NO. 0-11786


                              VILLAGE BANCORP, INC.
             (Exact name of Registrant as specified in its charter)


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


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


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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                         YES __X__          NO _____

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



            CLASS                        OUTSTANDING AT OCTOBER 31, 1997
            -----                        -------------------------------
 COMMON STOCK, $3.33 PAR VALUE                   954,317 SHARES

<PAGE>

                             VILLAGE BANCORP, INC.

                               TABLE OF CONTENTS

                                                                        PAGE NO.
                                                                        --------
PART I.  FINANCIAL INFORMATION:

     ITEM 1.  Financial Statements

          Condensed Consolidated Balance Sheets
            Sept. 30, 1997 and December 31, 1996 (unaudited)  . . . .       1

          Condensed Consolidated Statements of Income For The
            Three Months Ended Sept. 30, 1997 and 1996 (unaudited)
            Nine Months Ended Sept. 30, 1997 and 1996 (unaudited) . .       2

          Condensed Consolidated Statements of Cash Flows For The
            Nine Months Ended Sept. 30, 1997 and 1996 (unaudited) . .       3

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


     ITEM 2.  Management's Discussion and Analysis of Financial
                Condition and Results of Operations . . . . . . . . .       9


PART II.  OTHER INFORMATION:


     ITEM 1.  Legal Proceedings . . . . . . . . . . . . . . . . . . .      14

     ITEM 2.  Changes in Securities . . . . . . . . . . . . . . . . .      14

     ITEM 3.  Defaults Upon Senior Securities . . . . . . . . . . . .      14

     ITEM 4.  Results of votes of Security Holders  . . . . . . . . .      14

     ITEM 5.  Other Information . . . . . . . . . . . . . . . . . . .      14

     ITEM 6.  (a).  Exhibits  . . . . . . . . . . . . . . . . . . . .      14

              (b).  Reports on Form 8-K . . . . . . . . . . . . . . .      14


SIGNATURES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      15

<PAGE>

VILLAGE BANCORP, INC.

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

PART  I. - FINANCIAL INFORMATION

<PAGE>

VILLAGE BANCORP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
ASSETS                                           Sept. 30, 1997    Dec. 31, 1996
------                                           --------------    -------------
                                                   (Unaudited)
                                                         (In thousands)

Cash and due from banks                             $  15,290        $   8,545
Federal funds sold                                      5,750            6,600
                                                    ---------        ---------
Total cash and cash equivalents                        21,040           15,145

Securities:
  Available-for-sale (at fair value)                   12,640           15,706
  Held-to-maturity (fair value of                                
  $35,810 at Sept. 30, 1997 and                                  
  $17,135 at December 31, 1996)                        35,730           17,198
                                                                 
Federal Home Loan Bank stock, at cost                     782              712
Loans, net of deferred loan fees - Note C             139,793          126,836
Allowance for loan losses                              (1,328)          (1,356)
                                                    ---------        ---------
Loans - net                                           138,465          125,480
                                                                 
Loans held for sale                                        --               50
Bank premises and equipment - net                       5,305            1,509
Accrued interest and other assets                       2,908            3,750
                                                    ---------        ---------
TOTAL ASSETS                                        $ 216,870        $ 179,550
                                                    =========        =========
                                                                 
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Deposits:                                                        
  Noninterest bearing                               $  20,850        $  15,125
  Interest bearing                                    177,839          147,500
                                                    ---------        ---------
  Total deposits                                      198,689          162,625
                                                                 
Accrued interest payable                                1,568              912
Other liabilities                                         842              716
                                                    ---------        ---------
  Total liabilities                                   201,099          164,253
                                                    ---------        ---------
Stockholders' Equity:                                            
  Common stock, par value $3.33 per share;                       
    authorized - 10,000,000 shares, issued                       
    and outstanding, 952,317 at Sept. 30,                        
    1997 and 952,117 at December 31, 1996               3,172            3,171
  Additional paid-in capital                            7,997            7,996
  Retained earnings                                     4,584            4,143
  Net unrealized gains (losses) on available-                    
    for-sale securities, net of tax                        18              (13)
                                                    ---------        ---------
  Total stockholders' equity                           15,771           15,297
                                                    ---------        ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          $ 216,870        $ 179,550
                                                    =========        =========

