Exhibit 13.1




                            Investing in the Future


                                 ---------------
                                 [IMAGE OMITTED]
                                 ---------------




BancorpConnecticut, Inc.
--------------------------------------------------------------------------------



                                                                   -------------
                                                                       1998
                                                                   Annual Report
                                                                   -------------

<PAGE>


CORPORATE PROFILE


Bancorp Connecticut's wholly owned subsidiary,  Southington Savings Bank ("SSB")
is a  community-based  full-service  financial  institution  serving the central
Connecticut  market with retail and  commercial  banking,  money  management and
brokerage services through offices in Southington and Wallingford. SSB also owns
an indirect auto finance subsidiary,  BCI Financial Corporation ("BCIF").  BCIF,
through its car dealer relationships  throughout  Connecticut,  offers auto loan
financing to customers of those dealerships.


                        [BAR GRAPH OMITTED -- DATA BELOW]


                       Net Income (dollars in thousands)
                       ---------------------------------

            '94          '95          '96          '97          '98
           -----        -----        -----        -----        -----
           3,748        4,296        5,024        5,896        6,345*




                     Dividend Growth** (dollars per share)
                     -------------------------------------

            '94          '95          '96          '97          '98
           -----        -----        -----        -----        -----
            0.21         0.30         0.37         0.46         0.54



*    Includes a $337,000 charge to earnings attributed to the formation of a
     passive investment company. Excluding this charge, net income would have
     been $6,682,000. This passive investment company was formed to lower the
     Company's effective tax rate in future years.

**   Per share data has been restated to reflect a 6-for-5 stock split effected
     in the form of a stock dividend on June 19, 1996, and a 2-for-1 stock split
     effected in the form of a stock dividend on December 1, 1997.


<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


SELECTED CONSOLIDATED
FINANCIAL DATA


<TABLE>
<CAPTION>
                                                                 At or for the Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data)    1998           1997             1996              1995             1994
------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>              <C>               <C>              <C>     
STATEMENT OF CONDITION DATA:*
  Assets                                     $521,376       $444,863         $419,398          $383,978         $357,180
  Securities                                  217,333        166,712          149,612           130,549          124,372
  Loans, net                                  278,440        255,448          246,274           230,706          213,457
  Deposits                                    345,563        317,299          309,827           294,835          279,392
  FHLB of Boston advances                      40,630         20,630           21,000            19,990           22,299
  Federal funds purchased and securities
     sold under agreements to repurchase       80,516         55,368           41,879            22,227           15,027
  Shareholders' equity                         49,916         46,947           42,731            43,210           37,357

STATEMENT OF INCOME DATA:*
  Net interest income                        $ 16,840       $ 15,677         $ 14,754          $ 13,896         $ 12,975
  Provision for loan losses                       268            600              435               180              242
  Net gain on sale of securities                1,272            839              344               150               46
  Other income                                  2,191          1,484            1,315             1,093              737
  Other expenses                               10,398          8,701            8,573             8,625            7,879
  Income taxes**                                3,292          2,803            2,381             2,038            1,889
------------------------------------------------------------------------------------------------------------------------

  Net income**                               $  6,345       $  5,896         $  5,024          $  4,296         $  3,748
========================================================================================================================

PER SHARE DATA:***
  Earnings -- diluted                           $1.14          $1.08            $0.89             $0.77            $0.68
  Cash dividends                                 0.54           0.46             0.37              0.30             0.21
  Book value                                     9.72           9.22             8.31              7.95             6.93

SELECTED STATISTICAL DATA:
  Return on average assets                       1.29%          1.39%            1.26%             1.17%            1.11%
  Return on average equity                      13.07          13.48            11.69             10.67            10.11
  Average equity to average assets               9.85          10.34            10.71             10.95            10.99
  Net interest spread (tax equivalent basis)     3.18           3.50             3.48              3.53             3.63
  Net interest margin (tax equivalent basis)     3.80           4.13             4.10              4.15             4.14
  Dividend payout ratio                         43.15          39.95            39.63             37.01            30.15


*    Certain prior year amounts have been reclassified to conform with the 1998 presentation. These reclassifications
     had no impact on net income.

**   Includes a $337,000 charge to 1998 earnings attributed to the formation of a passive investment company. Excluding
     this charge, net income would have been $6,682,000. This passive investment company was formed to lower the
     Company's effective tax rate in future years.

***  Per share data has been restated to reflect a 6-for-5 stock split effected in the form of a stock dividend on June
     19, 1996, and a 2-for-1 stock split effected in the form of a stock dividend on December 1, 1997.

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

TABLE OF CONTENTS

     Selected Consolidated Financial Data ..............................  1
     Letter to Shareholders ............................................  2
     Growth and Expansion ..............................................  5
     Technology ........................................................  6
     BCI Financial Corporation .........................................  7
     Brokerage .........................................................  8
     Management's Discussion and Analysis ..............................  9
     Report of Independent Accountants ................................. 21
     Consolidated Statements of Condition .............................. 22
     Consolidated Statements of Income ................................. 23
     Consolidated Statements of Shareholders' Equity ................... 24
     Consolidated Statements of Cash Flows ............................. 25
     Notes to Consolidated Financial Statements ........................ 26
     Shareholder Information ........................................... 40
     Bancorp Connecticut, Inc. Directors and Officers .................. 41
     SSB Directors and Officers ........................................ 42



                                       1
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


TO OUR 
SHAREHOLDERS:


---------------------------
[IMAGE OMITTED]
Robert D. Morton
President and 
Chief Executive Officer
of BancorpConnecticut, Inc.
---------------------------


Bancorp  Connecticut,  Inc. and its subsidiary SSB had another  challenging  and
exciting year. Net income for 1998 amounted to $6,345,000,  or $1.14 per diluted
share,  compared to $5,896,000,  or $1.08 per diluted share in 1997. Excluding a
one-time  write-down  of $337,000  recorded in the fourth  quarter of 1998,  net
income would have been $6,682,000,  or $1.20 per diluted share--up 13.3% for the
year. This write-down of a previously recorded deferred tax asset was the result
of the formation of a passive investment company (SSB Mortgage Corporation) that
will enable the Company to reduce its effective tax rate in 1999 and thereafter.
We expect to recover this  write-down  in less than one year through tax savings
on pretax income.  Many other  initiatives were undertaken in 1998 to strengthen
the Company and grow our  franchise.  These include the August 1998 opening of a
new branch  office on Route 5 in  Wallingford,  the  formation of BCI  Financial
Corporation  (an  indirect  auto-finance  subsidiary  of SSB),  and the  midyear
conversion of virtually  every computer system in the Bank. All in all, we had a
good year.

At the  same  time,  the  price  action  of  our  stock  in  1998  was  somewhat
disappointing--particularly  in light of the many things that we accomplished to
make your Company better.  For example,  for the sixth consecutive year, Bancorp
Connecticut,  Inc. set all-time records in total assets, loans, deposits, equity
capital and net income. In addition, the Company had solid growth in noninterest
income and  increased its cash  dividends  paid.  It also  performed  quite well
relative to its peer group. Nevertheless,  financial performance and share-price
performance  have at times seemed unrelated over the past four or five quarters.
In my judgement, this was due to a number of unique circumstances. For instance,
in late 1997,  as regional  bank-merger  activity  approached a  crescendo,  our
Company split its common shares 2 for 1--simultaneously  driving our share price
to an all-time high. This localized  speculative fever in bank stocks eventually
broke,  which we knew it would.  In addition,  late in the third quarter of last
year,  severe  international  turmoil  affected  the  entire  equity  market and
particularly  bank stocks.  There was a worldwide  liquidity  crisis that,  even
recently,  has had lingering effects on the domestic stock market. This has been
particularly the case with New England bank stocks. The smaller the company, the
smaller the market  capitalization and the less liquid its common shares. We are
very aware of this situation,  which has nothing whatsoever to do with financial
performance.  In fact,  one could easily make the case that the Company's  share
price  is  undervalued.  It is worth  noting  too that  patience  and  long-term
thinking has its rewards.



                                       2
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


                                                         -----------------------
                                                         OVER FIVE YEARS,
                                                         BANCORP HAS SPLIT ITS
                                                         SHARE PRICE THREE
                                                         TIMES, UNDERTAKEN A
                                                         SIGNIFICANT STOCK
                                                         REPURCHASE PROGRAM,
                                                         INSTITUTED A DIVIDEND
                                                         REINVESTMENT PROGRAM
                                                         AND RAISED OUR CASH
                                                         DIVIDEND EACH YEAR.
                                                         -----------------------

The Company continues to be well positioned for the new millennium.  In 1998, we
invested  heavily  for the future.  Our new  Wallingford  office  opened in late
summer and is off to an excellent start. In addition to Wallingford, the Meriden
and  Cheshire  market areas are an  important  part of our business  plan in the
years ahead.  At midyear,  we converted  the Bank's  entire  computer  operating
system to an  in-house,  client-server-based  mode that  will  improve  customer
service and is  compliant  with Year 2000  readiness  requirements.  Late in the
second  quarter  of last  year,  the Bank  formed a  subsidiary,  BCI  Financial
Corporation.   This  company  has  been  primarily   involved  in  the  indirect
auto-finance  business  which we think  holds  great  potential  for  generating
consumer loan volume for SSB and fee income through the sale of loan  production
to other financial institutions. It, in fact, will play an important role in our
business plan as we look to the future.

We continue to grow and develop our extensive menu of products and services. For
instance,  commercial-relationship  banking has assumed a more important role in
the Company's plans as the Bank strives to take on a more  commercially-oriented
focus.   Toward  this  end,  the   introduction   of   comprehensive   PC-based,
cash-management  services  will provide a new source of fee income and enable us
to serve our existing  customers better and attract  commercial  business in all
areas of the state.  In addition,  the  Financial  Services area is an important
source  of fee  income  as  well.  At  year-end,  trust  customer  assets  under
investment  management  had grown to almost $83 million  while our  full-service
brokerage unit (offering  products  through  Infinex  Financial  Group) produced
record  results.  The brokerage  unit is primarily  responsible  for the sale of
mutual funds,  annuities and other selected insurance products to our customers.
In 1999,  the Bank intends to broaden its product  offerings of other  insurance
products through a strategic alliance with one or more established vendors.

Our banking subsidiary,  SSB, continued to do very well on both the consumer and
commercial  banking  fronts.  For example,  transaction-based  deposit  accounts
increased more than 50% on a year-to-year  basis while  commercial  loans (which
now represent 30% of all loans) rose 11.7% as compared to year-end  1997.  Local
decision making, "reasonable" banking fees, and great customer service have made
this success  possible.  As we reaffirm  our  commitment  to  community  banking
excellence,  SSB is focusing even more intently on providing  superior  customer
service.  Being more responsive to our customers in terms of problem resolution,
accuracy and  promptness is a particularly  critical  ingredient in our business
plan. Toward this end, in the first quarter of 1999, the Bank designated Richard
Fracasso,  a senior executive officer of SSB and head of Consumer Banking, to be
responsible for bank-wide customer service.



                                       3
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


The  competitive  nature of our business  also  continues to change and, in some
cases, quite dramatically.  As the national and regional economies  strengthened
and the level of market  interest  rates declined  markedly,  the level of price
competition for loans and deposits intensified--not unlike the late 1980s--while
non-bank financial  institutions such as brokerage firms, mortgage companies and
credit unions continued to compete  aggressively without the regulatory mandates
imposed on the banking  industry.  Despite  this  intense  competition,  we have
managed to stay ahead of our peers in terms of financial performance and plan to
continue to do so.

We also continue to analyze and review opportunities to grow our franchise.  For
instance,  a few larger  regional banks may well divest some of their smaller or
medium-sized  branch offices and this  eventuality  may work to our benefit.  At
this   point,   one   or   two   strategically   placed   offices   to   develop
commercial-related business might be of interest to us. In addition, we have not
ruled out small bank acquisitions or mergers, but the remaining small banks that
are publicly  owned in  Connecticut  are few.  Recent  acquisition  prices still
remain high  relative to either our share price or multiples  of earnings  paid.
Nonbank  subsidiaries,  similar to our  auto-finance  unit, are more  attractive
because of their  ability to generate  both loan volume and  noninterest  income
quickly.

Clearly,  the Company is ready for the Year 2000,  or Y2K as the issue is known.
As we mentioned  previously,  the Bank converted its entire operating system and
all of its  components to a Year 2000  certified  vendor in mid-1998.  Banks are
probably the most well prepared industry in the nation,  owing to the persistent
oversight  of  government  regulators  since  early  1998.  SSB,  as  part  of a
bank-holding company, is subject to examination by the Federal Reserve Bank, the
FDIC and the  Connecticut  State  Banking  Department.  Except for some isolated
testing, we will be prepared for Y2K before you read this report. We are looking
forward to measurable  productivity  improvements with our new operating system,
as well as the  introduction  of new  products and services in the first half of
1999. Most notably, they will include Internet banking and bill-paying services.

As a Company,  we are still very much  focused on improving  shareholder  value.
Over the past five years,  Bancorp  Connecticut  has split its share price three
times, undertaken a significant stock repurchase program,  instituted a dividend
reinvestment program and raised our cash dividend each year. During this period,
we have also  continued  to produce  record  earnings  each year.  As  discussed
previously,  liquidity  of our stock  remains  an issue and one which we hope to
improve  over  time.  First  and  foremost,  however,  is the  execution  of our
aggressive  business  plan for 1999.  We plan to be around  for the  millennium,
which will mark the Bank's 140th  anniversary.  At the same time,  as a publicly
owned company,  we are very aware of and continue to review all of our strategic
options.

The directors,  officers, and staff are grateful for your continued interest and
support.

Sincerely,



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




                                       4
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


                              GROWTH AND EXPANSION
                              --------------------


-------------------------          --------------------------
OUR SUCCESS HAS NOT BEEN           [IMAGE OMITTED]            
LIMITED TO THE COMMERCIAL          Ray Jannelli and Donna   
AREA -- CONSUMER LOAN AND          Ierardi, Branch Manager of 
DEPOSIT ACTIVITY ALSO              the Wallingford Office.
EXCEEDED PROJECTIONS.              --------------------------
-------------------------


IN AUGUST 1998, SSB ESTABLISHED A BRANCH OFFICE IN  WALLINGFORD,  CONNECTICUT AT
950 NORTH  COLONY  ROAD,  EXPANDING  ITS MARKET  AREA AND  EXTENDING  ITS BRANCH
NETWORK BEYOND SOUTHINGTON.

                                   ----------

Wallingford  was selected as our first  out-of-town  branch to capitalize on the
consolidation  in the banking  industry and address the needs of businesses that
desire more personal  attention.  Recognizing  this as a key success factor,  we
staffed  the branch  with  experienced  professionals  like Ray  Jannelli,  Vice
President,  who directs our commercial  business efforts.  Local decision making
and our timely entry into the  Wallingford  market  resulted in loan and deposit
activity exceeding projections.

Overall,  the bank's  growth in deposits  continued to reflect more  transaction
accounts, including growth in our business accounts as well as our popular Money
Fund Max Account, a consumer checking account,  paying a money market rate. Loan
growth  reflected  our  continued  emphasis  on  meeting  the  banking  needs of
businesses and professional organizations.



                                       5
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


                                   TECHNOLOGY
                                   ----------


                                                           -------------------- 
                    ----------------------------           THE BANKING INDUSTRY 
                    [IMAGE OMITTED]                        HAS BEEN CITED AS ONE
                    Lynndel Bartulis, Vice                 OF THE MOST PREPARED 
                    President, chairs the Bank's           INDUSTRIES IN THE    
                    Year 2000 Compliance and               NATION.              
                    Readiness Team.                        -------------------- 
                    ----------------------------

TECHNOLOGY  IMPROVEMENTS PLAYED A MAJOR ROLE AT SSB THROUGHOUT THE YEAR AND WILL
CONTINUE TO BE AN IMPORTANT FACTOR IN THE NEW MILLENNIUM.

                                   ----------

------------------
[IMAGE OMITTED]
SSB's new in-house
computer system.
------------------

In July, we installed a new in-house  computer  system to position SSB to better
meet  customer  demand for new and enhanced  products and services  such as home
banking  and bill  paying  services.  This new  system is Year  2000  compliant,
further supporting our decision to upgrade to this state-of-the-art technology.

