AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 22, 1997

REGISTRATION NO. 333-31339
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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PRE-EFFECTIVE AMENDMENT NO. 4 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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FIRST INTERNATIONAL BANCORP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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DELAWARE 6711 06-1151731
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBERS)
ONE COMMERCIAL PLAZA
HARTFORD, CT 06103
(860) 727-0700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

BRETT N. SILVERS
CHAIRMAN OF THE BOARD AND PRESIDENT
FIRST INTERNATIONAL BANCORP, INC.
ONE COMMERCIAL PLAZA
HARTFORD, CT 06103
(860) 727-0700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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WITH COPIES TO:

NEAL J. CURTIN, ESQ. LESLIE A. GALBRAITH JAMES R. TANENBAUM,
BINGHAM, DANA & GOULD EXECUTIVE VICE ESQ.
LLP PRESIDENT, SECRETARY STROOCK & STROOCK &
150 FEDERAL STREET AND TREASURER LAVAN LLP
BOSTON, MA 02110 FIRST INTERNATIONAL 180 MAIDEN LANE
(617) 951-8437 BANCORP, INC. NEW YORK, NY 10038
FACSIMILE NO. (617) ONE COMMERCIAL PLAZA (212) 806-5400
951-8736 HARTFORD, CT 06103 FACSIMILE NO. (212)
(860) 241-2529 806-6006
FACSIMILE NO. (860)
241-2501

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

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If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--DATED SEPTEMBER , 1997

PROSPECTUS

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1,700,000 Shares

LOGO

Common Stock
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All of the 1,700,000 shares of common stock, par value $0.10 per share (the
"Common Stock"), offered hereby (the "Offering") are being sold by First
International Bancorp, Inc. (the "Company").

Prior to the Offering, there has been no public market for the Common Stock. It
is currently estimated that the public offering price will be between $12.00
and $14.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the public offering price. The Common Stock has been
approved for inclusion in The Nasdaq Stock Market's National Market (the
"Nasdaq National Market") under the symbol "FNCE."

SEE "RISK FACTORS" ON PAGES 8 TO 13 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
COMMON STOCK OFFERED HEREBY.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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Underwriting
Price to Discount and Proceeds to
Public Commissions (1) Company (2)
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Per Share................................. $ $ $
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Total (3)................................. $ $ $

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(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated to be $600,000.

(3) The Company has granted the Underwriters a 30-day over-allotment option to
purchase up to 255,000 additional shares of the Common Stock on the same
terms and conditions as set forth above. If all such additional shares are
purchased by the Underwriters, the total Price to Public will be $ , the
total Underwriting Discount and Commissions will be $ and the total
Proceeds to Company will be $ . See "Underwriting."

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The shares of Common Stock are offered by the several Underwriters subject to
delivery by the Company and acceptance by the Underwriters, to prior sale and
to withdrawal, cancellation or modification of the offer without notice.
Delivery of the shares to the Underwriters is expected to be made at the office
of Prudential Securities Incorporated, One New York Plaza, New York, New York,
on or about September , 1997.

PRUDENTIAL SECURITIES INCORPORATED KEEFE, BRUYETTE & WOODS, INC.

September , 1997

LOGO

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THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS
OR OTHER OBLIGATIONS OF THE COMPANY'S SUBSIDIARY, FIRST NATIONAL BANK OF NEW
ENGLAND (THE "BANK"), AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.

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CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
WHICH STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT
POSITION IN THE COMMON STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and related notes thereto
appearing elsewhere in this Prospectus. Unless otherwise indicated, all
information in this Prospectus (i) assumes that the Underwriters' over-
allotment option will not be exercised and (ii) has been adjusted to reflect
the 3.5-for-1 stock split approved by the Company's stockholders on June 26,
1997 and effected by the Company in August 1997 (the "Stock Split").
Additionally, unless otherwise indicated, all references to the "Company" shall
refer to the Company and the Bank on a combined basis. For a discussion of
certain factors that should be considered by the purchasers of the Common Stock
offered hereby, see "Risk Factors."

THE COMPANY

OVERVIEW

First International Bancorp, Inc., a Delaware corporation, is a one bank
holding company incorporated in 1985 and regulated by the Board of Governors of
the Federal Reserve System. Its principal asset and subsidiary is First
National Bank of New England, a national banking association established in
1955 and regulated by the Office of the Comptroller of the Currency (the
"OCC").

The Company specializes in providing credit, trade and depository services to
small and medium size manufacturing companies located in the United States and
in foreign "Big Emerging Markets" as defined by the U.S. Department of
Commerce. The Company serves its target market by offering flexible and
attractive terms to borrowers and manages its credit risk through the combined
utilization of commercial loan guarantee programs made available by three U.S.
federal agencies: the U.S. Small Business Administration (the "SBA"), the U.S.
Department of Agriculture (the "USDA") and the Export-Import Bank of the U.S.
("Ex-Im Bank").

For the federal fiscal year ending September 30, 1996, the Company was the
country's fifth largest SBA 7(a) lender measured by dollar volume, the third
largest USDA Business and Industry lender measured by dollar volume and the
second largest Ex-Im Bank lender measured by number of transactions. The
Company is the only "Top 5" lender in the nation for all three agencies, and
maintains preferred status for several jurisdictions and programs. In
recognition of the Company's efforts in promoting small business exports and
its high volume of loan originations, the Company received Ex-Im Bank's annual
"Small Business Bank of the Year Award" in May 1997.

As of June 30, 1997, the Company had total assets of $177.5 million, total
balance sheet loans of $118.2 million, total deposits of $158.7 million and
total stockholders' equity of $16.0 million. The Company had a total commercial
and international loan servicing portfolio of $344.6 million at December 31,
1996 which increased 26% to $433.1 million at June 30, 1997. The total
portfolio serviced for investors increased 56% from $98.7 million at December
31, 1994 to $153.9 million at December 31, 1995, increased 73% to $265.8
million at December 31, 1996 and increased 30% to $344.9 million at June 30,
1997. Net income for the year ending December 31, 1996 was $3.2 million, and
return on average assets and return on average equity were 2.1% and 25.5%,
respectively. Net income for the six months ended June 30, 1996 was $1.6
million and increased 26% to $2.1 million for the six months ended June 30,
1997. Return on average assets and return on average equity for the six months
ended June 30, 1997 were 2.5% and 27.8%, respectively. As of June 30, 1997, the
Bank was "well-capitalized" for federal bank regulatory capital adequacy
purposes.

LOAN ORIGINATIONS

Management believes that the specialized market knowledge and experience of
the Company's loan officers combined with the broad range of commercial loan
products offered enable the Company to satisfy the needs of its small and
medium size manufacturing clients. Brand recognition for the Company is
maintained by incorporating the servicemark Financing Manufacturers
Worldwide SM in its logos. The Company's domestic and international lending
relationships generally range from $150,000 to $2.5 million.

The Company's Commercial Banking Department underwrites lines of credit, term
loans and industrial property mortgages through the use of SBA, USDA and non-
guaranteed loans for businesses located primarily in the Northeast United
States. Commercial lending teams operate from the Hartford, Connecticut
headquarters, as well as from eight regional loan production or
"representative" offices located in Boston and Springfield, Massachusetts,
Providence, Rhode Island, Morristown, New Jersey, Pittsburgh and Philadelphia,
Pennsylvania, Rochester, New York and Washington, D.C. The Company's domestic
loan officers are trained to understand the specific financial needs of small
and medium size manufacturers, and to use government guarantee and other
commercial loan products to respond to those needs. Domestic loan officers
participate in industrial trade organizations representing the Company's target
market and conduct other marketing activities to reach potential borrowers.

The Company's International Banking Department underwrites Ex-Im Bank
guaranteed loans to small and medium size manufacturers located throughout the
United States and in nine "Big Emerging Markets." See "Business--International
Banking Services and Products." International lending activities support trade
flows between the United States and the "Big Emerging Markets," which have
grown 12% annually since 1990 and reached $473 billion in 1996. International
lending teams operate from the Hartford, Connecticut headquarters and are
assisted in their efforts by contractual international marketing
representatives who are actively involved in providing financial, accounting,
consulting and/or engineering services to manufacturers in their home
countries. Contractual marketing arrangements have been established with
professionals in Brazil, Mexico, Poland, Turkey and India. The Company began
lending internationally in 1994 and has increased such loan originations from
$397,000 in 1994 to $1.8 million in 1995, $13.6 million in 1996 and $27.3
million for the six months ended June 30, 1997.

UNDERWRITING

The Company's underwriting activities are initiated from each of its lending
offices and supported and approved at the Hartford, Connecticut headquarters.
Commercial lending officers analyze the creditworthiness of proposed borrowers
and evaluate each borrower's financial statements, credit reports, business
plans and other data to determine if the credit and proposed collateral satisfy
the Company's specific lending standards and policies. All credit memoranda are
reviewed by an independent loan officer and may require additional approval
depending on the particular circumstances of the financing package. Domestic
and international loans undergo a substantially identical approval process.

LOAN SALES

The Company achieves high returns while meeting the growing credit needs of
its target market by selling a portion of its commercial and international
loans on a non-recourse, servicing-retained basis. A separate Capital Markets
Department was established in 1996 to sell loans, including commercial and
international loans without federal guarantees. The Capital Markets Department
directs its resources toward identifying non-government guarantee secondary
loan markets as a further means of mitigating credit risk, leveraging capital
and replenishing liquidity. As of June 30, 1996, $20.5 million, or 10%, of the
loan portfolio serviced for investors did not have government guarantees or
credit enhancements compared to $57.9 million, or 17%, of such servicing
portfolio as of June 30, 1997.

DEPOSITS

The Company's lending and investing activities are funded primarily by
interest-bearing deposits from commercial borrowers, their principals and other
private banking clients. The Private Banking Department provides stable, low-
cost funding to the Company by managing the deposit base while offering a full
array of financial products to serve the personal needs of, and facilitate
relationships with, the Company's client base. The Private Bankers continually
seek to expand the Company's deposit base by soliciting deposits from
individuals who seek highly personalized service and to strengthen existing
deposit relationships by offering new financial products and services to both
existing and prospective clients.

STRATEGY

The Company's strategy is to serve small and medium size manufacturers by:
(i) expanding domestic loan origination activities in existing and new
geographic markets in the U.S., (ii) strengthening the Company's international
lending presence in the "Big Emerging Markets" by establishing new marketing
relationships and expanding on the Company's existing relationships, (iii)
expanding commercial loan sales activities, (iv) developing new financing
products, and (v) continuing to maintain low-cost funding for the Company while
offering existing and prospective clients a broad range of services through its
Private Banking Department.

The Company's headquarters and executive management are located at One
Commercial Plaza, Hartford, Connecticut 06103 and its telephone number is (860)
727-0700. The Company maintains a website at http://eximbankloans.com.

THE OFFERING

Common Stock Offered hereby....................... 1,700,000 shares
Common Stock to be Outstanding after the Offering. 7,481,085 shares (1)
Use of Proceeds................................... The Company intends to use
the net proceeds from the
Offering to support and
expand the Company's
international and domestic
financing activities.
Approximately 50% of the
proceeds will be
contributed to the Bank for
such purposes. See "Use of
Proceeds."
Nasdaq National Market symbol..................... FNCE

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(1) Excludes 1,050,508 shares of Common Stock reserved for issuance under the
Company's stock option plans and certain other option grants, of which
792,531 shares were subject to outstanding options as of the date hereof.
See "Capitalization," "Management--Stock Option Plans" and "Shares Eligible
for Future Sale."

RISK FACTORS

Investors should consider the material risk factors involved in connection
with an investment in the Common Stock and the impact to investors from various
events which could adversely affect the Company's business. See "Risk Factors."

SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

FOR THE SIX MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------ --------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- --------- ---------
(UNAUDITED)

INCOME STATEMENT DATA:
Interest income........ $ 7,319 $ 6,559 $ 7,997 $ 11,601 $ 13,305 $ 6,564 $ 6,622
Interest expense....... 3,660 2,891 3,150 4,869 5,741 2,836 3,011
-------- -------- -------- -------- -------- --------- ---------
Net interest income... 3,659 3,668 4,847 6,732 7,564 3,728 3,611
Provision for possible
loan losses........... (1,773) (2,225) (1,683) (1,237) (3,487) (554) (959)
-------- -------- -------- -------- -------- --------- ---------
Net interest income
after provision for
possible loan losses.. 1,886 1,443 3,164 5,495 4,077 3,174 2,652
Non-interest income:
Service charges and
other deposit fees... 386 484 385 398 424 229 204
Loan servicing income
and fees............. 164 288 493 896 1,475 605 1,121
Gain on loan sales:
SBA guaranteed........ 1,133 2,258 2,577 1,570 3,558 1,803 2,559
USDA guaranteed....... -- -- 136 822 805 458 1,205
Ex-Im working capital
guaranteed........... -- -- -- 104 201 51 89
Ex-Im medium term
guaranteed........... -- -- -- 248 340 73 967
Unguaranteed portions
of SBA and USDA...... -- -- -- -- 842 275 370
Other commercial...... -- -- -- 97 91 33 228
Residential........... 113 153 17 18 7 3 59
-------- -------- -------- -------- -------- --------- ---------
Total gain on loan
sales............... 1,246 2,411 2,730 2,859 5,844 2,696 5,477
-------- -------- -------- -------- -------- --------- ---------
Gain on branch sale.... -- -- -- -- 2,202 -- --
Gain on securities..... 230 392 -- -- -- -- --
-------- -------- -------- -------- -------- --------- ---------
Total non-interest
income.............. 2,026 3,575 3,608 4,153 9,945 3,530 6,802
-------- -------- -------- -------- -------- --------- ---------
Operating expenses..... (3,756) (4,576) (5,129) (6,128) (8,425) (3,900) (5,909)
-------- -------- -------- -------- -------- --------- ---------
Income before income
taxes................. 156 442 1,643 3,520 5,597 2,804 3,545
Provision for income
taxes................. (48) (137) (583) (1,494) (2,353) (1,179) (1,492)
-------- -------- -------- -------- -------- --------- ---------
Net income............. $ 108 $ 305 $ 1,060 $ 2,026 $ 3,244 $ 1,625 $ 2,053
======== ======== ======== ======== ======== ========= =========

AS OF DECEMBER 31, AS OF JUNE 30,
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1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- --------- ---------
(UNAUDITED)

BALANCE SHEET DATA:
Total assets........... $105,663 $109,735 $125,609 $141,223 $161,642 $ 164,262 $ 177,471
Loans:
SBA.................... 4,928 11,324 29,939 37,873 31,692 46,898 36,750
USDA................... -- -- 535 3,265 3,211 3,115 5,816
Ex-Im working capital.. -- -- -- 184 3,419 999 2,725
Ex-Im medium term...... -- -- 153 120 2,067 99 2,487
Other commercial....... 22,689 20,077 20,544 28,826 33,713 31,839 38,680
Commercial mortgage.... 8,346 13,911 16,238 15,518 18,808 18,912 16,950
Investment property
mortgage.............. 10,942 9,610 9,396 7,698 7,620 6,882 6,286
Residential and other
consumer.............. 15,043 16,491 18,313 13,508 14,097 13,815 8,495
-------- -------- -------- -------- -------- --------- ---------
Total loans.......... 61,948 71,413 95,118 106,992 114,627 122,559 118,189
Total cash and cash
equivalents........... 11,190 11,612 7,585 10,050 18,867 24,524 16,440
Total investment
securities............ 26,015 19,727 13,981 11,631 15,874 9,645 15,767
Core deposits (1)...... 51,911 63,719 76,622 104,379 105,414 114,971 117,566
Time deposits.......... 41,573 32,068 35,227 23,982 38,902 34,980 41,081
-------- -------- -------- -------- -------- --------- ---------
Total deposits....... 93,484 95,787 111,849 128,361 144,316 149,951 158,647
Total stockholders'
equity................ 8,518 8,823 9,675 11,602 14,216 12,985 15,995

(see footnotes on following page)

FOR THE SIX
FOR THE YEARS ENDED DECEMBER 31, MONTHS ENDED JUNE 30,
---------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)

PER COMMON SHARE DATA:
Net income per common
share (2)............. $ 0.02 $ 0.06 $ 0.18 $ 0.33 $ 0.54 $ 0.27 $ 0.34
Book value per common
share................. $ 1.63 $ 1.69 $ 1.84 $ 2.19 $ 2.63 $ 2.42 $ 2.94
Average weighted shares
(2)................... 5,512,138 5,512,138 5,821,223 6,063,213 6,050,379 6,044,817 6,058,945
Dividend payout ratio
(2)(3)................ -- -- -- 8.55% 21.32% 21.24% 16.85%
PERFORMANCE RATIOS:
Net interest spread
(4)................... 3.61% 3.55% 4.35% 4.82% 4.79% 4.90% 4.21%
Net interest margin
(4)(5)................ 4.05% 3.97% 4.68% 5.56% 5.48% 5.53% 5.04%
Return on average
equity (4)............ 1.30% 3.58% 11.70% 19.31% 25.49% 23.62% 27.84%
Return on average
assets (4)............ 0.11% 0.30% 0.93% 1.51% 2.06% 1.85% 2.53%
Efficiency ratio (6)... 66.07% 63.18% 60.66% 56.29% 55.04% 53.73% 56.75%
ASSET QUALITY RATIOS:
Allowance for loan
losses as a percentage
of loans.............. 0.81% 2.00% 2.10% 1.87% 2.62% 1.67% 2.54%
Allowance for loan
losses as a percentage
of non-performing
loans................. -- 188.60% 89.06% 158.93% 133.23% 102.11% 115.65%
Non-performing loans as
a percentage of loans. -- 1.06% 2.36% 1.18% 1.96% 1.60% 2.19%
Net charge-offs as a
percentage of average
outstanding loans (4). 5.35% 1.97% 1.38% 1.24% 2.12% 0.95% 1.64%
Total losses as a
percentage of average
outstanding loans
serviced (4)(7)....... 3.60% 1.16% 0.69% 1.18% 1.33% 0.47% 1.13%
Provision for loan
losses as a percentage
of average outstanding
loans (4)............. 2.79% 3.38% 2.09% 1.24% 2.97% 0.95% 1.64%
CAPITAL RATIOS:
Total capital (to risk-
weighted assets)...... 11.64% 10.77% 9.28% 10.73% 11.62% 10.58% 11.50%
Tier 1 capital (to
risk-weighted assets)
(8)................... 12.34% 12.03% 11.27% 9.47% 10.36% 9.33% 10.25%
Tier 1 capital (to
average assets)....... 8.21% 7.96% 7.87% 7.71% 8.44% 7.56% 8.97%
Equity to assets ratio
(9)................... 8.31% 8.33% 7.93% 7.84% 8.08% 7.84% 9.07%

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(1) Represents checking and savings accounts.
(2) Includes common stock equivalents associated with any Company stock options
issued one year prior to the expected public offering date of September
1997. In accordance with Staff Accounting Bulletin Topic 4-D, for all
periods presented, the effect of such equivalents was computed under the
treasury stock method, assuming the repurchase of such options by the
Company at an assumed offering price of $13.00 per share (the midpoint of
the estimated range set forth on the cover page of this Prospectus).
(3) Represents cash dividends paid per share as a percentage of net income per
share.
(4) Annualized for the six month periods.
(5) Calculated as the differential between interest income and interest expense
as a percentage of average interest-bearing assets during the period
presented.
(6) Amount reflects non-interest expense as a percentage of net interest income
plus non-interest income and excludes the gain on the branch sale for the
year ended December 31, 1996.
(7) Amount reflects the Company charge-offs on portfolio loans plus amounts
paid by government guarantee agencies pursuant to guarantees on loans
serviced by the Company, as a percentage of total loans serviced.
(8) The Company's Tier 1 capital includes common equity, less goodwill and any
disallowed intangibles.
(9) Represents average equity as a percentage of average assets.

FOR THE SIX
MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------ -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- -------- -------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)

OPERATING DATA:
Commercial loan
originations and sales:
SBA loan originations.. $17,202 $28,879 $ 58,753 $ 37,522 $ 85,303 $ 45,139 $ 47,302
SBA guaranteed loan
sales................. $13,731 $21,659 $ 39,607 $ 27,413 $ 58,878 $ 30,079 $ 33,985
SBA unguaranteed loan
sales................. $ -- $ -- $ -- $ -- $ 29,867 $ 4,550 $ 6,327
USDA loans
originations.......... $ -- $ -- $ 2,825 $ 19,241 $ 12,700 $ 7,180 $ 17,679
USDA guaranteed loan
sales................. $ -- $ -- $ 2,260 $ 14,984 $ 10,199 $ 5,784 $ 14,143
USDA unguaranteed loan
sales................. $ -- $ -- $ -- $ -- $ 3,207 $ 2,699 $ 815
Ex-Im working capital
loan originations..... $ -- $ -- $ -- $ 6,882 $ 23,300 $ 1,700 $ 10,625
Ex-Im working capital
loan sales............ $ -- $ -- $ -- $ 2,632 $ 8,614 $ 1,100 $ 8,179
Ex-Im medium term loan
originations.......... $ -- $ -- $ 397 $ 1,814 $ 13,617 $ 2,289 $ 27,297
Ex-Im medium term loan
sales................. $ -- $ -- $ 245 $ 1,814 $ 12,745 $ 2,289 $ 27,297
Other commercial loan
sales................. $ -- $ -- $ -- $ 8,843 $ 9,329 $ 4,767 $ 8,879
Total commercial loan
sales................. $13,731 $21,659 $ 42,112 $ 55,686 $132,839 $ 51,268 $ 99,625
Commercial loans
serviced for the Bank
and others
(at period end)........ $66,631 $95,501 $157,557 $226,294 $344,622 $288,015 $433,057

RISK FACTORS

An investment in the shares of Common Stock involves a high degree of risk.
Prospective investors should carefully consider the following risk factors, in
addition to the other information set forth in this Prospectus, in connection
with the investment in the shares of Common Stock.

When used in this Prospectus, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend" and similar
expressions are intended to identify forward-looking statements regarding
events, conditions and financial trends that may affect the Company's future
plans of operations, business strategy, results of operations and financial
position. Prospective investors are cautioned that any forward-looking
statements are not guarantees of future performance and are subject to risks
and uncertainties and that actual results may differ materially from those
included within the forward-looking statements as a result of various factors.
Factors that could cause or contribute to such differences include, but are
not limited to, those described below, and under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Prospectus.

RISKS ASSOCIATED WITH GOVERNMENT GUARANTEE LOAN PROGRAMS. A substantial
portion of the Company's business depends upon the continuation of various
government guarantee loan programs, such as the SBA, USDA and Ex-Im Bank loan
guarantee programs. Of the total loans originated by the Company during the
year ended December 31, 1996 and the six months ended June 30, 1997,
approximately 73% and 78% by principal amount, respectively, were SBA loans,
USDA loans or Ex-Im Bank loans. There can be no assurance that guarantee
programs currently used by the Company will continue to be available in their
present form. The ongoing federal budget debate has included discussions about
the role and relevance of the loan guarantee programs used by the Company. The
SBA experienced funding crises in 1993, 1994 and 1995 which impeded the
Company and other lenders from using the agency's programs consistently within
their intended guidelines. In 1995, Congressional inaction on the budget
closed the SBA and Ex-Im Bank for 22 days.

In May 1997, the SBA mistakenly projected a funding shortfall for the fiscal
year ending September 30, 1997 but corrected its prognosis after 30 days. The
USDA has projected that its Business and Industry Program (the "B and I
Program") will have a funding shortfall for the current federal fiscal year
ending September 30, 1997.

The Ex-Im Bank charter is currently being evaluated by the federal
government for renewal, and while the Company believes renewal is likely, this
renewal process has prompted discussion concerning the continued relevance and
appropriate funding level for such a program. The Company believes that the
Ex-Im Bank small business programs will be fully funded for the current fiscal
year. Approximately 20% and 29% of the Company's originations were made under
Ex-Im Bank programs for the year ended December 31, 1996 and the six months
ended June 30, 1997, respectively.

Any material increase in government guarantee loan program costs, reduction
in government risk coverage, or decrease in program availability may have a
material adverse impact on the Company's financial condition and results of
operations.

ABILITY OF THE COMPANY TO CONTINUE ITS GROWTH STRATEGY. The Company has
achieved recent growth and profitability in its operations by following a non-
traditional operating strategy. The Company derives a majority of its revenues
from non-interest income, principally gains on the sale of commercial and
international loans and related loan servicing income. Such loan-related non-
interest income increased 92%, from $3.8 million in 1995 to $7.3 million in
1996, and 100% from $3.3 million for the six months ended June 30, 1996 to
$6.6 million for the six months ended June 30, 1997 as the Company originated
and sold an increasing number of loans on a servicing-retained basis.
Historical growth rates are not necessarily indicative of future results, and
it may become more difficult for the Company to maintain historical rates of
growth as it expands. The Company's ability to implement its strategy for
continued growth of its commercial and international loan origination and sale
activities largely depends on its ability to attract and retain new clients
for the Company's services in a

competitive market and on the business growth of those clients. This will
require the Company to achieve a greater share of its existing markets as well
as to successfully expand into new geographic markets, potentially requiring
additional personnel, new offices or new marketing representatives which could
affect the Company's profitability. Moreover, as part of its growth strategy,
the Company expects to increase originations of non-government guarantee
loans, including international loans, which may result in increased credit and
other business risks associated with lending. A significant loss in these
activities could have a material adverse effect on the Company's financial
condition and results of operations. See "Business--Business Strategy."

POTENTIAL DECREASE IN VALUATION OF SERVICING ASSETS. The Company sells a
majority of its loans on a non-recourse, servicing-retained basis. As the
servicer of the loans, the Company collects interest and principal over the
term of the loan from the borrower and retains a portion of the interest
collected as a loan servicing fee. Gains on the sale of such loans consist of
any premiums received on the sale, as well as a servicing asset if the
Company's loan servicing fee is greater than the amount determined to
represent "adequate compensation" (as defined in Statement of Financial
Accounting Standards ("SFAS") No. 125) for such loan type. In recording any
gain when only a portion of a loan is sold, the Company also follows the
guidance provided by Emerging Issues Task Force Issue 88-11. The Company
calculates the value of any servicing asset recognized at the time of a loan
sale by estimating (i) the amount of "adequate compensation," (ii) the
estimated life of the underlying loan and (iii) the discount factor used in
the present value calculation of the servicing asset. Based on these factors
and the principal amount of the loan serviced, the Company records a servicing
asset on its balance sheet which is amortized over the estimated life of the
loan as a charge to servicing income. A portion of the cash payments received
from the borrower as interest is credited to this non-interest income account
as collected.

Realization of the servicing asset is subject to the prepayment and loss
characteristics of the underlying loan. Estimates of prepayment rates are made
based on management's expectations of future prepayment rates, which are
based, in part, on the historic performance of the Company's loans and other
considerations. No assurance can be given that management's estimates are
accurate. If actual prepayments occur more quickly than management's
estimates, the carrying value of the servicing asset may have to be written
down. Furthermore, there is no active market for such servicing assets and, in
some cases, the Company is contractually prohibited from selling such
servicing rights and, therefore, there is no assurance that the Company would
be able to sell the servicing assets at their stated balance sheet values. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Accounting for Loan Sales."

ECONOMIC CONDITIONS; GEOGRAPHIC CONCENTRATION. All of the Company's present
domestic lending activity is focused within the Northeast, and although the
Company's lending activity has recently expanded throughout the Northeast,
there remains a significant lending concentration in the State of Connecticut.
The Company believes that certain parts of the Northeast have emerged more
slowly from the 1989-1992 recession than other areas of the country. The
Northeast has been characterized as a region with certain economic risks,
including higher "embedded" costs of doing business, including higher taxes,
fluctuating real estate values and the declining importance of manufacturing
as the key industry in the region. Although some of the Company's borrowers
have diversified their businesses from exclusive reliance on this region,
continued economic sluggishness in the Northeast combined with uncompetitive
economic and regulatory conditions, may limit the Company's ability to operate
profitably. Consequently, the Company has begun to expand its business beyond
the Northeast; however, there can be no assurance that local, regional,
national and international economic conditions affecting the supply of and
demand for U.S. manufactured products would not adversely affect the Company's
profitability in the future. The Company's business may be adversely affected
by periods of economic slowdown or recession in the geographic markets served
by the Company which could negatively impact the Company's ability to attract
and retain deposits and originate loans, the ability of the Company's
borrowers to repay loans, the value of any collateral securing such loans, and
consequently, the financial condition and results of operations of the
Company. See "Business--Loan Originations."

COMMERCIAL LENDING RISKS. At June 30, 1997, the Company's outstanding loan
portfolio was $118.2 million, of which commercial loans represented 93%,
exposing the Company to risks inherent in financing based upon analyses of
credit risk, including risks associated with the value of underlying
collateral, especially real

estate, the adequacy of the documentation relating to such collateral and
other more intangible factors considered in making commercial loans. Although
the Company provides an allowance for loan losses, the Company's profitability
may be negatively impacted by errors in risk analyses and by loan defaults.
Furthermore, the ability of certain borrowers to repay such loans may be
adversely affected by any downturn in general economic conditions. In
addition, a decrease in pledged collateral value could occur due to changes in
equipment resale market conditions, the failure by users of collateral to
properly maintain and protect such other collateral or other events. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

IMPACT OF CHANGES IN INTEREST RATES. The Company's results of operations may
be directly affected by the levels of and fluctuations in interest rates.
Changes in interest rates may affect the Company's net interest income by
impairing the Company's ability to earn a spread between the interest received
on its loans and the cost of borrowings, reduce gains from loan sales, result
in higher loan losses, reduce loan originations and corresponding loan
servicing income and require write downs to servicing assets. A substantial or
sustained increase in interest rates could adversely affect the Company's
ability to originate or sell loans with returns consistent with past
practices, and because most of the loans serviced are variable rate, increases
in interest rates could impact the borrowers' abilities to meet scheduled debt
service requirements. A significant decline in interest rates could decrease
the size of the Company's loan servicing portfolio by increasing the level of
loan prepayments if borrowers chose to refinance their loans. Additionally, to
the extent that servicing assets have been recognized on the books of the
Company, higher than anticipated prepayment rates or losses would require the
Company to write down the value of such servicing assets thereby, adversely
impacting earnings. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

COMPETITION FOR COMMERCIAL AND EXPORT LOANS. The Company's business is
highly competitive. The Company competes for commercial and export borrowers
with other commercial and savings banks, savings and loan associations, credit
unions, finance companies, mutual funds, insurance companies, brokerage and
investment banking firms and certain other nonfinancial institutions, many of
whom are able to devote far greater resources than the Company to market,
underwrite and service loans to the same customer base. As a bank holding
company and national bank, respectively, the Company and the Bank are subject
to extensive regulation and supervision, including in many cases regulation
which limits the types and scope of their activities. Nonfinancial
institutions which compete with the Company for government guarantee loan
programs are not subject to such extensive regulation and supervision. For
example, as a financial institution, the Bank is subject to limitations on the
amount of unguaranteed portions of SBA guaranteed loans which it may sell or
securitize. See "Regulation and Supervision." There can be no assurance that
the Company will be able to originate the same or an increasing volume of
loans in the lines of business in which it has operated, or with the same or
increasing returns in an environment of heightened competition. Furthermore,
future market conditions may impede the origination of loans sold on a
servicing-retained basis and may change the demand for and pricing of such
loans, all of which may have a material adverse impact on the Company's growth
and profitability. See "Business--Competition."

POTENTIAL FOR POLITICAL AND ECONOMIC INSTABILITY IN FOREIGN MARKETS. An
increasingly significant aspect of the Company's business focuses on borrowers
located in Mexico, Brazil, Turkey, India, Poland, Argentina, South Africa,
Indonesia and the Philippines. These originations represented 7% and 21% of
total loans originated by the Company for the year ended December 31, 1996 and
the six months ended June 30, 1997, respectively. The majority of such loans
have been made to borrowers in Brazil. In these countries, some creditworthy
middle market borrowers have experienced difficulty in obtaining competitively
priced financing from their often unstable local financial services sectors.
To varying degrees, each of these countries has experienced economic
difficulties, including periods of slow or negative growth, large government
budget deficits, high inflation, currency devaluation, government influence
over the private sector and unavailability of foreign exchange, including U.S.
dollars. Some of these countries have a history of political and economic
instability. The Company depends, to a significant extent, on the marketing
efforts of foreign professionals with whom the Company has established
contractual relationships for foreign loan origination. Serious economic
downturns or a return to non-democratic forms of government in one or more of
these countries, particularly Brazil, could limit

the ability of these foreign representatives as well as the Company to
effectively market the Company's loan and other products, thus reducing the
ability of the Company to originate international loans and adversely
affecting the Company's financial condition and results of operations. See
"Business--International Banking Services and Products."

DEPENDENCE ON MARKETING REPRESENTATIVES. The Company has contractual
marketing arrangements with various professional firms or individuals in its
targeted foreign markets for local solicitation and coordination of Ex-Im Bank
medium term loans. There can be no assurance that these professionals will
continue to work on behalf of the Company, rather than with local or U.S.
competitors. In 1996 related gains on loan sales from such sources represented
10% of pre-tax income, excluding the non-recurring branch sale gain, and such
amounts represented 27% of pre-tax income for the six months ended June 30,
1997. International loan originations are expected to represent an
increasingly higher proportion of the Company's income in future periods.
Accordingly, the loss of such marketing representatives could have a material
impact on the volume of Ex-Im Bank medium term loans originated and a
resulting material adverse effect on the Company's financial condition and
results of operations. See "Business--International Banking Services and
Products--International Banking--Big Emerging Markets."

DEPENDENCE ON KEY EMPLOYEES. The Company's continued growth and
profitability depend upon the abilities and experience of members of its
senior management, including its Chairman and President, Brett N. Silvers, and
certain of the Company's Executive Vice Presidents, who would be difficult to
replace. The loss of the services of any of these key employees could have a
material adverse impact on the Company. The future success of the Company also
depends to a significant degree on its ability to identify, attract and retain
additional qualified personnel. There can be no assurance that the Company
will be successful in attracting or retaining additional qualified personnel.
See "Management--Employment Agreements; Key-Man Insurance Policies."

REGULATION AND SUPERVISION. Bank holding companies and banks operate in a
highly regulated environment and are subject to extensive supervision and
examination by several federal regulatory agencies. The Company is subject to
the Bank Holding Company Act of 1956, as amended (the "BHCA"), and to
regulation and supervision by the Board of Governors of the Federal Reserve
System (the "FRB"). The Bank, a national banking association, is subject to
regulation and supervision by the OCC. These regulations are intended
primarily for the protection of depositors rather than for the benefit of
investors. Federal laws and regulations govern numerous matters, including
changes in the ownership or control of banks and bank holding companies,
maintenance of adequate capital and the financial condition of a financial
institution, permissible types, amounts and terms of extensions of credit and
investments, permissible non-banking activities, the level of reserves against
deposits, and restrictions on dividend payments. The federal regulatory
agencies possess cease and desist powers to prevent or remedy unsafe or
similar unsound practices or violations of law by bank holding companies and
national banks. These and other restrictions limit the manner in which the
Company and the Bank may conduct business and obtain financing. Furthermore,
the commercial banking business is affected not only by general economic
conditions, but also by the monetary policies of the FRB. Changes in monetary
or legislative policies may affect the interest rates the Bank must offer to
attract deposits and the interest rates it must charge on its loans, as well
as the manner in which it offers deposits and makes loans. These monetary
policies have had, and are expected to continue to have, significant effects
on the operating results of commercial banks, including the Bank. See
"Regulation and Supervision."

CONCENTRATED OWNERSHIP INTEREST AND POSSIBLE EFFECT. Following consummation
of the Offering, the Company's executive officers, directors and certain other
stockholders (the "Principal Owners") will beneficially own approximately
64.21% of the outstanding shares of Common Stock (approximately 62.09% of such
shares of Common Stock if the Underwriters' over-allotment option is exercised
in full) (assuming no exercise of any outstanding stock options). Accordingly,
the Principal Owners will be able to control the outcome of all matters
required to be submitted to the stockholders of the Company for approval,
including decisions relating to the election of the Board of Directors of the
Company, the determination of the day-to-day corporate and management policies
of the Company. The Principal Owners will also be able to control the outcome
of any proposed merger or consolidation of the Company under applicable
Delaware law. In addition, the Principal

Owners' significant ownership interest in the Company may discourage third
parties from seeking to acquire control of the Company which may adversely
affect the market price of the Common Stock. See "Management," "Principal
Stockholders" and "Description of Capital Stock--Delaware Law and Certain
Charter and By-Law Provisions."

DILUTION. Purchasers of the Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value per share of
Common Stock of $8.20 per share. In the event that the Underwriters exercise
their over-allotment option in full, resulting in an additional 255,000 shares
of Common Stock being sold, purchasers of the Common Stock offered hereby will
experience immediate and substantial dilution in net tangible book value per
share of Common Stock of $7.96 per share. See "Dilution."

BROAD DISCRETION IN THE USE OF PROCEEDS. The Company intends to contribute
approximately 50% of the net proceeds of the Offering to the capital of the
Bank to support future growth in the Bank's domestic and international lending
and other financing activities. Accordingly, the Company will have broad
discretion as to the application of such proceeds. An investor will not have
the opportunity to evaluate the economic, financial and other relevant
information utilized by the Company in determining the application of such
proceeds. See "Use of Proceeds."

NO PRIOR TRADING MARKET; VOLATILITY OF STOCK PRICE. Prior to the Offering,
there has been no public market for the Common Stock and there can be no
assurance that an active trading market will develop or be sustained after the
Offering or that if such a market develops, the market price will not decline
below the public offering price. The public offering price of the Common Stock
will be determined through negotiations between the Company and the
representatives of the Underwriters, and may not be indicative of future
market prices. See "Underwriting." Among the factors to be considered in
making such determination will be prevailing market conditions, the Company's
financial and operating history and condition, its prospects and prospects for
its industry in general, the management of the Company and the market prices
of securities for companies in businesses engaged in activities similar to
that of the Company. The market price of the Common Stock could be subject to
wide fluctuations in response to quarter-to-quarter variations in operating
results of the Company or its competitors, changes in earnings estimates by
analysts or changes in general economic conditions.

SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, the
Company will have 7,481,085 shares of Common Stock outstanding (7,736,085
shares if the Underwriters' over-allotment option is exercised in full),
2,360,818 shares (2,615,818 shares if the Underwriters' over-allotment option
is exercised in full) of which will be freely tradeable without restriction or
the requirement of future registration under the Securities Act of 1933, as
amended (the "Securities Act"). All of the remaining 5,127,267 shares of
Common Stock are either "restricted securities" as defined by Rule 144
promulgated under the Securities Act or are held by persons who may be deemed
"affiliates" of the Company. Of such shares, 289,459 shares will be eligible
for sale without restriction and without lock-up agreement in the public
market immediately following commencement of the Offering and 39,200 shares
will become eligible for sale without restriction 90 days following
commencement of the Offering.

