Exhibit 13.1

Bancorp Connecticut, Inc.

Annual Report


1996

[Photo of Cupola with weathervane appearing above caption "Our Bright Future"]


<PAGE>

Selected Consolidated Financial Data

<TABLE>
<CAPTION>
                                                                 At or for the year ended December 31
(dollars in thousands, except for per share data)        1996      1995      1994        1993        1992
                                                         ----      ----      ----        ----        ----
<S>                                                    <C>        <C>        <C>        <C>        <C>
Statement of Condition Data:
         Assets                                        $419,398   $383,978   $357,180   $327,793   $313,935
         Securities                                     149,611    130,549    124,372     93,975     83,812
         Loans, net                                     246,274    230,706    213,457    206,815    206,420
         Deposits                                       309,827    294,835    279,392    268,294    263,426
         FHLB of Boston advances                         21,000     19,990     22,299     16,650     10,950
         Federal funds purchased and securities sold
                  under agreements to repurchase         41,879     22,227     15,027      2,831      4,172
         Shareholders' equity                            42,731     43,210     37,357     36,965     32,089
Statement of Income Data:
         Net interest income                           $ 14,754   $ 13,896   $ 12,975   $ 12,368   $ 12,212
         Provision for loan losses                          435        180        242        881      3,201
         Net gain on sale of securities                     344        150         46        790        480
         Other income                                     1,341      1,093        737        954        937
         Other expenses                                   8,599      8,625      7,879      8,068      6,871
         Income taxes                                     2,381      2,038      1,889      1,670      1,369
                                                          -----      -----      -----      -----      -----
         Income before cumulative effect
                  of accounting change                    5,024      4,296      3,748      3,493      2,188
         Cumulative effect of
                  accounting change                        --         --         --        2,140       --
                                                          -----      -----      -----      -----      -----

         Net income                                    $  5,024   $  4,296   $  3,748   $  5,633   $  2,188
                                                       ========   ========   ========   ========   ========
Per Share Data:*
         Earnings before cumulative effect of
                  accounting change - fully diluted    $   1.76   $   1.54   $   1.36   $   1.31   $    .83
         Cumulative effect of accounting change            --         --         --          .81       --
         Earnings - fully diluted                          1.76       1.54       1.36       2.12        .83
         Cash dividends                                     .74        .59        .42        .34        .03
         Book value                                       16.63      15.91      13.85      13.80      12.19
Selected Statistical Data:
         Return on average assets                          1.26%      1.17%      1.11%      1.77%       .72%
         Return on average equity                         11.69      10.67      10.11      16.13       7.12
         Average equity to average assets                 10.71      10.95      10.99      10.67      10.14
         Net interest spread (tax equivalent basis)        3.48       3.53       3.63       3.74       3.79
         Net interest margin (tax equivalent basis)        4.10       4.15       4.14       4.20       4.32
         Dividend payout ratio                            39.63      37.01      30.15      16.02       4.18
</TABLE>

*  Per share data has been restated to reflect a 20% stock dividend on June 1,
   1993 and a 6-for-5 stock split effected in the form of a stock dividend on
   June 19, 1996.

                               Table of Contents
                               -----------------

Selected Consolidated Financial Data ......................................    1
Letter to Shareholders ....................................................    2
Our Bright Future .........................................................    3
Business Description ......................................................    4
Management's Discussion and Analysis ......................................    5
Report of Independent Accountants .........................................   17
Consolidated Statements of Condition ......................................   18
Consolidated Statements of Income .........................................   19
Consolidated Statements of Shareholders' Equity ...........................   20
Consolidated Statements of Cash Flows .....................................   21
Notes to Consolidated Financial Statements ................................   22
Bancorp Connecticut, Inc. Directors and Officers ..........................   40
Southington Savings Bank Directors and Officers ...........................   41
Shareholder Information ...................................................   42

                                       1

<PAGE>

Letter To Shareholders
To Our Shareholders:

Bancorp Connecticut, Inc. and its subsidiary, Southington Savings Bank (SSB),
had another very good year. During 1996, the Company's net income increased
16.9% to $5,024,000, or $1.76 per share, compared to $4,296,000, or $1.54 per
share in 1995. A higher volume of earning assets and an increase in net interest
income, noninterest income from financial services and income from securities
transaction activities were principally responsible for these excellent
operating results.

     As always, along with servicing our customers and the community to the best
of our ability, we continue to focus on improving shareholder value. Last year,
for instance, we pointed out that your Company was undervalued. Toward this end,
we took a number of actions to address this issue, starting with the February
announcement of a 15% share buy-back program to reduce our excessive capital
position. In addition, the Company effected a 20% stock split in the form of a
stock dividend at midyear and raised its cash dividend in excess of 25% during
1996. These actions, combined with speculative interest in publicly-owned
Northeast bank stocks which arose from assorted merger activity, favorably
influenced the value of Bancorp Connecticut, Inc. At the end of 1996, the
Company's market capitalization approached $62 million, an increase of
approximately $21 million since year-end 1995. In other words, our share price
rose 52.1% in the twelve months ending December 31, 1996. According to Keefe,
Bruyette and Woods (KBW), the nationally-known bank analysts, market
appreciation of 44 publicly-owned New England banks' stocks, including the major
super-regional banks as well as Bancorp Connecticut, averaged 32.3% in 1996.
Over the past five years, the compound growth rate of share appreciation of
BKCT's stock was 50.1% - so we have done well! Our stock, however, was still
selling at only an "average" 140% of book value and approximately 12 times
earnings at year-end. We still believe it is undervalued when related to the
Company's financial track record.

               [Photo: Robert D. Morton]
               Robert D. Morton, President and
               Chief Executive Officer of Bancorp Connecticut, Inc.

     As previously stated, our goal continues to be: to grow our corporate
"franchise" beyond Southington, either through SSB or the acquisition of other
banks and/or related companies into our holding company. In this regard we
continue to review appropriate acquisition opportunities but "price" continues
to be an impediment. Unfortunately, in the first half of last year, a spate of
banking acquisitions took place (primarily in the downstate area) at multiples
that exceed two times book value. This benchmark price now seems to be a
"hurdle" target for many smaller banks that are considering being acquired, even
though your Company with a superior track record is selling at 1.4 times book
value. It is interesting to note that the average acquisition price of banks in
Connecticut during 1995 and 1996 was 180% of book value. We also believe that
there are some fundamental truths that all banks, particularly smaller ones,
must face in the years ahead. Unbridled competition from bank and nonbank
competitors will make profitable growth more difficult. In addition,
technological innovation within the industry and the resources that will be
needed to address this issue pose difficult challenges for most community banks.
Finally, the potential buyers of banks in recent years, which have been
primarily area super-regional or out-of-state banks, are likely to remain on the
sidelines as they digest their acquisitions. Our Company, with its anchor jewel
of SSB, offers a great alternative for many smaller banks but not at an
unrealistic price. At the same time, we have not ruled out strategically located
branches beyond the borders of Southington if we can purchase or lease an
existing site that makes business sense for us.

     As the central Connecticut economy continues to improve, we are optimistic
about the prospects for our banking company. SSB, as we have explained in the
past, is looking and acting more like a full-service commercial bank. Our
balance sheet structure is now, and has been, focused on generating more
commercial business loans, lower cost transaction balances, and noninterest
sources of revenue from money management services, brokerage activity and the
sale of insurance products. In this regard, we have made excellent progress over
the past few years. Whether it's business banking or a wide range of financial
services for the consumer, we continue to emphasize our strengths friendly
personalized service, the stability and continuity of our outstanding staff, and
a decision-making process that begins and ends right here in town.

     In 1997, and beyond, technology will play an increasingly important role in
the banking industry and your Company. As we sort out the most efficient
delivery systems of the future and continue to bring more electronic-based
products and services on stream, our Bank has the resources and the staff in
place to make it happen. Our approach is twofold. First, we are placing
substantial emphasis on new product and services development and delivery
implementation. Our primary focus will be on increased support of our commercial
lending area where we will be introducing cash management and deposit products
to complement our existing comprehensive loan products. Secondly, we are
continuing to scrutinize developing technologies and systems that will be
critical to our future success. For example, we are keeping a close watch on
Internet banking to determine the best method and system to match this type of
technology with the needs of our customers.

     In the meantime, SSB and the Company are committed to a very aggressive
business plan for 1997 and, indeed, the balance of this century. While in some
respects we plan to stick with the "basics," which for us include the highest
quality customer service and supporting our community, we are also mindful of
the need for the orderly growth of our Company. Banking and/or the delivery of
all financial services is becoming a much more competitive business, and a
"blurring" effect among brokerage firms, insurance companies, credit unions and
the like promises to make our future more interesting. As is usually the case,
however, people make the difference and we've got some of the very best.

     We believe that SSB and your Company are extremely well positioned to take
advantage of various opportunities as they may arise, and we feel confident
about our future prospects in the rapidly changing financial services industry.
The directors, management and staff join me in thanking you for your confidence
and support.

Sincerely,

/s/ Robert D. Morton
    Robert D. Morton
    President and
    Chief Executive Officer

                                       2

<PAGE>



Our Bright Future...

 ...is based on our successful past. This graph charts the recent history of our
cash dividends. The stockholders have reaped the benefits of our success.

--------------------------------------------------------------------------------
[Graph Data]

                           1992      1993      1994      1995      1996
Cash dividend per share  $0.03     $0.34     $0.42     $0.59     $0.74

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

Per share data has been restated to reflect a 20% stock dividend on June 1, 1993
and a 6-for-5 stock split effected in the form of a stock dividend on June 19,
1996.

 ...grows due to the stability of our experienced staff. We are always willing to
help each customer determine their specific financial needs and match those to
our product and service offerings. SSB is a friendly place to conduct business,
both personal and professional.

[Photo: Staff and family members]

From the left: Alice Mathews, Customer Service Representative;
Diane Adams, Main Office Receptionist; Tiffany Gillis and son,
Zachary Gillis, customers.

 ...begins today as we prepare young people for careers in the financial services
industry. Our SSB Training Branch, located in the Southington High School
Atrium, is the only one of its kind in Connecticut. The SSB Training Branch
provides financial services to staff, students and visitors of SHS while
providing training to students in the business program.

[Photo: Staff members]

Left background: Dennis Kelly, SHS DECA Teacher. Left foreground: Joan E.
Morelli, SHS Training Branch Manager, with Benjamin Gonzales, student. In
foreground is Christine L. Stocker, student.

 ...is enhanced by our commitment to the technology necessary to support new
product and services development. We will focus on the needs of customers while
improving our delivery systems.

[Photo: Staff members]

Left to right: Barry J. Abramowitz, Chief Information Officer; Terry Kelly, AVP
Deposit Services Manager; Kurt M. Heinrich, Systems Administration Officer; and
Annette Petruzzi, Loan Operations Manager.

                                        3

<PAGE>

Business Description

     The primary asset of Bancorp Connecticut, Inc. (the Corporation) is
Southington Savings Bank (SSB), a full-service community bank founded in 1860.
SSB operates three banking offices and one mortgage center within the town of
Southington and services the financial needs of commercial business, families,
municipal government, and nonprofit organizations throughout the area -
including, but not limited to, greater Southington. The Bank also operates a
limited purpose branch bank and training facility at Southington High School.

     Southington Savings Bank offers a comprehensive menu of products and
services to meet the financial needs of individuals, families and businesses,
including deposit accounts, loans, investment management services and related
accounts.

     Deposit accounts include checking and related transaction accounts, regular
savings and money market savings, certificates of deposit, IRAs, and other
retirement vehicles.

     Individuals and institutions can also take advantage of Southington Savings
Bank's depth of experience in trust services which include investment
management, estate settlement and small business benefit plans.

     SSB serves the borrowing needs of individuals and families with residential
mortgages, consumer (personal) loans, auto loans and student loans. Central
Connecticut businesses rely on SSB for commercial business loans (including SBA
loans) and cash management services.

     Investment brokerage services are provided at SSB through Liberty
Securities Corporation, an independent broker-dealer. They complement available
tax-deferred annuities and insurance policies through Savings Bank Life
Insurance.

     Automated teller machines, safe deposit boxes and electronic tax filing
services are also available at Southington Savings Bank for the convenience of
the customers. You can visit SSB on the world wide web at www.s-s-b.com.

                                        4

<PAGE>

Management's Discussion and Analysis

General

     On November 17, 1994, Southington Savings Bank completed a change in its
corporate structure with the formation of its parent holding company, Bancorp
Connecticut, Inc. (the Corporation). The holding company structure provides the
Corporation with maximum flexibility in pursuing financial opportunities as they
present themselves. Since Southington Savings Bank (the Bank) is the sole
subsidiary of the Corporation, the Corporation's earnings and financial
condition are predicated almost entirely on the performance of the Bank.

     The Bank's results of operations depend primarily upon the difference
between the interest, dividends and fees earned on its loan and investment
portfolios and the interest paid on its deposits and borrowings. In addition,
the Bank's income is significantly affected by the provision for loan losses,
the fees it charges for its services, security gains and losses, administrative
expenses, other real estate expenses, and income taxes.

Investments

     On December 31, 1996, investment securities totaled $149,611,000 as
compared to $130,549,000 on December 31, 1995, an increase of 14.6%. A majority
of the increase was in the held-to-maturity category which rose by $20,436,000.
This increase was part of the Bank's overall asset and liability management
strategy. Funds from longer term borrowings and proceeds from sales of available
for sale securities were primarily invested in mortgage-backed securities and to
a lesser extent, United States Government agency obligations within the
held-to-maturity classification. The mix within the available-for-sale category
changed slightly from 1995 to 1996. Funds from reverse repurchase agreements
were invested in money market preferred stocks which are highly liquid and
subject to tax advantages of the federal and state dividends received deduction.
Approximately 67.6% of the marketable equity security portfolio is comprised of
money market preferred stocks as of December 31, 1996.

     The following table sets forth the carrying amount of investment securities
at the dates indicated:

<TABLE>
<CAPTION>
(dollars in thousands)                                    December 31,
------------------------------------------------------------------------------
                                                  1996        1995      1994
                                                  ----        ----      ----
<S>                                              <C>       <C>        <C>
Held-to-maturity (at cost):
         United States Government
           agency obligations                    $22,651   $ 17,947   $ 13,474
         Municipal bonds                           3,252      3,022      2,369
         Mortgage-backed securities               18,194      2,691       --
                                                --------   --------   --------
                  Total held-to-maturity        $ 44,097   $ 23,660   $ 15,843
                                                ========   ========   ========
Available-for-sale (at market):
         United States Government
           agency obligations                   $ 15,067   $ 23,110   $ 31,276
         Mortgage-backed securities               26,216     39,265     33,387
         Marketable equity securities             56,531     36,839     36,330
         Mutual funds                              7,701      7,675      7,536
                                                --------   --------   --------
                  Total available-for-sale      $105,515   $106,889   $108,529
                                                ========   ========   ========
</TABLE>

     The following table sets forth the maturities of investment securities at
December 31, 1996 and the weighted average yields of such securities (calculated
on the basis of book and effective yields weighted for the scheduled maturity of
each security).

<TABLE>
<CAPTION>
                                                                    Maturing
                                   -------------------------------------------------------------------------
                                      Within          After One But      After Five But         After
                                      One Year       Within Five Years   Within Ten Years     Ten Years
                                   -------------------------------------------------------------------------
(dollars in thousands)             Amount   Yield     Amount    Yield    Amount   Yield     Amount    Yield
                                   -------------------------------------------------------------------------
<S>                                 <C>     <C>      <C>        <C>      <C>      <C>       <C>        <C>
Held-to-maturity (at cost):
 United States Government
          and agency obligations    $500    6.19%    $14,945    6.64%    $3,485   7.43%     $3,721     7.58%
 Municipal bonds                     --       --%      2,988    4.74%       264   5.80%        --        --%
 Mortgage-backed securities          --       --%       --        --%       --      --%     18,194     7.43%
                                   -------------------------------------------------------------------------
 Total held-to-maturity             $500    6.19%    $17,933    6.32%    $3,749   7.32%    $21,915     7.46%
                                   =========================================================================
</TABLE>
                                       5

<PAGE>

Loans

     On December 31, 1996, total loans amounted to $252,144,000 as compared to
$237,154,000 on December 31, 1995, an increase of 6.3%. The primary area of
increase was in the commercial loan portfolio which increased by $5,079,000 for
the year to $37,050,000 due to increased efforts in commercial loan
originations, specifically, adjustable rate loans that reprice at least
annually, and to the purchase of the guaranteed portion of SBA loans. In
addition, consumer loans increased by $3,833,000 or 10.8% primarily as a result
of purchased automobile loans. Finally, real estate construction loans increased
by $3,771,000 between year end 1996 and 1995. Approximately 47% of the balance
of these loans as of December 31, 1996 are for construction of residential homes
which convert to a permanent mortgage upon completion of the construction. On
December 31, 1996, $212,910,000 or 84.4% of total loans were collateralized by
real estate.