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                     - 1 -
<PAGE>

VILLAGE BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                      (UNAUDITED)                 (UNAUDITED)
                                                  THREE MONTHS ENDED           NINE MONTHS ENDED
                                                       SEPT. 30,                     SEPT. 30,
                                                 1997           1996            1997           1996
                                              ---------      ---------       ---------      ---------
                                                       (In thousands, except per share data)
<S>                                           <C>            <C>             <C>            <C>      
INTEREST INCOME:
  Loans, including fees                       $   3,000      $   2,633       $   8,545      $   7,836
  Investment securities:
    Taxable                                         539            456           1,486          1,465
    Tax-exempt                                       91             33             199             92
  Federal funds sold                                 87             43             292            227
                                              ---------      ---------       ---------      ---------
  Total interest income                           3,717          3,165          10,522          9,620

INTEREST EXPENSE ON DEPOSITS                      1,611          1,170           4,406          3,727
                                              ---------      ---------       ---------      ---------
NET INTEREST INCOME                               2,106          1,995           6,116          5,893

PROVISION FOR LOAN LOSSES                            15             30              45             90
                                              ---------      ---------       ---------      ---------
NET INTEREST INCOME AFTER PROVISION
  FOR LOAN LOSSES                                 2,091          1,965           6,071          5,803
                                              ---------      ---------       ---------      ---------

OTHER INCOME:
  Security gains/(losses) - net                      --             (7)             --             (5)
  Other operating income                            149            124             419            371
                                              ---------      ---------       ---------      ---------
  Total other income                                149            117             419            366
                                              ---------      ---------       ---------      ---------

OTHER EXPENSES:
  Salaries and employee benefits                    919            768           2,594          2,274
  Net occupancy                                     235            136             561            431
  Furniture and equipment                            95             67             215            202
  Data processing services                          159            137             438            398
  Regulatory assessments                              5              1              15              3
  Printing, stationery and supplies                  74             46             173            126
  Other operating expenses                          400            419           1,058            984
                                              ---------      ---------       ---------      ---------
  Total other expenses                            1,887          1,574           5,054          4,418
                                              ---------      ---------       ---------      ---------

INCOME BEFORE PROVISION FOR INCOME TAXES            353            508           1,436          1,751
PROVISION FOR INCOME TAXES                          122             50             481            480
                                              ---------      ---------       ---------      ---------
NET INCOME                                    $     231      $     458       $     955      $   1,271
                                              =========      =========       =========      =========
PER SHARE DATA - Note E:
Cash dividends declared                       $     .18      $     .17       $     .54      $     .49
Net income                                    $     .24      $     .48       $     .98      $    1.33
Weighted average number of common
  and common equivalent
  shares outstanding                            970,295        958,375         970,074        957,447
</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                     - 2 -
<PAGE>

VILLAGE BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                       (Unaudited)
                                                               Nine Months Ended Sept. 30,
                                                                  1997             1996
                                                                --------         --------
OPERATING ACTIVITIES:                                                (In thousands)
---------------------
<S>                                                             <C>              <C>     
Net income                                                      $    955         $  1,271
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Provision for loan losses                                         45               90
    Provision for depreciation and amortization                      227              183
    (Accretion) amortization of investment security
      premiums discounts - net                                      (153)            (224)
    Net decrease in deferred loan fees                               (32)              (8)
    Increase (decrease) in accrued interest payable                  656              (62)
    Decrease (increase) in accrued int. and other assets             842           (1,159)
    Increase in other liabilities                                    126              454
    Origination of loans held for sale                            (2,376)          (6,428)
    Proceeds from sales of loans                                   2,426            6,830
                                                                --------         --------
Net cash provided by operating activities                          2,716              947
                                                                --------         --------

