U.S. 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 December 31, 1998

                                      OR

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

                       Commission File Number: 0-24791

                         MASSACHUSETTS FINCORP, INC
------------------------------------------------------------------------------
               (Name of small business issuer in its charter)

                   Delaware                                04-3431804
----------------------------------------------       ------------------------
(State or other jurisdiction of incorporation          (I.R.S. Employer
                or organization)                      Identification No.)

1442 Dorchester Avenue, Boston, Massachusetts                02122
----------------------------------------------       ------------------------
  (Address of principal executive offices)                 (Zip Code)

Issuer's telephone number:  (617) 825-5555
                           ---------------

Securities registered under Section 12(b) of the Exchange Act:  None
                                                                ----

Securities registered under             Common Stock, par value $.01 per share
 Section 12(g) of the Exchange Act:     --------------------------------------
                                                  (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
    -----        -----
YES           NO   X
    -----        -----

      Check if no disclosure of delinquent filers in response to Item 405 of 
Regulation S-B is 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.    X
                                -----

      The Issuer's revenues for the fiscal year under report were $71,000.

      As of March 19, 1999, there were issued and outstanding 545,481 shares 
of the Registrant's Common Stock.  Based on the average of the bid and ask 
prices, the aggregate market value of the Common Stock outstanding held by the 
nonaffiliates of the Registrant on March 19,1999, was $4,669,357 (485,128 
shares at $9.625 per share).


                                    INDEX

                                                                      Page No.
                                                                      --------

PART I                                                                    3

  ITEM 1.   DESCRIPTION OF BUSINESS                                       3
  ITEM 2.   DESCRIPTION OF PROPERTY                                      25
  ITEM 3.   LEGAL PROCEEDINGS                                            26
  ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS          26

PART II                                                                  26

  ITEM 5.   MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS                                          27
  ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS                          27
  ITEM 7.   FINANCIAL STATEMENTS                                         40
  ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE                          62

PART III                                                                 63

  ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
            PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT   63
  ITEM 10.  EXECUTIVE COMPENSATION                                       65
  ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND 
            MANAGEMENT                                                   67
  ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS               68

PART IV                                                                  69
  ITEM 13.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
            FORM 8-K                                                     69

SIGNATURES                                                               70


PART I

ITEM 1.   DESCRIPTION OF BUSINESS.

General

      Massachusetts Fincorp, Inc. (the "Company") was incorporated under 
Delaware law on July 10, 1998.  On December 21, 1998, the Company acquired The 
Massachusetts Co-operative Bank (the "Bank") as a part of the Bank's 
conversion from a mutual to a stock Massachusetts-chartered co-operative Bank 
(the "Conversion").  The Company is a savings and loan holding company and is 
subject to regulation by the Office of Thrift Supervision (the "OTS").  
Currently, the Company does not transact any material business other than 
through the Bank.  Prior to December 21, 1998, the Company had no operations. 
The Company retained 50% of the net conversion proceeds amounting to $4.9 
million which it used for general business activities and to form and 
capitalize the Employee Stock Ownership Plan ("ESOP") Loan Subsidiary (MCB 
Funding), which loaned funds to the ESOP to purchase 8% of the stock issued in 
the Conversion.  At December 31, 1998, the Company had total assets of $71.6 
million and stockholders' equity of $9.5 million.

      The Bank is a community-oriented co-operative bank which was originally 
organized in 1908 as The Massachusetts Co-operative Bank, a Massachusetts-
chartered mutual co-operative bank.  The Bank's principal business consists of 
the acceptance of retail deposits from the general public in the areas 
surrounding its two full-service banking offices and the investment of those 
deposits, together with funds generated from operations and borrowings, 
primarily in mortgage loans secured by one-to four-family residences and, to 
a lesser extent, multi-family and commercial real estate loans, construction 
loans, home equity lines of credit and consumer loans.  However, in the 
future, the Bank intends to increase its emphasis on multi-family, commercial 
real estate and construction lending.  The Bank operates through its two full-
service banking offices and its two loan origination offices, all of which are 
located in the greater Boston metropolitan area.  The Bank originates loans 
for investment and loans for sale in the secondary market, generally releasing 
the servicing rights to all loans sold.  The Bank also invests in mortgage-
backed securities, securities issued by the U.S. Government and other 
investments permitted by applicable laws and regulations.  The Bank's revenues 
are derived principally from the generation of interest and fees on loans 
originated and, to a lesser extent, interest and dividends on investment 
securities.  The Bank's primary sources of funds are retail savings deposits 
and, to a lesser extent, principal and interest payments on loans and 
investment securities, advances from the FHLB-Boston and proceeds from the 
sale of loans.

      The following discussion refers to the Bank's operation as it makes up
the vast majority of the Company's assets.

Market Area and Competition

      The Bank's main office is headquartered in the Dorchester section of 
Boston, Massachusetts. The Bank's primary deposit gathering area is 
concentrated in the communities surrounding its main office located in 
Dorchester and other full-service banking office located in East Milton, 
Massachusetts.  The Bank also maintains two loan origination offices located 
in the Boston suburban communities of Wakefield and Norwell, Massachusetts. 
All of the Bank's banking and loan origination offices are located within 30 
miles of Boston. Although the Bank originates loans throughout Massachusetts 
and New Hampshire, the Bank's primary lending area is the greater Boston 
metropolitan area.

      The Dorchester section of Boston, Massachusetts is a fully-developed and 
densely populated urban area located south of downtown Boston.  The major 
traffic roadways running through Dorchester, including U.S. Interstate Highway 
93, are heavily traveled and lined with commercial and retail business 
operations.  The greater Boston metropolitan area benefits from the presence 
of numerous institutions of higher education, medical care and research 
facilities and the corporate headquarters of several significant investment 
and technology companies employing individuals with specialized skills.  These 
firms and businesses, along with tourism, form the backbone of the economy of 
the greater Boston metropolitan area.

      The Bank faces significant competition both in generating loans and in 
attracting deposits. The Bank's primary market area is highly competitive and 
the Bank faces direct competition from a significant number of financial 
institutions, many with a state-wide or regional presence and, in some cases, 
a national presence.  Many of these financial institutions are significantly 
larger and have greater financial resources than the Bank.  The Bank's 
competition for loans comes principally from commercial banks, savings banks, 
co-operative banks, credit unions, mortgage brokers, mortgage banking 
companies and insurance companies.  Its most direct competition for deposits 
has historically come from savings, co-operative and commercial banks and 
credit unions.  In addition, the Bank faces significant competition for 
deposits from non-bank institutions such as brokerage firms and insurance 
companies in such instruments as short-term money market funds, corporate and 
government securities funds, mutual funds and annuities.  Competition may also 
increase as a result of the lifting of restrictions on the interstate 
operations of financial institutions.  The Bank has also experienced 
significant competition from credit unions which have a competitive advantage 
as they do not pay state or federal income taxes.  Such competitive advantage 
has placed increased pressure on the Bank with respect to its loan and deposit 
pricing. 

Lending Activities

      Loan Portfolio Composition.  The types of loans that the Bank may 
originate are subject to federal and state laws and regulations.  Interest 
rates charged by the Bank on loans are affected principally by the demand for 
such loans, the supply of money available for lending purposes and the rates 
offered by its competitors.  These factors are, in turn, affected by general 
and economic conditions, monetary policies of the federal government, 
including the Federal Reserve Board ("FRB"), legislative tax policies and 
governmental budgetary matters.

      The Bank's loan portfolio primarily consists of first mortgage loans 
secured by one-to four-family residences most of which are located in the 
Bank's primary market area.  At December 31, 1998, the Bank's gross loan 
portfolio totaled $58.3 million, of which $44.9  million were one-to four-
family residential mortgage loans, or 77.0% of total loans.  At such date, the 
remainder of the loan portfolio consisted of $3.3 million of multi-family 
loans, or 5.6% of total loans; $1.6  million of commercial real estate loans, 
or 2.7% of total loans; $8.0 million of construction loans, or 13.8% of total 
loans; $404,000 of home equity lines of credit, or 0.7% of  total loans; 
$121,000 of consumer  loans, or 0.2% of total loans, consisting of $38,000 of 
loans on savings accounts and $83,000 of automobile loans; and $36,000 of 
other loans consisting of unsecured personal loans.

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

<TABLE>
<CAPTION>

                                                                  At December 31,
                                         ----------------------------------------------------------------
                                                1998                   1997                   1996
                                         ------------------     ------------------     ------------------
                                                    Percent                Percent                Percent
                                         Amount    of Total     Amount    of Total     Amount    of Total
                                         ----------------------------------------------------------------
                                                                  (In Thousands)

<S>                                     <C>         <C>        <C>         <C>        <C>         <C>
Mortgage loans:
  One-to four-family                    $44,887      77.02%    $37,953      84.61%    $33,248      82.26%
  Multi-family                            3,267       5.61%      2,460       5.48%      2,754       6.81%
  Commercial real estate                  1,557       2.67%      1,485       3.31%      1,898       4.70%
  Construction, net of due mortgagor      8,011      13.75%      2,169       4.84%      1,480       3.66%
  Home equity lines                         404       0.69%        560       1.25%        720       1.78%
                                         ----------------------------------------------------------------
    Total mortgage loans                 58,126      99.73%     44,627      99.49%    $40,100      99.21%
                                         ----------------------------------------------------------------
Consumer loans:
  Auto loans                                 83       0.14%        119       0.27%        100       0.25%
  Loans on savings accounts                  38       0.07%         76       0.17%        132       0.33%
    Total consumer loans                    121       0.20%        195       0.44%        232       0.58%
                                         ----------------------------------------------------------------
Other loans                                  36       0.06%         35       0.07%         86       0.21%
                                         ----------------------------------------------------------------
    Total loans                          58,283     100.00%     44,857     100.00%     40,418     100.00%
                                                    ======                 ======                 ======
Less:
  Deferred loan fees                      (146)                   (57)                   (32)
  Allowance for possible loan losses      (525)                  (349)                  (322)
Loans, net                              $57,612                $44,451                $40,064
                                        =======                =======                =======

</TABLE>

      Origination, Sale and Servicing of Loans.   The Bank's mortgage lending 
activities are conducted primarily by its commissioned loan personnel 
operating at its two full service banking offices and two loan origination 
offices.  All loans originated by the Bank are underwritten by the Bank 
pursuant to the Bank's policies and procedures.  The Bank originates both 
adjustable-rate and fixed-rate mortgage loans.  The Bank's 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.

      Generally, all adjustable-rate mortgage loans originated by the Bank are 
originated for investment.  While the Bank has historically originated all 
fixed-rate one-to four-family mortgage loans for sale in the secondary market 
to either Fannie Mae or private investors, the Bank intends to begin to retain 
certain one-to four-family fixed-rate loans for its portfolio, based on 
various factors, including its asset/liability position and market interest 
rates.  The one-to four-family mortgage loan products currently originated for 
sale by the Bank include a variety of loans which conform to the underwriting 
standards specified by Fannie Mae ("conforming loans") and, to a lesser 
extent, loans which do not conform to Fannie Mae standards due to loan amounts 
("jumbo loans").  The Bank also originates mortgage loans insured by the 
Federal Housing Authority ("FHA") and Veterans Administration ("VA").  All 
one-to four-family mortgage loans sold by the Bank are sold pursuant to master 
commitments negotiated with Fannie Mae and other investors to purchase loans 
meeting such investors' defined criteria.  Although the Bank has entered into 
such master commitment contracts, such contracts generally do not require the 
purchasers to buy or the Bank to deliver a specific amount of mortgage loans. 
All conforming loans currently sold by the Bank are sold to Fannie Mae and 
private investors and all non-conforming loans which are sold are generally 
sold to private investors.  Sales of loans are made without recourse to the 
Bank in the event of default by the borrower.  The Bank generally retains the 
servicing rights on the mortgage loans sold to Fannie Mae and releases the 
servicing rights on the mortgage loans sold to private investors.

      At December 31,1998, the Bank was servicing $4.6 million of loans for 
others, primarily consisting of conforming fixed-rate mortgage loans sold by 
the Bank.  Loan servicing includes collecting and remitting loan payments, 
accounting for principal and interest, contacting delinquent mortgagors, 
supervising foreclosures and property dispositions in the event of unremedied 
defaults, making certain insurance and tax payments on behalf of the borrowers 
and generally administering the loans.  Substantially all of the loans 
currently being serviced for others are loans which have been sold by the 
Bank.

      During the years ended December 31, 1998 and December 31, 1997, the Bank 
originated $66.7 million  and $30.4 million of fixed-rate and adjustable-rate 
one-to four-family loans, respectively, of which $21.3 million and $4.8 
million, respectively, were retained by the Bank.  The Bank recognizes, at the 
time of sale, the cash gain or loss on the sale of the loans based on the 
difference between the net cash proceeds received and the carrying value of 
the loans sold. On January 1, 1996, the Bank implemented SFAS No. 122 pursuant 
to which the value of servicing rights may be recognized as an asset of the 
Bank.  In the two years ended December 31, 1998, the fair market value of 
servicing rights under SFAS No. 122 and SFAS No. 125 were not material and 
were not recognized in the financial statements for those periods.

      The following table set forth the Bank's loan originations, sales and 
principal repayments for the periods indicated.

<TABLE>
<CAPTION>

                                                      For the years ended
                                                         December 31,
                                                 -----------------------------
                                                   1998       1997      1996
                                                 -----------------------------

<S>                                              <C>        <C>        <C>
Gross loans:
  Balance outstanding at beginning of period     $41,672    $40,418    $33,083
Loans originated:
  One-to four-family                              66,714     30,371     31,420
  Multi-family                                       746        453        715
  Commercial real estate                           1,218          -         82
  Construction                                    12,094      6,284      2,158
  Home equity lines                                   79         43        303
  Auto loans                                          46         93         96
  Loans on savings accounts                           72         51        274
  Other loans                                         34          1         68
                                                 -----------------------------
    Total loans originated                        81,003     37,296     35,116
Less:
  Principal repayments                            21,760     11,326      8,117
  Sales of loans                                  42,631     21,520     19,234
  Transfers to real estate owned                       -          -        257
  Principal charged off                                1         11        173
                                                 -----------------------------
    Total loans                                   58,283     44,857     40,418
Less:
  Loans held for sale, net                         6,336      3,185      1,398
                                                 -----------------------------
  Loans receivable held for investment at end
   of period                                     $51,947    $41,672    $39,020
                                                 =============================

</TABLE>

      Loan Maturity.  The following table shows the remaining contractual 
maturity of the Bank's loan portfolio at December 31, 1998.  The table does 
not include prepayments or scheduled principal amortization.  Prepayments and 
scheduled principal amortization on mortgage loans totaled $20.4 million, 
$11.4 million and $8.1 million for the years ended December 31, 1998, 1997 and 
1996, respectively.

<TABLE>
<CAPTION>

                                                                  At December 31, 1998
                         --------------------------------------------------------------------------------------------------------
                         One-to                                                                      Loans on            Total
                         Four-    Multi-   Commercial   Construction    Home                 Auto    Savings             Loans
                         Family   Family   Real Estate    and Land     Equity   Commercial   Loans   Accounts   Other  Receivable
                         --------------------------------------------------------------------------------------------------------
                                                                      (In Thousands)

<S>                      <C>      <C>        <C>           <C>          <C>        <C>        <C>      <C>       <C>    <C>
Amounts due:
Within one year          $ 1,139  $  238     $  284        $6,527       $ 16       $  -       $ -      $28       $ 5    $ 8,237
                         ------------------------------------------------------------------------------------------------------
After one year:
  More than one year
   to three years            809     848        522         1,025         61          -        59        -        25      3,349
  More than three years
   to five years             581     672        174             -          -          -        24        -         6      1,457
  More than five years
   to 10 years             1,284     714         54           104          -          -         -        -         -      2,156
  More than 10 years
   to 20 years             5,558     544        523            63          -          -         -        -         -      6,688
  More than 20 years      35,516     251          -           292        327          -         -       10         -     36,396
                         ------------------------------------------------------------------------------------------------------

    Total due after
     May 31, 1999         43,748   3,029      1,273         1,484        388          0        83       10        31     50,046
                         ------------------------------------------------------------------------------------------------------

    Total amount due
     (gross)              44,887   3,267      1,557         8,011        404          0        83       38        36     58,283
                         ======================================================================================================
Less:
Deferred loan fees, net                                                                                                    (146)
Allowance for possible
 loan losses                                                                                                               (525)
                                                                                                                        -------
Total loans, net                                                                                                        $57,612

                                                                                                                        =======

--------------------
<F1>  Included in amounts due more than 20 years are mortgage loans held for 
      sale totaling $6.3  million.  Although these loans have a maturity date 
      of more than 20 years, they are typically sold within 90 days.

</TABLE>

      The following table sets forth at December 31, 1998, the dollar amount 
of gross loans receivable contractually due after December 31, 1999, and 
whether such loans have fixed interest rates or adjustable interest rates.

<TABLE>
<CAPTION>

                                   Due After December 31, 1999
                                ----------------------------------
                                 Fixed      Adjustable      Total
                                ----------------------------------
                                          (In thousands)

<S>                             <C>          <C>           <C>
Mortgage loans:
  One-to four-family            $21,346      $22,402       $43,748
  Multi-family                      291        2,738         3,029
  Commercial real estate             54        1,219         1,273
  Construction                    1,125          359         1,484
  Home equity lines                   0          388           388
                                ----------------------------------
    Total mortgage loans         22,816       27,106        49,922
                                ----------------------------------

Consumer loans:
  Auto loans                         83            -            83
  Loans on savings accounts          10            -            10
                                ----------------------------------
    Total consumer loans             93            -            93
                                ----------------------------------
Other loans                          31            -            31
                                ----------------------------------
    Total loans                 $22,940      $27,106       $50,046
                                ==================================

</TABLE>

      One- to Four-Family Lending.  The Bank currently offers both fixed-rate 
and adjustable-rate mortgage ("ARM") loans with maturities of up to 30 years 
secured by one-to four-family residences substantially all of which are 
located in the Bank's primary market area. At December 31, 1998, the Bank's 
one-to four-family mortgage loans totaled $44.9 million, or 77.0% of total 
loans.  Of the one-to four-family mortgage loans outstanding at that date, 
48.1% were fixed-rate mortgage loans and 51.9% were ARM loans.

      The Bank currently offers fixed-rate one-to-four family mortgage loans 
with terms from 15 to 30 years.  While the Bank has historically sold 
substantially all of the fixed-rate mortgage loans which it has originated, on 
a going forward basis, the Bank intends to selectively retain certain fixed-
rate loans for its portfolio, based on the asset quality and coupon rates of 
such loans.  Generally, the Bank releases servicing rights on loans sold to 
private investors and retains servicing rights on loans sold to Fannie Mae. 
The Bank currently offers a number of ARM loans with terms of up to 30 years 
and interest rates which adjust every one or three years from the outset of 
the loan or which adjust annually after a five year initial fixed period.  The 
interest rates for the Bank's ARM loans are indexed to the applicable Constant 
Maturity Treasury ("CMT") Index.  The Bank's ARM loans generally provide for 
periodic (not more than 2%) and overall (not more than 6%) caps on the 
increase or decrease in the interest rate at any adjustment date and over the 
life of the loan.

      The origination of adjustable-rate residential mortgage loans, as 
opposed to fixed-rate residential mortgage loans, helps reduce the Bank's 
exposure to increases in interest rates.  However, adjustable-rate loans 
generally pose credit risks not inherent in fixed-rate loans, primarily 
because as interest rates rise, the underlying payments of the borrower rise, 
thereby increasing the potential for default.  Periodic and lifetime caps on 
interest rate increases help to reduce the risks associated with adjustable-
rate loans but also limit the interest rate sensitivity of such loans.

      Generally, the Bank originates one-to four-family residential mortgage 
loans in amounts of up to 95% of the appraised value or selling price of the 
property securing the loan, whichever is lower, with the exception of certain 
loans in the Bank's "First-Time Home Buyer" program, which allows for a 97% 
loan-to-value ("LTV") ratio.  Private Mortgage Insurance ("PMI") may be 
required for loans with a LTV ratio of greater than 80%.  Mortgage loans 
originated by the Bank generally include due-on-sale clauses which provide the 
Bank with the contractual right to deem the loan immediately due and payable 
in the event the borrower transfers ownership of the property without the 
Bank's consent.  Due-on-sale clauses are an important means of adjusting the 
yields on the Bank's fixed-rate mortgage loan portfolio and the Bank has 
generally exercised its rights under these clauses.  The Bank requires fire, 
casualty, title and, in certain cases, flood insurance on all properties 
securing real estate loans made by the Bank.

      In an effort to provide financing for moderate income and first-time 
home buyers, the Bank offers FHA and VA loans and has its own First-Time Home 
Buyer loan program.  These programs offer residential mortgage loans to 
qualified individuals.  These loans are offered with adjustable-and fixed-
rates of interest and terms of up to 30 years.  Such loans may be secured by 
a one-to four-family residential property, in the case of FHA and VA loans, 
and must be secured by a single family owner-occupied unit in the case of 
First-Time Home Buyer loans.  These loans are originated using modified 
underwriting guidelines, in the case of FHA and VA loans, and the same 
underwriting guidelines as are the Bank's other one-to four-family mortgage 
loans, in the case of First-Time Home Buyer loans.  All such loans are 
originated in amounts of up to 97% of the lower of the property's appraised 
value or the sale price.  Private mortgage insurance is required on all such 
loans.

      The Bank also originates "investor rehab loans" to local contractors and 
investors for the improvement and remodeling of existing non-owner occupied 
one-to four-family residential properties.  Such first mortgage loans are 
originated with a maximum LTV ratio of 80% of the purchase price of the 
property plus up to 80% of the cost of the improvements, as confirmed by an 
independent appraiser.  Investor rehab loans are offered with terms of one-
year and fixed-rates of interest, generally 1.5% above the prime rate of 
interest as reported in The Wall Street Journal.  During the term of the loan, 
the borrower is required to remit monthly payments of interest only.  The 
principal balance of such loan is due at the end of the one-year term.  The 
Bank primarily relies on the borrower's income statements and tax returns when 
underwriting such loans.  The Bank generally requires personal and/or 
corporate guarantees on such loans.  At December 31, 1998, investor rehab 
loans totaled $3.7 million, or8.2% of one-to four-family loans, and 6.3% of 
the Bank's total loans.

      In March 1998, the Bank also began to offer a limited documentation 
mortgage loan product ("Low Doc" loans).  Such loans are secured by owner-
occupied one-to four-family properties and are offered with both fixed and 
adjustable rates of interest.  The  terms and interest rate caps of Low Doc 
loans are generally the same as those of the Bank's other fixed and 
adjustable-rate one-to four-family loan products; however, borrowers pay a 
premium in the form of higher interest rates and loan fees and provide larger 
down payments (75% maximum LTV ratio) in exchange for more expedient loan 
processing by virtue of less income and asset information as compared to loans 
underwritten in conformance with Fannie Mae standards.  When underwriting a 
Low Doc loan, the Bank requires executed income tax returns and a satisfactory 
credit report but does not verify employment status.  At December 31, 1998, 
Low Doc loans totaled $3.2 million, or 7.1% of one-to four-family loans, and 
5.5% of the Bank's total loans.

      Multi-Family and Commercial Real Estate Lending.  The Bank 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, restaurants or retail facilities 
primarily located in the Bank's primary market area.  The Bank's multi-family 
and commercial real estate underwriting policies provide that such real estate 
loans may be made in amounts of up to 80% of the appraised value of the 
property, subject to the Bank's current loans-to-one-borrower limit, which at 
December 31, 1998 was $1.9 million.  The Bank's multi-family and commercial 
real estate loans may be made with terms of up to 10 years and are offered 
with interest rates that adjust periodically.  In reaching its decision on 
whether to make a multi-family or commercial real estate loan, the Bank 
considers the net operating income of the property, the borrower's expertise, 
credit history and profitability and the value of the underlying property.  
The Bank 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 1.30x.  Environmental impact surveys are 
generally required for all commercial real estate loans.  Generally, all 
multi-family and commercial real estate loans made to corporations, 
partnerships and other business entities require personal guarantees by the 
principals.  On an exception basis, the Bank may not require a personal 
guarantee on such loans depending on the creditworthiness of the borrower and 
the amount of the down payment and other mitigating circumstances.  The Bank's 
multi-family real estate loan portfolio at December 31, 1998 was $3.3 million, 
or 5.6% of total loans, and the Bank's commercial real estate loan portfolio 
at such date was $1.6 million, or 2.7% of total loans.

      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 successful operation or management of the properties, repayment 
of such loans may be subject to adverse conditions in the real estate market 
or the economy.  The Bank seeks to minimize these risks through its 
underwriting standards.

      Construction Lending.  The Bank originates fixed-rate construction loans 
for the development of one-to four-family residential properties primarily 
located in the Bank's primary market area.  Although the Bank does not 
generally make loans secured by raw land, the Bank's policies permit the 
origination of such loans.  Construction loans are generally offered to 
experienced local developers operating in the Bank's primary market area and, 
to a lesser extent, to individuals for the construction of their primary 
residence.  Construction loans are generally offered with terms of up to 12 
months and may be made in amounts of up to 70% of the appraised value of the 
property, as improved, in the case of construction loans to developers, up to 
90% of the appraisal value of the property, as improved, in the case of 
construction loans to individuals for the construction of their primary 
residence and up to 50% of the appraised value of the property in the case of 
land loans.  Construction loan proceeds are disbursed periodically in 
increments as construction progresses and as inspections by the Bank's lending 
officers warrant.  Generally, if the borrower is a corporation, partnership or 
other business entity, personal guarantees by the principals are required for 
all construction loans.