     In December, 1996, the Bank sold approximately $3,657,000 of fixed rate
residential mortgages with servicing retained which resulted in the recognition
of capitalized mortgage servicing rights in the amount of $28,000. The servicing
rights were valued based on a valuation model that calculates the present value
of future cash flows utilizing certain assumptions such as estimates of the cost
of servicing per loan, discount rate and prepayment.

[BAR CHART SHOWING TOTAL LOANS FROM 1992 TO 1996]

(millions)
1992   $213,256
1993   $214,137
1994   $220,542
1995   $237,154
1996   $252,144

The following table shows the Bank's loan distribution at the end of the last
five years.

<TABLE>
<CAPTION>
                                                    December 31,
----------------------------------------------------------------------------------------
(in thousands)                1996         1995        1994         1993         1992
                           --------     --------     --------     --------     --------
<S>                        <C>          <C>          <C>          <C>          <C>
Residential real estate    $134,000     $132,566     $125,833     $123,722     $121,579
Commercial real estate       35,472       34,598       33,660       33,397       32,420
Real estate construction      6,234        2,463        2,233        2,513        3,439
Commercial                   37,050       31,971       25,753       29,561       29,008
Consumer                     39,388       35,556       33,063       24,944       26,810
                           --------     --------     --------     --------     --------
Total Loans                $252,144     $237,154     $220,542     $214,137     $213,256
                           ========     ========     ========     ========     ========
</TABLE>

     The following table shows the maturity and repricing of loans (excluding
real estate mortgage and consumer loans outstanding) as of December 31, 1996.
Also provided are the amounts due after one year classified according to the
sensitivity to changes in interest rates.

<TABLE>
<CAPTION>
                                     Maturing or Repricing:
                            --------------------------------------------------
                              Within      After One But      After
(in thousands)              One Year   Within Five Years   Five Years   Total
                            --------------------------------------------------
<S>                          <C>           <C>              <C>        <C>
Real estate - construction   $ 3,328       $ 1,025          $1,881     $ 6,234
Commercial                    23,199         9,254           4,597      37,050
                             -------       -------          ------     -------
         Total               $26,527       $10,279          $6,478     $43,284
                             =======       =======          ======     =======

Loans maturing/repricing after one year with:
 Fixed interest rates                      $ 5,178         $ 5,033
 Variable interest rates                     5,101           1,445
                                           -------         -------
         Total                             $10,279         $ 6,478
                                           =======         =======
</TABLE>

                                       6

<PAGE>

Nonperforming assets and allowance for loan losses

     Nonperforming assets declined between year end 1996 and 1995 mainly as a
result of the settlement of litigation during 1996 which allowed the Corporation
to take possession of properties collateralizing certain loans that were
nonperforming in 1995. A large portion of these properties were disposed of
throughout 1996. Nonperforming loans decreased to $2,939,000 or 1.2% of total
loans on December 31, 1996 as compared to $6,256,000 or 2.6% on December 31,
1995. Foreclosed real estate as of year end 1996 increased to $1,367,000 from
$872,000 at year end 1995.

[BAR CHART SHOWING NONPERFORMING ASSETS FROM 1992 TO 1996]

1992     $14,240,000
1993      $9,424,000
1994      $6,868,000
1995      $7,128,000
1996      $4,306,000

Nonperforming Assets

<TABLE>
<CAPTION>
                                                   December 31,
-------------------------------------------------------------------------------
(dollars in thousands)            1996      1995     1994      1993       1992
-------------------------------------------------------------------------------
<S>                             <C>       <C>       <C>       <C>       <C>
Nonaccrual loans
   Residential real estate      $2,060    $3,650    $3,392    $5,244    $ 6,945
   Commercial real estate          337     1,134     1,465     1,646      1,508
   Commercial                      306     1,062     1,030     1,136      1,852
   Consumer                        236       410       340       396        575
                                ------    ------    ------    ------    -------
      Total nonaccrual loans     2,939     6,256     6,227     8,422     10,880
Accruing loans past due
   90 days or more                --        --        --        --         --
                                ------    ------    ------    ------    -------
      Total nonperforming loans  2,939     6,256     6,227     8,422     10,880
Foreclosed real estate           1,367       872       641     1,002      3,360
                                ------    ------    ------    ------    -------
    Total nonperforming assets  $4,306    $7,128    $6,868    $9,424    $14,240
                                ======    ======    ======    ======    =======
Nonperforming loans as a
    percentage of total loans     1.17%     2.64%     2.82%     3.93%      5.10%
                                ======    ======    ======    ======    =======
Nonperforming assets as a
    percentage of total assets    1.03%     1.86%     1.92%     2.87%      4.54%
                                ======    ======    ======    ======    =======
Restructured loans in
     compliance with modified
     terms not included above     $--       $--       $--       $--     $   136
                                ======    ======    ======    ======    =======
</TABLE>

     The Bank classifies loans as nonaccrual when they become 90 days or more
past due. Interest income is then reversed and not recognized until received.
Interest income that would have been recorded during 1996 on all nonaccrual
loans under the original loan terms was approximately $354,000. Actual income
collected on these loans was $228,000.

     On January 1, 1995, the Bank adopted Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("FAS
114") and Statement of Financial Accounting Standards No. 118 "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosure". Under
the new standards, a loan is considered impaired if, based on current
information and events, it is probable that the Bank will be unable to collect
the scheduled payments of principal and interest when due, according to the
contractual terms of the loan agreement. Management reviews the loan portfolio
on a quarterly basis to identify loans as impaired. Generally, nonaccrual loans
as well as classified loans past due greater than 60 days are reviewed for
impairment as well as other loans that are monitored internally due to possible
credit risk. As permitted by the statement, smaller-balance homogeneous loans
which consist of residential mortgages and consumer loans are evaluated
collectively and reserves are established based on historical loss experience.
The measurement of impairment is based on the fair value of collateral for
collateral-dependent loans or the present value of future cash flows for other
loans.

                                       7

<PAGE>

     The following table illustrates the amount of loans identified as impaired
and the basis used for measuring impairment as of December 31, 1996:

Impaired Loans
<TABLE>
<CAPTION>
                                          Basis of measurement
-------------------------------------------------------------------------------
                            Fair value        Present value of
(dollars in thousands)     of collateral    expected future cash flow     Total
-------------------------------------------------------------------------------
<S>                          <C>                     <C>                 <C>
Residential real estate
  (non-owner occupied)       $   85                  $ --                   $85
Commercial real estate        1,402                    --                 1,402
Commercial                      835                   109                   944
                             ------                  ----                ------
     Total Impaired Loans    $2,322                  $109                $2,431
                             ======                  ====                ======
</TABLE>

     The adoption of FAS 114 resulted in a reclassification of $3,299,000 of
"in-substance foreclosures" from other real estate owned to loans as of January
1, 1995. Prior periods have been reclassified for comparative purposes,
including the balance sheet and income statement. The reclassification had no
impact on net income.

     The Bank also has $5,681,000 in real estate loans and $824,000 in other
loans that are current or less than 90 days past due and not deemed impaired
which are considered potential problem loans. A loan is considered a potential
problem if the loan is risk rated "substandard", "doubtful" or "loss" in
accordance with regulatory definitions or has demonstrated a pattern of past due
payments and/or deterioration of collateral value. A decline in Connecticut's
economy and local real estate values as well as the impact of higher interest
rates on adjustable rate notes could hasten the movement of loans from potential
problems to nonperforming loans and negatively impact earnings. Management is
constantly monitoring the status of these loans and reviews their classification
quarterly.

     The allowance for loan losses is maintained at a level that management
believes is prudent and adequate to absorb losses within the loan portfolio. As
of December 31, 1996, the allowance was $4,875,000 or 165.9% of nonperforming
loans as compared to $5,488,000 and 87.7% of nonperforming loans on December 31,
1995. The table on the following page illustrates the allocation of the
allowance for loan losses to each loan category for the last five years. Actual
losses from loans of any type, however, may be charged against the total amount
of the allowance regardless of the allocations.

Allowance For Loan Losses
<TABLE>
<CAPTION>
                                          Year Ended December 31,
-------------------------------------------------------------------------------------
(dollars in thousands)            1996        1995      1994        1993        1992
--------------------------------------------------------------------------------------
<S>                            <C>         <C>        <C>          <C>        <C>
Balance at beginning of year   $ 5,488     $ 6,136    $ 6,447     $ 6,050     $ 5,400
Chargeoffs:
  Residential real estate         (264)       (341)      (238)       (146)       (416)
  Commercial real estate          (169)       (161)      (172)        (60)       (129)
  Real estate - construction        --          --         --          --        (570)
  Commercial                      (446)       (227)      (225)       (268)     (1,545)
  Consumer                        (334)       (312)      (141)       (253)       (307)
                               -------     -------    -------     -------     -------
      Total                     (1,213)(A)  (1,041)(A)   (776)       (727)     (2,967)
                               -------     -------    -------     -------     -------
Recoveries:
  Residential real estate            8           2          1          --          45
  Commercial real estate            20          --          1          24          --
  Commercial                        51          98         89         104         266
  Consumer                          86         113        132         115         105
                               -------     -------    -------     -------     -------
      Total                        165         213        223         243         416
                               -------     -------    -------     -------     -------
Net chargeoffs                  (1,048)       (828)      (553)       (484)     (2,551)
Provision for loan losses          435         180        242         881       3,201
                               -------     -------    -------     -------     -------
Balance at end of year         $ 4,875     $ 5,488    $ 6,136     $ 6,447     $ 6,050
                               =======     =======    =======     =======     =======
Ratio of net chargeoffs to
   average loans outstanding       .43%        .36        .26%        .23%       1.21%
                               =======     =======    =======     =======     =======
</TABLE>

A) Of the total chargeoffs, $415,000 in 1996 and $352,000 in 1995 relates to the
   reduction in fair value of the underlying collateral and past due taxes of
   one group of loans which had been in litigation since 1992.

                                       8

<PAGE>

Allocation of Allowance For Loan Losses
(dollars in thousands)

<TABLE>
<CAPTION>
                       December 31, 1996   December 31, 1995   December 31, 1994   December 31, 1993   December 31, 1992
                       -----------------   -----------------   -----------------   -----------------   -----------------
                                 Percent of          Percent of          Percent of          Percent of          Percent of
                                  Loans to            Loans to            Loans to            Loans to            Loans to
                                   Total               Total               Total               Total               Total
                         Amount    Loans    Amount     Loans     Amount    Loans     Amount    Loans     Amount    Loans
                       ----------  -----   ----------  -----   ----------  -----   ----------  -----   ----------  -----

<S>                        <C>       <C>   <C>           <C>     <C>         <C>      <C>       <C>     <C>        <C>
Residential real estate    $  659    53%   $  367        56%     $  479      57%      $  665    57%     $  654     56%
Commercial real estate        752    14%      803        15%      1,129      15%       1,321    16%      1,471     15%
Real estate construction       83     2%       35         1%         33       1%          78     1%        108      2%
Commercial                  1,162    15%    1,209        13%      1,069      12%       1,511    14%      1,787     14%
Consumer                      620    16%      541        15%        565      15%         548    12%        524     13%
Unallocated                 1,599    --%    2,533        --%      2,861      --%       2,324    --%      1,506     --%
                           ------   ---    ------       ---      ------     ---       ------   ---      ------    ---
                           $4,875   100%   $5,488       100%     $6,136     100%      $6,447   100%     $6,050    100%
                           ======   ===    ======       ===      ======     ===       ======   ===      ======    ===
</TABLE>

Deposits

     Total deposits increased $14,992,000 or 5.1% during 1996 as compared to
1995. The Bank's deposit structure changed during the year as interest rates
remained somewhat stable after a slight rise in the first quarter of 1996.
Customers shifted funds into shorter term certificates of deposits and money
market accounts while regular savings accounts decreased. As a result of the
rate environment and the promotion of short term certificates, certificates of
deposit with maturities of one year or less increased $25,827,000 from the prior
year while the total balance increased by $14,420,000. Regular savings accounts
declined $2,634,000 and money market savings accounts declined $1,265,000. The
transfer of regular savings deposits and money market accounts into certificates
of deposits increased the Bank's overall cost of funds.

[BAR CHART SHOWING TOTAL DEPOSITS FROM 1992 TO 1996 IN MILLIONS]

1992      $263,426,000
1993      $268,294,000
1994      $279,392,000
1995      $294,835,000
1996      $309,827,000

Deposits

   The average daily amount of deposits and rates paid on such deposits for the
past three years are summarized in the following table:

<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                                      ---------------------------------------------------------
(dollars in thousands)                      1996                1995               1994
----------------------                ----------------     ----------------   ----------------
                                       Amount     Rate     Amount     Rate     Amount     Rate
                                      --------    ----     --------   ----    --------    ----
<S>                                   <C>         <C>      <C>        <C>     <C>         <C>
Noninterest-bearing demand deposits   $ 19,662    0.00%    $ 15,845   0.00%   $ 14,173    0.00%
NOW accounts                            14,495    1.76%      13,713   1.76%     14,033    1.75%
Regular savings                         61,690    2.25%      69,289   2.25%     81,875    2.25%
Money market savings                    35,952    3.36%      29,457   3.12%     29,459    2.70%
Certificates of deposit                167,399    5.54%     154,733   5.50%    135,839    4.61%
Club accounts                              420    3.33%         397   3.27%        391    3.32%
                                      --------             --------           --------
         Total                        $299,618             $283,434           $275,770
                                      ========             ========           ========
</TABLE>

   Maturities of time certificates of deposit in amounts of $100,000 or more
outstanding at December 31, 1996 are summarized as follows:

<TABLE>
<CAPTION>
                                             Time
                                         Certificates
(in thousands)                            of deposit
                                         ------------
<C>                                         <C>
3 months or less                            $ 6,290
Over 3 months through 6 months                3,024
Over 6 months through 12 months               2,703
Over 12 months                                3,308
                                            -------
         Total                              $15,325
                                            =======
</TABLE>

                                       9

<PAGE>

Borrowings

     Federal funds purchased and securities sold under agreements to repurchase
increased $19,651,000 or 88.4% during 1996 as compared to 1995. These funds were
primarily used to purchase investment securities, specifically, money market
preferred stocks and SBA loans and provide a positive spread between the yield
on the investment and the cost of the funds which contributes to the
Corporation's net interest margin.

Asset/Liability Management

     Management is continuously fine-tuning the Bank's statement of condition to
maximize net interest income while maintaining a level of interest rate and
credit risk that is prudent and manageable. During 1996, the Bank's strategy for
maintaining its interest rate exposure at an acceptable level focused primarily
on increasing the amount of adjustable rate commercial loans. Also, a majority
of the increase in residential mortgages consisted of products with a fixed rate
for a term of 3, 5, 7, and 10 years which adjust on an annual basis thereafter.
In addition, the Bank modestly leveraged its strong capital position by
increasing its investments in highly liquid money market preferred stock which
reprice every 49 days to manage interest rate exposure at an acceptable level.
These investments were funded by short term certificates of deposit and
repurchase agreements. An additional leverage consisted of the purchase of
approximately $5 million of mortgage backed securities which were funded by
repurchase agreements.

     Total assets increased $35,420,000 or 9.2% to $419,398,000 at year end 1996
compared to $383,978,000 at year end 1995. The growth was funded by a
$19,651,000 or 88.4% increase in repurchase and reverse repurchase agreements
and a $14,992,000 or 5.1% increase in deposits. Asset growth was primarily in
the Bank's investment portfolio as well as the loan portfolio.

1992      $314,000,000
1993      $328,000,000
1994      $357,000,000
1995      $384,000,000
1996      $419,000,000

     The table following sets forth certain information regarding the Bank's
interest rate sensitivity.