INVESTING ACTIVITIES:
---------------------
Proceeds from sales of available-for-sale securities                  --            2,177
Proceeds from maturities of avail.-for-sale securities             6,067           13,732
Proceeds from maturities of held-to-maturity securities              990            5,775
Purchases of available-for-sale securities                        (2,852)          (8,207)
Purchases of held-to-maturity securities                         (19,487)          (9,433)
Purchase of Federal Home Loan Bank stock                             (70)              --
Net increase in loans                                            (12,998)          (5,782)
Purchases of premises and equipment                               (4,023)            (155)
                                                                --------         --------
Net cash used in investing activities                            (32,373)          (1,893)
                                                                --------         --------
FINANCING ACTIVITIES:
---------------------
Net increase (decrease) in deposits                               36,064           (4,032)
Cash dividends                                                      (514)            (466)
Net proceeds from issuance of common stock                             2               15
                                                                --------         --------
Net cash provided by (used in) financing activities               35,552           (4,483)
                                                                --------         --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                   5,895           (5,429)
                                                                --------         --------
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                      15,145           17,325
                                                                --------         --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                        $ 21,040         $ 11,896
                                                                ========         ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
  Interest paid on deposits                                     $  3,750         $  3,789
  Income tax payments                                                714              579
  Change in net unrealized gains (losses) on
    available-for-sale securities, net of tax                         31              (87)
</TABLE>

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.


                                     - 3 -
<PAGE>

VILLAGE BANCORP, INC.

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


NOTE A - BASIS OF PRESENTATION

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

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

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

While management believes that the disclosures  presented are adequate so as not
to make  the  information  misleading,  it is  suggested  that  these  financial
statements be read in conjunction with the consolidated financial statements and
notes included in the Company's 1996 annual report.

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


                                     - 4 -
<PAGE>

VILLAGE BANCORP, INC.

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


     SFAS No. 125,  "Accounting for Transfers and Servicing of Financial  Assets
and  Extinguishments  of  Liabilities,"   specifies   accounting  and  reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities  and for  distinguishing  whether a transfer of financial  assets in
exchange for cash or other consideration should be accounted for as a sale or as
a pledge of  collateral  in a secured  borrowing.  SFAS No. 125 is effective for
transfers and servicing of financial assets and  extinguishments  of liabilities
occurring after December 31, 1996,  except for certain  provisions  (relating to
the  accounting  for secured  borrowings  and  collateral and the accounting for
transfers  and  servicing of repurchase  agreements,  dollar  rolls,  securities
lending and similiar  transactions)  which have been  deferred  until January 1,
1998 in accordance with SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB  Statement No. 125." The adoption of these  standards has not
and is  not  expected  to  have  a  material  impact  on  the  Bank's  financial
statements.

     On March 3, 1997, the Financial  Accounting Standards Board issued SFAS No.
128,  "Earnings Per Share." SFAS No. 128 is effective  for financial  statements
issued for periods ending after December 31, 1997,  including  interim  periods.
Earlier application is not permitted.  Restatement of all prior-period  earnings
per share ("EPS") data  presented is required when SFAS No. 128 is  implemented.
SFAS No. 128  establishes  standards for computing  and  presenting  "Basic" and
"Diluted" EPS. SFAS No. 128 states that the "Basic EPS" excludes dilution and 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 would then share in the earnings
of the entity.  "Diluted  EPS" is computed  similiarly  to "Fully  Diluted  EPS"
pursuant to Accounting Principles Board ("APB") Opinion No. 15.

     In June 1997,  the  Financial  Accounting  Standards  Board  issued two new
accounting standards, SFAS No. 130 "Reporting Comprehensive Income" and SFAS No.
131 "Disclosures About Segments of an Enterprise and Related Information".

     SFAS  No.  130   establishes   standards   for  reporting  and  display  of
comprehensive  income  and  its  components  in a full  set of  general  purpose
financial  statements.  This statement requires that all items that are required
to be recognized  under  accounting  standards as  components  of  comprehensive
income be reported  in a financial  statement  that is  displayed  with the same
prominence as are the financial  statments.  Comprehensive  income is defined as
"the change in equity (net assets) of a business enterprise during a period from
transactions  and other events and  circumstances  from  non-owner  sources.  It
includes  all changes in equity  during a period,  except those  resulting  from
investments by owners and distributions to owners."


                                     - 5 -
<PAGE>

VILLAGE BANCORP, INC.