      At December 31, 1998, the Bank had $8.0  million of advanced 
construction loans which amounted to 13.8% of the Bank's total loans.

      Construction financing is generally considered to involve a higher 
degree of credit risk than long-term financing on improved, owner-occupied 
real estate.  Risk of loss on a construction loan is dependent largely upon 
the accuracy of the initial estimate of the property's value at completion of 
construction compared to the estimated cost (including interest) of 
construction and other assumptions, including the estimated time to sell 
residential properties.  If the estimate of value proves to be inaccurate, the 
Bank may be confronted with a project, when completed, having a value which is 
insufficient to assure full repayment.

      Home Equity Lines of Credit.  Substantially all of the Bank's home 
equity lines of credit are secured by second mortgages on owner-occupied one-
to four-family residences located in the Bank's primary market area.  At 
December 31, 1998, these loans totaled $404,000, or7% of the Bank's total 
loans.  Home equity lines of credit generally have adjustable-rates of 
interest which adjust on a monthly basis.  The adjustable-rate of interest 
charged on such loans is indexed to the prime rate as reported in The Wall 
Street Journal.  Home equity lines of credit generally have an 18% lifetime 
limit on interest rates.  Generally, the maximum combined LTV ratio on home 
equity lines of credit is 70%.  The underwriting standards employed by the 
Bank for home equity lines of credit include a determination of the 
applicant's credit history and an assessment of the applicant's ability to 
meet existing obligations and payments on the proposed loan and the value of 
the collateral securing the loan.  The stability of the applicant's monthly 
income may be determined by verification of gross monthly income from primary 
employment and, additionally, from any verifiable secondary income.  
Creditworthiness of the applicant is of primary consideration.

      Consumer Lending.  Consumer loans at December 31, 1998 amounted to 
$121,000, or 0.2% of the Bank's total loans, and consisted primarily of new 
and used automobile loans and passbook loans.  Such loans are generally 
originated in the Bank's primary market area and generally are secured by 
automobiles and deposit accounts.

      Loans on savings accounts are generally secured by deposit accounts.  
Automobile loans have a maximum borrowing limitation of 80% of the sale price 
of the automobile or average value in the National Automobile Dealer's 
Association price guide (the "bluebook"), whichever is lower.  At December 31, 
1998, automobile loans totaled $83,000, or 68.6% of consumer loans and 0.1% of 
the Bank's total loans; and  loans on savings accounts totaled $38,000, or 
31.4% of consumer loans and 0.1% of the Bank's total loans.

      Loans secured by rapidly depreciable assets such as automobiles entail 
greater risks than one-to four-family residential mortgage loans.  In such 
cases, repossessed collateral for a defaulted loan may not provide an adequate 
source of repayment of the outstanding loan balance, since there is a greater 
likelihood of damage, loss or depreciation of the underlying collateral.  
Further, consumer loan collections on these loans are dependent on the 
borrower's continuing financial stability and, therefore, are more likely to 
be adversely affected by job loss, divorce, illness or personal bankruptcy. 
Finally, the application of various federal and state laws, including federal 
and state bankruptcy and insolvency laws, may limit the amount which can be 
recovered on such loans in the event of a default.

      Loan Approval Procedures and Authority.  The Board of Directors 
establishes the lending policies and loan approval limits of the Bank.  The 
Board of Directors has established the Security Committee (the "Committee") of 
the Board which considers and approves all loans within its designated 
authority as established by the Board.  In addition, the Board of Directors 
has authorized certain officers of the Bank (the "designated officers") to 
consider and approve all loans within their designated authority as 
established by the Board.

Delinquent Loans, Classified Assets and Real Estate Owned

      Delinquencies, Classified Assets and Real Estate Owned.  Reports listing 
all delinquent accounts are generated and reviewed by management on a monthly 
basis and the Board of Directors performs a monthly review of all loans or 
lending relationships delinquent 60 days or more.  The procedures taken by the 
Bank with respect to delinquencies vary depending on the nature of the loan, 
period and cause of delinquency and whether the borrower is habitually 
delinquent.  When a borrower fails to make a required payment on a loan, the 
Bank takes a number of steps to have the borrower cure the delinquency and 
restore the loan to current status.  The Bank generally sends the borrower a 
written notice of non-payment after the loan is first past due.  The Bank's 
guidelines provide that telephone and written correspondence will be attempted 
to ascertain the reasons for delinquency and the prospects of repayment.  When 
contact is made with the borrower at any time prior to foreclosure, the Bank 
will attempt to obtain full payment, offer to work out a repayment schedule 
with the borrower to avoid foreclosure or, in some instances, accept a deed in 
lieu of foreclosure.  In the event payment is not then received or the loan 
not otherwise satisfied, additional letters and telephone calls generally are 
made.  If the loan is still not brought current or satisfied and it becomes 
necessary for the Bank to take legal action, which typically occurs after a 
loan is 90 days or more delinquent, the Bank will commence foreclosure 
proceedings against any real property that secured the loan.  If a foreclosure 
action is instituted and the loan is not brought current, paid in full, or 
refinanced before the foreclosure sale, the property securing the loan 
generally is sold at foreclosure and, if purchased by the Bank, becomes real 
estate owned.

      Federal regulations and the Bank's internal policies require that the 
Bank utilize an internal asset classification system as a means of reporting 
problem and potential problem assets.  The Bank currently classifies problem 
and potential problem assets as "Substandard," "Doubtful" or "Loss" assets. 
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 Bank 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 Bank to a sufficient degree of risk to warrant 
classification in one of the aforementioned categories but possess weaknesses 
are required to be designated "Special Mention."

      When the Bank classifies one or more assets, or portions thereof, as 
Substandard or Doubtful, it is required to establish an allowance for possible 
loan losses in an amount deemed prudent by management unless the loss of 
principal appears to be remote.  When the Bank  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 assets so classified 
or to charge off such amount.

      The Bank's determination as to the classification of its assets and the 
amount of its valuation allowances is subject to review by the FDIC and 
Commissioner, which can order the establishment of additional general or 
specific loss allowances.  The FDIC, in conjunction with the other federal 
banking agencies, recently 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.   While the Bank believes that 
it has established an adequate allowance for possible loan losses, there can 
be no assurance that regulators, in reviewing the Bank's loan portfolio, will 
not request the Bank to materially increase at that time its allowance for 
possible loan losses, thereby negatively affecting the Bank's financial 
condition and earnings at that time.  Although management believes that 
adequate specific and general loan loss allowances have been established, 
future provisions are dependent upon future events such as loan growth and 
portfolio diversification and, as such, further additions to the level of 
specific and general loan loss allowances may become necessary.

      Management of the Bank reviews and classifies its assets on a quarterly 
basis, and the Board of Directors reviews the results of the reports on a 
quarterly basis.  The Bank classifies its assets in accordance with the 
management guidelines described above.  At December 31, 1998, the Bank had 
$1.1 million, or 1.5%, of assets designated as Substandard, consisting of nine 
one-to four-family mortgage loans and two  multi-family mortgage loans.  At 
such date, the Bank had no loans classified as Special Mention, Doubtful or 
Loss  At December 31, 1998, these classified assets represented 2.1% of loans 
receivable.

      Non-performing Assets.  The following table sets forth information 
regarding non-performing loans and REO.  At December 31, 1998, the Bank had no 
REO in its portfolio.  It is the general policy of the Bank to cease accruing 
interest on loans 90 days or more past due and to fully reserve for all 
previously accrued interest.  If interest payments on all non-accrual loans 
for the years ended December 31, 1998, 1997 and 1996 had been made in 
accordance with original loan agreements, interest income of $8,000,$9,000 and 
$38,000, respectively, would have been recognized.

<TABLE>
<CAPTION>

                                                               At December 31,
                                                          -------------------------
                                                          1998      1997      1996
                                                          -------------------------
                                                           (Dollars in thousands)

<S>                                                       <C>       <C>       <C>
Non-accrual loans:
  One-to four-family                                      $173      $115      $392
Real estate owned, net(1)                                    -         -       540
                                                          ------------------------
    Total non-performing assets                           $173      $115      $932
                                                          ========================

Non-performing loans as a percent of loans(2)(3)          0.33%     0.28%     1.01%
Non-performing assets as a percent of total assets(3)     0.24%     0.21%     1.84%

--------------------
<F1>  Real Estate owned balances are shown net of related loss allowances.
<F2>  Loans include loans receivable held for investment, net, excluding the 
      allowance for possible loan losses.
<F3>  Non-performing assets consist of non-performing loans and REO.  Non-
      performing loans consist of non-accruing loans and all loans 90 days or 
      more past due and other loans which have been identified by the Bank as 
      presenting uncertainty with respect to the collectibility of interest or 
      principal.
<F4>  There are no loans over 90 days that are accruing interest.

</TABLE>

Allowance for Possible Loan Losses

      The allowance for possible loan losses is maintained through provisions 
for loan losses based on management's on-going evaluation of the risks 
inherent in its loan portfolio in consideration of the trends in its loan 
portfolio, the national and regional economies and the real estate market in 
the Bank's primary lending area. The allowance for possible loan losses is 
maintained at an amount management considers adequate to cover estimated 
losses in its loan portfolio which are deemed probable and estimable based on 
information currently known to management. The Bank's loan loss allowance 
determinations also incorporate factors and analyses which consider the 
potential principal loss associated with the loan, costs of acquiring the 
property securing the loan through foreclosure or deed in lieu thereof, the 
periods of time involved with the acquisition and sale of such property, and 
costs and expenses associated with maintaining and holding the property until 
sale and the costs associated with the Bank's inability to utilize funds for 
other income producing activities during the estimated holding period of the 
property.

      Management periodically calculates a loan loss allowance sufficiency 
analysis based upon the loan portfolio composition, asset classifications, 
loan-to-value ratios, potential impairments in the loan portfolio and other 
factors.  The analysis is compared to actual losses, peer group comparisons 
and economic conditions.  The Bank will continue to monitor and modify its 
allowance for possible loan losses as conditions dictate.  Management believes 
that, based on information available at December 31, 1998, the Bank's 
allowance for possible loan losses was sufficient to cover losses inherent in 
its loan portfolio at that time.  However, no assurances can be given that the 
Bank's level of allowance for possible loan losses will be sufficient to cover 
future loan losses incurred by the Bank or that further future adjustments to 
the allowance for possible loan losses will not be necessary if economic and 
other conditions differ substantially from the economic and other conditions 
used by management to determine the current level of the allowance for 
possible loan losses.  In addition, the FDIC and the Commissioner, as an 
integral part of their examination processes, periodically review the Bank's 
allowance for possible loan losses.  Such agencies may require the Bank to 
make additional provisions for estimated loans losses based upon judgements 
different from those of management.

      The following table sets forth activity in the Bank's allowance for 
possible loan losses for each period set forth.

<TABLE>
<CAPTION>

                                                 At or For the
                                           Years ended December 31,
                                          ---------------------------
                                           1998       1997      1996
                                          ---------------------------

<S>                                         <C>       <C>        <C>
Balance at beginning of period              $349      $ 322      $300
Provision for possible loan losses            87        (90)       14


Charge-offs:
  One-to four-family                                     11       173
  Auto loans                                   1          -         -
                                            -------------------------
    Total charge-offs                          1         11       173
Recoveries:
  One-to four-family                          90        128       179
  Auto loans                                   -          -         2
    Total recoveries                          90        128       181
                                            -------------------------
Net charge-offs (recoveries)                 (89)      (117)       (8)
                                            -------------------------
Balance at end of period                    $525       $349      $322
                                            =========================
Allowance for possible loan losses as
 a percent of loans(1)                      0.90%      0.84%     0.83%
Allowance for possible loan losses as
 a percent of nonperforming loans         303.47%    303.50%    82.10%

</TABLE>

      The following table sets forth a breakdown of the allowance for possible 
loan losses by loan category at the dates indicated.  Management believes that 
the allowance can be allocated by category only on an approximate basis.  
These allocations are not necessarily indicative of future losses and do not 
restrict the use of the allowance to absorb losses in any other loan category.

<TABLE>
<CAPTION>

                                                                   At December 31,
                                     ----------------------------------------------------------------------------


                                              1998                       1997                       1996
                                     ----------------------     ----------------------     ----------------------
                                                Percent of                 Percent of                 Percent of
                                                 Loans in                   Loans in                   Loans in
                                                   Each                       Each                       Each
                                                Category to                Category to                Category to
                                     Amount     Total Loans     Amount     Total Loans     Amount     Total Loans
                                     ----------------------------------------------------------------------------


<S>                                   <C>         <C>            <C>         <C>            <C>         <C>
One-to four family                    $295         77.02%        $160         84.61%        $178         82.26%
Multi-family                            49          5.61%          57          5.48%          95          6.81%
Commercial real estate                  23          2.67%          15          3.31%          19          4.70%
Construction and land                  119         13.75%          22          4.84%          15          3.66%
Consumer Loans                           2          0.89%           3          1.69%           5          2.36%
Other                                    1          0.06%           -          0.07%           -          0.21%
Unallocated                             36          0.00%          92          0.00%          10          0.00%
                                      -------------------------------------------------------------------------
    Total allowance for possible
     loan losses                      $525        100.00%        $349        100.00%        $322        100.00%
                                      =========================================================================

</TABLE>


      Real Estate Owned.  At December 31, 1998, the Bank had no REO in its 
portfolio.  When the Bank does acquire property through foreclosure or deed in 
lieu of foreclosure, it is initially recorded at the lower of the recorded 
investment in the corresponding loan or the fair value of the related assets 
at the date of foreclosure, less costs to sell. Thereafter, if there is a 
further deterioration in value, the Bank provides for a specific valuation 
allowance and charges operations for the diminution in value.

Investment Activities

      The Board of Directors sets the investment policy and procedures of the 
Bank.  This policy generally provides that investment decisions will be made 
based on the safety of the investment, liquidity requirements of the Bank and, 
to a lesser extent, potential return on the investments.  In pursuing these 
objectives, the Bank considers the ability of an investment to provide 
earnings consistent with factors of quality, maturity, marketability and risk 
diversification.  While the Board of Directors has final authority and 
responsibility for the securities investment portfolio, the Board has 
delegated day-to-day oversight of the Bank's investments to the President of 
the Bank  On a monthly basis, the Board reviews and evaluates all investment 
activities for safety and soundness, adherence to the Bank's investment policy 
and assurance that authority levels are maintained.

      As required by SFAS No. 115, the Bank has established an investment 
portfolio of securities that are categorized as held-to-maturity, available-
for-sale or held for trading.  The Bank generally invests in securities as a 
method of utilizing funds not utilized for loan origination activity and as a 
method of maintaining liquidity at levels deemed appropriate by management. 
The Bank does not currently maintain a portfolio of securities categorized as 
held for trading.  At December 31, 1998, the available-for-sale securities 
portfolio totaled $7.4 million, or 10.3% of assets and the held-to-maturity 
portfolio totaled $1.3 million, or 1.8% of assets.

      The Bank currently does not participate in hedging programs, interest 
rate swaps, or other activities involving the use of off-balance sheet 
derivative financial instruments.  Similarly, the Bank does not invest in 
mortgage-related securities which are deemed to be "high risk," or purchase 
bonds which are not rated investment grade.

      Mortgage-Backed Securities.  The Bank currently invests in mortgage-
backed securities insured or guaranteed by Fannie Mae, Freddie Mac and Ginnie 
Mae.  At December 31, 1998, mortgage-backed securities totaled $1.0 million, 
or 1.4%, of total assets and 1.6% of total interest earning assets, all of 
which were classified as available-for-sale.  At December 31, 1998, all of the 
mortgage-backed securities were backed by adjustable-rate loans.  The 
mortgage-backed securities portfolio had a stated rate of 6.4% at December 31, 
1998.  The estimated fair value of the Bank's mortgage-backed securities at 
December 31, 1998, was $1.0 million, which is $12,000 more than the amortized 
cost of $988,000.  Investments in mortgage-backed securities involve a risk 
that actual prepayments may differ from estimate prepayments over the life of 
the security, which may require adjustments to the amortization of any premium 
or accretion of any discount relating to such instruments thereby changing the 
net yield on such securities.  There is also reinvestment risk associated with 
the cash flows from such securities or in the event such securities are 
redeemed by the issuer.  In addition, the market value of such securities may 
be adversely affected by changes in interest rates.

      U.S. Government and Federal Agency Obligations.  At December 31, 1998, 
the Bank's U.S. Government and federal agency obligations securities portfolio 
totaled $1.9 million, all of which were classified as available-for-sale.  
Such portfolio at December 31, 1998 primarily consisted of short-to medium-
term (maturities of one to five years) securities issued by federal agencies.

      Corporate Equity Securities and Debt Obligations.  The Bank currently 
invests in the equity securities and debt obligations of United States 
corporations.  At December 31, 1998, the Bank's equity securities portfolio 
totaled $1.0 million, or 1.4% of total assets, all of which were classified as 
available-for-sale.  Such portfolio consisted of $250,000 of common stock and 
$772,000 in preferred stock issued by corporate issuers.  The Bank's current 
policies generally provide that the maximum equity investment in any one 
corporation shall not exceed 3% of the Bank's surplus and reserves and the 
maximum aggregate investment in any one industry shall not exceed 15% of the 
Bank's surplus and reserves.  At December 31, 1998, the Bank had $4.8 million, 
or 6.7% of total assets, of corporate debt obligations, all of which were 
investment grade, with maturities of two years or less.  The Bank's current 
policies generally provide that the average maturity of the Bank's portfolio 
of corporate debt securities may not exceed 5 years and 80% of such 
obligations shall mature in 3 years or less.  The Bank's policies further 
provide that the Bank's total portfolio of corporate debt, commercial paper 
and consumer loans may not exceed 30% of total assets.

      Investments in corporate equity securities and debt obligations involve 
risk as they are not insured or guaranteed by the U.S. government or any 
agency thereof, generally not secured by collateral and generally rely upon 
future income from the operations of the issuer for repayment of principal and 
interest.

      The following table sets forth at the dates indicated certain 
information regarding the amortized cost and market values of the Bank's 
investment securities.

<TABLE>
<CAPTION>

                                                                          At December 31,
                                               ----------------------------------------------------------------------
                                                       1998                     1997                     1996
                                               --------------------     --------------------     --------------------
                                               Amortized     Market     Amortized     Market     Amortized     Market
                                                 Cost        Value        Cost        Value        Cost        Value
                                               ----------------------------------------------------------------------

<S>                                            <C>           <C>        <C>           <C>        <C>           <C>
Investment securities(1):
  Held to maturity:
    U.S. Government and federal
     agency                                    $    -        $    -     $1,499        $1,500     $    -        $    -
    Corporate debt                              1,308         1,314      1,480         1,483
                                               ----------------------------------------------------------------------
      Total investment securities held
       to maturity                              1,308         1,314      2,979         2,983          -             -
                                               ----------------------------------------------------------------------
  Available for sale:
    U.S. Government and federal
     agency                                     1,842         1,861      1,340         1,353      1,512         1,482
    Corporate debt                              3,557         3,494          0             0      1,580         1,599
    Mortgage-backed securities                    988         1,027      1,015         1,044      1,475         1,503
    Marketable equity securities                1,013         1,022        575           626        238           257
                                               ----------------------------------------------------------------------
      Total  securities available for sale      7,400         7,404      2,930         3,023      4,805         4,841
                                               ----------------------------------------------------------------------
      Total securities                         $8,708        $8,718     $5,909        $6,006     $4,805        $4,841
                                               ======================================================================

</TABLE>

      The table below sets forth certain information regarding the carrying 
value, weighted average yields and contractual maturities of the Bank's 
securities portfolio as of December 31, 1998.

<TABLE>
<CAPTION>

                                                                     At December 31, 1998
                                -----------------------------------------------------------------------------------------------
                                                     More than One       More than Five        More than
                                One Year or Less   Year to Five Years  Years to Ten Years      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>       <C>
Held-to-maturity:
  Corporate debt                 $  773    8.04%    $  535    8.50%     $    -        -     $    -        -    $1,308    8.23%
                                 --------------------------------------------------------------------------------------------
    Total held-to-maturity          773    8.04%       535    8.50%          -        -          -        -     1,308    8.23%
Available for sale:
  Mortgage-backed securities          -       -          -       -           -        -      1,027     6.69%    1,027    6.69%
  U.S. Government and
   federal agency                     -       -      1,003    5.83%        858     6.62%         -        -     1,861    6.20%
  Corporate debt                    551    8.72%       374    6.77%        200     5.45%     2,369     6.09%    3,494    6.54%
  Marketable equity securities        -       -          -       -           -        -          -        -     1,022       -
                                 --------------------------------------------------------------------------------------------
    Total available-for-sale        551    8.72%     1,377    6.09%      1,058     6.40%     3,396     6.27%    7,404    5.57%
                                 --------------------------------------------------------------------------------------------
    Total securities             $1,324    8.33%    $1,912    6.76%     $1,058     6.40%    $3,396     6.27%   $8,712    5.97%
                                 ============================================================================================

</TABLE>

Sources of Funds

      General.  Deposits, repayments and prepayments of loans, cash flows 
generated from operations and FHLB advances are the primary sources of the 
Bank's funds for use in lending, investing and for other general purposes.

      Deposits.  The Bank offers a variety of deposit accounts with a range of 
interest rates and terms.  The Bank's deposit accounts consist of savings, 
retail checking/NOW accounts, commercial checking accounts, money market 
accounts, club accounts and certificate of deposit accounts.  The Bank offers 
certificate of deposit accounts with balances in excess of $100,000 at 
preferential rates (jumbo certificates) and also offers Individual Retirement 
Accounts ("IRAs") and other qualified plan accounts.

      At December 31, 1998, the Bank's deposits totaled $57.0 million, or 
91.8%, of total liabilities.  For the year ended December 31, 1998, the 
average balance of core deposits (savings, NOW, money market and noninterest-
bearing checking accounts) totaled $26.9 million, or 50.3% of total average 
deposits.  At December 31, 1998, the Bank had a total of $28.6 million in 
certificates of deposit, of which $24.5 million had maturities of one year or 
less.  For the year ended December 31, 1998, the average balance of core 
deposits represented approximately 47.2% of total deposits and certificate 
accounts represented 50.2%.  Although the Bank has a significant portion of 
its deposits in core deposits, management monitors activity on the Bank's core 
deposits and, based on historical experience and the Bank's current pricing 
strategy, believes it will continue to retain a large portion of such 
accounts.  The Bank is not limited with respect to the rates it may offer on 
deposit products.

      The flow of deposits is influenced significantly by general economic 
conditions, changes in money market rates, prevailing interest rates and 
competition.  The Bank's deposits are obtained predominantly from the areas in 
which its banking offices are located.  The Bank relies primarily on customer 
service and long-standing relationships with customers to attract and retain 
these deposits; however, market interest rates and rates offered by competing 
financial institutions affect the Bank's ability to attract and retain 
deposits.  The Bank uses traditional means of advertising its deposit 
products, including radio and print media and generally does not solicit 
deposits from outside its market area.  While certificate accounts in excess 
of $100,000 are accepted by the Bank, and may be subject to preferential 
rates, the Bank does not actively solicit such deposits as such deposits are 
more difficult to retain than core deposits.  Although the Bank's policies do 
permit the use of brokered deposits, the Bank does not currently accept 
brokered deposits.

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

<TABLE>
<CAPTION>

                                         For the Years ended December 31,
                                         --------------------------------
                                           1998        1997        1996
                                         --------------------------------
                                                  (In thousands)

<S>                                      <C>          <C>         <C>
Net deposits                             $12,266      $7,124      $  715
Interest credited on deposit accounts      2,181       1,583       1,248
                                         -------------------------------
Total increase in deposit accounts       $14,447      $8,707      $1,963
                                         ===============================

</TABLE>

      At December 31, 1998, the Bank had outstanding $8,555 million in 
certificate of deposits accounts in amounts of $100,000 or more, maturing as 
follows:

<TABLE>
<CAPTION>

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

<S>                               <C>            <C>
Three months or less              $3,043         5.81%
Over three through six months      1,007         5.69%
Over six through 12 months         2,771         5.15%
Over 12 months                     1,734         5.62%
Total                              8,555         5.54%

</TABLE>

      The following table sets forth the distribution of the Bank's average 
deposit accounts for the periods indicated and the weighted average interest 
rates on each category of deposits presented.

<TABLE>
<CAPTION>

                                                          At December 31,
                                 ------------------------------------------------------------------
                                              1998                               1997
                                 -------------------------------    -------------------------------
                                            Percent     Weighted               Percent     Weighted
                                 Average    of Total    Average     Average    of Total    Average
                                 Balance    Deposits      Rate      Balance    Deposits      Rate
                                 ------------------------------------------------------------------
                                                       (Dollars in thousands)

<S>                              <C>        <C>           <C>       <C>        <C>           <C>
Money market deposits            $   808      1.51%       2.62%     $ 1,079      2.73%       2.59%
Demand accounts                    4,486      8.38%          -        2,255      5.71%          -
NOW accounts                      11,963     22.35%       4.08%       5,377     13.61%       3.20%
Regular and other savings          9,685     18.09%       1.97%      10,328     26.14%       2.35%
Total certificates of deposit     26,585     49.67%       5.57%      20,471     51.81%       5.57%
                                 ----------------------------------------------------------------
    Total                        $53,527    100.00%       4.08%     $39,510    100.00%       4.25%
                                 ================================================================

</TABLE>

      Borrowed Funds.  As part of its operating strategy, the Bank utilizes 
advances from the FHLB as an alternative to retail deposits to fund its 
operations.  By utilizing FHLB advances, which possess varying stated 
maturities, the Bank can meet its liquidity needs without otherwise being 
dependent upon retail deposits, which have no stated maturities (except for 
certificates of deposit), which are interest rate sensitive and which are 
subject to withdrawal from the Bank at any time.  These FHLB advances are 
collateralized primarily by certain of the Bank's mortgage loans and mortgage-
backed securities and secondarily by the Bank's investment in capital stock of 
the FHLB.  FHLB advances are made pursuant to several different credit 
programs, each of which has its own interest rate and range of maturities.  
The maximum amount that the FHLB will advance to member institutions, 
including the Bank, fluctuates from time-to-time in accordance with the 
policies of the FHLB.