<TABLE>
<CAPTION>
Interest Rate Sensitivity
----------------------------------------------------------------------------------------
(dollars in thousands)                                    December 31, 1996
----------------------------------------------------------------------------------------
                                           0-180      181-365
                                           days        days       1-2 years    2-3 years
                                       -------------------------------------------------

<S>                                    <C>           <C>          <C>         <C>
Assets subject to interest rate adjustment:
   Short term investments              $   3,130     $     --     $     --    $      --
   Investment securities                  51,971        8,768        9,840       11,607
   Adjustable rate mortgages              36,533       35,126       14,978       13,811
   Fixed rate mortgages                    2,756        2,725        5,403        5,146
   Consumer and
     commercial loans                     40,440        6,157        8,119        4,334
----------------------------------------------------------------------------------------
       Total rate-sensitive assets     $ 134,830     $ 52,776     $ 38,340     $ 34,898
========================================================================================
Liabilities subject to
   interest rate adjustment:
   NOW accounts                        $      --     $     --     $     --     $     --
   Regular savings                         2,370        2,370        4,740        4,736
   Federal funds purchased and
     repurchase agreements                33,819           --        6,180        1,880
   Money market deposits                  36,255           --           --           --
   Time certificates of deposit           94,449       35,246       24,974        9,757
   Advances from FHLB                      2,000        7,000       12,000           --
   Mortgagors' escrow                      1,687           --           --           --
----------------------------------------------------------------------------------------
       Total rate-sensitive
        liabilities                    $ 170,580     $ 44,616     $ 47,894     $ 16,373
========================================================================================
   Excess (deficiency) of
     rate-sensitive assets over
      rate-sensitive liabilities       $ (35,750)    $  8,160     $ (9,554)    $ 18,525
----------------------------------------------------------------------------------------
   Cumulative excess
     (deficiency)                      $ (35,750)    $(27,590)    $(37,144)    $(18,619)
========================================================================================
   Cumulative rate-sensitive assets
     as a percentage of
      rate-sensitive liabilities            79.0%        87.2%        85.9%        93.3%
   Cumulative excess
     (deficiency) as a
       percentage of total assets           (8.5)%       (6.6)%       (8.9)%      (4.4)%
========================================================================================
</TABLE>

<TABLE>
<CAPTION>

                                                           December 31, 1996
---------------------------------------------------------------------------------------------
                                            3-4 years   4-5 years      5+ years      Total
---------------------------------------------------------------------------------------------
<S>                                         <C>          <C>         <C>           <C>
Assets subject to interest rate adjustment:
   Short term investments                   $     --     $    --     $      --     $   3,130
   Investment securities                       6,081       9,794        53,590       151,651
   Adjustable rate mortgages                   3,108       4,722        11,475       119,753
   Fixed rate mortgages                        4,803       4,388        31,036        56,257
   Consumer and
     commercial loans                          4,174       5,149         8,336        76,709
---------------------------------------------------------------------------------------------
       Total rate-sensitive assets          $ 18,166     $24,053     $ 104,437     $ 407,500
=============================================================================================
Liabilities subject to
   interest rate adjustment:
   NOW accounts                             $     --     $    --     $  14,965     $  14,965
   Regular savings                             4,737       4,737        36,121        59,811
   Federal funds purchased and
     repurchase agreements                        --          --            --        41,879
   Money market deposits                          --          --            --        36,255
   Time certificates of deposit                5,832       5,027            87       175,372
   Advances from FHLB                             --          --            --        21,000
   Mortgagors' escrow                             --          --            --         1,687
---------------------------------------------------------------------------------------------
       Total rate-sensitive
        liabilities                         $ 10,569     $ 9,764     $  51,173     $ 350,969
=============================================================================================
   Excess (deficiency) of
     rate-sensitive assets over
       rate-sensitive liabilities           $  7,597     $14,289     $  53,264     $  56,531
---------------------------------------------------------------------------------------------
   Cumulative excess
     (deficiency)                           $(11,022)    $ 3,267     $  56,531
=============================================================================================
   Cumulative rate-sensitive assets
    as a percentage of
     rate-sensitive liabilities                 96.2%      101.1%        116.1%
   Cumulative excess
     (deficiency) as a
       percentage of total assets               (2.6)%       0.8%         13.5%
=============================================================================================
</TABLE>
                                       10

<PAGE>

     To limit its exposure to fluctuating interest rates, it is the policy of
the Bank that the cumulative excess or deficiency of the one year gap position
be maintained within a range of 85% - 115% of total assets. The one year gap
position as measured by the Bank was 87% as of December 31, 1996. The table
assumes that regular savings account balances will transfer to higher yielding
deposits at an annual decay rate of 8% based on historical trends. In addition
to evaluation of the Bank's GAP position, a "rate-shock" simulation is utilized
to measure potential earnings at risk due to an immediate increase or decrease
in market interest rates of up to 200 basis points. Utilizing a 200 basis point
immediate rate shock simulation as of December 31, 1996, the simulation model
projects net interest income for the next twelve months to decrease by
approximately 4.7%, which is within the Bank's policy limit of 10%. An immediate
200 basis point rise in interest rates is a hypothetical rate scenario used to
measure risk, and does not necessarily represent management's expectation
relative to actual market developments.

Liquidity and Capital Resources

     Liquidity is the ability of the Bank to meet customer loan demands,
depositor requests for withdrawals and pay operating expenses. The Bank's
sources of funding are from deposit growth, loan repayments, borrowings,
reduction of its securities and income generated from operations.

     The Bank also has the capacity to borrow funds from the Federal Home Loan
Bank of Boston (FHLB), of which it is a member. The Bank is eligible to borrow
against its assets an amount not to exceed collateral as defined by the FHLB. As
of December 31, 1996, qualified collateral totaled $122,184,000. The Bank's
actual borrowings on that date were $21,000,000.

     As of December 31, 1996, the Corporation had liquid assets consisting of
cash, federal funds sold, money market preferred stock and unpledged U.S.
Government and agency obligations of $71,699,000 or 17.1% of total assets which
is within an acceptable level as established in the Corporation's policy . The
Corporation also had additional equity securities with a market value of
$23,300,000 that could be converted to cash if necessary. On December 31, 1996,
commitments to extend credit totaled $29,610,000.

     During the latter part of 1996, the Bank hired a Chief Information Officer
to review the Bank's current utilization of available technology and implement a
strategy to upgrade systems for greater flexibility and effectiveness. Although
the Bank had no material commitments for capital expenditures at year end, the
results of the data processing analysis may warrant system enhancements in the
future.

     The Corporation's improvement in earnings during 1996 led to an increase in
dividend payments to shareholders. Dividends paid in 1996 totaled $1,991,000 or
$.74 per share as compared to $1,590,000 or $.59 per share in 1995 which
reflects an adjustment per share for a six-for-five stock split effected in the
form of a stock dividend on June 19, 1996. See Note 10 to the Corporation's
Consolidated Financial Statements for a description of the applicable
restrictions on the Corporation's ability to pay dividends.

     Shareholders' equity at year end decreased to $42,731,000 as compared to
$43,210,000 as of the prior year end. This decline was the result of a stock
repurchase plan announced in February of 1996 whereby the Corporation authorized
the repurchase of up to 15% of the Corporation's outstanding common stock over
an eighteen month time period. As of December 31, 1996, a total of 197,552
shares had been repurchased for a total cost of $4,339,000. Under regulatory
definitions, an institution is considered "well capitalized" (the highest
rating) if its leverage capital ratio is 5% or higher, its tier one risk based
capital ratio is 6% or higher and its total risk based capital ratio is 10% or
higher. On December 31, 1996, the Corporation had a leverage capital ratio of
10.3%, a tier one risk based capital ratio of 15.2% and a total risk based
capital ratio of 16.4% as compared to 11.2%, 17.5% and 18.8% respectively, for
1995.

Comparisons of Years Ended December 31, 1996 and 1995

Overall

     For 1996, the Corporation had net income of $5,024,000 as compared to
$4,296,000 for 1995. Higher net interest income, higher noninterest income and
to a lesser extent, an increase in net securities gains contributed to the
improved results. 1996 net income represents an annualized return on average
assets of 1.26% as compared to 1.17% for 1995. Return on average equity for 1996
rose to 11.7% from 10.7% for 1995.

Interest Income

     Interest income increased $2,407,000 or 8.7% to $29,927,000 in 1996 as
compared to $27,520,000 earned in 1995. The increase can be attributed to an
8.0% increase in average earning assets as well as an increase in the tax
equivalent yield on earning assets from 7.92% in 1995 to 7.99% 1996. The
increase in the yield is primarily due to the repricing of adjustable rate
mortgages at higher rates during 1996 as compared to 1995.

Interest Expense

     Interest expense increased $1,549,000 or 11.4% to $15,173,000 in 1996 as
compared to $13,624,000 in 1995. The primary reason for the rise in interest
expense was an 8.3% increase in average interest bearing liabilities. In
addition, a slight rise in interest rates during the early part of 1996 caused
the cost of funds to increase to 4.51% in 1996 from 4.39% in 1995. Interest
expense also increased as deposits shifted from savings accounts to higher
yielding money market accounts and time certificates of deposit and the level of
borrowed funds increased from year to year.

Net Interest Income

     Net interest income increased $858,000 or 6.2% in 1996 as compared to 1995.
The tax equivalent net interest margin for 1996 was 4.10%, a slight decline from
4.15% in 1995.

                                       11

<PAGE>

Provision for Loan Losses

     The provision for loan losses for 1996 was $435,000 as compared to $180,000
in 1995, an increase of 142%. Management determines the provision based upon an
evaluation of the credit risk associated with the portfolio and current market
conditions as well as the level of the allowance for loan losses compared to
nonperforming loans. Net chargeoffs for 1996 increased to $1,047,000 compared to
$829,000 for 1995. Of the total chargeoffs in 1996 and 1995, $415,000 and
$352,000, respectively, relates to the reduction in fair value of the underlying
collateral and past due taxes of one group of loans which had been in litigation
since 1992. This is the principle reason for the increase in the provision for
loan losses over 1995.

Other Income

     Noninterest income increased $441,000 to $1,685,000 for 1996 as compared to
$1,244,000 for 1995. The increase was primarily the result of a $194,000
increase in securities gains as well as a $105,000 increase in trust fees due
primarily to a higher volume of assets under management during 1996 as compared
to 1995. In addition, net trading account gains of $21,000 in 1996 compared
favorably to losses of $14,000 in 1995. Other contributions to the increase in
other income include a higher volume of sales of Savings Bank Life Insurance
("SBLI") and increased brokerage activity.

Other Expenses

     Noninterest expenses decreased $27,000 or 0.3% for 1996 as compared to
1995. The primary reason for the decrease was a reduction in premiums assessed
by the Federal Deposit Insurance Corporation ("FDIC") which resulted in a
decrease in expense of $326,000 when comparing 1996 to 1995. In addition, the
Corporation adopted Financial Accounting Standard No. 121 "Accounting for the
Impairment of Long Lived Assets" in 1995 which resulted in a $281,000 writedown
of the carrying amount of certain Corporation premises to fair value. A partial
offset to these expense reductions was a rise in salaries and benefits of
$353,000 or 8.3% for 1996 as compared to the prior year due to normal
compensation adjustments of approximately 4%, additional full time exempt
employees and an increase in incentive compensation in relation to the
Corporation's improved performance.

Income Taxes

     The provision for income taxes increased to $2,381,000 for 1996 as compared
to $2,038,000 for 1995. The increase was primarily due to the generation of
income before taxes of $7,405,000 in 1996 as compared to $6,334,000 earned in
1995. The effective income tax rate for 1996 and 1995 was 32.2% and is lower
than the expected statutory rate due to the Federal and State dividends received
deduction.

     As of December 31, 1996, the Corporation had a total deferred tax asset of
$2,196,000 which was comprised of two separate components. A deferred tax
liability based on the tax effect of the net unrealized holding gains in the
Corporation's available for sale investment portfolio totaled $352,000. The
change in this component directly impacts shareholders' equity. In addition, a
deferred asset representing the net effect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
those for income tax purposes amounted to $2,548,000. The change in this
component directly impacts earnings. As of year end, the Corporation has
recorded no valuation allowance against deferred tax assets. A valuation
allowance is not considered necessary for Federal purposes based on sufficient
available Federal taxable income in the carryback period and sufficient future
earnings during the carryforward period. For state income tax purposes, the
carryback of net losses to prior years is not allowed and the basis for
recording no valuation allowance is anticipated sufficient future taxable income
during the carryforward period. The Corporation is confident that future taxable
income will be sufficient to use the deferred tax assets based upon its budget
projections for future periods.

Comparisons of Years Ended December 31, 1995 and 1994

Overall

     For 1995, the Corporation had net income of $4,296,000 as compared to
$3,748,000 for 1994. Higher net interest income, higher noninterest income and
to a lesser extent, an increase in net securities gains contributed to the
improved results. 1995 net income represents an annualized return on average
assets of 1.17% as compared to 1.11% for 1994. Return on average equity for 1995
rose to 10.7% from 10.1% for 1994.

Interest Income

     Interest income increased $4,108,000 or 17.5% to $27,520,000 in 1995 as
compared to $23,412,000 earned in 1994. The increase can be attributed to an
8.8% increase in average earning assets as well as an increase in the tax
equivalent yield on earning assets from 7.28% in 1994 to 7.92% in 1995. The
increase in the yield is primarily due to the repricing of adjustable rate
mortgages and investment securities at higher rates during 1995 as compared to
1994.

Interest Expense

     Interest expense increased $3,187,000 or 30.5% to $13,624,000 in 1995 as
compared to $10,437,000 in 1994. The primary reason for the rise in interest
expense was an 8.2% increase in average interest bearing liabilities. In
addition, rising interest rates during the latter part of 1994 and early 1995
caused the cost of funds to increase to 4.39% in 1995 from 3.64% in 1994.
Interest expense also increased as deposits shifted from savings accounts to
higher yielding money market accounts and time certificates of deposit.

                                       12

<PAGE>

Net Interest Income

     Net interest income increased $921,000 or 7.1% in 1995 as compared to 1994.
The net interest margin on a tax equivalent basis for 1995 was 4.15%, a slight
increase from the 4.14% of 1994.

Provision for Loan Losses

     The provision for loan losses for 1995 was $180,000 as compared to $242,000
in 1994, a decrease of 25.7%. Management determines the provision based upon an
evaluation of the credit risk associated with the portfolio and current market
conditions. Net chargeoffs during 1995 increased to $828,000, an increase of
49.7% as compared to $553,000 for 1994. Nonperforming loans increased a modest
$29,000 to $6,256,000 from $6,227,000 in 1994. As of December 31, 1995, the
allowance for loan losses was 87.7% of nonperforming loans as compared to 98.5%
on December 31, 1994.

Other Income

     Noninterest income increased $461,000 to $1,244,000 for 1995 as compared to
$783,000 for 1994. The increase was primarily the result of a $105,000 increase
in securities gains and a $277,000 decrease in net trading account losses.
Service charges on deposit accounts increased $67,000 or 15.0% over 1994 due to
an increase in fees collected for ATM and checking account activity.

Other Expenses

     Noninterest expenses increased $747,000 or 9.5% for 1995 as compared to
1994. The primary reason for the increase was a rise in salaries and benefits of
$390,000 or 10.1% due to normal compensation adjustments as well as additional
staffing. During the fourth quarter of 1995, the Bank also increased the number
of hours its branches were open for customer service.

     As of December 31, 1995, the Corporation elected to early adopt Financial
Accounting Standard No. 121 "Accounting for the Impairment of Long Lived
Assets". The adoption of this new accounting standard resulted in a $281,000
writedown of the carrying amount of certain Corporation premises to fair value.

     Additionally, the Holding Company, which was formed in November of 1994,
had incremental expenses relating to its first full year of operation in the
amount of $130,000. The increase in noninterest expenses in 1995 was partially
offset by a $288,000 reduction in premiums assessed by the Federal Deposit
Insurance Corporation.

     Finally, data processing expense increased $69,000 primarily due to the
implementation of a new accounting system in the Trust Department during 1995,
as well as normal increases in account volume. Foreclosed real estate expenses
decreased by $69,000 due to a reduction in the provision for OREO losses and
property management expenses as the volume of properties held during 1995 was
lower than 1994.

Income Taxes

     The provision for income taxes increased to $2,038,000 for 1995 as compared
to $1,889,000 for 1994. The increase was primarily due to the generation of
income before taxes of $6,334,000 in 1995 as compared to $5,637,000 earned in
1994. The effective income tax rate for 1995 decreased slightly to 32.2% as
compared to 33.5% for 1994, and is lower than the expected statutory rate due to
the Federal and State dividends received deduction.

     As of December 31, 1995, the Corporation had a total deferred tax asset of
$2,425,000 which was comprised of two separate components. A deferred tax
liability based on the tax effect of the net unrealized holding gains in the
Company's available for sale investment portfolio totaled $355,000. In addition,
a deferred asset representing the net effect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and those for income tax purposes amounted to $2,070,000. As of year end, the
Company has recorded no valuation allowance against deferred tax assets.