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


     SFAS No. 131 establishes  standards for the way public business enterprises
report information about operating  segments in annual financial  statements and
requires that those  enterprises  report  selected  information  about operating
segments  in  interim  financial   reports  issued  to  shareholders.   It  also
establishes  standards  for related  disclosure  about  products  and  services,
geographic  areas,  and major  customers.  The statement  requires that a public
business  enterprise  report  financial and  descriptive  information  about its
reportable   operating  segments.   Operating  segments  are  components  of  an
enterprise  about which  separate  financial  information  is available  that is
evaluated  regularly by the chief  operating  decision  maker in deciding how to
allocate  resources and assess  performance.  The statement requires that public
business  enterprises  report a  measure  of  segment  profit  or loss,  certain
specific  revenue and expense  items and segment  assets.  It also requires that
information be reported about revenues derived from the enterprises' products or
services,  or about the  countries in which the  enterprises  earn  revenues and
holds assets, and about major customers,  regardless of whether that information
is used in making operating decisions. This statement is effective for financial
statements for periods beginning after December 31, 1997.

     Both of these statements require  disclosures that the Company must make in
its financial statements or notes thereto. Accordingly,  implementation of these
statements will not have any significant  effect on the results of operations or
financial condition, as currently reported by the Company.


NOTE B - SECURITIES

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

<TABLE>
<CAPTION>
                                                         (Unaudited)
                                                      September 30, 1997
                                    ------------------------------------------------------
                                    Amortized             Unrealized                Fair
                                      Cost            Gain         (Losses)         Value
                                    ---------       -------        -------         -------
<S>                                  <C>            <C>            <C>             <C>    
SECURITIES HELD-TO-MATURITY
---------------------------
U.S. Treasury Securities             $19,602        $    24        $   (36)        $19,590
Mortgage-backed securities of
  U.S. Government agencies             6,739             17             (7)          6,749
Obligations of states and
  political subdivision                9,389            104            (22)          9,471
                                     -------        -------        -------         -------
TOTAL                                $35,730        $   145        $   (65)        $35,810
                                     =======        =======        =======         =======
</TABLE>


                                     - 6 -
<PAGE>

VILLAGE BANCORP, INC.

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


<TABLE>
<S>                                  <C>            <C>            <C>             <C>    
SECURITIES AVAILABLE-FOR-SALE
-----------------------------
U.S. Treasury Securities             $12,195        $    30        $    --         $12,225
Mortgage-backed Securities
  of U.S. Government agencies            372              3             --             375
Other                                     40             --             --              40
                                     -------        -------        -------         -------
TOTAL                                $12,607        $    33        $    --         $12,640
                                     =======        =======        =======         =======


<CAPTION>
                                                       December 31, 1996
                                    ------------------------------------------------------
                                    Amortized             Unrealized                Fair
                                      Cost            Gain         (Losses)         Value
                                    ---------       -------        -------         -------
<S>                                  <C>            <C>            <C>             <C>    
SECURITIES HELD-TO-MATURITY
---------------------------
U.S. Treasury Securities             $ 9,824        $    31        $   (96)        $ 9,759
Mortgage-backed securities of
  U.S. Government agencies             4,735             15            (34)          4,716
Obligations of states and
  political subdivision                2,639             37            (16)          2,660
                                     -------        -------        -------         -------
TOTAL                                $17,198        $    83        $  (146)        $17,135
                                     =======        =======        =======         =======


SECURITIES AVAILABLE-FOR-SALE
-----------------------------
U.S. Treasury Securities             $15,250        $     6        $   (27)        $15,229
Mortgage-backed securities of
  U.S. Government agencies               430             --             --             430
Other                                     48             --             (1)             47
                                     -------        -------        -------         -------
TOTAL                                $15,728        $     6        $   (28)        $15,706
                                     =======        =======        =======         =======
</TABLE>


At  September  30, 1997 and December  31, 1996  securities  with a book value of
$1,136,000 and $1,140,000,  respectively, were pledged to secure public deposits
and for other purposes as required by law and banking regulation.


NOTE C - LOANS

                                              Sept. 30, 1997     Dec. 31, 1996
                                                 --------          --------
                                                       (In thousands)
Real estate                                      $116,332          $104,561
Commercial and financial                           15,230            12,621
Installment and consumer credit                     8,462             9,917
Deferred loan fees                                   (231)             (263)
                                                 --------          --------
TOTAL                                            $139,793          $126,836
                                                 ========          ========


                                     - 7 -
<PAGE>

VILLAGE BANCORP, INC.