As with all  industries,  Year 2000  readiness  is a top  priority in 1999.  The
banking  industry has been cited as one of the most  prepared  industries in the
nation.  The  bank's  progress  in  preparing  for the Year  2000 is  regulated,
examined and monitored by three regulatory  agencies:  the FDIC, the Connecticut
State Banking Department and the Federal Reserve Bank.

In 1997,  SSB  established  an internal  committee  to address Year 2000 issues,
including  the system  upgrade  mentioned,  the  testing of all  systems and the
review of all operating procedures.  All that remains are a few isolated testing
routines that will be completed in the second quarter of 1999. SSB will be ready
for the Year 2000.

-----------------------------
[IMAGE OMITTED]
Fran LaPila, teller, utilizes 
SSB's new computer system to 
assist a customer.
-----------------------------


                                       6
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


                           BCI FINANCIAL CORPORATION
                           -------------------------


                                                           ---------------------
                                                           WITH FAST TURNAROUND
                                                           OF LOAN APPLICATIONS,
                                                           COMPETITIVE RATES AND
                                                           SUPERIOR CUSTOMER
                                                           SERVICE, THE COMPANY
                                                           EXCEEDED ITS LOAN
                                                           PRODUCTION OBJECTIVE
                                                           FOR THE YEAR.
                                                           ---------------------

FORMED AS A SUBSIDIARY OF SSB IN MID-1998,  BCI FINANCIAL PROVIDES THE BANK WITH
AN EFFECTIVE DELIVERY CHANNEL FOR AUTO LOAN FINANCING.

                                   ----------

With  consumers   increasingly  receiving  their  financing  directly  from  the
dealership,  BCIF's team of experienced  professionals provides quick turnaround
of loan applications, competitive rates and superior customer service.

In 1999, BCIF will expand to work with more dealerships  throughout the state of
Connecticut and establish  relationships  with other financial  institutions for
the sale of loan  production.  This  expansion of production  and sales channels
will  provide a growing  stream of loan  volume and a new source of  noninterest
income to the bank.

                                                  ------------------------------
                                                  [IMAGE OMITTED]
                                                  Tim Rourke, President of BCIF
                                                  with customer, Robert Winner,
                                                  Finance Manager for Richard
                                                  Chevrolet in Cheshire, CT.
                                                  ------------------------------


                                       7
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


                                   BROKERAGE
                                   ---------


                                                           ---------------------
                                                           SSB'S BROKERAGE
                                                           SERVICES UNIT,
                                                           OFFERED THROUGH
                                                           INFINEX FINANCIAL
                                                           GROUP, PERFORMED VERY
                                                           WELL IN 1998.
                                                           ---------------------

SSB's brokerage  services unit (with products offered through Infinex  Financial
Group) had an outstanding  year in assisting our customers with their  financial
planning needs. Managed by David Smith, Investment Executive, this unit provides
convenient access to:

o    Mutual funds
o    Fixed, indexed and variable annuities
o    Individual stocks and bonds
o    Retirement plans/IRA's
o    Life insurance products
o    Long-term care insurance

David works closely with his clients by helping them  understand  and select the
best products to meet their financial goals.  Developing plans for retirement or
college  education  are just some of the ways David and his staff have  provided
sound financial advice to our customers.


                                                                 ---------------
                                                                 [IMAGE OMITTED]
                                                                 ---------------



                                       8
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                      ------------------------------------


GENERAL

The  following  discussion  and  analysis  presents  a review  of the  financial
condition and results of Bancorp Connecticut,  Inc. (the  "Corporation").  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.  This  review  should  be  read  in
conjunction with the consolidated  financial statements and other financial data
presented elsewhere herein.

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 affected by the provision for loan losses, the fees it charges for its
financial services,  security gains and losses,  administrative  expenses, other
real estate expenses and income taxes.

The Bank has two subsidiaries.  BCI Financial  Corporation ("BCIF"), an indirect
auto finance sales  company,  commenced  operations  April 23, 1998.  During the
fourth  quarter  of 1998,  the Bank  formed a passive  investment  company,  SSB
Mortgage  Corporation,  to take  advantage of changes in  Connecticut  state tax
statutes,  which  will  serve  to lower  the  Corporation's  effective  tax rate
beginning in 1999.

INVESTMENTS

On December 31, 1998,  investment securities totaled $217,333,000 as compared to
$166,712,000  at  year-end  1997,  an  increase  of 30.4%  primarily  due to the
implementation  of a strategy  to  purchase  approximately  $43  million of U.S.
Government   and   agency   obligations,    including   mortgage   participation
certificates.  The investments were funded by broker  repurchase  agreements and
Federal Home Loan Bank borrowings to provide a positive net interest spread.  An
increase of $5.2 million in retail repurchase  agreements from December 31, 1997
was  also  primarily  invested  in these  securities  as well as  capital  trust
preferred  securities.  Investments in U.S.  Government and agency  obligations,
mortgage-backed  securities  and capital trust  preferred  securities  increased
$20,138,000,  $27,635,000 and $8,914,000,  respectively, from December 31, 1997.
Net unrealized  gains within the investment  portfolio at December 31, 1998 were
$1,251,000 as compared to $3,146,000 at year-end 1997.

On December 31,  1998,  approximately  69.6% or  $41,200,000  of the  marketable
equities  securities  portfolio was comprised of money market preferred  stocks.
These securities are highly liquid, reprice every 49 days and are subject to the
tax advantages of the Federal and state dividends received deductions.


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

                                                         December 31,
                                            ------------------------------------
(in thousands)                                 1998          1997         1996
--------------------------------------------------------------------------------
Held-to-maturity (at cost):
  United States Government and
    agency obligations                      $     --      $     --      $ 22,651
  Municipal bonds                                 --            --         3,252
  Mortgage-backed securities                      --            --        18,194
--------------------------------------------------------------------------------
    TOTAL HELD-TO-MATURITY                  $     --      $     --      $ 44,097
================================================================================
Available-for-sale (at market):
  United States Government and
    agency obligations                      $ 47,755      $ 27,617      $ 15,067
  Municipal bonds                              3,683         3,432            --
  Capital trust preferreds                    12,966         4,052            --
  Mortgage-backed securities                  93,131        65,496        26,216
  Marketable equity securities                59,204        61,815        56,531
  Mutual funds                                   594         4,300         7,701
--------------------------------------------------------------------------------
    TOTAL AVAILABLE-FOR-SALE                $217,333      $166,712      $105,515
================================================================================



                                       9
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


                                     LOANS
                                     -----


Loans  increased  $22,992,000 or 9.0% to  $278,440,000 at December 31, 1998 from
$255,448,000 at December 31, 1997 primarily due to a higher volume of commercial
and  commercial  real estate loan  originations  and loans  closed by BCIF,  the
Bank's auto loan financing subsidiary.  Commercial loans increased $5,565,000 or
14.9%  and  represented  15.0% of the  loan  portfolio  at  December  31,  1998.
Commercial  real estate  mortgages  increased  $3,365,000 or 8.6%,  representing
approximately  14.9% of total loans.  Consumer  loans  increased  $10,688,000 or
22.3%  primarily due to loans closed by BCIF. At December 31, 1998, the consumer
loan portfolio of $58,560,000  consisted of 57.4% of home equity loans and lines
of credit, 32.3% automobile loans and 10.3% other consumer loans.

At year-end 1998, loans  collateralized  by residential  real estate,  including
home  equity  loans and lines of  credit,  represented  60.8% of the total  loan
portfolio.


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


                                                 December 31,
                            ----------------------------------------------------
(in thousands)                 1998       1997       1996       1995       1994
--------------------------------------------------------------------------------
Residential real estate     $137,326   $134,494   $134,000   $132,566   $125,833
Commercial real estate        42,408     39,043     35,472     34,598     33,660
Real estate  construction      3,689      3,003      6,234      2,463      2,233
Commercial                    42,857     37,292     37,050     31,971     25,753
Consumer                      58,560     47,872     39,388     35,556     33,063
--------------------------------------------------------------------------------
  TOTAL LOANS               $284,840   $261,704   $252,144   $237,154   $220,542
================================================================================

The  following  table  shows the  maturity  and  repricing  of loans  (excluding
commercial and residential real estate mortgages and consumer loans outstanding)
as of  December  31,  1998.  Also  provided  are the  amounts due after one year
classified according to the sensitivity to changes in interest rates.


                                                  Maturing or Repricing
                                     -------------------------------------------
                                      Within   After one       After
                                         one  but within        five
(in thousands)                          year  five years       years       Total
--------------------------------------------------------------------------------
Real estate construction             $ 3,689     $    --     $    --     $ 3,689
Commercial                            31,961      10,025         871      42,857
--------------------------------------------------------------------------------
  TOTAL                              $35,650     $10,025     $   871     $46,546
================================================================================

Loans maturing/repricing after one year with:
  Fixed interest rates                           $ 6,560        $871
  Variable interest rates                          3,465          --
--------------------------------------------------------------------
    TOTAL                                        $10,025        $871
====================================================================


NONPERFORMING ASSETS AND ALLOWANCE FOR LOAN LOSSES

Nonperforming  assets  declined to  $1,599,000  at year-end  1998 as compared to
$4,039,000 at year-end 1997. Nonperforming loans decreased to $1,265,000 or 0.4%
of  total  loans  as  compared  to  $2,861,000  or 1.1% at  December  31,  1997.
Foreclosed  real estate at year-end 1998 declined to $334,000 from $1,178,000 at
year-end  1997  primarily  from  the  sale  of 5 lots  of a  17-lot  residential
subdivision at a net gain of $113,000.  At year-end 1998, the unsold lots in the
subdivision represented 69.6% of total foreclosed real estate.



                                       10
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


The following table shows the Bank's nonperforming assets at the end of the last
five years.


                                                   December 31,
                                 -----------------------------------------------
(dollars in thousands)             1998      1997      1996      1995      1994
--------------------------------------------------------------------------------
Nonaccrual loans
  Residential real estate        $  705    $1,988    $2,060    $3,650    $3,392
  Commercial real estate            402       258       337     1,134     1,465
  Commercial                         60       387       306     1,062     1,030
  Consumer                           98       228       236       410       340
--------------------------------------------------------------------------------
    Total nonaccrual loans        1,265     2,861     2,939     6,256     6,227
Accruing loans past due 90
  days or more                       --        --        --        --        --
--------------------------------------------------------------------------------
    Total nonperforming loans     1,265     2,861     2,939     6,256     6,227
Foreclosed real estate              334     1,178     1,367       872       641
--------------------------------------------------------------------------------
    Total nonperforming assets   $1,599    $4,039    $4,306    $7,128    $6,868
================================================================================
Nonperforming loans as a
  percentage of total loans        0.44%     1.09%     1.17%     2.64%     2.82%
================================================================================
Nonperforming assets as a
  percentage of total assets       0.31%     0.91%     1.03%     1.86%     1.92%
================================================================================
Restructured loans in
  compliance with modified
  terms not included above           --        --        --        --        --
================================================================================

The Bank classifies loans as being on nonaccrual status 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 1998, 1997 and
1996 on all  nonaccrual  loans under the original  loan terms was  approximately
$203,000, $335,000 and $354,000, respectively.  Actual income collected on these
loans  during  1998,   1997  and  1996  was  $90,000,   $201,000  and  $228,000,
respectively.

Management  reviews the loan  portfolio on a quarterly  basis to identify  loans
that  are  impaired.  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.  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.
Smaller-balance  homogeneous  loans which consist of  residential  mortgages and
consumer  loans are evaluated  collectively  and reserves  established  based on
historical loss  experience.  The measurement of impairment is based on the fair
value of  collateral  for  collateral-dependant  loans or the  present  value of
future cash flows for other loans.

The following table  illustrates the amount of loans  identified as impaired and
the basis used for measuring impairment as of December 31, 1998.


                                                  Basis of measurement
                                     -------------------------------------------
                                                   Present value
                                                     of expected
                                        Fair value        future
(in thousands)                       of collateral     cash flow           Total
--------------------------------------------------------------------------------
Commercial real estate                      $1,301          $ --          $1,301
Commercial                                     532           113             645
--------------------------------------------------------------------------------
  Total impaired loans                      $1,833          $113          $1,946
================================================================================



                                       11
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


The Bank also has  $5,380,000  in real estate  loans and $569,000 in other loans
that are  current  or less than 90 days past due.  These  loans  were not deemed
impaired but were  considered  potential  problem  loans. A loan is considered a
potential problem loan if it is risk-rated substandard or doubtful 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  problem
loan status 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, 1998, the allowance was $5,549,000 or 438.7% of nonperforming loans
as compared to $5,306,000 or 185.5% of nonperforming loans on December 31, 1997.


<TABLE>
<CAPTION>

                                                          Year Ended December 31,
                                  -------------------------------------------------------------------
(dollars in thousands)               1998           1997           1996           1995           1994
-----------------------------------------------------------------------------------------------------
<S>                               <C>            <C>            <C>            <C>            <C>    
Balance at beginning of year      $ 5,306        $ 4,875        $ 5,488        $ 6,136        $ 6,447
Charge-offs:
  Residential real estate             (29)          (219)          (264)          (341)          (238)
  Commercial real estate               --             --           (169)          (161)          (172)
  Commercial                           --            (94)          (446)          (227)          (225)
  Consumer                           (126)           (76)          (334)          (312)          (141)
-----------------------------------------------------------------------------------------------------
    Total                            (155)          (389)        (1,213)        (1,041)          (776)
-----------------------------------------------------------------------------------------------------
Recoveries:
  Residential real estate              35             14              8              2              1
  Commercial real estate               --             18             20             --              1
  Commercial                           30             96             51             98             89
  Consumer                             65             92             86            113            132
-----------------------------------------------------------------------------------------------------
    Total                             130            220            165            213            223
-----------------------------------------------------------------------------------------------------
Net charge-offs                       (25)          (169)        (1,048)          (828)          (553)
Provision for loan losses             268            600            435            180            242
-----------------------------------------------------------------------------------------------------
Balance at end of year            $ 5,549        $ 5,306        $ 4,875        $ 5,488        $ 6,136
=====================================================================================================
Ratio of net charge-offs to
  average loans outstanding          0.01%          0.07%          0.43%          0.36%          0.26%
=====================================================================================================

</TABLE>

The following table  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.


<TABLE>
<CAPTION>

                                                                         December 31,
                             ---------------------------------------------------------------------------------------------------
                                     1998                1997                1996                1995                1994
                             ---------------------------------------------------------------------------------------------------
                                         Percent             Percent             Percent             Percent             Percent
                                        of Loans            of Loans            of Loans            of Loans            of Loans
                                        to Total            to Total            to Total            to Total            to Total
(dollars in thousands)        Amount      Loans     Amount    Loans     Amount    Loans     Amount    Loans     Amount    Loans
--------------------------------------------------------------------------------------------------------------------------------
<S>                          <C>          <C>      <C>        <C>      <C>        <C>      <C>        <C>      <C>        <C> 
Residential real estate      $  559        48%     $  652      51%     $  659      53%     $  367      56%     $  479      57%
Commercial real estate          847        15         804      15         752      14         803      15       1,129      15
Real estate construction         48         1          38       1          83       2          35       1          33       1
Commercial                    1,343        15       1,194      15       1,162      15       1,209      13       1,069      12
Consumer                        962        21         756      18         620      16         541      15         565      15
Unallocated                   1,790        --       1,862      --       1,599      --       2,533      --       2,861      --
--------------------------------------------------------------------------------------------------------------------------------
  TOTAL                      $5,549       100%     $5,306     100%     $4,875     100%     $5,488     100%     $6,136     100%
================================================================================================================================
</TABLE>




                                       12
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


DEPOSITS

Total  deposits  increased  $28,264,000 or 8.9% for 1998 as compared to year-end
1997. NOW account deposits  increased  $17,629,000 or 70.8% for 1998 as compared
to  year-end  1997  primarily  due to the  promotion  of the  Bank's  money fund
checking product that pays a rate of interest  comparable to rates paid on money
market  mutual funds.  Also during 1998,  noninterest-bearing  demand  deposits,
which  provide  both a low cost of funding  and a source of service  fee income,
increased  $8,610,000 or 33.4% from  year-end 1997  primarily as a result of the
opening of the  Wallingford  branch and an  increased  emphasis on  relationship
banking with the Bank's commercial customers.