Impact of Inflation

     The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting principles which
require the measurements of financial position and operating results in terms of
historical dollars without considering changes in the relative purchasing power
of money over time and due to inflation. Virtually, all assets and liabilities
of a financial institution are monetary in nature. As a result, interest rates
typically have a more significant impact on a financial institution's
performance than the effects of general levels of inflation. Inflation, however,
may impact a creditor's ability to service debt if the loan is variable in
nature or if the creditor's income stream were to be adversely affected due to
inflationary cycles. In addition, the effects of deflation on real estate values
in Connecticut has a negative impact on a creditor's ability to recover the
principal amount loaned on properties subsequently foreclosed upon. The impact
of inflationary/deflationary pressures are considered in the Bank's allowance
for loan losses. See "Nonperforming Assets and Allowance for Loan Losses".

Accounting Pronouncements
and Other

     In June, 1996, the FASB issued Statement of Financial Accounting Standards
No. 125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" ("SFAS 125"). SFAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities. The Corporation will be required to adopt SFAS
125 for transfers and servicing of financial assets and extinguishment of
liabilities occurring after December 31, 1996, on a prospective basis. The
adoption of this standard is not expected to have a material impact on the
Corporation's financial condition or results of operations.

                                       13

<PAGE>

     In February, 1997, the FASB issued Statement of Financial Accounting
Standards No. 128 "Earnings Per Share" ("SFAS 128"). SFAS 128 provides
accounting and reporting standards for the calculation of earnings per share
intended to simplify the computation by replacing the presentation of primary
earnings per share with a presentation of basic earnings per share. The
Corporation will be required to adopt SFAS 128 in the fourth quarter of 1997.
The adoption of this standard is not expected to have a material impact on the
Corporation's financial condition or results of operations.

     As the year 2000 approaches, an issue impacting all companies has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. In brief, many existing application software
products in the marketplace were designed to only accommodate a two digit date
position which represents the year (e.g., "95" is stored on the system and
represents the year 1995). As a result, the year 1999 (i.e., "99") could be the
maximum date value systems will be able to accurately process. Management is in
the process of working with its software vendors to assure that the Bank is
prepared for the year 2000. Management does not anticipate that the Corporation
will incur operating expenses or be required to invest heavily in computer
system improvements to be year 2000 compliant.

                                       14

<PAGE>

Distribution of Assets, Liabilities and Shareholders' Equity:
Interest Rates and Interest Differential

<TABLE>
<CAPTION>
                                                                     Year ended December 31
--------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                      1996                               1995
--------------------------------------------------------------------------------------------------------------------
                                               Average                     Yield/   Average                  Yield/
                                               Balance      Interest       Rate(c)  Balance    Interest      Rate(c)
                                               -------      --------       -------  -------    --------      -------
<S>                                           <C>           <C>            <C>      <C>        <C>           <C>
Assets
Interest-earning assets:
 Loans (a) (b)                                $ 244,298     $  21,123      8.65%    $226,335   $ 19,238      8.50%
 Taxable investment securities (at cost) (c)    135,457         9,461      6.98%     126,188      8,814      6.98%
 Municipal bonds (c)                              3,150           226      7.17%       2,882        209      7.25%
 Federal funds sold                               4,616           240      5.20%       3,421        199      5.82%
 Other interest-earning assets                    2,648           131      4.95%       2,364        139      5.88%
                                              ---------     ---------              ---------     ------
Total interest-earning assets                   390,169        31,181      7.99%     361,190     28,599      7.92%
                                                            ---------                            ------
Noninterest-earning assets                        9,697                                6,385
                                              ---------                            ---------
Total Assets                                  $ 399,866                            $ 367,575
                                              =========                            =========
Liabilities and Equity
Interest-bearing liabilities:
  NOW and savings deposits                    $ 112,137         2,850      2.54%    $112,459      2,716      2.42%
  Time deposits                                 167,819         9,293      5.54%     155,130      8,518      5.49%
  Mortgagors' escrow                              1,078            32      2.97%       1,054         27      2.56%
  FHLB of Boston advances
    and other borrowings                         19,636         1,112      5.66%      15,154        813      5.36%
  Securities sold under agreements
    to repurchase                                35,585         1,886      5.30%      26,819      1,550      5.78%
                                               --------      --------               --------     ------
Total interest-bearing liabilities              336,255        15,173      4.51%     310,616     13,624      4.39%
                                                             --------                            ------
Noninterest-bearing liabilities:
 Demand deposits                                 19,662                               15,845
 Other                                            1,109                                  870
Shareholders' equity                             42,840                               40,244
                                               --------                             --------
Total Liabilities and
 Shareholders' Equity                         $ 399,866                            $ 367,575
                                              =========                            =========
Net interest income before
 tax equivalent adjustment                                     16,008                            14,975
Tax equivalent adjustment                                      (1,254)                           (1,079)
                                                             --------                           --------
Net interest income                                         $  14,754                         $  13,896
                                                            =========                          =========
Net interest spread (tax equivalent basis)                                 3.48%                             3.53%
                                                                           =====                             =====
Net interest margin (tax equivalent basis)                                 4.10%                             4.15%
                                                                           =====                             =====
</TABLE>

<TABLE>
<CAPTION>
                                                      Year ended December 31
------------------------------------------------------------------------------------
(dollars in thousands)                                        1994
------------------------------------------------------------------------------------
                                                 Average                     Yield/
                                                 Balance      Interest       Rate(c)
                                                 -------      --------       -------
<S>                                              <C>        <C>        <C>
Assets
Interest-earning assets:
 Loans (a) (b)                                   $214,336     $ 17,060        7.96%
 Taxable investment securities (at cost) (c)      107,710        6,714        6.23%
 Municipal bonds (c)                                1,447           87        6.01%
 Federal funds sold                                 5,557          205        3.69%
 Other interest-earning assets                      3,601          154        4.28%
                                                 --------     --------
Total interest-earning assets                     332,651       24,220        7.28%
                                                              --------
Noninterest-earning assets                          6,459
                                                 --------
Total Assets                                     $339,110
                                                 ========
Liabilities and Equity
Interest-bearing liabilities:
  NOW and savings deposits                       $125,367        2,888        2.30%
  Time deposits                                   136,230        6,272        4.60%
  Mortgagors' escrow                                  917           22        2.40%
  FHLB of Boston advances
    and other borrowings                           15,056          830        5.51%
  Securities sold under agreements
    to repurchase                                   9,460          425        4.49%
                                                 --------       ------
Total interest-bearing liabilities                287,030       10,437        3.64%
                                                                ------
Noninterest-bearing liabilities:
 Demand deposits                                   14,174
 Other                                                829
Shareholders' equity                               37,077
                                                 --------
Total Liabilities and
 Shareholders' Equity                            $339,110
                                                 ========
Net interest income before
 tax equivalent adjustment                                      13,783
Tax equivalent adjustment                                         (808)
                                                              --------
Net interest income                                           $ 12,975
                                                              ========
Net interest spread (tax equivalent basis)                                    3.63%
                                                                              =====
Net interest margin (tax equivalent basis)                                    4.14%
                                                                              =====
</TABLE>


(a)  Nonaccruing loans are included in the average loans balance outstanding.

(b)  Included in interest income are loan fees of $379,218, $302,769, and
     $354,009, for the years ended December 31, 1996, 1995 and 1994,
     respectively.

(c)  Yields/Rates are calculated on a tax equivalent basis using statutory
     federal and state tax rates. The tax equivalent adjustment (increase) to
     net interest income was $1,254,000, $1,079,000 and $808,000 for the years
     ended December 31, 1996, 1995 and 1994, respectively.

                                       15

<PAGE>

Net Interest Income; Rate/Volume Analysis

<TABLE>
<CAPTION>
                                                       Year ended December 31,
                                                       -----------------------
                                          1996 Compared to 1995          1995 Compared to 1994
                                       Increase (Decrease) Due to      Increase (Decrease) Due to
                                     ------------------------------  ------------------------------

(in thousands)                        Volume       Rate       Net(1)  Volume       Rate       Net(1)
                                     ------------------------------  ------------------------------
<S>                                 <C>        <C>        <C>        <C>        <C>        <C>
Interest earned on:
 Loans                              $ 1,548    $   337    $ 1,885    $   984    $ 1,194    $ 2,178
 Taxable investment securities          647         --        647      1,233        867      2,100
 Municipal bonds                         19         (2)        17        101         21        122
 Federal funds sold                      64        (23)        41        (97)        91         (6)
 Other interest-earning assets           16        (24)        (8)       (62)        47        (15)
                                     ------------------------------  ------------------------------
                                      2,294        288      2,582      2,159      2,220      4,379
                                     ------------------------------  ------------------------------
Interest paid on:
 NOW and savings deposits                (8)       142        134       (307)       135       (172)
 Time deposits                          702         73        775        940      1,306      2,246
 Mortgagors' escrow                       1          4          5          3          2          5
 FHLB of Boston advances
   and other borrowings                 252         47        299          5        (22)       (17)
 Securities sold under agreements
   to repurchase                        473       (137)       336        973        152      1,125
                                     ------------------------------  ------------------------------
                                      1,420        129      1,549      1,614      1,573      3,187
                                     ------------------------------  ------------------------------
Change in net interest income       $   874    $   159    $ 1,033    $   545    $   647    $ 1,192
                                     ==============================  ==============================
</TABLE>

(1)  The change in interest income due to both tax equivalent rate and volume
     has been allocated to volume and tax equivalent rate changes in proportion
     to the relationship of the absolute dollar amounts of the change in each.

                                       16

<PAGE>

Report of Independent Accountants

To the Board of Directors and Shareholders of
Bancorp Connecticut, Inc.:

   We have audited the accompanying consolidated statements of condition of
Bancorp Connecticut, Inc. and subsidiary as of December 31, 1996 and 1995, and
the related consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

   We conducted our audits in accordance with 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Bancorp Connecticut, Inc. and subsidiary as of December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.

   As discussed in Note 1 to the consolidated financial statements, the
Corporation changed its methods of accounting for long-lived assets and the
allowance for loan losses in 1995.

/s/ Coopers & Lybrand L.L.P.

Hartford, Connecticut
January 15, 1997

                                       17

<PAGE>


Consolidated Statements of Condition
Bancorp Connecticut, Inc.
<TABLE>
<CAPTION>
                                                                    December 31
                                                        -------------------------------
                                                               1996             1995
                                                        --------------   --------------
<S>                                                     <C>              <C>
Assets:
 Cash and due from banks                                $   8,454,570    $   6,571,706
 Federal funds sold                                           700,000        4,100,000
                                                          -----------      -----------
   Cash and cash equivalents                                9,154,570       10,671,706
                                                          -----------      -----------
 Securities available for sale (at market value)          105,514,806      106,889,015
 Securities held to maturity
   (market value: 1996 - $43,973,649
    and 1995 - $24,021,725)                                44,096,667       23,660,434
 Trading account securities                                 2,429,765          390,476
 Federal Home Loan Bank stock                               2,039,700        1,978,300
 Loans                                                    252,144,314      237,153,691
 Less:
  Deferred loan fees                                         (995,049)        (959,540)
  Allowance for loan losses                                (4,875,308)      (5,487,801)
                                                          -----------      -----------
   Net loans                                              246,273,957      230,706,350
                                                          -----------      -----------
 Premises and equipment                                     3,083,859        3,387,793
 Accrued income receivable                                  2,716,624        2,520,205
 Foreclosed real estate, net                                1,367,303          872,351
 Deferred taxes                                             2,196,226        2,425,108
 Other assets                                                 524,555          475,883
                                                          -----------      -----------
   Total assets                                          $419,398,032    $ 383,977,621
                                                        =============    =============
Liabilities and Shareholders' Equity
Liabilities:
  Deposits                                              $ 309,826,725    $ 294,835,090
  Advances from Federal Home Loan Bank of Boston           21,000,000       19,990,000
  Federal funds purchased and securities sold
     under agreements to repurchase                        41,878,710       22,227,488
  Mortgagors' escrow accounts                               1,687,087        1,653,465
  Accrued taxes, expenses and other
    liabilities                                             2,274,390        2,062,009
                                                          -----------      -----------
                                                          376,666,912      340,768,052
                                                          -----------      -----------
Commitments and contingencies (Notes 15 and 19)
Shareholders' Equity:
  Preferred Stock, no par value: authorized
    1,000,000 shares; none issued and outstanding                  --               --
  Common Stock, $1.00 par value: authorized
    7,000,000 shares; issued and outstanding
    2,768,149 shares at December 31, 1996 and
    2,263,313 shares at December 31, 1995                   2,768,149        2,263,313
  Additional paid-in capital                               19,189,194       18,861,973
  Retained earnings                                        24,608,695       21,575,723
  Unrealized gain on securities available-for-sale,
    net of tax                                                503,880          508,560
  Treasury stock at cost; 197,552 shares at
    December 31, 1996 and -0- shares at
    December 31, 1995                                      (4,338,798)            --
                                                          -----------      -----------
                                                           42,731,120       43,209,569
                                                          -----------      -----------
       Total liabilities and shareholders' equity       $ 419,398,032    $ 383,977,621
                                                        =============    =============
</TABLE>

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

                                       18

<PAGE>

Consolidated Statements of Income
Bancorp Connecticut, Inc.

<TABLE>
<CAPTION>
                                                             For the Years Ended December 31
                                                      --------------------------------------------
                                                           1996           1995            1994
                                                      -----------    -----------     -------------
<S>                                                   <C>            <C>             <C>
Interest income:
 Interest on loans, including fees                    $21,123,152    $ 19,238,504    $ 17,060,016
                                                      -----------    ------------    ------------
 Interest and dividends on investment securities:
     Interest income                                    5,627,447       5,515,895       3,979,693
     Dividend income                                    2,779,739       2,415,212       1,919,917
     Interest on trading account                           25,824          12,579          93,751
                                                      -----------    ------------    ------------
                                                        8,433,010       7,943,686       5,993,361
                                                      -----------    ------------    ------------
 Interest on federal funds sold                           240,231         199,100         204,508
 Other interest and dividends                             130,697         138,883         154,217
                                                      -----------    ------------    ------------
     Total interest income                             29,927,090      27,520,173      23,412,102
                                                      -----------    ------------    ------------
Interest expense:
  Savings deposits                                      2,628,068       2,502,088       2,663,909
  Time deposits                                         9,292,756       8,518,244       6,271,903
  NOW accounts                                            254,754         240,806         246,296
                                                      -----------    ------------    ------------
                                                       12,175,578      11,261,138       9,182,108
  Interest on borrowed money                            2,997,846       2,363,220       1,254,773
                                                      -----------    ------------    ------------
     Total interest expense                            15,173,424      13,624,358      10,436,881
                                                      -----------    ------------    ------------
     Net interest income                               14,753,666      13,895,815      12,975,221
Provision for loan losses                                 435,000         180,000         242,452
                                                      -----------    ------------    ------------
     Net interest income after
     provision for loan losses                         14,318,666      13,715,815      12,732,769
                                                      -----------    ------------    ------------
Other income:
  Net securities gains                                    343,730         150,226          45,644
  Net trading account gains (losses)                       20,754         (14,005)       (291,120)
  Trust fees                                              457,732         352,969         386,051
  Service charges on deposit accounts                     534,005         515,901         448,473
  Other                                                   329,025         238,513         193,819
                                                      -----------    ------------    ------------
                                                        1,685,246       1,243,604         782,867
                                                      -----------    ------------    ------------
Other expenses:
  Salaries and employee benefits                        4,601,019       4,247,720       3,857,892
  Occupancy expense, net                                  518,026         497,887         476,743
  Furniture and equipment expense                         349,178         319,148         274,912
  Data processing expense                                 631,744         590,040         520,889
  FDIC assessments                                          2,000         328,346         615,953
  Legal expense                                           272,331         232,090         236,006
  Foreclosed real estate provision and expense, net       185,320         189,863         258,689
  Advertising expense                                     318,646         297,803         275,996
  Other                                                 1,720,444       1,922,815       1,361,621
                                                      -----------    ------------    ------------
                                                        8,598,708       8,625,712       7,878,701
                                                      -----------    ------------    ------------
    Income before income taxes                          7,405,204       6,333,707       5,636,935
Provision for income taxes                              2,380,841       2,038,080       1,888,638
                                                      -----------    ------------    ------------
  Net income                                          $ 5,024,363    $  4,295,627    $  3,748,297
                                                      ===========    ============    ============
Per share data:
  Primary earnings per share                                $1.77          $ 1.54          $ 1.36
                                                      ===========    ============    ============
  Fully diluted earnings per share                          $1.76          $ 1.54          $ 1.36
                                                      ===========    ============    ============
</TABLE>

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

                                       19

<PAGE>

Consolidated Statements of Shareholders' Equity
Bancorp Connecticut, Inc.