Officers, directors and stockholders of the Company, owning upon completion
of the Offering, in the aggregate 4,764,733 shares of Common Stock, have
agreed that they will not, subject to certain exceptions, for a period of 180
days from the date of this Prospectus, directly or indirectly, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale,
contract of sale, pledge, grant of any option to purchase or other sale or
disposition) of any shares of Common Stock or other capital stock of the
Company or any securities convertible into, or exercisable or exchangeable
for, any shares of Common Stock, or other capital stock of the Company without
the prior written consent of Prudential Securities Incorporated, on behalf of
the Underwriters. Further, holders of outstanding stock options for, in the
aggregate, an additional 723,656 shares of Common Stock are subject to 180 day
lock-up agreements with Prudential Securities Incorporated, on behalf of the
Underwriters. The Company has agreed that it will not, for a period of 180
days from the date of this Prospectus, directly or indirectly, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer,

sale, offer of sale, contract of sale, pledge, grant of any option to purchase
or other sale or disposition) of any shares of Common Stock or other capital
stock of the Company or any securities convertible into, or exercisable or
exchangeable for, any shares of Common Stock, or other capital stock of the
Company without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, except that such agreement does
not prevent the exercise of outstanding options or the Company from granting
additional options under the Company's stock option plans. Prudential
Securities Incorporated may, in its sole discretion and at any time without
notice, release all or any portion of the securities subject to lock-up
agreements.

Upon the expiration of or release from such lock-up agreements, 4,183,639
shares will be eligible for immediate sale under Rule 144 or Rule 701 and
316,402 additional shares subject to outstanding vested stock options could
also be sold, subject in some cases to compliance with certain volume
limitations.

Sales of such shares in the future could adversely affect the prevailing
market price of the Common Stock. No prediction can be made as to the effect,
if any, that future sales of shares or the availability of shares for sale
will have on the market price for Common Stock prevailing from time to time.
Sales of substantial amounts of Common Stock in the public market, or the
perception of the availability of shares for sale, could adversely affect the
prevailing market price of the Common Stock and could impair the Company's
ability to raise capital through the sale of its equity securities.

ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW, CERTAIN CHARTER AND BY-LAW
PROVISIONS AND EMPLOYMENT AGREEMENT. Certain provisions of the Company's
Amended and Restated Certificate of Incorporation (the "Charter") and Amended
and Restated By-laws (the "By-laws") and of Delaware law could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of the Company. Such
provisions may adversely affect the price that investors might be willing to
pay in the future for Common Stock. These provisions require that the Company
have a Board of Directors comprised of three classes of directors with
staggered terms of office, provide for the issuance of "blank check" preferred
stock by the Board of Directors without stockholder approval, require that all
stockholder actions be taken at duly called annual or special meetings and not
by written consent, and impose various procedural and other requirements that
could make it more difficult for stockholders to effect certain corporate
actions. Additionally, pursuant to the terms of Mr. Silvers' employment
agreement with the Company and the Bank, in the event that the Chase family,
who will own, in the aggregate, 48.97% of the Common Stock after the Offering,
enter into an agreement to sell all or a majority of their shares, the Chase
family has agreed to cause the buyer to give Mr. Silvers the opportunity to
sell the same percentage of his shares of Common Stock on the same terms as
the Chase family proposes to sell their shares. See "Management--Employment
Agreements; Key-Man Insurance Policies." This provision could have the effect
of making it more difficult for a third party to acquire control of the
Company through a purchase of the shares owned by the Chase family.
Furthermore, the Company is subject to the anti-takeover provisions of Section
203 of the Delaware General Corporation Law (the "DGCL"), which prohibits the
Company from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person first becomes an "interested stockholder," unless the
business combination is approved in a prescribed manner. The application of
Section 203 could also have the effect of delaying or preventing a change of
control of the Company. See "Description of Capital Stock."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,700,000 shares of
Common Stock offered hereby, based on an assumed public offering price of
$13.00 per share (the midpoint of the estimated range set forth on the cover
page of this Prospectus), after deducting the underwriting discounts and
commissions and estimated offering expenses payable by the Company, are
estimated to be $20,174,000 ($23,290,100 if the Underwriters' over-allotment
option is exercised in full).

The Company intends to use the net proceeds to support and expand the
Company's on-going international and domestic lending and other financing
activities, including by investing in technological improvements to improve
the delivery of services and products. The Company anticipates that
approximately 50% of the net proceeds will be contributed to the Bank. The
balance of the net proceeds will be retained by the Company to support the
Bank's operations. The Company may also establish one or more non-bank
subsidiaries to expand the Company's operations. The Company has not yet
allocated specific amounts of such net proceeds to any of these uses. Pending
such uses, the net proceeds will be invested in short-term, investment grade,
interest-bearing securities and deposit accounts.

DIVIDEND POLICY

Holders of the Common Stock are entitled to receive dividends when, as, and
if declared by the Board of Directors, out of funds legally available for such
purpose. The Company has paid quarterly dividends to its stockholders since
October 1995. For each quarter from October 1995 to July 1997, the Company
paid quarterly cash dividends equal to $0.03 per share (adjusted to reflect
the Stock Split).

The Company currently plans to continue to declare and pay quarterly cash
dividends on approximately the same basis to the holders of the Common Stock.
However, there can be no assurance that dividends will be declared and paid in
the future. Additionally, the Company's ability to declare and pay dividends
depends upon the receipt of dividends from the Bank. In determining whether,
and to what extent, the Company should declare and pay dividends, the
Company's Board of Directors will consider, among other factors, the Company's
consolidated financial condition and results of operations, tax
considerations, general economic conditions and capital requirements. The
payment of dividends by the Company and the Bank is also restricted by the
requirements of federal banking law. See "Regulation and Supervision."

DILUTION

Purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution in the pro forma book value of the Common Stock from the
public offering price. The net tangible book value of the Company as of June
30, 1997 was $15,690,557 or $2.72 per share of Common Stock after giving
effect to the Stock Split. Net tangible book value per share represents the
amount of the Company's total tangible assets less total liabilities, divided
by the total number of shares of Common Stock outstanding.

After giving effect to the sale of the 1,700,000 shares of the Common Stock
offered hereby and the receipt by the Company of the estimated net proceeds
therefrom, based on an assumed public offering price of $13.00 per share (the
midpoint of the estimated range set forth on the cover page of this
Prospectus), and after deducting underwriting discounts and commissions and
estimated offering expenses payable by the Company, the pro forma net tangible
book value of the Company as of June 30, 1997 would have been approximately
$35,864,557, or $4.80 per share. This represents an immediate increase in net
tangible book value of $2.08 per share to existing stockholders and an
immediate and substantial dilution of $8.20 per share to new investors. The
following table illustrates this per share dilution:

Assumed public offering price per share......................... $13.00
Net tangible book value per share as of June 30, 1997.......... $2.72
Increase per share attributable to new stockholders............ 2.08
Pro forma net tangible book value per share as of June 30, 1997. 4.80
------
Dilution per share to new investors............................. $ 8.20
======

Assuming the Underwriters' over-allotment option is exercised in full,
1,955,000 shares would be issued in the Offering and the pro forma net
tangible book value per share of Common Stock and the dilution per share to
new stockholders would be $5.04 and $7.96, respectively.

The following table summarizes, as of the date hereof, after giving effect
to the sale of the shares of the Common Stock offered hereby, the number of
shares of Common Stock purchased from the Company, the net consideration paid
and the average net price per share paid by existing stockholders and by
purchasers of the Common Stock in the Offering:

SHARES PURCHASED NET CONSIDERATION
----------------- ------------------- AVERAGE NET PRICE
NUMBER PERCENT AMOUNT PERCENT PAID PER SHARE
--------- ------- ----------- ------- -----------------

Existing Stockholders... 5,781,085 77% $ 8,823,996 30% $ 1.53
New Investors........... 1,700,000 23% 20,174,000 70% 11.87
--------- --- ----------- --- ------
Total................. 7,481,085 100% $28,997,996 100% $ 3.83
========= === =========== === ======

The foregoing table assumes no exercise of any stock options subsequent to
September 15, 1997. As of September 15, 1997, an aggregate of 1,050,508 shares
of Common Stock reserved for issuance under the Company's stock option plans
and certain other option grants, of which 792,531 shares at a weighted average
exercise price of $3.96 per share, were subject to outstanding options. To the
extent such options are exercised, there will be further dilution to new
stockholders.

CAPITALIZATION

The following table sets forth the capitalization of the Company at June 30,
1997, and as adjusted to reflect the sale of the Common Stock offered hereby
and the receipt by the Company of the estimated net proceeds therefrom, based
on the public offering price of $13.00 per share (the midpoint of the
estimated range set forth on the cover page of this Prospectus) and after
deducting the underwriting discounts and commissions set forth on the cover
page of this Prospectus and estimated offering expenses of $600,000 payable by
the Company. The information set forth below should be read in conjunction
with the consolidated financial statements and related notes thereto included
elsewhere in this Prospectus.

AT JUNE 30, 1997
---------------------------
ACTUAL AS ADJUSTED(1)
----------- --------------

Stockholders' equity:
Preferred Stock, $0.10 par value; 2,000,000
shares authorized and no shares issued and
outstanding...................................... $ -- $ --
Common Stock, $0.10 par value; 12,000,000 shares
authorized and 5,773,560 shares issued and
outstanding, actual; 12,000,000 shares
authorized and 7,473,560 shares issued and
outstanding, as adjusted......................... 577,356 747,356
Paid-in capital in excess of par value............. 8,233,407 28,237,407
Stockholder note receivable........................ (953,967) (862,452)
Unrealized holding loss on investments available
for sale, net..................................... (30,126) (30,126)
Retained earnings.................................. 8,168,801 8,003,801
----------- -----------
Total stockholders' equity..................... $15,995,471 $36,095,986
=========== ===========

- --------
(1) Includes a charge to earnings of $165,000 equal to the bonus payable by
the Company to Mr. Silvers, Chairman of the Board and President of the
Company and the Bank in connection with the forgiveness of certain
interest payments and reimbursement of the tax liabilities associated
therewith with respect to a promissory note issued by Mr. Silvers to the
Company. See "Management--Employment Agreements; Key-Man Insurance
Policies."

Set forth below is a summary of regulatory minimum capital requirements, the
Bank's June 30, 1997 actual capital ratios and the Bank's capital ratios
adjusted to reflect the sale of the Common Stock offered hereby based on the
receipt by the Bank of approximately 50% of the net proceeds therefrom. See
also "Regulation and Supervision--Capital Adequacy."

REGULATORY PRO FORMA
MINIMUM ACTUAL AS ADJUSTED
---------- ------ -----------

Bank regulatory capital ratios:
Risk-based:
Tier 1...................................... 4.00% 10.25% 17.29%
Total....................................... 8.00% 11.50% 18.55%
Leverage..................................... 4.00% 8.97% 15.14%

SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected consolidated income statement data for the three years in the
period ended December 31, 1996 and the balance sheet data at December 31, 1995
and 1996 set forth below have been derived from the audited consolidated
financial statements of the Company contained elsewhere herein. The selected
consolidated income statement data for the years ended December 31, 1992 and
1993 and the balance sheet data at December 31, 1992, 1993 and 1994 are
derived from audited consolidated financial statements not included herein.
The consolidated financial statements as of and for the years ended December
31, 1992, 1993, 1994, 1995 and 1996 have been audited by Coopers & Lybrand
L.L.P., independent auditors. The income statement data for the six months
ended June 30, 1996 and 1997 and the balance sheet data as of June 30, 1997
have been prepared by management and are derived from unaudited financial
statements of the Company, and, in the opinion of management, reflect all
adjustments, consisting of normal recurring adjustments necessary to fairly
state the information set forth therein. Operating results for the six months
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the full year. The data set forth below should be read in
conjunction with the consolidated financial statements and related notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.

FOR THE SIX MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
------- -------- ------- -------- -------- --------- ---------
(UNAUDITED)

INCOME STATEMENT DATA:
Interest income........ $ 7,319 $ 6,559 $ 7,997 $ 11,601 $ 13,305 $ 6,564 $ 6,622
Interest expense....... 3,660 2,891 3,150 4,869 5,741 2,836 3,011
------- -------- ------- -------- -------- --------- ---------
Net interest income... 3,659 3,668 4,847 6,732 7,564 3,728 3,611
Provision for possible
loan losses........... (1,773) (2,225) (1,683) (1,237) (3,487) (554) (959)
------- -------- ------- -------- -------- --------- ---------
Net interest income
after provision for
possible loan losses.. 1,886 1,443 3,164 5,495 4,077 3,174 2,652
Non-interest income:
Service charges and
other deposit fees.... 386 484 385 398 424 229 204
Loan servicing income
and fees.............. 164 288 493 896 1,475 605 1,121
Gain on loan sales:
SBA guaranteed........ 1,133 2,258 2,577 1,570 3,558 1,803 2,559
USDA guaranteed....... -- -- 136 822 805 458 1,205
Ex-Im working capital
guaranteed........... -- -- -- 104 201 51 89
Ex-Im medium term
guaranteed........... -- -- -- 248 340 73 967
Unguaranteed portions
of SBA and USDA...... -- -- -- -- 842 275 370
Other commercial...... -- -- -- 97 91 33 228
Residential........... 113 153 17 18 7 3 59
------- -------- ------- -------- -------- --------- ---------
Total gain on loan
sales................. 1,246 2,411 2,730 2,859 5,844 2,696 5,477
------- -------- ------- -------- -------- --------- ---------
Gain on branch sale.... -- -- -- -- 2,202 -- --
Gain on securities..... 230 392 -- -- -- -- --
------- -------- ------- -------- -------- --------- ---------
Total non-interest
income............... 2,026 3,575 3,608 4,153 9,945 3,530 6,802
------- -------- ------- -------- -------- --------- ---------
Operating expenses...... (3,756) (4,576) (5,129) (6,128) (8,425) (3,900) (5,909)
------- -------- ------- -------- -------- --------- ---------
Income before income
taxes.................. 156 442 1,643 3,520 5,597 2,804 3,545
Provision for income
taxes.................. (48) (137) (583) (1,494) (2,353) (1,179) (1,492)
------- -------- ------- -------- -------- --------- ---------
Net income............. $ 108 $ 305 $ 1,060 $ 2,026 $ 3,244 $ 1,625 $ 2,053
======= ======== ======= ======== ======== ========= =========

AS OF
AS OF DECEMBER 31, JUNE 30,
-------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)

BALANCE SHEET DATA:
Total assets........... $105,663 $109,735 $125,609 $141,223 $161,642 $164,262 $177,471
Loans:
SBA.................... 4,928 11,324 29,939 37,873 31,692 46,898 36,750
USDA................... -- -- 535 3,265 3,211 3,115 5,816
Ex-Im working capital.. -- -- -- 184 3,419 999 2,725
Ex-Im medium term...... -- -- 153 120 2,067 99 2,487
Other commercial....... 22,689 20,077 20,544 28,826 33,713 31,839 38,680
Commercial mortgage.... 8,346 13,911 16,238 15,518 18,808 18,912 16,950
Investment property
mortgage.............. 10,942 9,610 9,396 7,698 7,620 6,882 6,286
Residential and other
consumer.............. 15,043 16,491 18,313 13,508 14,097 13,815 8,495
-------- -------- -------- -------- -------- -------- --------
Total loans.......... 61,948 71,413 95,118 106,992 114,627 122,559 118,189
Total cash and cash
equivalents........... 11,190 11,612 7,585 10,050 18,867 24,524 16,440
Total investment
securities............ 26,015 19,727 13,981 11,631 15,874 9,645 15,767
Core deposits (1)...... 51,911 63,719 76,622 104,379 105,414 114,971 117,566
Time deposits.......... 41,573 32,068 35,227 23,982 38,902 34,980 41,081
-------- -------- -------- -------- -------- -------- --------
Total deposits....... 93,484 95,787 111,849 128,361 144,316 149,951 158,647
Total stockholders'
equity.............. 8,518 8,823 9,675 11,602 14,216 12,985 15,995

PER COMMON SHARE DATA:
Net income per common
share (2)............. $ 0.02 $ 0.06 $ 0.18 $ 0.33 $ 0.54 $ 0.27 $ 0.34
Book value per common
share................. $ 1.63 $ 1.69 $ 1.84 $ 2.19 $ 2.63 $ 2.42 $ 2.94
Average weighted shares
(2)................... 5,512,138 5,512,138 5,821,223 6,063,213 6,050,379 6,044,817 6,058,945
Dividend payout ratio
(2)(3)................ -- -- -- 8.55% 21.32% 21.24% 16.85%
PERFORMANCE RATIOS:
Net interest spread
(4)................... 3.61% 3.55% 4.35% 4.82% 4.79% 4.90% 4.21%
Net interest margin
(4)(5)................ 4.05% 3.97% 4.68% 5.56% 5.48% 5.53% 5.04%
Return on average
equity (4)............ 1.30% 3.58% 11.70% 19.31% 25.49% 23.62% 27.84%
Return on average
assets (4)............ 0.11% 0.30% 0.93% 1.51% 2.06% 1.85% 2.53%
Efficiency ratio (6)... 66.07% 63.18% 60.66% 56.29% 55.04% 53.73% 56.75%
ASSET QUALITY RATIOS:
Allowance for loan
losses as a percentage
of loans.............. 0.81% 2.00% 2.10% 1.87% 2.62% 1.67% 2.54%
Allowance for loan
losses as a percentage
of non-performing
loans................. -- 188.60% 89.06% 158.93% 133.23% 102.11% 115.65%
Non-performing loans as
a percentage of loans. -- 1.06% 2.36% 1.18% 1.96% 1.60% 2.19%
Net charge-offs as a
percentage of average
outstanding loans (4). 5.35% 1.97% 1.38% 1.24% 2.12% 0.95% 1.64%
Total losses as a
percentage of average
outstanding loans
serviced (4)(7)....... 3.60% 1.16% 0.69% 1.18% 1.33% 0.47% 1.13%
Provision for loan
losses as a percentage
of average outstanding
loans (4)............. 2.79% 3.38% 2.09% 1.24% 2.97% 0.95% 1.64%
CAPITAL RATIOS:
Total capital (to risk-
weighted assets)...... 11.64% 10.77% 9.28% 10.73% 11.62% 10.58% 11.50%
Tier 1 capital (to
risk-weighted
assets) (8) .......... 12.34% 12.03% 11.27% 9.47% 10.36% 9.33% 10.25%
Tier 1 capital (to
average assets)....... 8.21% 7.96% 7.87% 7.71% 8.44% 7.56% 8.97%
Equity to assets ratio
(9)................... 8.31% 8.33% 7.93% 7.84% 8.08% 7.84% 9.07%

(4) Annualized for the six month periods.
(5) Calculated as the differential between interest income and interest
expense as a percentage of average interest-bearing assets during the
period presented.
(6) Amount reflects non-interest expense as a percentage of net interest
income plus non-interest income and excludes the gain on the branch sale
for the year ended December 31, 1996.
(7) Amount reflects the Company charge-offs on portfolio loans plus amounts
paid by government guarantee agencies pursuant to guarantees on loans
serviced by the Company, as a percentage of total loans serviced.
(8) The Company's Tier 1 capital includes common equity, less goodwill and any
disallowed intangibles.
(9) Represents average equity as a percentage of average assets.

OPERATING DATA:
Commercial loan
originations and
sales:
SBA loan originations.. $17,202 $28,879 $ 58,753 $ 37,522 $ 85,303 $ 45,139 $ 47,302
SBA guaranteed loan
sales................. $13,731 $21,659 $ 39,607 $ 27,413 $ 58,878 $ 30,079 $ 33,985
SBA unguaranteed loan
sales................. -- -- -- -- $ 29,867 $ 4,550 $ 6,327
USDA loans
originations.......... -- -- $ 2,825 $ 19,241 $ 12,700 $ 7,180 $ 17,679
USDA guaranteed loan
sales................. -- -- $ 2,260 $ 14,984 $ 10,199 $ 5,784 $ 14,143
USDA unguaranteed loan
sales................. -- -- -- -- $ 3,207 $ 2,699 $ 815
Ex-Im working capital
loan originations..... -- -- -- $ 6,882 $ 23,300 $ 1,700 $ 10,625
Ex-Im working capital
loan sales............ -- -- -- $ 2,632 $ 8,614 $ 1,100 $ 8,179
Ex-Im medium term loan
originations.......... -- -- $ 397 $ 1,814 $ 13,617 $ 2,289 $ 27,297
Ex-Im medium term loan
sales................. -- -- $ 245 $ 1,814 $ 12,745 $ 2,289 $ 27,297
Other commercial loan
sales................. -- -- -- $ 8,843 $ 9,329 $ 4,767 $ 8,879
Total commercial loan
sales................. $13,731 $21,659 $ 42,112 $ 55,686 $132,839 $ 51,268 $ 99,625
Commercial loans
serviced for the Bank
and others
(at period end)....... $66,631 $95,501 $157,557 $226,294 $344,622 $288,015 $433,057

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

The following discussion and analysis of the consolidated financial
condition and results of operations of the Company should be read in
conjunction with the Company's consolidated financial statements, including
the related notes thereto, and other information contained elsewhere in this
Prospectus.

GENERAL

The Company provides a wide variety of credit, trade and depository services
to its niche market of small and medium size manufacturers. Management
believes the Company's experienced loan officers and broad range of commercial
loan and deposit products enable the Company to satisfy the needs of its
manufacturing clients. In serving these clients, the Company has relied on a
mix of government guarantee loan programs, traditional commercial loan
offerings and private banking services to generate both fee and net interest
income for the Company. In contrast to many of its competitors, the Company
derives a majority of its revenues from non-interest income, principally gains
on the sale of commercial and international loans and related loan servicing
income.

Recent Growth

During the past three years of operations, the Company has achieved
significant earnings growth primarily as a result of increases in the sale of
government guarantee and other commercial loans, net interest income, which is
the difference between interest earned on interest-earning assets (principally
loans) and interest paid on interest-bearing liabilities (principally
deposits), and fee income on loans serviced for others. Net income in 1996
also benefited from a gain realized on the sale of the Company's suburban
branch facility, explained below.

FOR THE YEARS ENDED FOR THE SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
-------------------- -------------------
1994 1995 1996 1996 1997
------ ------ ------ --------- ---------
(NET INCOME IN THOUSANDS)

Net income............................. $1,060 $2,026 $3,244 $ 1,625 $ 2,053
Earnings per share..................... $ 0.18 $ 0.33 $ 0.54 $ 0.27 $ 0.34

The Company intends to expand its domestic loan origination activities in
existing markets and in new geographic areas and its international presence in
the Big Emerging Markets. The Company plans to continue to rely on government
guarantee loan programs as it expands into new markets; however, the Company
is also developing new non-government guarantee loan products to meet the
needs of its niche market and to mitigate the potential risk that resources
available to the government guarantee loan programs will diminish. See "Risk
Factors--Ability of the Company to Continue its Growth Strategy" and
"Business--Business Strategy."

The following discussions make reference to average balances of certain
assets and liabilities as well as volume and rate changes. For further
information with respect to these matters see the tables set forth on pages
26, 27, 33 and 34.

ACCOUNTING FOR LOAN SALES

Gains from loan sales and servicing income represented approximately 48% and
63% of the total net interest income and non-interest income for the year
ended December 31, 1996 (excluding the gain realized on the sale of the
branch, as explained below) and the six months ended June 30, 1997,
respectively. Detailed below is a discussion of the relevant accounting
principles governing loan sales and servicing activities.

SBA and USDA Loan Sales

The majority of the Company's SBA and USDA guaranteed loans are variable
rate, indexed to the Prime Rate as quoted in The Wall Street Journal
("Prime").

The Company generally sells, for a premium, the guaranteed portions of these
loans at origination. For example, if the Company sells a 20-year SBA or USDA
guaranteed mortgage loan with an interest rate of Prime plus 1.50%, the
Company receives a premium because the market demands a yield of less than
Prime plus 1.50%. Guaranteed portions do not trade at the level of U.S.
Treasury bills, but at rates between those of a government bill and a
commercial loan due to prepayment risks and other factors. After the loan
sale, an investor will receive the pro rata principal and pro rata interest at
the note rate less any ongoing guarantee and Company servicing fees. Sales of
the unguaranteed portions of SBA and USDA loans are generally at or above the
carrying value and the Company continues to retain an unguaranteed
participation equal to either 10% or 5%, respectively, of the original loan.

Emerging Issues Task Force ("EITF") 88-11 governs accounting for sales by
the Company of a part of a loan and, as discussed in Note 1 to the
consolidated financial statements, requires that the gain on the sale of a
portion of a loan be based on the relative fair market value of the loan sold,
the portion of the loan retained and any other assets created in the
transaction. The Company creates a servicing asset when it sells loans on a
servicing-retained basis with a servicing fee in excess of what accounting
literature defines as "adequate compensation," which is equal to the net
present value of the estimated cash flows in excess of such compensation. The
original principal basis of a loan must be allocated between the guaranteed
portion sold, the unguaranteed portion retained and the servicing asset,
resulting in a discount being recognized on the unguaranteed retained portion
of the loan.

In connection with calculating gain on sale, the Company must make certain
assumptions which include (i) the amount of "adequate compensation" used to
determine the amount of the servicing asset that the Company can recognize at
the date of the sale, (ii) the estimated life of the underlying loan used in
projecting the time period over which the Company will receive the servicing
fee and (iii) the discount rate used in the present value calculation of the
servicing asset.

Management has defined adequate compensation as 40 basis points. The
constant prepayment rates utilized by the Company in estimating the lives of
the loans depend on the original term of the loan, industry and Company
historical data. Such constant prepayment rates range from 6% to 12% per
annum. The discount rate utilized in the net present value calculation is
equal to 200 basis points above the stated note rate, which, for 1996 and the
six month period ended June 30, 1997, was approximately 10-12%.

Actual prepayment rates may be affected by a variety of economic and other
factors, including prevailing interest rates and the availability of
alternative financing. The effect of these factors varies depending on the
types of loans. Estimated prepayment rates are based on management's
expectations of future prepayments, and, while management believes that the
term of amortization and market interest rate on the variable rate loans
somewhat reduce the prepayment risk, there can be no assurance that
management's prepayment estimates are accurate. If the actual prepayment rate
of loans sold is higher than projected at the time such loans were sold, the
carrying value of the servicing asset would be reduced by a charge to
earnings. Because the Company also recognizes a discount on the retained loan,
an adjustment to the discount would be made which would partially offset the
effect of the negative servicing adjustment. If the actual prepayment rate for
loans sold is lower than estimated, the carrying value of the servicing asset
is not increased, although the total income over the life of the loan would
exceed previously estimated amounts.

The servicing asset is amortized against the servicing fee income received
monthly, using an effective interest method, and the discount on the retained
loan is accreted to interest income using an effective interest method. The
servicing asset is carried at the lower of amortized cost or net realizable
value.

Ex-Im Bank and Other Commercial Loan Sales

Sales of 100% of Ex-Im Bank guaranteed medium term loans are generally made
at the carrying value although the Company receives a servicing fee above the
amount defined as "adequate compensation," resulting in the recognition of a
gain at the time of the sale equal to the calculated servicing asset and any
net loan origination fees. The Company uses a discount factor on the estimated
cash flows equal to 200 basis points above the note rate. The Company adjusts
for prepayments on these 3-5 year term loans as they occur, although
prepayments are minimal due to the lack of alternative U.S. dollar financing
in the Big Emerging Markets and the fact that such Em-Im Bank financing is
unsecured.

The Company also sells 100% of certain other unguaranteed commercial loans
and certain residential and other consumer loans where no portion of the loan
is retained on the Company's balance sheet.

RESULTS OF OPERATIONS

Comparison of the Six Months Ended June 30, 1996 and 1997

Net Income. Net income increased $428,000, or 26%, from $1.6 million for the
six months ended June 30, 1996 to $2.1 million for the six months ended June
30, 1997. This increase was primarily attributable to increased loan
production and a corresponding $3.3 million, or 100%, increase in gains on
loans sold and loan servicing fees, partially offset by a $2 million, or 52%,
increase in non-interest expense and a $405,000, or 73%, increase in the
provision for possible loan losses.

Net Interest Income. Net interest income decreased $117,000, or 3%, from
$3.7 million for the six months ended June 30, 1996 to $3.6 million for the
six months ended June 30, 1997 due to a decrease in the yield on assets
attributable to loan sales and a shift to more expensive deposits following
the September 1996 branch sale. An $8 million, or 6%, increase in average
earning assets was offset by a 49 basis point decrease in net interest margin.

The Company sold checking and savings accounts totaling $24 million from its
last suburban branch facility for a premium of approximately 9% in September
1996. The deposit base of the branch was comprised of personal accounts with
an average balance of $6,500; lower than the Company's average checking and
savings account balance of $30,000 as of June 30, 1997. The Company's sale of
the branch was part of its strategy of targeting commercial depository
accounts of small and medium size manufacturers and accounts of individuals
who seek highly personalized service.

Interest Income. Interest income remained relatively flat from $6.6 million
for the six months ended June 30, 1996, increasing only $58,000, or 1%, for
the six month period ended June 30, 1997. Interest income on loans decreased
$191,000, or 3%, for the period due to a lower average balance and lower yield
on the portfolio following the September 1996 $20 million bulk-loan sale of
the unguaranteed portions of SBA guaranteed loans to provide funding for the
deposit liabilities transferred in the branch sale. The impact of this sale
was partially offset by a 13 basis point increase in the average prime rate
from the six months ended June 30, 1996 as compared to the six months ended
June 30, 1997. Interest income on investments and federal funds sold increased
$249,000 or 46% due primarily to an $8.9 million increase in the average
balance for the six month period.

Interest Expense. Interest expense increased $174,000, or 6%, from the six
months ended June 30, 1996 to the six months ended June 30, 1997, as the
average balance of interest-bearing deposits increased 2%, from $116.6 million
to $118.5 million and deposits shifted to more expensive deposit products.

Provision for Possible Loan Losses. The provision for possible loan losses
totaled $554,000 for the six months ended June 30, 1996 as compared to
$959,000 for the six months ended June 30, 1997. See "--Financial Condition--
Allowance for Loan Losses."

Non-Interest Income. Non-interest income is comprised of the following
items:

FOR THE SIX MONTHS
ENDED JUNE 30,
-----------------------
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)

NON-INTEREST INCOME
Gain on loan sales:
SBA loan sales..................................... $ 1,803 $ 2,559
USDA loan sales.................................... 458 1,205
Ex-Im working capital loan sales................... 51 89
Ex-Im medium term loan sales....................... 73 967
Unguaranteed portions of SBA and USDA.............. 275 370
Other commercial loans............................. 33 228
Residential loans.................................. 3 59
----------- -----------
Total gain on loan sales........................ 2,696 5,477
Loan servicing income and fees...................... 605 1,121
Service charges and other deposit fees.............. 229 204
----------- -----------
Total non-interest income....................... $ 3,530 $ 6,802
=========== ===========

The 93%, or $3.3 million, increase in non-interest income from the six
months ended June 30, 1996 compared to the six months ended June 30, 1997 was
due to a $2.8 million, or 103%, increase in the gain on the sale of loans and
a $516,000, or 85%, increase in loan servicing income and fees. This growth
corresponds to the 72%, or, $144 million, increase in the average balance of
loans serviced for others to $345 million for the six months ended June 30,
1997.

The increase in SBA and USDA loan sale gains reflects the Company's
geographic expansion, while the Ex-Im Bank medium term loan sales increase
reflects stronger marketing relationships in the Big Emerging Markets, which
have begun to produce referrals for the Company's international loan officers.
The Company has sold other unguaranteed commercial loans on a servicing-
retained, non-recourse basis since 1995 but in 1997 undertook a more
systematic selling program as a number of buyers have been identified. See "--
Accounting for Loan Sales" and "Business."

Loan Servicing Income. Loan servicing income is comprised of servicing fees
received on loans sold on a servicing-retained basis, net of amortization of
the servicing asset. The amount of the servicing fee varies in accordance with
the terms of the loan sale. See "--Accounting for Loan Sales."

FOR THE SIX MONTHS
ENDED JUNE 30,
-----------------------
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)

LOAN SERVICING INCOME AND FEES
Loan servicing income:
SBA guaranteed loans............................... $ 424 $ 574
USDA guaranteed loans.............................. 57 125
Ex-Im working capital loans........................ 13 77
Ex-Im medium term loans............................ 17 56
Other commercial loans............................. 27 58
Residential and consumer loans..................... 27 26
----------- -----------
Total loan servicing income...................... 565 916
Other loan fees..................................... 40 205
----------- -----------
Total loan servicing income and fees............ $ 605 $ 1,121
=========== ===========
LOANS SERVICED FOR OTHERS (AT PERIOD END)
Outstanding balance................................ $ 200,883 $ 344,898
=========== ===========

The increase in loan servicing income reflects the growth of the respective
portfolios. Loan servicing income as a percentage of loans serviced for others
was 56 basis points and 53 basis points, on an annualized basis, for the six
months ended June 30, 1996 and 1997, respectively. Other loan fees have
increased due to a greater demand from the Company's borrowers for letters of
credit.

Data with respect to the retained portions of SBA and USDA loans are set
forth in the tables below:

AT JUNE 30,
------------------------
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)

PORTFOLIO BALANCE
Unguaranteed portions of:
SBA loans....................................... $ 46,898 $ 36,750
USDA loans...................................... 3,115 5,816
----------- -----------
Total SBA and USDA loans...................... 50,013 42,566
Less:
Discount........................................ 2,817 2,402
----------- -----------
Net carrying value............................ $ 47,196 $ 40,164
=========== ===========

FOR THE SIX MONTHS
ENDED JUNE 30,
------------------------
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)

DISCOUNT ON RETAINED SBA AND USDA LOANS ACTIVITY
Balance at beginning of period.................... $ 2,300 $ 2,232
Current period sales............................. 1,005 890
Deletion due to sales............................ (275) (444)
Accretion........................................ (213) (276)
----------- -----------
Balance at end of period.......................... $ 2,817 $ 2,402
=========== ===========

The servicing asset for all loans sold is as follows:

AT JUNE 30,
------------------------
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)

SERVICING ASSET
Servicing on other loan sales:
Ex-Im medium term................................ $ 192 $ 1,001
Other commercial................................. 182 123
Other consumer................................... 12 6
----------- -----------
Total other servicing......................... 386 1,130
Servicing on SBA and USDA loan sales:
SBA.............................................. 2,855 3,293
USDA............................................. 461 424
----------- -----------
Total SBA and USDA servicing.................. 3,316 3,717
----------- -----------
Total servicing asset....................... $ 3,702 $ 4,847
=========== ===========

The activity in the servicing asset is detailed below:

FOR THE SIX MONTHS
ENDED JUNE 30,
------------------------
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)

SERVICING ASSET ACTIVITY
Balance at beginning of period.................... $ 2,809 $ 4,138
Current period sales............................. 1,188 1,289
Amortization..................................... (295) (580)
----------- -----------
Balance at end of period.......................... $ 3,702 $ 4,847
=========== ===========

Non-Interest Expense. The increases in non-interest expense reflect the
Company's growth over the periods as indicated below:

FOR THE SIX MONTHS
ENDED JUNE 30,
-----------------------
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)

NON-INTEREST EXPENSE
Salaries and benefits............................... $ 2,136 $ 3,844
Occupancy and equipment expense..................... 593 764
FDIC and OCC........................................ 42 33
Outside services.................................... 119 228
Foreclosed property and collection, net............. 305 97
Other............................................... 705 943
----------- -----------
Total non-interest expense........................ $ 3,900 $ 5,909
=========== ===========

AT JUNE 30,
-----------------
1996 1997
-------- --------
(DOLLARS IN
THOUSANDS)

SELECTED DATA
Total servicing portfolio................................. $323,442 $463,087
======== ========
Number of loans serviced.................................. 1,404 1,627
======== ========
Number of total personnel................................. 84 114
======== ========
Number of loan officers................................... 18 36
======== ========

The 52%, or $2.0 million, increase in non-interest expense for the six
months ended June 30, 1996 compared to the six months ended June 30, 1997
reflects a 36% increase in full-time employees, from 84 employees at June 30,
1996 to 114 employees at June 30, 1997. The increase in salaries and benefits
also reflects a shift in the mix of employees to more professionals following
elimination of eight clerical branch positions as a result of the September
1996 branch sale, as well as a full six months expense for the 25 new hires
which occurred during 1996. The occupancy and equipment expense increase
includes additional headquarter space leased to house the new employees, and
includes rental expense for the Morristown, New Jersey, Pittsburgh,
Pennsylvania and Washington, D.C. representative offices for part of the six
month period. The decrease in FDIC and OCC assessments reflects a decrease in
the statutory rate of the deposit insurance premium. The outside services
expense, comprised of legal and accounting fees, reflects legal costs
associated with the establishment of international marketing representatives
relationships and other related diligence.

Other non-interest expense is comprised of the following:

FOR THE SIX MONTHS
ENDED JUNE 30
-----------------------
1996 1997
----------- -----------
(DOLLARS IN THOUSANDS)

OTHER NON-INTEREST EXPENSE
Office expenses..................................... $ 349 $ 390
Marketing........................................... 250 386
Operating services.................................. 60 50
Insurance........................................... 33 42
Other expenses...................................... 13 75
----------- -----------
Total other non-interest expense.................. $ 705 $ 943
=========== ===========

Other non-interest expense increases reflect costs to support the growth of
personnel, the Company's geographic growth and more formalized marketing
efforts.

The Company's efficiency ratios, calculated as the ratio of non-interest
expense to the sum of net interest income and non-interest income were 54% and
57% for the six months ended June 30, 1996 and 1997, respectively.

Income Taxes. The Company is subject to federal income tax and state income
taxes in Connecticut and the other states in which it operates representative
offices. The effective income tax rates remained constant for the six months
ended June 30, 1996 and 1997 at 42.1%.

The following table sets forth the components of the Company's net interest
income and yields on average interest-earning assets and interest-bearing
liabilities.

FOR THE SIX MONTHS ENDED
---------------------------------------------------
JUNE 30, 1996 JUNE 30, 1997
------------------------- -------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE EARNED/ YIELD/ AVERAGE EARNED/ YIELD/
BALANCE PAID RATE BALANCE PAID RATE
-------- -------- ------- -------- -------- -------
(DOLLARS IN THOUSANDS)

TOTAL EARNINGS ASSETS
Loans (1):
Commercial................ $101,803 $5,437 10.68% $103,566 $5,426 10.48%
Residential............... 12,839 550 8.57% 9,391 335 7.13%
Other consumer............ 679 35 10.36% 1,463 69 9.51%
-------- ------ ----- -------- ------ -----
Total loans............... 115,321 6,022 10.44% 114,420 5,830 10.19%
Investment securities..... 10,578 321 6.07% 16,226 479 5.90%
Federal funds sold........ 8,556 222 5.22% 11,826 313 5.34%
-------- ------ ----- -------- ------ -----
Total investment
securities and federal
funds sold............... 19,134 543 5.69% 28,052 792 5.67%
-------- ------ ----- -------- ------ -----
Total earning assets....... 134,455 6,565 9.77% 142,472 6,622 9.30%
------ ----- ------ -----
Total non-earning assets... 19,544 20,115
-------- --------
Total assets............... $153,999 $162,587
======== ========
INTEREST-BEARING
LIABILITIES
Deposits:
Interest-bearing demand
deposits................. $ 9,607 $ 138 2.89% $ 6,954 $ 87 2.52%
Premier money market...... 60,979 1,576 5.20% 68,586 1,771 5.21%
Other savings............. 13,759 229 3.35% 4,665 44 1.90%
Certificates of deposit... 25,902 705 5.47% 31,882 916 5.79%
IRA CD's.................. 6,378 174 5.49% 6,456 174 5.44%
-------- ------ ----- -------- ------ -----
Total deposits............ 116,625 2,822 4.87% 118,543 2,992 5.09%
Other borrowings.......... 622 15 4.85% 749 19 5.12%
-------- ------ ----- -------- ------ -----
Total interest bearing
liabilities.............. 117,247 2,837 4.87% 119,292 3,011 5.09%
-------- ------ ----- -------- ------ -----
Non-interest bearing
liabilities:
Demand deposits........... 23,383 26,295
Other liabilities......... 1,293 2,250
-------- --------
Total non-interest bearing
liabilities.............. 24,676 28,545
Stockholders' equity...... 12,076 14,750
-------- --------
Total liabilities and
stockholders' equity..... $153,999 $162,587
======== ========
NET INTEREST INCOME/NET
INTEREST SPREAD........... $3,728 4.90% $3,611 4.21%
====== ===== ====== =====
NET INTEREST MARGIN........ 5.53% 5.04%
===== =====

- --------
(1) For purposes of these computations, non-accruing loans are included in the
average balances.