The following table sets forth certain information regarding the bank's 
borrowed funds at or for the periods ended on the dates indicated:

<TABLE>
<CAPTION>

                                             At or For the Years Ended
                                                   December 31,
                                           ----------------------------
                                             1998      1997      1996
                                           ----------------------------

<S>                                        <C>       <C>       <C>
FHLB advances:
  Average balance outstanding              $4,267    $6,402    $10,406
  Maximum amount outstanding at any
   month-end during the period              6,093     9,251     13,493
  Balance outstanding at end of period      4,211     6,436     11,605
  Weighted average interest rate during
   the period                                5.80%     5.87%      5.70%
  Weighted average interest rate at end
   of period                                 6.11%     6.11%      5.80%

</TABLE>

Subsidiary Activities

      Mass Securities Corporation ("MSC") was organized in March 1998 for the 
sole purpose of acquiring and holding investment securities of a type that are 
permissible for banks to hold under applicable law.  MSC was established to 
qualify as a "securities corporation" for Massachusetts tax purposes.  The 
Bank recently established a second subsidiary ("Mass SEC Corp II") for the 
similar purpose.  The Bank recently established a Massachusetts limited 
liability company for the purpose of holding property.  The results of 
operations of these subsidiaries will be consolidated in the results and 
operations of the Company

Personnel

      As of December 31, 1998, the Bank had 42 full-time employees and no 
part-time employees.  The employees are not represented by a collective 
bargaining unit and the Bank considers its relationship with its employees to 
be good.

REGULATION AND SUPERVISION

General

      As a co-operative bank chartered by the Commonwealth of Massachusetts, 
the Bank is subject to extensive regulation under state law with respect to 
many aspects of its banking activities; this state regulation is administered 
by the Commissioner.  In addition, as a bank whose deposits are insured by the 
FDIC under the Bank Insurance Fund, the Bank is subject to deposit insurance 
assessments by the FDIC, the FDIC has examination and supervisory authority 
over the Bank, with a broad range of enforcement powers and the FDIC regulates 
the Bank's activities and operations.  Finally, the Bank is required to 
maintain reserves against deposits according to a schedule established by the 
Federal Reserve System. These laws and regulations have been established 
primarily for the protection of depositors, customers and borrowers of the 
Bank, not bank stockholders.

      The following discussion of the laws and regulations material to the 
operations of the Company and Bank are brief summaries.  The summaries do not 
purport to be complete and are qualified in their entirety by reference to the 
applicable laws and regulations.  The Holding Company will also be required to 
file certain reports with, and otherwise comply with the rules and 
regulations, of the OTS, the Commissioner and of the Securities and Exchange 
Commission ("SEC") under the federal securities laws.  Certain of the 
regulatory requirements applicable to the Bank and to the Holding Company are 
referred to below or elsewhere herein.

Massachusetts Banking Laws and Supervision

      The powers of a Massachusetts co-operative bank are established by 
Massachusetts law, as qualified by applicable federal law and regulation.  
Massachusetts co-operative banks are regulated and supervised by the 
Commissioner. The Commissioner is required to regularly examine each state-
chartered bank. The approval of the Commissioner is required to establish or 
close branches, to merge with another bank, to form a holding company, to 
issue stock or to undertake many other activities. Any Massachusetts bank that 
does not operate in accordance with the regulations, policies and directives 
of the Commissioner is subject to sanctions. The Commissioner may under 
certain circumstances suspend or remove directors or officers of a bank who 
have violated the law, conducted a bank's business in a manner which is 
unsafe, unsound or contrary to the depositors' interests, or been negligent in 
the performance of their duties.

      All Massachusetts-chartered co-operative banks are required to be 
members of the Co-operative Central Bank and are subject to its assessments. 
The Co-operative Central Bank maintains the Share Insurance Fund, a private 
deposit insurer, which insures all deposits in member banks in excess of FDIC 
deposit insurance limits. In addition, the Co-operative Central Bank acts as 
a source of liquidity to its members in supplying them with low-cost funds, 
and purchasing certain qualifying obligations from them.

      A co-operative bank may only pay dividends on its capital stock if such 
payment would not impair the bank's capital stock and surplus account.  No 
dividends may be paid to stockholders of a bank if such dividends would reduce 
stockholders' equity of the bank below the amount of the liquidation account 
required by Massachusetts conversion regulations.

Federal Regulations

      Capital Requirements. Under FDIC regulations, federally insured state-
chartered banks that are not members of the Federal Reserve System ("state 
non-member banks"), such as the Bank, are required to comply with minimum 
leverage capital requirements. For an institution determined by the FDIC to 
not be anticipating or experiencing significant growth and to be in general a 
strong banking organization, rated composite 1 under the Uniform Financial 
Institutions Ranking System, the minimum capital leverage requirement is a 
ratio of Tier 1 capital to total assets of 3%. For all other institutions, the 
minimum leverage capital ratio is 3% plus an additional "cushion" amount of at 
least 100 to 200 basis points. Tier 1 capital is the sum of common 
stockholders' equity, noncumulative perpetual preferred stock including any 
related surplus and minority investments in certain subsidiaries, less 
intangible assets except for servicing rights and credit card relationships.

      The FDIC has also adopted risk-based capital guidelines to which the 
Bank is subject. The FDIC guidelines require state non-member banks to 
maintain certain levels of regulatory capital in relation to regulatory risk-
weighted assets. Risk-based capital ratios are determined by allocating assets 
and specified off-balance sheet items to four risk-weighted categories ranging 
from 0% to 100%, with higher levels of capital being required for the 
categories perceived as representing greater risk.

      State non-member banks must maintain a minimum ratio of qualifying 
capital to risk-weighted assets of at least 8%, of which at least one-half be 
Tier 1 capital. Qualifying total capital consists of Tier 1 capital plus Tier 
2 or supplementary capital items, which include allowances for loan losses in 
an amount of up to 1.25% of risk-weighted assets, cumulative preferred stock, 
preferred stock with a maturity of over 20 years, and certain other capital 
instruments.

      The following is a summary of the Bank's regulatory capital at December 
31, 1998:

<TABLE>

           <S>                                      <C>
           GAAP Capital to Total Assets             13.3%
           Total Capital to Risk-Weighted Assets    17.0%
           Tier I Leverage Ratio                    11.7%
           Tier I to Risk-Weighted Assets           15.9%

</TABLE>

      The federal banking agencies have also adopted a regulation providing 
that the agencies will take account of the exposure of a bank's capital and 
economic value to changes in interest rate risk in assessing a bank's capital 
adequacy.

      Standards for Safety and Soundness.  The federal banking agencies have 
adopted regulations and Interagency Guidelines Establishing Standards for 
Safety and Soundness to implement safety and soundness standards.  The 
Guidelines set forth the safety and soundness standards that the federal 
banking agencies use to identify and address problems at insured depository 
institutions before capital becomes impaired.  If the appropriate federal 
banking agency determines that an institution fails to meet any standard 
prescribed by the Guidelines, the agency may require the institution to submit 
to the agency an acceptable plan to achieve compliance with the standard. 

Investment Activities

      All state-chartered FDIC insured banks, including co-operative banks, 
are generally limited to activities as principal and equity investments of the 
type and in the amount authorized for national banks, notwithstanding state 
law.  Applicable regulations permit certain exceptions to these limitations. 
 For example, certain state chartered banks, such as the Bank, may, with FDIC 
approval, continue to exercise state authority to invest in common or 
preferred stocks listed on a national securities exchange or the Nasdaq 
National Market and in the shares of an investment company registered under 
the Investment Company Act of 1940, as amended.  Such banks may also continue 
to sell savings bank life insurance.  In addition, the FDIC is authorized to 
permit such institutions to engage in state authorized activities or 
investments that do not meet this standard (other than non-subsidiary equity 
investments) for institutions that meet all applicable capital requirements if 
it is determined that such activities or investments do not pose a significant 
risk to the Bank Insurance Fund.  The Bank received grandfathering authority 
from the FDIC in February, 1993 to invest in listed stocks and/or registered 
shares subject to the maximum permissible investment of 100% of Tier 1 
capital, as specified by the FDIC's regulations, or the maximum amount 
permitted by Massachusetts Commonwealth Banking Law, whichever is less.  Such 
grandfathering authority is subject to termination upon the FDIC's 
determination that such investments pose a safety and soundness risk to the 
Bank or in the event the Bank converts its charter, other than a mutual to 
stock conversion, or undergoes a change in control.  As of December 31, 1998, 
the Bank had $1.0 million of securities which were subject to such 
grandfathering authority.

Prompt Corrective Regulatory Action

      Federal law requires, among other things, that federal bank regulatory 
authorities take "prompt corrective action" with respect to banks that do not 
meet minimum capital requirements.  An institution is deemed to be 
"undercapitalized" if it has a total risk-based capital ratio of less than 8%, 
a Tier I risk-based capital ratio of less than 4%, or generally a leverage 
ratio of less than 4%.  An institution is deemed to be "significantly 
undercapitalized" if it has a total risk-based capital ratio of less than 6%, 
a Tier I risk-based capital ratio of less than 3%, or a leverage ratio of less 
than 3%.  An institution is deemed to be "critically undercapitalized" if it 
has a ratio of tangible equity (as defined in the regulations) to total assets 
that is equal to or less than 2%.

      "Undercapitalized" banks are subject to growth, capital distribution 
(including dividend) and other limitations and are required to submit a 
capital restoration plan.  A bank's compliance with such plan is required to 
be guaranteed by any company that controls the undercapitalized institutions. 
 If an "undercapitalized" bank fails to submit an acceptable plan, it is 
treated as if it is "significantly undercapitalized."  "Significantly 
undercapitalized" banks are subject to one or more of a number of additional 
restrictions, including but not limited to an order by the FDIC to sell 
sufficient voting stock to become adequately capitalized, requirements to 
reduce total assets and cease receipt of deposits from correspondent banks or 
dismiss directors or officers, and restrictions on interest rates paid on 
deposits, compensation of executive officers and capital distributions by the 
parent holding company.  Generally, subject to a narrow exception, the 
appointment of a receiver or conservator is required for a "critically 
undercapitalized" institution within 270 days after it obtains such status.

Transactions with Affiliates

      Transactions between depository institutions and their affiliates are 
governed by federal law.  An affiliate of an institution  is any company that 
controls, is controlled by, or is under common control with the institution, 
other than a subsidiary.  In a holding company context, at a minimum, the 
parent holding company of an institution and any companies which are 
controlled by such parent holding company are affiliates of the institution. 
 Generally, federal law limits the extent to which the institution and its 
subsidiaries may engage in "covered transactions" with any one affiliate to an 
amount equal to 10% of such institution's capital stock and surplus, and 
contains an aggregate limit on such transactions with all affiliates of 20% of 
capital stock and surplus.  The law also establishes specific collateral 
requirements for loans or extensions of credit to, or guarantees, acceptances 
on letters of credit issued on behalf of an affiliate and requires that 
affiliate transactions generally be on terms substantially the same, or no 
less favorable, to the institution or its subsidiary as similar transactions 
with nonaffiliates.

      Further, federal law restricts an institution with respect to loans to 
directors, executive officers, and principal stockholders.  Loans to 
directors, executive officers and stockholders who control, directly or 
indirectly, 10% or more of voting securities of the institution, and certain 
related interests of any of the foregoing, may not exceed, together with all 
other outstanding loans to such persons and affiliated entities, the 
institution's total capital and surplus.  Further, loans to directors, 
executive officers and principal shareholders must be made on terms 
substantially the same as offered in comparable transactions to other persons, 
except that such insiders may receive preferential loans  made pursuant to a 
benefit or compensation program that is widely available to the Bank's 
employees and does not give preference to the insider over the other 
employees.  The law also establishes board of director approval requirements 
for specified insider loans.  Federal law places additional limitations on 
loans to executive officers.

Enforcement

      The FDIC has extensive enforcement authority over insured co-operative 
banks, including the Bank.  This enforcement authority includes, among other 
things, the ability to assess civil money penalties, to issue cease and desist 
orders and to remove directors and officers.  In general, these enforcement 
actions may be initiated in response to violations of laws and regulations and 
unsafe or unsound practices.  The FDIC has authority under Federal law to 
appoint a conservator or receiver for an insured bank under certain 
circumstances.

Insurance of Deposit Accounts

      The FDIC has adopted a risk-based insurance assessment system.  An 
institution is assigned to one of three capital categories based on the 
institution's capital position, and one of three supervisory subcategories 
within each capital group.  The supervisory subgroup to which an institution 
is assigned is based on an evaluation by the FDIC of information which the 
FDIC determines to be relevant to the institution's financial condition and 
the risk posed to the deposit insurance funds.  An institution's assessment 
rate depends on the capital category and supervisory category to which it is 
assigned.  Assessment rates are determined by FDIC semi-annually and currently 
range from zero basis points for the healthiest institution to 27 basis points 
for the riskiest.  In addition, Bank Insurance Fund institutions are required 
to make certain payments toward bonds issued in the late 1980s by the 
financing Corporation to recapitalize the insurance fund for savings and loan 
association.  The Bank paid $5,686 in deposit insurance assessments for fiscal 
1998.  The FDIC is authorized to raise the assessment rates in certain 
circumstances.  The FDIC has exercised this authority several times in the 
past and may raise insurance premiums in the future.  If such action is taken 
by the FDIC, it could have an adverse effect on the earnings of the Bank.

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

Federal Reserve System

      Federal Reserve Board regulations require depository institutions to 
maintain non-interest-earning reserves against their transaction accounts.  
The regulations generally require that reserves be maintained against 
aggregate transaction accounts as follows:  for that portion of transaction 
accounts aggregating $46.5 million or less (subject to adjustment by the 
Federal Reserve Board) the reserve requirement is 3%; and for accounts greater 
than $46.5 million, the reserve requirement is $1.395 million plus 10% 
(subject to adjustment by the Federal Reserve Board between 8% and 14%) 
against that portion of total transaction accounts in excess of $46.5 million 
 The first $4.9 million of otherwise reservable balances (subject to 
adjustments by the Federal Reserve Board) are exempted from the reserve 
requirements.  The Bank is in compliance with the foregoing requirements. 

Federal Home Loan Bank System

      The Bank is a member of the FHLB System, which consists of 12 regional 
FHLBs.  The FHLB provides a central credit facility primarily for member 
institutions.  The Bank, as a member of the FHLB, is required to acquire and 
hold shares of capital stock in the FHLB in an amount at least equal to 1% of 
the aggregate principal amount of its unpaid residential mortgage loans and 
similar obligations at the beginning of each year, or 1/20 of its advances 
(borrowings) from the FHLB, whichever is greater.  The Bank was in compliance 
with this requirement with an investment in FHLB stock at December 31, 1998 of 
$763,000.

Holding Company Regulation

      Federal law allows a state co-operative bank that qualifies as a 
"qualified thrift to elect to be treated as a "savings association" for 
purposes of the savings and loan holding company provisions of federal law. 
 Such election results in its holding company being regulated as a savings and 
loan holding company by the OTS rather than as a bank holding company by the 
Federal Reserve Board.  The Bank has made such an election.  The Company is 
subject to OTS regulations, examinations, supervision and reporting 
requirements.  Among other things, this authority permits the OTS to restrict 
or prohibit activities that are determined to be a serious risk to the 
subsidiary savings institution.  Additionally, the Bank is required to notify 
the OTS at least 30 days before declaring any dividend to the Company.

      As a unitary savings and loan holding company, the Company is generally 
not restricted as to the types of business activities in which it may engage. 
 Upon any non-supervisory acquisition by the Company of another savings 
association as a separate subsidiary, the Company would become a multiple 
savings and loan holding company subject to extensive limitations on the types 
of business activities in which it could engage.  Federal law limits the 
activities of a multiple savings and loan holding company and its non-insured 
institution subsidiaries primarily to activities permissible for bank holding 
companies under Section 4(c)(8) of the Bank Holding Company Act, as amended, 
subject to the prior approval of the OTS, and to other activities authorized 
by OTS regulation.  Multiple savings and loan holding companies are prohibited 
from acquiring or retaining, with certain exceptions, more than 5% of a non-
subsidiary company engaged in activities other than those permitted by federal 
law.

      A savings and loan holding company is prohibited from, directly or 
indirectly, acquiring more than 5% of the voting stock of another savings 
association or savings and loan holding company or from acquiring such an 
institution or company by merger, consolidation or purchase of its assets, 
without prior written approval of the OTS.  In evaluating applications by 
holding companies to acquire savings associations, the OTS must consider the 
financial and managerial resources and future prospects of the company and 
institution involved, the effect of the acquisition on the risk to the 
insurance funds, the convenience and needs of the community and competitive 
factors.

      The OTS 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:  (i) interstate supervisory 
acquisitions by savings and loan holding companies; and (ii) 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.  In a savings and loan holding company structure, the 
Bank is prohibited from extending credit to affiliates not engaged exclusively 
in activities permissible for a bank holding company and may not invest in the 
securities of an affiliate, except a subsidiary.

      In order to elect and continue to be regulated as a savings and loan 
holding company by the OTS (rather than as a bank holding company by the 
Federal Reserve Board), the Bank must continue to be a qualified thrift 
lender.  This requires the Bank either to maintain compliance with the test 
for a "domestic building and loan association," as defined in the Internal 
Revenue Code, or with a qualified thrift lender test.  Under the qualified 
thrift lender test, a savings institution is required to maintain at least 65% 
of its "portfolio assets" (total assets less: (i) specified liquid assets up 
to 20% of total assets; (ii) intangibles, including goodwill; and (iii) the 
value of property used to conduct business) in certain "qualified thrift 
investments" (primarily residential mortgages and related investments, 
including certain mortgage-backed and related securities) in at least 9 months 
out of each 12 month period.  A holding company of a savings institution that 
fails to qualify as a qualified thrift lender must either convert to a bank 
holding company and thereby become subject to the regulation and supervision 
of the Federal Reserve Board or operate under certain restrictions.  As of 
December 31, 1998, the Bank maintained in excess of 65% of its portfolio 
assets in qualified thrift investments.  The Bank also met the qualified 
thrift lender test in each of the prior 12 months and, therefore, met the QTL 
test.  Recent legislative amendments have broadened the scope of "qualified 
thrift investments" that go toward meeting the QTL test to fully include 
credit card loans, student loans and small business loans.

      Massachusetts Holding Company Regulation.  In addition to the federal 
holding company regulations, a bank holding company organized or doing 
business in Massachusetts may be also subject to regulation under the 
Massachusetts law.  The term "bank holding company," for the purposes of 
Massachusetts law, is defined generally to include any company which, directly 
or indirectly, owns, controls or holds with power to vote more than 25% of the 
voting stock of each of two or more banking institutions, including commercial 
banks and state savings banks, co-operative banks and savings and loan 
associations and national banks, federal savings banks and federal savings and 
loan associations.  In general, a holding company controlling only one banking 
institution will not be deemed to be a bank holding company for the purposes 
of Massachusetts law.  Under Massachusetts law, the prior approval of the 
Board of Bank Incorporation is required before a company may become a bank 
holding company and before an existing bank holding company may acquire 
additional institutions.

Thrift Rechartering

      Both the Bank and the Company are subject to extensive regulations and 
supervision.  Such regulation, which affects the Bank on a daily basis, may be 
changed at any time, and the interpretation of the relevant law and 
regulations is also subject to change by the authorities who examine the Bank 
and interpret those laws and regulations.  Any change in the regulatory 
structure or the applicable statutes or regulations, whether by the 
Commissioner, the OTS, the FDIC or the Congress, could have a material impact 
on the Company, the Bank, and their operations.

      Legislation enacted in 1996 provides that the Bank Insurance Fund and 
the Savings Association Insurance Fund would merge on January 1, 1999 if there 
are no more savings associations as of that date.  Several bills where 
introduced in Congress that would have eliminated the federal thrift charter, 
created a uniform federal financial institutions charter abolished OTS and 
restricted the activities of savings and loan holding companies.  The Bank is 
unable to predict whether the legislation will be enacted or, given such 
uncertainty, determine the extent to which the legislation, if enacted, would 
affect its business.  The Bank is also unable to predict whether the Bank 
Insurance Fund and the Savings Association Insurance Fund will eventually be 
merged.

Federal Securities Laws

      The Company has filed with the SEC a registration statement under the 
Securities Act for the registration of the Common Stock to be issued pursuant 
to the Conversion (the "Registration Statement").  Upon completion of the 
Conversion, the Company's Common Stock will be registered with the SEC under 
the Exchange Act.  The Company will then be subject to the information, proxy 
solicitation, insider trading restrictions and other requirements under the 
Exchange Act.

      The registration under the Securities Act of shares of the Common Stock 
to be issued in the Conversion does not cover the resale of such shares.  
Shares of the Common Stock purchased by persons who are not affiliates of the 
Company may be resold without registration.  Shares purchased by an affiliate 
of the Company will be subject to the resale restrictions of Rule 144 under 
the Securities Act.  If the Company meets the current public information 
requirements of Rule 144 under the Securities Act, each affiliate of the 
Company who complies with the other conditions of Rule 144 (including those 
that require the affiliate's sale to be aggregated with those of certain other 
persons) would be able to sell in the public market, without registration, a 
number of shares not to exceed, in any three-month period, the greater of (i) 
1% of the outstanding shares of the Company or (ii) the average weekly volume 
of trading in such shares during the preceding four calendar weeks.  Provision 
may be made in the future by the Company to permit affiliates to have their 
shares registered for sale under the Securities Act under certain 
circumstances.

FEDERAL AND STATE TAXATION

Federal Taxation

      General.  The Company and the Bank will report their income on a 
consolidated basis, using a calendar year and the accrual method of accounting 
and will be subject to federal income taxation in the same manner as other 
corporations with some exceptions, including particularly the Bank's treatment 
of its reserve for bad debts discussed below.  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 the Bank or the 
Company.  The Bank had been last audited by the IRS for the five-year period 
ended 1984.  The Bank was also audited by the State of Illinois for the three-
year period ended 1994.  Both audits resulted in adjustments which were 
immaterial to the Bank's financial statements.

      Bad Debt Reserves.    The Small Business Job Protection Act of 1996 (the 
"1996 Act"), which was enacted on August 20, 1996, made significant changes to 
provisions of the Code relating to a savings institution's use of bad debt 
reserves for federal income tax purposes and requires such institutions to 
recapture (i.e. take into income) certain portions of their accumulated bad 
debt reserves.  The effect of the 1996 Act on the Bank is discussed below.  
Prior to the enactment of the 1996 Act, the Bank was permitted to establish 
tax reserves for bad debts and to make annual additions thereto, which 
additions, within specified formula limits, were deducted in arriving at the 
Bank's taxable income.  The Bank's deduction with respect to "qualifying 
loans," which are generally loans secured by certain interests in real 
property, could be computed using an amount based on a six-year moving average 
of the Bank's actual loss experience (the "Experience Method"), or a 
percentage equal to 8% of the Bank's taxable income (the "PTI Method"), 
computed without regard to this deduction and with additional modifications 
and reduced by the amount of any permitted addition to the non-qualifying 
reserve.    The Bank's deduction with respect to non-qualifying loans was 
required to be computed under the Experience Method.

      The 1996 Act.  Under the 1996 Act, for its current and future taxable 
years, as a "Small Bank" the Bank is permitted to make additions to its tax 
bad debt reserves under an Experience Method based on total loans.  However, 
the Bank is required to recapture (i.e. take into income) over a six year 
period the excess of the balance of its tax bad debt reserves as of December 
31, 1995 over the balance of such reserves as of December 31, 1987.  The 
recapture was suspended for 1996 because the Bank met certain residential loan 
requirements.  If the Bank continues to meet the residential loan requirements 
in 1997, the six-year recapture period will begin in 1998.  As of December 31, 
1995, the Bank's tax bad debt reserve exceeded the balance of such reserve as 
of December 31, 1987 by $2.2 million.  However, the Bank will not incur an 
additional tax liability related to its tax bad debt reserves as the Bank has 
previously provided deferred taxes on the recapture amount.

      Distributions.  Under the 1996 Act, if the Bank makes "non-dividend 
distributions" to the Company, such distributions will be considered to have 
been made from the Bank's unrecaptured tax bad debt reserves (including the 
balance of its reserves as of December 31, 1987) to the extent thereof, and an 
amount based on the amount distributed (but not in excess of the amount of 
such reserves) will be included in the Bank's income.  The term "non-dividend 
distributions" is defined as distributions in excess of the Bank's current and 
accumulated earnings and profits, as calculated for federal income tax 
purposes, distributions in redemption of stock, and distributions in partial 
or complete liquidation.  Dividends paid out of the Bank's current or 
accumulated earnings and profits will not cause this pre-1988 reserve to be 
included in the Bank's income.