For the years ended December 31, 1996, 1995, and 1994.

<TABLE>
<CAPTION>
                                                                                 Net Unrealized
                                                                                   Gain (Loss)
                                                      Additional                  on Securities                        Total
                                         Common        Paid-In       Retained       Available-       Treasury      Shareholders'
                                         Stock         Capital       Earnings        for-Sale          Stock          Equity
                                       ----------   -------------   -------------   ------------   ------------   -------------
<S>                                    <C>          <C>             <C>             <C>            <C>            <C>
Balance as of
 December 31, 1993                     $2,232,063   $ 18,588,616    $ 16,251,842    $  (107,179)   $      --      $ 36,965,342
  Net income                                 --             --         3,748,297           --                        3,748,297
  Stock options exercised                  15,810        115,282            --             --             --           131,092
  Cash dividends declared -
    $.42 per share                           --             --        (1,130,206)          --             --        (1,130,206)
  Increase in net unrealized loss on
    securities available-for-sale            --             --              --       (2,357,754)          --        (2,357,754)
                                       ----------   ------------    ------------    -----------    -----------    ------------
Balance as of
 December 31, 1994                      2,247,873     18,703,898      18,869,933     (2,464,933)                    37,356,771
  Net income                                 --             --         4,295,627           --             --         4,295,627
  Stock options exercised                  15,440        118,575            --             --             --           134,015
  Cash dividends declared -
    $.59 per share                           --             --        (1,589,837)          --             --        (1,589,837)
  Decrease in net unrealized
    loss on securities
    available-for-sale                       --             --              --        2,973,493           --         2,973,493
  Tax benefits related to
    common stock option
    exercises and restricted
    stock                                    --           39,500            --             --             --            39,500
                                       ----------   ------------    ------------    -----------    -----------    ------------
Balance as of
 December 31, 1995                      2,263,313     18,861,973      21,575,723        508,560           --        43,209,569
  Net income                                 --             --         5,024,363           --             --         5,024,363
  Stock options exercised                  63,046        503,748            --             --             --           566,794
  Cash dividends declared -
    $.74 per share                           --             --        (1,991,391)          --             --        (1,991,391)
  6-for-5 stock split
    effected in the form
    of a stock dividend                   441,790       (441,790)           --             --             --              --
  Treasury stock purchased                   --             --              --             --       (4,338,798)     (4,338,798)
  Decrease in net unrealized
    gain on marketable equity
    securities                               --             --              --           (4,680)          --            (4,680)
  Tax benefits related to
    common stock option
    exercises and restricted
    stock                                    --          265,263            --             --             --           265,263
                                       ----------   ------------    ------------    -----------    -----------    ------------
Balance as of
 December 31, 1996                     $2,768,149   $ 19,189,194    $ 24,608,695    $   503,880    $(4,338,798)   $ 42,731,120
                                       ==========   ============    ============    ===========    ===========    ============
</TABLE>

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

                                       20

<PAGE>

Consolidated Statements of Cash Flows

Bancorp Connecticut, Inc.

<TABLE>
<CAPTION>
                                                                For the years ended December 31
                                                          -------------------------------------------
                                                             1996           1995            1994
                                                          -----------   -------------   -------------
<S>                                                     <C>            <C>             <C>
Cash flows from operating activities:
  Net income                                              5,024,363    $  4,295,627    $  3,748,297
                                                       ------------    ------------    ------------
  Adjustments to reconcile net income
   to net cash provided by operating activities:
    Deferred income tax provision (credit)                  232,147        (105,848)        525,994
    Write-down of premises and equipment                       --           281,417            --
    Net accretion and amortization of
      bond premiums and discounts                           123,801        (385,536)       (417,597)
    Provision for loan losses                               435,000         180,000         242,296
    Provision for foreclosed real estate losses             201,730         120,404         147,974
    Gain on sale of foreclosed real estate                 (175,323)        (45,922)           --
    Gain on sale of loans                                   (15,762)           --              --
    Amortization of deferred loan points                   (177,448)       (127,177)       (159,302)
    Realized investment security (gains) losses            (364,485)       (136,221)        245,476
    Depreciation expense                                    457,818         392,963         321,979
    Increase in trading account                          (2,018,535)       (390,476)           --
    Increase in accrued income receivable                  (196,419)       (311,626)       (554,030)
    Increase in other assets                                (60,645)       (103,542)       (102,049)
    Addition of mortgage servicing rights                   (27,783)           --              --
    Increase in accrued expenses payable
       and other liabilities                                477,644         461,697          37,391
                                                       ------------    ------------    ------------
         Total adjustments                               (1,108,260)       (169,867)        288,288
                                                       ------------    ------------    ------------
    Net cash provided by operating activities             3,916,103       4,125,760       4,036,585
                                                       ------------    ------------    ------------
Cash flows from investing activities:
 Purchases of securities held-to-maturity               (26,496,387)    (15,402,231)    (10,860,920)
 Purchases of securities available-for-sale             (45,396,922)    (34,872,521)    (59,230,222)
 Proceeds from sales of securities available-for-sale    24,642,498      22,221,950      20,476,350
 Proceeds from maturities of securities                  18,000,000      21,500,000       7,638,563
 Paydowns on mortgage-backed securities                  10,400,772       5,980,517       7,638,395
 Purchases of Federal Home Loan Bank stock                  (61,400)           --              --
 Proceeds from sale of loans                              3,620,834            --              --
 Net increase in loans                                  (22,067,707)    (18,699,522)     (7,401,650)
 Purchases of premises and equipment, net                  (114,128)       (390,400)       (521,508)
 Proceeds from sales of foreclosed real estate, net       2,116,117       1,091,741         889,305
                                                       ------------    ------------    ------------
    Net cash used in investing activities               (35,356,323)    (18,570,466)    (41,371,687)
                                                       ------------    ------------    ------------
Cash flows from financing activities:
 Net increase in time deposits                           14,671,325      19,688,059      11,207,965
 Net increase (decrease) in other deposits                  320,310      (4,244,684)       (110,468)
 Net increase in mortgagors' escrow                          33,622         187,566          15,894
 Proceeds from borrowings                                42,028,000      14,602,000      14,298,000
 Repayment of borrowings                                (41,018,000)    (16,911,000)     (8,649,000)
 Net increase in Federal funds purchased
  and repurchase agreements                              19,651,222       7,200,385      12,196,207
 Proceeds from exercise of stock options                    566,794         134,015         131,092
 Repurchase of common stock                              (4,338,798)           --              --
 Cash dividends paid                                     (1,991,391)     (1,589,837)     (1,130,206)
                                                       ------------    ------------    ------------
    Net cash provided by financing activities            29,923,084      19,066,504      27,959,484
                                                       ------------    ------------    ------------
    Net increase (decrease) in
     cash and cash equivalents                           (1,517,136)      4,621,798      (9,375,618)

Cash and cash equivalents at beginning of year           10,671,706       6,049,908      15,425,526
                                                       ------------    ------------    ------------
    Cash and cash equivalents at end of year           $  9,154,570    $ 10,671,706    $  6,049,908
                                                       ============    ============    ============
Noncash investing and financing activities:
  Change in net unrealized loss on securities
    available-for-sale, net of $3,266,
    $2,019,915 and $1,755,120 of deferred
    taxes in 1996, 1995 and 1994, respectively         $     (4,680)   $  2,973,493    $ (2,357,754)
  Transfer of loans to foreclosed real estate             3,259,676       1,397,575       1,847,446
</TABLE>

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

                                       21

<PAGE>

Notes To Consolidated Financial Statements

Bancorp Connecticut, Inc.

Note 1 - Significant Accounting Policies:
Principles of Consolidation

   The consolidated financial statements of Bancorp Connecticut, Inc. (the
"Corporation") include the accounts of its wholly-owned subsidiary, Southington
Savings Bank (the "Bank"). The Bank operates three branches in Southington,
Connecticut. The Bank's primary source of revenue is providing loans to
customers, who are either small and middle-market businesses or individuals. All
significant intercompany balances and transactions have been eliminated in
consolidation.

   On November 17, 1994, Southington Savings Bank completed the formation of
Bancorp Connecticut, Inc., a holding company for the Bank. On that date, each
outstanding share of the Bank's common stock was automatically converted into
one share of the Corporation's common stock. The acquisition of the Bank was
accounted for in a manner similar to a pooling of interests in that the book
value of assets, liabilities and shareholders' equity of the Bank and its
operations are combined with those of the newly formed company.

   The formation of the Corporation and subsequent name change of the reporting
entity had no impact on the comparability of financial information with that of
prior periods.

Basis of Financial Statement Presentation

   The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles. In preparing the financial statements,
management is required to make extensive use of estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
statement of condition and revenues and expenses for the period. Actual results
could differ significantly 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 and
valuation of real estate acquired in connection with foreclosures. In connection
with the determination of the allowance for loan losses and valuation of
foreclosed real estate, management obtains independent appraisals for
significant properties. A substantial portion of the Bank's loans are
collateralized by real estate in Connecticut. Accordingly, the ultimate
collectibility of a substantial portion of the Bank's loan portfolio is
particularly susceptible to changes in market conditions in Connecticut.

   Management believes that the allowance for loan losses and valuation of
foreclosed real estate are adequate. While management uses available information
to recognize losses on loans and foreclosed real estate, future additions to the
allowance or writedowns may be necessary based on changes in economic
conditions, particularly in Connecticut. In addition, various regulatory
agencies, as an integral part of their examination process, periodically review
the Bank's allowance for loan losses and valuation of foreclosed real estate.
Such agencies may require the Bank to recognize additions to the allowance or
additional writedowns on foreclosed real estate based on their judgments of
information available to them at the time of their examination.

Investments

   Securities that the Corporation has the ability and positive intent to hold
to maturity are classified as held-to-maturity and carried at amortized cost.
Securities that may be sold as part of the Corporation's asset/liability or
liquidity management or in response to or in anticipation of changes in interest
rates and resulting prepayment risk, or for other similar factors, are
classified as available-for-sale and carried at fair market value. Unrealized
gains and losses on such securities are reported, net of tax, as a separate
component of shareholders' equity. From time to time, the Corporation may
classify a security as a trading security when the intent is to sell the
security in the near future to generate profits. Any unrealized gains or losses
in trading securities are included in income. Realized gains and losses on the
sales of all securities are reported in earnings and computed using the specific
identification cost basis.

Interest and Fees on Loans

   Interest on loans is included in income monthly as earned based on rates
applied to principal amounts outstanding, except that interest on loans 90 or
more days past due is not recognized as income until received. Loan origination
fees and certain direct loan origination costs are deferred and the net amount
amortized as an adjustment to the related loan's yield over the life of the loan
or taken into income when the related loan is sold.

Loans and Allowance for Loan Losses

   Loans are stated at principal balance and are net of unearned interest
income.

   Management's determination of the adequacy of the allowance is based on an
evaluation of the portfolio, past loan loss experience, current economic
conditions, volume, growth and composition of the loan portfolio and other
relevant factors. The allowance is increased by provisions for loan losses
charged against income. When a loan, including an impaired loan, or portion of a
loan is determined to be uncollectible, the portion deemed uncollectible is
charged against the allowance and subsequent recoveries, if any, are credited to
the allowance.

   On January 1, 1995, the Corporation adopted Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS
114") and Statement of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosure". Under
the new standards, a loan is considered impaired if, based on current
information and events, it is probable that the Corporation will be unable to
collect the scheduled payments of principal and interest when due, according to
the contractual terms of the loan agreement. The measurement of impaired loans
and the related allowance for loan losses is generally based on the present
value of

                                       22

<PAGE>

expected future cash flows discounted at the historical effective interest rate,
except that all collateral-dependent loans are measured for impairment based on
the fair value of the collateral. As permitted by the statement, smaller-balance
homogeneous loans consisting of residential mortgages and consumer loans are
evaluated for reserves collectively based on historical loss experience. Prior
to 1995, the allowance for credit losses related to all loans was based on
undiscounted cash flows or the fair value of the collateral for collateral
dependent loans. The adoption of SFAS 114 also resulted in a reclassification of
$3,299,212 of "in-substance foreclosures" from other real estate owned to loans
as of January 1, 1995. Prior periods have been reclassified for comparative
purposes. The adoption of SFAS 114 had no impact on the overall level of the
allowance for loan losses.

   In May 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage
Servicing Rights - an amendment of FASB Statement No. 65" ("FAS 122"), which the
Corporation adopted on January 1, 1996. FAS 122 amends FASB Statement No. 65,
"Accounting for Certain Mortgage Banking Activities" to provide that a mortgage
banking enterprise recognize, as separate assets, rights to service mortgage
loans for others, however those servicing rights are acquired. It also requires
the Corporation to assess its capitalized mortgage servicing rights for
impairment, based on the fair value of those rights.

   FAS 122 requires that a portion of the cost of originating a mortgage loan
that is sold with servicing rights retained be allocated to the mortgage
servicing right, based on its fair value relative to the loan as a whole. To
determine the fair value of the servicing rights, the Corporation uses a
valuation model that calculates the present value of future cash flows. Certain
assumptions, such as estimates of the cost of servicing per loan, discount rate,
and prepayment were used in the calculation which was done on an aggregate loan
basis.

   Mortgage servicing rights are amortized in proportion to, and over the period
of, estimated net servicing income.

   FAS 122 also requires a periodic assessment of the fair value of mortgage
servicing rights. In determining fair value, the servicing rights are
disaggregated into the predominant risk characteristics, which are currently
loan type and interest rate. These segments are then valued using the same model
used to originally determine the fair value at origination, using current
assumptions. The new value is then compared to the book value to determine if a
reserve for impairment is required.

   The impact of adopting FAS 122 was capitalization of $27,783 in mortgage
servicing rights.

Premises and Equipment

   Premises and equipment are stated at cost, less accumulated depreciation,
computed on the straight-line and declining-balance methods at rates based on
estimated useful lives of the assets.

   Effective December 31, 1995, the Corporation adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed. As a result of adoption, an impairment writedown of $281,417 was
included in noninterest expense as of December 31, 1995. The impairment amount
was determined by comparing the carrying value of certain buildings and land
owned by the Corporation to the estimates of current fair value based on
appraisals or assessment information. The impairment was a result of a decline
in market value since the date of acquisition of such premises that management
has deemed to be other than temporary.

Foreclosed Real Estate

   Foreclosed real estate consists principally of properties acquired through
mortgage loan foreclosure proceedings. These properties are recorded at the
lower of the carrying value of the related loans, including costs of
foreclosure, or estimated fair value, less estimated costs to sell, of the real
estate acquired or repossessed. An allowance for losses on foreclosed real
estate is maintained for subsequent valuation adjustments on a specific-property
basis.

Income Taxes

   Deferred income taxes and tax benefits are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The Corporation provides
deferred taxes for the estimated future tax effects attributable to temporary
differences and carryforwards when realization is more likely than not.

   Deferred tax expense is based on items of income and expense that are
reported in different years in the consolidated financial statements and tax
returns and are measured at the tax rate in effect the year the difference
originated.

Earnings Per Share

   Primary earnings per share are computed using the weighted-average common
shares outstanding during the year, including common stock equivalents, when
dilutive. The computation of fully diluted earnings per share is calculated in
the same way as primary earnings per share, except that the higher of the ending
market price or average market price is used to determine the dilutive effect of
common stock equivalents. The shares used in the computations for the three
years ended December 31, 1996 were as follows:

                     1996        1995        1994
                ---------   ---------   ---------
Primary         2,835,863   2,786,686   2,748,957
Fully diluted   2,855,928   2,795,051   2,753,697

                                       23

<PAGE>

   The number of common shares used in the calculation have been restated for
all periods presented to reflect a 6-for-5 stock split effected in the form of a
stock dividend on June 19, 1996.

Cash Flows

   Cash and cash equivalents include cash, interest and noninterest bearing
deposits due from banks and federal funds sold. The Bank paid interest of
$15,018,515, $13,346,669, and $10,348,936 on deposits, mortgagors' escrow
accounts and borrowings in 1996, 1995 and 1994, respectively.

Reclassification

   Certain 1995 and 1994 amounts have been reclassified to conform with the 1996
presentation. These reclassifications had no impact on net income.

Note 2 -- Restriction on Cash and Due from Banks:

   The Bank is required to maintain reserves against certain deposit transaction
accounts. At December 31, 1996, the Bank was required to have cash and liquid
assets of approximately $952,000 to meet these requirements.