Time  certificates  of  deposit,  which range from terms of 3 months to 5 years,
declined  $8,828,000  or 5.2% at year-end  1998 as compared to 1997. On December
31, 1998,  approximately  73.6% of the  certificates of deposit either mature or
reprice  within  one year.  At this  time,  the Bank does not  utilize  brokered
deposits as a funding source.

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)                            1998                     1997                     1996
--------------------------------------------------------------------------------------------------------------
                                           Amount      Rate         Amount      Rate         Amount      Rate
--------------------------------------------------------------------------------------------------------------
<S>                                      <C>           <C>        <C>           <C>        <C>           <C>  
Noninterest-bearing demand deposits      $ 29,633      0.00%      $ 22,248      0.00%      $ 19,662      0.00%
NOW accounts                               32,846      2.94         19,301      2.35         14,495      1.76
Regular savings                            65,778      2.07         61,650      2.25         61,690      2.25
Money market savings                       36,555      3.54         33,950      3.34         35,952      3.36
Certificates of deposit                   163,196      5.33        171,471      5.48        167,399      5.54
Club accounts                                 435      2.99            426      3.29            420      3.33
-------------------------------------------------                 --------                 --------
  TOTAL                                  $328,443                 $309,046                 $299,618
=================================================                 ========                 ========
</TABLE>


Maturities  of time  certificates  of deposit in  amounts  of  $100,000  or more
outstanding at December 31, 1998 are summarized as follows:

        (in thousands)
        --------------------------------------------------
        3 months or less                           $ 3,653
        Over 3 months through 6 months               4,178
        Over 6 months through 12 months              3,142
        Over 12 months                               7,304
        --------------------------------------------------
          TOTAL                                    $18,277
        ==================================================

BORROWINGS

Federal  funds  purchased  and  securities  sold under  agreements to repurchase
increased  $25,148,000  or 45.4% to  $80,516,000 at year-end 1998 as compared to
year-end 1997.  Repurchase  agreements  involve the sale of securities to either
broker/dealers  or retail customers under agreements to repurchase the identical
securities at a future date. The Bank uses broker/dealer  repurchase  agreements
to fund specific investment securities transactions.  Such repurchase agreements
have maturities of up to 10 years;  however,  those with terms of three years or
greater may be callable two years after  issuance by the  broker/dealer.  Retail
repurchase  agreements are offered primarily to commercial customers as a method
of providing  collateral for funds that exceed the maximum regulatory  insurance
coverage.  As of December  31, 1998,  broker/dealer  repurchase  agreements  and
retail repurchase agreements totaled $62,560,000 and $16,181,000, respectively.

The Bank also uses the Federal Home Loan Bank of Boston (the "FHLB") as a source
of funds.  Advances (i.e.  borrowings)  are used primarily to match certain loan
originations  and  securities  purchases as well as to manage the  maturities of
interest-bearing  liabilities  as part  of the  Bank's  overall  asset/liability
management  strategy.  FHLB  advances  totaled  $40,630,000  at year-end 1998 as
compared to $20,630,000 at year-end 1997.



                                       13
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


ASSET/LIABILITY MANAGEMENT AND INTEREST RATE RISK

The Bank's assets and  liabilities  are managed to maximize net interest  income
while  maintaining a level of interest rate risk that is prudent and manageable.
Interest rate risk is the  sensitivity of net interest income to fluctuations in
interest rates over both  short-term  and long-term  time  horizons.  Management
establishes  overall  policy and interest rate risk  tolerance  levels which are
administered  by  the  Bank's  Asset/Liability  Committee  on a  monthly  basis.
Interest  rate  risk is  measured  through  the use of a  static  interest  rate
sensitivity report and a dynamic simulation model.

The   interest-rate   sensitivity   report   measures  the  difference   between
interest-earning  assets that reprice or mature within various time horizons and
interest-bearing  liabilities  that  reprice  or  mature  within  the same  time
horizons.  Assumptions  are also made on the rate of  prepayment of principal on
loans and mortgage-backed  securities and an estimate, based on historic trends,
that regular savings  deposits will transfer to higher  yielding  deposits at an
annual decay rate of 3.5%. To limit exposure to fluctuating  interest  rates, it
is the policy of the Bank to maintain  the  difference  (GAP)  between  interest
rate-sensitive assets and interest rate-sensitive  liabilities within a range of
+/- 10% of total  assets in the  one-year  time  frame.  At December  31,  1998,
rate-sensitive  assets  exceeded  rate-sensitive  liabilities in a one-year time
frame by $9,046,000 or 2.0% of total assets.

Although the rate  sensitivity  analysis  indicates how well matched maturing or
repricing  assets and liabilities are in a given time frame, it does not measure
the  asymmetrical  movement of asset and liability  yields.  The Bank utilizes a
simulation  model to measure the potential  change in net interest income due to
an immediate  increase or decrease in market  interest  rates of up to 200 basis
points.  Various assumptions regarding the shape of the yield curve, the pricing
characteristics  of loan and deposit  products and borrowings and prepayments of
loans and  investments  are built into the model.  The following table indicates
that the estimated  percentage change in net interest income for the next twelve
months  from a change in  interest  rates of 200 basis  points is within the 10%
tolerance limit set by management.

Change in Rate     % Change in Net Interest Income
--------------------------------------------------
+200 bp                                     -2.71%
-200 bp                                     -0.95%

Due to the numerous  assumptions built into the simulation model, actual results
may differ from estimated results.  Factors other than changes in interest rates
could also impact net interest income.  For example,  the majority of the Bank's
deposit base is composed of local retail customers who tend to be less sensitive
to interest rate changes than other funding sources. In addition, an increase in
competitive  pricing  could cause loan  yields to decline  and deposit  costs to
rise.

Both the rate sensitivity  analysis and simulation model indicate that a rise in
interest rates would negatively impact earnings. Strategies for maintaining risk
limits  may  include  but are not  limited  to the  purchase  and sale of loans,
borrowing  from the Federal  Home Loan Bank of Boston,  the purchase and sale of
available-for-sale  securities  and a change  in the  composition  of  deposits.
Although  not  utilized  in 1998,  interest  rate  swaps may be used to  correct
interest rate mismatches.  Strategies utilized in 1998 include the sale of fixed
rate newly originated  30-year mortgages into the secondary mortgage market with
servicing released, the addition of intermediate term fixed rate home equity and
automobile loans and the promotion of the Bank's money fund checking product. In
addition,  to increase net interest  income,  the Bank  purchased $43 million of
U.S.  Government  and  agency  obligations,   including  mortgage  participation
certificates,  which were funded by repurchase  agreements and Federal Home Loan
Bank borrowings.

The Bank maintains a trading account,  designated as trading securities, for the
purpose of generating  gains on short-term  fluctuations  in the market price of
bond and equity  securities.  The Bank's  Board of  Directors  approves  trading
policy  limits,  which include the type of  securities  that can be purchased as
well as maximum  size and maturity  limits.  In  addition,  they also  establish
monthly and quarterly net trading loss limits. If the monthly or quarter-to-date
net trading losses exceed the  predetermined  loss limit,  trading activity will
cease and will not resume until the Board approves continuance.



                                       14
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


INTEREST RATE SENSITIVITY


<TABLE>
<CAPTION>
                                                                               December 31, 1998
                                                  -----------------------------------------------------------------------
(dollars in thousands)                            1-3 months  4-6 months  7-12 months  1-5 years    5+ years        Total
-------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>          <C>        <C>         <C>           <C>     
ASSETS SUBJECT TO INTEREST RATE ADJUSTMENT:
  Short-term investments                           $    172    $     --     $    --    $     --    $      --     $    172
  Investment securities                              50,491       7,874      10,004      57,730       94,066      220,165
  Adjustable rate mortgages                          25,572      15,919      32,124      40,669           --      114,284
  Fixed rate mortgages                                6,063       4,305       8,053      36,978       19,987       75,386
  Consumer and commercial loans                      26,452       3,623       8,067      37,637       19,391       95,170
-------------------------------------------------------------------------------------------------------------------------
    TOTAL RATE-SENSITIVE ASSETS                    $108,750    $ 31,721     $58,248    $173,014    $ 133,444     $505,177
=========================================================================================================================
LIABILITIES SUBJECT TO INTEREST RATE ADJUSTMENT:
  NOW accounts                                     $ 20,823    $     --     $    --    $     --    $  21,705     $ 42,528
  Regular savings                                       604         604       1,208       9,326       57,287       69,029
  Federal funds purchased and
    repurchase agreements                            19,836          --       2,800      32,880       25,000       80,516
  Money market deposits                              22,965          --          --          --       16,353       39,318
  Certificates of deposit                            40,847      35,675      41,511      42,246           --      160,279
  Advances from FHLB                                  2,000          --         800         830       37,000       40,630
-------------------------------------------------------------------------------------------------------------------------
    TOTAL RATE-SENSITIVE LIABILITIES               $107,075    $ 36,279     $46,319    $ 85,282    $ 157,345     $432,300
=========================================================================================================================
  Excess (deficiency) of rate-sensitive assets
    over rate-sensitive liabilities                $  1,675    $ (4,558)    $11,929    $ 87,732    $ (23,901)    $ 72,877
-------------------------------------------------------------------------------------------------------------------------
  Cumulative excess (deficiency)                   $  1,675    $ (2,883)    $ 9,046    $ 96,778    $  72,877
=========================================================================================================================
  Cumulative rate-sensitive assets as a
    percentage of rate-sensitive liabilities          101.6%       98.0%      104.8%      135.2%       116.9%
  Cumulative excess (deficiency) as a
    percentage of total assets                          0.4%       (0.7)%       2.0%       21.8%        16.4%
=============================================================================================================
Excluding regular savings:
  Excess (deficiency) of rate-sensitive assets
    over rate-sensitive liabilities                $  2,279    $ (3,954)    $13,137    $ 97,058    $  33,386     $141,906
-------------------------------------------------------------------------------------------------------------------------
  Cumulative excess (deficiency)                   $  2,279    $ (1,675)    $11,462    $108,520    $ 141,906
=========================================================================================================================
  Cumulative rate-sensitive assets as a
    percentage of rate-sensitive liabilities          102.1%       98.8%      106.1%      141.2%       139.1%
  Cumulative excess (deficiency) as a
    percentage of total assets                          0.5%       (0.4)%       2.6%       24.5%        32.0%
=============================================================================================================
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Liquidity  represents  the  ability of the Bank to meet  customer  loan  demand,
depositor  requests  for  withdrawals  and pay  operating  expenses.  The Bank's
sources  of  funding  are from  deposit  growth,  loan  repayments,  borrowings,
maturities,  prepayment and sales 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,  of which it is a member.  The Bank is eligible to borrow against its
assets in an amount  not to exceed  collateral  as  defined  by the FHLB.  As of
December 31, 1998, qualified collateral totaled $129,059,000.  The Bank's actual
borrowings on that date were $40,630,000.

As of December 31, 1998, the Bank had liquid assets consisting of cash,  Federal
funds sold,  money market  preferred  stock and unpledged  U.S.  Government  and
agency obligations totaling $86,978,000 or 16.7% of total assets,  indicating an
acceptable level of liquid assets and within the Bank's policy limits.  The Bank
also  had  additional  marketable  equity  securities  with a  market  value  of
$18,598,000 that could be converted to cash if necessary.  At December 31, 1998,
commitments to extend credit  totaled  $33,683,000 as compared to $47,489,000 at
December 31, 1997.

The  Corporation's  improvement  in  earnings  during 1998 led to an increase in
dividend payments to shareholders.  Dividends paid in 1998 totaled $2,773,000 or
$0.54 per share as compared to $2,355,000 or $0.46 per share in 1997 (reflecting
an adjustment per share for a two-for-one  stock split on December 1, 1997 which
was effected in the form of a stock dividend).  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.



                                       15
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


Shareholders'  equity at year-end 1998  increased to  $49,916,000 as compared to
$46,947,000  as  of  the  prior  year-end.  Under  regulatory  definitions,   an
institution is considered well  capitalized (the highest rating) if its leverage
capital  ratio is 5% or higher,  its Tier 1  risk-based  capital  ratio is 6% or
higher and its total risk-based  capital ratio is 10% or higher. On December 31,
1998, the Corporation had a leverage  capital ratio of 9.5%, a Tier 1 risk-based
capital ratio of 16.0% and a total risk-based capital ratio of 17.3% as compared
to 10.4%, 15.9% and 17.2% for 1997, respectively.

YEAR 2000
---------

PROJECT PLAN

Management  recognizes the major impact the Year 2000 computer chip problem will
have on all corporations doing business. The following plan has been implemented
to identify  critical  systems that must be modified to avoid any  disruption of
daily business. Several of the phases are ongoing concurrently.

AWARENESS  PHASE:  Management  created a Year 2000  project  team to  develop an
overall Year 2000  strategy,  provide  education  to employees  and to establish
corporate accountability. The awareness phase was completed February 28, 1998.

RISK ASSESSMENT  PHASE:  Beginning in March 1998, an assessment of all hardware,
software,  networks and other  processing  platforms  was  performed.  Year 2000
problems have been identified and mission critical applications prioritized.  In
July 1998,  the Bank completed the  conversion to a new core  processing  system
utilizing Jack Henry & Associates software and IBM AS400 hardware, both of which
have been  certified  Year 2000  compliant.  This new data  processing  solution
addresses many of the Bank's mission critical applications.  The risk assessment
phase includes the  development of  contingency  plans for all mission  critical
applications.  The  development of contingency  plans lagged behind the original
target date because of the need to reevaluate  the risk  assessments as a result
of the bankwide  effort to convert to the new core processing  system.  The risk
assessment phase was completed on December 31, 1998.

RENOVATION  PHASE:  Management  established  a December 31, 1998 target date for
replacement or modification of the Bank's mission critical internal applications
to allow for a full year of testing.  This phase was essentially completed ahead
of time with the replacement of the core data processing system.

VALIDATION  PHASE:  This phase  provides for the testing of hardware,  software,
interfaces  and  integration  with other systems.  It also includes  testing and
certifying third parties for Year 2000 readiness. The Bank's new core processing
system has been certified Year 2000 compliant by its manufacturer.  However, the
Bank intends to perform its own  independent  tests  rather than  utilize  proxy
testing  results from the vendor.  In  addition,  the Bank intends to retain the
services of an independent  party to review overall plan  effectiveness  and the
results of testing.  Management  expects to complete the validation phase on all
critical systems by June 30, 1999.

IMPLEMENTATION  PHASE: As applications  become certified they will be considered
to be placed  into  service.  Management  will  assess  the impact of any system
failing  the  certification  tests  and  will  implement  the  contingency  plan
developed  for that  application.  The  Bank's  primary  internal  technological
systems  including  core  processing  system,  teller  equipment  and local area
network have already been placed in service.  Management expects  implementation
of all critical systems by June 30, 1999.

COSTS

In 1997, the Bank completed an extensive analysis of its data processing systems
and decided to bring its core processing system in-house rather than continue in
a service bureau relationship  environment.  The decision to move to an in-house
solution was primarily based on the improved operating  effectiveness,  enhanced
new product development and expanded  management  reporting the new system could
provide.  However,  the additional benefit of the decision was the purchase of a
mainframe  computer,  banking software and peripheral  devices that have already
been  certified Year 2000  compliant.  The cost of the new software and hardware
(which includes all new teller equipment)  acquired for the July 1998 conversion
totaled $1,991,000.  The cost has been capitalized and is being depreciated over
the useful lives of the assets, approximately $437,000 per year.

The Corporation does not separately track the internal costs associated with its
Year 2000  readiness  project,  and such costs are  primarily  the portion of an
employee's time spent on Year 2000 related issues.

Due to the recent  conversion,  the Bank does not expect to incur any additional
significant  Year  2000  costs for  further  equipment  replacement.  Management
expects to incur Year 2000  readiness  costs  primarily  from labor costs in the
testing and validation of systems,  professional  consulting costs and marketing
costs to keep customers informed of Year 2000 progress.  Management has budgeted
$100,000 for those costs.