      The amount of additional taxable income created from a non-dividend 
distribution is an amount that, when reduced by the tax attributable to the 
income, is equal to the amount of the distribution.  Thus, if, after the 
Conversion, the Bank makes a non-dividend distribution to the Company, 
approximately one and one-half times the amount of such distribution (but not 
in excess of the amount of such reserves) would be includable in income for 
federal income tax purposes, assuming a 35% federal corporate income tax rate. 
 The Bank does not intend to pay dividends that would result in a recapture of 
any portion of its tax bad debt reserves.

      Corporate Alternative Minimum Tax.  The Code imposes a tax on 
alternative minimum taxable income ("AMTI") at a rate of 20%.  Only 90% of 
AMTI can be offset by net operating loss carryforwards.  The adjustment to 
AMTI based on book income will be an amount equal to 75% of the amount by 
which a corporation's adjusted current earnings exceeds its AMTI (determined 
without regard to this adjustment and prior to reduction for net operating 
losses).  In addition, for taxable years beginning after December 31, 1986 and 
before January 1, 1996, an environmental tax of12% of the excess of AMTI (with 
certain modifications) over $2 million, is imposed on corporations, including 
the Bank, whether or not an Alternative Minimum Tax ("AMT") is paid.  The Bank 
does not expect to be subject to the AMT.

      Dividends Received Deduction and Other Matters.  The Company may exclude 
from its income 100% of dividends received from the Bank as a member of the 
same affiliated group of corporations.  The corporate dividends received 
deduction is generally 70% in the case of dividends received from unaffiliated 
corporations with which the Company and the Bank will not file a consolidated 
tax return, except that if the Company and the Bank own more than 20% of the 
stock of a corporation distributing a dividend, then 80% of any dividends 
received may be excluded.

State Taxation

      Massachusetts Commonwealth Taxation.  Prior to July, 1995, the Bank was 
subject to an annual Massachusetts excise (income) tax equal to 12.54% of its 
pre-tax income. In 1995, legislation was enacted to reduce the Massachusetts 
bank excise (income) tax rate and to allow Massachusetts-based financial 
institutions to apportion income earned in other states. Further, this 
legislation expands the applicability of the tax to non-bank entities and out-
of-state financial institutions. The Massachusetts excise tax rate for co-
operative banks is currently 10.91% of federal taxable income, adjusted for 
certain items. This rate will be reduced over the next year so that the Bank's 
tax rate will become 10.5% by December 31, 1999. Taxable income includes gross 
income as defined under the Code, plus interest from bonds, notes and 
evidences of indebtedness of any state, including Massachusetts, less 
deductions, but not the credits, allowable under the provisions of the Code. 
No deductions, however, are allowed for dividends received until July 1, 1999. 
In addition, carry forwards and carrybacks of net operating losses are not 
allowed.

      A financial institution or business corporation is generally entitled to 
special tax treatment as a "security corporation," provided that:  (a) its 
activities are limited to buying, selling, dealing in or holding securities on 
its own behalf and not as a broker; and, (b) it has applied for, and received, 
classification as a "security corporation" by the Commissioner of the 
Massachusetts DOR.  A security corporation that is also a bank holding company 
under the Code is subject to a tax equal to 0.33% of its gross income.  A 
security corporation that is not a bank holding company under the Code is 
subject to a tax equal to 1.32% of its gross income.

      The Bank's subsidiary, MSC, was established solely for the purpose of 
acquiring and holding investments which are permissible for banks to hold 
under Massachusetts law. MSC is classified with the Massachusetts DOR as a 
"security corporation" under Massachusetts law, qualifying it to take 
advantage of the 1.32% income tax rate on Massachusetts securities 
corporations.

      Delaware State Taxation.  As a Delaware holding company not earning 
income in Delaware, the Company is exempted from Delaware Corporate income tax 
but is required to file an annual report with and pay an annual franchise tax 
to the State of Delaware.

ITEM 2.   DESCRIPTION OF PROPERTY.

      The Bank currently conducts its business through its main office located 
in the Dorchester section of Boston, Massachusetts and one other full-service 
banking office and two loan origination centers, all of which are located in 
the greater Boston metropolitan area.  Consistent with its expansion strategy, 
the Bank is actively pursuing establishing a de novo branch location.  Upon 
the establishment of the new branch office, the Bank intends to relocate its 
administrative functions to the new location.  The Bank expects to incur 
capital expenditures of up to $2 million in connection with the establishment 
of a de novo branch office and relocation of its administrative offices.  The 
Bank has purchased a building for $975,000 for this purpose and expects to 
open the facility in the Fall of 1999.  This building is currently held by the 
limited liability company which the branch is leasing.  Once such branch is 
established, the Company believes that the Bank's facilities will be adequate 
to meet the then present and immediately foreseeable needs of the Bank and the 
Company.  It is the opinion of management that all the properties are 
adequately covered by insurance.

<TABLE>
<CAPTION>

                                                                           Net Book Value
                                                                            of Property
                                                                            or Leasehold
                                                                            Improvements
                             Leased    Original Year                             at
                               or        Leased or        Date of Lease     December 31,
Location                     Owned       Acquired           Expiration          1998
-----------------------------------------------------------------------------------------
                                                                           (In thousands)

<S>                          <C>           <C>          <C>                     <C>
Main Office:
1442 Dorchester Avenue
Boston, MA  02122             (1)           (1)                (1)              $211

Banking Offices:
561 Adams Street
East Milton, MA  02186       Owned         1996                                  746

70 Quincy Ave (3)
Quincy, MA 02169             Owned         1999                                  975

Loan Origination Centers:
607 North Avenue, D-12
Wakefield, MA  01880         Leased        1997           February 2000           --

200 Cordwainer Drive
Norwell, MA  02061           Leased        1998           January 2000(2)         --
                                                                              ------
    Total                                                                     $1,932
                                                                              ======

--------------------
<F1>  This property is comprised of two adjacent parcels of land.  The Bank 
      owns one of the parcels, which it obtained in 1908, and leases the 
      other, which lease began in June 1986.  With respect to the leased 
      parcel, the Bank is currently in the first year of the second of three 
      five-year renewal options.  The current option period will expire in May 
      2003.
<F2>  The Bank has an option to renew this lease for an additional three-year 
      period.
<F3>  The Bank anticipates moving into the property and beginning retail 
      operations in the fall of 1999.

</TABLE>

ITEM 3.   LEGAL PROCEEDINGS.

      The Bank is not involved in any pending legal proceedings other than 
routine legal proceedings occurring in the ordinary course of business.  Such 
routine legal proceedings, in the aggregate, are believed by management to be 
immaterial to the financial condition and results of operations of the Bank. 

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

      None

PART II

ITEM 5.   MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER 
          MATTERS.

      Massachusetts Fincorp, Inc.'s Common Stock is traded over-the-counter 
through the National Daily Quotation Service "Pink Sheet" published by the 
National Quotation Bureau, Inc.  The stock began trading on December 23, 1998. 
 The high and low bid for the common stock for the quarter ended December 31, 
1998 were $10.56 and $10.00, respectively.  The quotations reflect inter-
dealer prices, without retail mark-up, mark-down or commission and may not 
represent actual transactions.  Massachusetts Fincorp, Inc. has approximately 
413 holders of record as of December 31, 1998.

Use of Proceeds

      The following information is provided in connection with the Company's 
sale of its common stock as part of the Bank's conversion:

      (a)   The effective date of the Registration Statement on Form SB-2 
            (File No. 333-60237) was October 9, 1999.

      (b)   The offering was consummated on December 22, 1998 with the sale of 
            545,481 securities registered pursuant to the Registration 
            Statement.  Trident Securities Inc. acted as marketing agent for 
            the offering.

      (c)   The class of securities registered was common stock, par value 
            $.01 per share.  The aggregate amount of such securities 
            registered was 545,481 shares which represented an aggregate 
            amount of $5,454,481.  That amount included 519,506 shares (or 
            $5,195,060) sold in the offering and 25,975 shares (or $259,750) 
            issued to the Massachusetts Co-operative Charitable Foundation.

      (d)   A reasonable estimate of the expenses incurred in connection with 
            the conversion and offering was $586,000, including expenses paid 
            to or for underwriters of $153,000, attorney and accounting fees 
            of $275,000 and other expenses of $158,000  The net proceeds 
            resulting from the offering after deducting expenses was 
            $4,600,000

      (e)   The net proceeds are temporarily invested in an interest-bearing 
            deposit account at The Massachusetts Co-operative Bank.  The 
            Company intends to use these funds to invest in loans, federal 
            funds and mortgage-backed securities and to repay Federal Home 
            Loan Bank borrowings.

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

      Statements contained in this document, which are not historical facts, 
are forward-looking statements as that term is defined in the Private 
Securities Litigation Reform Act of 1995. Such forward-looking statements are 
subject to risk and uncertainties, which could cause actual results to differ 
materially from those currently anticipated due to a number of factors.  Such 
factors include, but are not limited to, factors discussed in documents filed 
by the Bank with the Securities and Exchange Commission from time to time.

General

      The Company became operational on December 21, 1998 and, accordingly, 
had no significant operations during 1998.  The Company's results of 
operations primarily depend on its investment of net conversion proceeds in 
securities and interests on deposits of the Bank and dividends from the Bank. 
 The Bank's results of operations are dependent primarily on net interest 
income, which is the difference between the interest income earned on the 
Bank's interest-earning assets, such as loans and investments, and the 
interest expense on its interest-bearing liabilities, such as deposits and 
borrowings.  The Bank also generates non-interest income such as service 
charges and other fees.  The Bank's non-interest expenses primarily consist of 
employee compensation and benefits, depreciation and repairs, data processing 
fees, office building expenses and other operating expenses.  The Bank's 
results of operations are also significantly affected by general economic and 
competitive conditions, particularly changes in market interest rates, 
government policies and actions of regulatory agencies.  The Bank exceeded all 
of its regulatory capital requirements at December 31, 1998.

Management Strategy

      The Bank's operating strategy has in the past consisted of maintaining 
profitability and managing its interest rate risk mainly by originating fixed-
rate one-to four-family mortgage loans primarily for sale, generally on a 
servicing released basis, and originating adjustable-rate one-to four-family 
mortgage loans for investment.  The Bank has also pursued a growth strategy to 
broaden the Bank's lending and deposit base through the establishment of a de 
novo branch office in 1996 and two loan origination centers in the greater 
Boston metropolitan area in 1997 and 1998.  The Bank is actively pursuing the 
establishment of another de novo branch office  The Bank has purchased a 
building for $975,000 for this purpose and expects to open the facility in the 
Fall of 1999.  The Bank has made substantial infrastructure investments 
recently, including staffing, offices and technology, to support future 
growth.

Analysis of Net Interest Income

      Net interest income represents the difference between income on 
interest-earning assets and expense on interest-bearing liabilities.  Net 
interest income depends on the relative amounts of interest-earning assets and 
interest-bearing liabilities and the interest rate earned or paid on them.

      Average Balance Sheet.  The following table sets forth certain 
information relating to the Bank for the years ended December 31, 1998, 1997 
and 1996.  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 and reflect annualized yields 
and costs.  Average balances are derived from average monthly balances. The 
yields and costs include fees which are considered adjustments to yields.  
Loans on non-accrual status are included in the average balances of loans 
shown in the table.  Interest earned on loans is net of reserves for 
uncollected interest.

<TABLE>
<CAPTION>

                                                                    For the Years Ended December 31,
                                       -----------------------------------------------------------------------------------------
                                                   1998                           1997                           1996
                                       ----------------------------   ----------------------------   ---------------------------
                                                            Average                        Average                       Average
                                       Average              Yield/    Average              Yield/    Average             Yield/
                                       Balance   Interest    Cost     Balance   Interest    Cost     Balance   Interest   Cost
                                       -----------------------------------------------------------------------------------------
                                                                        (Dollars in thousands)

<S>                                    <C>        <C>       <C>       <C>        <C>       <C>       <C>        <C>      <C>
Assets:
  Interest earning assets:
    Federal funds sold and
     short term investments            $ 1,945    $  108      5.55%   $ 2,299    $  126      5.48%   $ 1,024    $   41     4.00%
    Securities                           6,928       430      6.21%     4,624       295      6.38%     5,137       329     6.40%
    Mortgage loans, net                 50,876     4,057      7.97%    40,507     3,342      8.25%    36,559     3,227     8.83%
    Other                                  924        63      6.82%       925        66      7.14%       761        55     7.23%
                                       -------------------------------------------------------------------------------
      Total interest earning asssets    60,673     4,658      7.68%    48,355     3,829      7.92%    43,481     3,652     8.40%
  Noninterest-earning assets             2,566                          2,625                          4,082
                                       -------                        -------                        -------
  Equity securities                        648        20      3.09%       368        27      7.34%       151        22    14.57%
                                       -------    ------              -------    ------              -------    ------
      Total assets                     $63,887    $4,678              $51,348     3,856              $47,714     3,674
                                       =======    ------              =======    ------              =======    ------
Liabilities and Surplus:
  Deposits:
    Savings accounts                   $ 9,685    $  191      1.97%   $10,328    $  244      2.36%   $ 9,854    $  240     2.44%
    Money market accounts                  808        21      2.60%     1,079        28      2.59%     1,290        33     2.56%
    Now accounts                        11,963       488      4.08%     5,377       173      3.20%     2,612        49     1.88%
    Certificates of deposit             26,585     1,481      5.57%    20,471     1,138      5.56%    16,405       926     5.64%
                                       -------    ------              -------    ------              -------    ------
      Total deposits                    49,041     2,181      4.45%    37,255     1,583      4.25%    30,161     1,248     4.14%
  FHLB advances                          4,267       259      6.07%     6,402       373      5.83%    10,406       640     6.15%
                                       -------    ------              -------    ------              -------    ------
      Total interest bearing
       liabilities                      53,308     2,440      4.58%    43,657     1,956      4.48%    40,567     1,888     4.65%
                                       -------    ------              -------    ------              -------    ------
Noninterest -bearing demand
 checking accounts                       4,486                          2,255                          2,043
Noninterest-bearing liabilities            644                            653                            620
                                       -------                        -------                        -------
      Total liabilities                 58,438                         46,565                         43,230
      Total surplus                      5,487                          4,783                          4,484
                                       -------                        -------                        -------
      Total liabilities and surplus    $63,925                        $51,348                        $47,714
                                       =======                        =======                        =======
Net interest income                               $2,238                         $1,900                         $1,786
                                                  ======                         ======                         ======
Net interest income/interest
 rate spread                                                  3.10%                          3.44%                         3.75%
                                                            ======                         ======                        ======
Net interest margin as a percent 
 of interest-earning assets                                   3.69%                          3.93%                         4.11%
                                                            ======                         ======                        ======
Ratio of interest-earning assets
 to interest-bearing liabilities                            113.82%                        110.76%                       107.18%
                                                            ======                         ======                        ======

</TABLE>

      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 Bank'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) the 
net change.  The changes attributable to the combined impact of volume and 
rate have been allocated proportionately to the changes due to volume and the 
changes due to rate.

<TABLE>
<CAPTION>

                                                Year Ended                   Year Ended 
                                             December 31, 1998            December 31, 1997
                                                Compared to                  Compared to
                                                Year Ended                   Year Ended
                                             December 31, 1997            December 31, 1996
                                         ------------------------     ------------------------
                                         Increase(Decrease)           Increase(Decrease)
                                               Due to                       Due to
                                         -----------------            -----------------
                                         Volume      Rate     Net     Volume      Rate     Net
                                         -----------------------------------------------------

<S>                                      <C>       <C>      <C>       <C>      <C>      <C>
Interest-earning assets:
  Federal funds sold and
   short-term investments                $ (20)    $   2    $ (18)    $  66    $  19    $  85
  Investment securities                    153        (2)     151       (13)      (6)     (19)
  Mortgage-backed securities, net          (12)       (4)     (16)      (21)       6      (15)
  Mortgage loans, net                      830      (115)     715       334     (219)     115
  Other loans                                -        (3)      (3)       (2)       2        -
  FHLB stock                                 -         -        -        12       (1)      11
                                         ----------------------------------------------------
    Total interest-earning assets          951      (122)     829       376     (199)     177
                                         ----------------------------------------------------
Interest-bearing liabilities:
  Savings accounts                         (15)      (38)     (53)       10       (6)       4
  Money market accounts                     (7)        -       (7)       (5)       -       (5)
  NOW accounts                             258        57      315        74       50      124
  Certificates of deposit                  341         2      343       227      (15)     212
  FHLB advances                           (129)       15     (114)     (235)     (32)    (267)
                                         ----------------------------------------------------
    Total interest-bearing liabilities     448        36      484        71       (3)      68
                                         ----------------------------------------------------
Net change in net interest income (1)    $ 503     $(158)   $ 345     $ 305    $(196)   $ 109
                                         ====================================================

--------------------
<F1>  Net interest income does not include dividends received on equity 
      securities.

</TABLE>

Comparison of Financial Condition at December 31, 1998 and December 31, 1997

      The Bank's total assets increased $17.0 million, to $71.6 million at 
December 31, 1998 from $54.6 million at December 31, 1997.  The increase in 
total assets was primarily attributed to  increases in federal funds sold and 
in the loan and securities portfolios. Federal funds increased $1.6 million, 
or 920.7% to $1.8 million at December 31, 1998 from $173,000 at December 31, 
1997.  Loans and loans held for sale, net, increased $13.6 million, or 30.6% 
to $58.0 million at December 31, 1998 from $44.4 million at December 31, 1997. 
 The increase in loans resulted from the increase of $6.9 million, or 18.3%, 
in fixed rate one-to-four family mortgage loans, a $5.8 million, or 269.3% 
increase in advanced construction loans and a $3.2 million, or 98.9% increase 
in loans available for sale.  The increase in loans primarily reflects the 
opening of a new origination office in Norwell, Massachusetts, an increase in 
the number of loan originators, increased marketing efforts of the Bank to 
generate these types of loans as well as a favorable interest rate 
environment.  The securities portfolio increased $2.7, or 45%, to $8.7 million 
at December 31, 1998 from $6.0 million at December 31, 1997.  This increase 
was primarily the result of an increase in available for sale corporate bonds.

      The increase in assets was funded by a $7.6 million increase in interest 
bearing checking and demand deposit accounts and a $6.9 million increase in 
certificate of deposit accounts.  The Bank's total deposits increased $14.3 
million, or 34.0%, to $57.0 million at December 31, 1998 from $42.7 million at 
December 31, 1997.  The increase in deposit accounts resulted from the 
promotion of new competitively priced deposit products as well as continued 
deposit growth from the branch office which opened in 1996.

      Non-performing assets totaled $173,000 at December 31, 1998 as compared 
to $115,000, an increase of $58,000. A portion of the non-performing assets 
were part of a workout agreement and $79,000 of the balance was paid off in 
January 1999.  Surplus increased $4.5 million, or 90.6%, to $9.5 million at 
December 31, 1998 compared to $5.0 million at December 31, 1997.  This 
increase in surplus was the result of net conversion proceeds of $4.9 million 
from the conversion of the Bank from a mutual co-operative bank to a capital 
stock co-operative bank. Net conversion proceeds were used to fund loan 
production and reduce borrowings from FHLB-Boston, which decreased $2.2 
million, or 34.4%, to $4.2 million at December 31, 1998 from $6.4 million at 
December 31, 1997.

Comparison of Financial Condition at December 31, 1997 and December 31, 1996

      The Bank's total assets increased $3.9 million, or 7.6%, to $54.6 
million at December 31, 1997 from $50.8 million at December 31, 1996.  The 
increase in total assets was primarily the result of an increase in the 
mortgage loan and securities portfolios.  Loans and loans held for sale, net, 
increased $4.4 million, or 10.9%, to $44.5 million at December 31, 1997 from 
$40.0 million at December 31, 1996.  The increase in loans resulted from the 
increase of $1.6 million, or 16.7%, in fixed-rate one-to four-family mortgage 
loans, a $689,000, or 46.6%, increase in advanced construction loans and a 
$1.8 million, or 128%, increase in loans available for sale.  The increase in 
loans primarily reflects the opening of a new loan origination office in 
Wakefield, Massachusetts, an increase in the number of loan originators, 
increased marketing efforts, and a favorable interest rate environment.  

      The increase in total assets was primarily funded by a $4.8 million 
increase in interest-bearing checking and demand deposit accounts and a $4.3 
million increase in certificate of deposit accounts.  The Bank's total 
deposits increased $8.7 million, or 25.4%, to $42.9 million at December 31, 
1997 from $34.2 at December 31, 1996.  The increase in deposits was mainly the 
result of opening a new retail branch office in East Milton, Massachusetts in 
August 1996.  Deposit growth was used to fund loan production and reduce 
borrowings from the FHLB-Boston, which decreased $5.2 million, or 44.5%, to 
$6.4 million at December 31, 1997 as compared to $11.6 million at December 31, 
1996.

      Non-performing assets totaled $115,000 at December 31, 1997 compared to 
$932,000 at December 31, 1996, a decrease of $817,000, or 87.7%.  The decrease 
is primarily due to a $277,000, or 70.8%, reduction in non-accrual loans and 
a $540,000 decrease in REO to a zero balance resulting from the sale of its 
remaining parcel of REO.

      Surplus increased $392,000 from $4.6 million, or 9.0% of total assets at 
December 31, 1996, to $5.0 million, or 9.1% of total assets at December 31, 
1997.  The increase in surplus was due to net income during the year ended 
December 31, 1997.

Comparison of Operating Results for the Years Ended December 31, 1998 and 1997

      General.

      Net income decreased $296,000, or 80.7% to $71,000 for the year ended 
December 31, 1998 from $367,000 for the year ended December 31, 1997.  The 
decrease in net income was primarily attributed to non-interest expense 
increasing $800,000, or 41.2% to $2.8 million for the year ended December 31, 
1998 as compared to $2.0 million for the year ended December 31, 1997.  The 
increase in non-interest expense was primarily the result of addition to staff 
based on growth and a one-time non-occurring expense due to the formation of 
the Massachusetts Co-operative Charitable Foundation.  Not including these 
one-time expenses, net income would have been $253,000.

      Interest Income.

      Interest income for the year ended December 31, 1998 increased $800,000, 
or 21.3%, to $4.7 million as compared to $3.9 million for the year ended 
December 31, 1997.  The increase in interest income was primarily the result 
of a $13.6 million increase in loans, due to increased originations in fixed 
one-to-four family mortgage loans, construction loans and mortgage loans held 
for sale, as well as,a $144,000 increase in interest and dividend income on 
investments.  The effect of higher average balances in interest earning assets 
was offset, in part, by lower average yield on interest earning assets.  The 
average yield on interest earning assets decreased 20 basis points to 7.7% 
during the year ended December 31, 1998 as compared to an average yield of 
7.9% for the year ended December 31, 1997.  The decline was caused by falling 
interest rates which stimulated consumer mortgage refinancing activity.

      Interest Expense.

      Interest expense for the year ended December 31, 1998 was $2.5 million 
compared to $2.0 million for the same period in 1997, an increase of $500,000 
or 25%.  The increase reflects both an increase in average interest bearing 
liabilities of $9.6 million and an increase in average rates paid.  The 
increase in average interest bearing liabilities was primarily due to an 
increase in interest bearing checking accounts and term certificates of 
deposit.  Average interest bearing checking accounts increased $6.6 million, 
or 122.2%, to $12.0 million for the year ended December 31, 1998 as compared 
to $5.4 for year ended December 31, 1997.  Average term certificates of 
deposit increased $6.1 million, or 29.8%, to $26.6 million for the year ended 
December 31, 1998 as compared to $20.5 million for the same period in 1997. 
 The increase in interest bearing checking accounts was primarily the result 
of the Bank's promotion of a tiered interest bearing checking accounts for 
retail customers to attract new deposit relationships.  These increases were 
partially offeset by a lower expense on borrowed funds.

      Net Interest Income.

      Net interest income increased $200,000, or 15.8%, to $2.2 million for 
the year ended December 31, 1998 from $2.0 million for the same period in 
1997.  The increase was due to a combination of an increase in average 
interest earning assets in excess of interest bearing liabilities of $7.4 
million, offset by the effect of a 34 basis point decline in interest rate 
spread which decreased to 3.10% from 3.44%.

      Provision (Credit) for Possible Loan Losses.

      The Bank's provision for possible loan losses increased $177,000 to 
$87,000 for the year ended December 31, 1998 compared to a credit of $90,000 
for the same period in 1997.  The increase in the provision primarily 
reflected the increase in the Bank's overall loan portfolio weighted by loan 
product and management's ongoing review and analysis of the general loan loss 
reserve.  The allowance for possible loan losses as a percent of loans was 
0.89% for year ended December 31, 1998 as compared to 0.79% for the same 
period in 1997.  Non-performing loans increased $58,000 to $173,000 for year 
ended December 31, 1998 compared to $115,000 for year ended December 31, 1997. 
 The increase was attributable to a workout agreement under which $79,000 of 
these loans were paid in January 1999.  The workout agreement required no 
additional reserve.

      Non-Interest Income.

      Non-interest income increased $200,000, to $700,000, for the year ended 
December 31, 1998 from $500,000 for the year ended December 31, 1997.  The 
increase was primarily attributed to a $211,000 increase in the gain on sale 
of loans for the year ended December 31, 1998, due to the increased 
originations of fixed rate loans originated for sale.  Additionally, the Bank 
recognized an increase of $65,000 in miscellaneous income.

      Non-Interest Expense.