The following rate/volume analysis shows the portions of the net change in
interest income due to changes in volume or rate. The changes in interest due
to both volume and rate have been allocated proportionally to changes due to
volume and changes due to rate.

SIX MONTHS
ENDED JUNE 30, 1996
COMPARED TO 1997
CHANGES DUE TO:
---------------------
VOLUME RATE TOTAL
------ ------ ------
(DOLLARS IN
THOUSANDS)

INCREASE (DECREASE) IN NET INTEREST INCOME DUE TO
Loans:
Commercial loans....................................... $ 92 $ (103) $ (11)
Residential loans...................................... (123) (92) (215)
Other consumer loans................................... 37 (3) 34
---- ------ ------
Total loans........................................... 6 (198) (192)
Investment securities................................... 167 (9) 158
Federal funds sold...................................... 87 4 91
---- ------ ------
Total investments and federal funds sold.............. 254 (5) 249
---- ------ ------
Total interest earning assets......................... 260 (203) 57
Deposits
Interest-bearing demand deposits....................... (33) (18) (51)
Premier money market savings........................... 196 (1) 195
Other savings.......................................... (86) (99) (185)
Time deposits.......................................... 172 39 211
IRA time deposits...................................... 2 (2) 0
---- ------ ------
Total deposits........................................ 251 (81) 170
FHLB advances........................................... 3 1 4
---- ------ ------
Total interest-bearing liabilities.................... 254 (80) 174
---- ------ ------
Change in net interest income....................... $ 6 $ (123) $ (117)
==== ====== ======

Comparison of the Years Ended December 31, 1994, 1995 and 1996

Net Income. Net income totaled $1.1 million in 1994 and increased $1.0
million, or 91%, to $2.0 million in 1995 and increased $1.2 million, or 60%,
to $3.2 million in 1996. The increase in net income from 1994 to 1995 reflects
a $1.9 million, or 39%, increase in net interest income due to a favorable
interest rate environment and an increase in commercial loan sales gains and
servicing income, as sales activities increased 32%, from $42.1 million in
1994 to $55.7 million in 1995. These results were partially offset by an
increase in personnel-related expenses associated with increases in the loan
production and servicing staff.

The increase in net income from 1995 to 1996 reflects the continued
geographic expansion of the Company's U.S. and international commercial loan
origination and related sales activities. Geographic expansion contributed to
a $3.6 million, or 95%, increase in lending-related non-interest income from
1995 to 1996. The loan loss provision increased $2.3 million from 1995 to 1996
due to a $1.2 million increase in charge-offs attributable to continued poor
performance of the investor mortgage portfolio, a line of business abandoned
in 1990, and a $1 million increase in the allowance for loan losses to reflect
the continued growth of the Company's loan portfolio. See "--Allowance for
Loan Losses." This increase in the allowance for loan losses was offset by a
$2.2 million gain realized on the branch sale in September 1996.

Net Interest Income. Net interest income increased $1.9 million, or 39%,
from 1994 to 1995 resulting from an 88 basis point increase in the net
interest margin. The increase in net interest margin was attributable to
changes in the Company's asset and liability mix as the yield on assets
increased faster than the increased rate

paid on deposits. Net interest income increased $832,000, or 12%, from $6.7
million in 1995 to $7.6 million in 1996 as growth more than offset the net
interest margin decrease of 8 basis points. Average interest-earning assets
increased $17.0 million, or 14%, while average interest-bearing liabilities
increased $16.1 million, or 16%, from 1995 to 1996. The higher asset growth,
however, was offset by a greater increase in the cost of deposits over the
yield on assets. The deposit cost increased due to a shift of the deposits
into higher rate money market savings and certificates of deposit used to
replace the sold retail deposits.

Interest Income. Interest income increased $3.6 million, or 45%, from $8.0
million in 1994 to $11.6 million in 1995 due to a 160 basis point increase in
the average Prime rate from 1994 to 1995, and a shift in the composition of
average interest-earning assets towards loan balances. In 1994, 76% of
interest-earning assets were held in the form of higher yielding loans
compared to 81% held in such loans in 1995. Interest income increased by $1.7
million, or 15%, from $11.6 million in 1995 to $13.3 million in 1996 due
primarily to a $19.6 million increase in the average balance of commercial
loans. This increase was partially offset in 1996 by a lower yield on
commercial loans due to a 25 basis point decrease in the Prime rate in
February 1996. The annual average Prime rate decreased 50 basis points from
1995 to 1996. The yield on loans also decreased in the fourth quarter of 1996
due to a bulk-sale of unguaranteed portions of SBA loans. Interest income on
investment securities decreased $104,000 due to a $2.4 million average balance
decrease in the investment portfolio. Interest earned on federal funds sold
increased 8% to $632,000 due to a $2.0 million average balance increase
maintained to fund loan demand partially offset by a 25 basis point decrease
in short-term interest rates in February 1996.

Interest Expense. Interest expense increased $1.7 million, or 55%, from 1994
to 1995 due to an increase in the average balance of the Company's externally
indexed money market accounts from $20.4 million in 1994 to $41.8 million in
1995, and a 180 basis point increase in the average rate of the underlying
external index of those accounts from 1994 to 1995. Interest expense increased
$872,000, or 18%, from 1995 to 1996, due principally to a $19.7 million
increase in the average balance of the money market accounts from $41.8
million in 1995 to $61.5 million in 1996. The impact of the increase in these
account balances was partially offset by a 25 basis point reduction, in
October 1995, of the margin added to the Company's external index. The
reduction in the margin was made after consideration of prevailing market
rates; this action had no discernible effect on the Company's ability to
attract such deposits because the Company maintained competitive rates.

Provision for Possible Loan Losses. The provision for possible loan losses
totaled $1.7 million in 1994, $1.2 million in 1995 and $3.5 million in 1996.
The provision is affected by net loan charge-offs, changes in the level and
mix of loans, changes in asset quality and general economic conditions.
Approximately 74% of the charge-offs for the period from January 1, 1994 to
June 30, 1997 are attributable to the Company's investor mortgage portfolio.
See "--Financial Condition--Allowance for Loan Losses."

Non-Interest Income. The components of non-interest income are detailed
below:

FOR THE YEARS ENDED
DECEMBER 31,
--------------------
1994 1995 1996
------ ------ ------
(DOLLARS IN
THOUSANDS)

NON-INTEREST INCOME
Gain on loan sales:
SBA loan sales........................................... $2,577 $1,570 $3,558
USDA loan sales.......................................... 136 822 805
Ex-Im working capital loan sales......................... -- 104 201
Ex-Im medium term loan sales............................. -- 248 340
Unguaranteed SBA and USDA loan portions.................. -- -- 842
Other commercial loans................................... -- 97 91
Residential loans........................................ 17 18 7
------ ------ ------
Total gain on loan sales.............................. 2,730 2,859 5,844
Loan servicing income and fees............................ 493 896 1,475
Gain on sale of branch.................................... -- -- 2,202
Service charges and other deposit fees.................... 385 398 424
------ ------ ------
Total non-interest income............................. $3,608 $4,153 $9,945
====== ====== ======

The non-interest income increase of $545,000, or 15%, from 1994 to 1995 was
attributable to a $403,000 increase in loan servicing income, which was
directly proportional to the increase in the average loan portfolio serviced
for others from year to year. Gains on SBA loan sales decreased as limitations
on loan size were imposed by the SBA to preserve its funding. Such limits
resulted in a decrease in the average balance of SBA loans originated from
$556,000 in 1994 to an average balance of $395,000 in 1995. As a result of
these loan limits, a greater number of originations was required to yield the
same return. However, this decrease in income from the sale of SBA loans was
offset by increases in gains on the sale of USDA and Ex-Im Bank loans as more
opportunities for USDA loans were identified and Ex-Im Bank marketing efforts
increased.

The non-interest income increase of $5.8 million from 1995 to 1996 reflects
the non-recurring $2.2 million gain realized on the sale of the Company's
suburban branch facility and its deposits as well as increasing gains on the
sale of the guaranteed and unguaranteed portions of SBA and USDA loans. The
increased loan sales activity reflects the Company's addition of new regional
representative offices and the hiring of nine additional commercial loan
officers. The Company completed its first bulk-sale of the unguaranteed
portions of SBA and USDA loans in 1996. These sales, along with the on-going
sales of government guarantee loans on a servicing-retained basis, increased
the loan servicing portfolio, which resulted in an increase in servicing fees
for the year.

In January 1995, the SBA adopted certain policies, such as the temporary
reduction of the maximum SBA loan amount to $500,000 and the temporary
prohibition of the use of SBA loan proceeds for certain refinancings. These
temporary limits were removed in October 1995, but resulted in the Company
originating loans with a smaller average balance in 1995. The Company
originated and sold 109 SBA loans in 1994 with a total outstanding balance of
$40 million compared to 95 loans in 1995 with a total balance of $27 million.
Sales totaled $59 million for 170 SBA loans in 1996.

On May 5, 1997, the SBA adopted a similar temporary restriction on the
maximum SBA loan amount to $500,000 but lifted this on June 5, 1997. Although
the Company is not aware of any other pending SBA program changes, management
continues to manage such risk through its continued diversification to Ex-Im
Bank guaranteed loan products as well as through the introduction of new non-
guaranteed financing products.

The Company began selling certain unguaranteed portions of SBA and USDA
loans in 1996 on a non-recourse, servicing-retained basis. The unguaranteed
portion of such loans were sold above the carrying value and resulted in
gains. In 1996, gains from the sale of the unguaranteed portions of SBA and
USDA loans totaled

$842,000 on sales of loans totaling $33.1 million. Many of these loans sold
were originated prior to 1996. The Company can give no assurance that it will
have a similar volume of loans available to sell and therefore that it will
attain similar gains in the future.

Loan servicing income comprises the servicing fees received on loans sold on
a servicing retained basis, net of amortization of the servicing asset.

FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1994 1995 1996
------- -------- --------
(DOLLARS IN THOUSANDS)

LOAN SERVICING INCOME AND FEES
Loan servicing income:
SBA guaranteed loans.............................. $ 442 $ 766 $ 921
USDA guaranteed loans............................. 2 43 151
Ex-Im working capital loans....................... -- 7 56
Ex-Im medium term loans........................... -- -- 43
Other commercial loans............................ -- 16 65
Residential and consumer loans.................... 43 48 59
------- -------- --------
Total loan servicing income.................... 487 880 1,295
Other loan fees.................................. 6 16 180
------- -------- --------
Total loan servicing income and fees........... $ 493 $ 896 $ 1,475
======= ======== ========
LOANS SERVICED FOR OTHERS (AT PERIOD END):
Outstanding balance.............................. $98,740 $153,850 $265,805
======= ======== ========

The increases in loan servicing income reflect the growth of the servicing
portfolios. Stated as a percentage of the average balance of loans serviced for
others, loan servicing income totaled 49, 57 and 49 basis points for the years
ended December 31, 1994, 1995 and 1996, respectively. This ratio will vary in
accordance with the mix of loans comprising the servicing portfolio and
generally will move in the same direction as the cost of servicing.

Data with respect to the retained portions of loans of SBA and USDA loan
sales and related accounts are set forth in the tables below.

AT DECEMBER 31,
---------------------------
1994 1995 1996
------- -------- --------
(DOLLARS IN THOUSANDS)

PORTFOLIO BALANCE
Unguaranteed portions of:
SBA loans......................................... $29,908 $ 37,873 $ 31,691
USDA loans........................................ 535 3,265 3,211
------- -------- --------
Total SBA and USDA loans....................... 30,443 41,138 34,902
Less:
Discount......................................... 1,792 2,300 2,232
------- -------- --------
Net carrying value............................. $28,651 $ 38,838 $ 32,670
======= ======== ========

FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1994 1995 1996
------- -------- --------
(DOLLARS IN THOUSANDS)

DISCOUNT ON RETAINED SBA AND USDA LOANS
Balance at beginning of year....................... $ 805 $ 1,792 $ 2,300
Current period sales............................ 1,089 839 1,510
Deletions due to sales.......................... -- -- (1,112)
Accretion....................................... (102) (331) (466)
------- -------- --------
Balance at end of year............................. $ 1,792 $ 2,300 $ 2,232
======= ======== ========

The servicing assets for all loans sold is as follows:

AT DECEMBER 31,
----------------------------
1994 1995 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)

SERVICING ASSET
Servicing on other loan sales:
Ex-Im medium term................................ $ -- $ 161 $ 374
Other commercial................................. -- 140 173
Other consumer................................... 14 16 8
-------- -------- --------
Total other servicing......................... 14 317 555
Servicing on SBA and USDA loan sales:
SBA.............................................. 2,031 2,290 3,100
USDA............................................. 39 202 483
-------- -------- --------
Total SBA and USDA servicing.................. 2,070 2,492 3,583
-------- -------- --------
Total servicing asset........................ $ 2,084 $ 2,809 $ 4,138
======== ======== ========

The activity in the servicing asset is detailed below:

FOR THE YEARS ENDED
DECEMBER 31,
----------------------------
1994 1995 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)

SERVICING ASSET ACTIVITY
Balance at beginning of period.................... $ 1,210 $ 2,084 $ 2,809
Current period sales............................. 1,040 1,127 1,979
Amortization..................................... (166) (402) (650)
-------- -------- --------
Balance at end of period.......................... $ 2,084 $ 2,809 $ 4,138
======== ======== ========

Non-Interest Expense. Increases in non-interest expense reflect the Company's
growth over the periods as indicated below:

FOR THE YEARS ENDED
DECEMBER 31,
----------------------------
1994 1995 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)

NON-INTEREST EXPENSE
Salaries and benefits............................. $ 2,485 $ 3,399 $ 4,963
Occupancy and equipment expense................... 837 980 1,236
FDIC and OCC...................................... 296 206 69
Outside services.................................. 198 210 231
Foreclosed property and collection, net........... 365 311 360
Other............................................. 948 1,022 1,566
-------- -------- --------
Total non-interest expense...................... $ 5,129 $ 6,128 $ 8,425
======== ======== ========
SELECTED DATA
Total servicing portfolio......................... $193,858 $260,842 $380,432
======== ======== ========
Number of loans serviced.......................... 1,176 1,308 1,519
======== ======== ========
Number of total personnel......................... 55 67 92
======== ======== ========
Number of loan officers........................... 7 11 26
======== ======== ========

Non-interest expense increased 20%, or $1.0 million, from 1994 to 1995 which
reflects a 22% increase in the number of employees from 55 full-time employees
at December 31, 1994 to 67 full-time employees at December 31, 1995. Occupancy
and equipment expense increased 17% due to the cost of additional space leased
at the Hartford, Connecticut headquarters as well as a partial year's rental
expense for the representative offices in Boston and Springfield,
Massachusetts and Providence, Rhode Island. The FDIC and OCC assessments
reflects a statutory decrease in the FDIC Bank Insurance Fund assessment rate
effective May 1995; this rate may be increased at any time by the FDIC and
fluctuates with the Company's deposit base.

The $2.3 million, or 38%, increase in total non-interest expense from 1995
to 1996 reflects the personnel increases and related occupancy increases as
the Company acquired additional leased space at its headquarters facility to
accommodate additional lending staff and the support staff hired in 1996. The
occupancy and equipment expense increase reflects the cost of additional
leased space acquired for the Springfield and Boston, Massachusetts and
Providence, Rhode Island representative offices, each of which had twelve
months rental expense in 1996 compared to a partial year's expense in 1995.
The annual occupancy and equipment expense on each such representative office
is approximately $50,000. FDIC and OCC assessments decreased $137,000, or 67%,
from 1995 to 1996 due to the May 1995 statutory decrease in the deposit
premium insurance rate.

Other non-interest expense is comprised of the following:

FOR THE YEARS
ENDED DECEMBER 31,
------------------
1994 1995 1996
---- ------ ------
(DOLLARS IN
THOUSANDS)

OTHER NON-INTEREST EXPENSE
Office expenses............................................. $367 $ 539 $ 692
Marketing................................................... 156 288 632
Operating services.......................................... 109 107 126
Insurance................................................... 62 61 62
Other expenses.............................................. 204 27 52
Loss on sale of equipment................................... 50 -- 2
---- ------ ------
Total other non-interest expense.......................... $948 $1,022 $1,566
==== ====== ======

The overall increase in other non-interest expense was only $74,000, or 8%,
from 1994 to 1995. However, the 1994 expenses included expenditures of
$171,000 related to due diligence on an abandoned acquisition, offset by a
$172,000 increase in office expenses in 1995, due to a 22% increase in
personnel and a $36,000, or 54%, increase in postage due to the introduction
of an international mass mailing program, and a 10% increase in the postal
rates in January 1995. The mass mailing program, based on proprietary
information compiled by the Company, was undertaken by the Company's
international loan officers to reach potential foreign-based buyers of U.S.-
made goods prior to the time the Company had relationships with local
marketing representatives. The Company's international loan officers have
continued such mass mailing efforts on a more limited scale to supplement
referrals from the marketing representatives.

The increase in office and marketing expense from 1995 to 1996 reflects
costs to support the growth of personnel over the periods and the Company's
geographically wider and more formalized marketing efforts. The $153,000, or
28%, increase in office expense from 1995 to 1996 includes a $54,000 increase
in telephone expense and $24,000 increase in postage. Such expenses increased
as international loan officers responded to inquiries from potential borrowers
and domestic commercial loan officers expanded their marketing efforts. The
$344,000, or 119%, increase in marketing expense from 1995 to 1996 reflects an
investment in the development of international marketing relationships and
marketing literature. The Company also engaged a public relations firm to
create various marketing pieces for use in mass mailing solicitations and
other expanded and regionalized calling efforts. International development
efforts included legal expenses, visits by Company officers to the locations
of prospective international marketing representatives and related due
diligence, as well as training in Connecticut of the international marketing
representatives. The Company's domestic and international loan

officers also incurred greater travel and other business development costs as
they expanded their marketing efforts, and the number of officers increased
from 11 to 26.

The Company's efficiency ratios, calculated as the ratio of non-interest
expenses to the sum of net interest income and non-interest income, excluding
the 1996 gain on the branch sale, were 61%, 56% and 55% for the years ended
December 31, 1994, 1995 and 1996, respectively.

Income Taxes. The effective income tax rates for the years ended December
31, 1994, 1995 and 1996 were 35.5%, 42.4% and 42.0%, respectively. The 1994
tax provision reflects utilization of a state net operating loss carryforward.

The following table sets forth the components of the Company's net interest
income and yield on average interest earning assets and rate on interest
bearing liabilities.

FOR THE YEARS ENDED
-----------------------------------------------------------------------------
DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996
------------------------- ------------------------- -------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE EARNED/ YIELD/ AVERAGE EARNED/ YIELD/ AVERAGE EARNED/ YIELD/
BALANCE PAID RATE BALANCE PAID RATE BALANCE PAID RATE
-------- -------- ------- -------- -------- ------- -------- -------- -------
(DOLLARS IN THOUSANDS)

TOTAL EARNING ASSETS
Loans(1):
Commercial............. $ 61,400 $5,558 9.05% $ 82,040 $8,976 10.94% $101,656 $10,882 10.70%
Residential............ 14,104 1,037 7.35% 14,472 1,152 7.96% 12,848 1,059 8.24%
Other consumer......... 3,639 300 8.24% 1,388 138 9.94% 874 86 9.84%
-------- ------ ---- -------- ------ ----- -------- ------- -----
Total loans............ 79,143 6,895 8.71% 97,900 10,266 10.49% 115,378 12,027 10.42%
Investment securities.. 17,302 799 4.62% 12,921 750 5.80% 10,495 646 6.16%
Federal funds sold..... 7,202 303 4.21% 10,179 585 5.75% 12,153 632 5.20%
-------- ------ ---- -------- ------ ----- -------- ------- -----
Total investment
securities and federal
funds sold............ 24,504 1,102 4.50% 23,100 1,335 5.78% 22,648 1,278 5.64%
-------- ------ ---- -------- ------ ----- -------- ------- -----
Total earning assets.... 103,647 7,997 7.72% 121,000 11,601 9.59% 138,026 13,305 9.64%
Total non-earning
assets................. 10,644 12,924 19,466
-------- -------- --------
Total assets............ $114,291 $133,924 $157,492
======== ======== ========
INTEREST-BEARING
LIABILITIES
Deposits:
Interest-bearing demand
deposits.............. $ 14,953 $ 211 1.41% $ 9,970 $ 229 2.30% $ 8,705 $ 241 2.77%
Premier money market... 20,448 846 4.14% 41,822 2,417 5.78% 61,519 3,176 5.16%
Other savings.......... 23,162 623 2.69% 16,462 425 2.58% 12,607 386 3.06%
Certificates of
deposit............... 24,512 1,027 4.19% 25,626 1,356 5.29% 28,384 1,564 5.51%
IRA CD's............... 5,784 253 4.37% 6,262 344 5.49% 6,436 347 5.39%
-------- ------ ---- -------- ------ ----- -------- ------- -----
Total deposits......... 88,859 2,960 3.33% 100,142 4,771 4.76% 117,651 5,714 4.86%
Other borrowings....... 4,495 190 4.23% 1,999 98 4.90% 623 27 4.33%
-------- ------ ---- -------- ------ ----- -------- ------- -----
Total interest bearing
liabilities........... 93,354 3,150 3.37% 102,141 4,869 4.77% 118,274 5,741 4.85%
-------- ------ ---- -------- ------ ----- -------- ------- -----
Non-interest-bearing
liabilities:
Demand deposits........ 11,400 20,220 24,862
Other liabilities...... 476 1,068 1,630
-------- -------- --------
Total non-interest
bearing liabilities... 11,876 21,288 26,492
Stockholders' equity... 9,061 10,495 12,726
-------- -------- --------
Total liabilities and
stockholders' equity.. $114,291 $133,924 $157,492
======== ======== ========
NET INTEREST INCOME/NET
INTEREST SPREAD........ $4,847 4.35% $6,732 4.82% $ 7,564 4.79%
====== ==== ====== ===== ======= =====
NET INTEREST MARGIN..... 4.68% 5.56% 5.48%
==== ===== =====

- --------
(1) For purposes of these computations, non-accruing loans are included in the
average balances.

YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1994 COMPARED TO 1995 1995 COMPARED TO 1996
CHANGES DUE TO: CHANGES DUE TO:
------------------------- ---------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL
-------- ------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)

INCREASE (DECREASE) IN
NET INTEREST INCOME DUE
TO:
Loans:
Commercial loans....... $ 2,258 $ 1,160 $ 3,418 $ 2,100 $ (194) $ 1,906
Residential loans...... 29 86 115 (134) 41 (93)
Other consumer loans... (224) 62 (162) (51) (1) (52)
------- ------- ------- -------- ------- --------
Total loans........... 2,063 1,308 3,371 1,915 (154) 1,761
Investment securities... (254) 205 (49) (149) 45 (104)
Federal funds sold...... 171 111 282 103 (56) 47
------- ------- ------- -------- ------- --------
Total investments and
federal funds sold... (83) 316 233 (46) (11) (57)
------- ------- ------- -------- ------- --------
Total interest earning
assets............... 1,980 1,624 3,604 1,869 (165) 1,704
Deposits:
Interest-bearing demand
deposits.............. (114) 132 18 (35) 47 12
Premier money market
savings............... 1,235 336 1,571 1,017 (258) 759
Other savings.......... (173) (25) (198) (118) 79 (39)
Time deposits.......... 59 270 329 152 56 208
IRA time deposits...... 26 65 91 9 (6) 3
------- ------- ------- -------- ------- --------
Total deposits........ 1,033 778 1,811 1,025 (82) 943
FHLB advances........... (122) 30 (92) (60) (11) (71)
Total interest-bearing
liabilities.......... 911 808 1,719 965 (93) 872
------- ------- ------- -------- ------- --------
Change in net
interest income.... $ 1,069 $ 816 $ 1,885 $ 904 $ (72) $ 832
======= ======= ======= ======== ======= ========

FINANCIAL CONDITION

General. Total assets increased $15.6 million, or 12%, from $125.6 million
at December 31, 1994 to $141.2 million at December 31, 1995, and $20.4
million, or 15%, from $141.2 million at December 31, 1995 to $161.6 million at
December 31, 1996. These increases reflect the increased loan portfolio and
the corresponding growth in deposits used to fund loan originations. Assets
increased $15.8 million, or 10%, to $177.5 million at June 30, 1997 due to the
$3.4 million, or 3%, increase, in net loans and a $13.2 million, or 128%,
increase in receivable from loans sold due to month end June 1997 sales.

Cash and Cash Equivalents. Cash and cash equivalents increased $2.5 million,
or 33%, from $7.6 million at December 31, 1994 to $10.1 million at December
31, 1995, increased $8.8 million, or 87%, to $18.9 million at December 31,
1996 and decreased $2.4 million, or 13%, to $16.4 million at June 30, 1997.
The Company maintains such funds on hand as federal funds sold, providing
overnight liquidity for the Company's loan originations.

Investment Securities. The investment securities portfolio decreased $2.4
million, or 17%, from $14.0 million at December 31, 1994 to $11.6 million at
December 31, 1995 and increased $4.2 million, or 37%, from December 31, 1995
to $15.9 million at December 31, 1996 and totaled $15.8 million at June 30,
1997. The portfolios are managed for liquidity and security, rather than
yield, and are comprised primarily of U.S. Treasury and other U.S. government
mortgage-backed securities and collateralized mortgage obligations with
average lives of less than five years. The portfolios are also utilized to
collateralize lines of credit with correspondent banks, providing letter of
credit facilities to supplement the Company's own product offerings.

Loans. Loans increased $12 million, or 13%, from $95.1 million in 1994 to
$107.0 million in 1995, and increased $7.6 million, or 7%, from December 31,
1995 to $114.6 million at December 31, 1996 and increased $3.6 million, or 3%,
from December 31, 1996 to $118.2 million at June 30, 1997. The growth in the
portfolios resulted from the retained portions of SBA and USDA loans and was
partially offset by the sale from portfolio in 1996 of a total of $33.1
million of the unguaranteed portions of SBA and USDA loans, many of which had
been originated in earlier years. This sale was undertaken to provide the
funding required for the September 1996 branch sale as well as to provide
general liquidity for originations and investment portfolio purchases. For the
six months ended June 30, 1997, sales of the unguaranteed portions of SBA and
USDA loans totaled $7.1 million.

Allowance for Loan Losses. The Company reviews the adequacy of the allowance
for loan losses quarterly. The allowance totaled $2 million at December 31,
1994 and at December 31, 1995. The allowance for loan losses increased $1
million, from $2 million at December 31, 1995 to $3 million at December 31,
1996, to include a specific allocation for certain investor property mortgage
loans, and to reflect a general allocation to the commercial loan portfolios
due to increases in the outstanding loan balances. The allowance for loan
losses remained flat at $3 million from the December 31, 1996 balance to the
June 30, 1997 balance.

AT DECEMBER 31, AT JUNE 30,
--------------------------- ------------------
ACTIVITY IN THE ALLOWANCE 1994 1995 1996 1996 1997
FOR LOAN LOSSES ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)

Balance of allowance for loan
losses at the beginning of the
period........................ $ 1,425 $ 2,000 $ 2,000 $ 2,000 $ 3,000
Charge-offs:
Investor mortgage............ 709 1,086 1,730 512 801
SBA.......................... -- 18 478 73 74
USDA......................... -- -- -- -- --
Commercial................... 418 173 168 -- 17
Private...................... 82 8 27 -- 1
Ex-Im working capital........ -- -- -- -- --
Ex-Im medium term............ -- -- -- -- --
Construction................. -- 4 -- -- --
Residential and other consum-
er........................... 3 32 124 -- 78
------- -------- -------- -------- --------
Total charge-offs.......... 1,212 1,321 2,527 585 971
Recoveries:
Investor mortgage............ -- 13 13 12 --
Commercial................... 34 6 16 15 3
Private...................... 69 63 10 4 --
Residential and other consum-
er.......................... 1 2 1 -- 9
------- -------- -------- -------- --------
Total recoveries............... 104 84 40 31 12
------- -------- -------- -------- --------
Net charge-offs................ 1,108 1,237 2,487 554 959
------- -------- -------- -------- --------
Provision for loan losses...... 1,683 1,237 3,487 554 959
------- -------- -------- -------- --------
Balance of allowance for loan
losses at end of period....... $ 2,000 $ 2,000 $ 3,000 $ 2,000 $ 3,000
======= ======== ======== ======== ========
Total loans.................... $95,118 $106,992 $114,627 $122,559 $118,189
======= ======== ======== ======== ========
Allowance to total loans....... 2.1% 1.9% 2.6% 1.6% 2.5%
======= ======== ======== ======== ========

Charge-offs from the investor mortgage portfolio represented 59%, 82%, 69%,
88% and 83% of the total charge-offs for the years ended December 31, 1994,
1995 and 1996, and the six months ended June 30, 1996 and June 30, 1997,
respectively. The Company's portfolio of investor mortgages is collateralized
by multi-family urban residential units located in various Connecticut inner
cities. Following the recession in 1990, management determined that no new
loans collateralized by urban residential units would be made as the Company's
focus turned toward its current target market of small and medium size
manufacturers. In the early 1990's the Company

worked to resolve investor mortgages related to certain urban residential
loans by facilitating sales of the troubled properties to experienced property
managers who had an interest in acquiring and rehabilitating them. Due to
deteriorating economic conditions in Hartford and New Haven, Connecticut, many
of these properties experienced cash flow difficulties again in 1995 which
worsened through 1996 due to continued deterioration in the socio-economic
environment. The Company increased the allocated allowance for loan losses for
such properties in 1996 and charged-off $801,000 of this additional allowance
during the first six months of 1997 upon resolution of a long-outstanding loan
from this portfolio. The Company continues to monitor this portfolio and,
based on current information, believes that it maintains appropriate reserves.
The outstanding balance of this portfolio at June 30, 1997 totaled $6.3
million and was comprised of 40 loans.

The provision for loan losses reflects the charge to earnings deemed
appropriate by management to maintain an adequate allowance for loan losses.
The provision totaled $1.7 million in 1994 and decreased $446,000, or 27%, to
$1.2 million for the year ended December 31, 1995 and increased $2.3 million,
or 192%, to $3.5 million for the year ended December 31, 1996. The provision
for loan losses totaled $554,000 for the six months ended June 30, 1996 and
increased $405,000, or 73%, to $959,000 for the six months ended June 30,
1997.

The $2.3 million increase in the provision for loan losses in 1996 was
necessitated by the continued deterioration of the investor mortgage portfolio
which became evident in the third and fourth quarters of 1996. It was at that
time that management determined that the cash flow difficulties of the
underlying properties were other than temporary. Management also determined
that the unallocated portion of the allowance should be increased to reflect a
broader geographic base of originations to areas where the Company had no
previous experience. The $405,000, or 73%, increase in the provision for loan
losses from the six months ended June 30, 1996 to the six months ended June
30, 1997 was due to additional reserves allocated to the non-performing
portfolio which increased $700,000, or 37%, from $1.9 million at June 30, 1996
to $2.6 million at June 30, 1997.

The Company manages charge-offs by relationships and has noted no
appreciable increase in the number of relationships charged-off. For the years
ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1996
and 1997, the charge-offs were comprised of 12, 19, 21, 5 and 10 lending
relationships, respectively.

The SBA net loan charge-offs for the year ended 1996 represented losses
realized on seven of the Company's 435 SBA loans after liquidation of the
collateral, and represent an annual loss ratio of 1.0% of the average balance
of the unguaranteed portion of SBA loans which were retained in the Company's
portfolio.

The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated. Management believes that the
allowance can be allocated by category only on an approximate basis, and
therefore allocation of the allowance to each category is not necessarily
indicative of future losses and does not restrict use of the allowance to
absorb losses in any category. The unallocated portion of the allowance
represents an amount that is not specifically allocable to one of the loan
portfolios. All of the loans included in the Company's portfolio are to
domestic companies. Loans to foreign entities are 100% Ex-Im Bank guaranteed
and sold at origination.

DECEMBER 31,
--------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
----- ------ ------ ------ ------ --------
(DOLLARS IN THOUSANDS)

ALLOCATION OF THE ALLOWANCE BY
CATEGORY OF LOANS
Unguaranteed portions of:
SBA and USDA loans............... $ 37 $ 147 $ 338 $ 563 $ 491 $ 833
Ex-Im Bank working capital loans. -- -- -- 3 44 104
Commercial mortgage loans.......... 63 416 237 482 271 211
Other commercial loans............. 196 346 353 316 475 522
Investor mortgage loans............ 82 223 581 399 1,061 540
Residential and other consumer
loans............................. 38 99 106 72 113 171
Unallocated........................ 84 194 385 165 545 619
----- ------ ------ ------ ------ ------
Total allowance for loan losses.. $ 500 $1,425 $2,000 $2,000 $3,000 $3,000
===== ====== ====== ====== ====== ======

DECEMBER 31,
--------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
----- ----- ----- ----- ----- --------

PERCENT OF LOANS IN EACH CATEGORY
TO TOTAL LOANS
Unguaranteed portions of:
SBA and USDA loans.............. 8.0% 15.9% 32.0% 38.5% 30.5% 36.0%
Ex-Im Bank working capital
loans.......................... -- -- -- 0.2 3.0 2.3
Ex-Im Bank medium term loans...... -- -- 0.2 0.1 1.8 2.1
Commercial mortgage loans......... 13.5 19.5 17.1 14.5 16.4 14.3
Other commercial loans............ 36.6 28.1 21.6 26.9 29.4 32.8
Investor mortgages loans.......... 17.6 13.5 9.9 7.2 6.6 5.3
Residential and other consumer
loans............................ 24.3 23.0 19.2 12.6 12.3 7.2
----- ----- ----- ----- ----- -----
Total........................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== =====

The following table sets forth information regarding the Company's non-
performing loans at the dates indicated:

DECEMBER 31,
----------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
NON-PERFORMING LOANS ----- ----- ------ ------ ------ --------
(DOLLARS IN THOUSANDS)

Commercial:
Unguaranteed portions:
SBA/USDA loans............... $ -- $ -- $ -- $ 419 $ 188 $ 835(1)
Ex-Im bank working capital
loans....................... -- -- -- -- -- --
Commercial mortgage loans..... -- -- 703 -- -- --
Other commercial loans........ -- -- 106 -- 132 136
Investor mortgages loans...... -- 755 1,437 839 1,853 1,050
Consumer....................... -- -- -- -- 79 573
----- ----- ------ ------ ------ ------
Total non-performing loans..... $ -- $ 755 $2,246 $1,258 $2,252 $2,594
===== ===== ====== ====== ====== ======
Total non-performing loans to
total loans................... -- 1.06% 2.36% 1.18% 1.96% 2.19%
===== ===== ====== ====== ====== ======
Total non-performing loans to
total assets.................. -- 0.69% 1.79% 0.89% 1.39% 1.46%
===== ===== ====== ====== ====== ======
Allowance to total non-
performing loans.............. -- 189% 89% 159% 133% 116%
===== ===== ====== ====== ====== ======

- --------
(1) Excludes the Company's only guaranteed USDA loan not sold of $345,000
which is fully guaranteed as to the collection of principal and interest.

The gross interest income that would have been recorded if the nonaccrual
loans had been current in accordance with their original terms would have been
$100,000 for the period ended June 30, 1997. The actual amount of interest
income recognized on those loans was $35,000 for the period ended June 30,
1997. The Company had no loans past due 90 days and accruing interest at any
period end as presented in the above table.

Other Real Estate Owned. It is the Company's policy, whenever possible, not
to take title to real property collateralizing loans, thereby avoiding
management time and any environmental liabilities associated with holding such
properties. From the end of the 1994 to 1997 reporting periods discussed
herein, the highest balance of other real estate owned totaled $300,000.

Receivable From Loans Sold. Receivable from loans sold represents the
balance of loans sold for which funding has not yet been received. Government
guaranteed loans are generally sold within a day of origination and settled
within 30 days of the trade date. During this thirty day period, the Company
reviews and delivers closing documents to the investor. The receivable balance
fluctuates with the month's loan sale activity and tends to be higher at any
quarter end due to increased loan closing activity. The average balance of
this receivable was $2.6 million, $3.5 million and $8.0 million for the fiscal
years ended December 31, 1994, 1995 and 1996, respectively and $7.0 million
for the six months ended June 30, 1997. The Company actively monitors the
settlement of loans to ensure that this source of liquidity is properly
managed.

Prepaid Expenses and Other Assets. Prepaid Expenses and Other Assets is
comprised principally of servicing assets as discussed in "--Accounting for
Loan Sales."

DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996 1997
------ ------ ------ --------
(DOLLARS IN THOUSANDS)

OTHER ASSETS
Servicing assets.................................. $2,084 $2,809 $4,138 $4,847
Prepaid expenses and other assets................. 226 280 631 730
------ ------ ------ ------
Total other assets.............................. $2,310 $3,089 $4,769 $5,577
====== ====== ====== ======

Deposits. Deposits are the Company's primary funding source and have
increased to sustain the Company's balance sheet growth. See "Business--
Funding Sources."

Federal Home Loan Bank of Boston Advances. Federal Home Loan Bank ("FHLB")
advances were utilized in 1994 to "match fund" certain community reinvestment
initiatives and were repaid in 1995 when alternative, less expensive deposits
became available. Since 1995, these advances have been utilized to provide
short-term liquidity. As of June 30, 1997, the Bank had a $2.9 million unused
line of credit from the FHLB and had the ability to borrow approximately $3.8
million from the FHLB under various term advance programs.

Stockholders' Equity. Stockholders' equity increased $1.9 million from $9.7
million at year end 1994 to $11.6 million at year end 1995, and $2.6 million
from year end 1995 to $14.2 million at year end 1996, and $1.8 million to
$16.0 million at June 30, 1997 due to the retention of earnings. The Company
has paid quarterly dividends of $0.03 per share (restated for the Stock Split)
since the fourth quarter of 1995. As explained in Note 7 to the Company's
consolidated financial statements, the Company holds a note receivable from
the Company's Chairman of the Board and President related to the issuance of
614,600 shares of Common Stock (restated to reflect the Stock Split) in June
1994, the repayment of which would result in an increase in stockholders'
equity although this note may be reduced or forgiven under certain
circumstances. See "Management--Employment Agreement; Key-Man Insurance
Policies."

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity and funding are its diverse
deposit base and loan sales and participations. Secondary sources of liquidity
include FHLB advances and the sale of investments. As an FDIC-insured
institution, the Bank may make available traditional business and consumer
depository products, including checking, savings and time deposit accounts.

Management considers scheduled cash flows from existing clients and
borrowers and projected deposit levels as well as estimated liquidity needs
from maturing and disintermediating deposits, approved extensions of credit
and unadvanced commitments to existing borrowers, in determining the level and
maturity of deposits necessary to support operations. Historically, the
Company has increased the level of deposits to support its planned loan
growth. Marketing efforts are focused on externally indexed "core accounts" of
checking and savings deposits, which have proven to be generally less interest
rate sensitive than time deposits. The Company, in addition to its primary
deposit solicitation efforts, may, from time to time, target time deposit
campaigns to the general public in conjunction with anticipated liquidity
needs in order to better allow an appropriate matching of its funding sources
to its funding needs.