                                       16
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


RISKS AND CONTINGENCIES

Based upon a  self-assessment  of its current  Year 2000  readiness,  management
believes that the greatest Year 2000  uncertainties and exposures are not within
its own technological  systems but within its third-party  vendor  relationships
and its commercial borrowers.

As of year-end 1998, the Bank has devoted the majority of its efforts to convert
to the new core processing  system.  By June 30, 1999, when the validation phase
of the Year 2000 will be completed,  significant  third-party  vender  exposures
will be identified and contingency plans developed to reduce those exposures.

The Bank has  completed  mailings  to its  larger  commercial  borrowers.  These
mailings included Year 2000 thought provoking information and a questionnaire to
be completed by the borrower so that the Bank could analyze individual responses
to critical issues. In addition,  the Bank has completed the process of randomly
selecting and contacting an appropriate number of borrowers with smaller overall
relationships.  This has  addressed  a mixture  of various  sized  relationships
within the entire  commercial  portfolio.  Risk data as to what the  borrower is
doing to  ensure  Year 2000  compliance  has been  collected  and  includes  the
following   assessments:    technological   capabilities,    external   vendors,
communications equipment, disaster recovery plans and other operating systems.

The Bank is also  subject to the safety and  soundness  standards  for Year 2000
readiness established by the Federal Deposit Insurance Corporation and the State
of  Connecticut  Banking  Department  and  has  completed  the  Limited  Phase 2
examinations by these agencies to date.  Management  believes it will be able to
comply with all standards set forth by the regulatory agencies.

COMPARISONS OF YEARS ENDED DECEMBER 31, 1998 AND 1997
-----------------------------------------------------

OVERALL

For 1998, the Corporation had net income of $6,345,000 as compared to $5,896,000
in 1997,  an increase of 7.6%.  The  increase  was  primarily  due to higher net
interest  income  and net  security  gains  partially  offset  by  increases  in
noninterest  expenses and establishment of a valuation allowance against a state
deferred  tax asset as a result of creating a passive  investment  company  (see
"Income  Taxes" and Note 12). Net income  generated an annual  return on average
assets of 1.29% for 1998 as compared to 1.39% for 1997. Return on average equity
for 1998 was 13.07% as compared to 13.48% for 1997.

INTEREST INCOME

Interest income increased $3,441,000 or 10.8% to $35,345,000 in 1998 as compared
to  $31,904,000  in 1997.  This increase was  attributed to a 15.7%  increase in
average  interest-earning  assets  partially  offset by lower  yields on taxable
investment   securities,   resulting  in  the  tax  equivalent  yield  on  total
interest-earning  assets  decreasing  to 7.67% for 1998 as compared to 8.06% for
1997.

INTEREST EXPENSE

Interest  expense  increased  $2,279,000  or  14.0%  to  $18,506,000  in 1998 as
compared to $16,227,000  for 1997. The rise in interest  expense was largely due
to a 15.7% increase in average interest-bearing liabilities, partially offset by
a reduction in the rates paid primarily  resulting from a decline in the general
level of interest  rates.  In  addition,  a greater  utilization  of  repurchase
agreements  and FHLB  borrowings as a funding source caused the cost of funds to
decrease slightly to 4.49% for 1998 as compared to 4.56% for 1997 as the average
rates  on  these  borrowings  declined  4  basis  points  and  9  basis  points,
respectively, from 1997 average rates.

NET INTEREST INCOME

Net interest  income  increased  $1,162,000 or 7.4% in 1998 as compared to 1997.
The tax  equivalent net interest  margin for 1998 was 3.80%,  down from 4.13% in
1997.

PROVISION FOR LOAN LOSSES

The  provision  for loan losses for 1998 was $268,000 as compared to $600,000 in
1997, a decrease of 55.3%.  Management  determines the provision for loan losses
based upon an  evaluation  of the credit  risk  associated  with the  portfolio,
current  market  conditions  and the level of the  allowance  for loan losses as
compared to  nonperforming  loans.  The  decrease in the  provision  for 1998 is
commensurate with the reduction in nonperforming loans to $1,265,000 at December
31, 1998 from $2,861,000 at December 31, 1997,  representing  0.44% and 1.09% of
total  loans,  respectively.  Net  charge-offs  for 1998  declined to $25,000 as
compared to $169,000 for 1997.  As of December 31, 1998,  the ratio of loan loss
reserves to  nonperforming  loans was 438.7% as compared to 185.5% for  year-end
1997.

OTHER INCOME

Noninterest  income  increased  $1,140,000  or  49.1% to  $3,463,000  in 1998 as
compared to  $2,323,000  for 1997.  The increase was  primarily  the result of a
$433,000 or 51.6% increase in investment  securities gains partially offset by a
$190,000 or 182.7%  decrease  in net trading  account  gains.  Favorable  market
conditions  and a strategic  shift in the mix of securities  contributed  to the
higher  level of net  realized  security  gains.  A higher level of assets under
management  and an increase  in 



                                       17
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


estate settlement fees resulted in trust fees increasing  $134,000 or 27.5% from
the prior year. Brokerage fees increased $272,000 or 191.5% for 1998 as compared
to 1997 due to higher sales volume and greater fee retention.

OTHER EXPENSES

Noninterest  expenses increased $1,697,000 or 19.5% in 1998 as compared to 1997.
Salaries and benefits rose  $859,000 or 17.9%  primarily  from higher  brokerage
commissions attributed to higher sales volume, staff additions from the start-up
of BCIF and the new  Wallingford  branch  facility and  temporary  employee cost
associated  with  the  conversion  process.   Furniture  and  equipment  expense
increased $284,000 or 55.3% due to higher depreciation charges and the write-off
of data processing  equipment as a result of the Bank's  installation of the new
in-house core processing system.  Data processing  expense rose to $691,000,  an
increase of $123,000 or 21.7%, due to the conversion to and outsourcing of check
image processing and proof of deposit.  Advertising expense increased $99,000 or
26.9% as  compared to 1997 due to the  promotion  of the Bank's  demand  deposit
image  statements,  money fund checking product and new branch  facility.  Other
noninterest expense increased $456,000 or 27.1%,  reflecting  increased fees for
professional services,  printing and forms supplies,  telephone expense, postage
and a number of miscellaneous expense categories. The increases in these expense
categories are largely  associated with BCIF, the Wallingford  facility and data
processing.  Noninterest expenses in 1998 benefited from a reduction of $124,000
or 263.8% in foreclosed real estate  expenses,  resulting from fewer  properties
under management and gains on sales of foreclosed properties.

INCOME TAXES

The provision for income taxes  increased to $3,292,000 in 1998 from  $2,803,000
in 1997. The increase was primarily due to the generation of income before taxes
of $9,636,000  in 1998 as compared to  $8,698,000  earned in 1997 and a $337,000
charge  related to state  deferred tax assets to establish a passive  investment
company as discussed below. As a result, the effective income tax rates for 1998
and 1997 were 34.2% and 32.2%,  respectively,  and were lower than the  expected
statutory rate due to the Federal and state dividends received deduction and the
Federal tax-exempt status of the Bank's municipal bond investments.

As of  December  31,  1998,  the  Corporation  had a net  deferred  tax asset of
$1,901,000  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  $425,000.  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  $2,326,000.  The  change in this
component  directly  impacts  earnings.  As of  year-end,  the  Corporation  has
recorded no valuation allowance against Federal deferred tax assets. A valuation
allowance is not considered  necessary for Federal  purposes based on sufficient
available Federal taxable income in the carryback period.

On May 19, 1998, the Connecticut  state  legislature  enacted  legislation which
permits  financial  services  companies which maintain an office in Connecticut,
and have a minimum of five employees,  the authority to create a limited passive
investment  company  ("PIC")  for the purpose of holding  for  investment  loans
collateralized  by real estate free from Connecticut  corporation  business tax.
The  regulation  is effective  for income tax years  beginning  January 1, 1999.
During the fourth quarter of 1998, the Bank formed a passive investment company,
SSB Mortgage  Corporation.  The creation of the PIC required the  recording of a
valuation  allowance of $477,000  against the Bank's  deferred  Connecticut  tax
asset and a related  increase in income tax  expense of $337,000  for the fourth
quarter of 1998.  Subsequently,  for tax years  beginning  January 1, 1999,  the
Corporation's effective state tax rate will be eliminated.

COMPARISONS OF YEARS ENDED DECEMBER 31, 1997 AND 1996
-----------------------------------------------------

OVERALL

For 1997, the Corporation had net income of $5,896,000 as compared to $5,024,000
in 1996,  an increase of 17.4%.  The  increase was  primarily  due to higher net
interest income and net security gains,  supported by a modest increase in other
expenses.  Net income for 1997  represents an annual return on average assets of
1.39% as compared to 1.26% for 1996.  Return on average  equity for 1997 rose to
13.48% from 11.69% for 1996.

INTEREST INCOME

Interest income increased  $1,996,000 or 6.7% to $31,923,000 in 1997 as compared
to $29,927,000 in 1996. The increase is primarily  attributed to a 5.9% increase
in  average  interest-earning  assets.  In  addition,  higher  yields on taxable
investment securities caused the tax equivalent yield on total  interest-earning
assets to rise to 8.06% for 1997 as compared to 7.99% for 1996.

INTEREST EXPENSE

Interest  expense  increased  $1,053,000  or  6.94%  to  $16,227,000  in 1997 as
compared to  $15,173,000  for 1996.  The primary reason for the rise in interest
expense was a 5.9%  increase in  interest-bearing  liabilities.  In 



                                       18
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


addition, a greater utilization of repurchase  agreements and FHLB borrowings as
a funding  source caused the cost of funds to rise slightly to 4.56% for 1997 as
compared to 4.51% for 1996.

NET INTEREST INCOME

Net interest income increased  $943,000 or 6.4% in 1997 as compared to 1996. The
tax  equivalent net interest  margin for 1997 was 4.14%, a slight  increase from
4.10% in 1996.

PROVISION FOR LOAN LOSSES

The  provision  for loan losses for 1997 was $600,000 as compared to $435,000 in
1996, an increase of 37.9%.  Management determines the provision for loan losses
based upon an  evaluation  of the credit  risk  associated  with the  portfolio,
current  market  conditions  and the level of the  allowance  for loan losses as
compared to  nonperforming  loans.  The increase in the  provision  for 1997 was
primarily generated by a rise in nonperforming loans from $2,939,000 at December
31,  1996 to  $4,149,000  at June 30,  1997.  Management's  success in  reducing
problem loans, particularly in the fourth quarter of 1997, resulted in a decline
in nonperforming loans at year-end 1997 to $2,861,000 or 1.09% of total loans as
compared  to 1.17% at  year-end  1996.  Net  charge-offs  for 1997  declined  to
$169,000 as compared to $1,048,000  for 1996. As of December 31, 1997, the ratio
of loan loss reserves to  nonperforming  loans totaled 185.5% compared to 165.9%
for year-end 1996.

OTHER INCOME

Noninterest income increased $618,000 or 36.7% to $2,303,000 in 1997 as compared
to $1,685,000 in 1996. The increase of $495,000 or 144% was primarily the result
of an increase in investment security gains and an $83,000 or a 400% increase in
net  gains  on  securities  trading  activity.  An  increase  in the  volume  of
investment securities as compared to 1996 as well as favorable market conditions
both  contributed  to the higher volume of realized  securities  gains. A higher
volume of assets under management also resulted in trust fees increasing $30,000
or 6.5% from the prior year.  Brokerage fees increased $87,000 or 160.5% in 1997
as compared to 1996 due to an increase in sales volume.

OTHER EXPENSES

Noninterest expenses increased a modest $103,000 or 1.2% for 1997 as compared to
1996.  Salaries and benefits rose $188,000 or 4.1%  primarily  from annual merit
increases and an increase in incentive compensation related to the Corporation's
financial performance.  Advertising expense increased $50,000 or 15.6% primarily
from the promotion of a new money fund checking product  introduced during 1997.
Data processing  costs  increased  $50,000 or 8.0% primarily from an increase in
the  services  provided  by the  Corporation's  computer  servicer.  Noninterest
expenses in 1997 were  favorably  impacted by a $138,000 or 74.4%  reduction  in
foreclosed  real estate  expenses from 1996,  resulting from a smaller volume of
properties  under  management and gains on the sales of OREO  properties.  Legal
expenses  in 1997 also  declined  $115,000 or 42.4%  primarily  from lower costs
incurred in  administering  nonperforming  assets in 1997.  In  addition,  legal
expenses for 1996 were higher due to the settlement of a lawsuit.

INCOME TAXES

The  provision  for income taxes  increased to $2,803,000 in 1997 as compared to
$2,381,000 in 1996.  The increase was primarily due to the  generation of income
before  taxes of  $8,698,000  in 1997 as compared  to  $7,405,000  in 1996.  The
effective  income  tax rate for 1997 and 1996 was  32.2%  and is lower  than the
expected  statutory  rate  due to  the  Federal  and  state  dividends  received
deduction  and the  Federal  tax-exempt  status  of the  Bank's  municipal  bond
securities.

As of December  31,  1997,  the  Corporation  had a total  deferred tax asset of
$1,512,000,  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 $1,267,000.  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  $2,779,000.  The  change in this
component  directly  impacts  earnings.  As of  year-end,  the  Corporation  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




                                       19
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


of  inflationary/deflationary  pressures are considered in the Bank's  allowance
for loan losses. See Nonperforming Assets and Allowance for Loan Losses.

ACCOUNTING PRONOUNCEMENTS

On June 15, 1998, the FASB issued  Statement of Financial  Accounting  Standards
No. 133,  "Accounting for Derivative  Instruments and Hedging Activities" ("SFAS
133").  SFAS 133 is effective for all fiscal years beginning after June 15, 1999
(January 1, 2000 for the  Corporation).  SFAS 133 requires  that all  derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of the  derivative  instruments  are recorded  each period in current
earnings or other  comprehensive  income,  depending on whether a derivative  is
designated  as part of a hedge  transaction  and,  if it is,  the  type of hedge
transaction.  Management  anticipates  that,  since it does  not use  derivative
instruments,  the adoption of SFAS 133 will not have a significant effect on the
Corporation's results of operations or its financial position.

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY: INTEREST RATES AND
INTEREST DIFFERENTIAL
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>

                                                                            Year Ended December 31,
                                            --------------------------------------------------------------------------------------
(dollars in thousands)                                  1998                         1997                         1996
----------------------------------------------------------------------------------------------------------------------------------
                                            Average              Yield/   Average             Yield/   Average             Yield/
                                            Balance   Interest  Rate (c)  Balance  Interest  Rate (c)  Balance  Interest  Rate (c)
----------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>       <C>         <C>    <C>       <C>         <C>    <C>       <C>         <C>  
ASSETS
  Interest-earning assets:
    Loans (a)(b)                            $265,319  $ 22,617    8.52%  $256,944  $ 22,255    8.66%  $244,298  $ 21,123    8.65%
    Taxable investment securities
      (at cost) (c)                          201,542    13,372    6.63    146,263    10,469    7.16    135,457     9,461    6.98
    Municipal bonds (c)                        3,446       243    7.05      3,287       232    7.06      3,150       226    7.17
    Federal funds sold                         5,028       267    5.31      3,859       207    5.36      4,616       240    5.20
    Other interest-earning assets              3,006       182    6.05      2,917       145    4.97      2,648       131    4.95
--------------------------------------------------------------           ------------------           ------------------
Total interest-earning assets                478,341    36,681    7.67    413,270    33,308    8.06    390,169    31,181    7.99
--------------------------------------------------------------           ------------------           ------------------
Noninterest-earning assets                    14,381                       11,967                        9,697                  
----------------------------------------------------                     --------                     --------          
TOTAL ASSETS                                $492,722                     $425,237                     $399,866                  
====================================================                     ========                     ========          
LIABILITIES AND EQUITY
Interest-bearing liabilities:
  NOW and savings deposits                  $135,179     3,625    2.68%  $116,009     3,008    2.59%  $113,215     2,882    2.55%
  Time deposits                              163,631     8,703    5.32    171,897     9,356    5.44    167,819     9,293    5.54
  FHLB of Boston advances                     32,525     1,795    5.52     24,805     1,491    6.01     18,097     1,029    5.69
  Federal funds purchased and
    securities sold under
    agreements to repurchase                  80,592     4,383    5.44     43,244     2,371    5.48     37,124     1,969    5.30
--------------------------------------------------------------           ------------------           ------------------
Total interest-bearing liabilities           411,927    18,506    4.49    355,955    16,226    4.56    336,255    15,173    4.51
--------------------------------------------------------------           ------------------           ------------------
Noninterest-bearing liabilities:
  Demand deposits                             29,633                       22,233                       19,662                  
  Other                                        2,628                        3,308                        1,109                  
Shareholders' equity                          48,534                       43,741                       42,840                  
----------------------------------------------------                     --------                     --------          
TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY                      $492,722                     $425,237                     $399,866                  
====================================================                     ========                     ========          
Net interest income before
  Federal tax equivalent adjustment                     18,175                       17,082                       16,008        
Federal tax equivalent adjustment                       (1,336)                      (1,405)                      (1,254)       
--------------------------------------------------------------                     --------                     --------
Net interest income                                   $ 16,839                     $ 15,677                     $ 14,754        
==============================================================                     ========                     ========
Net interest spread (tax equivalent basis)                        3.18%                        3.50%                        3.48%
======================================================================                         ====                         ====
Net interest margin (tax equivalent basis)                        3.80%                        4.13%                        4.10%
======================================================================                         ====                         ====
</TABLE>


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

(b)  Included  in  interest  income  are loan  fees of  $454,000,  $387,000  and
     $379,000  for  the  years  ended   December   31,  1998,   1997  and  1996,
     respectively.