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


The recorded investment in loans considered to be impaired at September 30, 1997
and December 31, 1996 was  $1,181,000  and  $1,576,000,  respectively.  Specific
valuation  allowances for these loans was $192,000 and $215,000 at September 30,
1997 and December 31, 1996, respectively.  Generally, the fair value of impaired
loans was determined using the fair value of the underlying collateral.


NOTE D - COMMITMENTS

     On September 30, 1997, standby letters of credit  approximated  $1,879,000,
and unused lines of credit approximated $22,768,000.

     During the year the Bank  entered  into a new lease for a branch  office in
Westport,   Connecticut.  Rent  expense  on  an  annual  basis  for  the  branch
approximates $302,000.


NOTE E - STOCKHOLDERS' EQUITY

     A $.15  per  share  cash  dividend  was  distributed  February  2,  1996 to
stockholders  of record on January 19, 1996. A $.17 per share cash  dividend was
distributed May 3, 1996 to stockholders of record on April 25, 1996. An $.18 per
share cash dividend was distributed  August 2, 1996 to stockholders of record on
July 25, 1996.

     An $.18 per  share  cash  dividend  was  distributed  February  7,  1997 to
stockholders  of record on January 30, 1997. An $.18 per share cash dividend was
distributed May 2, 1997 to stockholders of record on April 25, 1997. An $.18 per
share cash dividend was distributed  August 1, 1997 to stockholders of record on
July 25, 1997.


                                     - 8 -
<PAGE>

VILLAGE BANCORP, INC.

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


GENERAL
-------

     Village  Bancorp,  Inc. (the "Company")  through its only  subsidiary,  The
Village  Bank & Trust  Company  ("Village"  or the "Bank")  had total  assets of
$216,870,000 on September 30, 1997 in comparison to total assets of $179,550,000
on December 31, 1996. This is an increase of $37,320,000 or 20.8%.

     For the  three  month  periods  ended  September  30,  1996 and  1997,  the
Company's net income decreased from $458,000 for the 1996 period to $231,000 for
the 1997 period.  Net interest income increased  $111,000 (5.7%) from $1,995,000
for the 1996 period to $2,106,000 for the 1997 period.

     For the nine month periods ended September 30, 1996 and 1997, the Company's
net income  decreased  from  $1,271,000  for the 1996 period to $955,000 for the
1997 period.  Net interest income increased  $223,000 (3.8%) from $5,893,000 for
the 1996 period to $6,116,000 for the 1997 period.


ASSETS AND RELATED INCOME ANALYSIS (Nine Month Comparison)
----------------------------------

     Loans  outstanding on September 30, 1997 totaled  $139,793,000  which is an
increase of $12,957,000  (10.2%) from the  $126,836,000  outstanding at December
31, 1996.  This increase in loans is primarily  attributable to a combination of
factors.  The Bank increased its marketing  effort in this area and expanded its
adjustable rate product line with a new selection of choices.  These new product
lines have been well received, and as the Bank generally retains adjustable rate
loans for its own  portfolio,  this  contributed to the increase in the mortgage
loan area.  Loan income  increased  $709,000 (9.0%) from $7,836,000 for the 1996
period to $8,545,000 for the 1997 period. This increase is due to an increase in
average  outstanding  loans from $120,469,000 in the 1996 period to $132,673,000
in the 1997 period offset by a decrease in the average rate earned from 8.67% in
the 1996 period to 8.59% in the 1997 period.

     Securities,  which consist of securities  held-to-maturity  and  securities
available-for-sale,  increased  $15,466,000 (47.0%) from $32,904,000 at December
31, 1996 to  $48,370,000  at  September  30,  1997.  Security  income  increased
$128,000  (8.2%) from  $1,557,000  in the period  ending  September  30, 1996 to
$1,685,000  in the 1997  period.  This  increase  was due to an  increase in the
average dollar amount of securities held, from $35,823,000 in the 1996 period to
$39,918,000 in the 1997 period,  offset by a decrease in the average rate earned
from 5.80% in the 1996 period to 5.63% in the 1997 period.


                                     - 9 -
<PAGE>

VILLAGE BANCORP, INC.