Note 3 -- Investment Securities:

The amortized cost, gross unrealized gains and losses, and estimated market
values as of December 31, 1996 were as follows:

<TABLE>
<CAPTION>
                                                Held-To-Maturity
                             --------------------------------------------------
                                              Gross       Gross       Estimated
                              Amortized    Unrealized   Unrealized     Market
                                 Cost         Gains       Losses        Value
                             ----------   -----------   -----------  -----------
<S>                          <C>           <C>          <C>          <C>
United States Government
  agency obligations         $22,651,085   $ 152,030    $(122,493)   $22,680,622
Municipal bonds                3,251,878      87,903       (5,710)     3,334,071
Mortgage-backed securities    18,193,704       6,553     (241,301)    17,958,956
                             -----------   -----------  -----------  -----------
                             $44,096,667   $ 246,486    $(369,504)   $43,973,649
                             ===========   =========    =========    ===========
</TABLE>

<TABLE>
<CAPTION>
                                             Available-For-Sale
                            --------------------------------------------------
                                             Gross       Gross       Estimated
                             Amortized    Unrealized   Unrealized     Market
                                Cost         Gains       Losses        Value
                            ----------   -----------   -----------  -----------
<S>                        <C>           <C>          <C>         <C>
United States Government
  obligations              $ 14,977,409  $   91,799   $  (2,333)  $ 15,066,875
Mortgage-backed
  securities                 26,062,538     297,752    (144,108)    26,216,182
Marketable equity
  securities                 55,848,223     944,026    (261,632)    56,530,617
Mutual funds                  7,771,227       9,776     (79,871)     7,701,132
                           ------------  ----------   ---------   ------------
                           $104,659,397  $1,343,353   $(487,944)  $105,514,806
                           ============  ==========   =========   ============
</TABLE>

   The amortized cost, gross unrealized gains and losses, and estimated market
values as of December 31, 1995 were as follows:

<TABLE>
<CAPTION>
                                              Held-To-Maturity
                             --------------------------------------------------
                                              Gross       Gross       Estimated
                              Amortized    Unrealized   Unrealized     Market
                                 Cost         Gains       Losses        Value
                             ----------   -----------   -----------  -----------
<S>                         <C>           <C>          <C>         <C>
United States
  Government agency
  obligations               $17,947,094   $ 251,111    $(23,970)   $18,174,235
Municipal bonds               3,022,202     112,228      (5,870)     3,128,560
Mortgage-backed
  securities                  2,691,138      27,792        --        2,718,930
                            -----------   ---------    --------    -----------
                            $23,660,434   $ 391,131    $(29,840)   $24,021,725
                            ===========   =========    ========    ===========
</TABLE>

                                       24

<PAGE>

                                             Available-For-Sale
                            --------------------------------------------------
                                             Gross       Gross       Estimated
                             Amortized    Unrealized   Unrealized     Market
                                Cost         Gains       Losses        Value
                            ----------   -----------   -----------  -----------
United States Government
  obligations             $ 22,916,769   $  204,693    $ (11,637)   $ 23,109,825
Mortgage-backed
  securities                38,887,526      497,366     (119,763)     39,265,129
Marketable equity
  securities                36,375,134      665,006     (200,737)     36,839,403
Mutual funds                 7,846,227         --       (171,569)      7,674,658
                          ------------   ----------    ---------    ------------
                          $106,025,656   $1,367,065    $(503,706)   $106,889,015
                          ============   ==========    =========    ============

   The amortized cost and estimated market value of debt securities at December
31, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because borrowers may have the right to call or
repay obligations with or without call or prepayment penalties:

<TABLE>
<CAPTION>
                                                   1996
                          -----------------------------------------------------
                              Held-To-Maturity            Available-For-Sale
                          -------------------------   -------------------------
                                          Estimated                 Estimated
                             Amortized     Market      Amortized      Market
                               Cost         Value         Cost         Value
                          -----------   -----------   -----------   -----------
<S>                       <C>           <C>           <C>           <C>
Due in one year or less   $   499,964   $   500,155   $ 8,997,892   $ 9,035,313
Due after one year
  through five years       17,932,461    18,063,880     5,979,517     6,031,562
Due after five years
  through ten years         3,749,837     3,799,756          --            --
Due after ten years         3,720,701     3,650,902          --            --
                          -----------   -----------   -----------   -----------
                           25,902,963    26,014,693    14,977,409    15,066,875
Mortgage-backed
  securities               18,193,704    17,958,956    26,062,538    26,216,182
                          -----------   -----------   -----------   -----------
                          $44,096,667   $43,973,649   $41,039,947   $41,283,057
                          ===========   ===========   ===========   ===========
</TABLE>

   Proceeds from sales of securities available-for-sale were $24,642,498,
$22,221,950 and $20,476,350 in 1996, 1995 and 1994, respectively. There were no
sales of securities held-to-maturity in 1996, 1995 or 1994. Gross gains of
$634,399, $745,433 and $234,442 and gross losses of $290,669, $595,207 and
$188,798 were realized on sales of securities available-for-sale in 1996, 1995
and 1994, respectively.

   At December 31, 1996, investment securities with a carrying amount of
$50,765,852 were pledged as collateral to secure public deposits and for other
purposes.

Note 4 - Loans and the Allowance for Loan Losses:

Loans consisted of the following as of December 31:

<TABLE>
<CAPTION>
                                      1996              1995
                                -------------    -------------
<S>                             <C>              <C>
Residential real estate         $ 134,000,216    $ 132,565,700
Commercial real estate             35,471,892       34,598,367
Real estate construction            6,233,776        2,463,033
Commercial                         37,049,994       31,971,024
Consumer                           39,388,436       35,555,567
                                -------------    -------------
                                  252,144,314      237,153,691
Less: Deferred loan fee              (995,049)        (959,540)
   Allowance for loan losses       (4,875,308)      (5,487,801)
                                -------------    -------------
                                $ 246,273,957    $ 230,706,350
                                =============    =============
</TABLE>

                                       25

<PAGE>

Activity in the allowance for loan losses was as follows:

<TABLE>
<CAPTION>
                                         Year Ended December 31,
                               ------------------------------------------
                                    1996           1995           1994
                               -----------    -----------    -----------
<S>                            <C>            <C>            <C>
Balance at beginning of year   $ 5,487,801    $ 6,136,422    $ 6,447,483
Provision for loan losses          435,000        180,000        242,452
Chargeoffs                      (1,212,490)    (1,041,851)      (776,464)
Recoveries                         164,997        213,230        222,951
                               -----------    -----------    -----------
Balance at end of year         $ 4,875,308    $ 5,487,801    $ 6,136,422
                               ===========    ===========    ===========
</TABLE>

   Information with respect to impaired loans, in accordance with SFAS 114,
consisting primarily of commercial real estate and commercial loans, was as
follows:

<TABLE>
<CAPTION>
                                        December 31,
                                 -----------------------
                                    1996         1995
                                 ----------   ----------
<S>                              <C>          <C>
Investment in impaired loans     $2,431,559   $4,992,518
Impaired loans with
  no valuation allowance          2,304,586    4,791,857
Impaired loans with
  a valuation allowance             126,973      200,661
Valuation allowance                  42,803        3,661
Average recorded investment
  in impaired loans               2,482,867    4,702,103
Commitments to lend additional
  funds for loans considered
  impaired                               --           --
</TABLE>


<TABLE>
<CAPTION>
                                  Year Ended December 31,
                                 ------------------------
                                    1996           1995
                                 ----------   ------------
<S>                              <C>          <C>
Interest income, recognized
   on a cash basis               $  258,740   $  253,867

Information with respect to
  nonaccrual loans is as follows:
</TABLE>
<TABLE>
<CAPTION>
                                           December 31,
                                 ------------------------------
                                         1996          1995
                                 -----------------  -----------
<S>                                   <C>            <C>
Nonaccrual loans                      $2,939,000     $6,256,499
</TABLE>


<TABLE>
<CAPTION>
                                     Year Ended December 31,
                                 ------------------------------
                                   1996       1995       1994
                                 --------   --------   --------
<S>                              <C>        <C>        <C>
Interest income that
  would have been recorded
  under original terms           $353,572   $443,052   $278,519
Interest income recorded
  during the period               228,389    268,461    161,872
</TABLE>


   Information regarding capitalized originated loan servicing assets is as
follows:


<TABLE>
<CAPTION>
<S>                                                   <C>
Balance at December 31, 1995                         $    --
Additions                                             27,783
                                                     -------
Balance at December 31, 1996                         $27,783
                                                     =======
</TABLE>

   In 1996, there was no amortization or impairment of the loan servicing asset
reflected in the results of operations, as the loan sale transaction took place
in the month of December. As of December 31, 1996, the fair value of the
capitalized loan servicing asset approximated cost.

                                       26

<PAGE>

Note 5 - Foreclosed Real Estate:

   Changes in the allowance for foreclosed real estate losses were as follows:

<TABLE>
<CAPTION>
                                        Year Ended December 31,
                               --------------------------------------
                                  1996          1995          1994
                               ---------     ---------     ---------
<S>                            <C>           <C>           <C>
Balance at beginning of year   $  35,000     $  94,502     $ 469,981
Provision for losses             201,730       120,404       147,974
Chargeoffs, net                 (236,730)     (179,906)     (523,453)
                                --------      --------      --------
Balance at end of year         $      --     $  35,000      $ 94,502
                                ========      ========      ========
</TABLE>

Note 6 - Premises and Equipment:

   Cost and accumulated depreciation of the various categories of premises and
equipment consisted of the following:

<TABLE>
<CAPTION>
                               December 31, 1996        December 31, 1995
                          ------------------------- ------------------------
                           Accumulated               Accumulated
                              Cost     Depreciation     Cost    Depreciation
                          ----------   ------------ ----------  ------------
<S>                       <C>          <C>          <C>          <C>
Land                      $  594,725   $       --   $  735,798   $       --
Buildings                  3,049,361    1,571,065    3,112,751    1,453,294
Furniture and equipment    2,147,435    1,136,597    1,985,431      992,893
                          ----------   ----------   ----------   ----------
                          $5,791,521   $2,707,662   $5,833,980   $2,446,187
                          ==========   ==========   ==========   ==========
</TABLE>

   The Company leases office space under a noncancelable operating lease with a
renewal option for three consecutive one-year terms. Future minimum lease
payments at December 31, 1996 are as follows:

<TABLE>
<CAPTION>
                                      Year           Amount
                                      ----           ------
<S>                                   <C>           <C>
                                      1997          $14,400
                                      1998           12,000
                                                    -------
     Total minimum lease payments                   $26,400
                                                    =======
</TABLE>


   Total net rental expense amounted to $75,768, $67,405 and $55,550 in 1996,
1995 and 1994, respectively.

Note 7 - Deposits:

   Deposits consisted of the following as of December 31:

<TABLE>
<CAPTION>
                               1996           1995
                          ------------   ------------
<S>                       <C>            <C>
Noninterest-bearing
  demand deposits         $ 23,419,607   $ 19,007,639
NOW accounts                14,965,344     14,916,062
Regular savings             59,814,277     62,447,763
Money market savings        36,255,460     37,519,543
Certificates of deposit    175,120,731    160,700,712
Club accounts                  251,306        243,371
                          ------------   ------------
                          $309,826,725   $294,835,090
                          ============   ============
</TABLE>

   The amount of individual certificates of deposit in excess of $100,000
included in certificates of deposit at December 31, 1996 and 1995 was
$15,324,749 and $12,413,775, respectively.

                                       27

<PAGE>

Note 8 - Advances from Federal Home Loan Bank of Boston:

   Advances from Federal Home Loan Bank of Boston consisted of the following as
of December 31:

<TABLE>
<CAPTION>
                                  1996                 1995
                               -----------          -----------
<C>                            <C>                   <C>
6.40% due January 2, 1996      $        --           $2,990,000
5.96% due March 20, 1996                --            1,000,000
4.82% due March 29, 1996                --            1,000,000
4.80% due July 9, 1996                  --            2,000,000
5.94% due July 22, 1996                 --            1,000,000
4.71% due July 30, 1996                 --            1,000,000
6.01% due August 23, 1996               --            1,000,000
4.49% due September 9, 1996             --            2,000,000
5.45% due September 16, 1996            --            1,000,000
5.41% due January 2, 1997        1,000,000                   --
5.66% due March 21, 1997         1,000,000                   --
6.19% due September 5, 1997      1,000,000                   --
6.14% due September 16, 1997     1,000,000                   --
5.87% due September 22, 1997     1,000,000                   --
5.79% due October 17, 1997       1,000,000            1,000,000
4.89% due October 21, 1997       1,000,000            1,000,000
5.65% due November 17, 1997      2,000,000                   --
6.05% due January 26, 1998       2,000,000            2,000,000
5.93% due March 20, 1998         1,000,000                   --
6.31% due July 20, 1998          2,000,000                   --
6.42% due September 8, 1998      1,000,000                   --
6.43% due September 30, 1998     1,000,000                   --
5.99% due October 8, 1998        2,000,000                   --
5.87% due October 19, 1998       2,000,000            2,000,000
5.07% due October 21, 1998       1,000,000            1,000,000
                               -----------          -----------
                               $21,000,000          $19,990,000
                               ===========          ===========
</TABLE>

   As a member of the Federal Home Loan Bank of Boston ("FHLBB"), and in
accordance with an agreement with them, the Bank is required to maintain
qualified collateral, as defined in the FHLBB Statement of Credit Policy, free
and clear of liens, pledges and encumbrances as collateral for the advances. The
Bank maintains qualified collateral as defined by the FHLBB in excess of the
amount required to collateralize the outstanding advances at December 31, 1996.
The Bank also participates in the IDEAL Way Line of Credit Program with the
FHLBB. These advances are one-day variable rate loans with automatic rollover.
The Bank has a pre-approved line up to 2% of total assets.

Note 9 - Short-Term Borrowings:

   The following table summarizes average outstandings, maximum month-end
outstandings, daily average interest rates and average interest rates on
year-end balances. Average interest rates during the year were computed by
dividing total interest expense by the average amount outstanding.

<TABLE>
<CAPTION>
(dollars in thousands)          1996         1995       1994
                              -------       -------    -------
<S>                           <C>           <C>        <C>
Securities sold under
  agreements to repurchase:
Average outstanding           $35,585       $26,819    $ 9,460
Maximum outstanding at
  any month-end                47,008        31,194     21,058
Average interest rate
  during the year                5.30%         5.78%      4.49%
Interest rate at year-end        5.35%         5.48%      5.42%
</TABLE>

                                       28

<PAGE>
Note 10 - Shareholders' Equity:

   The Corporation's ability to pay dividends is dependent on the Bank's ability
to pay dividends to the Corporation. There are certain restrictions on the
payment of dividends and other payments by the Bank to the Corporation. Under
Connecticut law, the Bank is prohibited from declaring a cash dividend on its
common stock except from its net earnings for the current year and retained net
profits for the preceding two years. In some instances, further restrictions on
dividends may be imposed on the Bank by the Federal Reserve Bank.

   In February 1996, the Corporation announced that it planned to repurchase up
to 15% (approximately 394,000 shares) of its outstanding common shares. As of
December 31, 1996, 197,552 shares have been repurchased.

Note 11 - Employee Benefit Plans:

   The Corporation has a noncontributory defined benefit retirement plan under
an immediate participation guarantee contract covering all employees eligible as
to age and length of service. Benefits are based on a covered employee's final
average compensation, primary Social Security benefit and credited service. The
Corporation's funding policy is to contribute amounts to the plan sufficient to
meet the Employee Retirement Income Security Act's minimum funding requirements.

   The Corporation also offers a nonqualified supplemental employee retirement
plan to certain executives for lost benefits due to the Internal Revenue Service
(IRS) limitation under the Corporation's qualified defined benefit retirement
plan.