Average balances of deposits accounts increased $20 million from $100
million in 1994 to $120 million in 1995, and $22 million from 1995 to $143
million in 1996, with the majority of the increases in the savings account
balances. The deposit base remained flat for the first six months of 1997,
with the average balance of deposits totaling $145 million.

The Company's liquidity position is monitored daily by management to
maintain a level of liquidity conducive to efficient operations and is
continuously evaluated as part of the asset/liability management process. The
Company believes that its liquidity sources will continue to provide funding
sufficient to support operating activities, loan originations and commitments,
and deposit withdrawals.

The Bank is subject to various regulatory capital requirements administered
by federal banking agencies. Failure to meet minimum capital requirements can
result in certain mandatory and discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company's financial
condition. The regulations require that the Bank meet specific capital
adequacy guidelines as calculated under regulatory accounting practices. The
Bank's capital classification is also subject to qualitative judgments by the
regulators about interest rate risk, concentration of credit risk and other
factors.

Quantitative measures established by regulations to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of Tier I capital to total average assets and minimum ratios of
Tier I and total capital to risk weighted assets. The Bank's actual capital
amounts and ratios are also presented in the table. The Company is not subject
to any additional capital ratio requirements.

REGULATORY
MINIMUM FOR REGULATORY
CAPITAL ADEQUACY MINIMUM TO BE
ACTUAL PURPOSES WELL CAPITALIZED
-------------- ----------------- -----------------
DOLLAR DOLLAR DOLLAR
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ------ --------- ------- --------- -------
(DOLLARS IN THOUSANDS)

As of December 31, 1995:
Total capital (to risk
weighted assets)........ $12,268 10.73% $ 9,148 8.00% $ 11,435 10.00%
Tier I capital (to risk
weighted assets)........ $10,831 9.47% $ 4,574 4.00% $ 6,861 6.00%
Tier I capital (to
average assets)......... $10,831 7.71% $ 5,622 4.00% $ 7,028 5.00%
As of December 31, 1996:
Total capital (to risk
weighted assets)........ $14,253 11.62% $ 9,811 8.00% $ 12,264 10.00%
Tier I capital (to risk
weighted assets)........ $12,702 10.36% $ 4,906 4.00% $ 7,358 6.00%
Tier I capital (to
average assets)......... $12,702 8.44% $ 6,017 4.00% $ 7,522 5.00%
As of June 30, 1997:
Total capital (to risk
weighted assets)........ $16,475 11.50% $ 11,457 8.00% $ 14,321 10.00%
Tier I capital (to risk
weighted assets)........ $14,676 10.25% $ 5,728 4.00% $ 8,593 6.00%
Tier I capital (to
average assets)......... $14,676 8.97% $ 6,541 4.00% $ 8,176 5.00%

ASSET/LIABILITY MANAGEMENT

The Company seeks to manage its assets and liabilities to reduce the
potential adverse impact on net interest income that might result from changes
in interest rates. Control of interest rate risk is conducted through
systematic monitoring of maturity mismatches. The Company's investment
decision-making takes into account not only the rates of return and their
underlying degree of risk, but also liquidity requirements, including minimum
cash reserves, withdrawal and maturity of deposits and additional demand for
funds. For any given period, the pricing structure is matched when an equal
amount of assets and liabilities reprice. An excess of assets or liabilities
over these matched items results in a gap or mismatch, as shown on the
following table. A negative gap denotes liability sensitivity and normally
means that a decline in interest rates would have a positive effect on net
interest income, while an increase in interest rates would have a negative
effect on net interest income. However, significant variations may exist in
the degree of interest rate sensitivity between individual asset and liability
types within the repricing periods presented due to differences in their
repricing elasticity relative to changes in the general level of interest
rates. All of the Company's assets and liabilities are U.S. dollar-denominated
and, therefore, the Company bears no foreign exchange risk.

The majority of the Company's assets reprice according to contractual
arrangements although the Company has fairly broad discretion over the
frequency and magnitude of interest rate changes on its liabilities which has
enabled the Company to minimize the impact of any general changes in the
interest rate environment.

The Company utilizes the analysis detailed below to generally monitor the
composition of assets and liabilities and focuses on the one-year mismatch.
The Company believes the negative one year cumulative gap -$6.7 million, or
5%, reflects a relatively balanced position.

For purposes of the following analysis, checking and savings accounts are
presented 20% in the 0-90 day period, 20% in the 91-180 day period, and 30% in
the 181-365 day period and 30% in the 1-5 year period. Although the elasticity
of such deposits cannot be tied to any one time period, these are the
assumptions which have been developed by the Company based on historical
experience and are utilized for internal and regulatory reporting purposes.

AT JUNE 30, 1997
----------------------------------------------------------------
0 TO 90 91 TO 180 181 TO 365 1 TO 5 OVER 5
DAYS DAYS DAYS YEARS YEARS TOTAL
-------- --------- ---------- -------- -------- ---------
(DOLLARS IN THOUSANDS)

Commercial loans........ $ 89,785 $ 5,384 $ 3,586 $ 8,944 $ 1,995 $ 109,694
Residential loans....... 1,245 681 992 2,771 966 6,655
Other consumer loans.... 1,346 14 10 417 53 1,840
Investments............. 1,319 1,108 542 11,275 1,574 15,818
Federal funds sold...... 8,000 -- -- -- -- 8,000
-------- -------- -------- -------- -------- ---------
Total................. $101,695 $ 7,187 $ 5,130 $ 23,407 $ 4,588 $ 142,007
======== ======== ======== ======== ======== =========
Checking................ $ 7,115 $ 7,115 $ 10,664 $ 10,664 -- $ 35,558
Money market savings.... 15,343 15,344 23,016 23,015 -- 76,718
Other savings........... 1,058 1,058 1,587 1,587 -- 5,290
Time deposits........... 10,924 7,221 20,221 2,715 -- 41,081
Treasury, tax and loan.. 58 -- -- -- -- 58
-------- -------- -------- -------- -------- ---------
Total................. $ 34,498 $ 30,738 $ 55,488 $ 37,981 -- $ 158,705
======== ======== ======== ======== ======== =========
Interest sensitivity
gap.................... $ 67,197 $(23,551) $(50,358) $(14,574) $ 4,588 $ (16,698)
-------- -------- -------- -------- -------- =========
Cumulative gap.......... $ 67,197 $ 43,646 $ (6,712) $(21,286) $(16,698)
======== ======== ======== ======== ========
Cumulative gap as a
percentage of total
earning assets......... 47% 31% (5)% (15)% (12)%
======== ======== ======== ======== ========

SEASONALITY

The Company's business is seasonal as the level of loan originations tend to
be lower during the third quarter when many manufacturing companies shut down
for a limited time for summer vacation.

IMPACT OF INFLATION

The consolidated financial statements and related data presented in this
report have been prepared in accordance with generally accepted accounting
principles which require the measurement of financial position and operating
results in terms of historical dollars without considering changes in the
relative purchasing power of money over time due to inflation. The primary
impact of inflation on the operations of the Company is reflected in increased
operating costs. Interest rates have a significant impact on the Company's
performance. Increases in interest rates affect the ability of the Company's
borrowers to service their variable rate debt. Furthermore, inflation can
directly affect the value of loan collateral in general, and real estate
collateral in particular. These factors are taken into account in the initial
underwriting process and over the life of the loans. The Company believes that
it has the systems in place to continue to manage the rates, liquidity and
interest rate sensitivity of the Company's assets and liabilities.

RECENT ACCOUNTING PRONOUNCEMENTS

SFAS No. 125

In June 1996, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS No. 125 requires that, after a transfer
of financial assets, an entity recognize the financial and servicing assets it
controls and the liabilities it has incurred, derecognize financial assets
when control has been surrendered, and derecognize liabilities when
extinguished. SFAS No. 125 is intended to provide consistent standards by
which a company may distinguish transfers of financial assets that are sales
from transfers that are secured borrowings. SFAS No. 125 applies to transfers
and servicing of financial assets and extinguishment of liabilities occurring
after December 31, 1996, and is to be applied prospectively; earlier or
retroactive application is not permitted. Implementation of SFAS No. 125,
beginning on January 1, 1997, did not have a significant effect on the
financial condition or results of operations of the Company.

SFAS No. 128

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
(i) replaces the presentation of primary earnings per share ("EPS") with a
presentation of basic EPS; (ii) requires dual presentation of basic and
diluted EPS on the face of the consolidated statements of income regardless of
whether basic and diluted EPS are the same; and (iii) requires a
reconciliation of the numerator and denominator used in computing basic and
diluted EPS. Basic EPS excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to Accounting Principles Board Opinion
No. 15. SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods. Earlier application
is not permitted. SFAS No. 128 requires restatement of all prior-period EPS
data presented.

SFAS No. 129

In February 1997, the FASB also issued SFAS No. 129 "Disclosure of
Information about Capital Structure." This pronouncement establishes standards
for the disclosure of information about an entity's capital structure and is
effective for financial statements issued for periods ending after December
15, 1997. The adoption of this pronouncement is expected to have no impact on
the financial statements of the Company.

SFAS No. 130

In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and display of comprehensive
income which is defined as the change in equity of a business enterprise
during a period from nonowner sources. SFAS No. 130 is effective for years
beginning after December 15, 1997 and requires reclassification of financial
statements for all prior years presented. The adoption of SFAS No. 130 is
expected to impact the presentation of financial information only.

SFAS No. 131

In June 1997, the FASB also issued SFAS No. 131 "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 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 No. 131
is effective for financial statements for periods beginning after December 15,
1997 and requires presentation of comparative information for prior periods
presented. The adoption of SFAS No. 131 is expected to impact the way the
Company reports information about its operations.

YEAR 2000 COMPLIANCE

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

BUSINESS

GENERAL

Overview

First International Bancorp, Inc., a Delaware corporation, is a one bank
holding company incorporated in 1985 and regulated by the Board of Governors
of the Federal Reserve System. Its principal asset and subsidiary is First
National Bank of New England, a national banking association established in
1955 and regulated by the OCC.

The Company specializes in providing credit, trade and depository services
to small and medium size manufacturing companies located in the United States
and in foreign "Big Emerging Markets" as defined by the U.S. Department of
Commerce. The Company serves its target market by offering flexible and
attractive terms to borrowers and manages its credit risk through the combined
utilization of commercial loan guarantee programs made available by three U.S.
federal agencies: the SBA, the USDA and Ex-Im Bank.

As of June 30, 1997, the Company had total assets of $177.5 million, total
balance sheet loans of $118.2 million, total deposits of $158.7 million and
total stockholders' equity of $16.0 million. The Company had a total
commercial and international loan servicing portfolio of $344.6 million at
December 31, 1996 which increased 26% to $433.1 million at June 30, 1997. The
total portfolio serviced for investors increased 56% from $98.7 million at
December 31, 1994 to $153.9 million at December 31, 1995, increased 73% to
$265.8 million at December 31, 1996 and increased 30% to $344.9 million at
June 30, 1997. Net income for the year ending December 31, 1996 was $3.2
million, and return on average assets and return on average equity were 2.1%
and 25.5%, respectively. Net income for the six months ended June 30, 1996 was
$1.6 million and increased 26% to $2.1 million for the six months ended June
30, 1997. Return on average assets and return on average equity for the six
months ended June 30, 1997 were 2.5% and 27.8%, respectively. As of June 30,
1997, the Bank was "well-capitalized" for federal bank regulatory capital
adequacy purposes.

Loan Originations

The Company's Commercial Banking Department underwrites lines of credit,
term loans and industrial property mortgages through the use of SBA, USDA and
non-guaranteed loans for businesses located primarily in the Northeast United
States. Commercial lending teams operate from the Hartford, Connecticut
headquarters, as well as from eight regional loan production or
"representative" offices located in Boston and Springfield, Massachusetts,
Providence, Rhode Island, Morristown, New Jersey, Pittsburgh and Philadelphia,
Pennsylvania, Rochester, New York and Washington D.C. The Company's domestic
loan officers are trained to understand the specific financial needs of small
and medium size manufacturers, and to use government guaranteed and other
commercial loan products to respond to those needs. Domestic loan officers
participate in industrial trade organizations representing the Company's
target market and conduct other marketing activities to reach potential
borrowers.

The Company's International Banking Department underwrites Ex-Im Bank
guaranteed loans to small and medium size manufacturers located throughout the
United States and in nine "Big Emerging Markets." See "--International Banking
Services and Products." International lending activities support trade flows
between the United States and the "Big Emerging Markets," which have grown 12%
annually since 1990 and reached $473 billion in 1996. International lending
teams operate from the Hartford, Connecticut headquarters and are assisted in
their efforts by contractual international marketing representatives who are
actively involved in providing financial, accounting, consulting and/or
engineering services to manufacturers in their home countries. Contractual
marketing arrangements have been established with professionals in Brazil,
Mexico, Poland, Turkey and India. The Company began lending internationally in
1994 and has increased such loan originations from $397,000 in 1994 to $1.8
million in 1995, $13.6 million in 1996 and $27.3 million for the six months
ended June 30, 1997.

Underwriting

The Company's underwriting activities are initiated from each of its lending
offices and supported and approved at the Hartford, Connecticut headquarters.
Commercial loan officers analyze the creditworthiness of proposed borrowers
and evaluate each borrower's financial statements, credit reports, business
plans and other data to determine if the credit and proposed collateral
satisfy the Company's specific loan standards and policies. All credit
memoranda are reviewed by an independent loan officer and may require
additional approval depending on the particular circumstances of the financing
package. Domestic and international loans undergo a substantially identical
approval process.

Loan Sales

The Company achieves high returns while meeting the growing credit needs of
its target market by selling a portion of its commercial and international
loans on a non-recourse, servicing-retained basis. A separate Capital Markets
Department was established in 1996 to sell loans, including commercial and
international loans without federal guarantees. The Capital Markets Department
directs its resources toward identifying non-government guaranteed secondary
loan markets as a further means of mitigating credit risk, leveraging capital
and replenishing liquidity. As of June 30, 1996, $20.5 million, or 10%, of the
loan portfolio serviced for investors did not have government guarantees or
credit enhancements compared to $57.9 million, or 17%, of such servicing
portfolio as of June 30, 1997.

Deposits

The Company's lending and investing activities are funded primarily by
interest-bearing deposits from commercial borrowers, their principals and
other private banking clients. The Private Banking Department provides stable,
low-cost funding to the Company by managing the deposit base while offering a
full array of financial products to serve the personal needs of, and
facilitate relationships with, the Company's client base. The Private Bankers
continually seek to expand the Company's deposit base by soliciting deposits
from individuals who seek highly personalized service and to strengthen
existing deposit relationships by offering new financial products and services
to both existing and prospective clients.

BUSINESS STRATEGY

The Company's strategy is to serve small and medium size manufacturers
through the following key activities:

Expand Domestic Loan Origination Activities. Commercial lending teams
currently operate from the Hartford, Connecticut headquarters as well as
from eight regional loan production or "representative" offices, located in
Boston and Springfield, Massachusetts, Providence, Rhode Island, Pittsburgh
and Philadelphia, Pennsylvania, Morristown, New Jersey, Rochester, New York
and the Washington, D.C. area. The Company intends to continue to expand in
its established geographic markets by adding additional staff over the
second half of 1997 and in 1998. In addition, the Company will continue to
enter new markets by

opening representative offices as marketing diligence is completed. In the
fourth quarter of 1997, the Company plans to establish an office in Long
Island, New York.

Increase International Presence In "Big Emerging Markets." The
International Banking Department operating from the Hartford, Connecticut
headquarters is assisted in its efforts abroad by its contractual
relationships with international marketing representatives in Brazil,
Mexico, Poland, Turkey and India. The marketing representatives are
actively involved in providing professional financial services to privately
owned manufacturers in their home countries. The Company intends to
continue to develop its network of marketing representatives and expand the
nature of the services provided by the marketing representatives to
increase the Company's presence in targeted countries. In the second half
of 1997, the Company plans to establish similar contractual marketing
relationships in Argentina, South Africa, Indonesia and the Philippines.

Expand Commercial Loan Sales Activities. The Capital Markets Department
was established in July 1996 to sell the non-recourse, servicing-retained
portions of government guarantee and non-government guarantee loans. Sales
of the unguaranteed portions of SBA and USDA loans and unguaranteed
commercial loans have increased as the Capital Markets Department has
analyzed and developed a network of purchasers. The Company plans to
continue developing this network of purchasers as loan origination
activities increase and the commercial loan secondary market develops for
all categories of loans.

Develop New Products. Due to the increasingly competitive nature of the
environment in which the Company operates and the inherent uncertainty
associated with funding for government guarantee loan programs, the
financing and deposit-related needs of its targeted privately owned
manufacturing clientele must be constantly evaluated. Product development
efforts are on-going and the Company's centralized infrastructure enables
it to bring new products and services to the market on a timely basis,
designed to enhance service to and improve relationships with its niche
clientele. The Company introduced a commercial lockbox product and expanded
its foreign exchange services in 1996. In the second half of 1997, the
Company plans to introduce additional export-related financing programs.

Utilize Private Banking To Provide Stable, Low-Cost Funding And Enhance
Client Relations. The Private Banking Department was established to provide
stable, low-cost funding to the Company. Private banking services are
offered to serve the personal needs of, and facilitate relationships with,
the Company's existing clients and their principals and other private
banking clients. The Company intends to grow by expanding its deposit base
by strengthening existing deposit relationships, soliciting deposits from
individuals who seek highly personalized service and offering new products
consistent with the needs of these clients.

LENDING ACTIVITIES AND POLICIES

The Company's distribution of domestic and international commercial loan
originations are detailed below:

FOR THE YEAR ENDED FOR THE SIX MONTHS
DECEMBER 31, 1996 ENDED JUNE 30, 1997
-------------------- --------------------
PRINCIPAL PRINCIPAL
BALANCE PERCENTAGE BALANCE PERCENTAGE
LOAN ORIGINATIONS BY DEPARTMENT --------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)

Domestic:
SBA loans............................. $ 85,303 50% $ 47,302 40%
USDA loans............................ 12,700 7% 17,679 15%
Other commercial loans................ 37,824 22% 15,190 13%
-------- ---- -------- ----
Total domestic banking............... 135,827 79% 80,171 68%
-------- ---- -------- ----
International:
Ex-Im working capital lines........... 23,300 13% 10,625 9%
Ex-Im medium term loans............... 13,617 8% 27,297 23%
-------- ---- -------- ----
Total international banking.......... 36,917 21% 37,922 32%
-------- ---- -------- ----
Total commercial loan originations... $172,744 100% $118,093 100%
======== ==== ======== ====

MARKETING

Domestic Commercial Banking

The Company originates domestic loans through its network of 26 commercial
loan officers in nine offices who seek to establish long-term relationships
with their clients. The Company believes it is uniquely positioned to serve
its domestic market through its ability to provide clients with a flexible
combination of lines of credit, term loans and mortgages for industrial
property and trade financing. The Company generally utilizes the SBA, USDA
and/or Ex-Im Bank loan guarantee programs as a part of a financing package in
light of an applicant's particular situation. The Company's participation in
three government guarantee loan programs enables it to provide its clients
with longer term loans than are typically available to small and medium size
manufacturers.

Commercial loan officers are responsible for marketing, underwriting,
servicing, monitoring and collecting their portfolio of loans. The Company
believes that this broad range of responsibilities enables the commercial loan
officers to establish strong working relationships with both existing and
prospective clients and promotes strong client service and prudent loan
portfolio management. Commercial loan officers are encouraged to keep apprised
of market conditions through frequent contact with clients and potential
borrowers, to develop specific knowledge of its clients' businesses and are
trained to offer flexible structuring of the Company's loan products. In
consultation with the borrower, the commercial loan officer will evaluate the
financing needs of the business and then recommend the best way to structure
the lending transaction to fit the client's unique needs.

The marketing efforts by commercial loan officers consist of participation
in trade associations serving the needs of small and medium size
manufacturers; contacting accountants, attorneys and other professionals known
to the Company to have contact with businesses in need of financing; personal
visits, direct mail solicitations; and referrals from existing clients. Since
the target client of the domestic and international loan officers is generally
the same, there is an active cross-selling effort between these two teams.

International Banking

Domestically, the Company has four international loan officers who target
U.S. exporters able to take advantage of the Company's trade financing
programs, including those supported by Ex-Im Bank. These loan officers market
the working capital lines of credit for use by the exporter. As with the
domestic commercial banking relationships, the U.S. international loan
officers are responsible for marketing, underwriting, servicing, monitoring
and collecting their portfolios of loans. If a borrower has both a domestic
and international banking loan facility, the relationship is evaluated and
monitored on an aggregate basis and each loan officer is responsible for his
or her loan and further responsible for close coordination with his or her
lending counterpart to ensure proper maintenance of the entire relationship.

Internationally, the Company has established contractual marketing
relationships with professionals in five of the Big Emerging Markets who,
during the course of conducting their primary business of accounting,
consulting and equipment sales have frequent contact with local manufacturers
who require financing for their purchase of U.S. goods. These professionals
are located by the Company through its review of databases from the U.S.
Department of Commerce and direct private sector sources. Prior to entering
into relationships with these individuals, the Company conducts due diligence,
including visiting the prospective representative and conducting inquiries of
local professionals. The Company also requires that each representative be
trained in the Company's products and services at the Hartford, Connecticut
headquarters. Each of the foreign marketing representatives markets, on behalf
of the Company, medium term loans guaranteed by Ex-Im Bank in their respective
foreign market. The contractual marketing relationships generally provide for
an eighteen month term, with certain minimum loan origination volumes required
of the representative and a narrowly-defined expense reimbursement policy.
Once the foreign marketing representatives develop a lead with a potential
borrower they direct the prospect to the U.S.-based loan officer who completes
the application process. The marketing representative receives a negotiated
fee when a loan referral made to a Company international loan officer is
originated. The marketing representative assists the lender in obtaining
certain information from the applicant

and in responding to inquiries of the applicant, but does not have any direct
underwriting responsibilities. All decisions with respect to referrals of the
foreign representatives are made by the Company which retains control over the
Company's international loan originations.

The Company generally grants each foreign representative a non-exclusive
license during the term of the agreement to use the Company's name, logo and
intellectual property in its separate foreign market. Each marketing
representative agrees not to engage in any activities on behalf of any
organization other than the Company if such organization offers products that
compete with the Company, as determined by the Company. The foreign
representative agreements generally provide that the Company may terminate
such agreements if the foreign representative fails to meet certain specified
levels of loan originations within the first six months of the term.

Although the Company has contractual marketing relationships with firms in
Brazil, Mexico, Poland, Turkey and India, $36.6 million, or 87%, of the $42.0
million medium term loan portfolio at June 30, 1997 represents loans to
borrowers in Brazil and Mexico. This concentration of originations reflects
the length of time which the Company has been marketing to Brazil and Mexico
and is not expected to reflect the concentration of activity in the future as
more recently-added marketing relationships in Big Emerging Markets generate
referrals. Loan origination activity does not begin until some months after
the date the marketing relationship is established as the Company's marketing
representatives are trained, marketing plans are developed and calling efforts
are undertaken prior to generating viable leads for the Company.

Marketing efforts include visitations and direct mail solicitation of U.S.-
based exporters of capital goods (most of which are performed by the Company's
U.S. loan officers), direct mail solicitation of foreign-based manufacturers
and industrial trade organizations interested in financing their purchases of
U.S. products and services, and local marketing by the Company's network of
international marketing professionals.

DOMESTIC COMMERCIAL BANKING SERVICES AND PRODUCTS

Loan Products and the Origination Process

The commercial loans originated by the Company include commercial real
estate mortgages (i.e., loans to businesses secured by commercial property),
term equipment loans and revolving lines of credit to manufacturers, capital
goods wholesalers and distributors, many of which are exporters. The typical
commercial borrower is a privately owned and operated company with annual
sales of $2-$25 million, employing 10-175 workers, which has been in business
for at least three years. A number of the Company's borrowers have a
proprietary product, export their products and/or have a geographically
diverse client base. The Company is typically the borrower's primary lender
and provides a mortgage loan, a term equipment loan and either a term working
capital loan or a revolving working capital line of credit collateralized by
accounts receivable and inventory. The Company's Private Banking Department
also provides a variety of business and personal depository and cash
management products to a borrower and its principals. The Company believes it
has a competitive advantage in the marketplace because it is able to provide a
full range of financing alternatives, as well as a broad array of deposit
products and services.

The Company originates loans to a variety of industries. However, based upon
its loss experience and economic forecasts, the Company may decide to de-
emphasize certain industries from time to time.

At December 31, 1996, the Company's commercial loans serviced were
distributed among the following lines of business:

PERCENTAGE OF
INDUSTRY CLASSIFICATION TOTAL SERVICED
----------------------- --------------

Manufacturing:
Industrial and commercial machinery.......................... 17%
Metal fabrication............................................ 12%
Electronic and other electrical.............................. 8%
Transportation............................................... 8%
Other........................................................ 12%
---
Total manufacturing......................................... 57%
Wholesale/distribution........................................ 12%
Professional services......................................... 10%
Retail........................................................ 6%
Foreign....................................................... 6%
Other......................................................... 9%
---
Total....................................................... 100%
===

The Company's commercial loans are typically Prime-based, variable monthly
or quarterly. The term of a loan depends upon whether the loan is guaranteed.
Government guarantee programs give clients access to longer term financing and
slower amortization than otherwise available. A government guaranteed mortgage
has a maximum term and amortization of up to 25-30 years, while an
unguaranteed mortgage loan maximum term and amortization typically does not
exceed 15 years. Equipment loans are underwritten to correspond to the useful
life of the equipment and generally range from 5-15 years. SBA guaranteed
working capital term loans range from 7-10 years while unguaranteed working
capital revolving lines of credit have a one-year term. Term loans are
generally fully amortizing.

The primary collateral sought by the Company for commercial loans consists
of first liens on owner-occupied commercial real estate, equipment, inventory
or accounts receivable, although additional collateral may include junior
liens on residential properties. The Company typically requests the personal
guarantee of the principals of the business because the Company believes this
induces the guarantor to facilitate repayment of the loan.

In striving to meet the credit needs of its clients, the Company utilizes
government guarantee loan programs which allow it to offer longer-term loans
while mitigating the credit risk to the Company through the government
guarantee. The two government guarantee loan programs utilized by the
Company's domestic lending department to provide financing to its niche market
are discussed below.

SBA Guaranteed Loan Originations

The Company utilizes the SBA's 7(a) loan program for eligible borrowers.
Eight of the Company's nine offices have Preferred Lender status. Preferred
Lender status allows the Bank to approve loans on behalf of the SBA, with the
national SBA processing center's concurrence that the applicant meets the SBA
eligibility requirements. The SBA generally completes its eligibility review
within 24 hours of submission. Eight of the Company's offices also have
Certified Lender status. Certified Lender status entitles the Bank to a 72-
hour turnaround of local district SBA approval of loan applications which
require the slightly expanded Certified Lender process. Examples of loans
requiring such extended processing are those used to refinance the Bank's
existing debt or another lender's SBA guaranteed loan. The majority of the
Bank's SBA loans are, however, processed under the expedited Preferred Lender
Program. The preferred authorities provide the Bank with a competitive
advantage by allowing the Bank to respond more quickly to customer requests.
The Bank, however,

usually is not competing against a lender offering an SBA-guaranteed loan, but
rather against a lender offering a conventional loan on slightly different
terms. The Company is able to utilize the SBA 7(a) program to provide small
business borrowers with terms not otherwise available and, because the Company
has preferred and certified designations, it is not at a competitive
disadvantage from a timing standpoint.

The SBA's 7(a) loan program provides for the guarantee of a loan equal to
75% of the principal balance, up to a maximum guarantee of $750,000 per
borrower. The SBA's 7(a) program includes an International Trade or "IT"
subprogram which allows a borrower to obtain guarantees equal to 75% of the
loan, up to a maximum $1,250,000 guarantee per borrower. This program is
available to companies which are exporting or are considering export
activities.

Funding for the SBA 7(a) loan programs is established through annual U.S.
Congressional budget appropriations; for the fiscal year ended September 30,
1997, the SBA had funding to support the origination of loans totaling $10.3
billion.

The Company also makes use of the SBA's Defense Loan and Technical
Assistance ("DELTA") Program which is designed to assist defense-dependent
subcontractors diversify their operations into the commercial sector. This
program provides for a 75% guarantee with a maximum loan size of $1,250,000.
Although such loans are administered by the SBA, the Department of Defense
funds this program and has made appropriations to guarantee loans totaling
$3.0 billion over the three-year period ending September 30, 1998.

The Company uses the SBA loan guarantee programs for term loans made to
businesses which qualify under SBA regulations as a "small business." The
primary operative SBA eligibility criteria for the Company's marketing efforts
are privately-owned manufacturers employing fewer than 500 workers. Loans may
be used for the acquisition or refinancing of property, plant and equipment,
working capital and debt consolidation, although loans guaranteed under the IT
and DELTA programs cannot be utilized for refinancing or debt consolidation
purposes.

In the event of a default, the SBA and the Company share in any collections
or collateral on a pari passu basis. For example, if a loan carries a 75%
guarantee, the SBA receives 75% of all collections while the Company receives
25% of such amounts, beginning with the initial collections. In the event of
default by a borrower on an SBA loan, if the SBA establishes that any
resulting loss is attributable to a failure by the Company to comply with SBA
policies and procedures in connection with the origination, documentation or
funding of the loan, the SBA may seek recovery of funds from the Company. With
respect to guaranteed SBA loan participations which have been sold, the SBA
will first honor its guarantee and then seek compensation from the Company in
the event that a loss is deemed to be attributable to such failure to comply
with SBA policies and procedures. To date, the SBA has not sought recovery
from the Company on any of its SBA Loans. However, after evaluating available
options, the Company chose to absorb a portion of the guaranteed balance of
one loan, increasing the Company's charge-off by $17,000 in the first quarter
of 1996.

USDA Guaranteed Loan Originations

The Company utilizes the B and I Program of the USDA, when available, based
on the applicant's geographical location and other characteristics. The B and
I Program provides for 80% guarantees on loans with principal balances up to
$5 million and 70% guarantees on loans up to $10 million, and therefore
enables the Company to provide financing to borrowers with greater financing
needs than those eligible for the SBA loan guarantee program or from a non-
guaranteed commercial loan by the Company, due to the Company's legal lending
limits. The stated purpose of this program is to improve, develop and finance
business, industry and employment and improve the economic and environmental
climate in rural communities. The fiscal 1997 U.S. Congressional Budget
appropriation for the B and I Program supports loans of $688 million.

The B and I Program loan guarantees are available to privately or publicly
owned companies operating in rural areas, which are designated from time to
time by the USDA. Such areas are generally comprised of towns with fewer than
50,000 inhabitants. The Company's current marketing area includes a number of
USDA-eligible towns. Such loans may be utilized for acquisition, improvement
or refinance of property, plant and equipment, working capital or debt
consolidation.

Loans to be guaranteed under the B and I Program must be submitted to the
USDA district office and, depending on that office's loan authority, must be
forwarded to the national USDA for approval. The USDA recently approved the
Company as a Certified Lender in six states making it one of the first USDA
Certified Lenders nationally. The authority conferred with this status is yet
to be determined, but is expected to facilitate the processing of USDA loans
and allow for the reservation of funds.

The guarantee of the USDA also provides for pari passu application of loan
or collection proceeds, and for recourse to the Company similar to that
discussed above for SBA loans in the event the Company is found to have been
negligent in the origination, documentation or funding of USDA loans.

DOMESTIC COMMERCIAL BANKING UNDERWRITING

The underwriting process allows the Company's staff to (i) analyze
borrowers' credit profiles, (ii) assess the collateral underlying a loan,
(iii) assure compliance with all eligibility requirements for inclusion under
the guarantee programs and (iv) provide all documentation and servicing
required by loan purchasers.

Commercial loan officers receive and assemble initial applications, analyze
the creditworthiness of proposed borrowers and prepare credit memoranda and
are assisted by administrative assistants who prepare any required government
guarantee loan application packages and credit analysts who format the
historical financial data provided by the client and conduct credit, customer
and vendor reference checks. Commercial loan officers evaluate each
applicant's financial statements, credit reports, business plans and other
data to determine if the credit and collateral satisfy the Company's
standards. Such standards include meeting certain prescribed limits with
respect to historic debt service coverage ratios, analyzing the reasonableness
of the borrower's projections (when submitted), and evaluating the experience,
strength and continuity of the borrower's management, financial condition of
the individual guarantors, and value of the collateral, as well as compliance
with any applicable government guarantee loan program requirements. An
originating officer and, generally, another senior officer perform on-site
inspections to determine the condition of the facility, the manner in which
business is being conducted, the orderliness of the inventory, the maintenance
of the structure and any equipment, and to observe the economic conditions of
the local market and inspect the real property in order to identify any
apparent structural defects or environmental issues.

The originating commercial loan officers have no authority to approve a loan
on their own. Subject to compliance with credit policies and program
parameters, the Senior Vice Presidents of the Hartford, Connecticut office and
each representative office have limited lending authority in accordance with
their experience, and loans above their lending authority must be approved by
the Chief Operating Officer ("COO"), while loans above the COO's authority are
presented to a Loan Committee of the Bank's Board of Directors after being
approved by the Chief Credit Officer. All loans to a borrower and its
affiliates are aggregated to determine whether a loan is within a loan
officer's lending authority. The Company has established a matrix governing
the particular loan approval authorities granted to the various parties
involved in the loan origination process. Under no circumstances may an
originating loan officer, individually, approve an extension of credit or
modification of an existing loan. The lending authorities granted are based on
the experience of the loan officer, the dollar amount of the request, the
amount of any government guarantees and the risk rating of the loan.

Upon initial approval by a Senior Vice President, the credit memorandum must
be approved by the Credit Policy Officer, who reports to the Chief Credit
Officer. The Credit Policy Officer reviews the memorandum and supporting file
for compliance with internal Company credit policies as well as any applicable
government guarantee program parameters. If additional approvals are required,
the credit memorandum is forwarded to the appropriate parties as noted above.
If the financing package includes a government guarantee loan product, the
application is forwarded to the applicable government agency.

The Company performs a credit analysis of all applications, considering the
type and value of the asset(s) securing a loan, the characteristics of the
borrower, the industry of the borrower and the anticipated debt service ratio.
The Company requires that the borrower's most recently completed fiscal year's
results demonstrate that the borrower be able to service the debt by requiring
a pro forma debt service coverage ratio of at least 1.25 to 1.

If the requested funds are to be utilized for plant or line of business
expansions, consideration may also be given to projected results, and
therefore certain loans may be granted when the pro forma debt service
coverage is less than 1.25 to 1.

Any real property taken as primary collateral for a loan is appraised by an
independent appraiser in accordance with federal banking regulations, and the
appraisal is then subject to an internal review in accordance with such
regulations. Equipment serving as primary collateral for a loan is generally
appraised by an independent equipment appraiser. The Company will generally
obtain a Phase I environmental report completed in accordance with the
standards of the American Society for Testing and Materials on any commercial
real property to be mortgaged. Additional environmental reports and
remediation are required prior to closing if there are environmental issues.

The loan-to-value ratio included in the credit analysis refers to the ratio
of the amount of the loan to the value of the collateral securing the loans.
For such purpose, the Company discounts the appraised or estimated value of
the collateral based on the type of collateral, the lien position and other
relevant factors.

The Company's standard underwriting criteria details the maximum advance
rates which are utilized for each type of collateral. Commercial property is
generally given a collateral value for underwriting purposes equal to 80% of
the appraised value; finished goods and raw material inventories are generally
valued at 50% of book value; trade accounts receivable under 90 days are
generally valued at 75% of book value.

Although the maximum prescribed collateral values are generally utilized in
the Company's analyses, there may be instances in a borrower's situation where
the maximum values are reduced or, again due to the borrower's situation,
special consideration may be given to applications exceeding the general
standards. Exceptions to the Company's loan policy are entertained by the
approving officers and Loan Committee when applicable, on a case-by-case
basis, and depend upon the overall creditworthiness of the applicant. The
overall trends in underwriting exceptions are monitored by the Chief Credit
Officer and the Company's Audit Committee.

INTERNATIONAL BANKING SERVICES AND PRODUCTS

The International Banking Department offers Ex-Im Bank guaranteed revolving
lines of credit for U.S. manufacturers, term loans to foreign buyers of U.S.
goods and letters of credit issued under such facilities.

The International Banking Department is organized as follows:

DIVISION/TERRITORY EX-IM PRODUCT USED DESCRIPTION
------------------ ------------------ -----------

United States Working capital line of credit; One year revolving line of credit
(principally the 90% guaranteed; indexed to Prime, for U.S. manufacturers
Northeast) variable daily collateralized
by export accounts receivable and
inventory
Big Emerging Markets Medium term loan; 100% 3- to 5-year term loan to foreign
(principally Mexico, guaranteed; indexed to 6-month purchasers of qualified U.S. made
Brazil, Argentina, LIBOR, variable semi-annually; equipment
India, Poland, Turkey, U.S. dollar
South Africa,
Indonesia and the
Philippines)

Ex-Im Bank is an independent corporate agency of the U.S. which was first
organized as a District of Columbia banking corporation in 1934. Ex-Im Bank's
mission is to facilitate export financing of U.S. goods and services by
neutralizing the effect of export credit subsidies from other governments and
absorbing credit risks that the private sector will not accept. The Company
utilizes the two Ex-Im Bank's loan guarantee programs designed to support
small U.S. exporters: working capital and medium term loan guarantee programs.

Annual Congressional budget appropriations to support Ex-Im Bank's programs
have remained flat for federal fiscal years-ended 1995, 1996 and 1997. Due to
Ex-Im Bank's independent corporate structure, the annual appropriations are
less directly allocable to specific Ex-Im Bank programs than the allocations
made to SBA and USDA programs. For the federal fiscal year ended September
1996, however, Ex-Im Bank authorized guarantees totaling $378 million and $721
million under the working capital and medium term loan guarantee programs,
respectively.

International Banking--United States
Working Capital Loan Products and the Origination Process

The typical U.S. International Banking client is a privately-owned U.S.-
based manufacturer with sales of $2 to $25 million and export financing needs.
The U.S. International Banking team lends primarily to the same target client
base as the Company's domestic loan officers.

The one-year revolving Ex-Im Bank working capital lines of credit are
indexed to Prime and adjust daily. The primary collateral for these loans is
export inventory and export-related accounts receivable. The accounts
receivable are generally insured under an Ex-Im Bank insurance policy or an
acceptable letter of credit. Open accounts receivable may qualify as
collateral if approved in advance by the Company and Ex-Im Bank. Borrowers
must submit borrowing base certificates to the Company to evidence the
availability of acceptable collateral when an advance is requested, and
monthly thereafter.

The Company is one of eight lenders in the U.S. with "AA" Level Delegated
Authority status with respect to Ex-Im Bank's working capital loan guarantee
program and, therefore, has the authority to approve working capital lines up
to $5 million per borrower, up to an aggregate portfolio of $75 million
without prior Ex-Im Bank approval. The Company believes that this authority
provides it with a significant competitive advantage as it is able to react
quickly to loan application requests.

In the event of a loan default, the Company and Ex-Im Bank share in all loan
proceeds on a pari passu basis in accordance with the 90% guaranteed/10%
unguaranteed ratio. The Company also has the responsibility to ensure that the
loans are underwritten, documented and funded in accordance with Ex-Im Bank
policies and procedures in order to avoid loss of the guarantee. The Company
has had no instances of lost or impaired guarantees on such loans.