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


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

     Federal funds sold decreased  $850,000  (12.9%) from $6,600,000 at December
31,  1996 to  $5,750,000  at  September  30,  1997.  Federal  funds sold  income
increased  $65,000 (28.6%) from $227,000 for the 1996 period to $292,000 for the
1997  period,  primarily  due  to an  increase  in  the  average  dollar  amount
outstanding from $5,726,000 in the 1996 period to $7,309,000 in the 1997 period,
along with an increase in the average  rate earned from 5.29% in the 1996 period
to 5.33% for the 1997 period.


LIABILITIES AND RELATED EXPENSE ANALYSIS (Nine Month Comparison)
----------------------------------------

     Deposits  increased  $36,064,000  (22.2%) from $162,625,000 at December 31,
1996 to  $198,689,000  at  September  30, 1997.  Interest on deposits  increased
$679,000  (18.2%) from $3,727,000 for the 1996 period to $4,406,000 for the 1997
period.  This increase was primarily  attributable to an increase in the average
outstandings  from $156,299,000 for the 1996 period to $176,536,000 for the 1997
period, coupled with an increase in the average rate paid from 3.18% in the 1996
period to 3.33% in the 1997 period.

     Salary  and  employee  benefit  expense  increased  $320,000  (14.1%)  from
$2,274,000 in the 1996 period to  $2,594,000  in the 1997 period  primarily as a
result of increased  staff levels due to the growth of the Bank and staffing for
the two new branch offices.

     Printing,  stationery and supplies expense  increased  $47,000 (37.3%) from
$126,000  in the 1996  period to  $173,000  in the 1997  period,  net  occupancy
expenses increased $130,000 (30.2%) from $431,000 in the 1996 period to $561,000
in the 1997  period  primarily  as a result of the opening of the two new branch
offices along with growth of the Bank.

     Data processing expense increased $40,000 (10.1%) from $398,000 in the 1996
period to $438,000 in the 1997 period,  as a result of increased use of services
along with the growth of the Bank.


ASSETS AND RELATED INCOME ANALYSIS (Three Month Comparison)
----------------------------------

     Loans outstanding increased $7,598,000 (5.7%) during the three month period
ended September 30, 1997. This compares to the $6,897,000


                                     - 10 -
<PAGE>

VILLAGE BANCORP, INC.

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


increase  in the 1996  period.  Loan  income  increased  $367,000  (13.9%)  from
$2,633,000 for the 1996 period to $3,000,000 for the 1997 period.  This increase
is due to an increase in the average outstanding loans from $122,734,000 for the
1996 period to  $137,160,000  for the 1997 period  along with an increase in the
average rate earned from 8.58% for the 1996 period to 8.75% for the 1997 period.

     Securities,  which consist of securities  held-to-maturity  and  securities
available-for-sale,  increased  $7,100,000  (17.2%)  during  the 1997  period as
compared to a decrease of $1,915,000 (5.9%) for the 1996 period. Security income
increased  from  $489,000  for the 1996 period to $630,000  for the 1997 period,
primarily as a result of an increase in the average  dollar amount of securities
held from  $32,980,000  for the 1996 period to $45,012,000  for the 1997 period,
offset by a decrease in the  average  rate earned from 5.93% for the 1996 period
to 5.60% for the 1997 period.

     Federal funds sold increased  $1,400,000  (32.2%) during the 1997 period as
compared to a decrease of $5,450,000 (63.4%) for the 1996 period.  Federal funds
sold  income  increased  $44,000  (102.3%)  from  $43,000 in the 1996  period to
$87,000 in the 1997 period  primarily  as a result of an increase in the average
dollar amount  outstanding  from  $3,244,000  for the 1996 period as compared to
$6,276,000  for the 1997 period  coupled  with an  increase in the average  rate
earned of 5.30% for the 1996 period as compared to 5.54% for the 1997 period.


LIABILITIES AND RELATED EXPENSE ANALYSIS (Three Month Comparison)
----------------------------------------

     Deposits increased  $20,561,000  (11.5%) during the 1997 period as compared
to a decrease  of  $1,274,000  (.8%) for the 1996  period.  Interest on deposits
increased $441,000 (37.7%) from $1,170,000 for the 1996 period to $1,611,000 for
the 1997  period.  This  increase is mainly  attributable  to an increase in the
average  dollar  amount  outstanding  from  $153,030,000  for the 1996 period to
$187,600,000  for the 1997 period  coupled  with an increase in the average rate
paid from 3.06% in the 1996 period to 3.43% in the 1997 period.