   The following table sets forth the plans' funded status and amounts
recognized in the financial statements at December 31:

<TABLE>
<CAPTION>
                                                       1996         1995
                                                  -----------    -----------
<S>                                               <C>            <C>
Actuarial present value of benefit obligations:
  Accumulated benefit obligation,
    of $2,439,643 in 1996 and
    $2,345,208 in 1995                            $(2,495,130)   $(2,401,755)
                                                  ===========    ===========
  Projected benefit obligation for
    service rendered to date                      $(3,201,593)   $(3,075,674)
  Plan assets at fair value,
    primarily cash and cash
    equivalents, U.S. and
    other bonds and listed stocks                   3,929,650      3,424,610
                                                  -----------    -----------
  Plan assets in excess of
    projected benefit obligation                      728,057        348,936
  Unrecognized net gain from
    past experience different
    from that assumed and
   effects of changes in
   assumptions                                     (1,088,373)      (750,401)
  Unrecognized prior service cost                     187,492        211,152
  Unrecognized net obligation
    at January 1                                       28,404         32,175
  Contribution                                             --        100,000
                                                  -----------    -----------
  Accrued pension cost                            $  (144,420)   $   (58,138)
                                                  ===========    ===========
</TABLE>

   The components of net pension expense are as follows:

<TABLE>
<CAPTION>
                                        Year Ended December 31,
                                 ------------------------------------
                                     1996        1995         1994
                                 ---------    ---------    ---------
<S>                              <C>          <C>          <C>
Service cost - benefits earned
  during the year                $ 208,308    $ 186,748    $ 168,114
Interest cost of projected
  benefits                         224,362      201,368      188,858
Actual return on plan
  assets                          (449,628)    (452,635)     (15,695)
Net amortization and
  deferral                         199,921      230,221     (186,330)
                                 ---------    ---------    ---------
                                 $ 182,963    $ 165,702    $ 154,947
                                 =========    =========    =========
</TABLE>

Weighted-Average Annualized Actuarial Assumptions:

<TABLE>
<CAPTION>
                                                     1996     1995     1994
                                                     ----     ----     ----
<S>                                                  <C>      <C>     <C>
Discount rate                                        7.5%     7.5%    7.5%
Expected long-term rate of return on plan assets     8.5      8.0      8.0
Rate of increase in future compensation levels       5.0      5.0      5.0
</TABLE>

                                       29
<PAGE>

   Employees who have completed one year of service and have attained the age of
21 are eligible to participate in the Corporation's defined contribution savings
plan (401k plan). Eligible employees may contribute up to 15% of their
compensation. The Corporation may make a matching contribution of up to 6% of
the participant's compensation. Contributions by the Corporation for the years
ended December 31, 1996, 1995 and 1994 were $76,062, $65,783, and $53,315,
respectively.

   The Corporation does not offer any postretirement or postemployment benefits
other than pensions.

Note 12 - Federal and State Taxes on Income:

Significant components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                        1996              1995                1994
                    ----------        ----------         ----------
<S>                 <C>                <C>               <C>
Current:
  Federal           $1,588,727        $1,575,793         $1,058,998
  State                559,967           568,135            303,646
                    ----------       -----------         ----------
    Total current    2,148,694         2,143,928          1,362,644
                    ----------       -----------         ----------

Deferred:
  Federal              158,308          (105,327)           369,418
  State                 73,839              (521)           156,576
                    ----------       -----------         ----------
    Total deferred     232,147          (105,848)           525,994
                    ----------       -----------         ----------
                    $2,380,841       $ 2,038,080         $1,888,638
                    ==========       ===========         ==========
</TABLE>


Following is a reconcilement of the statutory Federal income tax rate applied
to pre-tax accounting income with the income tax provisions in the statements of
operations:

<TABLE>
<CAPTION>
                                          1996            1995           1994
                                      -----------    -----------    -----------
<S>                                   <C>            <C>            <C>
Income tax at statutory rate          $ 2,517,769    $ 2,153,460    $ 1,916,557
Increase (decrease) resulting from:
 Dividends received deduction            (550,719)      (479,466)      (349,281)
 Connecticut corporation tax,
   net of Federal tax benefit             418,312        374,625        303,747
 Impact of State tax rate change           16,461         22,437             --
 Other items, net                         (20,982)       (32,976)        17,615
                                      -----------    -----------    -----------
 Provision for income taxes           $ 2,380,841    $ 2,038,080    $ 1,888,638
                                      ===========    ===========    ===========
</TABLE>

                                       30

<PAGE>

The components of the Corporation net deferred tax assets at December 31 are
as follows:

<TABLE>
<CAPTION>
                                           1996                   1995
                                 ---------------------   ---------------------
                                   Federal      State      Federal      State
                                 ----------   --------   ----------   --------
<S>                              <C>          <C>        <C>          <C>
Deferred tax assets:
 Loan loss provision             $1,483,556   $511,907   $1,665,273   $589,939
 Reserve - other real
   estate owned                        --         --         10,621      3,763
 Basis difference on other
   real estate owned                 31,175     10,757         --         --
 Net mortgage origination
   fees                             200,348     69,131      248,406     88,000
 Accrued interest payable           317,538    109,568      300,023    106,286
 Other                              183,391     63,280      152,637     54,073
                                 ----------   --------   ----------   --------
   Total deferred tax assets      2,216,008    764,643    2,376,960    842,061
                                 ----------   --------   ----------   --------

Deferred tax liabilities:
 Tax loan loss reserve in
   excess of base year              174,423     60,185      243,151     86,139
 SFAS 115 mark-to-market            259,574     91,957      261,986     92,811
 Other                              150,886     47,400       84,801     25,025
                                 ----------   --------   ----------   --------
   Total deferred tax
     liabilities                    584,883    199,542      589,938    203,975
                                 ----------   --------   ----------   --------
   Deferred tax assets            1,631,125    565,101    1,787,022    638,086
   Valuation allowance                 --         --           --         --
                                 ----------   --------   ----------   --------
   Net deferred tax assets       $1,631,125   $565,101   $1,787,022   $638,086
                                 ==========   ========   ==========   ========
</TABLE>

The allocation of deferred tax expense (benefit) involving items charged to
current year income and items charged directly to shareholders' equity for the
year ended December 31, are as follows:

<TABLE>
<CAPTION>
                                       1996                      1995
                             ---------------------    ------------------------
                               Federal      State       Federal         State
                             ---------    --------    -----------    ---------
<S>                          <C>          <C>         <C>            <C>
Deferred tax expense
  (benefit) allocated to
  shareholders' equity       $  (2,411)   $   (854)   $ 1,543,943    $ 565,974
Deferred tax expense
  (benefit) allocated
  to income                    158,308      73,839       (105,327)        (521)
                             ---------    --------    -----------    ---------
  Total deferred
    tax expense              $ 155,897    $ 72,985    $ 1,438,616    $ 565,453
                             =========    ========    ===========    =========
</TABLE>

   The Corporation will only recognize a deferred tax asset when, based upon
available evidence, realization is more likely than not. Accordingly, at
December 31, 1996, the Corporation has recorded no valuation allowance against
deferred tax assets based on sufficient available Federal taxable income in the
carryback period and anticipated future earnings.

   The Corporation made income tax payments of $1,729,533, $2,077,494, and
$1,611,795 in 1996, 1995 and 1994, respectively.

   Pursuant to the Small Business Job Protection Act of 1996, the Corporation is
required to change its method of accounting with respect to its tax bad debt
reserves. The change results in taxable income of approximately $100,000 which
will be recognized ratably over a six-year period. A deferred tax liability has
been established for this required change.

   The Corporation has not provided deferred taxes for the tax reserve for bad
debts, of approximately $1.2 million, that arose in tax years beginning before
1988 because it is expected that the requirements of Section 593 as amended by
the Small Business Protection Act of 1996, will be met in the foreseeable
future.

                                       31

<PAGE>

Note 13 - Loans to Related Parties:

   Certain directors and executive officers of the Corporation, including their
immediate families and companies in which they are principal owners, were loan
customers of the Bank during 1996 and 1995. Loans to such parties were made in
the ordinary course of business at the Bank's normal credit terms, including
interest rate and collateralization, and did not represent more than a normal
risk of collection. Such loans at December 31, 1996 and 1995 amounted to
$5,690,404 and $5,950,562, respectively. New loans of $449,095 were made, and
repayments totaled $709,253 during 1996. In addition, unused lines of credit to
related parties as of December 31, 1996 were $907,089.

Note 14 - Stock Option Plan:

   The Corporation has a stock option plan offered to employees and directors of
the Bank (the "Plan"). A total of 582,414 shares can be issued to participants
at an exercise price equal to the market price of the Corporation's stock on the
date of grant with a maximum term of ten years. Options are granted upon the
approval of the Board and vest 100% in one year. As of December 31, 1996, a
total of 19,560 shares are remaining for issuance.

   On January 1, 1996, the Corporation adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"). As
permitted by SFAS 123, the Corporation has chosen to apply APB Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its Plan. Accordingly, no compensation cost has been
recognized for options granted under the Plan. Had compensation cost for the
Corporation's Plan been determined based on the fair value at the grant dates
for awards under the Plan consistent with the method of SFAS 123, the
Corporation's net income and net income per share would have been reduced to the
pro forma amounts indicated below.

<TABLE>
<CAPTION>
                                     1996                          1995
                          -------------------------     -----------------------
                          As Reported    Pro Forma      As Reported   Pro Forma
                          -----------    ---------      -----------   ---------
<S>                       <C>            <C>            <C>          <C>
Net Income                $5,024,363     $4,588,413     $4,295,627   $4,221,820
Net Income Per Share -
  Fully Diluted                 1.76           1.61           1.54         1.51
</TABLE>

   The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants:

<TABLE>
<CAPTION>
                              1996               1995
                            -------            -------
<S>                           <C>                <C>
Dividend Yield                3.75%              3.75%
Expected Volatility          34.84%             34.84%
Risk-free interest rate       6.16%              5.68%
Expected lives              7 years            7 years
</TABLE>

   A summary of the status of the Corporation's Plan as of December 31, 1996 and
1995 and changes during the years ending on those dates is presented below:

<TABLE>
<CAPTION>
                              1996                       1995
                        -----------------------    ------------------------
                                   Weighted                    Weighted
                                    Average                     Average
                        Shares   Exercise Price    Shares    Exercise Price
                        ------   --------------    ------    --------------
<S>                    <C>          <C>            <C>            <C>
Outstanding at
  beginning of year    390,454      $10.58         284,594        $ 8.70
Granted                118,500       22.35         121,300         14.75
Exercised              (63,046)       8.94         (15,440)         8.54
Forfeited                 (600)      14.79            --              --
                       -------       -----         -------         -----
Outstanding at
  end of year          445,308       13.94         390,454         10.58
                       =======       =====         =======         =====
Options exercisable
  at year-end          366,808                     288,354
Weighted-average
  fair value of
  options granted
  during the year                   $ 7.05                        $ 4.53

                                       32
</TABLE>

<PAGE>

The following table summarizes information about the Plans' stock options at
December 31, 1996:

<TABLE>
<CAPTION>
                               Options Outstanding                        Options Exercisable
                  -----------------------------------------------    -------------------------------
                    Number       Weighted-Average    Weighted           Number          Weighted
   Range of       Outstanding       Remaining         Average        Exercisable         Average
Exercise Prices   at 12/31/96    Contractual Life  Exercise Price    at 12/31/96      Exercise Price
---------------   -----------    ----------------  --------------    -----------      --------------
<S>                 <C>                <C>           <C>               <C>               <C>
$2.952 - $ 7.986    100,904            5.3           $ 6.42            100,904           $ 6.42
10.208 -  15.417    225,904            8.4            12.89            225,904            12.89
22.320 -  22.880    118,500            9.9            22.35             40,000            22.32
                  ---------                                          ---------
                    445,308                                            366,808
                  =========                                          =========
</TABLE>

Note 15 - Financial Instruments with Off-Balance-Sheet Risk:

   The Bank is party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers. These
instruments expose the Bank to credit risk in excess of the amount recognized in
the statement of condition.

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

Total credit exposure related to those items is summarized as follows:

<TABLE>
<CAPTION>
                                                 1996         1995
                                             -----------   -----------
<S>                                          <C>           <C>
Loan commitments:
  Approved mortgage loan commitments         $ 1,153,340   $ 1,331,800
  Unadvanced portion of construction loans     1,665,389       579,967
  Unused home equity lines of credit          11,152,058    10,404,574
  Unused commercial lines of credit           13,427,265     9,425,659
  Standby letters of credit                    2,212,132     1,928,619
                                             -----------   -----------
                                             $29,610,184   $23,670,619
                                             ===========   ===========
</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. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Bank upon extension of credit is based on management's
credit evaluation of the counterparty. Collateral held is primarily residential
property. Interest rates on home equity lines of credit are variable and are
available for terms of 10 or 15 years. All other commitments are a combination
of fixed and variable with maturities of one year or more.

Note 16 - Significant Group Concentrations of Credit Risk:

   The Bank primarily grants residential, commercial and consumer loans to
customers located within its primary market area in the State of Connecticut.
The majority of the Bank's loan portfolio is collateralized by residential real
estate.

                                       33

<PAGE>

Note 17 - Fair Value of Financial Instruments:

   FASB Statement No. 107, "Disclosure about Fair Value of Financial
Instruments", requires disclosure of fair value information about financial
instruments, whether or not recognized in the statement of condition, for which
it is practicable to estimate that value. In cases where quoted market prices
are not available, fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement No. 107 excludes certain
financial instruments and all nonfinancial instruments from its disclosure
requirements. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Corporation.

   The following methods and assumptions were used by the Corporation in
estimating its fair value disclosures for financial instruments:

Cash and Cash Equivalents

   The carrying amounts reported in the statement of condition for cash and
short-term instruments approximate those assets' fair values.

Trading Account Assets

   Fair values for the Bank's trading account assets, which also are the amounts
recognized in the consolidated statement of condition, are based on quoted
market prices where available.

Securities Available-for-Sale and Held-to-Maturity

   Fair values for securities available-for-sale and held-to-maturity are based
on quoted market prices, where available.

Federal Home Loan Bank Stock

   The carrying value of Federal Home Loan Bank stock approximates its fair
value.

Loans Receivable

   The fair values for loans (excluding nonaccrual loans) are estimated using
discounted cash flow analyses, using interest rates currently being offered for
loans with similar terms to borrowers of similar credit quality. The Bank does
not believe an estimate of the fair value of nonaccrual loans can be made
without incurring excessive cost. The carrying amount of accrued interest
approximates its fair value.

Off-Balance-Sheet Instruments

   Fair values for the Bank's off-balance-sheet instruments (primarily lending
commitments) are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and the
counterparties' credit standing (guarantees, loan commitments).

Deposit Liabilities

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

   Statement No. 107 defines the fair value of demand deposits as the amount
payable on demand, and prohibits adjusting fair value for any value derived from
retaining those deposits for an expected future period of time. That component
is commonly referred to as a deposit base intangible. This intangible asset is
neither considered in the fair value amounts nor is it recorded as an intangible
asset in the statement of condition. The Corporation has not performed the
calculations to estimate the amount of this intangible asset due to the absence
of certain information required and the complexity of the computation.

Advances from Federal Home Loan Bank of Boston

   The fair values of the Bank's borrowings from the Federal Home Loan Bank of
Boston are estimated using discounted cash flow analyses, based on the Bank's
current incremental borrowing rates for similar types of borrowing arrangements.

Securities Sold Under Agreements to Repurchase

   The carrying amount reported in the consolidated statement of condition for
securities sold under agreements to repurchase is estimated to approximate its
fair value due to the fact that they are short-term instruments that mature
within 89 days.

                                       34

<PAGE>

   The following table presents a comparison of the carrying value and estimated
fair value of the Corporation's financial instruments at December 31, 1996 and
1995:

<TABLE>
<CAPTION>
                                                     1996                           1995
                                         --------------------------    --------------------------
                                           Carrying      Estimated      Carrying       Estimated
                                             Amount      Fair Value      Amount        Fair Value
                                         -----------    -----------    -----------    -----------
<S>                                     <C>            <C>            <C>            <C>
Financial assets:
 Cash and due from banks                $  8,454,570   $  8,454,570   $  6,571,706   $  6,571,706
 Federal funds sold                          700,000        700,000      4,100,000      4,100,000
 Trading account                           2,429,765      2,429,765        390,476        390,476
 Securities available-for-sale           105,514,806    105,514,806    106,889,015    106,889,015
 Securities held-to-maturity              44,096,667     43,973,649     23,660,434     24,021,725
 Federal Home Loan
          Bank Stock                       2,039,700      2,039,700      1,978,300      1,978,300
 Loans (excluding nonaccrual loans)      249,205,314    247,961,115    230,897,192    230,721,301
 Accrued income receivable                 2,716,624      2,716,624      2,520,205      2,520,205

Financial liabilities:
  Deposits:
    Noninterest-bearing
      demand deposits                   $ 23,419,607   $ 23,419,607   $ 19,007,639   $ 19,007,639
    Regular savings                       59,814,277     59,814,277     62,447,763     62,447,763
    Money market savings                  36,255,460     36,255,460     37,519,543     37,519,543
    Certificates of deposit              175,120,731    175,631,030    160,700,712    161,606,609
    NOW accounts                          14,965,344     14,965,344     14,916,062     14,916,062
    Club accounts                            251,306        251,306        243,371        243,371
    Advances from the Federal
      Home Loan Bank of Boston            21,000,000     20,991,116     19,990,000     19,978,440
    Securities sold under
      agreements to repurchase            41,878,710     41,878,710     21,552,488     21,552,488
  Unrecognized financial instruments:
    Commitments to extend credit                --          273,981           --          217,420
    Letters of credit                           --           22,121           --           19,286
</TABLE>

Note 18 - Recent Accounting Pronouncements:

   In June 1996, the FASB issued Statement of Financial Accounting Standards No.
125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities" ("SFAS 125"). SFAS 125 provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishment of liabilities. The Bank will be required to adopt SFAS 125 for
transfers and servicing of financial assets and extinguishment of liabilities
occurring after December 31, 1996, on a prospective basis. The adoption of this
standard is not expected to have a material impact on the Bank's financial
condition or its results of operations.