(c)  Yields/Rates  are computed on a tax equivalent basis using a Federal income
     tax rate of 34% and  state  income  tax rates of 9.5%,  10.5%  and  10.75%,
     respectively, for the three years ended December 31, 1998.



                                       20
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


NET INTEREST INCOME; RATE/VOLUME ANALYSIS
-----------------------------------------

<TABLE>
<CAPTION>
                                                                                                                           
                                                   1998 Compared to 1997                  1997 Compared to 1996
                                             ----------------------------------------------------------------------
                                                 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                                      $   718      $  (356)     $   362      $ 1,095      $  37      $ 1,132
  Taxable investment securities                3,714         (811)       2,903          769        239        1,008
  Municipal bonds                                 11           --           11           10         (4)           6
  Federal funds sold                              62           (2)          60          (40)         7          (33)
  Other interest-earning assets                    5           32           37           13          1           14
-------------------------------------------------------------------------------------------------------------------
                                               4,510       (1,137)       3,373        1,847        280        2,127
-------------------------------------------------------------------------------------------------------------------
Interest paid on:
  NOW and savings deposits                       511          106          617           72         54          126
  Time deposits                                 (443)        (210)        (653)         224       (161)          63
  FHLB of Boston advances                        434         (130)         304          400         62          462
  Federal funds purchased and securities
    sold under agreements to repurchase        2,031          (19)       2,012          334         68          402
-------------------------------------------------------------------------------------------------------------------
                                               2,533         (253)       2,280        1,030         23        1,053
-------------------------------------------------------------------------------------------------------------------
Change in net interest income                $ 1,977      $  (884)     $ 1,093      $   817      $ 257      $ 1,074
===================================================================================================================
</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.


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

                       REPORT OF INDEPENDENT ACCOUNTANTS
                       ---------------------------------

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

In our opinion,  the accompanying  consolidated  statements of condition and the
related consolidated  statements of income,  shareholders' equity and cash flows
present  fairly,  in all material  respects,  the financial  position of Bancorp
Connecticut,  Inc. and subsidiary at December 31, 1998 and 1997, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.  These financial  statements are the responsibility of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.  We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion  expressed
above.


/s/ PricewaterhouseCoopers LLP
-------------------------------
    PricewaterhouseCoopers LLP

Hartford, Connecticut
March 1, 1999


                                       21
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


                      CONSOLIDATED STATEMENTS OF CONDITION
                      ------------------------------------


                                                            December 31,
                                                 -------------------------------
                                                         1998              1997
--------------------------------------------------------------------------------
ASSETS:
  Cash and due from banks                        $  11,178,208    $   9,217,128
  Federal funds sold                                        --        1,500,000
--------------------------------------------------------------------------------
    Cash and cash equivalents                       11,178,208       10,717,128
--------------------------------------------------------------------------------
  Securities available-for-sale
    (at market value)                              217,333,173      166,711,703
  Trading account securities                           172,312          612,444
  Federal Home Loan Bank stock                       2,831,500        2,094,400
  Loans                                            284,839,529      261,703,647
  Less:
    Deferred loan fees                                (850,394)        (949,694)
    Allowance for loan losses                       (5,548,638)      (5,306,096)
--------------------------------------------------------------------------------
      Net loans                                    278,440,497      255,447,857
--------------------------------------------------------------------------------
  Premises and equipment                             4,524,190        3,151,052
  Accrued income receivable                          3,076,956        2,759,537
  Foreclosed real estate, net                          333,647        1,178,418
  Deferred taxes                                     1,901,283        1,511,908
  Other assets                                       1,584,619          678,061
--------------------------------------------------------------------------------
      TOTAL ASSETS                               $ 521,376,385    $ 444,862,508
================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
  Deposits                                       $ 345,563,143    $ 317,298,944
  Advances from Federal
    Home Loan Bank of Boston                        40,630,000       20,630,000
  Federal funds purchased and
    securities sold under agreements
    to repurchase                                   80,515,666       55,368,188
  Accrued taxes, expenses and other
    liabilities                                      4,751,741        4,618,647
--------------------------------------------------------------------------------
                                                   471,460,550      397,915,779
--------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES                               --               --

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 5,653,406
    shares at December 31, 1998 and
    5,611,586 shares at December 31, 1997            5,653,406        5,611,586
  Additional paid-in capital                        17,420,340       17,050,743
  Retained earnings                                 31,760,805       28,149,253
  Accumulated other comprehensive income               825,346        1,879,209
  Treasury stock, at cost: 519,498 shares
    at December 31, 1998 and 1997                   (5,744,062)      (5,744,062)
--------------------------------------------------------------------------------
                                                    49,915,835       46,946,729
--------------------------------------------------------------------------------
    Total liabilities and shareholders'
      equity                                     $ 521,376,385    $ 444,862,508
================================================================================

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



                                       22
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


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


                                           For the Years Ended December 31,
                                       -----------------------------------------
                                               1998           1997          1996
--------------------------------------------------------------------------------
INTEREST INCOME:
  Interest on loans, including fees    $ 22,617,207   $ 22,254,341  $ 21,123,052
--------------------------------------------------------------------------------
  Interest and dividends on 
    investment securities:
    Interest income                       9,073,906      6,128,089     5,627,447
    Dividend income                       3,215,341      3,147,380     2,779,739
    Interest on trading account              12,241         30,405        25,824
--------------------------------------------------------------------------------
                                         12,301,488      9,305,874     8,433,010
--------------------------------------------------------------------------------
  Interest on Federal funds sold            267,147        207,017       240,231
  Other interest and dividends              159,377        136,310       130,697
--------------------------------------------------------------------------------
      TOTAL INTEREST INCOME              35,345,219     31,903,542    29,926,990
--------------------------------------------------------------------------------
INTEREST EXPENSE:
  Savings deposits                        2,657,602      2,553,314     2,628,068
  Time deposits                           8,704,196      9,356,542     9,292,756
  NOW accounts                              965,871        454,367       254,754
--------------------------------------------------------------------------------
                                         12,327,669     12,364,223    12,175,578
  Interest on borrowed money              6,178,135      3,862,337     2,997,846
--------------------------------------------------------------------------------
      TOTAL INTEREST EXPENSE             18,505,804     16,226,560    15,173,424
--------------------------------------------------------------------------------
      NET INTEREST INCOME                16,839,415     15,676,982    14,753,566
Provision for loan losses                   267,500        600,000       435,000
--------------------------------------------------------------------------------
      NET INTEREST  INCOME AFTER
        PROVISION FOR LOAN LOSSES        16,571,915     15,076,982    14,318,566
--------------------------------------------------------------------------------
OTHER INCOME:
  Net securities gains                    1,271,638        838,634       343,730
  Net trading account (losses) gains        (86,234)       103,776        20,754
  Trust fees                                620,551        487,377       457,732
  Service charges on deposit accounts       685,738        555,020       551,227
  Brokerage fees                            413,840        141,646        54,366
  Other                                     556,973        196,160       231,222
--------------------------------------------------------------------------------
                                          3,462,506      2,322,613     1,659,031
--------------------------------------------------------------------------------
OTHER EXPENSES:
  Salaries and employee benefits          5,648,031      4,788,534     4,601,019
  Occupancy expense, net                    525,389        536,522       529,638
  Furniture and equipment expense           798,483        514,406       425,282
  Data processing expense                   690,967        567,695       529,671
  FDIC assessments                           38,678         38,155         2,000
  Legal expense                             167,707        156,903       272,331
  Foreclosed real estate (recoveries)
    provision and expense, net              (76,719)        47,462       185,320
  Advertising expense                       466,853        368,339       318,646
  Other                                   2,138,589      1,683,117     1,708,486
--------------------------------------------------------------------------------
                                         10,397,978      8,701,133     8,572,393
--------------------------------------------------------------------------------
      INCOME BEFORE INCOME TAXES          9,636,443      8,698,462     7,405,204
Provision for income taxes                3,291,840      2,802,511     2,380,841
--------------------------------------------------------------------------------
      NET INCOME                       $  6,344,603   $  5,895,951  $  5,024,363
================================================================================
PER SHARE DATA:
  Basic earnings per share             $       1.24   $       1.16  $       0.94
================================================================================
  Diluted earnings per share           $       1.14   $       1.08  $       0.89
================================================================================

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


                                       23
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                -----------------------------------------------


<TABLE>
<CAPTION>
                                                          For the Years Ended December 31, 1998, 1997 and 1996
                                        ---------------------------------------------------------------------------------------
                                                                                      Accumulated
                                                                                            Other
                                                                                    Comprehensive
                                                       Additional                          Income                         Total
                                            Common        Paid-In        Retained      Unrealized      Treasury   Shareholders'
                                             Stock        Capital        Earnings   Gains (Losses)        Stock          Equity
-------------------------------------------------------------------------------------------------------------------------------
<S>                    <C> <C>          <C>          <C>             <C>             <C>            <C>            <C>         
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
  Decrease in net unrealized gain on
    securities available-for-sale               --             --              --         (4,680)            --          (4,680)
                                                                                                                   ------------
      Total comprehensive income                --             --              --             --             --       5,019,683
                                                                                                                   ------------
  Stock options exercised                   63,046        503,748              --             --             --         566,794
  Cash dividends declared --
    $0.37 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)
  Tax benefits related to common
    stock options exercised                     --        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
                                                                                                                   ------------
  Net income                                    --             --       5,895,951             --             --       5,895,951
  Increase in unrealized gain on
    securities available-for-sale               --             --              --      1,375,329             --       1,375,329
                                                                                                                   ------------
      Total comprehensive income                --             --              --             --             --       7,271,280
                                                                                                                   ------------
  Stock options exercised                   40,560        474,434              --             --             --         514,994
  Cash dividends declared --
    $0.4625 per share                           --             --      (2,355,393)            --             --      (2,355,393)
  2-for-1 stock split effected in the
    form of a stock dividend             2,802,877     (2,802,877)             --             --             --              --
  Treasury stock purchased                      --             --              --             --     (1,405,264)     (1,405,264)
  Tax benefits related to common
    stock options exercised                     --        189,992              --             --             --         189,992
-------------------------------------------------------------------------------------------------------------------------------
Balance as of December 31, 1997          5,611,586     17,050,743      28,149,253      1,879,209     (5,744,062)     46,946,729
                                                                                                                   ------------
  Net income                                    --             --       6,344,603             --             --       6,344,603
  Decrease in net unrealized gain on
    securities available-for-sale               --             --              --     (1,053,863)            --      (1,053,863)
                                                                                                                   ------------
      Total comprehensive income                --             --              --             --             --       5,290,740
                                                                                                                   ------------
  Stock options exercised                   41,820        259,676              --             --             --         301,496
  Cash dividends declared --
    $0.535 per share                            --             --      (2,733,051)            --             --      (2,733,051)
  Tax benefits related to common
    stock options exercised                     --        109,921              --             --             --         109,921
-------------------------------------------------------------------------------------------------------------------------------
BALANCE AS OF DECEMBER 31, 1998         $5,653,406   $ 17,420,340    $ 31,760,805    $   825,346    $(5,744,062)   $ 49,915,835
===============================================================================================================================

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>



                                       24
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


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


<TABLE>
<CAPTION>
                                                            For the Years Ended December 31,
                                                      -------------------------------------------
                                                               1998           1997           1996
-------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>            <C>         
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                          $   6,344,603   $  5,895,951   $  5,024,363
-------------------------------------------------------------------------------------------------
  Adjustments to reconcile net income
    to net cash provided by operating activities:
      Deferred income tax provision (credit)                452,409       (231,114)       232,147
      Write-down of premises and equipment                       --         13,690             --
      Net accretion and amortization of bond
        premiums and discounts                             (572,692)        78,087        123,801
      Provision for loan losses                             267,500        600,000        435,000
      Provision for foreclosed real estate losses            52,750        139,687        201,730
      Gain on sale of foreclosed real estate               (209,928)      (195,697)      (175,323)
      Gain on sale of loans                                 (78,954)       (41,724)       (15,762)
      Amortization of deferred loan points                 (218,116)      (139,328)      (177,448)
      Realized investment security gains                 (1,185,404)      (942,410)      (364,485)
      Depreciation expense                                  569,938        453,811        457,818
      Decrease (increase) in trading account                353,898      1,921,097     (2,018,535)
      Increase in accrued income receivable                (317,419)       (42,913)      (196,419)
      Increase in other assets                             (878,775)      (225,876)       (60,645)
      Addition of mortgage servicing rights                      --             --        (27,783)
      Increase in accrued expenses payable and
        other liabilities                                    15,673      2,543,167        477,644
-------------------------------------------------------------------------------------------------
        TOTAL ADJUSTMENTS                                (1,749,120)     3,930,477     (1,108,260)
-------------------------------------------------------------------------------------------------
        NET CASH PROVIDED BY OPERATING ACTIVITIES         4,595,483      9,826,428      3,916,103
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of securities held-to-maturity                       --    (19,495,531)   (26,496,387)
  Purchases of securities available-for-sale           (177,015,986)   (76,217,966)   (45,396,922)
  Proceeds from sales of securities
    available-for-sale                                   83,146,669     50,352,816     24,642,498
  Proceeds from maturities of securities                 23,623,368     23,759,233     18,000,000
  Paydowns on mortgage-backed securities                 19,844,802      7,552,526     10,400,772
  Purchases of Federal Home Loan Bank stock                (737,100)       (54,700)       (61,400)
  Proceeds from sale of loans                             5,172,304      1,653,217      3,620,834
  Net increase in loans                                 (28,309,918)   (11,693,004)   (22,067,707)
  Purchases of premises and equipment, net               (1,943,076)      (494,937)      (114,128)
  Proceeds from sales of foreclosed real estate, net      1,104,412        715,328      2,116,117
-------------------------------------------------------------------------------------------------
        NET CASH USED IN INVESTING ACTIVITIES           (75,114,525)   (23,923,018)   (35,356,323)
-------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Net (decrease) increase in time deposits               (8,815,694)    (6,276,948)    14,671,325
  Net increase in other deposits                         37,079,893     12,062,281        353,932
  Proceeds from borrowings                              116,268,748     35,351,000     42,028,000
  Repayment of borrowings                               (96,268,748)   (35,721,000)   (41,018,000)
  Net increase in Federal funds purchased and
    repurchase agreements                                25,147,478     13,489,478     19,651,222
  Proceeds from exercise of stock options                   301,496        514,994        566,794
  Repurchase of common stock                                     --     (1,405,264)    (4,338,798)
  Cash dividends paid                                    (2,733,051)    (2,355,393)    (1,991,391)
-------------------------------------------------------------------------------------------------
    NET CASH PROVIDED BY FINANCING ACTIVITIES            70,980,122     15,659,148     29,923,084
-------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS        461,080      1,562,558     (1,517,136)
Cash and cash equivalents at beginning of year           10,717,128      9,154,570     10,671,706
-------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR              $  11,178,208   $ 10,717,128   $  9,154,570
=================================================================================================
NONCASH INVESTING AND FINANCING ACTIVITIES
  Change in net unrealized loss on securities
    available-for-sale, net of $425,179, $915,432
    and $3,266 of deferred taxes in 1998,
    1997 and 1996, respectively                       $  (1,053,863)  $  1,375,329   $     (4,680)
  Transfer of loans to foreclosed real estate               174,543        682,333      3,259,676
  Transfer of held-to-maturity securities to
    available-for-sale securities                                --     53,454,786             --

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>




                                       25
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


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

December 31, 1998 and 1997

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  four  branches  and a mortgage
lending  center  in  Southington,   Connecticut,   one  branch  in  Wallingford,
Connecticut and BCI Financial  Corporation,  an indirect auto finance subsidiary
located in Southington, Connecticut. During the fourth quarter of 1998, the Bank
formed a passive investment company, SSB Mortgage Corporation, to take advantage
of changes in  Connecticut  state tax statutes (see Note 12). 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.