      Non-interest expense increased $800,000, or 40%, to $2.8 million for the 
year ended December 31, 1998 from $2.0 million for the year ended December 31, 
1997.  The increase was primarily due to an increase in salaries and benefits 
of $300,000 of which $224,000 was the result of addition to staff based on 
growth and $76,000 was the result of discretionary payments to ESOP and 
bonuses. A $259,000 one time non-recurring expense related to the funding of 
the Massachusetts Co-operative Charitable Foundation and an additional $44,000 
increase in advertising and marketing costs as the result of expenses 
associated with the Bank's promotional activities regarding its deposit 
products, contributed to the increase in non-interest expense.

      Income Tax Expense.

      Income tax expense decreased $107,000, or 78.1%, to $30,000 for the year 
ended December 31, 1998 from $137,000 for the year ended December 31, 1997. 
This decrease was primarily due to the decrease of $400,000 in pre-tax income. 
The effective tax rates for years ended December 31, 1998 and 1997 were 30.0% 
and 27.2%, respectively, which are below the statutory rate due to the 
utilization of capital loss carry forwards and tax credits which are estimated 
to be fully utilized by the Bank.  The Bank also formed a securities 
corporation for investments which resulted in a lower state tax rate.

Comparison of Operating Results for the Years Ended December 31, 1997 and 1996

      General.  Net income increased $175,000, or 91.1%, to $367,000 for the 
year ended December 31, 1997 from $192,000 for the year ended December 31, 
1996.  The increase was primarily attributable to increased interest income 
due to increased loan origination activity and a $104,000 decrease in the 
Bank's loan loss provision due to a reduction in non-accrual loans and 
classified assets. Other income increased $261,000, or 117%, which was 
primarily the result of gains on the sale of loans available for sale.  These 
increases in income were partially offset by an increase in non-interest 
expense of $218,000, or 12.4 %, which was primarily attributable to increases 
in salaries and benefits, due to additional staffing for the Bank's new retail 
branch office which opened in August 1996 and a new loan origination office 
which opened in January 1996.

      Interest Income.  Interest income for the year ended December 31, 1997 
increased $182,000, or 5.0%, to $3.9 million as compared to $3.7 million for 
the year ended December 31, 1996.  The increase in interest income during 1997 
was primarily attributable to an increase in the average balances of interest-
earning assets, due primarily to an increase in the average balance of 
mortgage loans, net, which increased by $3.9 million, or 10.8%, to $40.5 
million for the year ended December 31, 1997 from $36.6 million for the year 
ended December 31, 1996.  The increase was partially offset by a 48 basis 
point decrease in the weighted average yield on interest-earning assets to 
7.92% for the year ended December 31, 1997 from 8.40% for the year ended 
December 31, 1996, which decrease was primarily due to a lower market interest 
rate environment.  The increase in loans reflects an increase in one-to-four 
family loans of $4.7 million and an increase in available for sale loans of 
$1.8 million.  As a result, interest income on loans increased $115,000, or 
3.5%, to $3.4 million for the year ended December 31, 1997 as compared to $3.2 
million for the year ended December 31, 1996.

      Interest Expense.  Interest expense increased $68,000, or 3.6%, to $2.0 
million for year ended December 31, 1997 from $1.9 million for year ended 
December 31, 1996.  This increase was primarily due to the growth in the 
Bank's deposit base as the result of the Bank's new branch office and was 
offset with a decrease in the average balance of borrowings from the FHLB-
Boston. The growth in the deposit base consisted of a $2.8 million increase in 
average balances of interest-bearing checking accounts, and a $4.1 million 
increase in average balances of certificate of deposit accounts.  These 
increases were partially offset by a decrease in the average cost of funds due 
to a $4.0 million decrease in FHLB advances, and a 32 basis point decrease in 
the average cost of FHLB advances to 5.83% for year ended December 31, 1997 
from 6.15% for the year ended December 31, 1996.

      Net Interest Income.  Net interest income increased $114,000, or 6.4%, 
to $1.9 million for the year ended December 31, 1997 from $1.8 million for the 
same period in 1996.  The increase was due to a combination of an increase in 
average interest-earning assets in excess of interest-bearing liabilities of 
$1.8 million, offset by the effect of a 31 basis point decline in the interest 
rate spread which decreased to 3.44% from 3.75%.

      Provision (Credit) for Possible Loan Losses.  The Bank experienced a 
credit to income of $90,000 from a reduction in the Bank's allowance for loan 
losses for the year ended December 31, 1997 resulting in a decrease in the 
provision for possible loan losses of $104,000 from the prior year's level of 
$14,000.  The reduction in the allowance was based on management's evaluation 
of existing real estate market conditions, improvement in the level of charge-
offs, classified assets and recoveries of $128,000 in charged-off loans for 
the year ended December 31, 1997 as well as the relative stabilization of 
general economic conditions in the Bank's primary market area. The increased 
values in properties also resulted in increased collateral margins.   Non-
performing loans decreased $277,000, or 70.7%, to $115,000 for the year ended 
December 31, 1997 from $392,000 for the year ended December 31, 1996, as the 
result of prepayment of certain loans on a non-accrual status.

      Non-Interest Income.  Non-interest income increased $261,000, or 117%, 
to $485,000 for the year ended December 31, 1997 from $224,000 for the year 
ended December 31, 1996.  This increase was primarily due to a $192,000 
increase on the sale of loans available-for-sale due to improved product 
pricing, operating efficiency and improved quality control.  Additionally, the 
Bank realized losses of $35,000 on unlocked loans due to a decline in interest 
rates.  The increase was also due to a $33,000 increase in customer service 
fees due to an increased volume of checking accounts and fee increases, and a 
$19,000 gain on the sale of available-for-sale securities.

      Non-Interest Expense.  Non-interest expense for the year ended 
December 31, 1997 increased $218,000, or 12.4%, to $2.0 million from $1.8 
million for the year ended December 31, 1996.  This increase was primarily due 
to a $231,000 increase in salaries and employee benefits as a result of a full 
years expense relating to increased personnel  for the Bank's new branch 
office and new loan origination office which opened during 1996.  Occupancy 
and equipment increased $14,000, or 5.1%, as the result of depreciation and 
general operating costs resulting from the opening of the new branch office.

      Income Tax Expense.  Income tax expense increased $86,000, or 169%, to 
$137,000 for the year ended December 31, 1997 from $51,000 for the year ended 
December 31, 1996.  The effective tax rates for the years ended December 31, 
1997 and 1996 were 27.2% and 21.0%, respectively, which are below the 
statutory rate due to the utilization of the valuation reserve.

Liquidity and Capital Resources

      The Bank's primary sources of funds are deposits, principal and interest 
payments on loans and proceeds from maturing securities and borrowings from 
FHLB-Boston.  While maturities and scheduled amortization of loans and 
securities are predictable sources of funds, deposit outflows and mortgage 
prepayments are greatly influenced by general interest rates, economic 
conditions and competition.

      The primary investing activities of the Bank are the origination of 
primarily residential one-to four-family mortgage loans and, to a lesser 
extent, multi-family and commercial real estate loans, construction loans, 
home equity lines of credit and consumer loans and the investment in mortgage-
backed securities, U.S. Government and agency obligations and corporate equity 
securities and debt obligations.  These activities are funded primarily by 
principal and interest payments on loans, maturing of investment securities, 
deposit growth and the utilization of FHLB advances.  During the years ended 
December 31, 1998 and 1997, the Bank's loan originations totaled $81.0 
million, and $37.3 million, respectively.  For the years ended December 31, 
1998 and 1997, the Bank's investments in U.S. Government and agency 
obligations and corporate equity securities and debt obligations totaled $7.7 
million and $5.0 million, respectively.  The Bank experienced a net increase 
in total deposits of $14.0 million and $8.7 million for the years ended 
December 31, 1998 and 1997, respectively.  Deposit flows are affected by the 
overall level of interest rates, the interest rates and products offered by 
the Bank and its local competitors and other factors.  The Bank closely 
monitors its liquidity position on a daily basis.  In the event the Bank 
should require funds beyond its ability to generate them internally, 
additional sources of funds are available through FHLB advances.  At 
December 31, 1998, the Bank had $4.2 million of outstanding FHLB borrowings.

      Outstanding commitments for all loans totaled $8.8 million at 
December 31, 1998.  Management of the Bank anticipates that it will have 
sufficient funds available to meet its current loan commitments.  Certificates 
of deposit which are scheduled to mature in one year or less from December 31, 
1998 totaled $6.8 million.  From December 31, 1997 to December 31, 1998, the 
Bank experienced a 75.3% retention rate of funds maturing from certificates of 
deposit. It has been and will continue to be a priority of management to 
retain time deposits.  The Bank relies primarily on competitive rates, 
customer service, and long-standing relationships with customers to retain 
deposits.  From time to time, the Bank will also offer competitive special 
products to its customers to increase retention.  Based upon the Bank's 
experience with deposit retention and current retention strategies, 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 Bank.

      At December 31, 1998, the Bank exceeded all of its regulatory capital 
requirements with a leverage capital level of $7.5 million, or 15.9% of 
adjusted assets, which is above the required level of $1.8 million, or 4.00%, 
and risk-based capital of $8.0 million, or 17.0% of adjusted assets, which is 
above the required level of $3.7 million, or 8.00%.

      The capital injection from the Conversion significantly increased 
liquidity and capital resources.  Over time, the initial level of liquidity 
will be reduced as net proceeds are utilized for general corporate purposes, 
including the funding of lending activities and the expansion of facilities. 
 Specifically, the Bank expects to incur capital expenditures of approximately 
$2.0 million in connection with the establishment of a de novo branch office 
and relocation of its administrative offices, and approximately $180,000 in 
connection with achieving Year 2000 compliance and upgrading its related 
technology systems.

Year 2000 Compliance

      Many existing computer programs use only two digits to identify a year 
in the date field.  These programs were designed without considering the 
impact of the upcoming change in the century.  If not corrected, many computer 
applications and systems could fail or create erroneous results by or at the 
year 2000. In addressing the year 2000, the Bank has adopted a "Year 2000 
Policy" and has broken down the process into six steps: awareness, inventory, 
assessment, conversion and implementation, testing and contingency.

      The Bank has substantially completed its awareness phase with the 
exception of its ongoing task of notifying its customers and shareholders of 
its preparedness. The Bank has also completed its inventory phase. During the 
inventory phase the Bank identified all hardware and software applications as 
well as vendor and service providers.  The various systems identified were 
then prioritized in consideration of their overall importance of use to the 
Bank.  During the conversion and implementation phase, the Bank has replaced 
all internal systems which were deemed critical or necessary to the Bank's 
operation.

      While the Bank maintains an internal computer system for certain 
operating functions, the substantial majority of the Bank's data processing is 
out-sourced to a third party. The Bank has reviewed the Year 2000 compliance 
of its third party data processing vendor.  In connection with such review, 
the Bank determined that its current third party data processing vendor is not 
Year 2000 compliant and, accordingly, has formally agreed to engage a new 
third party data processing vendor. Such new third party vendor has provided 
the Bank with written assurances that the system and the software which it is 
licensed to use are Year 2000 compliant.  The Bank's new third party data 
processor has begun to test the integration of the system with its licensed 
software to ensure that the integrated system will be Year 2000 compliant, 
together, and expects to achieve such compliance by March 31, 1999.  The Bank 
began utilizing such third party vendor's services on March 22, 1999.

      The Bank has completed the internal portion of its testing phase.  The 
Bank expects to complete the external portion of the testing plan by March 31, 
1999.  During the contingency phase, the Bank will identify alternative 
systems for all critical and necessary systems, which are not compliant and 
tested by March 31, 1999.  The Bank expects to identify appropriate business 
responses to all critical core processes by June 30,1999.

      The Bank's operations may also be affected by the Year 2000 compliance 
of its significant customers, suppliers and other vendors. The Bank's loan 
portfolio consists primarily of loans on residential and mixed use properties 
whose cash flows depended on payments of leases by tenants that are unlikely 
to be materially affected by Year 2000 issues.  The Bank has reviewed its 
loan relationships and has determined that it does not have any material 
amount of loans to individuals or entities that are susceptible to Year 2000 
issues such that their noncompliance with Year 2000 issues will materially 
affect their ability to repay such loans.   New loan relationships are 
reviewed for potential year 2000 implications during the underwriting process

      Although the Bank has contacted each of its significant suppliers and 
vendors it continues to monitor their progress, the Bank does not currently 
have complete information concerning the compliance status of its significant 
suppliers and other vendors. The Bank's business or operations could be 
adversely affected if any of the Bank's significant customers and suppliers do 
not successfully achieve Year 2000 compliance in a timely manner. However, 
management believes that the Bank's own internal system, networks and 
resources would allow the Bank to effectively operate and service its 
customers in the event its significant vendors do not achieve satisfactory 
year 2000 compliance. In addition, If significant suppliers fail to meet Year 
2000 operating requirements, the Bank intends to engage alternative suppliers. 
In the event that the Bank's progress towards becoming Year 2000 complaint is 
deemed inadequate, regulatory action may be undertaken.

      The Bank is currently engaging in an upgrade of its technology systems 
in addition to implementing its Year 2000 policy. To date, the Bank has 
expended approximately $80,000 on Year 2000 issues and related technology 
updates. In addition, the Bank has estimated that it will spend another 
$100,000 in connection with the future costs associated with achieving Year 
2000 compliance and its related technology systems upgrade.  Approximately 
$69,000 of the past and $95,000 of the future expenses represent upgrades to 
the Bank's general ledger and data processing systems. The cost of these 
systems will be capitalized and depreciated over their expected useful life. 
 While the Bank cannot estimate the costs and expenses associated with hiring 
new vendors and suppliers, management believes that such costs would not have 
a material impact on the Bank's earnings or results of operations.

Impact of Inflation and Changing Prices

      The Financial Statements and Notes thereto presented herein have been 
prepared in accordance with GAAP, which generally require the measurement of 
financial position and operating results in terms of historical dollar amounts 
without considering the changes in the relative purchasing power of money over 
time due to inflation.  The impact of inflation is reflected in the increased 
cost of the Bank's operations.  Unlike industrial companies, nearly all of the 
assets and liabilities of the Bank are monetary in nature.  As a result, 
interest rates have a greater impact on the Bank's performance than do the 
effects of general levels of inflation.  Interest rates do not necessarily 
move in the same direction or to the same extent as the price of goods and 
services.

Impact of Accounting Standards

      The Bank will be required to account for the ESOP under SOP 93-6.  SOP 
93-6 measures compensation expense recorded by employers for leveraged ESOPs 
using the fair value of ESOP shares.  Under SOP 93-6, the Company will 
recognize compensation cost equal to the fair value of the ESOP shares during 
the periods in which they become committed to be released.  To the extent that 
the fair value of the Bank's ESOP shares differ from the cost of  such shares, 
this differential will be charged or credited to equity.  Employers with 
internally leveraged ESOPs will not report the loan receivable from the ESOP 
as an asset and will not report the ESOP debt as a liability.  See "Management 
of the Bank--Other Benefit Plans--Employee Stock Ownership Plan."

      In November 1995, the Financial Accounting Standards Board ("FASB") 
issued SFAS No. 123, "Accounting for Stock Based Compensation" ("SFAS No. 
123").  This statement establishes financial accounting standards for stock-
based employee compensation plans.  SFAS No. 123 permits the Company to choose 
either the new fair value based method, or the current accounting prescribed 
by Accounting Principles Board ("APB") Opinion 25, using the intrinsic value 
based method of accounting for its stock-based compensation arrangements.  
SFAS No. 123 requires pro forma disclosures of net earnings and earnings per 
share computed as if the fair value based method had been applied in APB 
Opinion 25.  SFAS No. 123 applies to all stock-based employee compensation 
plans in which an employer grants shares of its stock or other equity 
instruments to employees except for employee stock ownership plans.  SFAS No. 
123 also applies to plans in which the employer incurs liabilities to 
employees in amounts based on the price of the employer's stock, (e.g., stock 
option plans, stock purchase plans, restricted stock plans, and stock 
appreciation rights).  SFAS No. 123 also specifies the accounting for 
transactions in which a company issues stock options or other equity 
instruments for services provided by nonemployees or to acquire goods or 
services from outside suppliers or vendors.  The recognition provisions of 
SFAS No. 123 for companies choosing to adopt the new fair value based method 
of accounting for stock-based compensation arrangements may be adopted 
immediately and will apply to all transactions entered into in fiscal years 
then beginning after December 15, 1995.  The disclosure provisions of SFAS No. 
123 are effective for fiscal years beginning after December 15, 1995, however, 
disclosure of the pro forma net earnings and earnings per share, as if the 
fair value method of accounting for stock-based compensation had been elected 
is required for all awards granted in fiscal years beginning after 
December 31, 1994.  The Company expects to account for its stock-based 
compensation arrangements as prescribed in APB Opinion 25 upon the 
consummation of the Conversion.

      In June 1996, the FASB issued SFAS No. 125, "Accounting for Transfers 
and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS 
No. 125"), which supersedes FASB Statements No. 76, "Extinguishments of Debt," 
and No. 77, "Reporting by Transferors for Transfers of Receivables with 
Recourse."  This statement amends FASB Statement No. 115, "Accounting for 
Certain Investments in Debt and Equity Securities," and amends and extends to 
all servicing assets and liabilities, the accounting standards for mortgage 
servicing rights not set forth in SFAS No. 65, and supersedes SFAS No. 122. 
 SFAS No. 125 provides accounting and reporting standards for transfers and 
servicing of financial assets and extinguishments of liabilities.  After a 
transfer of financial assets, an entity recognizes the financial and servicing 
assets it controls and the liabilities it has incurred, derecognizes financial 
assets when control has been surrendered, and derecognizes liabilities when 
extinguished.  SFAS No. 125 provides consistent standards for distinguishing 
transfers of financial assets that are sales from transfers that are secured 
borrowings.  A transfer of financial assets in which the transferor surrenders 
control over those assets is accounted for as a sale to the extent that 
consideration other than beneficial interests in the transferred assets is 
received in exchange.  SFAS No. 125 further requires that liabilities and 
derivatives incurred or obtained by transferors as part of a transfer of 
financial assets be initially measured at fair value, if practicable.  It also 
requires that servicing assets and other retained interests in the transferred 
assets be measured by allocating the previous carrying amount between the 
assets sold, if any, and retained interest, if any, based on their relative 
fair values on the date of the transfer.  SFAS No. 125 also requires that 
servicing assets and liabilities be subsequently measured by (a) amortization 
in proportion to and over the period of estimated net servicing income or loss 
and (b) assessment for asset impairment or increased obligation based on their 
fair values.  SFAS No. 125 requires that debtors reclassify financial assets 
pledged as collateral and that secured parties recognize those assets and 
their obligation to return them to certain circumstances in which the secured 
party has taken control of those assets.  SFAS No. 125 requires that a 
liability be derecognized if and only if either (i) the debtor pays the 
creditor and is relieved of its obligation or the liability of (ii) the debtor 
is legally released from being the primary obligor under the liability either 
judicially or by the creditor.  Therefore, a liability is not considered 
extinguished by an in-substance defeasance.  SFAS No. 125 is effective for 
transfers and servicing of financial assets and extinguishments of liabilities 
occurring after December 31, 1997, and was adopted by the Bank on January 1, 
1997.  Such adoption was not material to the Bank.

      In February 1997, the FASB issued SFAS No. 129, "Disclosure of 
Information about Capital Structure," which establishes standards for 
disclosing information about an entity's capital structure.  This Statement 
continues the previous disclosure requirements found in APB Opinions No. 10, 
"Omnibus Opinion -1996," and No. 15, "Earnings Per Share," and FASB Statement 
No. 47, "Disclosure of Long-Term Obligations" and eliminates the exemption of 
nonpublic entities from certain disclosure requirements of Opinion 15.  
Additionally, this Statement consolidates capital disclosure requirements for 
ease of retrieval and greater visibility to nonpublic entities.  This 
Statement is effective for financial statements for periods ending after 
December 15, 1997 and is not expected to have a material impact on the 
Company.

      In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive 
Income."  This Statement establishes standards for reporting and displaying 
comprehensive income and its components within the financial statements.  
Comprehensive income is defined in FASB Concepts Statement 6 as the "change in 
equity of a business enterprise during a period from transactions and other 
events and circumstances from nonowner sources.  It includes all changes in 
equity during a period except those resulting from investments by owners and 
distributions to owners."  The Statement is effective for fiscal years 
beginning after December 15, 1997 and was adopted on January 1, 1998.

      In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments 
of an Enterprise and Related Information" which establishes standards for the 
way that public business enterprises report information about operating 
segments in annual financial statements.  This Statement requires that those 
enterprises report selected information about operating segments in interim 
financial reports issued to shareholders.  This Statement supersedes FASB 
Statement No. 14, "Financial Reporting for Segments of a Business Enterprise." 
 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 in 
assessing performance.  This Statement is effective for financial statements 
for periods beginning after December 15, 1997 and is not expected to have a 
material impact on the Company.

      In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures 
about Pensions and Other Postretirement Benefits," which standardizes the 
disclosure requirements for pensions and other postretirement benefits.  This 
Statement supersedes FASB Statements No. 87, "Employers' Accounting for 
Pensions," No. 88, "Employers' Accounting for Settlements and Curtailments of 
Defined Benefit Pension Plans and for Termination Benefits," and No. 106, 
"Employers' Accounting for Postretirement Benefits other than Pensions."  This 
Statement is effective for fiscal years beginning after December 15, 1997 and 
is not expected to have a material impact on the Company.

      In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative 
Instruments and Hedging Activities," which addresses the accounting for 
derivative instruments, including certain derivative instruments embedded in 
other contracts, and hedging activities.  This Statement amends FASB Statement 
No. 52, "Foreign Currency Translation" to permit special accounting for a 
hedge of a foreign currency forecasted transaction with a derivative.  It 
supersedes FASB Statements No. 80, "Accounting for Futures Contracts," 
No. 105, "Disclosure of Information about Financial Instruments with Off-
Balance-Sheet Risk and Financial Instruments with Concentrations of Credit 
Risk," and No. 119, "Disclosure about Derivative Financial Instruments and 
Fair Value of Financial Instruments."  It amends Statement No. 107, 
"Disclosures about Fair Value of Financial Instruments" to include in 
Statement 107 the disclosure provisions about concentrations of credit risk 
from Statement 105.  This Statement is effective for all fiscal quarters of 
fiscal years beginning after June 15, 1999.

Form of accountant letterhead
-----------------------------

Report of Independent Certified Public Accountants
--------------------------------------------------


Board of Directors
Massachusetts Fincorp, Inc. and Subsidiaries


      We have audited the consolidated balance sheet of Massachusetts 
Fincorp, Inc. and Subsidiaries as of December 31, 1998, and the related 
consolidated statements of income and comprehensive income, stockholders' 
equity, and cash flows for the year then ended.  These financial statements 
are the responsibility of the Bank's management.  Our responsibility is to 
express an opinion on these financial statements based on our audit.  The 
financial statements of Massachusetts Co-operative Bank as of December 31, 
1997 and for the years ended December 31, 1997 and 1996, were audited by 
other auditors whose report dated March 6, 1998, expressed an unqualified 
opinion on those statements.

      We conducted our audit in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial 
statements.  An audit also includes assessing the accounting principles 
used and significant estimates made by management, as well as evaluating 
the overall financial statement presentation.  We believe that our audit 
provides a reasonable basis for our opinion.

      In our opinion, the 1998 financial statements referred to above 
present fairly, in all material respects, the consolidated financial 
position of Massachusetts Fincorp, Inc. and Subsidiaries as of December 31, 
1998, and the consolidated results of their operations and their 
consolidated cash flows for the year then ended, in conformity with 
generally accepted accounting principles.


/s/ Grant Thornton LLP


Boston, Massachusetts
February 12, 1999


                        INDEPENDENT AUDITORS' REPORT



The Finance Committee
Massachusetts Co-operative Bank
Dorchester, Massachusetts

We have audited the accompanying balance sheet of Massachusetts Co-
operative Bank as of December 31, 1997, and the related statements of 
income and comprehensive income, changes in surplus and cash flows for each 
of the years in the two year period ended December 31, 1997.  These 
financial statements are the responsibility of the Bank's management.  Our 
responsibility is to express an opinion on these financial statements based 
on our audits.

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

In our opinion, the financial statements referred to above present fairly, 
in all material respects, the financial position of Massachusetts Co-
operative Bank as of December 31, 1997, and the results of its operations 
and its cash flows for each of the years in the two year period ended 
December 31, 1997 in conformity with generally accepted accounting 
principles.



/s/WOLF & COMPANY, P.C.