International Banking - Big Emerging Markets
Medium Term Loan Products and the Origination Process

The foreign-based client of the Big Emerging Markets International Banking
teams or "Medium Term" client, is typically a privately-owned or small
publicly-owned manufacturer requiring financing to purchase equipment,
components and raw materials from the U.S. The Company believes there are
significant growth opportunities among small and medium size manufacturers in
foreign markets and has devoted an increasing amount of resources to marketing
and developing relationships in this market. The Company believes there is an
opportunity for growth in this market because generally, local financing is
not available on commercially reasonable terms to foreign manufacturers
requiring financing, or a supplier from another industrialized country is
offering its products with very attractive financing.

The medium term loan is a 100% Ex-Im Bank guaranteed loan, typically 3-5
years in term, utilized to fund the acquisition of qualified U.S.-made capital
goods. The Ex-Im Bank program allows the financing of up to the lower of 85%
of the purchase price or 100% of the U.S. content. Certain other U.S. content
and product requirements must also be met. The loans range in size from
$150,000 to $10 million and are U.S. dollar-denominated. Although the
equipment is financed, the loans are unsecured; the Company relies on the
borrower's cash flow and the 100% Ex-Im Bank guarantee.

The medium term loan officers are responsible for marketing, underwriting,
servicing, monitoring and collecting their portfolios of loans. Because the
loans are short term and fully amortizing with semi-annual payments, there is
less post-closing analysis on performing loans than on other types of the
Company's loans.

In August 1997, the Company was approved as Ex-Im Bank's first medium term
priority lender, which enables it to obtain 20-day turnaround on applications
submitted to Ex-Im Bank.

In the event of default, Ex-Im Bank handles the liquidation of medium term
loans and pays the Company 100% of the principal balance, plus accrued
interest. See "--Delinquency and Collection Activities."

International Banking Underwriting

International loan officers receive and assemble initial applications,
analyze the creditworthiness of proposed borrowers and prepare loan memoranda
and are assisted in this effort by administrative assistants who prepare the
required Ex-Im Bank loan application packages and credit analysts who format
the historical financial data provided by the client and conduct credit,
customer and vendor reference checks. For medium term loans, the local
marketing representative, if any, aids in the transaction by obtaining
required financial or operational data, and generally assisting in the loan
origination and closing process.

The U.S. loan officer will visit the prospective borrower's place of
business and perform on-site inspections and the Company will generally
instruct its local marketing representative to make such inspections for
foreign borrowers. Although inventory serves as collateral for the working
capital lines of credit, other tangible assets are generally not taken as
collateral under the Ex-Im Bank loan programs, site inspections are conducted
because such information is helpful in assessing a borrower's operations.

The approval process is substantially similar to that followed by the
commercial loan officers. The Credit Policy Officer reviews the memorandum and
supporting file for compliance with internal Company credit policies as well
as applicable Ex-Im Bank guarantee program parameters. As with the domestic
commercial lending, exceptions to the Company's and Ex-Im Bank's loan policies
are entertained on a case-by-case basis by the approving loan officers and
acceptance depends upon the overall creditworthiness of the applicant.

Working capital lines of credit are collateralized by export-related
inventory and accounts receivable less than 90 days old; such collateral has
maximum prescribed collateral values of 75% and 90%, respectively. As is the
case with respect to commercial loans, the appropriateness of the collateral
value is determined based on the borrower's individual circumstance, and
applications exceeding the general standards may receive special
consideration.

Medium term loans are unsecured although debt service coverage and operating
history are reviewed in the underwriting process. The officer also considers
the availability to the borrower of U.S. dollars and other "hard" currency,
which generally does not pose a significant difficulty for the borrower, as
many are exporting goods to the U.S. or have access to fairly stable currency
markets.

While most working capital lines of credit are within the Company's AA
Delegated Authority, applications exceeding the maximum collateral values or
other program criteria, as well as loans above the Company's authority,
require Ex-Im Bank approval. All medium term and any "exception" working
capital applications are forwarded to Ex-Im Bank for approval after all
required internal approvals are obtained.

CAPITAL MARKETS AND LOAN SERVICING

Loan Sales and Servicing

As detailed below, the Company's loan origination and sales activities have
increased in volume and have become more expansive as new lending programs are
introduced and a more focused sales effort is undertaken.

DECEMBER 31, JUNE 30,
----------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)

SBA loans:
Total loans originated. $17,202 $28,879 $58,753 $ 37,522 $ 85,303 $ 45,139 $ 47,302
Total number of loans
originated............ 29 56 109 95 170 87 97
Average loan
originated............ $ 593 $ 516 $ 556 $ 395 $ 460 $ 519 $ 488
Total guaranteed loans
sold.................. $13,731 $21,659 $39,607 $ 27,413 $ 58,878 $ 30,079 $ 33,985
Total unguaranteed
loans sold............ -- -- -- $ 29,867 $ 4,550 $ 6,327
USDA loans:
Total loans originated. -- -- $ 2,825 $ 19,241 $ 12,700 $ 7,180 $ 17,679
Total number of loans
originated............ -- -- 2 12 6 4 9
Average loan
originated............ -- -- $ 1,413 $ 1,603 $ 2,117 $ 1,795 $ 1,964
Total guaranteed loans
sold.................. -- -- $ 2,260 $ 14,984 $ 10,199 $ 5,784 $ 14,143
Total unguaranteed
loans sold............ -- -- -- -- $ 3,207 $ 2,699 $ 815
Ex-Im medium term loans:
Total loans originated. -- -- $ 397 $ 1,814 $ 13,617 $ 2,289 $ 27,297
Total number of loans
originated............ -- -- 2 7 26 6 36
Average loan
originated............ -- -- $ 199 $ 259 $ 524 $ 382 $ 758
Total guaranteed loans
sold.................. -- -- $ 245 $ 1,814 $ 12,745 $ 2,289 $ 27,297
Ex-Im working capital
lines:
Total loans originated. -- -- -- $ 6,882 $ 23,300 $ 1,700 $ 10,625
Total number of loans
originated............ -- -- -- 12 17 4 12
Average loan
originated............ -- -- -- $ 574 $ 1,371 $ 425 $ 885
Total guaranteed
advances sold......... -- -- -- $ 2,632 $ 8,614 $ 1,100 $ 8,179
Other commercial loans:
Total loans sold....... -- -- -- $ 8,843 $ 9,329 $ 4,767 $ 8,879
Total number of loans
sold.................. -- -- -- 18 23 19 22
Total loans sold...... $13,731 $21,659 $42,112 $ 55,686 $132,839 $ 51,268 $ 99,625
Loans serviced for
others
(at period end):
Total commercial loans. $19,725 $40,579 $80,752 $132,810 $244,092 $179,271 $323,363
Total residential
loans................. $12,899 $17,781 $17,988 $ 21,040 $ 21,713 $ 21,612 $ 21,535
Total Number Commercial
Loans.................. 411 482 590 739 984 849 1,141
Total Number Residential
Loans.................. 293 331 335 336 318 322 267

Capital Markets Activities

The Capital Markets Department was formally established in July 1996 to
assume responsibility for the non-recourse, servicing-retained sale of SBA,
USDA and Ex-Im Bank government guarantee loans and to investigate and find
buyers and markets for the sale of non-guaranteed mortgage, term and revolving
commercial loans on a non-recourse, servicing-retained basis. The Capital
Markets Department activities allow the Company to reduce reliance on
government guarantee loan programs for revenue, leverage capital, replenish
liquidity and mitigate the risk of balance sheet exposure to a single
borrower.

The guaranteed portions of SBA and USDA loans are sold within one-day of
origination on a single loan basis to established brokers. Brokers generally
pool the SBA guaranteed portions. Although the Bank is an approved SBA pool
assembler, it has not undertaken this activity due to the additional liquidity
and resources required to fund and market the pools. USDA loans are sold to
individual investors. The guaranteed portions of the Ex-Im loans and lines of
credit are sold primarily to the Private Funding Export Funding Corporation
("PEFCO"), although additional private purchasers have been identified for
these products, and the Company expects that this investor base will become
more diversified during the second half of 1997. PEFCO is a private
corporation established with the support of the United States Treasury and Ex-
Im to assist in the financing of exports of U.S. goods and services by direct
loans to foreign importers of U.S. made goods, and providing liquidity support
for certain Ex-Im guaranteed loans. The Company is a 1% shareholder and one of
among approximately 50 PEFCO shareholders, with a common stock investment of
$599,000 at June 30, 1997.

SBA and USDA regulations permit the Company to sell a portion of the
unguaranteed amounts of the loans originated under their respective programs.
SBA regulations currently require a bank lender to retain an unguaranteed
interest equal to 10% of the SBA loan, and do not permit such a lender to
securitize any unguaranteed portions. Finance companies and other "non-bank"
lenders are currently not restricted in the amount of unguaranteed portions
which may be sold or securitized. The SBA, however, has published draft
regulations for comment which would allow banks to securitize or sell the
unguaranteed portions of SBA Loans subject to certain criteria designed to
ensure that originators retain a continuing economic interest in the loan. The
proposed rules would most likely include a provision to reduce the required
unguaranteed retention to 5% of the total SBA loan, thereby allowing the
Company to sell a greater percentage of such unguaranteed loan portions,
freeing up capital and liquidity for future loan originations. USDA
regulations permit the Company to sell unguaranteed portions equal to all but
5% of the total USDA loan. Upon the sale of such unguaranteed portions, the
Company shares in the payment stream and collateral on a pari passu basis with
all (guaranteed and unguaranteed) investors, beginning with the initial
collection.

In 1996, sales of unguaranteed portions of SBA Loans and USDA loans totaled
approximately $29.9 million and $3.2 million, respectively, for a total gain
of $842,000. A significant portion of the loans sold had been originated in
1994 and 1995 and, although originations are expected to continue to increase
the portfolio, there can be no assurance that this volume of loan sales will
be representative of on-going non-guaranteed loan sales activity. At June 30,
1997, the Company had approximately $16.0 million in unguaranteed portions of
SBA and USDA loans which could be sold under current regulations. The Company
would evaluate the return on the sales as well as the impact on net interest
income and alternative investment opportunities prior to selling any such
amounts.

The Capital Markets Department has developed a portfolio of buyers of non-
guaranteed mortgage loans, term loans and revolving lines of credit and
devotes substantial resources to the identification of such buyers. A primary
objective in the negotiation and sale of such loans is the Company's retention
of sole responsibility for borrower contact. Investors meet with borrowers
only in rare circumstances, and generally rely on the Company to prudently
service and monitor the lending relationship. The Company believes that this
is important to its clientele and that it reflects investor confidence in its
servicing ability and reputation.

Loan Servicing Activities

At June 30, 1997, the total loan portfolio serviced by the Company was
comprised of the following:

TOTAL NUMBER OF
SERVICED FOR COMPANY BALANCE LOANS
LOAN TYPE OTHERS BALANCE SERVICED SERVICED
- --------- ------------ -------- -------- ---------
(DOLLARS IN THOUSANDS)

Commercial banking portfolio:
SBA loans............................ $205,298 $ 36,750 $242,048 535
USDA loans........................... 45,052 5,816 50,868 29
Business loans....................... 2,828 10,059 12,887 109
Revolving lines of credit............ 594 25,503 26,097 236
Commercial mortgages................. 16,104 16,950 33,054 86
Investor property mortgages.......... 592 6,285 6,877 40
Private loans........................ -- 3,119 3,119 18
-------- -------- -------- -----
Total commercial banking............ 270,468 104,482 374,950 1,053
International banking portfolio:
Ex-Im medium term loans.............. 39,525 2,487 42,012 65
Ex-Im working capital lines.......... 13,370 2,725 16,095 23
-------- -------- -------- -----
Total international banking......... 52,895 5,212 58,107 88
Private banking portfolio:
Residential mortgages................ 17,429 6,655 24,084 267
Other consumer loans................. 4,106 1,840 5,946 219
-------- -------- -------- -----
Total private banking............... 21,535 8,495 30,030 486
-------- -------- -------- -----
Total............................... $344,898 $118,189 $463,087 1,627
======== ======== ======== =====

The Company services substantially all of the loans it originates, whether
sold to investors or held in portfolio. Servicing includes collecting payments
from borrowers and remitting applicable payments and required reports to any
investors; accounting for principal, interest and any real estate tax or other
escrow receipts and payments; contacting delinquent borrowers; supervising
foreclosures; and liquidating collateral when required. Other than tasks
performed by the assigned loan officers, loan servicing functions are
centralized in the Hartford, Connecticut headquarters.

The Company receives servicing fees on loans serviced for others in varying
amounts, as determined under the particular terms of the sale. Management
believes that servicing loans originated enhances the Company's relationship
with the borrower by allowing it to maintain contact with borrower. This
contact allows the Company to continue to market and provide its loan and
deposit products to the client who may need additional financing or retail
services. Further, such arrangements provide an additional and profitable
revenue stream that is less cyclical than the business of originating and
selling loans.

After a loan is closed, the loan servicing department initially reviews the
loan files to confirm that loans were originated in accordance with any
applicable government guarantee program guidelines and Company policies.
Thereafter, the loan officers and the Loan Review Department conduct periodic
reviews of the borrower's financial condition.

DELINQUENCY AND COLLECTION ACTIVITIES

The assigned loan officer retains responsibility for the routine collection
of his or her portfolio. The Company attempts to collect all loans on a 30-day
basis, leaving very few loans past due 30 days or more at any month end. An
officer's initial collection efforts generally begin when an account is 15
days past due. At 20 days past due, a reminder notice is sent to the borrower
and the loan officer again attempts to contact the borrower to determine the
reason for the delinquency and if the account will be brought current.

If a borrower is unable to make a payment within 30 days of the due date,
and has not made acceptable alternative arrangements with the Company, the
account is transferred to the Company's Loan Workout Officer for consideration
of additional collection procedures, including issuance of a demand letter and
possible liquidation of collateral.

The Loan Workout Officer is responsible for contacting the borrower and
analyzing its current and projected financial condition; the reasons leading
to the delinquency; and the value of the collateral available to the Company;
and then proposing a workout plan to the Chief Credit Officer and other
involved members of Senior Management. The Loan Workout Officer will also
provide any required notices and generally seek to comply with any government
guarantee program or investor requirements.

A loan is placed on non-accrual status when, in the Company's opinion, it is
unlikely that full collection of principal and interest will be made in
accordance with the original terms of the loan agreement. This determination
is generally made before a loan is 90 days delinquent and is reevaluated over
the course of the workout process, as more information becomes known. Any
interest accrued is charged-off against interest income when a loan is placed
on non-accrual.

If a modification of loan terms or other acceptable workout cannot be
achieved within a reasonable time frame, the Company will liquidate the
collateral. The Company prefers not to take title to real property or
equipment unless required to facilitate the collection process. The Company
solicits assistance from the principals of the delinquent borrower to effect
the liquidation of any property, with title remaining in the borrower's name,
thereby avoiding a lengthy foreclosure or repossession process, and exposure
to the Company regarding environmental or other liability issues. The Company
has generally found the principals to be cooperative and able to assist the
Company in efficiently liquidating the collateral. The Company follows the
same general workout procedures for all commercial loans serviced.

If a loan carries an SBA guarantee, the responsible District SBA Office will
be notified of the delinquency and will be presented with a liquidation plan
within 60-90 days of such delinquency. Unless the SBA objects, the Company
will carry out the terms of the liquidation plan. As a Preferred Lender, the
Bank has responsibility and authority over liquidation procedures on all SBA
guaranteed loans serviced. Any loss after liquidation of collateral is
allocated pro rata between the guaranteed and unguaranteed portions of the SBA
Loan. After an SBA loan becomes 60-90 days past due, the SBA, at the Company's
request, will repurchase the guaranteed portion of the principal balance of
the SBA Loan at par from the investor, together with accrued interest covering
a period of up to 120 days.

USDA procedures require that the Company file a liquidation plan when it is
believed action should be taken on a delinquent loan, which is generally when
the loan is 60-90 days delinquent. The USDA has 30 days to review the plan.
The Company will then execute the approved plan or work with the USDA to
arrive at a mutually acceptable plan. Any loss after liquidation of collateral
is allocated pro rata between the guaranteed and unguaranteed portions of the
USDA loan. The holder of the guaranteed portion may request that the USDA
repurchase the guaranteed portion at any time, or the Company will request
repayment on such holder's behalf when liquidation is complete. The USDA does
not impose any restrictions on the number of days for which interest will be
paid on the guaranteed portions.

The liquidation of delinquent working capital and medium term Ex-Im Bank
loans is handled by Ex-Im Bank. The Company may submit a claim for repurchase
at any time between 30 and 120 days of a delinquent loan, plus 15 days post-
Company demand for payment against the borrower and individual guarantors, but
at no time may such claim be made more than 150 days after the delinquency.
Ex-Im Bank will make payment under its guarantee 30 days after receipt and
acceptance of the Company's request.

The Company retains responsibility for the proper documentation and
servicing of all loans serviced for others, and may incur losses related to
such loans if it is found to be negligent in carrying out these duties by a
guaranteeing agency or other investor.

Unguaranteed loans or unguaranteed portions of loans held by investors are
subject to negotiated servicing agreements, although the agreements generally
provide the investor the option, after a loan becomes 60-90 days delinquent,
of assuming responsibility for all collection efforts. If the Company is to be
responsible for such efforts, the agreements generally require that the
investor pre-approve liquidation actions.

CREDIT RISK MANAGEMENT

The Executive Vice President-Chief Credit Officer has primary responsibility
for credit risk management, ensuring the appropriateness of underwriting
criteria, and the application thereof, the maintenance and application of
RISCOPESM, the Company's proprietary commercial risk assessment model, and the
independent analyses of loans by the Loan Review Department.

The Credit Policy Officer, who reports to the Chief Credit Officer, reviews
all credit memoranda for compliance with the requirements of government
guarantee programs and with the Company's credit policies. If, based on the
particular facts and circumstances, policy exceptions are proposed by the
officers, the Credit Policy Officer will also ensure that all appropriate
policy exceptions are documented and approved by the approving party, as the
case may be. The Chief Credit Officer periodically evaluates the nature and
trends of such exceptions, reporting them quarterly to the Company's Board of
Directors' Audit Committee.

As a nationally-chartered bank, the Bank is required to "risk rate" its loan
portfolio, by monitoring current changes in the financial condition of the
borrower and overall economic trends and assigning numerical ratings to the
loans in portfolio. The Company applies the regulatory definitions of the risk
ratings and has developed additional ratings for the "Pass" or uncriticized
loan category. Such a rating system, in conjunction with other available
quantitative and qualitative data, is utilized to assist management in its
quarterly evaluation of the adequacy of the allowance for loan losses.

The assigned loan officer has primary responsibility for the risk ratings
and such officer's decisions are periodically reviewed by the Loan Review
department. The Company's risk ratings are based on consideration of the
borrower's operating cash flow and debt service coverage ability, industry,
product segment, market, earnings, assets and liabilities, management
experience, debt capacity and prior credit history with Company.

The Company has developed a proprietary risk model, RISCOPESM, used in the
initial underwriting and post-closing monitoring and risk rating process by
the officers and the Loan Review Department. RISCOPESM assists the Company in
quantifying the credit risk of commercial clients. The model takes into
account quantitative and qualitative factors and was designed after analysis
of the Company's primary client base: privately-owned small and medium size
manufacturers. RISCOPESM is intended to quantify credit risk with respect to
the probability of default and, therefore, assists management in risk rating
loans and providing an appropriate allowance for loan losses and targeting
additional management attention to weaker credits earlier than might otherwise
be done if payment default were the sole trigger for such actions.

In accordance with the Bank's Board of Directors' approved annual plan, the
Loan Review Department reviews the Company's loan portfolio to evaluate the
appropriateness of the officer risk ratings and analyzes overall trends in the
portfolio. The loan review results are reported to the Company's Board of
Directors' Audit Committee quarterly.

PRIVATE BANKING

The Private Banking Department provides stable, low-cost funding for the
Company by enabling the Company to manage its deposit base, which consists of
demand deposits, money market savings accounts, and time certificates of
deposits, including individual retirement accounts. The Company does not
accept or solicit brokered deposits and completed its transition from a retail
to wholesale financial institution by selling its last suburban retail branch
facility and deposits totaling $24 million in September 1996. The Company
operates one depository main branch located on the first floor of its
Hartford, Connecticut headquarters as many of the Company's commercial clients
transact business through electronic funds transfer, telephone and the mail.

The Private Banking Department targets commercial depository accounts of
small and medium size manufacturers as well as the personal accounts of their
principals by offering a full array of deposit products to serve the personal
needs of, and facilitate relationships with, the Company's existing clients
and their principals. As of June 30, 1997, 55% of the $159 million in total
deposits were in the form of accounts from commercial clients. The private
bankers administer deposits and related services, such as automatic sweep
accounts, merchant and corporate credit card services, payroll processing,
business and individual retirement accounts, and international funds transfer
and foreign exchange conversions.

The Private Banking Department continually seeks to expand the Company's
deposit base by strengthening existing deposit relationships, soliciting
deposits from individuals who seek highly personalized service and offering
new products. Private bankers are trained to focus on, and respond to, the
needs of the commercial borrowers which management believes are often not
served effectively by other depository institutions. Private bankers, based in
Hartford, Connecticut, market the Company's services through direct mail and
telephone campaigns which reach businesses, institutions and individuals in
the areas were the Company maintains domestic offices and international
marketing relationships. The Company maintains an interactive voice response
system, First Access/SM/, which enables clients to obtain information about
their loan or deposit accounts through a toll free telephone call, and
recently introduced a commercial lockbox product and expanded its foreign
exchange services.

The following table sets forth the Company's deposit structure as noted:

DECEMBER 31,
-------------------------- JUNE 30,
1994 1995 1996 1997
DEPOSIT TYPE -------- -------- -------- --------
(DOLLARS IN THOUSANDS)

Business accounts:
Non-interest bearing checking............. $ 14,643 $ 19,337 $ 27,485 $ 26,480
Interest bearing checking................. 5,794 5,897 4,567 5,595
Savings................................... 20,738 31,453 46,660 55,316
-------- -------- -------- --------
Total business........................... 41,175 56,687 78,712 87,391
Consumer accounts:
Non-interest bearing checking............. 3,938 3,284 403 520
Interest bearing checking................. 4,736 4,835 3,681 2,962
Savings................................... 26,773 39,573 22,618 26,693
-------- -------- -------- --------
Total consumer........................... 35,447 47,692 26,702 30,175
Time deposits accounts:
Non-IRA time deposits..................... 29,365 17,904 32,372 34,583
IRA time deposits......................... 5,862 6,078 6,530 6,498
-------- -------- -------- --------
Total time deposits...................... 35,227 23,982 38,902 41,081
-------- -------- -------- --------
Total deposits......................... $111,849 $128,361 $144,316 $158,647
======== ======== ======== ========
Externally indexed savings accounts
included above............................ $ 26,953 $ 57,310 $ 65,779 $ 76,719
======== ======== ======== ========

As of June 30, 1997, the average balances held in checking and savings
accounts were $12,200 and $17,800, respectively. These balances are higher
than industry norms which the Company believes is attributable to the
Company's focus of attracting commercial deposits. Management believes that
such business deposits are more stable than those obtained from a consumer
deposit base. The Company does not generally compete with retail branches of
other depository institutions, but rather with mutual and money market funds,
yet it retains the advantage of FDIC insurance. The Company's basic business
cash management and private banking savings accounts are variable rate money
market accounts tied to an external index published daily in The Wall Street
Journal and are designed to compete with money fund alternatives.

The following table sets forth, by account types the aggregate amount and
weighted average rate of the Company's deposits:

DECEMBER 31,
----------------------------------------------------- JUNE 30,
1994 1995 1996 1997
----------------- ----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE AMOUNT RATE
-------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)

Transaction accounts:
Non-interest bearing
checking............. $ 18,581 --% $ 22,621 --% $ 27,888 --% $ 27,000 --%
Interest-bearing
checking............. 10,530 2.60 10,732 2.95 8,248 2.52 8,557 2.51
-------- ---- -------- ---- -------- ---- -------- ----
Subtotal.............. 29,111 0.94 33,353 0.95 36,136 0.57 35,557 0.60
Savings accounts....... 47,511 4.06 71,026 5.14 69,278 5.09 82,009 5.20
Time deposits.......... 35,227 4.67 23,982 5.43 38,902 5.55 41,081 5.79
-------- ---- -------- ---- -------- ---- -------- ----
Total deposits........ $111,849 3.44% $128,361 4.11% $144,316 4.08% $158,647 4.32%
======== ==== ======== ==== ======== ==== ======== ====

The following table sets forth the Company's certificate of deposits over
$100,000 by time remaining until maturity as of June 30, 1997:

MATURITY PERIOD CERTIFICATES OF DEPOSIT
--------------- -----------------------
(DOLLARS IN THOUSANDS)

Three months or less................................ $1,804
Over three through six months....................... 2,099
Over six through twelve months...................... 4,035
Over one year....................................... 683
------
Total certificate of deposits over $100,000....... $8,621
======

Additional funding for the Company's operations is also is available from
the following sources:

On-going sales of guaranteed and non-guaranteed loans. Proceeds from such
loan sales totaled $137 million and $88 million for the year ended December
31, 1996 and for the six months ended June 30, 1997, respectively.

Federal Home Loan Bank of Boston advances. Approximately $6.7 million was
available in overnight and term borrowings from the Federal Home Loan Bank of
Boston for short and longer term needs as of June 30, 1997. Funding from this
source has been, and is anticipated to be, used infrequently since the Company
relies on lower cost core deposits, leaving advances available to fund
temporary shortfalls.

Federal funds sold. Federal funds sold provide daily liquidity and are
invested on an overnight basis. Such investments had an average balance of $12
million for the year ended December 31, 1996 and $12 million for the six
months ended June 30, 1997. It has been the Company's policy that investment
securities be generally comprised of U.S. government and agency bonds with an
average term of less than five years. Such investments will continue to
comprise the majority of the portfolio after the Offering to provide, upon
maturity, on-going funding for higher yielding loans.

COMPETITION

The Company competes for commercial and export borrowers with other
commercial and savings banks, savings and loan associations, credit unions,
finance companies, mutual funds, insurance companies, brokerage and investment
banking firms and certain other nonfinancial institutions, many of whom are
able to devote far greater resources than the Company to market, underwrite
and service loans to the same client base. The Company competes by emphasizing
its expertise and knowledge of its client's businesses, customer service,
flexibility in structuring financing transactions and strong client
relationships. Through the combined utilization of government guarantee loan
programs, the Company is able to provide flexible longer-term financing than
would otherwise be available to borrowers, and through its Private Banking
Department, the Company is able to offer traditional personal deposit
products.

INTELLECTUAL PROPERTY

The Company possesses federal trademark for protection of the name, "First
National Bank of New England(R)." The Company has also applied for federal
protection of two of its servicemarks, Financing Manufacturers WorldwideSM,
the Company's slogan, and RISCOPESM, the Company's proprietary risk model.

LEGAL PROCEEDINGS

Neither the Company nor the Bank is involved in any legal proceedings except
for routine litigation incidental to the business of banking, none of which is
expected to have a material adverse effect on the Company's financial
position, results of operations or cash flows.

EMPLOYEES

At June 30, 1997, the Company had 114 full-time employees. The Company's
employees are not represented by a collective bargaining agreement, and the
Company considers its relations with its employees to be good.

PROPERTIES

The Company leases approximately 38,000 square feet in Hartford, Connecticut
to house its headquarters and only full-service branch. The Company maintains
leased space for representative offices in Boston and Springfield,
Massachusetts; Providence, Rhode Island; Morristown, New Jersey; Rochester,
New York; Philadelphia and Pittsburgh, Pennsylvania; and Washington, D.C. The
Company's leases generally provide for two five-year renewal options and
options on additional space. The leases with respect to the Pittsburgh and
Washington, D.C. space are for one-year terms. Management believes that its
existing facilities are adequate for their present and proposed uses and that
suitable facilities will be available on reasonable terms for any additional
offices.

REGULATION AND SUPERVISION

REGULATION OF THE COMPANY

The Company is registered as a bank holding company and regulated and
subject to periodic examination by the FRB under the BHCA.

Pursuant to the BHCA and the FRB's regulations, the Company is limited to
the business of owning, managing or controlling banks and engaging in certain
other bank-related activities, including those activities that the FRB
determines from time to time to be so closely related to the business of
banking as to be a proper incident thereto. The BHCA requires, among other
things, the prior approval of the FRB if a bank holding company proposes to
(i) acquire all or substantially all of the assets of a bank, (ii) acquire
direct or indirect ownership or control of more than 5% of the outstanding
voting stock of any bank (unless it already owns a majority of such bank's
voting shares) or (iii) merge or consolidate with any other bank holding
company.

As a bank holding company, the Company is required by the FRB to act as a
source of financial strength and to take measures to preserve and protect the
Bank. As a result, the Company may be required to inject capital in the Bank
if the Bank at any time lacks and requires such capital. The FRB may charge a
bank holding company such as the Company with unsafe and unsound practices for
failure to commit resources to a subsidiary bank when required. Any loans from
the Company to the Bank which would count as capital of the Bank must be on
terms subordinate in right of payment to deposits and to most other
indebtedness of the Bank.

The FRB, the OCC and the Federal Deposit Insurance Corporation (the "FDIC")
collectively have extensive enforcement authority over bank holding companies
and national banks in the United States. This enforcement authority, initiated
generally for violations of law and unsafe and unsound practices, includes,
among other things, the ability to assess civil money penalties, to initiate
injunctive actions and to terminate deposit insurance in extreme cases.

The bank regulatory agencies' enforcement authority was substantially
enhanced by the Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA") and the Federal Deposit Insurance Corporation Improvement Act
of 1991 ("FDICIA"). FIRREA significantly increased the amount of civil money
penalties and the grounds for imposing such penalties. Also, under FIRREA,
should a Bank failure result in a loss to the FDIC, any other FDIC-insured
subsidiaries of the Company could be required to compensate the FDIC for the
estimated amount of the loss. Additionally, pursuant to FDICIA, the Company in
the future could have the potential obligation to guarantee the capital
restoration plans of any undercapitalized FDIC-insured depository institution
subsidiaries it may control.

INTERSTATE BANKING

As of September 29, 1995, the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "RNA") permitted adequately capitalized and
managed bank holding companies to acquire control of banks in any state.
Additionally, beginning on June 1, 1997, the RNA provides for banks to branch
across state lines, although individual states are authorized to permit
interstate branches earlier or to elect to opt out entirely.

REGULATION OF THE BANK

General

The Bank, as an FDIC-insured national bank, is subject to regulation
primarily by the OCC, and secondarily by the FDIC. As a national bank, the
Bank is a member of the Federal Reserve System, and its operations are also
subject to certain FRB regulations. Various other federal and state consumer
laws and regulations also affect the operations of the Bank.

As a national bank, the Bank may be able to engage in certain activities
approved by the OCC which the FRB would not necessarily approve for the
Company. The OCC has been particularly aggressive in recent years

in allowing national banks to undertake an ever-increasing range of securities
and insurance activities. Along these lines, pursuant to certain revisions to
the OCC's regulations pertaining to the national bank activities effective on
December 31, 1996, national banks, among other things, are permitted, on a
case-by-case basis, to operate subsidiaries engaging in activities not
permissible for the Bank itself. Although the revised regulations do not
authorize any new activities, it is expected that national banks, if eligible
and if they obtain the approval of the OCC, will use these regulations to
expand further into the businesses of underwriting insurance and securities.

The revised OCC regulations contain "fire walls" intended to protect a
national bank from the risks taken by a subsidiary, including imposing a 10%
cap on the amount of bank capital that may be invested in a new subsidiary, as
well as requirements that extensions of credit to an operating subsidiary be
fully-collateralized and that transactions between the bank and a subsidiary
be conducted at arm's-length. The parent national bank's exposure to any
losses the subsidiary may incur are limited to the bank's equity investment in
the subsidiary. Parent national banks are required to be well-capitalized both
before and after an investment is made.

Since OCC approval is required on a case-by-case basis for an eligible bank
to engage in activities not permissible for the bank to conduct directly, the
effect of these revised regulations on the operations of national banks is
unclear. Further, it is expected that Congress will consider new banking
legislation in the near future addressing these revisions.

As a national bank, the Bank may ordinarily lend up to 15% of its capital on
an unsecured basis to any one borrower, and may lend up to an additional 10%
of its capital to that same borrower on a fully secured basis involving
readily marketable collateral having a market value, as determined by reliable
and continuously available price quotations, equal at least to the amount
borrowed. In addition, there are various other circumstances in which the Bank
may lend in excess of such limits, including authority to lend up to 35% of
capital and surplus when the loan is secured by documents of title to readily
marketable staples, unlimited authority if loans are guaranteed by a U.S.
government agency and certain other exceptions relevant to international trade
finance.

Federal law also imposes additional restrictions on the Bank with respect to
loans and extension of credit to certain related parties and purchases from
and other transactions with the Company's principal stockholders, officers,
directors and affiliates. Extensions of credit to such persons (i) must be
made on substantially the same terms (including interest rates and collateral)
as, and follow credit underwriting procedures not less stringent than, those
prevailing for comparable transactions with members of the general public, and
(ii) must not involve more than the normal risk of repayment or present other
unfavorable features. In addition, extensions of credit to each such person
beyond certain limits set by applicable law must be approved by the Bank's
Board of Directors, with the individual who is applying for the credit
abstaining from participation in the decision. The Bank is also subject to
certain lending limits and restrictions on overdrafts to such persons. A
violation of these restrictions may result in the assessment of substantial
civil money penalties against the Bank or any officer, director, employee,
agent or other person participating in the conduct of the affairs of the Bank
and/or may result in the imposition by the OCC of a cease and desist order
against the Bank.

Capital Adequacy

The federal bank regulatory authorities have adopted risk-based capital
guidelines to which the Bank is subject. The guidelines establish a systematic
framework that makes regulatory capital requirements more sensitive to
differences in risk profile among banking organizations, takes off-balance
sheet exposures into explicit account in assessing capital adequacy and
minimizes disincentives to holding liquid, low-risk assets. These risk-based
capital ratios are determined by allocating assets and specified off-balance
sheet financial instruments into four weighting categories, with higher levels
of capital required for the categories perceived as representing greater risk.

Under these guidelines, a banking organization's capital is divided into two
tiers. The first tier ("Tier 1") includes common equity, perpetual preferred
stock (excluding auction rate, money market or remarketable issues) and
minority interests held by others in a consolidated subsidiary, less goodwill
and any disallowed intangibles. Supplementary ("Tier 2") capital includes,
among other items, cumulative and limited-life preferred stock, mandatory
convertible securities, subordinated debt and the allowance for loan and lease
losses, subject to certain limitations and less required deductions as
provided by regulation.

Banking organizations are required to maintain a risk-based capital ratio of
total capital (Tier 1 plus Tier 2) to risk-weighted assets of 8%, of which at
least 4% must be Tier 1 capital. The federal bank regulatory authorities may,
however, set higher capital requirements when a banking organization's
particular circumstances warrant. As a general matter, banking organizations
are expected to maintain capital ratios well above the regulatory minimums.
The risk-based capital ratios of the Bank as of December 31, 1995, December
31, 1996 and June 30, 1997 are set forth under "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

In addition, federal bank regulatory authorities have established guidelines
for a minimum leverage ratio (Tier 1 capital to average total assets). These
guidelines provide for a minimum leverage ratio of 3% for banking
organizations that meet certain specified criteria, including excellent asset
quality, high liquidity, low interest rate exposure and the highest regulatory
rating. Banking organizations not meeting these criteria or which are
experiencing or anticipating significant growth are required to maintain a
leverage ratio which exceeds the 3% minimum by a least 100 to 200 basis
points. The leverage ratios of the Bank as of December 31, 1995, December 31,
1996 and June 30, 1997 are set forth under "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

Failure to meet applicable capital guidelines could subject a bank or bank
holding company to a variety of enforcement remedies available to the federal
bank regulatory authorities, including limitation on the ability to pay
dividends, the issuance of a capital directive to increase capital and, in the
case of a bank, the termination of deposit insurance by the FDIC or (in severe
cases) the appointment of a conservator or receiver.

Dividends

The Bank is subject to legal limitations on the frequency and amount of
dividends that can be paid to the Company. The OCC, in general, also has the
power to prohibit the payment of dividends by the Bank which would otherwise
be permitted under applicable regulations if the OCC determines that such
dividends would constitute an unsafe or unsound practice.

OCC approval is required for the payment of dividends by the Bank in any
calendar year if the total of all dividends declared by the Bank in that year
exceeds the current year's net income combined with the retained net income of
the two preceding years. "Retained net income" means the net income of a
specified period less any common or preferred stock dividends declared for
that period. Moreover, no dividends may be paid by a national bank in excess
of its undivided profits account. In addition, the FRB and the FDIC have
issued policy statements which provide that, as a general matter, insured
banks and bank holding companies may pay dividends only out of current
operating earnings. In accordance with such regulatory restrictions, the Bank
currently has the ability to pay dividends, and on June 30, 1997 an aggregate
of $7.3 million was available for the payment of dividends to the Company
without prior OCC approval.

There are also statutory limits on other transfers of funds to the Company
and any other future non-banking subsidiaries of the Company by the Bank,
whether in the form of loans or other extensions of credit, investments or
asset purchases. Such transfers by the Bank generally are limited in amount to
10% of the Bank's capital and surplus, to the Company or any such future
subsidiary of the Company, or 20% in the aggregate to the Company and all such
subsidiaries. Furthermore, such loans and extensions of credit are required to
be fully collateralized in specified amounts depending on the nature of the
collateral involved.

FDICIA

FDICIA was enacted on December 19, 1991. It substantially revised the bank
regulatory and funding provisions of the Federal Deposit Insurance Act and
made significant revisions to other federal banking statutes. FDICIA provided
for, among other things, (i) a recapitalization of the Bank Insurance Fund of
the FDIC (the "BIF") by increasing the FDIC's borrowing authority and provided
for adjustments in its assessment rates; (ii) annual on-site examinations of
federally-insured depository institutions by banking regulators; (iii)
publicly available annual financial condition and management reports for
financial institutions, including audits by independent accountants; (iv) the
establishment of uniform accounting standards by federal banking agencies; (v)
the establishment of a "prompt corrective action" system of regulatory
supervision and intervention, based on capitalization levels, with more
scrutiny and restrictions placed on depository institutions with lower levels
of capital; (vi) additional grounds for the appointment of a conservator or
receiver; (vii) a requirement that the FDIC use the least-cost method of
resolving cases of troubled institutions in order to keep the costs to
insurance funds at a minimum; (viii) more comprehensive regulation and
examination of foreign banks; (ix) consumer protection provisions, including a
Truth-in-Savings Act; (x) a requirement that the FDIC establish a risk-based
deposit insurance assessment system; (xi) restrictions or prohibitions on
accepting brokered deposits, except for institutions which significantly
exceed minimum capital requirements; and (xii) certain additional limits on
deposit insurance coverage.

A central feature of FDICIA is the requirement that the federal banking
agencies take "prompt corrective action" with respect to depository
institutions that do not meet minimum capital requirements. Pursuant to
FDICIA, the federal bank regulatory authorities have adopted regulations
setting forth a five-tiered system for measuring the capital adequacy of the
depository institutions they supervise. Under these regulations, a depository
institution is classified in one of the following capital categories: "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." Based on the Bank's
current regulatory capital position, management believes that the Bank is
"well capitalized."

FDICIA generally prohibits the Bank from making any capital distribution
(including payment of a cash dividend) or paying any management fees to the
Company if the Bank would thereafter be undercapitalized. Undercapitalized
depository institutions are subject to growth limitations and are required to
submit capital restoration plans acceptable to federal banking agencies. If a
depository institution fails to submit an acceptable plan, it is treated as if
it is "significantly undercapitalized."