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
statements 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 valuation of investments  and 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  write-downs  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  write-downs on foreclosed  real estate based on their  judgements 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.  The Corporation  classifies 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 or impaired  loans 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 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.

Management  considers  a loan  impaired  if,  based on current  information  and
events,  it is  probable  that the  Corporation  will be unable to  collect  the
scheduled  payments  of  



                                       26
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


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 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.  Smaller-balance  homogeneous loans consisting of residential
mortgages and consumer  loans are evaluated for reserves  collectively  based on
historical loss experience.

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.

FORECLOSED REAL ESTATE

Foreclosed real estate  consists 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

Effective December 31, 1997, the Corporation adopted the provisions of Statement
of Financial  Accounting  Standards No. 128,  "Earnings per Share" ("SFAS 128").
SFAS 128 establishes  standards for computing and presenting  earnings per share
("EPS").  It replaces the  presentation  of primary EPS with a  presentation  of
basic EPS. It also  requires dual  presentation  of basic and diluted EPS on the
face of the income  statement for all entities with complex capital  structures.
This statement was effective for financial  statements issued for periods ending
after December 15, 1997 and has been applied for all periods presented.

Basic  earnings per share is computed using the  weighted-average  common shares
outstanding  during the year. The  computation of diluted  earnings per share is
similar to the computation of basic earnings per share except the denominator is
increased to include the number of additional common shares that would have been
outstanding if dilutive potential common shares had been issued. The shares used
in the computations for the three years ended December 31, 1998 were as follows:

                                           1998          1997          1996
     ----------------------------------------------------------------------
     Basic                            5,110,191     5,093,588     5,372,760
     Effect of dilutive
       stock options                    438,085       384,783       268,476
     ----------------------------------------------------------------------
     Diluted                          5,548,276     5,478,371     5,641,236
     ======================================================================

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, and a 2-for-1 stock split effected in the form
of a stock dividend on December 1, 1997.

SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

In June 1997,  the  Financial  Accounting  Standards  Board (the "FASB")  issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 requires public
companies  to report  financial  and  descriptive  information  about  operating
segments in annual financial  statements and requires selected information about
operating  segments  to be  reported  in  interim  financial  reports  issued to
shareholders. Operating segment financial information is required to be reported
on the basis that it is used internally for evaluating  segment  performance and
allocation of resources.  SFAS 131 is effective  for  financial  statements  for
periods  beginning  after  December  15,  1997  and  requires   presentation  of
comparative  information for prior periods  presented.  The Corporation does not
have any  operating  segments,  as defined by SFAS 131, and  therefore,  has not
disclosed the additional information.

CASH FLOWS

Cash  and cash  equivalents  include  cash,  interest  and  non-interest-bearing
deposits  due from banks and  Federal  funds  sold.  The Bank paid  interest  of
$19,268,824,  $16,105,588  and  $15,018,515  on deposits and borrowings in 1998,
1997 and 1996, respectively.

RECLASSIFICATION

Certain 1997 and 1996 amounts  have been  reclassified  to conform with the 1998
presentation.  These  reclassifications  had  no  impact  on net  income  and no
material impact on the statements of condition.




                                       27
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


2. RESTRICTION ON CASH AND DUE FROM BANKS
   --------------------------------------

The Bank is required to maintain  reserves  against certain deposit  transaction
accounts.  At December 31,  1998,  the Bank was required to have cash and liquid
assets of approximately $3,202,000 to meet these requirements.

3. INVESTMENT SECURITIES
   ---------------------

The amortized  cost,  gross  unrealized  gains and losses and  estimated  market
values as of December 31, 1998 were as follows:

<TABLE>
<CAPTION>
                                                    Available-for-Sale
                               -------------------------------------------------------
                                                   Gross         Gross       Estimated
                                  Amortized   Unrealized    Unrealized          Market
                                       Cost        Gains        Losses           Value
--------------------------------------------------------------------------------------
<S>                            <C>            <C>          <C>            <C>         
United States Government
  and agency obligations       $ 47,547,262   $  277,317   $   (69,188)   $ 47,755,391
Municipal bonds                   3,583,749      100,468        (1,553)      3,682,664
Mortgage-backed securities       93,033,513      167,865       (70,296)     93,131,082
Capital trust preferreds         13,174,358      130,000      (338,358)     12,966,000
Marketable equity securities     58,141,396    1,924,678      (862,538)     59,203,536
Mutual funds                        602,370       15,367       (23,237)        594,500
--------------------------------------------------------------------------------------
                               $216,082,648   $2,615,695   $(1,365,170)   $217,333,173
======================================================================================
</TABLE>

The amortized  cost,  gross  unrealized  gains and losses and  estimated  market
values as of December 31, 1997 were as follows:

<TABLE>
<CAPTION>
                                                    Available-for-Sale
                               -------------------------------------------------------
                                                   Gross         Gross       Estimated
                                  Amortized   Unrealized    Unrealized          Market
                                       Cost        Gains        Losses           Value
--------------------------------------------------------------------------------------
<S>                            <C>            <C>          <C>            <C>         
United States Government
  and agency obligations       $ 27,577,121   $  106,714   $   (67,358)   $ 27,616,477
Municipal bonds                   3,342,276       90,871          (949)      3,432,198
Mortgage-backed securities       64,987,756      573,547       (65,415)     65,495,888
Capital trust preferreds          3,750,000      302,500            --       4,052,500
Marketable equity securities     59,594,575    2,319,331       (99,115)     61,814,791
Mutual funds                      4,313,803        9,400       (23,354)      4,299,849
--------------------------------------------------------------------------------------
                               $163,565,531   $3,402,363   $  (256,191)   $166,711,703
======================================================================================
</TABLE>

The amortized cost and estimated market value of debt securities at December 31,
1998, by contractual  maturity,  are shown below.  Actual maturities will differ
from  contractual  maturities  because  borrowers  may have the right to call or
repay obligations with or without call or prepayment penalties:

                                                            1998
                                                     Available-For-Sale
                                                ---------------------------
                                                                  Estimated
                                                   Amortized         Market
                                                        Cost          Value
     ----------------------------------------------------------------------
     Due in one year or less                    $  6,433,339   $  6,445,278
     Due after one year
       through five years                         17,890,236     18,196,322
     Due after five years
       through ten years                           7,241,222      7,265,485
     Due after ten years                          32,740,572     32,496,970
     ----------------------------------------------------------------------
                                                  64,305,369     64,404,055
     Mortgage-backed securities                   93,033,513     93,131,082
     ----------------------------------------------------------------------
                                                $157,338,882   $157,535,137
     ======================================================================

Proceeds  from  sales  of  securities   available-for-sale   were   $83,146,669,
$50,352,816 and $24,642,498 in 1998, 1997 and 1996, respectively.  There were no
sales of  securities  held-to-maturity  in 1998,  1997 or 1996.  Gross  gains of
$1,759,629,  $1,226,509 and $634,399 and gross losses of $487,991,  $387,875 and
$290,669 were realized on sales of securities  available-for-sale  in 1998, 1997
and 1996,  respectively.  During 1997,  the entire  securities  held-to-maturity
portfolio,  which  totaled  $53,454,786,   was  transferred  to  the  securities
available-for-sale  portfolio.  The transfer was performed by the Corporation to
provide the  flexibility to manage the  investment  portfolio for optimal return
and to execute risk  management  strategies.  The  transfer  resulted in a gross
unrealized gain of $162,930.

At  December  31,  1998,   investment  securities  with  a  carrying  amount  of
$97,654,971  were pledged as collateral to secure public  deposits and for other
purposes.



                                       28
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


4. LOANS AND THE ALLOWANCE FOR LOAN LOSSES 
   ----------------------------------------

Loans consisted of the following as of December 31:

                                                      1998                 1997
--------------------------------------------------------------------------------
Residential real estate                      $ 137,325,931        $ 134,493,679
Commercial real estate                          42,407,709           39,043,167
Real estate construction                         3,688,515            3,002,551
Commercial                                      42,857,465           37,291,728
Consumer                                        58,559,909           47,872,522
--------------------------------------------------------------------------------
                                               284,839,529          261,703,647
Less: Deferred loan fees                          (850,394)            (949,694)
  Allowance for loan losses                     (5,548,638)          (5,306,096)
--------------------------------------------------------------------------------
                                             $ 278,440,497        $ 255,447,857
================================================================================

Activity in the allowance for loan losses was as follows:

                                                  Year Ended December 31,
                                      ------------------------------------------
                                             1998           1997           1996
--------------------------------------------------------------------------------
Balance at beginning of year          $ 5,306,096    $ 4,875,308    $ 5,487,801
Provision for loan losses                 267,500        600,000        435,000
Charge-offs                              (154,955)      (388,794)    (1,212,490)
Recoveries                                129,997        219,582        164,997
--------------------------------------------------------------------------------
Balance at end of year                $ 5,548,638    $ 5,306,096    $ 4,875,308
================================================================================

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

                                                               December 31,
                                                       -------------------------
                                                             1998           1997
--------------------------------------------------------------------------------
Investment in impaired loans                           $1,946,363     $2,125,923
Impaired loans with no valuation allowance              1,374,857      2,088,300
Impaired loans with a valuation allowance                 571,506         37,623
Valuation allowance                                        91,648          6,500
Average recorded investment in impaired loans           2,010,395      2,477,185
Commitments to lend additional funds for
  loans considered impaired                                    --             --


                                                        Year Ended December 31,
                                                       -------------------------
                                                             1998           1997
--------------------------------------------------------------------------------
Interest income, recognized on a cash basis              $195,144       $222,415


Information with respect to nonaccrual loans is as follows:

                                                              December 31,
                                                       -------------------------
                                                             1998           1997
--------------------------------------------------------------------------------
Nonaccrual loans                                       $1,264,732     $2,860,528



                                                     Year Ended December 31,
                                                --------------------------------
                                                    1998        1997        1996
--------------------------------------------------------------------------------
Interest income that would have been
  recorded under original terms                 $202,703    $335,244    $353,572
Interest income recorded during
  the period                                      90,164     201,358     228,389


Information  regarding  capitalized  originated  loan  servicing  assets  is  as
follows:

                                                             December 31,
                                                     ---------------------------
                                                         1998              1997
--------------------------------------------------------------------------------
Balance at beginning of year                         $ 22,873          $ 27,783
Additions                                                  --                --
Amortization                                           (4,539)           (4,910)
--------------------------------------------------------------------------------
Balance at end of year                               $ 18,334          $ 22,873
================================================================================

As of  December  31,  1998 and  1997,  the fair  value of the  capitalized  loan
servicing assets approximated cost.

5. FORECLOSED REAL ESTATE
   ----------------------

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

                                                   Year Ended December 31,
                                         ---------------------------------------
                                             1998           1997           1996
--------------------------------------------------------------------------------
Balance at beginning of year             $ 25,000      $      --      $  35,000
Provision for losses                       52,750        139,687        201,730
Charge-offs, net                          (27,750)      (114,687)      (236,730)
--------------------------------------------------------------------------------
Balance at end of year                   $ 50,000      $  25,000      $      --
================================================================================

6. PREMISES AND EQUIPMENT
   ----------------------

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

                                 December 31, 1998          December 31, 1997
                             ---------------------------------------------------
                                          Accumulated                Accumulated
                                   Cost  Depreciation         Cost  Depreciation
--------------------------------------------------------------------------------
Land                         $  589,127    $       --   $  594,725    $       --
Buildings                     3,141,186     1,751,423    3,059,290     1,672,355
Furniture and equipment       3,808,041     1,262,741    2,441,638     1,272,246
--------------------------------------------------------------------------------
                             $7,538,354    $3,014,164   $6,095,653    $2,944,601
================================================================================

At  December  31,  1998,  the Bank was  obligated  under  several  noncancelable
operating  leases for office space which expire on various  dates  through 2008.
The leases  contain  rent  escalation  clauses for real  estate  taxes and other
operating  expenses and renewal  option  clauses  calling for  increased  rents.
Future minimum rental payments  required under operating  leases at December 31,
1998 were as follows:



                                       29
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


     Year                                                            Amount
     ----------------------------------------------------------------------
     1999                                                          $ 83,118
     2000                                                            45,000
     2001                                                            45,000
     2002                                                            45,000
     2003                                                            52,506
     After                                                          293,760
     ----------------------------------------------------------------------
     Total minimum lease payments                                  $564,384
     ======================================================================

Total net rental expense amounted to $114,812, $88,536 and $75,768 in 1998, 1997
and 1996, respectively.

7. DEPOSITS
   --------

Deposits consisted of the following as of December 31:

                                                          1998              1997
--------------------------------------------------------------------------------
Noninterest-bearing demand deposits               $ 34,408,824      $ 25,798,915
NOW accounts                                        42,528,062        24,899,327
Regular savings                                     69,028,793        63,611,111
Money market savings                                39,318,069        33,894,502
Certificates of deposit                            160,018,431       168,846,130
Club accounts                                          260,964           248,959
--------------------------------------------------------------------------------
                                                  $345,563,143      $317,298,944
================================================================================

The amount of individual  certificates of deposit in excess of $100,000 included
in  certificates  of deposit at December 31, 1998 and 1997 was  $18,276,703  and
$16,753,636, respectively.

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:

                                                         1998               1997
--------------------------------------------------------------------------------
6.05% due January 26, 1998                        $        --        $ 2,000,000
5.68% due March 4, 1998                                    --          1,000,000
5.93% due March 20, 1998                                   --          1,000,000
6.31% due July 20, 1998                                    --          2,000,000
6.08% due July 30, 1998                                    --          1,000,000
6.42% due September 8, 1998                                --          1,000,000
5.76% due September 25, 1998                               --          2,000,000
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
5.07% due October 21, 1998                                 --          1,000,000
5.95% due February 4, 1999                          2,000,000          2,000,000
6.03% due February 16, 1999                                --          1,000,000
5.95% due August 20, 1999                             800,000            800,000
6.70% due June 11, 2001                               830,000            830,000
5.44% due April 24, 2005                            2,000,000                 --
4.99% due January 14, 2008                          5,000,000                 --
5.09% due July 7, 2008                              5,000,000                 --
4.99% due September 1, 2008                        10,000,000                 --
4.59% due September 15, 2008                        5,000,000                 --
4.99% due June 18, 2013                            10,000,000                 --
--------------------------------------------------------------------------------
                                                  $40,630,000        $20,630,000
================================================================================

As a member of the Federal Home Loan Bank of Boston ("FHLB"),  and in accordance
with an  agreement  with  them,  the  Bank is  required  to  maintain  qualified
collateral, as defined in the FHLB 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 FHLB in excess of the amount
required to  collateralize  the  outstanding  advances at December 31, 1998. The
Bank also  participates  in the IDEAL Way Line of Credit  Program with the FHLB.
These advances are one-day variable rate loans with automatic rollover. The Bank
has a preapproved line up to 2% of total assets.

9. OTHER BORROWINGS
   ----------------

Other borrowings consist of Federal funds purchased,  repurchase agreements with
major brokerage firms and repurchase agreements directly with certain customers.