Boston, Massachusetts 
March 6, 1998


ITEM 7.    FINANCIAL STATEMENTS


                Massachusetts Fincorp, Inc. and Subsidiaries
                         CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                     December 31,
                                              --------------------------
                                                  1998           1997
                                              --------------------------

<S>                                           <C>            <C>
ASSETS
Cash and due from banks                       $   708,827    $ 1,320,315
Federal funds sold                              1,760,909        172,518
                                              --------------------------
    Total cash and cash equivalents             2,469,736      1,492,833

Securities available for sale                   7,403,857      3,022,890
Securities held to maturity                     1,308,286      2,979,113
Federal Home Loan Bank Stock, at cost             762,800        762,800
Mortgages loans held for sale                   6,335,665      3,185,120

Loans                                          51,801,597     41,614,930
Less:  allowance for possible loan losses        (524,924)      (349,404)
                                              --------------------------
    Loans, net                                 51,276,673     41,265,526

Banking premises and equipment, net.            1,206,459      1,200,551
Accrued interest recievable                       350,054        322,257
Due from Co-operative Central Bank                242,850        242,850
Other assets                                      276,740        156,549
                                              --------------------------
                                              $71,633,120    $54,630,489
                                              ==========================

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits                                      $56,992,800    $42,667,742
Federal Home Loan Bank borrowings               4,210,889      6,435,707
Mortgagor's escrow accounts                       292,944        263,368
Accrued expenses and other liabilities            633,277        277,154
                                              --------------------------
    Total liabilities                          62,129,910     49,643,971
                                              --------------------------

Commitments and contingencies

Preferred stock, par value $.01 per share,
 500,000 shares authorized                              -              -
Common stock par value $.01 per share,
 2,500,000 shares authorized;
 545,481 shares issued and outstanding              5,455              -
Additional paid in capital                      4,885,076              -
Unallocated ESOP shares                          (392,742)             -
Retained earnings                               5,003,347      4,932,838
Accumulated other comprehensive income              2,074         53,680
                                              --------------------------
Total Shareholders' equity                      9,503,210      4,986,518
                                              --------------------------
                                              $71,633,120    $54,630,489
                                              ==========================

</TABLE>

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


                Massachusetts Fincorp, Inc. and Subsidiaries
         CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>

                                                                Years ended December 31,
                                                         --------------------------------------
                                                            1998          1997          1996
                                                         --------------------------------------

<S>                                                      <C>           <C>           <C>
Interest and dividend income:
  Interest and fees on loans                             $4,070,807    $3,359,390    $3,243,577
  Interest  on investments                                  445,330       311,261       347,558
  Dividends on investments                                   69,222        59,379        42,080
  Interest on short-term investments                         20,367        81,666         6,699
  Interest on federal funds sold                             72,704        44,585        34,228
                                                         --------------------------------------
      Total interest and dividend income                  4,678,430     3,856,281     3,674,142
                                                         --------------------------------------
Interest expense:
  Interest on deposit accounts                            2,181,351     1,583,437     1,248,032
  Interest on borrowed funds                                259,189       372,583       640,201
                                                         --------------------------------------
      Total interest expense                              2,440,540     1,956,020     1,888,233
                                                         --------------------------------------
Net interest income                                       2,237,890     1,900,261     1,785,909
Provision (credit) for possible loan lossses                 87,413       (90,000)       14,148
                                                         --------------------------------------
Net interest income, after provision (credit)
 for possible loan losses                                 2,150,477     1,990,261     1,771,761
                                                         --------------------------------------

Other income:
  Customer service fees                                     155,275       176,794       143,693
  Loan fees and gain on sale of loans
   and loan servicing rights                                422,539       211,724        20,475
  Net gain  on sales of securities available for sale        35,446        42,439        23,798
  Co-operative Central Bank Share Insurance Fund
   special dividend                                          36,075        34,816        31,801
  Miscellaneous                                              83,557        19,316         4,747
                                                         --------------------------------------
      Total other income                                    732,892       485,089       224,514
                                                         --------------------------------------

Operating expenses:
  Salaries and employee benefits                          1,435,175     1,115,585       884,717
  Occupancy and equipment                                   320,715       286,250       272,417
  Data processing                                           148,595       135,727       133,196
  Foreclosed real estate, net                                     -       (24,991)      (35,491)
  Contributions.                                            268,436         6,475         5,837
  Other general and administrative                          610,222       451,770       492,441
                                                         --------------------------------------
      Total operating expenses                            2,783,143     1,970,816     1,753,117
                                                         --------------------------------------
Income before income tax provision                          100,226       504,534       243,158
Income tax provision                                         29,719       137,000        51,000
                                                         --------------------------------------
Net income                                                   70,507       367,534       192,158
                                                         ======================================

Other comprehensive income (loss), net of tax:
  Unrealized gains (loss) on securities:
    Unrealized holding gains (loss) arising
     during the period                                      (26,651)       49,842        18,443
Less:  reclassification adjustment for (gains)
        losses included in net income                       (24,954)      (25,463)      (14,279)
                                                         --------------------------------------
Other comprehensive income (loss), net of tax               (51,605)       24,379         4,164
                                                         --------------------------------------
Comprehensive income                                     $   18,902    $  391,913    $  196,322
                                                         ======================================

Basic and diluted earnings per share                          NM
Weighted average common shares outstanding - basic
 and diluted                                                  NM

</TABLE>

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


                Massachusetts Fincorp, Inc. and Subsidiaries
         CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
                Years ended December 31, 1998, 1997 and 1996

<TABLE>
<CAPTION>

                                                                                                     Accumulated
                                                                                     Unallocated        Other
                                               Common      Paid-in      Retained     ESOP           Comprehensive
                                               Stock       Capital      Earnings     Shares         Income(Loss)       Total
                                               --------------------------------------------------------------------------------

<S>                                            <C>       <C>           <C>             <C>             <C>          <C>
Balance at December 31, 1995                   $    -    $        -    $4,373,146      $      -        $25,137      $4,398,283
Net income for the year ended 
 December 31, 1996                                  -             -       192,158             -              -         192,158
Other comprehensive income, net of tax              -             -             -             -          4,164           4,164
                                               -------------------------------------------------------------------------------
Balance at December 31, 1996                        -             -     4,565,304             -         29,301       4,594,605
Net income for the year ended 
 December 31, 1997                                  -             -       367,534             -             -          367,534
Other comprehensive income, net of tax              -             -             -             -         24,379          24,379
                                               -------------------------------------------------------------------------------
Balance at December 31, 1997                        -             -     4,932,838             -         53,680       4,986,518
Stock issued pursant to initial common
 stock offering                                 4,759     4,753,921             -             -              -       4,758,680
Issuance of 25,975 shares of common stock
 to the Massachusetts Charitable Foundation       260       259,490             -             -              -         259,750
Common Stock accquired by ESOP                    436       435,944             -             -              -         436,380
Unallocated  ESOP shares                            -             -             -      (392,742)             -        (392,742)
Expenses incurred for initial public offering       -      (564,278)            -             -              -        (564,278)
Net income for the year ended
 December 31, 1998                                  -             -        70,507             -              -          70,507
Other comprehensive income, net of tax              -             -             -             -        (51,605)        (51,605)
                                               -------------------------------------------------------------------------------
Balance at December 31, 1998                   $5,455    $4,885,077    $5,003,345     $(392,742)       $ 2,075      $9,503,210
                                               ===============================================================================

</TABLE>

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


                Massachusetts Fincorp, Inc. and Subsidiaries
                    CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                             Years ended December 31,
                                                     -----------------------------------------
                                                         1998           1997           1996
                                                     -----------------------------------------

<S>                                                  <C>            <C>            <C>
Cash flow activities:
  Net income                                         $    70,507    $   367,534    $   192,158
  Adjustment to reconcile net income to net cash
   (used)provided by operating activities
    Provision (credit) for possible  loan losses          87,413        (90,000)        14,148
    Depreciation and amortization expense                133,847        139,357        131,146
    Net gain on sales of securities available
     for sale                                            (35,446)       (42,439)       (23,798)
    Net gain on sale of foreclosed real estate                 -        (41,366)       (40,315)
    Loans originated for sale                        (45,782,028)   (23,307,569)   (20,272,272)
    Principal balance on loans sold                   45,877,138     21,520,021     19,234,391
    Amortization of deferred loan (fee) costs            (36,127)       (21,244)         9,847
    Amortization of investment securities,
     net of accretion                                     27,547         13,977         17,866
    Increase in accrued interest receivable              (27,798)       (35,384)        (1,323)
    Decrease (increase) in other assets                 (120,191)       (11,116)       362,632
    Deferred tax (benefit)                              (102,000)       (34,000)       (44,000)
    Increase (decrease) in accrued expenses
     and other liabilities                              (356,123)       (76,607)       203,818
                                                     -----------------------------------------

      Net cash (used) provided by operating
       activities                                       (263,261)    (1,618,836)      (215,702)
                                                     -----------------------------------------

Cash flows from investing activities:
  Purchase of securities available for sale           (7,452,433)    (1,307,210)      (198,952)
  Purchase of securities held to maturity               (860,041)    (3,989,706)             -
  Proceeds from maturities of securities 
   available for sale                                    500,000      2,077,469        750,000
  Proceeds from maturities of securities 
   held to maturity                                    1,504,749      1,000,938              -
  Proceeds from sales and calls of securities
   Available for sale                                  2,480,076      1,048,085        114,997
  Proceeds from calls of securities held
   to maturity                                         1,000,000              -              -
  Purchase of Federal Home Loan Bank stock                     -              -       (376,600)
  Principal payments received on mortgage-backed
   securities                                                  -         94,910        165,048
  Loan (originations)/ principal payments, net        (6,941,651)    (2,487,633)    (6,580,283)
  Proceeds from sales of foreclosed real estate                -        581,330      1,020,876
  Rent payments (disbursements) on real estate
   In possession, net                                          -              -         (1,336)
  Purchase of banking premises and equipment            (146,215)       (57,549)    (1,010,628)
                                                     -----------------------------------------

      Net cash used  by investing
       activities                                     (9,915,515)    (3,039,366)    (6,116,878)
                                                     -----------------------------------------

Cash flows from financing activities:
  Proceeds from sale of stock, net of expenses         4,890,532              -              -
  Net increase in deposits                            14,325,058      8,793,273      1,856,049
  Net increase (decrease) in Federal Home
   Loan Bank advances with maturities less
   than three months                                     619,000        837,000       (191,263)
  Federal Home Loan Bank advances with maturities
   in excess of three months                           1,592,483      2,500,000     10,000,000
  Repayment of Federal Home Loan Bank advances
   with maturities in excess of three months         (10,241,818)    (8,506,559)    (4,450,000)
  Net increase (decrease) in mortgagor's
   escrow accounts                                       (29,576)       (86,293)       106,680
                                                     -----------------------------------------

      Net cash provided by financing activities       11,155,679      3,537,421      7,321,466
                                                     -----------------------------------------

Net change in cash and cash equivalents                  976,903     (1,120,781)       988,886

Cash and cash equivalents at beginning of period       1,492,833      2,613,614      1,624,728
                                                     -----------------------------------------

Cash and cash equivalents at end of period           $ 2,469,736    $ 1,492,833    $ 2,613,614
                                                     =========================================

Supplementary Information
  Interest paid on deposit accounts                  $ 2,181,351    $ 1,583,437    $ 1,248,032
  Interest paid on borrowed funds                        256,721        409,133        613,614
  Income tax payments (refunds), net                     153,542         91,269        (76,194)
  Transfer from loans to foreclosed real estate                -              -        256,698

</TABLE>

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


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Conversion to Stock Form of Ownership
--------------------------------------------------

Massachusetts Fincorp, Inc. (the "Company") was incorporated under Delaware 
law on July 10, 1998 for the purpose of acquiring the stock of 
Massachusetts Co-operative Bank (the "Bank") upon the Bank's conversion 
from a cooperative savings bank to a stock Massachusetts-chartered co-
operative Bank (the "Conversion") on December 22, 1998. Prior to that date 
the company had minimal assets and liabilities. The Company also has an 
ESOP funding subsidiary, MCB Funding.

The Bank is a community-oriented co-operative bank organized in 1908 as The 
Massachusetts Co-operative Bank. The Bank's principal business consists 
accepting deposits from the general public in the areas surrounding its two 
full-service banking offices and generating mortgage loans secured by one- 
to four-family residences and multi-family and commercial real estate. The 
bank also originates fixed rate residential mortgage loans for sale on the 
secondary market.  The Bank operates through two full-service banking 
offices and two loan origination offices located in the greater Boston 
metropolitan area.

In connection with the conversion, the Company established a charitable 
foundation ("Foundation") with a contribution of 5% of the common stock of 
the company sold in the conversion.  The Foundation will be dedicated to 
charitable purposes within the company's local community, including 
community development activities

Basis of Presentation and Consolidation
---------------------------------------

The consolidated financial statements include the accounts of Massachusetts 
Fincorp, Inc.,  and its wholly owned subsidiaries, Massachusetts Co-
operative Bank and MCB Funding.  All significant intercompany balances and 
transactions have been eliminated in consolidation.

Use of Estimates
----------------

In preparing financial statements in conformity with generally accepted 
accounting principles, management is required to make estimates and 
assumptions that affect the reported amounts of assets and liabilities as 
of the date of the balance sheet and reported amounts of revenues and 
expenses during the reporting period. Actual results could differ from 
those estimates.  Material estimates that are particularly susceptible to 
significant change in the near term relate to the determination of the 
allowance for loan losses, the valuation of real estate acquired in 
connection with foreclosures or in satisfaction of loans and the deferred 
tax asset valuation reserve.

Reclassifications
-----------------

Certain amounts have in the 1997 and 1996 consolidated financial statements 
have been reclassified to conform to the 1998 presentation.

Cash and Cash Equivalents
-------------------------

Cash and cash equivalents include amounts due from banks and Federal funds 
sold.

Securities
----------

Securities that management has the positive intent and ability to hold to 
maturity are classified as "held to maturity" and reflected at amortized 
cost.  Securities classified as "available for sale" are reflected at fair 
value, with unrealized gains and losses excluded from earnings and reported 
in determining comprehensive income and accumulated other comprehensive 
income/(loss) as a component of stockholders equity, net of tax effects.

Federal Home Loan Bank stock is reflected at cost.

Purchase premiums and discounts are recognized in interest income using a 
method that approximates the interest method over the terms of the 
investments.  Declines in the value of held to maturity and available for 
sale securities that are deemed to be other than temporary are reflected in 
earnings when identified.  Gains and losses on the sale of securities are 
recorded on the trade date and determined using the specific identification 
method.

Mortgage Loans Held for Sale
----------------------------

Mortgage loans originated for sale are carried at the lower of cost or 
aggregate fair value.  Changes in valuation are charged against gain or 
loss on sale of mortgage loans.  Gains or losses on sale of mortgage loans 
are recognized at time of sale.

Loans
-----

The loan portfolio consists of mortgage and other loans to the Company's 
customers located primarily in eastern Massachusetts. The ability of the 
Company's debtors to honor their contracts is dependent upon the economy in 
general and the real estate and construction economic sectors.

Loans are reported at the amount of unpaid principal less net deferred loan 
fees, unadvanced loan funds, and the allowance for loan losses.

Interest on loans is included in income as earned based on rates applied to 
the principal amounts outstanding.  Interest is not accrued on loans that 
are identified as impaired or loans that are ninety days or more past due.  
Interest income previously accrued on such loans is reversed against 
current period interest income. Interest income on all non-accrual loans is 
recognized only to the extent of interest payments received.

Loan origination and commitment fees and certain direct loan origination 
costs, applicable to mortgage loans, are deferred and the net amount is 
amortized to interest income over the contractual lives of the loans by the 
interest method.  Fees and costs applicable to other loans are not material 
and are recognized in income as received or incurred.

Allowance for Possible Loan Losses
----------------------------------

The allowance for possible loan losses is established by a provision for 
possible loan losses charged to earnings and is maintained at a level 
considered adequate by management to provide for reasonably foreseeable 
loan losses. Loan losses are charged against the allowance when management 
believes the collectibility of the loan is unlikely. Subsequent recoveries, 
if any, are credited to the allowance.

The allowance 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 known and inherent risks in the nature and volume of the loan 
portfolio, adverse situations that may affect the borrower's ability to 
repay, estimated value of underlying collateral and prevailing economic 
conditions.  This evaluation is inherently subjective, as it requires 
estimates that are susceptible to significant change.  Ultimately, losses 
may vary from current estimates and future additions to the allowance may 
be necessary.

A loan is considered impaired according to Statement of Financial 
Accounting Standard ("SFAS") No. 114 "Accounting by Creditors for 
Impairment of Loan," if  based on current information and events, it is 
probable that a creditor 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 by the fair value of the collateral.

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

Foreclosed Real Estate
----------------------

Foreclosed real estate includes both formally foreclosed property and 
property which the Company has taken physical possession without formal 
foreclosure proceedings.  Foreclosed real estate is initially recorded at 
fair value at the date of acquisition.  Costs relating to the development 
and improvement of property are capitalized, whereas costs relating to 
holding property are expensed.

Management periodically performs valuations, and an allowance for losses is 
established through a charge to earnings if the carrying value of a 
property exceeds its fair value less estimated costs to sell.

Banking Premises and Equipment
------------------------------

Land is carried at cost.  Buildings, leasehold improvements and equipment 
are stated at cost, less accumulated depreciation and amortization computed 
on the straight-line method over the estimated useful lives of the assets 
or the term of the lease if shorter.  Estimated useful lives of bank 
buildings are 10-40 years and equipment is 3-10 years.

It is general practice to charge the cost of maintenance and repairs to 
earnings when incurred; major expenditures for betterments are capitalized 
and depreciated.

Marketing Costs
---------------

Marketing costs are expensed as incurred.

Income Taxes
------------

Deferred tax assets and liabilities are reflected at currently enacted 
income tax rates applicable to the period in which the deferred tax assets 
or liabilities are expected to be realized or settled.  As changes in tax 
laws or rates are enacted, deferred tax assets and liabilities are adjusted 
accordingly through the provision for income taxes.  The Bank's base amount 
of its Federal income tax reserve for loan losses is a permanent difference 
for which there is no recognition of a deferred tax liability.  However, 
the loan loss allowance maintained for financial reporting purposes is a 
temporary difference with allowable recognition of a related deferred tax 
asset, if it is deemed realizable.

Employee Benefit Plans
----------------------

The Company has a Multi-employer defined benefit plan and a defined 
contribution plan covering substantially all employees. It is the Company's 
policy to fund pension plan costs in the year of accrual. The Company has 
an Employee Stock Ownership Plan (ESOP), covering eligible employees as 
defined by the ESOP. The Company records compensation expense in an amount 
equal to the fair value of shares committed to be released from the ESOP to 
employees.  The Company sponsors a Supplemental Executive Retirement Plan 
(SERP).  The SERP is a nonqualified deferred compensation plan designed to 
make up lost ESOP benefits to designated participants.

Recent Accounting Pronouncements
--------------------------------

In February 1997, the Financial Accounting Standards Board ("FASB") issued 
SFAS No. 129, "Disclosure of Information About Capital Structure," which is 
effective for the Company's 1998 financial statements.  The Company's 
Disclosures comply with the provisions of this statement.

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive 
Income," effective for fiscal years beginning after December 15, 1997.  
This Statement establishes standards for reporting and displaying 
comprehensive income, which is defined as all changes to equity income 
except investments by and distributions to shareholders.  Net income is a 
component information, with all other components referred to in the 
aggregate as other comprehensive income. The Company's financial statements 
comply with the provisions of this statement.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of 
an Enterprise and Related Information," which is effective for the 
Company's 1998 financial statements.  This statement establishes standards 
for reporting information about operating segments.  An operating segment 
is defined as a component of a business for which separate financial 
information is available that is regularly evaluated by the chief operating 
decision maker in deciding how to allocate resources and evaluate 
performance.  The Company has determined that its business is comprised of 
a single operating segment and that SFAS 131 has no material impact on its 
financial statements.

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures 
about Pensions and Other Postretirement Benefits," which is effective for 
the Company's 1998 financial statements.  This statement standardizes the 
disclosure requirements for pensions and other postretirement benefits to 
the extent practicable.  The Company's disclosures comply with the 
provisions of this statement.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative 
Instruments and Hedging Activities."  This Statement established accounting 
and reporting standards for derivative instruments, including certain 
derivative instruments embedded in other contracts, and hedging activities.  
It requires that an entity recognize all derivatives as either assets or 
liabilities on its balance sheet and measure those instruments at fair 
value.  The accounting for changes in the fair value of a derivative 
depends on the intended use of the derivative and the resulting 
designation. The Company is required to adopt this Statement effective 
January 1, 2000.  Through December 31, 1998 the Company's use of 
derivatives has not been material.

NOTE B - SECURITIES

The amortized cost and estimated fair value of  securities, with gross 
unrealized gains and losses, follows:

<TABLE>
<CAPTION>

                                                             December 31, 1998
                                           ----------------------------------------------------
                                                            Gross         Gross
                                           Amortized     Unrealized    Unrealized
                                              Cost          Gains        Losses      Fair Value
                                           ----------------------------------------------------

<S>                                        <C>             <C>         <C>           <C>
Securities Available for Sale
-----------------------------
  Debit securities:
  U.S. Government and Federal agency       $1,842,628      $ 18,685    $       -     $1,861,313
  Corporate                                 3,556,798           702      (63,285)     3,494,215
  Mortgage-backed                             988,164        38,399            -      1,026,563
                                           ----------------------------------------------------
  Total debt securitites                    6,387,590        57,786      (63,285)     6,382,091
  Marketable equity securities              1,012,688        47,303      (38,227)     1,021,764
                                           ----------------------------------------------------
    Total securities available for sale    $7,400,278      $105,089    $(101,512)    $7,403,855

Securitites Held to Maturity
----------------------------
  U.S. Government and Federal agency       $        -      $      -    $       -     $        -
  Corporate                                 1,308,286         5,402          (48)     1,313,640
                                           ----------------------------------------------------
    Total securities held to maturity      $1,308,286      $  5,402    $     (48)    $1,313,640
                                           ====================================================

<CAPTION>

                                                             December 31, 1997
                                          -----------------------------------------------------
                                                            Gross         Gross
                                           Amortized     Unrealized    Unrealized
                                              Cost          Gains        Losses      Fair Value
                                           ----------------------------------------------------

<S>                                        <C>             <C>         <C>           <C>
Securities Available for Sale
-----------------------------

Debt securities:
  U.S. Government and Federal agency       $1,340,043      $ 14,375    $ (2,077)     $1,352,341
  Mortgage-backed                           1,014,897        32,305      (2,861)      1,044,341
                                           ----------------------------------------------------
    Total debt securities                   2,354,940        46,680      (4,938)      2,396,682

Marketable equity securities                  575,270        62,833     (11,895)        626,208
                                           ----------------------------------------------------

    Total securities available for sale    $2,930,210      $109,513    $(16,833)     $3,022,890
                                           ====================================================
Securities Held to Maturity

U.S. Government and Federal agency         $1,499,025      $  1,260    $      -      $1,500,285
Corporate                                   1,480,088         3,343        (578)      1,482,853
                                           ----------------------------------------------------
Total securities held to maturity          $2,979,113      $  4,603    $   (578)     $2,983,138
                                           ====================================================

</TABLE>

The amortized cost and estimated fair value of debt securities by 
contractual maturity are as follows:

<TABLE>
<CAPTION>

                                                   December 31, 1998
                                  --------------------------------------------------
                                     Available for Sale          Held to Maturity
                                  ------------------------    ----------------------
                                  Amortized        Fair       Amortized        Fair
                                     Cost          Value         Cost          Value
                                  --------------------------------------------------

<S>                               <C>           <C>           <C>           <C>
Within 1 year                     $  551,978    $  550,473    $  773,427    $  773,900
Over 1 year through 5 years        1,377,337     1,377,842       534,859       539,740
After 5 years through 10 years     1,041,076     1,058,139             -             -
After 10 years                     2,429,035     2,369,074             -             -
                                  ----------------------------------------------------
                                   5,399,426     5,355,528     1,308,286     1,313,640

Mortgage-backed securities           988,164     1,026,563             -             -
                                  ----------------------------------------------------
Total Securities                  $6,387,590    $6,382,091    $1,308,286    $1,313,640
                                  ====================================================

</TABLE>

Sales and calls of securities available for sale are summarized as follows:

<TABLE>
<CAPTION>

                                           Years ended December 31,
                                     ------------------------------------
                                        1998          1997         1996
                                     ------------------------------------

<S>                                  <C>           <C>           <C>
Proceeds from sales and calls        $4,756,639    $1,048,085    $114,997
Gross gains from sales and calls         75,733        67,259      23,798
Gross losses from sales and calls        40,288        24,820           -

</TABLE>

As a member of the Federal Home Loan Bank of Boston ("FHLBB") the Bank is 
required to invest in $100 par value stock of the FHLBB in an amount equal 
to 1% of its outstanding loans secured by residential housing, or 1% of 30% 
of total assets, or 5% of its outstanding advances from the FHLBB, 
whichever is higher.  When such stock is redeemed, the Bank would receive 
from the FHLBB an amount equal to the par value of the stock.  As of 
December 31, 1998 and 1997 the bank had investments in FHLBB stock of 
$762,800.  Such investment is reflected separately in the Consolidated 
Statements of Financial Condition.

NOTE C - LOANS

A summary of the balances of loans follows:

<TABLE>
<CAPTION>

                                                    December 31,
                                             ---------------------------
                                                1998            1997
                                                ----            ----

<S>                                          <C>             <C>
Real estate mortgage loans:
  Adjustable rate                            $27,328,448     $26,977,594
  Fixed rate                                  22,382,582      11,078,815
  Construction loans                          11,079,041       5,006,181
  Equity lines of credit                         403,994         560,375
                                             ---------------------------
                                              61,194,065      43,622,965

Less:  Net deferred loan fees                   (145,973)        (56,653)
        Unadvanced loan funds                 (3,068,151)     (2,181,229)
                                             ---------------------------
       Net real estate mortgage loans         57,979,941      41,385,083
                                             ---------------------------

Other loans:
  Personal                                        82,752         112,882
  Unsecured                                       36,447          40,697
  Collateral                                      38,122          76,268
                                             ---------------------------
    Total other loans                            157,321         229,847
                                             ---------------------------

    Total loans                               58,137,262      41,614,930

Less: allowance for possible loan losses        (524,924)       (349,404)
                                             ---------------------------

    Loans, net                               $57,612,338     $41,265,526
                                             ===========================

</TABLE>

Mortgage loans serviced for others are not included in the accompanying 
consolidated balance sheets.  The unpaid principal of mortgage loans 
serviced for others was $3,761,875 and $3,412,215 at December 31, 1998 and 
1997, respectively. All loans serviced for others were sold without 
recourse provisions.