Significantly undercapitalized depository institutions may be subject to a
number of other requirements and restrictions, including orders to sell
sufficient voting stock to become adequately capitalized, and requirements to
reduce total assets and to stop accepting deposits from correspondent banks.
Critically undercapitalized institutions are subject to the appointment of a
receiver or conservator, generally within 90 days of the date of such
institution is determined to be critically undercapitalized.

FDICIA also provides for increased funding of the FDIC insurance funds.
Under the FDIC's risk-based insurance premium assessment system, each bank
whose deposits are insured by the BIF is assigned one of the nine risk
classifications based upon certain capital and supervisory measures and,
depending upon its classification, is assessed premiums. On November 14, 1995,
the FDIC board of directors voted to lower the BIF premium to a range of zero
to 27 basis points per $100 of assessable deposits, effective January 1996.
The rate schedule is subject to adjustment by the FDIC from time to time, by
the FDIC. In addition, the FDIC has authority to impose special assessments
from time to time. In addition to such premiums, as a result of the enactment
of the Federal Deposit Insurance Funds Act of 1996 on September 30, 1996,
commercial banks are now required to pay part of the interest on the Financing
Corporation's ("FICO") bonds issued to deal with the savings and loan crisis
of the late 1980s. As a result, commercial bank deposits are now also subject
to assessment by FICO upon the approval by the Board of Directors of the FDIC
of such assessment. Beginning in 1997, and until the earlier of December 31,
1999 or the date on which the last savings and loan association ceases to
exist, the assessment rate FICO imposes on a commercial bank must be at a rate
equal to one-fifth the assessment rate applicable to deposits assessable by
the Savings Association Insurance Fund.

Reserve Requirements

The Bank is required to maintain reserves against its transaction accounts.
The reserves must be maintained in vault cash on hand and in an interest-free
account at the Federal Reserve Bank of Boston. Reserve requirements are
subject to adjustment by the FRB from time to time. The current rate for
reserves is 3% of a depository institution's transaction accounts (less
certain permissible deductions) up to $52 million, plus 10% of the amount over
$52 million.

COMMUNITY REINVESTMENT ACT

The Federal Community Reinvestment Act (the "CRA") requires the OCC to
evaluate the Bank's performance in helping to meet the credit needs of the
community. The Bank defines its CRA marketplace as the State of Connecticut.
This definition is not intended to restrict the availability of credit
services throughout the Bank's general service area, but represents a special
commitment the Bank has made to provide access to lending and depository
services to the community. As a part of the CRA program, the Bank is subject
to periodic examinations by the OCC, and maintains comprehensive records of
its CRA activities for this purpose. Following its most recent examination in
November 1995, the Bank received a rating of "Outstanding."

The Bank is specifically interested in making financing available to small
and medium size manufacturers in its defined lending area. The Bank evaluates
credit applications without regard to race, color, religion, national origin,
gender, marital status or age, and does not discriminate against any loan
applicant whose income may come entirely or in part from any public assistance
program, or against any applicant who has exercised in good faith any right
under the Consumer Protection Act. The Company maintains preferred status with
the SBA, USDA and Ex-Im Bank which enables it to provide access to credit
products that might otherwise be unavailable.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The Board of Directors of the Company (the "Company Board") is divided into
three classes, each comprised of two directors. The Directors of the Company
are elected by the stockholders of the Company for staggered three-year terms,
or until their successors are elected and qualified. The Board of Directors of
the Bank (the "Bank Board") are elected annually for one-year terms. The
executive officers of the Company and the Bank are elected by the Company
Board and Bank Board, respectively, and hold office until their respective
successors have been elected and qualified or until such person's death,
resignation or removal by the applicable Board. The terms of Mr. Silvers', Mr.
Charlebois' and Ms. Galbraith's employment with the Company and the Bank are
governed by employment agreements among Mr. Silvers, Mr. Charlebois and Ms.
Galbraith, the Company and the Bank. See"--Employment Agreements; Key-Man
Insurance Policies."

The executive officers and directors of the Company and the Bank are as
follows:

NAME AGE POSITION
---- --- --------

Brett N. Silvers(1)..... 42 Chairman of the Board and President of the Company and the Bank

Brian J. Charlebois..... 37 Executive Vice President--Chief Operating Officer and Director of the Bank

Leslie A. Galbraith..... 35 Executive Vice President, Chief Financial Officer, Secretary and Treasurer
of the Company and Executive Vice President, Chief Financial Officer and
Director of the Bank

Michael R. Carter(2).... 43 Director of the Company and the Bank

Arnold L. Chase(3)...... 46 Director of the Company and the Bank

Cheryl A. Chase,
Esq.(3)................ 43 Director of the Company and the Bank

Frank P. Longobardi(2).. 42 Director of the Company and the Bank

Bernard R. Waldman(1)... 77 Director of the Company and the Bank

William J. Anderson..... 58 Executive Vice President and Director of the Bank

Craig M. Cooper......... 40 Director of the Bank

David G. Sandberg....... 46 Director of the Bank

Kenneth R. Sonenclar.... 43 Director of the Bank

- --------
(1) Term as Director of the Company expires at the 1999 Annual Meeting of the
Company's stockholders.
(2)Term as Director of the Company expires at the 1998 Annual Meeting of the
Company's stockholders.
(3)Term as Director of the Company expires at the 2000 Annual Meeting of the
Company's stockholders.

BIOGRAPHICAL INFORMATION OF EXECUTIVE OFFICERS AND DIRECTORS

BRETT N. SILVERS has served as Chairman of the Board and President of the
Company and the Bank since 1988. From 1985 until 1988, Mr. Silvers was
Executive Vice President of the Bank of New Haven, Assistant Treasurer of The
Chase Manhattan Bank from 1982 until 1985 and an international economist at
BankBoston, N.A. from 1979 until 1982. Mr. Silvers is currently an Advisory
Board Member of the Private Export Funding Corporation and has served as an
Advisory Committee Member of the Ex-Im Bank.

BRIAN J. CHARLEBOIS has served as Executive Vice President--Chief Operating
Officer of the Bank since May 1997. Since joining the Bank in 1988, Mr.
Charlebois has also served as Executive Vice President of Commercial Banking
and as a Senior Vice President of the Bank. From 1985 until 1988, Mr.
Charlebois was a Commercial Loan Officer for American National Bank of Hamden,
Connecticut.

LESLIE A. GALBRAITH has served as Chief Financial Officer and Treasurer of
the Company since October 1990 and as Secretary of the Company since March
1992. Since joining the Company, Ms. Galbraith has also been Vice President
and Senior Vice President of the Company and is currently an Executive Vice
President of the Company. Ms. Galbraith has also served as Chief Financial
Officer of the Bank since October 1990 and as a Director of the Bank since
1993. Prior to joining the Company, Ms. Galbraith was an Audit Manager at
Coopers & Lybrand L.L.P.

MICHAEL R. CARTER has been a Director of the Company since June 1997 and a
Director of the Bank since March 1990. Mr. Carter is President of Carter &
Company and Carter Capital Corporation, a regional investment banking firm and
registered broker-dealer, respectively. Mr. Carter is also a director of
Cannondale Corporation, a manufacturer and distributor of bicycles and related
accessories.

ARNOLD L. CHASE has been a Director of the Company since 1985 and a Director
of the Bank since 1972. Mr. Chase is Executive Vice President of David T.
Chase Enterprises, Inc., a diversified conglomerate with extensive holdings in
real estate, media, insurance, banking and international investments. Mr.
Chase's sister, Cheryl A. Chase, is also a Director of the Company and the
Bank.

CHERYL A. CHASE, ESQ. has been a Director of the Company since 1985 and a
Director of the Bank since 1979. Ms. Chase is Executive Vice President of
David T. Chase Enterprises, Inc. Ms. Chase's brother, Arnold L. Chase, is also
a Director of the Company and the Bank.

FRANK P. LONGOBARDI has been a Director of the Company since June 1997 and a
Director of the Bank since March 1990. Mr. Longobardi is a partner in the
certified public accounting firm of Haggett, Longobardi & Co. LLC, of
Glastonbury, Connecticut.

BERNARD M. WALDMAN has been a Director of the Company since 1985 and a
Director of the Bank since 1976. Mr. Waldman is currently retired.

WILLIAM J. ANDERSON has been a Director of the Bank since 1993. Since
joining the Bank in 1990, Mr. Anderson has been Senior Vice President of the
Bank and is currently Executive Vice President--Private Banking.

CRAIG M. COOPER has been a Director of the Bank since March 1990. Mr. Cooper
is Executive Vice President of Fairbank Mortgage Corp., a regional sub-prime
mortgage banking lender located in Waterbury, Connecticut.

DAVID G. SANDBERG has been a Director of the Bank since March 1990. Mr.
Sandberg is a partner in The Cornerstone Companies, a commercial real estate
firm, and is President of Cornerstone Capital Advisors, Inc., a registered
investment advisor.

KENNETH R. SONENCLAR has been a Director of the Bank since March 1990. Mr.
Sonenclar is currently the President of Classics Interactive, Inc., an
independent management consulting firm. Until 1993, Mr. Sonenclar was Chairman
and Chief Executive Officer of New Science Associates, Inc., a computer
industry consulting firm.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS OF THE COMPANY AND THE BANK

Each of the Company Board and the Bank Board meet quarterly. During the year
ended December 31, 1996, the Bank Board met monthly. Each of the Boards of
Directors may have additional special meetings upon the request of the
Chairman of the Board, the President or a majority of their respective
Directors. During the year ended December 31, 1996, the Company Board met 5
times and the Bank Board met 12 times. No director attended fewer than 80% of
the total number of board meetings held by either the Company or the Bank
during the year ended December 31, 1996.

The Company Board and the Bank Board have appointed certain committees.
Among these committees are the Executive Committee, the Audit Committee, the
CRA Committee, the Loan Committee, the Human Resources Committee and the
Technology Committee.

The Executive Committee of the Bank Board meets on an ad hoc basis when
empowered by the full Bank Board to take action on projects which may arise
from time to time requiring more diligence or additional consultations with
management or others. The Executive Committee of the Bank Board is comprised
of Messrs. Silvers, Carter, Chase, Longobardi and Waldman and Ms. Chase and is
chaired by Mr. Silvers.

The Audit Committee of the Company Board was established in February 1997
and reviews the scope and results of the annual audit of the Company's
consolidated financial statements conducted by the Company's independent
accountants, the scope of other services provided by the Company's independent
accountants, proposed changes in the Company's financial and accounting
standards and principles, and the Company's policies and procedures with
respect to its internal loan review system, regulatory compliance, internal
accounting, auditing and financial controls, and makes recommendations to the
Company Board on the engagement of the independent accountants, as well as
other matters which may come before it or as may be directed by the Company
Board. The Audit Committee of the Company Board consists of Messrs.
Longobardi, Chase, Carter, Sandberg and Ms. Chase and is chaired by Mr.
Longobardi. The Audit Committee meets quarterly. Prior to the establishment of
the Audit Committee, such matters were handled by the full Company Board.

The CRA Committee of the Bank Board is responsible for overseeing,
coordinating and evaluating the Bank's performance under the Community
Reinvestment Act. The CRA Committee reviews specific policies and policy
statements and assesses the Bank's compliance with those policies and overall
compliance with federal and state law. The CRA Committee of the Bank consists
of Messrs. Anderson, Charlebois, Cooper, Waldman and Ms. Galbraith and is
chaired by Mr. Anderson. The CRA Committee meets quarterly.

The Loan Committee of the Bank Board is responsible for reviewing and
approving loans made to borrowers in amounts greater than the authority vested
with the Chief Operating Officer. The Loan Committee of the Bank consists of
Messrs. Charlebois, Sandberg, Longobardi, Waldman and Ms. Chase and is chaired
by Mr. Charlebois. The Loan Committee meets quarterly.

The Human Resources Committee of the Bank is responsible for establishing
the compensation of the Company's directors, officers and employees, including
salaries, bonuses, commissions, benefit plans, the grant of options and other
forms of, or matters relating to, compensation. The Human Resources Committee
consists of Messrs. Sandberg, Chase, Anderson, Carter and Longobardi and is
chaired by Mr. Sandberg. The Human Resources Committee meets quarterly.

The Technology Committee of the Bank is responsible for monitoring and
implementing periodic technological changes to the Bank's delivery systems.
The Technology Committee consists of Messrs. Sonenclar, Anderson, Charlebois,
Chase and Cooper and is chaired by Mr. Sonenclar. The Technology Committee
meets quarterly.

DIRECTOR'S COMPENSATION

Non-employee directors are compensated in the form of an annual retainer and
fees for each meeting attended. Annual retainers are $2,500 for directors of
the Company, $10,000 for directors of the Bank and $2,500 for members of the
Audit and Loan Committees. In addition, directors receive a fee of $275 for
each board or committee meeting attended.

In July 1997, the Company Board granted to each non-employee director of the
Company and the Bank options to purchase up to 5,000 shares of the Common
Stock at an exercise price of $8.50 per share. All of the options vest six
months after the Offering. The options are exercisable at any time after the
vesting date and prior to July 31, 2007, so long as the holder continues to be
a director of the Company or the Bank at the time of exercise.

EXECUTIVE COMPENSATION

The following table sets forth certain information regarding the Company's
President and each of the most highly compensated other executive officers
(the "Named Executive Officers") during the year ended December 31, 1996.

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION
NUMBER OF SHARES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS GRANTED COMPENSATION(1)
--------------------------- -------- ------ ---------------- ---------------

Brett N. Silvers.............. $241,917 $ -- -- $6,870
Chairman of the Board and
President of the Company and
the Bank
Leslie A. Galbraith........... 127,764 24,600 12,481 5,400
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer of
the Company and Executive
Vice President and Chief
Financial Officer of the Bank
Brian J. Charlebois........... 117,956 21,400 12,663 4,985
Executive Vice President and
Chief Operating Officer of
the Bank

- --------
(1) Represents contributions to the Company's 401(k) Plan made by the Company
on the Named Executive Officer's behalf.

Options granted to the Named Executive Officers during the fiscal year ended
December 31, 1996 are set forth in the following table. For disclosure
regarding the terms of stock options, see "--Stock Option Plans." The Company
has not granted any stock appreciation rights.

OPTION GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS
--------------------------------------------------
NUMBER OF PERCENT OF
SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE
NAME GRANTED FISCAL 1996 ($/SHARE) EXPIRATION DATE
---- ---------- ------------- --------- ---------------

Brett N. Silvers............. -- -- -- --
Leslie A. Galbraith.......... 12,481 9.6% $2.19 2006
Brian J. Charlebois.......... 12,663 9.7% $2.19 2006

The following table sets forth certain information regarding the number of
shares of Common Stock received upon exercise of options during the last
fiscal year, the aggregate dollar value realized upon exercise and the total
number of unexercised options held by each of the Named Executive Officers as
of December 31, 1996.

AGGREGATED OPTION EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

NUMBER OF SECURITIES VALUE OF UNEXERCISED IN THE
UNDERLYING UNEXERCISED MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END (1)
NUMBER OF SHARES ---------------------------- -------------------------------
NAME ACQUIRED IN EXERCISE VALUE REALIZED EXERCISABLE(2) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------------- -------------- -------------- ------------- -------------- --------------

Brett N. Silvers........ -- -- -- -- -- --
Leslie A. Galbraith..... -- -- 63,875 1,106 $ 663,539 $ 11,469
Brian J. Charlebois..... -- -- 63,875 1,288 $ 663,539 $ 13,357

- --------
(1) There was no public market for Common Stock on December 31, 1996.
Accordingly, solely for purposes of this table, the values in these
columns have been calculated on the basis of an assumed public offering
price of $13.00 per share (rather than a determination of the fair market
value of Common Stock on December 31, 1996), less the applicable option
exercise price.
(2) In January 1997, the Company granted stock options, none of which are
currently exercisable, to Ms. Galbraith and Mr. Charlebois to purchase
61,250 shares of Common Stock, at an option exercise price of $2.63 per
share. In July 1997 the Company granted stock options, none of which are
currently exercisable, to Ms. Galbraith and Mr. Charlebois to purchase
25,000 and 35,000 shares of common stock, respectively at an option
exercise price of $8.50 per share.

STOCK OPTION PLANS

1996 Stock Option Plan. The First International Bancorp, Inc. 1996 Stock
Option Plan (the "1996 Plan") was adopted by the Company Board on October 17,
1996 and was approved by the Company's stockholders on June 26, 1997. The
aggregate number of shares of the Common Stock available for awards under the
1996 Plan is 701,106 shares. The 1996 Plan provides for the grant or award to
officers and directors of the Company non-qualified options ("Stock Options")
to purchase shares of the Common Stock. The purpose of the 1996 Plan is to
attract and retain outstanding directors and key employees through the
incentives of stock ownership. As of September 15, 1997, 443,129 of the
701,106 shares reserved for issuance under the 1996 Plan were subject to
outstanding Stock Options at a weighted average exercise price of $5.00 per
share.

The 1996 Plan is administered by the Company Board. Subject to the
provisions of the 1996 Plan, the Company Board has the authority to designate
officer participants and to determine the number of shares to be covered by
each Stock Option, the price of the exercise of the Stock Option, the time at
which Stock Options are exercisable or may be settled, the method of payment
and any other terms and conditions of the awards. Except as otherwise
determined by the Company Board, the 1996 Plan provides for a four-year
vesting schedule, beginning one year after the date of grant. Additionally,
the 1996 Plan also provides for certain minimum annual grants of Stock
Options. Each Vice President, Senior Vice President and Executive Vice
President is eligible to receive each year an option to purchase an amount of
shares determined by (a) multiplying the base salary for such officer as of
the end of the immediately preceding fiscal year by 5% for Vice Presidents,
10% for Senior Vice Presidents and 20% for Executive Vice Presidents divided
by (b) the fair market value of a share of the Common Stock.

Effective June 26, 1997, the 1996 Plan also provides for Stock Options to
purchase 500 shares of Common Stock to be granted each year to each Company or
Bank director who attended at least 80% of the combined number of Company
Board or Bank Board and applicable Board Committee meetings in the preceding
year; the directors are not eligible to receive any other Stock Options under
the 1996 Plan.

The Company Board determines the prices at which Stock Options may be
exercised under the 1996 Plan; however, the exercise price must be at least
100% of the fair market value (as determined under the terms of the 1996 Plan)
of a share of Common Stock on the date of grant; the exercise price for Stock
Options granted to directors will be 100% of the fair market value of the
Common Stock on the date of grant in all circumstances. The Company Board, as
specified in the 1996 Plan, estimates the fair market value of the Common
Stock at each grant date because prior to the Offering, there has been no
active trading market for the Common Stock. The Company Board's determination
is based on current economic conditions, characteristics of the Common Stock,
the Company's financial performance and other relevant factors. Stock Options
must be exercised by the tenth anniversary of the date of grant.

1994 Incentive Stock Option Plan. The 1994 Incentive Stock Plan (the "1994
Plan") was adopted by the Company Board on December 22, 1993 and was approved
by the Company's stockholders on March 17, 1994. The aggregate number of
shares of the Common Stock available for awards under the 1994 Plan is 309,402
shares. The 1994 Plan provides for the grant or award of incentive stock
options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). Under the 1994 Plan, incentive stock options
may be granted only to such officers of the Company and the Bank as selected
by the Company Board. As of September 15, 1997, all 309,402 shares reserved
for issuance under the 1994 Plan were subject to outstanding stock options at
a weighted average exercise price of $1.83 per share.

The 1994 Plan is administered by two or more members of the Company Board
who are not employees of the Company and who are "disinterested" directors, as
that term is defined in the 1994 Plan. The Company Board will also determine,
subject to the express provisions of the 1994 Plan, the time or times at which
options are granted, the purchase price of the Common Stock, the number of
shares covered by each option, the term of the options and the terms and
provisions of the option agreements (which need not be identical). The 1994
Plan requires that the purchase price of the Common Stock covered by each
option granted thereunder be not less than 100% of the fair market value of
the Common Stock on the date of grant, provided that options granted to
persons possessing voting power over more than 10% of the Common Stock must be
granted at a price not less than 110% of the fair market value, as determined
by the Company Board, on the date of grant.

401(k) Plan. The Company has adopted an employee profit-sharing plan
pursuant to Section 401(k) of the Code (the "401(k) Plan"). Under the 401(k)
Plan, eligible participants may defer portions of their salaries for future
receipt and the Company will match 75% of the deferral contribution made by
such participant up to a maximum deferral contribution of 6% of a
participant's compensation.

EMPLOYMENT AGREEMENTS; KEY-MAN INSURANCE POLICIES

BRETT N. SILVERS entered into an employment agreement with the Company and
the Bank, dated as of June 30, 1994, as amended on July 7, 1997, pursuant to
which Mr. Silvers is employed as the Chairman of the Board and President of
the Company and the Bank. The employment agreement provides for a base annual
salary of $300,000 for the twelve month period ending March 31, 1998,
increasing by 5% on April 1st of each year thereafter, plus various benefits
including club memberships, life insurance and use of an automobile. The term
of the agreement extends through December 31, 2000. If there is a material
change in the authority and responsibility of Mr. Silvers, Mr. Silvers will
have the right to terminate his employment and to receive severance pay equal
to one year's salary. If the employment of Mr. Silvers is terminated by the
Company without cause (as defined in the agreement), Mr. Silvers will have the
right to receive severance pay equal to one year's salary. The completion of
the Offering will not trigger these provisions of Mr. Silvers' employment
agreement.

In addition to the base annual salary, the employment agreement contemplates
that the Company Board may award annual discretionary performance bonuses to
Mr. Silvers in 1998, 1999 and 2000. The interest accrued on the promissory
note delivered by Mr. Silvers to the Company in connection with Mr. Silvers'
purchase of Common Stock in 1994, and any interest that would have accrued in
the future, will be forgiven by the Company if the Offering is consummated. In
addition to such forgiveness of interest, the Company will pay a bonus to Mr.
Silvers in the amount of his resulting income tax liability. See "Certain
Transactions." This forgiveness will result in a charge to net income of
approximately $165,000 for the quarter in which the Offering is consummated.

The principal balance of the Note will be canceled by the Company, and any
resulting income tax liability of Mr. Silvers will be paid by the Company, if
Mr. Silvers and his affiliates (the "Silvers Stockholders"), and Arnold L.
Chase, Cheryl A. Chase, Rhoda L. Chase, and David T. Chase and their
affiliates (the "Chase Stockholders"), at any time, cease in the aggregate (i)
to beneficially own at least 25% of the outstanding Common Stock of the
Company, or any successor thereto, (ii) to have the right to exercise at least
25% of the aggregate voting power of the Company, or any successor thereto,
(iii) to beneficially own, directly or indirectly, at least 25% of the Common
Stock of the Bank, or any successor thereto, or (iv) to have the right to
exercise, directly or indirectly, at least 25% of the aggregate voting power
of the Bank, or any successor thereto. The completion of the Offering will not
constitute an event resulting in the cancellation of the principal balance of
the promissory note.

The employment agreement also sets forth the agreement of the Chase
Stockholders that, if the Chase Stockholders enter into an agreement to sell
all or a majority of the shares of Common Stock of the Company owned by them,
they will cause the buyer to give Mr. Silvers the opportunity to sell the same
percentage of his shares of Common Stock of the Company as the Chase
Stockholders are selling, on the same terms as are applicable to the sale by
the Chase Stockholders.

BRIAN J. CHARLEBOIS and LESLIE A. GALBRAITH each entered into separate
employment agreements with the Bank, dated August 25, 1997, pursuant to which
Mr. Charlebois is employed as Executive Vice President and Chief Operating
Officer of the Bank and Ms. Galbraith is employed as Executive Vice President
and Chief Financial Officer of the Bank. Mr. Charlebois' employment agreement
provides for a base annual salary at the rate of $175,000 from the date of the
agreement through December 31, 1997, increasing by a minimum of 5% on each
January 1 thereafter, plus various benefits including life insurance. Ms.
Galbraith's employment agreement provides for a base annual salary at the rate
of $155,000 from the date of the agreement through December 31, 1997,
increasing by a minimum of 5% on each January 1 thereafter, plus various
benefits including life insurance. If the Offering is completed, Mr.
Charlebois and Ms. Galbraith are entitled to receive a $50,000 bonus under
their respective employment agreements. The term of each of the employment
agreements extends through December 31, 1999.

Under their respective employment agreements, if, within one year after a
"change in control" (as defined below) of the Company, there is a material
reduction in the authority or responsibility of Mr. Charlebois or Ms.
Galbraith or there is an involuntary relocation of Mr. Charlebois' or Ms.
Galbraith's place of employment to a location more than 30 miles from the
current headquarters of the Bank, or if Mr. Charlebois' or Ms. Galbraith's
employment is terminated without cause (as defined in the employment
agreement), Mr. Charlebois or Ms. Galbraith, as the case may be, will each
have the right to terminate his or her employment and to receive severance pay
equal to one year's salary. In addition, all options held by Mr. Charlebois or
Ms. Galbraith to purchase Common Stock become immediately exercisable. If the
employment of Mr. Charlebois or Ms. Galbraith is otherwise terminated by the
Company without cause, Mr. Charlebois or Ms. Galbraith, as the case may be,
will have the right to receive severance pay equal to one year's salary.

Under both employment agreements, a "change in control" of the Company is
deemed to occur if Brett N. Silvers and his affiliates and Arnold L. Chase,
Cheryl A. Chase, Rhoda L. Chase, and David T. Chase, and their affiliates, at
any time, cease in the aggregate (i) to beneficially own at least 25% of the
outstanding Common Stock of the Company or any successor thereto, or (ii) to
have the right to exercise at least 25% of the aggregate voting power of the
Bank, or any successor thereto. Except as provided herein, the completion of
the Offering will not constitute a change in control or otherwise trigger
these provisions.

Upon execution of the employment agreement, and as provided therein, Mr.
Charlebois was granted options under the 1996 Plan to purchase 35,000 shares
of the Common Stock at an exercise price of $8.50 per share. Upon execution of
the employment agreement, and as provided therein, Ms. Galbraith was granted
options under the 1996 Plan to purchase 25,000 shares of the Common Stock at
an exercise price of $8.50 per share. None of these options are currently
exercisable.

The Company has obtained "key-man" term insurance policies for Brett N.
Silvers, Chairman of the Board and President of the Company and the Bank,
Brian J. Charlebois, Executive Vice President-Chief Operating Officer of the
Bank and Leslie A. Galbraith, Executive Vice President-Chief Financial Officer
of the Bank.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Human Resources Committee (f/k/a the Compensation Committee) of the Bank
Board determines the compensation policies and programs of the Bank, subject
to final approval by the Bank Board. During the year ended December 31, 1996,
Mr. Silvers, Chairman of the Board and President of the Company and the Bank,
served as Chairman of the Compensation Committee. Mr. Silvers is not on the
Human Resources Committee for 1997. See "--Committees and Meetings of the
Board of Directors of the Company and the Bank."

CERTAIN TRANSACTIONS

On April 15, 1994, the Company issued 175,600 shares (614,600 shares after
adjustment for the Stock Split) of Common Stock to Brett N. Silvers, Chairman
of the Board and President of the Company and the Bank, for an aggregate
purchase price of $1,037,796, or $5.91 per share ($1.69 per share after
adjustment for the Stock Split). Mr. Silvers delivered to the Company, as
payment of the purchase price, $17,560 in cash and a promissory note in the
principal amount of $1,020,236 (the "Note"). To secure the payment of the
Note, Mr. Silvers pledged all 175,600 shares of the Common Stock to the
Company. In enforcing the Note, the Company has recourse to Mr. Silvers'
assets after the Company has sold all of the pledged shares and applied the
proceeds thereof to the Note. No principal or interest is payable under the
Note prior to December 31, 2000. The interest accrued on the Note, none of
which has been recognized by the Company, and any interest that would have
accrued in the future, will be forgiven by the Company if the Offering is
consummated resulting in a charge to net income of approximately $165,000 for
the quarter in which the Offering is consummated. The principal balance of the
Note will be cancelled by the Company in certain circumstances involving a
reduction below specified levels of the amount of Common Stock beneficially
owned in the aggregate by Mr. Silvers and the Chase family. See "Management--
Employment Agreement; Key-Man Insurance Policies." In addition to any possible
forgiveness, the Company will provide a reimbursement to Mr. Silvers for all
tax liabilities associated with such forgiveness and bonus.

On March 21, 1997, the Company engaged the services of Carter Capital
Corporation, a registered broker-dealer located in Southport, Connecticut,
whose managing director is Michael R. Carter, a director of the Company and
the Bank. Carter Capital Corporation has served as financial advisor during
the Offering. The Company has agreed to pay a minimum of three thousand
($3,000) dollars per month to Carter Capital Corporation for such services.

The Company and the Bank have with respect to this Offering, and from time
to time, retained the services of the law firm of Bingham, Dana & Gould LLP.
The Company anticipates that legal fees to be paid to Bingham, Dana & Gould
LLP for 1997 will exceed $200,000. Bruce C. Silvers, a partner at Bingham,
Dana & Gould LLP, is the brother of Brett N. Silvers, Chairman of the Board
and President of the Company and the Bank.

The Bank has had, and expects to have in the future, various loan and other
banking transactions in the ordinary course of business with the directors,
executive officers and principal stockholders of the Company, the Bank and
entities with which such persons may be associated. All such transactions: (i)
have been and will be made in the ordinary course of business; (ii) have been
and will be made on substantially the same terms, including interest rates and
collateral on loans, as those prevailing at the time for comparable
transactions with unrelated persons; and (iii) in the opinion of management do
not and will not involve more than the normal risk of collectability or
otherwise present other terms less favorable to the Bank than would otherwise
be obtained with unrelated persons. As of June 30, 1997, the total dollar
amount of extensions of credit to directors and executive officers identified
in "Management--Executive Officers and Directors," those stockholders named in
the table in "Principal Stockholders" and any of their associates were
approximately $2.4 million, which represented approximately 15% of total
stockholders' equity as of such date.

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of September 15, 1997, and as adjusted to
reflect the Stock Split and the sale of the shares of Common Stock offered
hereby, certain information with respect to the beneficial ownership of the
Common Stock by: (i) each of the Company's and the Bank's Directors, (ii) all
directors and executive officers of the Company and the Bank as a group, and
(iii) each other person (including any "group," as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) who is known by the Company to own beneficially 5% or more of
the Common Stock. The Company believes that the beneficial owners of the
Common Stock listed below, based on information furnished by such owners, have
sole voting and investment power with respect to such shares, except as noted
below.

SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE OWNED AFTER THE
OFFERING (1)(2) OFFERING (1)(2)
--------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------ ----------- --------------------- ----------

Arnold L. Chase (3)................ 3,659,682 63.38% 3,659,682 48.97%
Cheryl A. Chase (4)................ 3,659,682 63.38% 3,659,682 48.97%
Rhoda L. Chase (5)................. 3,659,682 63.38% 3,659,682 48.97%
David T. Chase (6)................. 3,659,682 63.38% 3,659,682 48.97%
Brett N. Silvers (7)............... 632,699 10.96% 632,699 8.47%
Bernard M. Waldman (8)............. 468,171 8.11% 468,171 6.26%
Anthony Gannuscio (9)
c/o Fleet National Bank........... 289,457 5.01% 289,457 3.87%
William J. Anderson (10)........... 71,092 1.22% 71,092 *
Leslie A. Galbraith (10)........... 64,575 1.11% 64,575 *
Brian Charlebois (10).............. 63,875 1.09% 63,875 *
Craig M. Cooper (11)............... 22,050 * 22,050 *
David Sandberg..................... 5,096 * 5,096 *
Frank P. Longobardi (12)........... 1,050 * 1,050 *
Kenneth R. Sonenclar............... 1,050 * 1,050 *
Michael R. Carter.................. 875 * 875 *
All executive officers and
directors as a group (12 persons). 4,990,215 86.95% 4,990,215 67.17%

- --------
*Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and includes
voting or investment power with respect to the shares. Shares of Common
Stock subject to options currently exercisable within sixty (60) days
following September 15, 1997, are deemed outstanding for computing the
share ownership and percentage of the person holding such options, but
are not deemed outstanding for computing the percentage of any other
person.
(2) The number of shares of Common Stock deemed outstanding prior to the
Offering includes (i) 5,781,085 shares of Common Stock outstanding as of
September 15, 1997 and (ii) 309,402 shares issuable pursuant to options
held by persons which may be exercised within sixty (60) days of
September 15, 1997. The number of shares of Common Stock deemed
outstanding after the Offering includes the 1,700,000 shares of Common
Stock offered hereby.
(3) Includes (i) 1,355 shares owned in joint tenancy with Sandra M. Chase,
his wife, (ii) 947,280 shares beneficially owned by Cheryl A. Chase, Mr.
Chase's sister, (iii) 112,522 shares held by the Rothschild Trust Cayman
Ltd. Trust, of which Cheryl A. Chase is the primary beneficiary, (iv)
149,877 shares owned by David T. Chase, Mr. Chase's father, and (v)
1,400,001 shares owned by Rhoda L. Chase, Mr. Chase's mother. Mr. Chase
disclaims beneficial ownership over all shares beneficially owned by Mr.
Chase's sister, father and mother.
(4) Includes (i) 1,050,002 shares owned by Arnold L. Chase, Ms. Chase's
brother, (ii) 112,522 shares held by the Rothschild Trust Cayman Ltd.
Trust, of which Ms. Chase is the primary beneficiary, (iii) 149,877
shares owned by David T. Chase, Ms. Chase's father and (iv) 1,400,001
shares owned by Rhoda L. Chase, Ms. Chase's mother. Ms. Chase disclaims
beneficial ownership over all shares beneficially owned by Ms. Chase's
brother, mother and father.
(5) Includes (i) 1,050,002 shares owned by Arnold L. Chase, Ms. Chase's son,
(ii) 947,280 shares beneficially owned by Cheryl A. Chase, Ms. Chase's
daughter, (iii) 112,522 shares held by the Rothschild Trust Cayman Ltd.
Trust, of which Cheryl A. Chase is the primary beneficiary, and (iv)
149,877 shares owned by David T. Chase, Ms. Chase's husband. Ms. Chase
disclaims beneficial ownership over all shares beneficially owned by Ms.
Chase's children.
(footnotes continued on next page)

(6) Includes (i) 1,050,002 shares owned by Arnold L. Chase, Mr. Chase's son,
(ii) 947,280 shares beneficially owned by Cheryl A. Chase, Mr. Chase's
daughter, (iii) 112,522 shares held by the Rothschild Trust Cayman Ltd.
Trust, of which Cheryl A. Chase is the primary beneficiary, and (iv)
1,400,001 shares owned by Rhoda L. Chase, Mr. Chase's wife. Mr. Chase
disclaims beneficial ownership over all shares beneficially owned by Mr.
Chase's children.
(7) Includes (i) 100,000 shares owned by The Silvers Family Trust f/b/o
Rebecca Anne Silvers, (ii) 100,000 shares owned by The Silvers Family
Trust f/b/o Claudia Belle Silvers, and (iii) 432,699 shares owned by Mr.
Silvers' wife.
(8) Includes (i) 225,593 shares owned by Bernice Waldman, Mr. Waldman's wife
and (ii) 242,137 shares owned by Mr. Waldman's three adult children and
grandchildren. Mr. Waldman disclaims beneficial ownership over all
shares beneficially owned by Mr. Waldman's children and grandchildren.
(9) Under the terms of Mr. Gannuscio's agreement with Fleet National Bank,
dated as of July 20, 1990, Fleet National Bank has voting power over
such shares.
(10) Includes shares of Common Stock subject to options which were
exercisable as of September 15, 1997 and options which will be
exercisable within sixty (60) days of September 15, 1997.
(11) Includes 4,550 shares owned in joint tenancy with Valarie Cooper, Mr.
Cooper's wife and 17,500 shares held by the pension account of Mr.
Cooper's father. Mr. Cooper disclaims beneficial ownership over all
shares beneficially owned by Mr. Cooper's father.
(12) Includes 1,050 shares held in the name of Haggett, Longobardi & Co. LLC,
of which Mr. Longobardi is a partner.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 12,000,000 shares of
Common Stock, par value $0.10 per share, and 2,000,000 shares of Preferred
Stock, par value $0.10 per share.

COMMON STOCK

As of September 15, 1997, a total of 5,781,085 shares of Common Stock were
outstanding after giving effect to the Stock Split. Based upon the number of
shares outstanding as of that date and giving effect to the issuance of the
shares of Common Stock offered by the Company pursuant to this Offering, there
will be 7,481,085 shares of Common Stock outstanding upon the closing of the
Offering.

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders. Holders of Common Stock do not
have cumulative voting rights. Accordingly, holders of a majority of the
shares of Common Stock entitled to vote in any election of directors may elect
all of the directors standing for election. Holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Company Board out of funds legally available therefor, subject to any
preferential dividend rights of any outstanding Preferred Stock. Upon the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive ratably the net assets of the Company available
after the payment of all debts and other liabilities and subject to the prior
rights of any outstanding Preferred Stock. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares offered by the Company in this
offering will be, when issued and paid for, validly issued, fully paid and
nonassessable. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future. Upon the closing of the Offering, there
will be no shares of Preferred Stock outstanding.

PREFERRED STOCK

The Company Board is authorized, subject to certain limitations prescribed
by law, without further stockholder approval, to issue from time to time up to
an aggregate of 2,000,000 shares of Preferred Stock in one or more series and
to fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions on the shares of each such series thereof,
including the dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption (including sinking fund provisions), redemption
price or prices, liquidation preferences and the number of shares constituting
any series or designations of such series. The issuance of Preferred Stock may
have the effect of delaying, deferring or preventing a change of control of
the Company. The rights, preferences and privileges of holders of the Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future. The Company has no current plan to issue
any shares of Preferred Stock.

DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS

The Amended and Restated Certificate of Incorporation of the Company (the
"Charter") provides for the division of the Company Board into three classes
as nearly equal in size as practicable with staggered three-year terms. See
"Management--Executive Officers and Directors."

The Charter and the Amended and Restated By-laws ("By-laws") provide that
any action required or permitted to be taken by the stockholders of the
Company may be taken only at a duly called annual or special meeting of the
stockholders and that special meetings may be called only by the Chairman of
the Company Board, the President, a majority of the entire Board of Directors
of the Company or by holders of at least 30% of the shares of the Common
Stock. These provisions could have the effect of delaying until the next
annual stockholders meeting stockholder actions which are favored by certain
of the stockholders, including actions to remove directors. These provisions
may also discourage another person or entity from making a tender offer for

the Company's Common Stock, because such person or entity, even if it acquired
all or a majority of the outstanding voting securities of the Company, would
be able to take action as a stockholder (such as electing new directors or
approving a merger) only at a duly called stockholders meeting, and not by
written consent.

The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or by-laws, unless a corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater percentage.
The Charter requires the affirmative vote of a majority of the entire Company
Board or the holders of at least 66 2/3% of the outstanding voting stock of
the Company to amend or repeal any of the foregoing Charter provisions or to
reduce the number of authorized shares of Common Stock and Preferred Stock. A
66 2/3% vote of the outstanding voting stock of the Company is also required
to amend or repeal the Company's By-laws. Such stockholder vote would in
either case be in addition to any separate class vote that might in the future
be required pursuant to the terms of any Preferred Stock that might be
outstanding at the time any such amendments are submitted to stockholders. The
By-laws may also be amended or repealed by a majority vote of the Company
Board.