LIQUIDITY
---------

     Liquidity  is the ability to provide  funds for loan  requests,  unexpected
deposit  outflows and meeting other recurring  financial  obligations.  Cash and
cash  equivalents at September 30, 1997 were $21,040,000 or 9.7% of total assets
as compared to  $15,145,000  or 8.4% of total assets at December  31, 1996.  The
Bank also maintains excess


                                     - 11 -
<PAGE>

VILLAGE BANCORP, INC.

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


stored liquidity  reserves to compensate for liquidity  forecasting  deviations.
These  reserves are comprised of  investment  grade  securities  that are highly
marketable and liquid. The primary source of liquidity,  cash and due from banks
and federal funds sold, have  historically  surpassed the liquidity needs of the
Company. Management closely monitors the Bank's liquidity/cash flow position and
does not anticipate any liquidity problems in the future.


CAPITAL RESOURCES
-----------------

     The table  below  lists the  minimum  capital  requirements  along with the
Company's capital position at September 30, 1997:

        Capital                    Minimum Capital         Company's Capital
       Standard                      Requirement               Position
       --------                    ---------------         -----------------
Total capital to risk
  weighted assets                       8.00%                    13.34%

Stockholders' equity to
  risk weighted assets                  4.00%                    12.31%

Leverage ratio                        3.0 - 5.0%                  7.66%


FORWARD-LOOKING STATEMENTS
--------------------------

     The Company has made,  and may  continue to make,  various  forward-looking
statements  with respect to earnings,  credit  quality and other  financial  and
business  matters for periods  subsequent  to September  30,  1997.  The Company
cautions  that  these   forward-looking   statements  are  subject  to  numerous
assumptions, risks and uncertainties, and that statements relating to subsequent
periods increasingly are subject to greater uncertainty because of the increased
likelihood  of changes in underlying  factors and  assumptions.  Actual  results
could differ materially from forward-looking statements.

     In addition to those factors previously  disclosed by the Company and those
factors  identified  elsewhere herein,  the following factors could cause actual
results to differ materially from such forward-looking  statements;  competitive
pressures on loan and deposit  product  pricing;  other actions of  competitors;
changes in economic conditions;  the extent and timing of actions of the Federal
Reserve  Board;  customer  deposit  disintermediation;   changes  in  customers'
acceptance of the


                                     - 12 -
<PAGE>

VILLAGE BANCORP, INC.

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


Company's  products and services;  and the extent and timing of legislative  and
regulatory actions and reform.

     The Company's forward-looking statements speak only as of the date on which
such statements are made. By making any forward-looking  statements, the Company
assumes no duty to update them to reflect new, changing or unanticipated  events
or circumstances.


                                     - 13 -
<PAGE>

VILLAGE BANCORP, INC.

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

PART  II. - OTHER INFORMATION

<PAGE>

VILLAGE BANCORP, INC.

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

PART II.  -  OTHER INFORMATION



Item 1.   Legal Proceedings                        Not Applicable


Item 2.   Changes in Securities                    Not Applicable


Item 3.   Defaults Upon Senior Securities          Not Applicable


Item 4.   Results of Votes of Security Holders     Not Applicable


Item 5.   Other Information                        Not Applicable


Item 6.   Exhibits and Reports on Form 8-K


  (a)     Exhibits - None

  (b)     Reports  on Form 8-K - There were no reports on Form 8-K filed for the
          three months ended September 30, 1997.


                                     - 14 -
<PAGE>

                                   SIGNATURES


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



                                            Village Bancorp, Inc.
                                                (Registrant)



Date:  November 12, 1997                /s/  Robert V. Macklin
                                        ---------------------------------------
                                             Robert V. Macklin - President
                                               and Chief Executive Officer





Date:  November 12, 1997                /s/  James R. Umbarger
                                        ---------------------------------------
                                             James R. Umbarger - Executive Vice
                                               President and Chief 
                                               Financial Officer

                                     - 15 -