An analysis of the allowance for possible loan losses for the periods 
indicated follows:

<TABLE>
<CAPTION>

                                                     Years ended December 31,
                                                -----------------------------------
                                                  1998         1997         1996
                                                  ----         ----         ----

<S>                                             <C>          <C>          <C>
Balance at beginning of period                  $349,404     $322,497     $ 299,606
Provision (credit) for possible loan losses       87,413      (90,000)       14,148
Recoveries                                        89,121      127,830       181,621
Loans charged-off                                 (1,014)     (10,923)     (172,878)
                                                -----------------------------------

Balance at end of period                        $524,924     $349,404      $322,497
                                                ===================================

</TABLE>

At December 31, 1998and 1997,  the recorded investment in impaired loans 
totaled $355,870 and $99,049 respectively, for which there was no valuation 
allowance.

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

For the years ended December 31, 1998, 1997, and 1996 the average recorded 
investment in impaired loans amounted to $214,890, $182,896, and $289,989, 
respectively.  Interest income recognized on impaired loans was $19,978, 
$4,912, and $4,450 for the years ended December 31, 1998, 1997 and 1996, 
respectively.  Note that all impaired loans are real estate mortgages.

Non-accrual loans totaled $172,736,and $114,566 at December 31, 1998 and 
1997,  respectively.  If interest payments on all non-accrual loans for the 
years ended December 31, 1998, 1997 and 1996 had been made in accordance 
with original loan agreements, interest income of approximately $8,000, 
$9,000 and $38,000 would have been recognized on loans compared to interest 
income actually recognized of approximately $0, $8,000, and $23,000, 
respectively.

NOTE D - FORECLOSED REAL ESTATE

Foreclosed real estate expenses (income) include the following:

<TABLE>
<CAPTION>

                                                           Years ended December 31,
                                                       --------------------------------
                                                       1998       1997          1996
                                                       ----       ----          ----

<S>                                                    <C>      <C>           <C>
Gain on sale of foreclosed real estate, net            $  -     ($41,366)     ($40,315)
Operating expenses, net of rental income                  -       16,375         4,824
                                                       -------------------------------

Net expense (recovery) from foreclosed real estate     $  -     ($24,991)     ($35,491)
                                                       ===============================

</TABLE>

NOTE E - BANKING PREMISES AND EQUIPMENT

A summary of the cost and accumulated depreciation and amortization of 
banking premises, leasehold improvements and equipment and their estimated 
useful lives is as follows:

<TABLE>
<CAPTION>

                                          Years ended December 31,
                                          -------------------------      Estimated
                                             1998           1997        Useful Lives
                                             ----           ----        ------------

<S>                                       <C>            <C>            <C>
Banking Premises:
  Land                                    $  170,000     $  170,000
  Building and leasehold improvements      1,030,073        980,307     10 - 40 years
Equipment                                    807,951        720,116      3 - 10 years
                                          -------------------------
                                           2,008,024      1,870,423

Less: accumulated depreciation
 and amortization                           (801,565)      (669,872)
                                          -------------------------

Net banking premises                      $1,206,459     $1,200,551
                                          =========================

</TABLE>

Total depreciation and amortization expense amounted to $133,847, $139,357 
and $131,146 for the years ended December 31, 1998, 1997 and 1996, 
respectively.

NOTE F - DEPOSITS

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

<TABLE>
<CAPTION>

                                                December 31,
                                         --------------------------
                                             1998           1997
                                         --------------------------

<S>                                      <C>            <C>
Demand                                   $ 4,100,588    $ 3,158,297
NOW                                       13,815,457      7,158,012
Money market accounts                        752,167      1,002,925
Regular and other savings                  9,700,906      9,623,208
                                         --------------------------
    Total non-certificate accounts        28,369,118     20,942,442
                                         --------------------------

Term certificates of $100,000 or more      8,554,978      6,120,848
Term certificates less than $100,000      20,068,704     15,604,452
                                         --------------------------
    Total term certificates               28,623,682     21,725,300
                                         --------------------------
    Total deposits                       $56,992,800    $42,667,742
                                         ==========================

</TABLE>

Interest expense on deposit balances is summarized as follows.

<TABLE>
<CAPTION>

                                    Years ended December 31,
                             --------------------------------------
                                1998          1997          1996
                             --------------------------------------

<S>                          <C>           <C>           <C>
Regular and other savings    $  191,062    $  244,032    $  240,060
NOW                             488,038       173,104        48,860
Money market accounts            21,175        27,864        33,046
Term certificates             1,481,076     1,138,437       926,066
                             --------------------------------------
                             $2,181,351    $1,583,437    $1,248,032
                             ======================================

</TABLE>

A summary of term certificates by maturity is as follows:

<TABLE>
<CAPTION>

                                             December 31,
                           ------------------------------------------------
                                     1998                       1997
                           -----------------------    ---------------------
                                          Weighted                 Weighted
                                          Average                   Average
                              Amount        Rate         Amount       Rate
                           ------------------------------------------------

<S>                        <C>              <C>       <C>             <C>
Within 1 year              $24,520,449      5.5%      $15,399,624     5.5%
Over 1 year to 2 years       3,799,189      5.3         4,600,447     5.8
Over 2 years to 3 years        216,173      5.2         1,692,907     5.8
Over 3 years to 4 years.        24,492      5.7             6,289     5.5
Over 4 years                    63,379      4.8            26,033     5.7

Total Term Certificates    $28,623,682      5.5%      $21,725,300     5.6%
                           ===========                ===========

</TABLE>

The Federal Reserve Bank requires that the Bank maintain average reserve 
balances.  The average amount of these reserve balances for the year ended 
December 31, 1998 was approximately $537,481.

NOTE G - FEDERAL HOME LOAN BANK BORROWINGS

A summary of borrowed funds consisting of advances from the Federal Home 
Loan Bank of Boston, by maturity, is as follows:

<TABLE>
<CAPTION>

                                                   December 31,
                             ---------------------------------------------------------
                                        1998                           1997
                             --------------------------     --------------------------
                                             Weighted                       Weighted
                                              Average                        Average
                               Amount          Rate           Amount          Rate
                               ------        --------         ------        --------

<S>                          <C>            <C>             <C>            <C>
Within 1 year                $2,000,000     5.40%-5.58%     $4,500,000     5.18%-5.81%
Over 1 year to 3 years        1,000,000        8.11                  -           -
Over 3 years to 5 years         500,000        5.60          1,000,000        8.11
Over 5 years                     92,483        4.00             98,707        4.00
Overnight line of credit        619,000        5.40            837,000        7.05
                             ----------                     ----------

    Total borrowings         $4,211,483                     $6,435,707
                             ==========                     ==========

</TABLE>

All borrowings from the Federal Home Loan Bank of Boston are secured by a 
blanket lien on qualified collateral, defined principally as 75% of the 
carrying value of first mortgage loans on owner-occupied residential 
property and 90% of the market value of U.S. Government and Federal agency 
securities. Borrowings under the variable rate overnight line of credit are 
limited to $4,300,000 as of December 31, 1998 and 1997.

NOTE H - INCOME TAXES

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

<TABLE>
<CAPTION>

                                   Years ended December 31,
                               -------------------------------
                                 1998        1997        1996
                               -------------------------------

<S>                            <C>         <C>         <C>
Current tax provision:
  Federal                      $105,000    $116,000    $15,000
  State                          12,000      55,000     80,000
                               -------------------------------
                                117,000     171,000     95,000

Deferred tax (benefit):
  Federal                       (82,000)     61,000    (29,000)
  State                         (20,000)          -          -
                               -------------------------------
                               (102,000)     61,000    (29,000)
                               -------------------------------

Change in valuation reserve           -     (95,000)   (15,000)
                               -------------------------------
                               $ 15,000    $137,000    $51,000
                               ===============================

</TABLE>

The reasons for the differences between the effective tax rates and the 
statutory Federal income tax rate are summarized as follows:

<TABLE>
<CAPTION>

                                             Years ended December 31,
                                             ------------------------
                                             1998      1997      1996
                                             ------------------------

<S>                                          <C>       <C>       <C>
Tax provision at statutory rate              34.0%     34.0%     34.0%
Increase (decrease) resulting from:
  State taxes, net of Federal tax benefit     8.0       7.2       8.2
  Change  in valuation reserve.               0.0      (7.4)     (6.1)
  Tax credits                               (22.5)    (11.3)     (9.4)
  Other, net                                 (4.2)      4.7      (5.7)
                                             ------------------------
Effective tax rates                          15.3%     27.2%     21.0%
                                             ========================

</TABLE>

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

<TABLE>
<CAPTION>

                                    December 31,
                                --------------------
                                  1998        1997
                                --------------------

<S>                             <C>         <C>
Deferred tax asset:
  Federal                       $241,000    $153,000
  State                           59,000      45,000
                                 300,000     198,000
  Valuation reserve on asset    (109,000)   (109,000)
                                 191,000      89,000
Deferred tax liability:
  Federal                        (10,000)    (36,000)
  State                           (2,000)    (14,000)
                                 (12,000)    (50,000)
                                --------------------
Net deferred tax asset          $179,000    $ 39,000
                                ====================

</TABLE>

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

<TABLE>
<CAPTION>

                                                                December 31,
                                                         -------------------------
                                                            1998           1997
                                                            ----           ----

<S>                                                      <C>            <C>
Net unrealized gain on securities available for sale     $  (1,000)     $ (39,000)
Depreciation                                                 6,000          9,000
Deferred loan fees                                           8,000         23,000
Allowance for loan losses                                  168,000        132,000
Other tax loss carryovers                                  110,000         27,000
Other                                                       (3,000)        (4,000)
                                                         ------------------------
                                                           288,000        148,000
Valuation reserve                                         (109,000)      (109,000)
                                                         ------------------------

Net deferred tax asset                                   $ 179,000      $  39,000
                                                         ========================

</TABLE>

The valuation reserve decreased by $0 and $122,000 for the years ended 
December 31, 1998 and 1997, respectively.  The decreases were the result of 
the utilization of previously unrecorded tax benefits that were used to 
offset current year's taxable income.  In addition, included in the 1997 
decrease is a $27,000 benefit that was the result of the expiration of 
capital loss carry forwards.

The Federal income tax reserve for loan losses at the Bank's base year 
amounted to approximately $1,208,000. If any portion of the reserve is used 
for purposes other than to absorb the losses for which established, 
approximately 150% of the amount actually used (limited to the amount of 
the reserve) would be subject to taxation in the fiscal year in which it is 
used.  As the Company intends to use the reserve only to absorb loan 
losses, a deferred income tax liability of approximately $495,000 has not 
been provided.

Tax benefits totaling $17,200 from capital loss carryforwards and 
alternative minimum tax credits were realized in 1998.

For the years ended December 31, 1998, 1997 and 1996, the tax expense 
(benefit) allocated to the components of comprehensive income amounted to 
$(12,542), $49,792, and $(3,720), respectively, for unrealized holding 
gains arising during the period and $10,492, $(16,976), and $(9,519) 
respectively, for the reclassification adjustment for gains (losses) 
realized in net income.

NOTE I - MINIMUM REGULATORY CAPITAL REQUIREMENTS

The Company and Bank are subject to various regulatory capital requirements 
administered by the Federal banking agencies. Failure to meet minimum 
capital requirements can initiate certain mandatory and possibly additional 
discretionary actions by regulators that, if undertaken, could have a 
direct material effect on the Company's and Bank's financial statements.  
Under capital adequacy guidelines and the regulatory framework for prompt 
corrective action, the Company and Bank 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.  The 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 Company and Bank to maintain minimum amounts and ratios (set 
forth in the following tables) of total and Tier 1 capital (as defined) to 
average assets (as defined).  Management believes, as of December 31, 1998 
and 1997, that the Company met all capital adequacy requirements to which 
they are subject.

The most recent notification from the Federal Deposit Insurance Corporation 
categorized the Bank as well capitalized under the regulatory framework for 
prompt corrective action.  To be categorized as well capitalized, it must 
maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage 
ratios as set forth in the following tables.  There are no conditions or 
events since the notification that management believes have changed the 
Bank's category.  The Company and Bank's actual capital amounts and ratios 
as of December 31, 1998 and 1997 are also presented in the tables.

<TABLE>
<CAPTION>

                                                                         Minimum To Be Well
                                                                         Capitalized Under
                                                 Minimum for Capital     Prompt Corrective
                                Actual            Adequacy Purposes      Action Provisions
                           -----------------     -------------------     ------------------
                           Amount      Ratio      Amount      Ratio       Amount     Ratio
                           ------      -----      ------      -----       ------     -----
                                                (Dollars in Thousands)

<S>                        <C>         <C>        <C>         <C>         <C>        <C>
--------------------------
December 31, 1998
--------------------------
Total Capital to Risk
  Weighted Assets Bank     $ 8,019     17.0%      $ 3,774      8.0%       $4,717     10.0%
  Consolidated              10,026     21.7%        3,694      8.0%            -        -

Tier 1 Capital to Risk
  Weighted Assets Bank       7,494     15.9%        1,887      4.0%        2,830      6.0%
  Consolidated               9,501     20.5%        1,847      4.0%            -        -

Tier 1 Capital to
  Average Assets Bank        7,494     11.7%        2,564-     4.0%-       3,205      5.0%
                                                    3,205      5.0%

  Consolidated               9,501     14.8%        2,564-     4.0%-           -        -
                                                    3,205      5.0%

--------------------------
December 31, 1997
--------------------------
Total Capital to Risk
  Weighted Assets           $5,282     15.4%       $2,745      8.0%       $3,431     10.0%

Tier 1 Capital to Risk
  Weighted Assets            4,933     14.4%        1,372      4.0%        2,059      6.0%

Tier 1 Capital to
  Average Assets             4,933      9.5%        2,086-       4%-       2,607      5.0%
                                                    2,607      5.0%

</TABLE>

NOTE J - PENSION PLANS

The Company provides for pension benefits for its eligible employees 
through membership in the Co-operative Companies Employees Retirement 
Association defined benefit pension plan.  Each full time employee reaching 
the age of 21 and having completed six months of service automatically 
becomes a participant in the retirement plan. Part-time employees must 
complete 1,000 hours of service in one consecutive twelve-month period 
beginning with such employee's date of employment to automatically become a 
participant in the retirement plan.  Participants become fully vested when 
credited with five years of service measured from their date of 
participation.

The plan is a multiemployer plan whereas the contributions by each Company 
are not restricted to provide benefits for employees of the contributing 
Company and information on the Company's share of the actuarial present 
value of accumulated plan benefits and the net assets at fair value 
available for benefits is not determinable. Total pension expense amounted 
to $136,360, $62,041 and $57,675 for the years ended December 31, 
1998,1997,and 1996, respectively.

In addition to the defined benefit plan, the Company adopted a Section 
401(k) plan that provides for voluntary contributions by participating 
employees ranging from one percent to twelve percent of their compensation, 
subject to certain limitations.  The Company will match the employee's 
voluntary contribution up to five percent of their compensation.  
Contributions made by the Company amounted to $52,165, $34,754, $26,083 for 
the years ended December 31, 1998, 1997 and 1996, respectively.

On December 22, 1998, the Company's ESOP purchased 43,638 shares of common 
stock for $436,380.  These funds were  obtained by the ESOP through a loan 
from MCB Funding.  Annual payments are approximately $59,803 with interest 
at 7.5%.  The Company's contributions are the primary source of funds for 
repayment of the loan.  Interest expense incurred on the ESOP debt totaled 
$834 for 1998.  Compensation expenses related to the ESOP amounted to 
$59,803 for 1998.  This included contributions in excess of amounts 
required to service the ESOP debt of $16,000.  There were no dividend 
payments on unallocated shares.  The shares held by the ESOP are as 
follows; Allocated shares 4,364, unallocated shares 39,274, total shares 
43,638.  The fair value of the unallocated shares as of December 31, 1998 
was $392,740.

Supplemental Executive Retirement Benefits

The Company maintains agreements to provide supplemental retirement 
benefits to certain executive officers.  Total expense for benefits payable 
under the agreement totaled $0.for the year ended December 31, 1998.  
Aggregate benefits payable included in accrued expenses and other 
liabilities at December 31, 1998 totaled $0.

NOTE K - COMMITMENTS AND CONTINGENCIES

In the normal course of business, there are outstanding commitments and 
contingencies that are not reflected in the financial statements.

Loan Commitments
----------------

The Company is a party to financial instruments with off-balance-sheet risk 
in the normal course of business to meet the financing needs of its 
customers.  These financial instruments include commitments to extend 
credit.  Such commitments involve, to varying degrees, elements of credit 
and interest rate risk in excess of the amount recognized in the balance 
sheets.

The Company's exposure to credit loss is represented by the contractual 
amount of these commitments.  The Company uses the same credit policies in 
making commitments as it does for on-balance-sheet instruments.

At December 31, 1998 and 1997, the following financial instruments were 
outstanding whose contract amounts represent credit risk:

<TABLE>

<S>                                           <C>           <C>
Commitments to grant loans                    $8,783,340    $2,355,376
Unadvanced funds on equity lines of credit       260,143       202,418

</TABLE>

Commitments to extend credit are agreements to lend to a customer as long 
as there is no violation of any condition established in the contract.  
Commitments generally have fixed expiration dates or other termination 
clauses and may require payment of a fee.  The commitments for equity lines 
of credit may expire without being drawn upon.  Therefore, the total 
commitment amounts do not necessarily represent future cash requirements. 
The Company evaluates each customer's credit worthiness on a case-by-case 
basis. Funds disbursed under these financial instruments are collateralized 
by real estate. Commitments to sell loans require the Company to make 
delivery at a specific future date of a specified amount, at a specified 
price or yield.  At December 31, 1998 and 1997, the Company had commitments 
to sell loans of $6,335,665 and $3,029,670, respectively.  Failure to 
fulfill delivery requirements of commitments may result in payment of 
certain fees to the investors.  Loans are sold without recourse and, 
accordingly, risks arise principally from movements in interest rates.

Operating Lease Commitments
---------------------------

Pursuant to the terms of noncancelable lease agreements in effect at 
December 31, 1998, pertaining to banking premises and equipment, future 
minimum rent commitments are as follows:

<TABLE>
<CAPTION>

                   Year ending
                   December 31,

                       <S>           <C>
                       1999          $30,365
                       2000           19,098
                       2001           17,500
                       2002           17,500
                       2003            7,292
                                     -------
                                     $91,755
                                     =======

</TABLE>

Rent expense was $43,193, $23,590, and $29,550 for the years ended December 
31, 1998, 1997 and 1996, respectively.

Other Contingencies
-------------------

The Company entered into employment agreements with three senior 
executives.  The agreements include provisions for minimum annual 
compensation and certain lump-sum severance payments in the event of a 
"change in control."

Various legal claims also arise from time to time in the normal course of 
business which in the opinion of management, will have no material effect 
on the Company's financial position.

NOTE L - RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Company has granted loans to 
principal officers and directors and their affiliates, generally at the 
same prevailing terms as those of other borrowers.  A summary of related 
party activity follows:

<TABLE>
<CAPTION>

                                      Years ended December 31,
                                  --------------------------------
                                    1998        1997        1996
                                  --------------------------------

<S>                               <C>         <C>         <C>
Balance at beginning of period    $403,000    $446,000    $484,000
Loans made/advanced                 66,200           -       2,600
Repayments                        (133,072)    (43,000)    (40,600)
                                  --------------------------------
Balance at end of period          $336,128    $403,000    $446,000
                                  ================================

</TABLE>

All Related Party transactions are performing as agreed.

NOTE M - DIVIDEND PAYMENT AND RETAINED EARNINGS RESTRICTIONS

The Company and the Bank may not declare or pay dividends on and the 
Company may not repurchase, any of its shares of common stock if the effect 
thereof would cause shareholders' equity to be reduced below applicable 
regulatory capital maintenance requirements or if such declaration, payment 
or repurchase would otherwise violate regulatory requirements.

The Company created a special "liquidation account" for the benefit of 
account holders in an amount equal to the shareholder's equity of the Bank 
as of the date of its latest balance sheet contained in the final 
prospectus in connection with the conversion.  Each account holder 
continuing to maintain a deposit account at the Bank would be entitled, in 
a complete liquidation of the Bank, to an interest in the liquidation 
account prior to any payment to the shareholders of the Bank.  As a result, 
the Company's shareholder's equity is substantially restricted with respect 
to payment of dividends to shareholders.

NOTE N - FAIR VALUES OF FINANCIAL INSTRUMENTS

The following is a summary of the carrying values and estimated fair values 
of the Company's significant financial and non-financial instruments as of 
the dates indicated:

<TABLE>
<CAPTION>

                                          December 31, 1998               December 31, 1997
                                     ---------------------------     ---------------------------
                                      Carrying       Estimated        Carrying       Estimated
                                        Value        Fair Value         Value        Fair Value
                                      --------       ----------       --------       ----------

<S>                                  <C>             <C>             <C>             <C>
Financial Assest 
  Cash and due from banks            $   708,827     $   708,827     $ 1,320,315     $ 1,320,315
  Federal funds sold                   1,760,909       1,760,909         172,518         172,518
  Securities                           8,708,564       9,480,295       6,764,803       6,768,828
  Loans, net                          57,612,338      58,159,480      44,450,646      44,904,331
  Accrued interest receivable            350,054         350,054         322,257         322,257

Financial Liabilities:
  Demand, NOW, savings and money
   market deposit accounts           $28,369,118     $28,369,118     $20,942,442     $20,942,442
  Term certificates of deposit        28,623,682      28,835,059      21,725,300      21,778,586
  Borrowed funds                       4,211,483       4,177,668       6,435,707       6,475,402

</TABLE>

SFAS No. 107 requires disclosures about fair values of financial 
instruments for which it is practicable to estimate fair value.  Fair value 
is defined in SFAS No. 107 as the amount that a financial instrument could 
be exchanged in a current transaction between willing parties, other than 
in a forced liquidation sale.  Quoted market prices are used to estimate 
fair values when those prices are available.  However, active markets do 
not exist for many types of financial instruments.  Consequently, fair 
values for these instruments must be estimated by management using 
techniques such as discounted cash flow analysis and comparison to similar 
instruments.  These instruments are highly subjective and require judgments 
regarding significant matters such as the amount and timing of future cash 
flows and the selection of discount rates that may appropriately reflect 
market and credit risks.  Changes in these judgments often have a material 
impact on the fair value estimates.  In addition, since these estimates are 
as of a specific point in time, they are susceptible to material near-term 
changes.  Fair values disclosed in accordance with SFAS No. 107 do not 
reflect any premium or discount that could result from the sale of a large 
volume of a particular financial instrument, nor do they reflect the 
possible tax ramifications or estimated transaction costs.

The following is a description of the principal valuation methods used by 
the Company to estimate the fair values of its financial instruments:

Securities
----------

The fair values of securities were based principally on market prices and 
dealer quotes.  Certain fair values were estimated using pricing models or 
were based on comparisons to market prices of similar securities.  The fair 
value of stock in the FHLB equals its carrying amount since such stock is 
only redeemable as its par value.

Loans
-----

The fair value of performing loans is estimated by discounting the 
contractual cash flows using interest rates currently being offered for 
loans with similar terms to borrowers of similar quality.  For non-
performing loans where the credit quality of the borrower has deteriorated 
significantly, fair values are estimated based on recent appraised values.  
In the event appraisal is not available, values are estimated by 
discounting cash flows at a rate commensurate with the risk associated with 
those cash flows.

Deposit Liabilities
-------------------

In accordance with SFAS No. 107, the fair values of deposit liabilities 
with no stated maturity (demand, NOW, savings and money market savings 
accounts) are equal to the carrying amounts payable on demand.  The fair 
value of time deposits represents contractual cash flows discounted using 
interest rates currently offered on deposits with similar characteristics 
and remaining maturities.  The fair value estimates for deposits do not 
include the benefit that results from the low-cost funding provided by the 
deposit liabilities compared to the cost of alternative forms of funding 
("deposit based intangibles").

Borrowed Funds
--------------

The fair value of borrowings from the FHLB represent contractual repayments 
discounted using interest rates currently available for borrowings with 
similar characteristics and remaining maturities.

Other Financial Assets and Liabilities
--------------------------------------

Cash and due from banks, short-term investments and accrued interest 
receivable have fair values which approximate the respective carrying 
values because the instruments are payable on demand or have short-term 
maturities and present relatively low credit risk and interest rate risk.

Off-Balance Sheet Financial Instruments
---------------------------------------

In the course of originating loans and extending credit, the Company will 
charge fees in exchange for its commitment.  While these commitment fees 
have value, the Company has not estimated their value due to the short-term 
nature of the underlying commitments and their immateriality.