The By-laws provide that for nominations for the Company Board or for other
business to be properly brought by a stockholder before an annual meeting of
stockholders, the stockholder must first have given timely notice thereof in
writing to the Secretary of the Company. To be timely, a stockholder's notice
generally must be delivered not later than 120 days in advance of the first
anniversary of the date that the Company's proxy statement to stockholders is
delivered in connection with the prior year's annual meeting of stockholders
or 90 days prior to the date of the meeting if no such proxy statement was
delivered to the stockholders. The notice must contain, among other things,
certain information about the stockholder delivering the notice and, as
applicable, background information about each nominee or a description of the
proposed business to be brought before the meeting. Business transacted at a
special meeting is limited to the purposes for which the meeting is called.

The foregoing provisions could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire, control of the Company. See "Risk Factors--Anti-Takeover
Provisions of Delaware Law, Certain Charter and By-law Provisions and
Employment Agreement" and "Management--Employment Agreements; Key-Man
Insurance Policies."

The Charter contains certain provisions permitted under the DGCL relating to
the liability of directors. These provisions eliminate a director's liability
for monetary damages for a breach of fiduciary duty, except in certain
circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. The Charter and By-laws also contain
provisions indemnifying the directors and officers of the Company to the
fullest extent permitted by the DGCL. The Company has obtained a directors and
officers liability insurance policy which provides for indemnification of its
directors and officers against certain liabilities incurred in their
capacities as such. The Company believes that these provisions will assist the
Company in attracting and retaining qualified individuals to serve as
directors.

The Company is subject to the provisions of Section 203 of the DGCL. Subject
to certain exceptions, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the interested
stockholder attained such status with the approval of the Board of Directors
or unless the business combination is approved in a prescribed manner. A
"business combination" includes certain mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, an "interested stockholder" is a person who,
together with his or her affiliates and associates, owns, or owned within
three years prior, 15% or more of the corporation's voting stock.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services LLC.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding 7,481,085
shares of Common Stock, assuming no exercise of options after August 25, 1997
(7,736,085 shares of the Underwriters over-allotment option is exercised in
full). Of these shares, the 1,700,000 shares offered hereby (1,955,000 shares
if the Underwriters' over-allotment option is exercised in full) will be
freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company as that term
is defined in Rule 144 under the Securities Act ("Rule 144") described below.
Of the remaining 5,781,085 shares of Common Stock outstanding upon closing of
the Offering, 5,127,267 shares are either "restricted securities" as that term
is defined in Rule 144 or are held by persons who may be deemed "affiliates"
of the Company. Of the remaining 5,781,085 shares, 4,764,733 shares are
subject to lock-up agreements.

Upon completion of the Offering, 943,295 shares will be eligible for
immediate sale without lock-up agreement pursuant to Rule 144(k) and,
beginning 90 days after commencement of the Offering, 39,200 shares will
become eligible for sale pursuant to Rule 144 or Rule 701 under the Securities
Act ("Rule 701"). Upon expiration of the lock-up agreements, approximately
4,183,639 additional shares will be eligible for sale subject to the timing,
volume, and manner of sale restrictions of Rule 144. The 614,951 remaining
shares will be subject to all of the restrictions of Rule 144. In addition,
309,402 additional shares of Common Stock subject to outstanding and vested
stock options could also be sold, subject in some cases to compliance with
certain volume limitations as described below.

In general, under Rule 144, as recently amended, a person (or persons whose
shares are aggregated) who has beneficially owned shares for at least one year
(including the holding period of any prior owner except an affiliate from whom
such shares were purchased) is entitled to sell in "brokers' transactions" or
to market makers, within any three-month period commencing 90 days after the
date of this Prospectus, a number of shares that does not exceed the greater
of (i) one percent of the number of shares of Common Stock then outstanding
(approximately 74,810 shares immediately after the completion of the Offering)
or (ii) generally, the average weekly trading volume in the Common Stock
during the four calendar weeks preceding the required filing of a Form 144
with respect to such sale. Sales under Rule 144 are generally subject to the
availability of current public information about the Company. Under Rule
144(k), a person who is not deemed to have been an affiliate of the Company at
any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years (including the holding
period of any prior owner other than an affiliate from whom such shares were
purchased), is entitled to sell such shares without having to comply with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144. Under Rule 701, persons who purchase shares upon exercise of options
granted prior to the effective date of the Offering are entitled to sell such
shares 90 days after the effective date of the Offering in reliance on Rule
144, without having to comply with the holding period requirements of Rule 144
and, in the case of non-affiliates, without having to comply with the public
information, volume limitation or notice provisions of Rule 144.

Pursuant to the lock-up agreements, officers, directors and stockholders of
the Company, owning upon completion of the Offering, in the aggregate,
4,764,733 shares of Common Stock, have executed agreements pursuant to which
each has agreed that, subject to certain exceptions, they will not, for a
period of 180 days from the date of this Prospectus, directly or indirectly,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise sell or dispose (or announce any offer, sale, offer of
sale, pledge, contract of sale, grant of any option to purchase or other sale
or disposition) of any shares of Common Stock or other capital stock of the
Company or any securities convertible into, or exercisable or exchangeable
for, any shares of Common Stock, or other capital stock of the Company without
the prior written consent of Prudential Securities Incorporated, on behalf of
the Underwriters. Further, holders of outstanding stock options for, in the
aggregate, an additional 723,656 shares of Common Stock are subject to 180 day
lock-up agreements with Prudential Securities Incorporated, on behalf of the
Underwriters. The Company has agreed that it will not,
for a period of 180 days from the date of this Prospectus, directly or
indirectly, offer, sell, offer to

sell, contract to sell, pledge, grant any option to purchase or otherwise sell
or dispose (or announce any offer, sale, offer of sale, contract of sale,
pledge, grant of any option to purchase or other sale or disposition) of any
shares of Common Stock or other capital stock of the Company or any securities
convertible into, or exercisable or exchangeable for, any shares of Common
Stock, or other capital stock of the Company without the prior written consent
of Prudential Securities Incorporated, on behalf of the Underwriters, except
that such agreement does not prevent the Company from granting additional
options under the Company's stock option plans. Prudential Securities
Incorporated may in its sole discretion and at any time without notice,
release all or any portion of the securities subject to lock-up agreements.

After the date of this Prospectus, the Company intends to file a
Registration Statement on Form S-8 covering an aggregate of approximately
1,010,506 shares of Common Stock that have been reserved for issuance under
the 1996 Stock Option Plan, and the 1994 Incentive Stock Option Plan, thus
permitting the resale of such shares in the public market without restriction
under the Securities Act.

Prior to the Offering, there has not been any public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public
market could adversely affect the prevailing market prices and impair the
Company's ability to raise capital through the sale of equity securities.

UNDERWRITING

The underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated and Keefe, Bruyette & Woods, Inc. are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions contained in the Underwriting Agreement, to purchase from
the Company the number of shares of Common Stock set forth below opposite
their respective names:

NUMBER
UNDERWRITER OF SHARES
----------- ---------

Prudential Securities Incorporated.................................
Keefe, Bruyette & Woods, Inc. .....................................
---------
Total............................................................ 1,700,000
=========

The Company is obligated to sell, and the Underwriters are obligated to
purchase, all of the shares of Common Stock offered hereby if any are
purchased.

The Underwriters, through the Representatives, have advised the Company that
they propose to offer the Common Stock initially at the public offering price
set forth on the cover page of this Prospectus; that the Underwriters may
allow to selected dealers a concession of $ per share; and that such dealers
may reallow a concession of $ per share to certain other dealers. After the
Offering, the offering price and the concessions may be changed by the
Representatives.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 255,000 additional
shares of Common Stock at the offering price, less underwriting discounts and
commissions, as set forth on the cover page of this Prospectus. The
Underwriters may exercise such option solely for the purpose of covering over-
allotments incurred in the sale of the shares of Common Stock offered hereby.
To the extent such option is exercised, each Underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number set forth next to such
Underwriter's name in the preceding table bears to 1,700,000.

The Company, directors, executive officers and other securityholders of the
Company have agreed that they will not, directly or indirectly, offer, sell,
offer to sell, contract to sell, pledge, or grant any option to purchase or
otherwise sell or dispose of (or announce any offer, sale, offer of sale,
contract of sale, pledge or grant of any option to purchase or other sale or
disposition of) any shares of Common Stock or of equity securities of the
Company substantially similar thereto or any securities convertible into, or
exchangeable or exercisable for, any shares of Common Stock or such similar
securities for a period of 180 days after the date of this Prospectus, without
the prior written consent of Prudential Securities Incorporated, on behalf of
the Underwriters. In addition, the Company has agreed that it will not,
directly or indirectly, offer, sell, offer to sell, pledge contract to sell or
grant any option to purchase or otherwise sell or dispose of (or announce any
offer, sale, offer of sale, pledge, contract for sale or grant of any option
to purchase or other sale or disposition of) any shares of Common Stock or of
equity securities of the Company substantially similar thereto or any other
securities convertible into, or exchangeable or exercisable for, any shares of
Common Stock or such similar securities for a period of 180 days after the
date of this Prospectus, without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters, except that during
such period, shares of Common Stock may be issued upon the exercise of
outstanding stock options and the Company may issue employee stock options
which are exercisable after the 180th day after the date of this Prospectus.
Prudential Securities Incorporated, may, in its sole discretion, at any time
and without prior notice, release all or any portion of the shares of Common
Stock subject to such agreements.

The Company has agreed to indemnify the several Underwriters against or
contribute to losses arising out of certain liabilities, including liabilities
under the Securities Act.

The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the public offering price will be determined through
negotiations between the Company and the Representatives. Among the factors to
be considered in making such determination will be prevailing market
conditions, the Company's financial and operating history and condition, its
prospects and prospects for its industry in general, the management of the
Company and the market prices of securities for companies in businesses
similar to that of the Company.

In connection with the Offering, certain Underwriters and selling group
members (if any) and their respective affiliates may engage in transactions
that stabilize, maintain or otherwise affect the market price of the Common
Stock. Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such persons may
bid for or purchase Common Stock for the purpose of stabilizing its market
price. The Underwriters also may create a short position for the account of
the selling Underwriters by selling more Common Stock in connection with the
Offering then they are committed to purchase from the Company, and in such
case may purchase Common Stock in the open market following completion of the
Offering to cover all or a portion of such short position. The Underwriters
may also cover all or a portion of such short position, up to 255,000 shares
of Common Stock, by exercising the Underwriters' over-allotment option
referred to above. In addition, Prudential Securities Incorporated, on behalf
of the Underwriters, may impose "penalty bids" under contractual arrangements
with the Underwriters whereby it may reclaim from an Underwriter (or dealer
participating in the Offering) for the account of the other Underwriters, the
selling concession with respect to the Common Stock that is distributed in the
Offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Common Stock at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph is required, and, if any is undertaken, it may be
discontinued at any time.

LEGAL MATTERS

The validity of the shares offered hereby will be passed upon for the
Company by Bingham, Dana & Gould LLP, Boston, Massachusetts. Certain legal
matters will be passed upon for the Underwriters by Stroock & Stroock & Lavan
LLP, New York, New York.

EXPERTS

The consolidated financial statements of the Company and its subsidiary
included in this Prospectus and Registration Statement have been audited by
Coopers & Lybrand L.L.P., certified independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in auditing and
accounting.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock
offered hereby. As permitted by the rules and regulations of the

Commission, this Prospectus does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and the shares of Common Stock
offered hereby, reference is hereby made to such Registration Statement and to
the schedules and exhibits filed as part thereof. Statements contained in this
Prospectus as to the contents of any contract or any other document are not
necessarily complete, and, in each instance, if such contract or document is
filed as an exhibit, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. Copies of the
Registration Statement, including all schedules and exhibits thereto, may be
inspected, copied and obtained at prescribed rates at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the Regional
Offices of the Commission at Suite 1400, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and Seven World Trade Center, Thirteenth Floor, New
York, New York 10048. The Commission also maintains a website at
(http://www.sec.gov).

ANNUAL AND QUARTERLY REPORTS

The Company intends to furnish its stockholders with annual reports
containing financial statements audited by its independent auditors and
quarterly reports for the first three quarters of each fiscal year containing
unaudited condensed financial information. In addition, after the Offering,
the Company will be subject to the information requirements of the Exchange
Act, and in accordance therewith will file reports, proxy statements and other
information with the Commission.

FIRST INTERNATIONAL BANCORP, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Report of Independent Accountants......................................... F-2
Financial Statements of First International Bancorp, Inc.
Consolidated Balance Sheets as of June 30, 1997 (unaudited), and
December 31, 1996 and 1995............................................. F-3
Consolidated Statements of Income for the six months ended June 30, 1997
and 1996 (unaudited) and the years ended December 31, 1996, 1995 and
1994................................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the six
months ended June 30, 1997 (unaudited) and the years ended December 31,
1996, 1995 and 1994.................................................... F-5
Consolidated Statements of Cash Flows for the six months ended June 30,
1997 and 1996 (unaudited) and the years ended December 31, 1996, 1995
and 1994............................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders of First International Bancorp, Inc.

We have audited the consolidated balance sheets of First International
Bancorp, Inc. and Subsidiary (the "Company") as of December 31, 1996 and 1995,
and the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of First International Bancorp, Inc. and Subsidiary as of December 31, 1996
and 1995, and the consolidated results of their operations, and their cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.

Coopers & Lybrand L.L.P.

Hartford, Connecticut
January 29, 1997
(except for Note 1, as it relates to
"Earnings Per Share" and "Common
Stock Split", and Note 13 as to
which the date is July 21, 1997)

F-2

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

AT DECEMBER 31,
AT JUNE 30, --------------------------
1997 1996 1995
------------ ------------ ------------
(UNAUDITED)

ASSETS
Cash and due from banks.............. $ 8,440,358 $ 5,866,653 $ 5,250,477
Federal funds sold................... 8,000,000 13,000,000 4,800,000
------------ ------------ ------------
Cash and cash equivalents........ 16,440,358 18,866,653 10,050,477
Investment securities (Note 2):
Available for sale at fair value... 10,676,049 11,523,795 6,642,123
Held to maturity at amortized cost
(fair value $2,995,004, $3,055,997
and $4,104,322)................... 3,021,820 3,062,478 4,116,443
U.S. Agency stocks at cost......... 2,069,350 1,287,350 872,350
Loans, net (Note 3).................. 112,886,399 109,452,484 102,731,649
Accrued interest receivable.......... 1,054,227 823,471 877,330
Other real estate owned, net......... -- -- 300,000
Premises and equipment, net (Note 4). 2,167,911 1,515,180 1,270,273
Receivable from loans sold (Note 1).. 23,578,227 10,341,091 11,272,960
Prepaid expenses and other assets
(Note 3)............................ 5,577,004 4,769,271 3,088,914
------------ ------------ ------------
Total assets..................... $177,471,345 $161,641,773 $141,222,519
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits (Note 5).................... $158,647,451 $144,316,149 $128,361,468
U.S. Treasury demand note............ 58,314 1,061,449 220,685
Accrued interest payable............. 793,361 621,609 298,076
Other liabilities.................... 1,976,748 1,426,991 740,666
------------ ------------ ------------
Total liabilities................ 161,475,874 147,426,198 129,620,895
------------ ------------ ------------
Commitments and Contingencies (Notes
3 and 4)
Stockholders' equity (Notes 1, 7, 8,
9 and 13):
Common stock, $.10 par value,
12,000,000 shares authorized;
5,773,560, 5,766,385 and 5,753,260
shares issued and outstanding..... 577,356 576,638 575,326
Preferred stock, $.10 par value,
2,000,000 shares
authorized no shares issued and
outstanding....................... -- -- --
Paid-in capital in excess of par
value............................. 8,233,407 8,221,656 8,201,882
Stockholder note receivable........ (953,967) (953,967) (1,006,678)
Unrealized holding loss on invest-
ments available-for-sale, net..... (30,126) (74,220) (28,300)
Retained earnings.................. 8,168,801 6,445,468 3,859,394
------------ ------------ ------------
Total stockholders' equity....... 15,995,471 14,215,575 11,601,624
------------ ------------ ------------
Total liabilities and stockhold-
ers' equity..................... $177,471,345 $161,641,773 $141,222,519
============ ============ ============

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

F-3

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
---------------------------------- ---------------------
1996 1995 1994 1997 1996
----------- ----------- ---------- ---------- ----------
(UNAUDITED)

Interest income:
Loans, including net
fees................. $12,027,413 $10,265,578 $6,895,123 $5,830,044 $6,021,327
Investment securities. 646,059 750,300 799,499 479,221 320,745
Federal funds sold.... 631,967 585,073 302,756 313,201 222,353
----------- ----------- ---------- ---------- ----------
Total interest
income............. 13,305,439 11,600,951 7,997,378 6,622,466 6,564,425
----------- ----------- ---------- ---------- ----------
Interest expense:
Deposits.............. 5,714,156 4,770,934 2,959,649 2,991,608 2,821,997
Other................. 27,229 97,790 190,719 19,562 14,663
----------- ----------- ---------- ---------- ----------
Total interest
expense............ 5,741,385 4,868,724 3,150,368 3,011,170 2,836,660
----------- ----------- ---------- ---------- ----------
Net interest income. 7,564,054 6,732,227 4,847,010 3,611,296 3,727,765
Provision for possible
loan losses............ 3,486,974 1,237,480 1,683,046 959,074 553,755
----------- ----------- ---------- ---------- ----------
Net interest income
after provision for
possible loan
losses............. 4,077,080 5,494,747 3,163,964 2,652,222 3,174,010
Non-interest income:
Service charges and
other deposit fees... 423,887 397,874 385,404 203,829 229,349
Loan servicing income
and fees............. 1,475,392 896,387 492,961 1,120,791 605,344
Gain on sale of
guaranteed commercial
loans................ 4,904,588 2,744,249 2,712,663 4,820,123 2,384,545
Gain on sale of
unguaranteed portions
of commercial loans.. 841,700 -- -- 370,447 274,996
Gain on sale of other
commercial loans..... 91,317 97,033 -- 227,831 32,782
Gain on residential
loan sales........... 6,593 18,123 17,371 59,274 2,987
Gain on branch sale... 2,201,781 -- -- -- --
----------- ----------- ---------- ---------- ----------
Total non-interest
income............. 9,945,258 4,153,666 3,608,399 6,802,295 3,530,003
----------- ----------- ---------- ---------- ----------
Total operating
income............. 14,022,338 9,648,413 6,772,363 9,454,517 6,704,013
----------- ----------- ---------- ---------- ----------
Non-interest expense:
Salaries and benefits. 4,963,436 3,398,992 2,485,375 3,844,207 2,135,872
Occupancy............. 773,776 572,940 492,895 452,797 367,297
Furniture and
equipment............ 462,288 407,221 344,385 311,000 225,545
Outside services...... 230,500 210,060 198,034 227,928 119,018
Foreclosed property
and collection, net.. 360,395 311,335 364,517 96,901 305,026
FDIC and OCC
assessments.......... 69,208 205,630 295,842 33,779 42,143
Office expenses....... 692,056 538,437 366,838 390,072 349,368
Marketing............. 631,829 287,536 155,718 386,143 249,525
Other................. 241,733 194,633 425,819 166,671 105,874
----------- ----------- ---------- ---------- ----------
Total non-interest
expense............ 8,425,221 6,127,784 5,129,423 5,909,498 3,899,668
----------- ----------- ---------- ---------- ----------
Income before income
taxes................ 5,597,117 3,520,629 1,642,940 3,545,019 2,804,345
Provision for income
taxes (Note 9)......... 2,352,781 1,494,400 583,000 1,491,976 1,178,947
----------- ----------- ---------- ---------- ----------
Net income.............. $ 3,244,336 $ 2,026,229 $1,059,940 $2,053,043 $1,625,398
=========== =========== ========== ========== ==========
Earnings per share
(Notes 1 and 7)........ $ .54 $ .33 $ .18 $ .34 $ .27
=========== =========== ========== ========== ==========

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

F-4

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND THE YEARS ENDED DECEMBER
31, 1996, 1995 AND 1994

PAID-IN
CAPITAL IN UNREALIZED HOLDING
COMMON EXCESS OF PAR STOCKHOLDER NOTE LOSS ON INVESTMENTS
STOCK VALUE RECEIVABLE AVAILABLE-FOR-SALE RETAINED EARNINGS
-------- ------------- ---------------- ------------------- -----------------

Balance at January 1, 1994..... $522,585 $7,362,486 $ -- $ -- $ 937,603
Issuance of 614,600 shares of
common stock (Note 7)......... 61,460 976,336 (1,020,236) -- --
Repurchase and retirement of
28,550 shares of common stock
(Note 7)...................... (2,856) (40,236) -- -- --
Unrealized holding loss, net of
income taxes.................. -- -- -- (182,000) --
1994 net income................ -- -- -- -- 1,059,940
-------- ---------- ----------- --------- ----------
Balance at December 31, 1994. $581,189 $8,298,586 $(1,020,236) $(182,000) $1,997,543
Repurchase and retirement of
62,132 shares of common stock
(Note 7)...................... (6,213) (102,529) -- -- --
Issuance of 3,500 shares of
common stock under option plan
(Note 8)...................... 350 5,825 -- -- --
Dividend on common stock
($.03/share).................. -- -- -- -- (164,378)
Principal payment on
stockholder note receivable
(Note 7)...................... -- -- 13,558 -- --
Reduction in unrealized holding
loss, net of income taxes..... -- -- -- 153,700 --
1995 net income................ -- -- -- -- 2,026,229
-------- ---------- ----------- --------- ----------
Balance at December 31, 1995. $575,326 $8,201,882 $(1,006,678) $ (28,300) $3,859,394
Repurchase and retirement of
7,875 shares of common stock
(Note 7)...................... (788) (21,071) -- -- --
Issuance of 21,000 shares of
common stock under option plan
(Note 8)...................... 2,100 40,845 -- -- --
Dividends on common stock
($.11/share).................. -- -- -- -- (658,262)
Principal payment on
stockholder note receivable
(Note 7)...................... -- -- 52,711 -- --
Increase in unrealized holding
loss, net of income taxes..... -- -- -- (45,920) --
1996 net income................ -- -- -- -- 3,244,336
-------- ---------- ----------- --------- ----------
Balance at December 31, 1996. $576,638 $8,221,656 $ (953,967) $ (74,220) $6,445,468
Issuance of 7,175 shares of
common stock under option
plan.......................... 718 11,751 -- -- --
Dividends on common stock
($.06/share).................. -- -- -- -- (329,710)
Reduction in unrealized holding
loss, net of income taxes..... -- -- -- 44,094 --
Net income..................... -- -- -- -- 2,053,043
-------- ---------- ----------- --------- ----------
Balance at June 30, 1997..... $577,356 $8,233,407 $ (953,967) $ (30,126) $8,168,801
======== ========== =========== ========= ==========

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

F-5

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------- --------------------------
1996 1995 1994 1997 1996
------------ ------------ ------------ ------------ ------------
(UNAUDITED)

CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income.............. $ 3,244,336 $ 2,026,229 $ 1,059,940 $ 2,053,043 $ 1,625,398
------------ ------------ ------------ ------------ ------------
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation and
amortization.......... 374,030 314,732 280,826 297,829 178,187
Amortization of
investment premiums,
net................... 55,024 92,835 250,026 3,234 34,194
Accretion of loan
discount, net......... 1,041,935 484,661 980,531 612,614 734,334
Provision for possible
loan losses........... 3,486,974 1,237,480 1,683,046 959,074 553,755
Provision for loss on
other real estate
owned................. 200,000 280,000 330,345 -- 300,000
Increase in other
liabilities........... 686,325 122,040 485,540 613,618 (18,893)
Increase (decrease) in
deferred loan costs... (15,517) 35,082 16,449 (40,356) (63,340)
(Decrease) increase in
accrued interest
receivable............ 53,859 (193,936) (147,164) (230,756) (64,886)
Increase (decrease) in
accrued interest
payable............... 323,533 (779) (2,889) 171,752 158,495
Deferred income tax
provision (benefit)... (248,824) (52,554) 47,300 (94,620) (10,200)
Gain on sale of loans.. (1,017,650) (352,515) 437,479 478,586 (269,912)
Loans originated for
sale.................. (90,435,699) (46,843,152) (42,112,000) (83,604,089) (36,670,000)
Proceeds from sale of
loans originated for
sale.................. 94,338,292 49,350,042 45,279,513 87,518,415 38,876,434
(Increase) decrease in
receivable from loans
sold.................. 931,869 (2,813,185) (2,914,623) (13,237,136) 5,791,933
(Increase) decrease in
prepaid expenses and
other assets.......... (1,394,953) (1,437,681) (1,129,819) (807,564) (1,398,994)
------------ ------------ ------------ ------------ ------------
Total adjustments.... 8,379,198 223,070 3,484,560 (7,359,399) 8,131,107
------------ ------------ ------------ ------------ ------------
Net cash provided by
(used) in operating
activities.......... 11,623,534 2,249,299 4,544,500 (5,306,356) 9,756,505
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Net increase in loans... (14,119,170) (15,265,479) (28,389,475) (9,358,159) (18,266,396)
Purchase of investment
securities available
for sale............... (10,513,906) (1,497,969) (3,498,428) (497,500) (1,496,094)
Purchase of investment
securities held to
maturity............... (500,000) (75,000) (1,000,000) -- --
Purchase of equity
securities............. (415,000) (4,500) (221,200) (782,000) --
Proceeds from
maturities and
principal repayments
of investment
securities available
for sale............... 5,522,946 3,105,542 8,820,945 1,416,695 2,016,767
Proceeds from
maturities and
principal repayments
of investment
securities
held to maturity....... 1,525,729 961,202 1,118,951 40,659 1,460,220
Proceeds from sale of
branch premises........ 275,000 -- -- -- --
Proceeds from sale of
other real estate
owned.................. 100,000 -- 286,663 -- --
Capital expenditures,
net.................... (893,937) (371,783) (164,303) (950,560) (252,253)
------------ ------------ ------------ ------------ ------------
Net cash used in
investing
activities.......... (19,018,338) (13,147,987) (23,046,847) (10,130,865) (16,537,756)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net increase (decrease)
in deposits............ 15,954,681 16,512,269 16,062,341 14,331,302 21,589,490
Net increase (decrease)
in other borrowings.... 840,764 (105,647) (498,500) (1,003,135) (73,391)
Increase in FHLBB
Advances............... -- -- 2,100,000 -- --
Repayments of FHLBB
Advances............... -- (2,788,589) (3,172,000) -- --
Proceeds from sale of
common stock........... 42,945 6,175 17,560 12,469 41,475
Repurchase of common
stock.................. (21,859) (108,742) (43,092) -- --
Dividends paid.......... (658,262) (164,378) -- (329,710) (328,756)
Principal payment on
stockholder note
receivable............. 52,711 13,558 -- -- 26,356
------------ ------------ ------------ ------------ ------------
Net cash provided by
(used in) financing
activities.......... 16,210,980 13,364,646 14,466,309 13,010,926 21,255,174
------------ ------------ ------------ ------------ ------------
Net increase (decrease)
in cash and cash equiv-
alents................. 8,816,176 2,465,958 (4,036,038) (2,426,295) 14,473,923
Cash and cash equiva-
lents at beginning of
year................... 10,050,477 7,584,519 11,620,557 18,866,653 10,050,477
------------ ------------ ------------ ------------ ------------
Cash and cash equiva-
lents at end of year... $ 18,866,653 $ 10,050,477 $ 7,584,519 $ 16,440,358 $ 24,524,400
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW
INFORMATION:
Cash paid during the
year for:
Interest............... $ 5,417,852 $ 4,869,184 $ 3,153,585 $ 2,839,418 $ 2,678,265
Income taxes........... $ 2,664,259 $ 1,693,483 $ 289,127 $ 1,306,140 $ 1,365,677
Non-cash items:
Real estate acquired
in settlement of
loans................. $ -- $ 580,000 $ -- $ -- $ --

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

F-6

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of First
International Bancorp, Inc. (the Company) and its wholly-owned subsidiary,
First National Bank of New England (formerly known as First National Bank of
Connecticut). Intercompany accounts and transactions have been eliminated in
consolidation. First National Bank of New England (the Bank) sold its last
retail branch facility and certain deposits in 1996. The Bank operates a full
service branch at its headquarters in Hartford, Connecticut and representative
offices, which are responsible for regional loan origination efforts, in
Boston and Springfield, Massachusetts, Providence, Rhode Island, Morristown,
New Jersey, Pittsburgh, Pennsylvania and Washington D.C. The Bank's primary
revenues are derived from net interest income and the origination and sale, on
a servicing retained basis, of commercial loans. The Bank is a national leader
in the use of loan guarantee programs offered by the U.S. Small Business
Administration (SBA), the U.S. Department of Agriculture (USDA) and the
Export-Import Bank of the United States (Ex-Im Bank). Continued availability
of such loan guarantees are dependent upon timely and adequate federal budget
appropriations. Each of these federal programs is funded through September
1997, but there can be no assurance of sufficient budgetary allocations to
allow a continuation of such programs in substantially their current form.

In preparing the consolidated financial statements, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and the results of operations
for the period. Material estimates in these consolidated financial statements
relate to the allowance and provision for possible loan losses, the valuation
of other real estate owned and the estimated lives of loans sold where
servicing has been retained. Market conditions are evaluated and independent
appraisals of significant properties are obtained by management as needed in
the process of setting the estimates. Notwithstanding this, such estimates are
particularly sensitive to the economic environment and can be significantly
affected by changing economic conditions affecting the value of the
collateral, interest rates, borrowers' financial position and other factors.
Accordingly, actual results could differ significantly from the estimates.

INVESTMENT SECURITIES

Securities that may be sold as part of the Company'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 holding gains and losses on such securities are reported net of
related taxes as a separate component of stockholders' equity. Debt securities
that the Company has the ability and positive intent to hold to maturity are
classified as held-to-maturity and carried at amortized cost. Realized gains
and losses on the sales of all investment securities are reported in earnings
and computed using the specific identification cost basis. Declines in the
market value of investment securities that are deemed to be other than
temporary are charged to income.

LOANS

Loans are stated at their principal amount outstanding. Interest income on
loans is recognized on the simple interest method based upon the principal
amount outstanding.

In May 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage
Servicing Rights,--an amendment of FASB Statement No. 65" (SFAS 122), which
the Company adopted on January 1, 1996. SFAS 122 amends FASB Statement No. 65,
"Accounting for Certain Mortgage Banking Activities," to provide that a
mortgage banking enterprise recognize as separate assets rights to service
mortgage loans for others, however those servicing rights

F-7

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
are acquired. It also requires the Company to assess its capitalized mortgage
servicing rights for impairment based on the fair value of those rights. The
adoption of this statement did not have a material impact on the Company's
financial condition or its results of operations.

In June 1996, FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No.
125 provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. These standards are based
on consistent application of a financial-components approach that focuses on
control. Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities
it has incurred, derecognizes financial assets when control has been
surrendered, and derecognizes liabilities when extinguished. SFAS No. 125 also
provides consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings. SFAS No. 125 is
effective for transfers and servicing of financial assets and extinguishments
of liabilities occurring after December 31, 1996, and is to be applied
prospectively. The adoption of this statement as of January 1, 1997 did not
have a material impact on the Company's financial condition or its results of
operations. This statement generally applies SFAS No. 122 concepts to a
variety of assets sold and the resultant retained servicing. SFAS No. 125 also
changed terminology used to describe the methods and assumptions used to
calculate the servicing assets. The discussion below reflects the concepts and
terminology included in SFAS No. 125.

Receivable from loans sold and gain on commercial loan sales are primarily
attributable to the sale of commercial loans which have been at least
partially guaranteed by the SBA, the USDA and Ex-Im Bank. The Company is
required to retain at least 10% of the unguaranteed portions of SBA and 5% of
the unguaranteed portions of USDA loans. Transactions are generally settled
within 30 days of the sale. The gains are calculated in accordance with
Emerging Issues Task Force Issue No. 88-11 (EITF 88-11), which requires that
the gain on the sale of a portion of a loan be based on the relative fair
market values of the loan sold and the loan retained. A portion of the gain on
commercial loan sales is due to an excess servicing asset which represents the
present value of the differential between the servicing fee received by the
Bank and the sum of the Bank's costs and a normal profit after considering the
estimated effects of prepayments. The discount rate utilized in calculating
the excess servicing asset approximates the market rate an investor would
demand on a risk-adjusted basis. The excess servicing asset is amortized as a
charge to non-interest income over the estimated lives of the underlying
loans. The excess servicing asset is carried at the lower of amortized cost or
net realizable value.

Unearned interest reflected as a reduction of loans in the consolidated
balance sheet relates primarily to the discount recognized under EITF 88-11 on
the retained portion of the commercial loans sold. The discount is recorded in
interest income over the estimated life of the retained loan.

LOAN ORIGINATION FEES (COSTS)

Fees for loan originations and commitments, and related origination costs,
are deferred and recognized as a yield adjustment utilizing the interest
method over the contractual life of the related loan, adjusted for prepayment
and sales.

PROVISION/ALLOWANCE FOR POSSIBLE LOAN LOSSES

On January 1, 1995, the Company adopted Statement of Financial Accounting
Standards No. 114 "Accounting by Creditors for Impairment of a Loan" and No.
118 "Accounting by Creditors for Impairment of a Loan--Income Recognition and
Disclosures" (SFAS 114 and 118). SFAS 114 and 118 require creditors to
evaluate the collectibility of impaired loans, as defined below, 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 collectibility of contractual principal and interest based on the
estimated fair value of the collateral. As

F-8

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
permitted by the Statements, smaller-balance homogeneous loans consisting of
residential mortgages and consumer loans are evaluated for collectibility by
the Company based on historical loss experience rather than on an individual
loan-by-loan basis. The Company considers a loan to be impaired for SFAS 114
and 118 purposes when, based on current information and events, it is probable
that it will be unable to collect all amounts of contractual interest and
principal as scheduled in the loan agreement. Such loans are placed on non-
accrual when such determination is made. An insignificant delay of under 60
days or a 10% shortfall in the amount of the payment is not an event that,
when considered in isolation, would automatically cause the Company to
consider a loan to be impaired for purposes of SFAS 114 and 118. The Company
evaluates all impaired loans, other than small balance loans, on an individual
loan-by-loan basis; it does not aggregate impaired loans into major risk
classifications. The Company places a loan on nonaccrual status when it is 90
days or more past due or when, in management's assessment, the full
collectability of principal and interest is uncertain. Except for certain
restructured loans, impaired loans are loans that are on nonaccrual status.

When an impaired loan or a portion of an impaired loan is deemed
uncollectible, the portion deemed uncollectible is charged against the
allowance for loan losses and subsequent recoveries, if any, are credited to
the allowance.

The Company generally recognizes interest income on impaired loans on a cash
basis and reverses any accrued interest income at the date of determination.

Any loans restructured prior to the adoption of SFAS 114 and 118 are
accounted for in accordance with SFAS No. 15 "Accounting by Debtors and
Creditors for Troubled Debt Restructurings."

Prior to the adoption of SFAS 114 and 118, the allowance for loan losses
related to all loans was based on undiscounted cash flows or the fair value of
the collateral for collateral dependent loans. The adoption of SFAS 114 and
118 did not result in any additions to the provision for loan losses.

Management determines the adequacy of its allowance for possible loan losses
primarily through periodic reviews of the loan portfolio, loan delinquencies,
collateral on loans and past payment history adjusted for such factors as
known changes in the character of the loan portfolio, current economic
conditions and the provisions of SFAS 114 and 118. Consideration is also given
to anticipated economic conditions, as well as other relevant factors in
establishing the allowance. The allowance is increased by provisions for loan
losses charged to income and decreased by charge offs, net of recoveries.

OTHER REAL ESTATE OWNED

Other real estate owned (OREO), representing property acquired by
foreclosure or acceptance of a deed in lieu of foreclosure is carried at the
lower of cost (the unpaid loan balance at the date of acquisition) or fair
value less estimated disposal costs. Improvements are capitalized to the
extent realizable.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are computed on the straight-line
and accelerated methods over the estimated useful lives of the assets.
Leasehold improvements are amortized over the period of the related lease
using the straight-line method. Costs of maintenance and repairs are expensed,
while major improvements are capitalized.

INCOME TAXES

Income taxes are provided based on the asset/liability method of accounting.
Deferred income taxes and tax benefits are recognized for the future income
tax consequences attributable to differences between the financial

F-9

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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. A
valuation allowance is established when it is more likely than not that some
portion of the deferred tax asset will not be realized.

EARNINGS PER SHARE

Earnings per share have been computed based on the weighted average
outstanding shares (December 31, 1996--6,050,379; 1995--6,063,213; 1994--
5,821,223; and June 30, 1997--6,058,945; 1996--6,044,817). In accordance with
Staff Accounting Bulletin Topic 4-D, for all periods presented, earnings per
share have been computed by including common stock equivalents associated with
the Company's stock options issued one year prior to the expected public
offering date of September 1997. The effect of such equivalents was computed
under the treasury stock method, assuming the repurchase of such options at an
assumed offering price of $13.00 per share. (See Notes 8 and 13.)

STOCK OPTION PLANS

SFAS 123, "Accounting for Stock Based Compensation" (SFAS 123) issued in
October 1995 gives companies the option of employing intrinsic value
accounting under the guidelines of Accounting Principles Board (APB) No. 25 or
fair value accounting for stock based compensation. While SFAS 123 does not
require the adoption of fair value accounting, it does require certain
disclosures in the financial statements as if fair value accounting had been
adopted, including pro forma net income and earnings per share. The Company
adopted this accounting standard effective January 1, 1996 for disclosure
purposes only and will continue to apply APB 25 in accounting for stock based
compensation.

COMMON STOCK SPLIT

On June 26, 1997, the Company's stockholders approved a 3.5-for-1 stock
split to stockholders of record on July 14, 1997, to be effective August 7,
1997. Stockholders' equity has been restated to give retroactive recognition
to the stock split in prior periods by reclassifying from paid-in capital in
excess of par value to common stock an amount equal to the par value of the
additional shares arising from the split. In addition, all references to the
number of shares, per share amounts and stock option data have been restated.

STATEMENT OF CASH FLOWS

For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, amounts due from banks and federal funds sold. Generally, federal
funds are sold for one day periods or terms of less than 30 days.

RECLASSIFICATIONS

Certain amounts from 1995 and 1994 have been reclassified to conform to the
1996 presentation.

UNAUDITED INFORMATION

The unaudited financial statements and related notes as of June 30, 1997 and
for the six-month periods ended June 30, 1997 and 1996 reflect, in the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to fairly present the statements of operations, cash
flows and balance sheets as of and for the periods presented. These unaudited
financial statements should be read in conjunction with the audited financial
statements and related notes thereto. The results for the interim period
presented are not necessarily indicative of results to be expected for the
full year.