The following table summarizes borrowings by contractual maturity:

                                            1998            1997            1996
--------------------------------------------------------------------------------
Federal funds purchased:
  Overnight                          $ 1,775,000     $ 1,040,000     $ 1,875,000
  Within 30 days                              --       1,000,000              --
  60-90 days                                  --       1,000,000              --
--------------------------------------------------------------------------------
                                       1,775,000       3,040,000       1,875,000
--------------------------------------------------------------------------------
Repurchase agreements
  with brokers/dealers:
    Within 30 days                    12,880,000              --      13,203,750
    30-90 days                        29,680,000       5,880,000      18,575,000
    Over 90 days                      20,000,000      34,630,000              --
--------------------------------------------------------------------------------
                                      62,560,000      40,510,000      31,778,750
--------------------------------------------------------------------------------
Repurchase agreements
  with customers:
    Overnight                          6,480,934       7,324,753       5,049,204
    Within 30 days                     7,579,790       1,646,051       2,899,281
    30-90 days                         2,119,942       2,847,384         276,475
--------------------------------------------------------------------------------
                                      16,180,666      11,818,188       8,224,960
--------------------------------------------------------------------------------
    Total short-term
      borrowings                     $80,515,666     $55,368,188     $41,878,710
================================================================================

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.

(dollars in thousands)                      1998            1997           1996
--------------------------------------------------------------------------------
Average outstanding                      $80,592         $43,244        $37,124
Maximum outstanding at any month-end      89,739          57,137         47,008
Average interest rate during the year       5.44%           5.48%          5.30%
Interest rate at year-end                   5.35%           5.54%          5.35%



                                       30
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


The  following  table   summarizes   repurchase   agreements   outstanding  with
brokers/dealers:

                                          1998             1997             1996
--------------------------------------------------------------------------------
Morgan Stanley                     $15,680,000      $ 7,650,000      $        --
Salomon Brothers                    46,880,000       30,860,000       17,460,000
Merrill Lynch                               --        2,000,000       14,318,750
--------------------------------------------------------------------------------
                                   $62,560,000      $40,510,000      $31,778,750
================================================================================

Securities  sold under  agreements to repurchase are generally  U.S.  Government
Agency  obligations  and  mortgage-backed   securities.   The  market  value  of
securities exceeds the face value of the repurchase agreements.

Accrued interest  payable on short-term  borrowings was $396,771 and $313,188 at
December 31, 1998 and 1997, respectively.

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. At December
31,  1998,  approximately  $4,733,799  of the Bank's  retained  net  profits was
available for dividends.

In February 1996, the Corporation  announced that it planned to repurchase up to
15% (788,000) of its  outstanding  common shares over the next eighteen  months.
During the eighteen-month period ended August 1997, the Corporation  repurchased
519,498 shares.  These shares were repurchased at an average price of $11.05 per
share.

In June 1997, the FASB issued  Statement of Financial  Accounting  Standards No.
130,  "Reporting  Comprehensive  Income"  ("SFAS  130").  SFAS  130  establishes
standards for reporting and display of comprehensive income, which is defined as
the change in net equity of a business enterprise during a period from non-owner
sources.   The  Corporation  adopted  SFAS  130  as  of  January  1,  1998.  The
Corporation's one source of comprehensive  income is the unrealized gain or loss
on investment securities.


The following table presents the components and related tax effects allocated to
other comprehensive income for the year ended December 31, 1998.

                                         Before            Tax              Net
                                            Tax       (Benefit)          of Tax
                                         Amount        Expense           Amount
--------------------------------------------------------------------------------
Net unrealized losses
  on securities arising
  during the period                 $  (624,009)     $(329,695)     $  (294,314)
Less: reclassification
  adjustment for gains
  realized in net income              1,271,638        512,089          759,549
--------------------------------------------------------------------------------
Net unrealized losses
  on securities                     $(1,895,647)     $(841,784)     $(1,053,863)
================================================================================

The following table presents the components and related tax effects allocated to
other comprehensive income for the year ended December 31, 1997.

                                          Before             Tax             Net
                                             Tax        (Benefit)         of Tax
                                          Amount         Expense          Amount
--------------------------------------------------------------------------------
Net unrealized gains
  on securities arising
  during the period                   $3,129,395      $1,258,685      $1,870,710
Less: reclassification
  adjustment for gains
  realized in net income                 838,634         343,253         495,381
--------------------------------------------------------------------------------
Net unrealized gains
  on securities                       $2,290,761      $  915,432      $1,375,329
================================================================================

11. EMPLOYEE BENEFIT PLANS
    ----------------------

In February 1998, the FASB issued  Statement of Financial  Accounting  Standards
No.  132,  "Employers'  Disclosures  about  Pensions  and  Other  Postretirement
Benefits" ("SFAS 132").  SFAS 132  standardizes the disclosure  requirements for
pensions and other postretirement  benefits by requiring additional  information
to facilitate  financial  analysis and eliminate  certain  disclosures  that are
considered no longer useful. SFAS 132 supersedes the disclosure  requirements of
SFAS Nos. 87, 88 and 106. This Statement is effective for fiscal years beginning
after December 15, 1997. Restatement of disclosures for earlier periods provided
for  comparative  purposes is  required  unless the  information  is not readily
available. The Corporation adopted SFAS 132 as of January 1, 1998.

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.



                                       31
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


The following  table sets forth  information  regarding the plan's funded status
and amounts recognized in the financial statements at December 31:

                                                         1998              1997
--------------------------------------------------------------------------------
Change in benefit obligation:
  Benefit obligation at beginning of year         $ 3,512,966       $ 3,201,593
  Service cost                                        233,097           214,970
  Interest cost                                       257,047           242,043
  Plan participants' contributions                         --                --
  Actuarial gain                                      418,908             5,761
  Benefits paid                                      (173,379)         (151,401)
--------------------------------------------------------------------------------
  Benefit obligation at end of year                 4,248,639         3,512,966
--------------------------------------------------------------------------------

Change in plan assets:
  Fair value of plan assets at beginning of year    4,792,961         3,929,650
  Actual return on plan assets                       (134,572)          877,052
  Employer contribution                                    --           137,660
  Plan participants' contributions                         --                --
  Benefits paid                                      (173,379)         (151,401)
--------------------------------------------------------------------------------
  Fair value of plan assets at end of year          4,485,010         4,792,961
--------------------------------------------------------------------------------

  Funded status                                       236,371         1,279,995
  Unrecognized net actuarial loss                    (711,603)       (1,645,153)
  Unrecognized prior service cost                     140,172           163,832
  Unrecognized transition (asset) obligation           20,862            24,633
--------------------------------------------------------------------------------
  Prepaid (accrued) benefit cost                  $  (314,198)      $  (176,693)
================================================================================

                                              1998          1997          1996
--------------------------------------------------------------------------------
Weighted-average assumptions
  as of December 31:
    Discount rate                             6.50%         7.50%         7.75%
    Expected return on plan assets            8.50%         8.50%         8.50%
    Rate of compensation increase             4.00%         5.00%         5.00%

Components of net periodic
  benefit cost:
    Service cost                         $ 233,097     $ 214,970     $ 208,308
    Interest cost                          257,047       242,043       224,362
    Expected return on plan assets         134,572      (877,052)     (449,628)
    Recognized net actuarial loss         (487,211)      589,972       199,921
--------------------------------------------------------------------------------
    Net periodic benefit cost            $ 137,505     $ 169,933     $ 182,963
================================================================================

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,  1998,  1997 and 1996 were  $86,435,  $80,124 and  $76,062,
respectively.

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

12. FEDERAL AND STATE TAXES ON INCOME
    ---------------------------------

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

                                         1998              1997             1996
--------------------------------------------------------------------------------
Current:
  Federal                         $ 2,377,458       $ 2,255,348       $1,588,727
  State                               461,973           778,277          559,967
--------------------------------------------------------------------------------
    Total current                   2,839,431         3,033,625        2,148,694
--------------------------------------------------------------------------------
Deferred:
  Federal                            (205,544)         (230,219)         158,308
  State                               657,953              (895)          73,839
--------------------------------------------------------------------------------
    Total deferred                    452,409          (231,114)         232,147
--------------------------------------------------------------------------------
                                  $ 3,291,840       $ 2,802,511       $2,380,841
================================================================================

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

                                             1998           1997           1996
--------------------------------------------------------------------------------
Income tax at statutory rate          $ 3,276,363    $ 2,957,477    $ 2,517,769
Increase (decrease) resulting from:
  Dividends received deduction           (623,877)      (636,011)      (550,719)
  Connecticut corporation tax,
    net of Federal tax benefit            401,859        513,072        418,312
  Impact of establishment of
    Connecticut Passive
    Investment Company                    337,292             --             --
Other items, net                         (145,168)       (73,352)       (20,982)
Impact of state tax rate change            45,371         41,325         16,461
--------------------------------------------------------------------------------
Provision for income taxes            $ 3,291,840    $ 2,802,511    $ 2,380,841
================================================================================



                                       32
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


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

                                              1998                   1997
                                   ---------------------------------------------
                                      Federal      State      Federal     State
--------------------------------------------------------------------------------
Deferred tax assets:
  Loan loss provisions             $1,886,537  $ 471,634   $1,632,685  $504,079
  Reserve - other real
    estate owned                       17,000      4,250        7,693     2,375
  Basis difference on other
    real estate owned                      --         --       21,326     6,584
  Net mortgage origination fees       149,908     37,477      162,774    50,255
  Accrued interest payable            324,014     81,004      321,623    99,299
  Other                               246,534     63,794      220,815    68,175
--------------------------------------------------------------------------------
    Total deferred tax assets       2,623,993    658,159    2,366,916   730,767
--------------------------------------------------------------------------------

Deferred tax liabilities:
  Tax loan loss reserve in
    excess of base year                84,165     21,041      101,559    31,356
  SFAS 115 mark-to-market             425,179    106,295      968,077   298,886
  Other                               213,366     53,342      144,439    41,458
--------------------------------------------------------------------------------
    Total deferred tax liabilities    722,710    180,678    1,214,075   371,700
--------------------------------------------------------------------------------
    Deferred tax assets             1,901,283    477,481    1,152,841   359,067
    Valuation allowance                    --   (477,481)          --        --
--------------------------------------------------------------------------------
    Net deferred tax assets        $1,901,283  $      --   $1,152,841  $359,067
================================================================================

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

                                             1998                   1997
                                  ----------------------------------------------
                                    Federal       State     Federal       State
--------------------------------------------------------------------------------
Deferred tax (benefit) allocated
  to shareholders' equity         $(542,898)  $(298,886)  $ 708,503   $ 206,929
Deferred tax (benefit) allocated
  to income                        (205,544)    657,953    (230,219)       (895)
--------------------------------------------------------------------------------
    Total deferred tax            $(748,442)  $ 359,067   $ 478,284   $ 206,034
================================================================================

The  Corporation  will only  recognize  a deferred  tax asset  when,  based upon
available  evidence,  realization  is more  likely  than  not.  Accordingly,  at
December 31, 1998, the Corporation has recorded no Federal  valuation  allowance
against deferred tax assets based on sufficient available Federal taxable income
in the carryback period.

During 1998, the Corporation  recorded a valuation allowance of $477,481 against
its state  deferred  tax asset in  connection  with the creation of SSB Mortgage
Corp. which will qualify and operate as a Connecticut passive investment company
pursuant  to  legislation  enacted in May 1998.  Because it is  expected to earn
sufficient  income  from  the  passive  investment  company  subsidiary  and its
dividends to the parent are exempt from  Connecticut  Corporation  Business Tax,
the Corporation no longer expects to recognize its state deferred tax assets.

The  Corporation  made  Federal and state  income tax  payments  of  $2,912,000,
$2,848,158 and $1,729,533 in 1998, 1997 and 1996, respectively.

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 Internal  Revenue  Code
Section 593, as amended by the Small Business  Protection  Act of 1996,  will be
met in the foreseeable future.

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 1998 and 1997.  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,  1998 and 1997  amounted  to
$3,911,381 and  $5,643,496,  respectively.  New loans of $235,168 were made, and
repayments totaled  $1,967,283 during 1998. In addition,  unused lines of credit
to related parties as of December 31, 1998 were $645,379.



                                       33
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


14. STOCK OPTION PLAN
    -----------------

The  Corporation  has a stock option plan offered to employees  and directors of
the Bank (the "Plan"). A total of 1,444,416 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,  1998,  a
total of 288,620 shares remain for issue.

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>
                                  1998                          1997                          1996
                       --------------------------------------------------------------------------------------
                       As Reported      Pro Forma    As Reported      Pro Forma    As Reported      Pro Forma
-------------------------------------------------------------------------------------------------------------
<S>                     <C>            <C>            <C>            <C>            <C>            <C>       
Net income              $6,344,603     $5,596,884     $5,895,951     $5,510,219     $5,024,363     $4,588,413
Net income per share--
  diluted                     1.14           1.01           1.08           1.01           0.89           0.81
</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:

                                                     1998       1997       1996
--------------------------------------------------------------------------------
Dividend yield                                       3.60%      3.75%      3.75%
Expected volatility                                 40.75      35.00      34.84
Risk-free interest rate                              4.67       6.26       6.16
Expected lives                                    7 years    7 years    7 years

A summary of the status of the Corporation's  Plan as of December 31, 1998, 1997
and 1996 and changes during the years ending on those dates is presented below:

<TABLE>
<CAPTION>
                                               1998                      1997                    1996
                                     ------------------------------------------------------------------------
                                                  Weighted-                 Weighted-               Weighted-
                                                    Average                   Average                 Average
                                                   Exercise                  Exercise                Exercise
                                        Shares        Price       Shares        Price     Shares        Price
-------------------------------------------------------------------------------------------------------------
<S>                                  <C>          <C>            <C>        <C>          <C>        <C>      
Outstanding at beginning of year     1,042,296    $    9.53      890,616    $    6.97    780,908    $    5.29
Granted                                116,000       15.625      237,000        18.30    237,000        11.18
Exercised                              (41,820)        7.22      (76,320)        7.32   (126,092)        4.49
Forfeited                               (2,500)      19.375       (9,000)       11.16     (1,200)        7.40
----------------------------------------------                 ---------                --------
Outstanding at end of year           1,113,976    $   10.23    1,042,296    $    9.53    890,616    $    6.97
=============================================================================================================
Options exercisable at year-end        998,976                   836,796                 733,616             
Weighted-average fair value of
  options granted during the year                 $    5.39                 $    5.76               $    3.53
</TABLE>


The following  table  summarizes  information  about the Plan's stock options at
December 31, 1998:

<TABLE>
<CAPTION>
                              Options Outstanding            Options Exercisable
                    -------------------------------------------------------------------------
                                   Weighted-
                                     Average       Weighted-          Number        Weighted-
                         Number    Remaining         Average     Exercisable          Average
Range of            Outstanding  Contractual        Exercise              at         Exercise
Exercise Prices     at 12/31/98         Life           Price        12/31/98            Price
---------------------------------------------------------------------------------------------
<S>                     <C>              <C>       <C>               <C>            <C>      
$ 1.00 - $ 7.50         552,976          5.1       $    5.32         552,976        $    5.32
  7.50 -  15.00         242,000          7.9           11.16         242,000            11.16
 15.00 -  22.50         319,000          9.3           18.02         204,000            19.38
----------------------------------------------------------------------------
                      1,113,976                                      998,976
============================================================================
</TABLE>




                                       34
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


15. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
    -------------------------------------------------

The Bank is party to financial instruments with off-balance-sheet credit 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:

                                                         1998               1997
--------------------------------------------------------------------------------
Loan commitments
  Approved loan commitments                       $ 2,310,950        $ 4,484,000
  Unadvanced portion of
    construction loans                              5,399,502          3,281,819
  Unused home equity
    lines of credit                                10,977,136         11,510,930
  Unused commercial
    lines of credit                                11,688,379         24,418,641
  Standby letters of credit                         3,307,306          3,793,939
--------------------------------------------------------------------------------
                                                  $33,683,273        $47,489,329
================================================================================

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 interest rates with maturities of one year or more.