NOTE O - CONDENSED PARENT COMPANY FINANCIAL STATEMENTS

Condensed parent company financial statements as of and for the period from 
July 10, 1998 (the date the Company commenced operations) through December 
31, 1998 as follows:


                         Massachusetts Fincorp, Inc.
                               BALANCE SHEETS

<TABLE>
<CAPTION>

                                                   December 31,
                                                       1998

<S>                                                 <C>
Assets:
Cash and due from banks                             $1,878,270
Investment in Massachusetts Co-operative Bank        2,320,592
Investment in MCB funding                              436,380
                                                    ----------
      Total Assets                                  $4,635,242
                                                    ==========

Liabilities and stockholders' equity:
Accrued taxes                                       $  -85,351
Accounts payable                                        16,231
                                                    ----------
      Total liabilities                                -69,120

Common Stock                                             5,455
Additional paid in capital.                          4,889,278
Surplus                                               -190,370
                                                    ----------
      Total shareholders' equity                     4,704,362
                                                    ----------
      Total liabilities and shareholders' equity    $4,635,242
                                                    ==========

</TABLE>


                         Massachusetts Fincorp, Inc.
                            STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                      December 31,
                                          1998

<S>                                    <C>
Operating expenses:
  Directors fees                       $   9,000
  Contributions                          259,490
  Miscellaneous expense                    7,231
                                       ---------
      Total operaing expenses            275,721
                                       ---------
Income before income tax provision      (275,721)
Income tax provisions                    (85,351)
                                       ---------
Net Income                             $(190,370)
                                       =========

</TABLE>


                         Massachusetts Fincorp, Inc.
                             STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>

                                                     December 31,
                                                         1998

<S>                                                  <C>
Cash flow from operating activities:
  Net income                                         $  (190,370)
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Increase in other assets                          (2,756,972)
    Decrease in other liabilities                        (69,120)
                                                     -----------
      Net cash provided from operating activities     (3,016,462)
                                                     -----------

Cash flows from financing activities:
  Proceeds from IPO offering                           5,454,810
  Payments in IPO offering                              (560,078)
                                                     -----------
      Net cash used for investing activities           4,894,732
                                                     -----------
Net increase (decerease) in cash equivalents           1,878,270
                                                     -----------
Cash and cash equilivalents at end of year                     0
                                                     -----------
Cash and cash equivalents at end of year             $ 1,878,270
                                                     ===========

</TABLE>

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

      Wolf & Company, P.C. resigned as of April 22, 1998, and Grant 
Thornton LLP was engaged and continues as the independent auditors of the 
Bank.  The decision to change auditors was approved by the Board of 
Directors.  The balance sheet as of December 31, 1997, and related 
statements of income and comprehensive income, surplus and cash flows for 
each of the years ended December 31, 1997 and 1996 were audited by Wolf & 
Company, P.C.

      For the  years ended December 31, 1997 and 1996 and up to the date of 
replacement of Wolf & Company, P.C., there were no disagreements with Wolf 
& Company, P.C. on any matter of accounting principles or practices, 
financial statement disclosure or auditing scope or procedure which, if not 
resolved to the satisfaction of Wolf & Company, P.C., would have caused 
them to make reference to the subject matter of the disagreement in 
connection with their report.  The independent auditors' report on the 
financial statements for the year ended December 31, 1997 did not contain 
an adverse opinion or a disclaimer of opinion, and was not qualified or 
modified as to uncertainty, audit scope or accounting principles.


PART III

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

Directors

      The Directors of the Company are also Directors of the Bank.  The 
following table sets forth certain information regarding the Board of 
Directors of the Bank and the Company.

<TABLE>
<CAPTION>

                                                                    Director       Term
Name                    Age(1)    Position(s) Held(2)               Since(3)    Expires(4)

<S>                       <C>     <C>                                 <C>          <C>
Paul C. Green             48      Director, President, Chief          1991         1999
                                   Executive Officer and 
                                   Chairman of the Board

John B. Byrne             86      Director                            1977         1999

John R. Byrne             57      Director                            1983         2000

Richard F. Cahill         55      Director                            1984         2000

W. Craig Dolan            59      Director and Clerk of the Bank      1973         2000

John E. Hurley, Jr.       57      Director                            1981         1999

Robert E. McGovern        80      Director                            1972         1999

John P. O'Hearn, Jr.      59      Director and Vice President         1973         2000
                                   of the Bank

Robert H. Quinn           70      Director                            1974         2001

Joseph W. Sullivan        61      Director                            1977         2001

Diane Valle               45      Director                            1983         2001

--------------------
<F1>  As of December 31, 1998.
<F2>  Positions listed are for the Company and the Bank unless otherwise 
      noted.
<F3>  Lists date individual first became director of the Bank.  All 
      Directors of the Company were appointed in 1998, the first year of 
      its incorporation.
<F4>  Expiration date is the same for the Company and the Bank.

</TABLE>

Executive Officers Who Are Not Directors

       The following table sets forth certain information regarding the 
executive officers who are not also directors.

<TABLE>
<CAPTION>

Name                     Age (1)    Position(s) Held

<S>                        <C>      <C>
Anthony A. Paciulli        49       Senior Vice President of the Company 
                                    and the Bank

Ruth J. Rogers             48       Chief Financial Officer and Treasurer 
                                    of the Company and the Bank and 
                                    Secretary of the Company

Kenneth R. Bordewieck      44       Vice President of the Bank

--------------------
<F1>  As of December 31, 1998.

</TABLE>

Biographical Information

Directors

      Paul C. Green has served as President and Chief Executive Officer of 
the Bank since February 1991.  Prior to 1991, Mr. Green was an executive 
officer at a thrift institution located in the greater Boston metropolitan 
area.

      John B. Byrne is the former President and Treasurer of Byrne, Daily & 
Pike Insurance Agency located in East Milton, Massachusetts.  Mr. Byrne is 
now retired.  Mr. Byrne is the father of John R. Byrne.

      John R. Byrne is the President and Treasurer of Byrne, Daily & Pike 
Insurance Agency located in East Milton, Massachusetts.  Mr. Byrne is the 
son of John B. Byrne.

      Richard F. Cahill is the President and Chief Executive Officer of 
Jack Conway & Co, Inc., a real estate firm located in Hanover, 
Massachusetts.

      W. Craig Dolan is President of James W. Dolan, Inc., a funeral home 
located in the Dorchester section of Boston, Massachusetts.  Mr. Dolan is 
the Clerk of the Board of Directors.

      John E. Hurley, Jr. is a probation officer for the Chelsea District 
Court in Chelsea, Massachusetts.

      Robert E. McGovern was, until his retirement in 1981, a real estate 
director for the Boston Redevelopment Authority in Boston, Massachusetts.

      John P. O'Hearn, Jr. is Executive Vice President of Meredith & Grew, 
Inc., a real estate firm located in Boston, Massachusetts.  He has served 
as a director of the Bank since 1973 and as a Vice President since 1995.

      Robert H. Quinn is a partner in the law firm of Quinn & Morris, 
located in Boston, Massachusetts.

      Joseph W. Sullivan is the former President of Neponset Lincoln 
Mercury, an automobile dealership located in the Dorchester section of 
Boston, Massachusetts.  Mr. Sullivan is now retired.

      Diane Valle is President of Harbor Greenery, a retail florist located 
in Boston, Massachusetts.

Executive Officers Who Are Not Directors

      Anthony A. Paciulli has been Senior Vice President of the Bank since 
March 1994.  From 1988 to 1994, Mr. Paciulli held several senior officer 
positions (including vice president, loan officer, sales manager and 
regional manager) with several different mortgage companies and financial 
institutions, all of which were located in the greater Boston metropolitan 
area.

      Ruth J. Rogers has been Treasurer of the Bank since August 1993.  In 
June 1998, Ms. Roger was named Chief Financial Officer and Treasurer of the 
Bank.  From 1970 to 1992, Ms. Rogers was Vice President and Assistant 
Controller of Guaranty First Trust Co., Waltham, Massachusetts.

      Kenneth R. Bordewieck has been Vice President of the Bank since 
August 1998.  Since 1976, Mr. Bordewieck has held various positions with 
several different financial institutions located in the greater Boston 
metropolitan area.

ITEM 10.   EXECUTIVE COMPENSATION.

Summary Compensation Table

      Summary Compensation Table.  The following table sets forth the cash 
compensation paid by the Bank as well as certain other compensation paid or 
accrued for services rendered in all capacities during the fiscal year 
ended December 31, 1998, to the Chief Executive Officer ("Named Executive 
Officer").

<TABLE>
<CAPTION>

                                                                                   Long-Term Compensation
                                                                            -------------------------------------
                                           Annual Compensation(1)                     Awards              Payouts
                                     -----------------------------------    --------------------------    -------
                                                               Other        Restricted     Securities
                                                               Annual         Stock        Underlying      LTIP       All Other
Name and                     Year     Salary      Bonus     Compensation      Awards      Options/SARs    Payouts    Compensation
Principal Position           (2)       ($)         ($)         ($)(3)         ($)(4)         (#)(5)       ($)(6)        ($)(7)
------------------           ----     ------      -----     ------------    ----------    ------------    -------    ------------

<S>                          <C>     <C>         <C>            <C>            <C>             <C>           <C>        <C>
Paul C. Green
  President and
  Chief Executive Officer    1998    $114,188    $12,575        $  -           $  -            -             -          $6,862

--------------------
<F1>  Under Annual Compensation, the column titled "Salary" includes 
      amounts deferred by the Named Executive Officer under the Bank's 
      401(k) Plan.
<F2>  Neither the Company nor its predecessor, the Bank was a reporting 
      company with respect to the 1997 or 1996 fiscal years.
<F3>  For 1998, there were no (a) perquisites over the lesser of $50,000 or 
      10% of the individual's total salary and bonus for the year; (b) 
      payments of above-market preferential earnings on deferred 
      compensation; (c) payments of earnings with respect to long-term 
      incentive plans prior to settlement or maturation; (d) tax payment 
      reimbursements; or (e) preferential discounts on stock.  For 1998, 
      the Bank had no restricted stock or stock related plans in existence. 
<F4>  No stock awards were granted or earned in fiscal year 1998.
<F5>  No stock options or SARs were earned or granted in 1998.
<F6>  For 1998, there were no payouts or awards under any long-term 
      incentive plan.
<F7>  Other compensation includes the Bank's matching contribution under 
      the Bank's 401(k) Plan.

</TABLE>

Employment Agreements

      The Bank and the Company entered into employment agreements with Paul 
C. Green, Ruth J. Rogers and Anthony A. Paciulli (individually, the 
"Executive") (collectively, the "Employment Agreements").  The Employment 
Agreements are intended to ensure that the Bank and the Company will be 
able to maintain a stable and competent management base after the 
Conversion.  The continued success of the Bank and the Company depends to a 
significant degree on the skills and competence of the above referenced 
officers.

      The Employment Agreements will provide for a three-year term for Mr. 
Green and a one-year term for Ms. Rogers and Mr. Paciulli.  The term of the 
Company Employment Agreements shall be extended on a daily basis unless 
written notice of non-renewal is given by the Board of Directors and the 
term of the Bank Employment Agreements shall be renewable on an annual 
basis.  The Employment Agreements provide that the Executive's base salary 
will be reviewed annually.  The base salaries which were effective for such 
Employment Agreements for Messrs.  Green and Paciulli and Ms. Rogers will 
be $120,750, $99,300 and $69,000, respectively.  In addition to the base 
salary, the Employment Agreements provide for, among other things, 
participation in stock benefits plans and other fringe benefits applicable 
to executive personnel.  The Employment Agreements provide for termination 
by the Bank or the Company for cause, as defined in the Employment 
Agreements, at any time.  In the event the Bank or the Company chooses to 
terminate the Executive's employment for reasons other than for cause, or 
in the event of the Executive's resignation from the Bank and the Company 
upon:  (i) failure to re-elect the Executive to his current offices; (ii) a 
material change in the Executive's functions, duties or responsibilities; 
(iii) a relocation of the Executive's principal place of employment by more 
than 25 miles; (iv) a reduction in the benefits and perquisites being 
provided to the Executive in the Employment Agreement; (v) liquidation or 
dissolution of the Bank or the Company; or (vi) a breach of the Employment 
Agreement by the Bank or the Company, the Executive or, in the event of 
death, his beneficiary would be entitled to receive an amount equal to the 
remaining base salary payments due to the Executive for the remaining term 
of the Employment Agreement and the contributions that would have been made 
on the Executive's behalf to any employee benefit plans of the Bank and the 
Company during the remaining term of the Employment Agreement.  The Bank 
and the Company would also continue and pay for the Exective's life, 
health, dental and disability coverage for the remaining term of the 
Employment Upon any termination of the Executive, the Executive is subject 
to a one year non-competition agreement.

      Under the Employment Agreements, if voluntary or involuntary 
termination follows a change in control of the Bank or the Company, the 
Executive or, in the event of the Executive's death, his beneficiary, would 
be entitled to a severance payment equal to the greater of:  (i) the 
payments due for the remaining terms of the agreement; or (ii) three times 
the average of the five preceding taxable years' annual compensation.  The 
Bank and the Company would also continue the Executive's life, health, and 
disability coverage for thirty-six months in the case of Mr. Green and 12 
months in the case of Mr. Paciulli and Ms. Rogers.  Notwithstanding that 
both the Bank and Company Employment Agreements provide for a severance 
payment in the event of a change in control, the Executive would only be 
entitled to receive a severance payment under one agreement.

      Payments to the Executive under the Bank's Employment Agreement will 
be guaranteed by the Company in the event that payments or benefits are not 
paid by the Bank.  Payment under the Company's Employment Agreement would 
be made by the Company.  All reasonable costs and legal fees paid or 
incurred by the Executive pursuant to any dispute or question of 
interpretation relating to the Employment Agreements shall be paid by the 
Bank or Company, respectively, if the Executive is successful on the merits 
pursuant to a legal judgment, arbitration or settlement.  The Employment 
Agreements also provide that the Bank and Company shall indemnify the 
Executive to the fullest extent allowable under Massachusetts and Delaware 
law, respectively.  In the event of a change in control of the Bank or the 
Company, the total amount of payments due under the Agreements, based 
solely on cash compensation paid to the officers who will receive 
Employment Agreements over the past five fiscal years and excluding any 
benefits under any employee benefit plan which may be payable, would be 
approximately $602,000.

Change in Control Agreements

      The Bank entered into a three-year Change in Control Agreements with 
Mr. Bordewieck, who was not covered by an employment agreement.  The Change 
in Control Agreement is renewable on an annual basis.  The Change in 
Control Agreement provides that in the event that voluntary or involuntary 
termination follows a change in control of the Company or the Bank, the 
officer would be entitled to receive a severance payment equal to three 
times the officer's average annual compensation for the five most recent 
taxable years.  The Bank would also continue and pay for the officer's 
life, health and disability coverage for thirty-six months following 
termination.  In the event of a change in control of the Company or the 
Bank, the total payments that would be due under the Change in Control 
Agreement, based solely on the current annual compensation paid to the 
officer covered by the Change in Control Agreement and excluding any 
benefits under any employee benefit plan which may be payable, would be 
approximately $195,000.

Management Supplemental Executive Retirement Plan

      The Bank implemented a non-qualified deferred compensation 
arrangement known as a "Management Supplemental Executive Retirement Plan" 
(the "MSERP").  The Bank intends the MSERP to make up lost Employee Stock 
Ownership Plan (the "ESOP") benefits to designated participants who retire, 
who terminate employment in connection with a change in control, or whose 
participation in the ESOP ends due to termination of the ESOP in connection 
with a change in control (regardless of whether the individual terminates 
employment) prior to the complete repayment of the ESOP loan.  Generally, 
upon the retirement of an eligible individual (designated by the Board of 
Directors of the Bank or a participating affiliate of the Bank) or upon a 
change in control of the Bank or the Company prior to complete repayment of 
the ESOP Loan, the MSERP will provide the individual with a benefit 
determined by first  (i) projecting the number of shares that would have 
been allocated to the individual under the ESOP if the individual had 
remained employed throughout the term of the ESOP loan (measured from the 
individual's first date of ESOP participation) and (ii) reducing that 
number by the number of shares actually allocated to the individual's 
account under the ESOP; and second, by multiplying the number of shares 
that represent the difference between such figures by the average fair 
market value of the Common Stock over the preceding five years.  The 
individual's benefits become payable under the MSERP upon the participant's 
retirement (in accordance with the standard retirement policies of the 
Bank) or upon the change in control of the Bank or the Company.   The Bank 
may establish a grantor trust in connection with the MSERP to satisfy the 
obligations of the Bank with respect to the MSERP. The assets of the 
grantor trust would remain subject to the claims of the Bank's general 
creditors in the event of the Bank's insolvency until paid to the 
individual pursuant to the terms of the MSERP.

Director Compensation

      Non-employee Directors of the Bank are currently paid an annual 
retainer of $6,600.  Each member of the Bank's Security Committee is 
currently paid an annual retainer of $1,800.  In addition, the Clerk of the 
Bank receives $50 for each monthly Board meeting that he attends.  All 
directors of the Company are paid an annual retainer fee of $1,800.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Security Ownership of Certain Beneficial Owners

      The following table sets forth information as to those persons 
believed by management to be beneficial owners of more than 5% of the 
Company's outstanding shares of Common Stock or as disclosed in certain 
reports received to date regarding such ownership filed by such persons 
with the Company and with the SEC, in accordance with Sections 13(d) and 
13(g) of the Securities Exchange Act of 1934, as amended (the "Exchange 
Act").  Other than those persons listed below, the Company is not aware of 
any person, as such term is defined in the Exchange Act, who owns more than 
5% of the Company's Common Stock as of the Record Date.

<TABLE>
<CAPTION>

                           Name and Address of              Number       Percent of
Title of Class               Beneficial Owner              of Shares       Class
--------------     -----------------------------------     ---------     ----------

<S>                <C>                                     <C>              <C>
Common Stock       The Massachusetts Co-operative Bank     43,638(1)        8.0%
                   Employee Stock Ownership Plan 
                   and Trust (the "ESOP")
                   1442 Dorchester Avenue
                   Boston, Massachusetts 02122

Common Stock      Spence Limited, L.P.                     33,100(2)        6.1%
                  4712 Clendenin Road
                  Nashville, TN 37220-1004

--------------------
<F1>  Shares of Common Stock were acquired by the ESOP in the Bank's 
      Conversion.  The ESOP Committee administers the ESOP.  First Bankers 
      Trust, N.A. has been appointed as the corporate trustee for the ESOP 
      ("ESOP Trustee").  The ESOP Trustee, subject to its fiduciary duty, 
      must vote all allocated shares held in the ESOP in accordance with the 
      instructions of the participants.  As of December 31, 1998, 4,364 shares 
      had been allocated and 39,274 shares were unallocated under the ESOP.  
      Under the ESOP, unallocated shares and allocated shares as to which 
      voting instructions are not given by participants are to be voted by the 
      ESOP Trustee in a manner calculated to most accurately reflect the 
      instructions received from participants regarding the allocated stock so 
      long as such vote is in accordance with the provisions of the Employee 
      Retirement Income Security Act of 1974, as amended ("ERISA").
<F2>  Based in information filed in a schedule 13G on March 12, 1999, 
      Spence Limited, L.P. may be deemed beneficial owners of 33,100 
      shares.


</TABLE>

Security Ownership of Management

      The following table sets forth, as of March 19, 1999, the number of 
shares of Common Stock that the directors own and that all directors and 
executive officers own as a group.

<TABLE>
<CAPTION>

                                                 Number of     Percent
         Name                 Title of Class      Shares       of Class
---------------------------   --------------     ---------     --------

<S>                            <C>               <C>            <C>
Paul C. Green(1)               Common Stock      10,100          1.85%
John B. Byrne(1)               Common Stock      10,000          1.83%
John R. Byrne                  Common Stock       5,000             *
Richard F. Cahill              Common Stock       1,500             *
W. Craig Dolan                 Common Stock       3,100             *
John E. Hurley, Jr.(1)         Common Stock       1,000             *
Robert E. McGovern(1)          Common Stock         500             *
John P. O'Hearn, Jr.           Common Stock      10,000          1.83%
Robert H. Quinn                Common Stock       1,000             *
Joseph W. Sullivan             Common Stock       2,500             *
Diane Valle                    Common Stock       2,653             *
                                                 ------         -----

All directors and executive
Officers as a group (14)                         60,353         11.06%
                                                 ======         =====

--------------------
<F*>  Does not exceed 1.0% of the Company's voting securities.
<F1>  Individuals whole terms expire in 1999.

</TABLE>

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      Federal regulations require that all loans or extensions of credit to 
executive officers and directors must be made on substantially the same 
terms, including interest rates and collateral, as those prevailing at the 
time for comparable transactions with the general public and must not 
involve more than the normal risk of repayment or present other unfavorable 
features.  In addition, loans made to a director or executive officer in 
excess of the greater of $25,000 or 5% of the Bank's capital and surplus 
(up to a maximum of $500,000) must be approved in advance by a majority of 
the disinterested members of the Board of Directors.

      The Bank currently has a policy of  not making loans to officers and 
employees.  Exceptions to that policy must be approved in advance by a 
majority of the disinterested members of the Board of Directors. The 
Company intends that all transactions between the Company and its executive 
officers, directors, holders of 10% or more of the shares of any class of 
its Common Stock and affiliates thereof, will contain terms no less 
favorable to the Company than could have been obtained by it in arms-length 
negotiations with unaffiliated persons and will be approved by a majority 
of independent outside directors of the Company not having any interest in 
the transaction.


PART IV

ITEM 13.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-
K.

(a) 1.   Financial Statements

      The following consolidated financial statements of the Company and 
its subsidiaries are filed as part of this document under Item 7:

-     Independent Auditors' Reports
-     Consolidated Balance Sheets as of December 31, 1998 and 1997
-     Consolidated Statements of Income and Comprehensive Income for the 
      Years Ended December 31, 1998, 1997 and 1996
-     Consolidated Statements of Changes in Surplus for the Years Ended 
      December 31, 1998, 1997 and 1996
-     Consolidated Statements of Cash Flows for the Years Ended
      December 31, 1998, 1997 and 1996
-     Notes to Consolidated Financial Statements

(a) 2.   Financial Statement Schedules

      Financial Statement Schedules have been omitted because they are not 
applicable or the required information is shown in the Consolidated 
Financial Statements or notes thereto.

(b)      Reports on Form 8-K filed during the last quarter of 1998

      None

(c)      Exhibits Required by Securities and Exchange Commission Regulation 
         S-K

<TABLE>
<CAPTION>
Exhibit
Number
-------

<C>      <S>
10.1     Employment Agreement between Massachusetts Fincorp, Inc. and Paul 
          C. Green
10.2     Employment Agreement between Massachusetts Fincorp, Inc. and Ruth 
          J. Rogers
10.3     Employment Agreement between Massachusetts Fincorp, Inc. and 
          Anthony A. Paciulli
10.4     Employment Agreement between The Massachusetts Co-operative Bank. 
          and Paul C. Green
10.5     Employment Agreement between The Massachusetts Co-operative Bank. 
          and Ruth J. Rogers
10.6     Employment Agreement between The Massachusetts Co-operative Bank. 
          and Anthony A. Paciulli
10.7     Change in Control agreement between The Massachusetts Co-operative 
          Bank and Kenneth R. Bordewieck
10.8     Form of Proposed The Massachusetts Co-operative Bank Employee 
          Severance Compensation Plan (1)
10.9     Form of  The Massachusetts Co-operative Bank Supplemental 
          Executive Retirement Plan  (1)
10.10    Form of The Massachusetts Co-operative Bank Management 
          Supplemental Executive Retirement Plan  (1)
11.0     Statement Re:  Computation of Per Share Earnings(2)
16.1     Letter re: Change in Certifying Accountant
21.0     Subsidiaries Information Incorporated Herein By Reference to
          Part 1 - Subsidiary Activity
27.0     Financial Data Schedule

--------------------
<F1>  Incorporated by reference into this document from the Exhibits filed 
      with the Registration Statement on Form SB-2, and any amendments 
      thereto, Registration No. 333-60237.
<F2>  Not applicable as the Company did not have earnings in 1998.

</TABLE>

CONFORMED SIGNATURES

      In accordance with the requirements of the Securities Act of 1933, 
the Registrant certifies that it has reasonable grounds to believe that it 
meets all the requirements of filing on Form SB-2 and authorized this 
registration statement  to be signed on its behalf by the undersigned, in 
the City of Boston, Commonwealth of Massachusetts, on March 29, 1999.

Massachusetts Fincorp, Inc.


By:  /s/ Paul C. Green
     ------------------------
     Paul C. Green
     President, Chief Executive Officer
      and Director

      In accordance with the requirements of the Securities Act of 1933, 
this Registration Statement was signed by the following persons in the 
capacities and on the dates stated.

<TABLE>
<CAPTION>

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

<S>                            <C>                           <C>
/s/ Paul C. Green              President, Chief Executive    March 29, 1999
--------------------------     Officer and Director
Paul C. Green                  (principal executive 
                               officer)

/s/ Ruth J. Rogers             Chief Financial Officer       March 29, 1999
--------------------------     Treasurer and Corporate
Ruth J. Rogers                 Secretary (principal
                               accounting and financial
                               officer)

/s/ John B. Byrne              Director                      March 29, 1999
--------------------------
John B. Byrne

/s/ John R. Byrne              Director                      March 29, 1999
--------------------------
John R. Byrne

/s/ Richard F. Cahill          Director                      March 29, 1999
--------------------------
Richard F. Cahill

/s/ W. Craig Dolan             Director                      March 29, 1999
--------------------------
W. Craig Dolan

/s/ John E. Hurley, Jr.        Director                      March 29, 1999
--------------------------
John E. Hurley, Jr.

/s/ Robert E. McGovern         Director                      March 29, 1999
--------------------------
Robert E. McGovern

/s/ Joseph P. O'Hearn, Jr.     Director                      March 29, 1999
--------------------------
John P. O'Hearn, Jr.

/s/ Robert H. Quinn            Director                      March 29, 1999
--------------------------
Robert H. Quinn

/s/ Joseph W. Sullivan         Director                      March 29, 1999
--------------------------
Joseph W. Sullivan

/s/ Diane Valle                Director                      March 29, 1999
--------------------------
Diane Valle

</TABLE>