F-10

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. INVESTMENT SECURITIES:

Securities classified as available for sale (carried at fair value) and as
held to maturity (carried at amortized cost) as of June 30, 1997 and December
31, 1996 and 1995 are as follows:

GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
JUNE 30, 1997 ----------- ---------- ---------- -----------

AVAILABLE FOR SALE
U.S. Treasury obligations........ $10,011,486 $ 768 $(58,098) $ 9,954,156
U.S. government mortgaged backed
securities...................... 715,710 6,410 (227) 721,893
----------- ------ -------- -----------
$10,727,196 $7,178 $(58,325) $10,676,049
=========== ====== ======== ===========
HELD TO MATURITY
U.S. government mortgaged backed
securities...................... $ 1,871,820 $3,376 $(30,192) $ 1,845,004
Debt securities of foreign
governments..................... 1,150,000 -- -- 1,150,000
----------- ------ -------- -----------
$ 3,021,820 $3,376 $(30,192) $ 2,995,004
=========== ====== ======== ===========

GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
DECEMBER 31, 1996 ----------- ---------- ---------- -----------

AVAILABLE FOR SALE
U.S. Treasury obligations........ $10,515,353 $ 2,424 $ (62,777) $10,455,000
U.S. government mortgaged backed
securities...................... 1,134,272 7,665 (73,142) 1,068,795
----------- ------- --------- -----------
$11,649,625 $10,089 $(135,919) $11,523,795
=========== ======= ========= ===========
HELD TO MATURITY
U.S. government mortgaged backed
securities...................... $ 1,912,478 $14,489 $ (20,970) $ 1,905,997
Debt securities of foreign
governments..................... 1,150,000 -- -- 1,150,000
----------- ------- --------- -----------
$ 3,062,478 $14,489 $ (20,970) $ 3,055,997
=========== ======= ========= ===========

GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
DECEMBER 31, 1995 ----------- ---------- ---------- -----------

AVAILABLE FOR SALE
U.S. Treasury obligations........ $ 1,499,949 $ 9,425 $ -- $ 1,509,374
U.S. government mortgaged backed
securities...................... 5,185,674 23,495 (76,420) 5,132,749
----------- ------- --------- -----------
$ 6,685,623 $32,920 $ (76,420) $ 6,642,123
=========== ======= ========= ===========
HELD TO MATURITY
U.S. government mortgaged backed
securities...................... $ 3,451,443 $10,372 $ (22,493) $ 3,439,322
Debt securities of foreign
governments..................... 665,000 -- -- 665,000
----------- ------- --------- -----------
$ 4,116,443 $10,372 $ (22,493) $ 4,104,322
=========== ======= ========= ===========

Stock securities are comprised of the following:

JUNE 30 DECEMBER 31
---------- -------------------
1997 1996 1995
---------- ---------- --------

Federal Reserve Bank............................ $ 224,150 $ 224,150 $224,150
Federal Home Loan Bank of Boston................ 1,246,200 648,200 648,200
Private Export Funding Corporation.............. 599,000 415,000 --
---------- ---------- --------
$2,069,350 $1,287,350 $872,350
========== ========== ========

F-11

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

At June 30, 1997 and December 31, 1996, investments with a carrying value of
$12,059,853 and $12,330,392, respectively, were pledged to collateralize
public and government deposits, as required by law, and certain of the Bank's
lines of credit. There were no sales of debt securities in the six months
ended June 30, 1997, and the years ended December 31, 1996 and 1995.

The contractual maturities of debt securities at June 30, 1997 and December
31, 1996 and 1995 are as follows:

WEIGHTED
AMORTIZED FAIR AVERAGE
COST VALUE YIELD
JUNE 30, 1997 ----------- ----------- --------

AVAILABLE FOR SALE
Due in one year or less...................... $ 499,728 $ 497,813 5.125%
Due after one year through five years........ 9,511,758 9,456,343 5.823%
Mortgage-backed securities................... 715,710 721,893 7.147%
----------- ----------- -----
$10,727,196 $10,676,049 5.880%
=========== =========== =====
HELD TO MATURITY
Due in one year or less...................... $ 25,000 $ 25,000 7.875%
Due after one year through five years........ 525,000 525,000 7.875%
Due after five years through ten years....... 600,000 600,000 7.500%
Mortgage-backed securities................... 1,871,820 1,845,004 5.618%
----------- ----------- -----
$ 3,021,820 $ 2,995,004 6.410%
=========== =========== =====

DECEMBER 31, 1996

AVAILABLE FOR SALE
Due in one year or less...................... $ 998,200 $ 1,000,626
Due after one year through five years........ 9,517,153 9,454,374
Mortgage-backed securities................... 1,134,272 1,068,795
----------- -----------
$11,649,625 $11,523,795
=========== ===========
HELD TO MATURITY
Due after one year through five years........ $ 350,000 $ 350,000
Due after five years through ten years....... 800,000 800,000
Mortgage-backed securities................... 1,912,478 1,905,997
----------- -----------
$ 3,062,478 $ 3,055,997
=========== ===========
DECEMBER 31, 1995
AVAILABLE FOR SALE
Due in one year or less...................... $ 1,499,949 $ 1,509,374
Due after one year through five years........ 999,725 1,010,500
Mortgage-backed securities................... 4,185,949 4,122,249
----------- -----------
$ 6,685,623 $ 6,642,123
=========== ===========
HELD TO MATURITY
Due after one year or less................... $ 15,000 $ 15,000
Due after one year through five years........ 1,150,000 1,150,000
Due after five years through ten years....... 500,000 500,000
Mortgage-backed securities................... 2,451,443 2,439,322
----------- -----------
$ 4,116,443 $ 4,104,322
=========== ===========

F-12

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. LOANS:

The outstanding balances of loans originated and held by the Bank are as
follows:

DECEMBER 31,
JUNE 30, --------------------------
1997 1996 1995
------------ ------------ ------------

Commercial and industrial......... $ 66,565,727 $ 61,435,058 $ 47,276,930
Commercial real estate............ 43,128,295 39,094,984 46,207,535
Residential real estate........... 6,655,106 12,843,235 12,951,738
Consumer loans and lines of
credit........................... 1,839,879 1,253,483 555,815
------------ ------------ ------------
Total loans..................... 118,189,007 114,626,760 106,992,018
Less:
Discount on retained loans...... 2,409,687 2,240,999 2,311,575
Allowance for possible loan
losses......................... 3,000,000 3,000,000 2,000,000
Net deferred loan origination
costs.......................... (107,079) (66,723) (51,206)
------------ ------------ ------------
Loans, net.................... $112,886,399 $109,452,484 $102,731,649
============ ============ ============

The scheduled maturities of the Bank's loan portfolio as of December 31,
1996 are as follows:

AFTER ONE
YEAR
WITHIN ONE THROUGH AFTER FIVE
YEAR FIVE YEARS YEARS TOTAL
----------- ----------- ----------- ------------

Commercial and industrial..... $19,558,139 $ 6,579,794 $35,297,124 $ 61,435,058
Commercial real estate........ 747,095 5,979,996 32,367,893 39,094,984
Residential real etate........ 486,281 1,673,126 10,683,829 12,843,235
Consumer loans and lines of
credit....................... 17,097 367,582 868,804 1,253,483
----------- ----------- ----------- ------------
Total....................... $20,808,612 $14,600,498 $79,217,650 $114,626,760
=========== =========== =========== ============

Approximately 40% of the commercial industrial and commercial real estate
loans at each period end are the unguaranteed portions of loans originated
under the federal guarantee programs discussed in Note 1. At December 31,
1996, the Company had fixed and variable rate loans with maturities greater
than one year totaling $8,685,754 and $88,917,278, respectively.

The outstanding balances of loans originated by the Bank and sold to others
on a servicing retained basis are as follows:

DECEMBER 31,
JUNE 30, -------------------------
1997 1996 1995
------------ ------------ ------------

GUARANTEED LOANS
SBA................................. $171,525,486 $145,620,429 $ 98,738,201
USDA................................ 41,077,424 26,900,567 17,323,504
Ex-Im Bank.......................... 52,894,242 26,669,557 8,018,309
FHLMC............................... 17,429,119 17,731,007 17,825,600
------------ ------------ ------------
282,926,271 216,921,560 141,905,614
UNGUARANTEED PORTIONS AND
UNGUARANTEED LOANS
SBA................................. 33,773,679 28,813,955 --
USDA................................ 3,974,587 3,191,257 --
Other commercial.................... 20,117,832 12,895,857 8,730,134
Home equity lines................... 4,106,049 3,982,247 3,214,303
------------ ------------ ------------
61,972,147 48,883,316 11,944,437
------------ ------------ ------------
Total loans serviced for others....... $344,898,418 $265,804,876 $153,850,051
============ ============ ============

F-13

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following amounts are included in Loans, net:

DECEMBER 31,
JUNE 30, -----------------------------------
1997 1996 1995 1994
DISCOUNT ON RETAINED LOANS ---------- ----------- ---------- ----------

Balance at beginning of
period...................... $2,240,999 $ 2,311,575 $1,791,953 $ 805,463
Discount on current period
sales...................... 890,151 1,509,724 851,602 1,089,367
Deletions due to sales...... (443,926) (1,112,511) -- --
Accretion................... (277,537) (467,789) (331,980) (102,877)
---------- ----------- ---------- ----------
Balance at end of period... $2,409,687 $ 2,240,999 $2,311,575 $1,791,953
========== =========== ========== ==========

The following amounts are included in Prepaid expenses and other assets:

DECEMBER 31,
JUNE 30, ----------------------------------
1997 1996 1995 1994
SERVICING ASSETS ---------- ---------- ---------- ----------

Balance at beginning of
period..................... $4,137,836 $2,808,930 $2,084,329 $1,209,820
Net servicing on current
period sales............. 1,289,185 1,978,810 1,126,723 1,040,276
Amortization.............. (580,378) (649,904) (402,122) (165,767)
---------- ---------- ---------- ----------
Balance at end of
period................. $4,846,643 $4,137,836 $2,808,930 $2,084,329
========== ========== ========== ==========

Changes in the Allowance for possible loan losses were as follows:

DECEMBER 31,
JUNE 30, -------------------------------------
1997 1996 1995 1994
---------- ----------- ----------- -----------

Balance at beginning of
period.................. $3,000,000 $ 2,000,000 $ 2,000,000 $ 1,425,000
Provision charged to
income................ 959,074 3,486,974 1,237,480 1,683,046
Recoveries on loans
previously charged
off................... 12,018 39,827 84,341 103,501
Loans charged off...... (971,092) (2,526,801) (1,321,821) (1,211,547)
---------- ----------- ----------- -----------
Balance at end of
period.............. $3,000,000 $ 3,000,000 $ 2,000,000 $ 2,000,000
========== =========== =========== ===========

Certain information with regard to impaired loans is detailed below:

DECEMBER 31,
JUNE 30, ---------------------
1997 1996 1995
---------- ---------- ----------

Impaired loans............................. $2,021,324 $2,172,830 $1,258,451
Allocated allowance........................ 656,513 543,145 680,000
Average recorded investment................ 2,226,505 1,669,654 1,904,393
Interest income recognized................. 29,200 124,515 26,566

The carrying value of the impaired loans has been calculated based on the
estimated fair value of the underlying collateral.

Non-accrual loans totaled $2,594,210, $2,251,710 and $1,258,451 at June 30,
1997, December 31, 1996 and 1995, respectively. The gross interest income that
would have been recorded if the non-accrual loans had been current in
accordance with their original terms would have been $100,000 for the period
ended June 30, 1997. The actual amount of interest income recognized on those
loans was $35,000 for the period ended June 30, 1997. There were no loans over
90 days and still accruing interest at each period end presented.

F-14

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1995, the loan portfolio included restructured loans
totaling $214,000. The gross interest income that would have been recorded, if
these loans had been current in accordance with the original terms was
$24,300, while the interest included in income on these loans was $8,500 in
1995. These loans were paid off in 1996.

Loans to principal stockholders, directors, companies of which directors are
principal owners, individuals directly related to or affiliated with
directors, and executive officers aggregated $2,369,000, $2,570,000 and
$2,784,000 at June 30, 1997, December 31, 1996 and 1995, respectively. During
1997 and 1996, repayments and sales amounted to $201,000 and $414,000,
respectively. Advances under new or existing loans totaled $200,000 in 1996.

In the normal course of business, the Bank enters into agreements to extend
credit which are not reflected in the accompanying consolidated financial
statements.

Outstanding credit commitments are detailed below:

JUNE 30, DECEMBER 31,
----------- -----------------------
1997 1996 1995
----------- ----------- -----------

Commercial lines of credit.............. $26,704,646 $24,393,670 $18,814,000
Consumer lines of credit................ 352,646 229,067 217,000
Performance letters of credit........... 10,381,106 1,435,172 740,400
Financial letters of credit............. 1,178,890 1,392,447 1,227,600
----------- ----------- -----------
$38,617,288 $27,450,356 $20,999,000
=========== =========== ===========

At June 30, 1997 and December 31, 1996, letters of credit totaling
$10,493,492 and $1,392,447, respectively, carry the guarantee of Ex-Im Bank.

Commitments to extend such credit are agreements to lend to a client 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 the payment of a fee. Since some of the agreements may expire
without being drawn upon or may be terminated by the Bank, these amounts do
not necessarily represent a future cash requirement of the Bank. Prior to
entering into any agreement to extend credit, the Bank evaluates the client's
creditworthiness in accordance with loan underwriting standards as approved by
the Board of Directors. The amount of collateral obtained, if deemed
necessary, is based on management's credit evaluation of the client.
Collateral for commercial loan commitments varies but may include accounts
receivable, inventory, property, plant and equipment and commercial real
estate.

Although the Bank's maximum exposure to credit loss is the total contract
amount of the commitments and letters of credit noted above, management does
not anticipate any material losses as a result of these agreements and does
not consider them to represent an undue level of credit, interest or liquidity
risk for the Bank.

The Bank specializes in lending to small privately owned commercial
enterprises and professional firms throughout southern New England, although
the majority of the loans outstanding are made to borrowers located in
Connecticut. Such loans and loan commitments are generally collateralized by
real estate or other assets.

4. PREMISES, EQUIPMENT AND LEASES:

DECEMBER 31,
JUNE 30, ---------------------
1997 1996 1995
---------- ---------- ----------

Land....................................... $ -- $ -- $ 12,700
Buildings and leasehold improvements....... 1,330,639 1,001,610 1,014,120
Furniture, fixtures and equipment.......... 2,795,260 2,173,727 2,006,401
---------- ---------- ----------
4,125,899 3,175,337 3,033,221
Less: Accumulated depreciation and
amortization.............................. 1,957,988 1,660,157 1,762,948
---------- ---------- ----------
Premises and equipment, net............ $2,167,911 $1,515,180 $1,270,273
========== ========== ==========

F-15

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Each of the leases provide for minimum and contingent rentals and include
renewal options. Total rental expense for the six months ended June 30, 1997
and the years ended December 31, 1996, 1995 and 1994 was $390,788, $636,196,
$455,719 and $374,587, respectively. Minimum future obligations for premises
under noncancelable leases are as follows:

YEAR ENDED OPERATING LEASES
---------- ----------------

1997.................................................. $ 751,756
1998.................................................. 197,508
1999.................................................. 197,527
2000.................................................. 154,530
2001.................................................. 29,598
----------
$1,330,919
==========

5. DEPOSITS:

DECEMBER 31,
JUNE 30, -------------------------
1997 1996 1995
------------ ------------ ------------

Non-interest bearing checking......... $ 27,000,586 $ 27,887,496 $ 22,621,086
Interest-bearing checking............. 8,557,022 8,248,470 10,731,941
Savings............................... 82,008,617 69,277,894 71,026,141
Time deposits under $100,000.......... 32,460,353 37,085,188 21,716,052
Time deposits $100,000 or more........ 8,620,873 1,817,101 2,266,248
------------ ------------ ------------
Total deposits...................... $158,647,451 $144,316,149 $128,361,468
============ ============ ============

6. FEDERAL HOME LOAN BANK OF BOSTON ADVANCES:

The Bank has a $2,870,000 unused line of credit from the Federal Home Loan
Bank of Boston (FHLBB) and currently has the ability to borrow approximately
$3,800,000 from the FHLBB under various term advance programs. Any outstanding
advances from the FHLBB are collateralized by holdings of stock in the FHLBB,
mortgage loans on residential properties and certain U.S. Treasury and Agency-
issued securities.

7. STOCKHOLDERS' EQUITY:

STOCKHOLDER NOTE RECEIVABLE

In June 1994 the Board of Directors approved the issuance of 175,600 shares
(614,600 shares as adjusted for the Common Stock Split) of the Company's
common stock to the Company's President at a price of $1.69 per share. The
terms of the transaction provided for a cash down payment of $17,560 and a
promissory note in the amount of $1,020,236 for the balance. The note bears
interest at the rate of 7% and is collateralized by the stock issued and the
personal guaranty of the President. Principal and interest payments are due at
maturity on December 31, 2000, however, if the public offering is completed,
the interest will be forgiven (See Note 13). No interest income has been
reflected in the financial statements for the interest due under the note. The
President is legally entitled to any cash dividends declared, although the
promissory note provided that 75% of such cash dividends must be retained by
the Company and applied to the note as a repayment of principal. This
repayment provision was eliminated effective January 1, 1997.

Although the stock is legally outstanding, since a note was accepted in
exchange for a portion of the issue price, the note receivable is presented as
a separate component of stockholders' equity, and only as repayments

F-16

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of principal are received does this sale of stock serve to increase
stockholders' equity. Because these shares are legally outstanding, they are
included in the earnings per share calculations as of the date of issuance.

Pursuant to this arrangement, when the Company paid dividends, the President
made principal payments on the note of $52,711 and $13,558 in 1996 and 1995,
respectively, which served to increase stockholders' equity.

REPURCHASE AND RETIREMENT OF COMMON STOCK

The Board of Directors authorized the repurchase and retirement of 7,875,
62,132, and 28,550 shares of the Company's common stock for average purchase
prices of $2.78, $1.75 and $1.51 per share in 1996, 1995 and 1994,
respectively.

DIVIDENDS

Dividends payable by First International Bancorp, Inc. are generally
unrestricted (see below), although the ability of the Company to pay dividends
is dependent upon the dividends paid to it by the Bank. A national bank must
obtain the approval of the Office of the Comptroller of the Currency (OCC) if
the total of all dividends declared in any calendar year exceeds the bank's
net profits, as defined, for that year combined with its retained net profits
for the preceding two calendar years.

REGULATORY CAPITAL REQUIREMENTS

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier I
capital to risk-weighted assets (as defined in regulations). Management
believes, as of June 30, 1997 and December 31, 1996, the Bank meets all
capital adequacy requirements to which it is subject and that, under the
current regulations, the Bank will continue to meet its minimum capital
requirements in the foreseeable future.

As of June 30, 1997 and December 31, 1996, the most recent notifications
from the Office of the Comptroller of the Currency categorized the Bank as
well-capitalized under the regulatory framework for prompt corrective action.
To be categorized as well-capitalized, the Bank must maintain minimum total
and Tier I risk-based and Tier I leverage ratios as set forth in the table
below. There are no conditions or events since the notification that
management believes have changed the Bank's category.

TO BE WELL CAPITALIZED
FOR CAPITAL UNDER PROMPT CORRECTIVE
ACTUAL RATIOS ADEQUACY PURPOSES ACTION PROVISIONS
----------------- ----------------- --------------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------- ----- ----------- ----- -------------- -----------

AS OF JUNE 30, 1997:
Total Capital (to Risk
Weighted Assets)..... $16,474,807 11.50% $11,456,912 8.00% $ 14,321,140 10.00%
Tier I Capital (to
Risk Weighted
Assets).............. 14,675,586 10.25% 5,728,456 4.00% 8,592,684 6.00%
Tier I Capital (to
Average Assets)...... 14,675,586 8.97% 6,540,699 4.00% 8,175,873 5.00%
AS OF DECEMBER 31, 1996:
Total Capital (to Risk
Weighted Assets)..... $14,253,389 11.62% $ 9,811,221 8.00% $ 12,264,027 10.00%
Tier I Capital (to
Risk Weighted
Assets).............. 12,702,275 10.36% 4,905,611 4.00% 7,358,416 6.00%
Tier I Capital (to
Average Assets)...... 12,702,275 8.44% 6,017,340 4.00% 7,521,675 5.00%
AS OF DECEMBER 31, 1995:
Total Capital (to Risk
Weighted Assets...... $12,267,631 10.73% $ 9,148,252 8.00% $ 11,435,315 10.00%
Tier I Capital (to
Risk Weighted
Assets).............. 10,831,172 9.47% 4,574,126 4.00% 6,861,189 6.00%
Tier I Capital (to
Average Weighted
Assets).............. 10,831,172 7.71% 5,622,007 4.00% 7,027,509 5.00%

F-17

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. STOCK INCENTIVE PLAN:

The Company's 1994 Incentive Stock Option plan allows for the award of
options to officers which vest immediately. As of December 31, 1996, options
to purchase 354,112 shares of the Company's common stock are available under
this plan.

The Company adopted a 1996 Stock Option Plan which reserves 701,106 shares
of common stock for the issuance of options that may be granted to full time
officers and directors. These options would generally vest ratably over a four
year period beginning one year after the grant date.

Both plans provide that the options may be granted to purchase common stock
at a price not less than the fair market price of the Company's stock at the
date for the granting of such options, and unless otherwise provided, the
options have a ten year term. The plans also provide that options granted and
the related option price are adjusted to reflect changes in the shares
outstanding due to stock splits and dividends, or other adjustments.

The following tables detail the activity under the 1994 Incentive Stock
Option Plan and 1996 Stock Option Plan:

1994 INCENTIVE STOCK OPTION PLAN

AVERAGE
OPTION OPTION
SHARES PRICE
------- -------

Outstanding at January 1, 1994......... -- --
Granted.............................. 178,500 $1.689
------- ------
Outstanding at December 31, 1994....... 178,500 1.689
Granted.............................. 131,250 1.840
Exercised............................ (3,500) 1.764
Cancelled............................ (1,750) 1.840
------- ------
Outstanding at December 31, 1995....... 304,500 1.752
Granted.............................. 83,653 2.191
Exercised............................ (21,000) 2.045
Cancelled............................ (37,538) 1.866
------- ------
Outstanding at December 31, 1996....... 329,615 1.832
Exercised............................ (7,175) 1.738
Cancelled............................ (5,513) 2.191
------- ------
Outstanding at June 30, 1997........... 316,927 $1.828
======= ======

1996 STOCK OPTION PLAN

AVERAGE
OPTION OPTION
SHARES PRICE
------- -------

Outstanding at January 1, 1996......... -- --
Granted.............................. 46,663 $2.191
Cancelled............................ (1,568) 2.191
------- ------
Outstanding at December 31, 1996....... 45,095 2.191
Granted.............................. 255,465 2.631
Cancelled............................ (39,991) 2.603
------- ------
Outstanding at June 30, 1997........... 260,569 $2.560
======= ======

F-18

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company utilizes the minimum value methodology of SFAS 123 and has
determined that there is no compensation expense for any options granted in
1997, 1996 or 1995, assuming an original four-year expected life, annual
dividends ranging from 6.2% to 7.7% of the exercise prices and risk-free
interest rates of 5.9%, 5.9% and 5.4% for grants issued in the periods ended
June 30, 1997, December 31, 1996 and December 30, 1995, respectively.

9. INCOME TAXES:

The components of the income tax provision (benefit) for the years ended
December 31 are as follows:

1996 1995 1994
---------- ---------- --------

Current provision (benefit):
Federal................................. $1,883,002 $1,155,382 $530,700
State................................... 718,603 391,572 5,000
---------- ---------- --------
2,601,605 1,546,954 535,700
Deferred provision (benefit):
Federal................................. (183,844) (60,086) 51,900
State................................... (64,980) 36,132 17,500
Benefit from state net operating loss
carryforward........................... -- (28,600) (22,100)
---------- ---------- --------
(248,824) (52,554) 47,300
---------- ---------- --------
Total provision for income taxes...... $2,352,781 $1,494,400 $583,000
========== ========== ========

The effective tax rates differ from the federal statutory rate due to state
taxes, net of the federal benefit.

The components of the net deferred tax asset (liability) at December 31 are
follows:

1996 1995
------------------ -------------------
FEDERAL STATE FEDERAL STATE
-------- -------- --------- --------

Deferred tax liabilities:
Allowance for possible loan
losses.......................... $ (-- ) $ (-- ) $ (77,395) $(27,418)
Depreciation..................... (56,232) (19,403) (67,221) (23,814)
Deferred loan costs.............. (20,304) (7,006) (15,538) (5,505)
Other............................ (5,656) (603) (389) (137)
-------- -------- --------- --------
(82,192) (27,012) (160,543) (56,874)
Deferred tax assets:
Reserve for other real estate
owned........................... -- -- 84,966 30,100
Reserve for investment securities
available for sale.............. 38,235 13,545 11,232 3,968
Allowance for possible loan
losses.......................... 152,366 52,575 -- --
Other............................ 92,408 31,886 54,316 19,242
-------- -------- --------- --------
283,009 98,006 150,514 53,310
-------- -------- --------- --------
Net deferred tax asset
(liability)................... $200,817 $ 70,994 $ (10,029) $ (3,564)
======== ======== ========= ========

A valuation allowance was provided against the deferred state tax assets in
1994 to reflect the possibility that all or a portion of these assets may not
have been realized due to a lack of sufficient taxable income in the future.
The valuation allowance decreased $24,200 and $198,901 in 1995 and 1994,
respectively, due principally to the utilization of state loss carryforwards
to offset taxable income for those years.

F-19

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. EMPLOYEE BENEFIT PLAN:

The Company maintains a contributory savings plan which qualifies under
Section 401(k) of the Internal Revenue Code for employees meeting certain
service requirements. Eligible employees may make contributions to the Plan
based on specified percentages of their compensation. In 1996, the Company
matched 75% of their contribution, up to 6% of compensation. The matching
contribution was 50% in prior years. The Company's matching contributions were
$60,273, $95,740, $55,679 and $43,807 for the six months ended June 30, 1997
and the years ended December 31, 1996, 1995 and 1994, respectively.

11. ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS:

Statement of Financial Accounting Standards No. 107 "Disclosures About Fair
Value of Financial Instruments" (SFAS 107) requires the Company to disclose
fair value information for certain of its financial instruments, including
loans, securities, deposits, borrowings and other such instruments. Quoted
market prices are not available for a significant portion of the Company's
financial instruments and, as a result, the fair values presented may not be
indicative of net realizable or liquidation values. Fair values are estimates
derived using present value or other valuation techniques and are based on
judgments regarding future expected loss experience, current economic
conditions, risk characteristics and other factors. In addition, fair value
estimates are based on market conditions and information about the financial
instrument at a specific point in time. Fair value estimates are based on
existing on- and off-balance sheet financial instruments without attempting to
estimate the value of anticipated future business and the value of assets and
liabilities that are not considered financial instruments. Such items include
loan servicing, core deposit intangibles and other customer relationships,
premises and equipment, foreclosed real estate and income taxes. In addition,
the tax ramifications relating to the realization of the unrealized gains and
losses may have a significant effect on fair value estimates, and have not
been considered in the estimates.

The following is a summary of the methodologies and assumptions used to
estimate the fair value of the Company's financial instruments pursuant to
SFAS 107:

CASH, CASH EQUIVALENTS AND OTHER: The fair value of cash and due from banks,
federal funds sold, accrued interest receivable and accrued interest payable,
is considered to approximate the book value due to their short-term nature and
negligible credit losses.

SECURITIES: Securities classified as available-for-sale are carried at fair
value. Fair value for securities available for sale and held to maturity was
determined by secondary market and independent broker quotations.

LOANS: The fair values for loans are estimated using discounted cash flow
analyses, and interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality.

DEPOSIT LIABILITIES: The fair value for demand and savings deposits is equal
to the amount payable on demand at the balance sheet date which is equal to
the carrying value. The fair value of certificates of deposit was estimated by
discounting cash flows using rates currently offered by the Bank for deposits
of similar remaining maturities.

F-20

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The fair value information of the Company's financial instruments required
to be valued by SFAS 107 are as follows:

DECEMBER 31, DECEMBER 31,
1996 1995
------------------------- -------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
------------ ------------ ------------ ------------

FINANCIAL ASSETS
Cash and due from banks... $ 5,866,653 $ 5,866,653 $ 5,250,477 $ 5,250,477
Federal funds sold........ 13,000,000 13,000,000 4,800,000 4,800,000
Securities available for
sale..................... 11,523,795 11,523,795 6,642,123 6,642,123
Securities held to
maturity................. 3,062,478 3,055,997 4,116,443 4,104,322
Loans..................... 109,452,484 108,910,302 102,731,649 102,628,830
Accrued interest
receivable............... 823,471 823,471 877,330 877,330
FINANCIAL LIABILITIES
Deposits
Checking................. $ 36,135,966 $ 36,135,966 $ 33,353,027 $ 33,353,027
Savings.................. 69,277,894 69,277,894 71,026,141 71,026,141
Time deposits............ 38,902,289 39,078,984 23,982,300 24,046,909
U.S. Treasury Demand Note. 1,061,449 1,061,449 220,685 220,685
Accrued interest payable.. 621,609 621,609 298,076 298,076

12. PARENT COMPANY FINANCIAL INFORMATION:

First International Bancorp, Inc. is the parent company of First National
Bank of New England. There have been no loans extended from the Bank to First
International Bancorp, Inc. since inception of the holding company. First
Regional Investcorp, Inc. (Investcorp), a regional investment bank, was merged
into its parent in December 1994. The results of Investcorp's operations were
not material to the Company.

DECEMBER 31,
JUNE 30, -----------------------
1997 1996 1995
CONDENSED BALANCE SHEETS ----------- ----------- -----------
(UNAUDITED)

ASSETS
Cash on deposit with Bank subsidiary........ $ 31,047 $ 21,288 $ 190,753
Investment in the Bank...................... 15,964,424 14,194,288 11,410,871
----------- ----------- -----------
$15,995,471 $14,215,576 $11,601,624
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity........................ $15,995,471 $14,215,576 $11,601,624
----------- ----------- -----------
$15,995,471 $14,215,576 $11,601,624
=========== =========== ===========

F-21

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE SIX MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- ---------------------
CONDENSED STATEMENTS OF 1996 1995 1994 1997 1996
INCOME ---------- ---------- ---------- ---------- ----------
(UNAUDITED)

Dividends from Bank
subsidiary............. $ 415,000 $ 430,000 $ 100,000 $ 327,000 $ 125,000
Equity in undistributed
net income of the Bank. 2,829,336 1,596,229 958,019 1,726,043 1,500,398
Other, net.............. -- -- 1,921 -- --
---------- ---------- ---------- ---------- ----------
Net income.............. $3,244,336 $2,026,229 $1,059,940 $2,053,043 $1,625,398
========== ========== ========== ========== ==========

SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------- ----------------------
CONDENSED STATEMENTS OF CASH 1996 1995 1994 1997 1996
FLOWS ---------- ---------- ---------- ---------- ----------
(UNAUDITED)

Net income.................. $3,244,336 $2,026,229 $1,059,940 $2,053,043 $1,625,398
Adjustments to reconcile net
income to net cash provided
by operating activities:
Equity in undistributed
net income of
subsidiaries............. (2,829,336) (1,596,229) (958,375) (1,726,043) (1,500,398)
---------- ---------- ---------- ---------- ----------
Net cash provided by
operations:............ 415,000 430,000 101,565 327,000 125,000
Cash flows from investing
activities:
Return of capital from
Investcorp............... -- -- 22,342 -- --
Decrease in other
investments.............. -- -- 652 -- --
Increase in Bank
investment............... -- -- (250,000) -- --
---------- ---------- ---------- ---------- ----------
Net cash used in
investing activities... -- -- (227,006) -- --
---------- ---------- ---------- ---------- ----------
Cash flows from financing
activities:
Issuance of common stock.. 42,945 6,175 17,560 12,469 42,945
Repurchase of common
stock.................... (21,859) (108,742) (43,092) -- (1,469)
Dividend paid............. (658,262) (164,378) -- (329,710) (328,756)
Principal payment on
stockholder note
receivable............... 52,711 13,558 -- -- 26,356
---------- ---------- ---------- ---------- ----------
Net cash used in
financing activities... (584,465) (253,387) (25,532) (317,241) (260,924)
---------- ---------- ---------- ---------- ----------
Net increase (decrease)
in cash and cash
equivalents............ (169,465) 176,613 (150,973) 9,759 (135,924)
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents
beginning of year.......... 190,753 14,140 165,113 21,288 190,753
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents
end of year................ $ 21,288 $ 190,753 $ 14,140 $ 31,047 $ 54,829
========== ========== ========== ========== ==========

F-22

FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SUBSEQUENT EVENTS:

At the June 26, 1997 annual meeting of stockholders, a proposal to amend the
Company's Certificate of Incorporation to authorize 12,000,000 shares of
common stock and to establish a class of 2,000,000 shares of preferred stock
was approved. In addition, the Board of Directors was granted the power to
establish and designate the different series and voting powers, designations,
preferences and other rights, qualifications, limitations or restrictions to
be placed upon any shares of preferred stock to be issued by the Company. The
stockholders approved a 3.5-for-1 common stock split (see Note 1).

On June 26, 1997, the Company's Board authorized the filing of a
registration statement relating to a public offering of up to 2,000,000 shares
of common stock.

On July 21, 1997 the Board of Directors granted options to purchase 182,560
shares of common stock to certain officers under the Company's 1996 Stock
Option Plan. The options have a 10 year term and an option price of $8.50. The
options vest over various time periods ranging from two to four years. Also on
July 21, 1997, the Board of Directors granted options to purchase 40,000
shares of common stock to non-employee directors at an option price of $8.50.
Such options will vest upon completion of the planned public offering
discussed above.

F-23

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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE IN THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY
ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY
THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH AN
OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.

UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECU-
RITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DE-
LIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UN-
SOLD ALLOTMENTS OR SUBSCRIPTIONS.

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TABLE OF CONTENTS

PAGE
----

Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
Use of Proceeds........................................................... 14
Dividend Policy........................................................... 14
Dilution.................................................................. 15
Capitalization............................................................ 16
Selected Consolidated Financial Data...................................... 17
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 20
Business.................................................................. 43
Regulation and Supervision................................................ 62
Management................................................................ 67
Certain Transactions...................................................... 74
Principal Stockholders.................................................... 75
Description of Capital Stock.............................................. 77
Shares Eligible for Future Sale........................................... 79
Underwriting.............................................................. 81
Legal Matters............................................................. 82
Experts................................................................... 82
Additional Information.................................................... 82
Annual and Quarterly Reports.............................................. 83
Index to Consolidated Financial Statements................................ F-1

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1,700,000 Shares

LOGO

Common Stock
---------------
PROSPECTUS
---------------

PRUDENTIAL SECURITIES INCORPORATED

KEEFE, BRUYETTE & WOODS, INC.

, 1997

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered, other than the underwriting discount, are
estimated as follows:

TOTAL
--------

SEC Registration Fee............................................. $ 7,750
NASD Fees........................................................ 2,846
NASDAQ Listing Fees.............................................. 36,186
Printing and Engraving Expenses.................................. 125,000
Legal Fees and Expenses.......................................... 175,000
Accountants' Fees and Expenses................................... 100,000
Expenses of Qualification Under State Securities Laws, Including
Attorneys' Fees................................................. 4,500
Transfer Agent and Registrar's Fees.............................. 5,000
Miscellaneous Costs.............................................. 143,718
--------
Total.......................................................... $600,000
========

ITEM 14. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES

Section 145 of the Delaware General Corporation law empowers a Delaware
corporation to indemnify its officers and directors and certain other persons
to the extent and under the circumstances set forth therein.

The Amended and Restated Certificate of Incorporation of the Company and the
Amended and Restated By-laws of the Company, copies of which are filed as
Exhibits 3.1 and 3.2, provide for indemnification of officers and directors of
the Company and certain other persons against liabilities and expenses
incurred by any of them in certain stated proceedings and under certain stated
conditions.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

On June 30, 1994, the Registrant issued 175,600 shares (614,600 shares as
adjusted for the 3.5 for 1 stock split effected by the Company in August 1997)
of Common Stock to Brett N. Silvers, Chairman of the Board and President of
the Registrant, for an aggregate consideration of $17,560 in cash and a
promissory note in the principal amount of $1,020,236.

The Registrant has, from time to time, issued an aggregate of 11,200 shares
(39,200 shares as adjusted for the 3.5-for-1 stock split effected by the
Registrant in August 1997) of restricted Common Stock to various employees
upon the exercise of options granted pursuant to the Company's 1994 Incentive
Stock Option Plan for aggregate consideration of $74,821.50 at an average
exercise price of $6.68 per share ($1.91 per share as adjusted for the 3.5-
for-1 stock split effected by the Registrant in August 1997).

II-1

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following is a list of exhibits filed as a part of this registration
statement:

EXHIBITS
--------

1.1 Form of Underwriting Agreement.
*3.1 Amended and Restated Certificate of Incorporation of the Registrant.
*3.2 Amended and Restated By-laws of the Registrant.
*4.1 Specimen Common Stock Certificate.
*5 Opinion of Bingham, Dana & Gould LLP with respect to the legality of
the shares being registered.
*10.1 Employment Agreement among Registrant, First National Bank of New
England (the "Bank") and Brett N. Silvers; as amended by Letter
Agreement, dated July 7, 1997.
*10.2 Promissory Note of Brett N. Silvers, payable to the Registrant, dated
June 30, 1994, as amended.
*10.3 Stock Pledge Agreement, dated June 30, 1994, between the Registrant
and Brett N. Silvers, as amended.
*10.4 Amended and Restated 1996 Stock Option Plan.
*10.5 1994 Incentive Stock Option Plan, as amended.
*10.6 401(k) Plan.
*10.7 Lease between Cambridge One Commercial Plaza, LLC and the Bank.
*10.8 Employment Agreement between the Bank and Brian J. Charlebois, dated
as of August 25, 1997.
*10.9 Employment Agreement between the Bank and Leslie A. Galbraith, dated
as of August 25, 1997.
*11.1 Computation of Income Per Share.
*21.1 Subsidiaries of Registrant.
23.1 Consent of Coopers & Lybrand L.L.P.
*23.2 Consent of Bingham, Dana & Gould LLP, counsel to Registrant (included
in Exhibit 5).
*24.1 Power of Attorney (included in signature page to Registration
Statement).
*27 Financial Data Schedule.

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* Previously filed.

(b) All other schedules have been omitted because either they are not
required, are not applicable, or the information is otherwise set forth in the
Consolidated Financial Statements and notes thereto.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 hereof, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.

II-2

The undersigned Registrant hereby undertakes:

(1) To provide the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriter to permit prompt delivery to each
purchaser.

(2) That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.

(3) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

II-3

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT,
FIRST INTERNATIONAL BANCORP, INC., HAS DULY CAUSED THIS AMENDMENT NO. 4 TO THE
REGISTRATION STATEMENT ON FORM S-1 TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HARTFORD, STATE OF
CONNECTICUT, ON THIS 22ND DAY OF SEPTEMBER, 1997.

First International Bancorp, Inc.

/s/ Brett N. Silvers
By: _________________________________
BRETT N. SILVERS
CHAIRMAN OF THE BOARD AND
PRESIDENT

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 4 TO THE REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:

SIGNATURE TITLE DATE

/s/ Brett N. Silvers Chairman of the
_____________________________________ Board and President September 22,
BRETT N. SILVERS 1997

Michael R. Carter* Director
_____________________________________ September 22,
MICHAEL R. CARTER 1997

Arnold L. Chase* Director
_____________________________________ September 22,
ARNOLD L. CHASE 1997

Cheryl A. Chase* Director
_____________________________________ September 22,
CHERYL A. CHASE 1997

Frank P. Longobardi* Director
_____________________________________ September 22,
FRANK P. LONGOBARDI 1997

Bernard M. Waldman* Director
_____________________________________ September 22,
BERNARD M. WALDMAN 1997

/s/ Leslie A. Galbraith Executive Vice
_____________________________________ President, September 22,
LESLIE A. GALBRAITH Secretary and 1997
Treasurer

/s/ Brett N. Silvers
*By: ________________________________
BRETT N. SILVERS
ATTORNEY-IN-FACT

II-4

EXHIBIT INDEX

EXHIBIT
NO. DESCRIPTION
------- -----------

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* Previously filed.