   In February, 1997, the FASB issued Statement of Financial Accounting
Standards No. 128 "Earnings Per Share" ("SFAS 128"). SFAS 128 provides
accounting and reporting standards for the calculation of earnings per share
intended to simplify the computation by replacing the presentation of primary
earnings per share with a presentation of basic earnings per share. The
Corporation will be required to adopt SFAS 128 in the fourth quarter of 1997.
The adoption of this standard is not expected to have a material impact on the
Corporation's financial condition or results of operations.

                                       35

<PAGE>

Note 19 - Contingencies:

   On April 11, 1996, the lawsuit filed in prior years by certain borrowers, and
a related company, against the officers and directors of Southington Savings
Bank (the "Bank") was withdrawn, and all of the related foreclosure actions were
resolved. The consequences of the resolution of these cases did not have a
material impact on the Bank's financial condition or results of operations.

Note 20 - Regulatory Matters:

   The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory - and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. The Bank's capital amounts and classifications are also
subject to qualitative judgements by the regulators about components, risk
weightings, and other factors.

   Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1996, that the Bank
meets all capital adequacy requirements to which it is subject.

   As of December 31, 1996, the most recent notification from the Office of the
Comptroller of the Currency categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
institution's category.

The Bank's actual capital amounts and ratios are also presented in the table.
<TABLE>
<CAPTION>

                                                                           To Be Well Capitalized
                                                                           Under Prompt Corrective
                                        Actual                                Action Provisions
                                   ----------------                   ----------------------------------
(dollars in thousands)              Amount   Ratio                     Amount                     Ratio
                                   -------  -------                   --------                   -------
<S>                                <C>       <C>     <C>              <C>       <C>                <C>
As of December 31, 1996:

   Total Capital                                     [Greater than              [Greater than
     (to Risk Weighted Assets)     $45,561   16.44%   or equal to]    $27,721    or equal to]      10.0%

   Tier I Capital                                    [Greater than              [Greater than
     (to Risk Weighted Assets)     $42,078   15.18%   or equal to]    $16,632    or equal to]       6.0%

   Tier I Capital                                    [Greater than              [Greater than
     (to Average Assets)           $42,078   10.33%   or equal to]    $20,368    or equal to]       5.0%

As of December 31, 1995:
   Total Capital                                     [Greater than              [Greater than
     (to Risk Weighted Assets)     $46,034   18.78%   or equal to]    $24,506    or equal to]      10.0%

   Tier I Capital                                    [Greater than              [Greater than
     (to Risk Weighted Assets)     $42,971   17.53%   or equal to]    $14,704    or equal to]       6.0%

   Tier I Capital                                    [Greater than              [Greater than
     (to Average Assets)           $42,971   11.19%   or equal to]    $19,199    or equal to]       5.0%
</TABLE>

                                       36

<PAGE>

Note 21 - Parent Company Only Financial Statements:

The financial statements of Bancorp Connecticut, Inc. are as follows:

<TABLE>
<CAPTION>
                                                December 31,
                                        -------------------------
                                             1996          1995
                                        -----------   -----------
Statement of condition:

<S>                                     <C>           <C>
Assets:
 Marketable equity securities           $   300,000   $   300,000
 Investment in Southington
   Savings Bank                          41,777,105    42,642,948
 Repurchase agreement                       425,000          --
 Organization costs                         115,957       155,714
 Due from Southington Savings Bank          113,967       151,976
 Other assets                                 9,696         8,970
                                        -----------   -----------
    Total assets                        $42,741,725   $43,259,608
                                        ===========   ===========

Liabilities and stockholder's equity:
  Accrued expenses                      $    10,605   $    50,039
  Stockholders' equity                   42,731,120    43,209,569
                                        -----------   -----------
     Total liabilities and
       stockholders' equity             $42,741,725   $43,259,608
                                        ===========   ===========
</TABLE>

<TABLE>
<CAPTION>
                                             Year Ended December 31,
                                   ------------------------------------------
                                        1996           1995           1994
                                   -----------    -----------    -----------
<S>                                <C>            <C>            <C>
Statement of income:
  Dividends from subsidiary        $ 6,334,433    $ 1,684,690    $   539,101
  Other income                          34,940           --             --
                                   -----------    -----------    -----------
     Total income                    6,369,373      1,684,690        539,101
  Operating expenses                   318,693        354,293          5,883
  Income tax (credit)                 (100,108)      (146,766)        (2,447)
                                   -----------    -----------    -----------
    Income before equity in
      undistributed net income
      of subsidiary                  6,150,788      1,477,163        535,665
  Equity in undistributed
    net income of subsidiary        (1,126,425)     2,818,464      3,212,632
                                   -----------    -----------    -----------
     Net income                    $ 5,024,363    $ 4,295,627    $ 3,748,297
                                   ===========    ===========    ===========
</TABLE>

                                       37

<PAGE>

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                            -----------------------------------------
                                                                1996           1995          1994
                                                            ----------     ----------          -----
<S>                                                        <C>            <C>            <C>
Statement of cash flows:
Operating activities:
 Net income                                                $ 5,024,363    $ 4,295,627    $ 3,748,297
                                                           -----------    -----------    -----------
 Adjustments to reconcile net income
   to net cash provided by operating activities:
   Equity in undistributed net income of subsidiary          1,126,425     (2,818,464)    (3,212,632)
   Amortization of organization costs                           39,757         12,364           --
   Increase in other assets                                       (725)        (8,970)      (168,077)
   (Decrease) increase in accrued expenses                     (39,434)        50,039           --
                                                           -----------    -----------    -----------
     Net cash provided by operating activities               1,126,023      1,530,596        367,588
                                                           -----------    -----------    -----------

Investing activities:
  Purchase of securities available-for-sale                       --             --         (300,000)
  Decrease (increase) in advances to subsidiaries               38,009        (74,774)       (77,202)
                                                           -----------    -----------    -----------
     Net cash provided by (used in) investing activities        38,009        (74,774)      (377,202)
                                                           -----------    -----------    -----------

Financing activities:
  Dividends paid                                            (1,991,391)    (1,589,837)          --
  Net increase in repurchase agreements                       (425,000)          --             --
  Repurchase of common stock                                (4,338,798)          --             --
  Issuance of common stock                                     566,794        134,015          9,614
                                                           -----------    -----------    -----------
    Net cash (used in) provided by financing activities     (6,188,395)    (1,455,822)         9,614
                                                           -----------    -----------    -----------
Net decrease in cash                                              --             --             --
Cash at beginning of year                                         --             --             --
                                                           -----------    -----------    -----------
Cash at end of year                                        $      --      $      --      $      --
                                                           ===========    ===========    ===========
</TABLE>

                                       38

<PAGE>

Note 22 - Quarterly Financial Data (Unaudited):

(dollars in thousands except per share data)

<TABLE>
<CAPTION>
                                         Three Months Ended
                              ----------------------------------------
                              March 31   June 30    Sept. 30   Dec. 31
                              --------   -------    --------   -------
<S>                             <C>      <C>        <C>        <C>
Fiscal 1996:
  Interest income               $7,287   $ 7,358    $ 7,579    $7,703
  Interest expense               3,702     3,723      3,832     3,916
                                ------   -------    -------    ------
    Net interest income          3,585     3,635      3,747     3,787
  Provision for loan losses         75       100        125       135
  Net securities gains             201        41         65        37
  Other income                     329       350        320       342
  Other expenses                 2,118     2,171      2,114     2,196
  Income taxes                     638       565        610       568
                                ------   -------    -------    ------
    Net income                  $1,284   $ 1,190    $ 1,283    $1,267
                                ======   =======    =======    ======
    Net income per common and
     common equivalent share    $  .45   $   .42    $   .45    $  .45
                                ======   =======    =======    ======

Fiscal 1995:
  Interest income               $6,481   $ 6,775    $ 7,023    $7,243
  Interest expense               3,021     3,322      3,558     3,724
                                ------   -------    -------    ------
    Net interest income          3,460     3,453      3,465     3,519
  Provision for loan losses         30        30         70        50
  Net securities gains              36        30          8        76
  Other income                     278       252        277       286
  Other expenses                 2,081     2,054      1,990     2,501
  Income taxes                     547       525        529       438
                                ------   -------    -------    ------
    Net income                  $1,116   $ 1,126    $ 1,161    $  892
                                ======   =======    =======    ======
    Net income per common
      and common equivalent
      share                     $  .40   $   .40    $   .42    $  .32
                                ======   =======    =======    ======
</TABLE>

   Income per share calculations for each of the quarters is based on the
weighted average number of shares outstanding, including common stock
equivalents for each period and the sum of the quarters may not necessarily be
equal to the full year income per share amount. Net income per common and common
equivalent share has been restated for all periods presented to reflect a
6-for-5 stock split effected in the form of a stock dividend on June 19, 1996.

                                       39

<PAGE>

Bancorp Connecticut, Inc. Directors

Walter J. Hushak
Chairman of the Board,
Southington Savings Bank
Senior Vice President,
Janazzo Services, Inc.

Andrew J. Meade
Vice Chairman,
Southington Savings Bank
President,
International Security Products, Inc.
(Manufacturer of Security Products)

Norbert H. Beauchemin
Vice President,
Dudzik & Beauchemin, P.C.
(Certified Public Accountants)

Michael J. Karabin
President,
Acme-Monaco Spring Corporation
(Manufacturer of springs, stampings, forms,
orthodontic hardware and medical assemblies)

David P. Kelley
Counsel, Southington Savings Bank
Partner, Kelley, Crispino & Kania (Attorneys at Law)

Frederick E. Kuhr
President and controlling
shareholder,
Evergreen Nursery, Inc.

Joseph J. LaPorte
Retired Manufacturers
Representative, B.C.S. Company
(Distributor of industrial metal  finishing chemicals and equipment)

Ralph G. Mann
Retired President,
Southington Savings Bank

Frank R. Miller
Managing Partner,
Miller, Moriarty and Company, L.L.C.
(Certified Public Accountants)

Robert D. Morton
President and
Chief Executive Officer,
BancorpConnecticut, Inc.

Anthony S. Pizzitola
Retired President and Treasurer,
Pizzitola Electric Co., Inc.

Dennis J. Stanek
Senior Vice President - Investments
Tucker Anthony Incorporated
(Investment Banking Firm)

Officers

Robert D. Morton
President and Chief Executive Officer

Anthony Priore, Jr.
Treasurer/Secretary

Steven F. Nyren
Assistant Secretary

                                       40

<PAGE>

Southington Savings Bank Directors and Officers

BOARD OF DIRECTORS
Walter J. Hushak
Chairman of the Board

Andrew J. Meade
Vice Chairman

Norbert H. Beauchemin

Michael J. Karabin

David P. Kelley

Frederick E. Kuhr

Joseph J. LaPorte

Ralph G. Mann

Frank R. Miller

Robert D. Morton

Anthony S. Pizzitola

Dennis J. Stanek


EXECUTIVE OFFICERS

Robert D. Morton
President and Chief Executive Officer

William R. DellaVecchia
Senior Vice President,
Commercial Loan Division

Richard A. Fracasso
Senior Vice President,
Consumer Banking Division

Anthony Priore, Jr.
Senior Vice President,
Treasurer & Chief Financial Officer


OFFICERS

ACCOUNTING:
Kim S. Just
Planning Officer

Carl H. Schmidt
Controller

AUDIT:
Maryanne E. Scarfo
CRA & Compliance Officer

Stephen M. Settino
Chief Auditor

COMMERCIAL LOAN:
Daniel R. DeRosa
Vice President
Commercial Loan Officer

Anthony Palmieri, Jr.
Vice President
Commercial Loan Officer

Vincent L. Ruggiero
Vice President
Commercial Loan Officer

Duane L. Beale
Assistant Vice President
Commercial Loan Officer

CONSUMER BANKING:
Paul E. MacDonald
Vice President

Richard P. Dextraze
Assistant Vice President
Consumer Loan Manager

Susan M. Dobratz
Assistant Vice President &
Branch Manager
South End Office

Donna M. Glatz
Assistant Vice President
Retail Operations Officer

Sue A. Kasek
Assistant Vice President
Consumer Loan Officer

Kenneth G. Penfield, Jr.
Assistant Vice President
Mortgage Loan Officer

Claudia A. Crooker
Assistant Treasurer &
Branch Manager
Main Office

Carol M. Vreeland
Assistant Treasurer &
Branch Manager
Queen Corner Office

CREDIT ADMINISTRATION:
Charles J. DeSimone, Jr.
Chief Credit Officer

Raymond D. Jannelli
Vice President
Managed Assets Manager

Diane L. Hoadley
Credit & Loan Review Officer

Diane L. McCoy
Commercial Loan
Documentation Officer

HUMAN RESOURCES:
Donna M. Schaefer
Vice President

INFORMATION SYSTEMS:
Barry J. Abramowitz
Chief Information Officer

Therese G. Kelly
Assistant Vice President
Deposit Services Manager

Kurt M. Heinrich
Systems Administration Officer

INVESTMENT SERVICES:
Robert P. Vocelli
Investment Services Manager

Rita H. Beaulieu
Vice President
Trust Services Manager

Steven F. Nyren
Corporate Secretary &
Trust Officer

MARKETING:
Pauline B. Levesque
Vice President

                                       41

<PAGE>

Shareholder Information

Annual Meeting
The Annual Meeting of Shareholders will be held at
2:00 p.m. on Wednesday, May 14, 1997 at The Elks Club
of Southington, 114 Main Street, Southington, CT.

Form 10-K Report

A copy of the Corporation's 1996 Annual Report to the Securities and Exchange
Commission on Form 10-K may be obtained without charge by any shareholder upon
written request to:

Lesley DeAngelo
Bancorp Connecticut, Inc.
121 Main Street
Southington, Connecticut  06489-2533

Stock Transfer Agent:
American Stock Transfer & Trust Company
40 Wall Street - 46th Floor
New York, New York 10005
1-800-937-5449

Independent Auditors:
Coopers & Lybrand, L.L.P.
100 Pearl Street
Hartford, CT 06103

Market Makers

The following companies have generally been market makers for Bancorp
Connecticut, Inc. as of December 31, 1996:
Advest, Inc.                     Sandler O'Neill & Partners
Herzog, Heine, Geduld, Inc.      Tucker Anthony Incorporated
Keefe, Bruyette & Woods, Inc.

Market Price and Dividends

   The Corporation's common stock trades on the Nasdaq National Market tier of
the Nasdaq Stock Market under the symbol BKCT. There were approximately 1,878
shareholders of record on February 28, 1997. The high and low bid prices and
cash dividends per share for each quarter during the last two calendar years
were as follows:

<TABLE>
<CAPTION>
                                                Dividend
        Quarter Ended        High      Low      per Share
<S>                         <C>      <C>        <C>
          3/31/95  (a)      $11.67   $10.83     $.133
          6/30/95  (a)       13.96    10.83      .146
          9/30/95  (a)       16.88    13.70      .150
         12/31/95  (a)       15.83    13.96      .158
          3/31/96  (a)       17.71    14.79      .171
          6/30/96            22.63    16.67      .180
          9/30/96            23.75    19.50      .190
         12/31/96            23.75    21.25      .200
</TABLE>

(a) Data has been restated to reflect a 6-for-5 stock split effected in the form
    of a stock dividend on June 19, 1996.

BancorpConnecticut, Inc. Internet Address:
www.bkct.com

Dividend Reinvestment and
Stock Purchase Plan

For more information contact:
American Stock Transfer & Trust Company
Dividend Reinvestment Dept.
40 Wall Street - 46th Floor
New York, New York 10005
1-800-278-4353

Southington Savings Bank Office Locations
-----------------------------------------
Main Office
121 Main Street

Main Office Drive-In Center
Berlin Avenue behind Main Office

Queen Corner Office
900 Queen Street

South End Office
921 Meriden-Waterbury Turnpike

Southington High School Training Branch
720 Pleasant Street

SSB Mortgage Center
188 North Main Street

Internet Address:
www.s-s-b.com

                                       42