16. RECENT ACCOUNTING PRONOUNCEMENTS
    --------------------------------

On June 15, 1998, the FASB issued  Statement of Financial  Accounting  Standards
No. 133,  "Accounting for Derivative  Instruments and Hedging Activities" ("SFAS
133").  SFAS 133 is  effective  for fiscal years  beginning  after June 15, 1999
(January 1, 2000 for the Corporation) and requires all derivative instruments be
recorded on the balance sheet at their fair value.  Changes in the fair value of
derivative  instruments  are to be recorded  each period in current  earnings or
other comprehensive  income,  depending on whether a derivative is designated as
part of a hedge  transaction  and,  if it is,  the  type of  hedge  transaction.
Management anticipates that the adoption of SFAS 133 will not have a significant
effect on the  Corporation's  results of operations  or its  financial  position
because  the  Corporation  presently  does not hold or  utilize  any  derivative
instruments.

17. 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.

18. FAIR VALUE OF FINANCIAL INSTRUMENTS
    -----------------------------------

FASB Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial  Instruments" ("SFAS 107"), 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.
SFAS 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

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



                                       35
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


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  non-accrual  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  non-accrual  loans can be made
without incurring excessive cost.

ACCRUED INTEREST RECEIVABLE

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 non-interest
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,  fixed-term
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.

SFAS 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 fair values for securities sold under agreements to repurchase are estimated
using  discounted  cash flow  analyses,  using interest  rates  currently  being
offered for similar instruments.

The following  table  presents a comparison of the carrying  value and estimated
fair value of the Corporation's  financial  instruments at December 31, 1998 and
1997:

<TABLE>
<CAPTION>
                                                                  1998                         1997
                                                     ---------------------------------------------------------
                                                         Carrying      Estimated       Carrying      Estimated
                                                           Amount     Fair Value         Amount     Fair Value
--------------------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>            <C>            <C>         
Financial assets:
  Cash and due from banks                            $ 11,178,208   $ 11,178,208   $  9,217,128   $  9,217,128
  Federal funds sold                                           --             --      1,500,000      1,500,000
  Trading account                                         172,312        172,312        612,444        612,444
  Securities available-for-sale                       217,333,173    217,333,173    166,711,703    166,711,703
  Federal Home Loan Bank stock                          2,831,500      2,831,500      2,094,400      2,094,400
  Loans, gross (excluding non-accrual loans)          283,574,797    285,540,749    258,843,119    258,852,151
  Accrued income receivable                             3,076,956      3,076,956      2,759,537      2,759,537

Financial liabilities:
  Deposits:
    Noninterest-bearing demand deposits              $ 34,408,824   $ 34,408,824   $ 25,798,915   $ 25,798,915
    Regular savings                                    69,028,793     69,028,793     63,611,111     63,611,111
    Money market savings                               39,318,069     39,318,069     33,894,502     33,894,502
    Certificates of deposit                           160,018,431    161,902,349    168,846,130    169,545,765
    NOW accounts                                       42,528,062     42,528,062     24,899,327     24,899,327
    Club accounts                                         260,964        260,964        248,959        248,959
    Advances from the Federal Home Loan
      Bank of Boston                                   40,630,000     38,096,085     20,630,000     20,641,311
    Securities sold under agreements to repurchase     80,515,666     81,159,919     55,368,188     55,368,188
  Unrecognized financial instruments:
      Commitments to extend credit                             --        303,760             --        437,971
      Letters of credit                                        --         33,073             --         37,939
</TABLE>



                                       36
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


19. CONTINGENCIES
    -------------

The Corporation and its subsidiaries  are defendants in proceedings  arising out
of, and incidental to, activities conducted in the normal course of business. In
the opinion of management,  resolution of these matters will not have a material
effect on the Corporation's financial condition or results of operations.

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  quantitative  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, 1998, that the Bank
meets all capital adequacy requirements to which it is subject.

As of December 31, 1997, the most recent  notification  from the Federal Deposit
Insurance  Corporation  categorized  the  Bank as  well  capitalized  under  the
regulatory  framework for prompt  corrective  action.  To be categorized as well
capitalized, 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 as follows:

<TABLE>
<CAPTION>
                                                                        To be Well Capitalized
                                                                        Under Prompt Corrective
                                                   Actual                  Action Provisions
                                             --------------------------------------------------
(dollars in thousands)                        Amount      Ratio           Amount          Ratio
-----------------------------------------------------------------------------------------------
<S>                                          <C>          <C>             <C>              <C>  
As of December 31, 1998:
  Total Capital (to Risk-Weighted Assets)    $52,942      17.27%       >/=$30,648       >/=10.0%
  Tier I Capital (to Risk-Weighted Assets)    49,090      16.02        >/= 18,389       >/= 6.0
  Tier I Capital (to Average Assets)          49,090       9.48        >/= 25,878       >/= 5.0

As of December 31, 1997:                                                             
  Total Capital (to Risk-Weighted Assets)    $48,550      17.16%       >/=$28,999       >/=10.0%
  Tier I Capital (to Risk-Weighted Assets)    44,991      15.90        >/= 16,979       >/= 6.0
  Tier I Capital (to Average Assets)          44,991      10.41        >/= 21,560       >/= 5.0
</TABLE>


21. PARENT COMPANY ONLY FINANCIAL STATEMENTS
    ----------------------------------------

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

                                                               December 31,
                                                      --------------------------
                                                             1998           1997
--------------------------------------------------------------------------------
Statement of condition:
  Assets:
    Marketable equity securities                      $ 1,525,150    $   358,853
    Investment in Southington Savings Bank             48,151,051     45,809,297
    Repurchase agreement                                  155,611        575,000
    Organization costs                                     36,444         76,200
    Due from Southington Savings Bank                     118,274        134,693
    Other assets                                           15,163          4,481
--------------------------------------------------------------------------------
      Total assets                                    $50,001,693    $46,958,524
================================================================================

  Liabilities and shareholders' equity:
    Accrued expenses                                  $    85,858    $    11,795
    Shareholders' equity                               49,915,835     46,946,729
--------------------------------------------------------------------------------
      Total liabilities and shareholders' equity      $50,001,693    $46,958,524
--------------------------------------------------------------------------------



                                       37
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


The financial statements of Bancorp Connecticut, Inc. (continued)

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                                    ---------------------------------------
                                                           1998          1997          1996
-------------------------------------------------------------------------------------------
<S>                                                 <C>           <C>           <C>        
Statement of income:
  Dividends from subsidiary                         $ 3,167,217   $ 3,594,005   $ 6,334,433
  Other income                                           32,726        29,676        34,940
-------------------------------------------------------------------------------------------
    Total income                                      3,199,943     3,623,681     6,369,373
  Operating expenses                                    360,847       288,813       318,693
  Income tax (credit)                                  (119,311)      (87,487)     (100,108)
-------------------------------------------------------------------------------------------
    Income before equity in undistributed
      net income of subsidiary                        2,958,407     3,422,355     6,150,788
  Equity in undistributed net income
    of subsidiary                                     3,386,196     2,473,596    (1,126,425)
-------------------------------------------------------------------------------------------
        Net income                                  $ 6,344,603   $ 5,895,951   $ 5,024,363
===========================================================================================

Statement of cash flows:
Operating activities:
  Net income                                        $ 6,344,603   $ 5,895,951   $ 5,024,363
  Adjustments to reconcile net income to net
    cash provided by operating activities:
    Equity in undistributed net income
      of subsidiary                                  (3,386,196)   (2,473,596)    1,126,425
    Amortization of organization costs                   39,757        39,757        39,757
    Increase) decrease in other assets                  (10,682)        5,215          (725)
    Increase (decrease) in accrued expenses               8,265        (3,343)      (39,434)
-------------------------------------------------------------------------------------------
        Net cash (used  in) provided by
          operating activities                       (3,348,856)   (2,431,967)    1,126,023

Investing activities:
  Purchase of securities available-for-sale          (1,000,000)      (47,595)           --
  Decrease (increase) in advances to subsidiaries        16,419       (20,726)       38,009
-------------------------------------------------------------------------------------------
        Net cash (used  in) provided by
          investing activities                         (983,581)      (68,321)       38,009
-------------------------------------------------------------------------------------------

Financing activities:
  Dividends paid                                     (2,733,051)   (2,355,393)   (1,991,391)
  Net decrease (increase) in repurchase agreements      419,389      (150,000)     (425,000)
  Repurchase of common stock                                 --    (1,405,264)   (4,338,798)
  Issuance of common stock                              301,496       514,994       566,794
-------------------------------------------------------------------------------------------
        Net cash used in financing activities        (2,012,166)   (3,395,663)   (6,188,395)
-------------------------------------------------------------------------------------------
Net decrease in cash                                         --            --            --
Cash at beginning of year                                    --            --            --
-------------------------------------------------------------------------------------------
Cash at end of year                                 $        --   $        --   $        --
===========================================================================================
</TABLE>



                                       38
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


22. QUARTERLY FINANCIAL DATA (UNAUDITED)
    ------------------------------------

                                                     Three Months Ended
                                          --------------------------------------
(dollars in thousands, except 
  per share data)                         March 31   June 30  Sept. 30   Dec. 30
--------------------------------------------------------------------------------
FISCAL 1998
  Interest income                           $8,589    $8,661    $8,942    $9,153
  Interest expense                           4,487     4,475     4,764     4,780
--------------------------------------------------------------------------------
    Net interest income                      4,102     4,186     4,178     4,373
  Provision for loan losses                    100        68        50        50
  Net securities gains                         474       338       354       106
  Other income                                 520       624       424       624
  Other expenses                             2,310     2,477     2,852     2,759
  Income taxes                                 941       852       525       974
--------------------------------------------------------------------------------
    Net income                              $1,745    $1,751    $1,529    $1,320
================================================================================
    Net income per diluted share            $ 0.31    $ 0.31    $ 0.28    $ 0.24
================================================================================

Fiscal 1997
  Interest income                           $7,709    $8,009    $8,010    $8,176
  Interest expense                           3,961     4,056     4,053     4,157
--------------------------------------------------------------------------------
    Net interest income                      3,748     3,953     3,957     4,019
  Provision for loan losses                    150       200       150       100
  Net securities gains                         161       175       268       235
  Other income                                 323       376       312       473
  Other expenses                             1,979     2,120     2,184     2,418
  Income taxes                                 688       690       697       728
--------------------------------------------------------------------------------
    Net income                              $1,415    $1,494    $1,506    $1,481
================================================================================
    Net income per diluted share            $ 0.26    $ 0.28    $ 0.27    $ 0.27
================================================================================

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 2-for-1  stock split
effected in the form of a stock dividend on December 1, 1997.



                                       39
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


                            SHAREHOLDER INFORMATION
                            -----------------------

ANNUAL MEETING
The Annual Meeting of Shareholders  will be held at 2:00 p.m. on Wednesday,  May
19, 1999 at:
         The Aqua Turf Club
         556 Mulberry Street
         Southington, Connecticut 06489

FORM 10-K REPORT
A copy of the  Corporation's  1998 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 ACCOUNTANTS:
         PricewaterhouseCoopers LLP
         100 Pearl Street
         Hartford, Connecticut 06103

MARKET MAKERS
The  following  companies  have  generally  been market makers in the trading of
Bancorp Connecticut, Inc. stock as of December 31, 1998:
         Advest, Inc.
         Keefe, Bruyette & Woods, Inc.
         Sandler O'Neill & Partners
         Tucker Anthony Incorporated

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

BANCORPCONNECTICUT, INC. INTERNET ADDRESS:
www.bkct.com

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  1,787
shareholders  of record on February  26,  1999.  The high and low bid prices and
cash  dividends  per share for each quarter  during the last two calendar  years
were as follows:

                                                                        Dividend
Quarter Ended                  High                   Low              per Share
--------------------------------------------------------------------------------
 3/31/97 (a)              $   12.13             $   10.75             $    0.103
 6/30/97 (a)                  13.25                 10.88                  0.110
 9/30/97 (a)                  18.50                 12.00                  0.125
12/31/97 (a)                  26.00                 19.00                  0.125

 3/31/98                      21.88                 17.25                  0.130
 6/30/98                      21.50                 19.25                  0.135
 9/30/98                      19.75                 14.94                  0.135
12/31/98                      17.88                 14.75                  0.135

(a)  Data has been  restated to reflect a 2-for-1  stock  split  effected in the
     form of a stock dividend on December 1, 1997.

SSB OFFICE LOCATIONS:
SOUTHINGTON OFFICES:
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

BRADLEY MEMORIAL HOSPITAL ATM FACILITY
81 Meriden Avenue

MORTGAGE CENTER
188 North Main Street

WALLINGFORD OFFICE:
950 North Colony Road

SSB INTERNET ADDRESS:
www.ssbonline.com




                                       40
<PAGE>

                                                        BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


                 BANCORP CONNECTICUT, INC. DIRECTORS & OFFICERS
                 ----------------------------------------------


BOARD OF DIRECTORS

Walter J. Hushak
Chairman,
Southington Savings Bank
Retired Senior Vice President,
Janazzo Services, Inc.

Andrew J. Meade
Vice Chairman,
Southington Savings Bank
President, International Security
Products, Inc. dba Lori Lock
(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,
Bancorp Connecticut, 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

Wayne F. Patenaude
Treasurer/Secretary

Steven F. Nyren
Assistant Secretary



                                       41
<PAGE>

BancorpConnecticut, Inc.
--------------------------------------------------------------------------------


                           SSB DIRECTORS AND OFFICERS
                           --------------------------


BOARD OF DIRECTORS

Walter J. Hushak
Chairman

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

Richard A. Fracasso
Senior Vice President
Consumer Banking

Wayne F. Patenaude
Treasurer/Chief Financial Officer

William Taylor
Senior Vice President
Commercial Banking

OFFICERS

ACCOUNTING AND FINANCE:

Kathleen H. Demers
Senior Financial Analyst

Carl H. Schmidt
Controller

Stephen M. Settino
Director of Asset/Liability Management and Planning

ADVERTISING AND PUBLIC RELATIONS:

Cynthia K. Barker
Advertising and
Public Relations Manager

COMMERCIAL LENDING:

Daniel R. DeRosa
Vice President

Raymond D. Jannelli
Vice President

Anthony Palmieri, Jr.
Vice President

Duane L. Beale
Assistant Vice President

CONSUMER BANKING:

Paul E. MacDonald
Vice President
Retirement Plans Manager

Richard P. Dextraze
Assistant Vice President
Consumer Loan Manager
Community Reinvestment
Act Officer

Sue A. Kasek
Assistant Vice President
Consumer Loan

Kenneth G. Penfield, Jr.
Assistant Vice President
Residential Loan Manager

Donna M. Ierardi
Assistant Vice President
Manager, Wallingford Office

Claudia A. Crooker
Assistant Treasurer
Manager, Queen Corner Office

Carol Vreeland
Assistant Treasurer
Manager, Main Office

Christine S. Matteo
Consumer Loan

Joan E. Morelli
Manager, South End Office

Elizabeth M. Paradis
Assistant Manager
South End Office

CREDIT ADMINISTRATION:

Charles J. DeSimone, Jr.
Chief Credit Officer

Vincent L. Ruggiero
Vice President
Managed Assets

Diane L. Hoadley
Assistant Vice President
Credit & Loan Review

Diane McCoy
Commercial Loan
Documentation

HUMAN RESOURCES:

Donna M. Schaefer
Vice President
Director of Human Resources

OPERATIONS AND INFORMATION SYSTEMS:

Barry J. Abramowitz
Chief Operating and
Information Officer

Lynndel M. Bartulis
Vice President
Alternative Delivery Systems

Donna M. Glatz
Vice President
Branch and Deposit Operations

Susan M. Dobratz
Assistant Vice President
Call Center

Therese G. Kelly
Assistant Vice President
Trainer/Analyst

Annette D. Petruzzi
Loan Operations Manager

INVESTMENT SERVICES:

Robert P Vocelli
Financial Services Manager

Steven F. Nyren
Trust and Employee Benefits

NEW BUSINESS DEVELOPMENT:

William DellaVecchia
Senior Vice President

BCI FINANCIAL CORPORATION:

Timothy W. Rourke
President and
Chief Executive Officer

Joseph M. DeAngelo
Vice President
Operations

Carol M. Montagna
Lending


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BancorpConnecticut, Inc.
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121 Main Street
Southington, Connecticut 06489-2533