AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 4, 1999
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM SB-2

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
------------------------

WESTBOROUGH FINANCIAL SERVICES, INC.
(Name of small business issuer in its charter)
------------------------

MASSACHUSETTS 6035 APPLICATION PENDING
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Identification No.)
Code Number)

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

100 E. MAIN STREET WESTBOROUGH, MA 01581
(508) 366-4111
(Address and telephone number of principal executive offices)
(Address of principal place of business or intended principal place of business)

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

MR. JOSEPH F. MACDONOUGH
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WESTBOROUGH SAVINGS BANK
100 E. MAIN STREET
WESTBOROUGH, MA 01581
(508) 366-4111
COPY TO:

RICHARD A. SCHABERG, ESQ.
THACHER PROFFITT & WOOD
1700 PENNSYLVANIA AVENUE, N.W. SUITE 800
WASHINGTON, D.C. 20006
(202) 347-8400

(Name and address, and telephone of agent for service)

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after this Registration Statement becomes effective.
------------------------

CALCULATION OF REGISTRATION FEE

TITLE OF EACH CLASS OF PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE PROPOSED MAXIMUM OFFERING AGGREGATE OFFERING PRICE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PRICE PER SHARE (2) (2) REGISTRATION FEE

Common Stock, $0.01 par value 925,750 $10.00 $9,257,500 $2,574

(1) Includes the maximum number of shares that may be issued in connection with
this offering.

(2) Estimated solely for the purpose of calculating the registration fee.

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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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

WESTBOROUGH FINANCIAL SERVICES, INC.
------------------------

CROSS REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM SB-2

REGISTRATION STATEMENT ITEM AND CAPTION LOCATION OR HEADINGS IN PROSPECTUS
- ----------------------------------------------------- ------------------------------------------
1. Front of Registration Statement and Outside Front Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information and Risk Factors Summary; Risk Factors
4. Use of Proceeds How We Intend to Use the Proceeds From the
Offering
5. Determination of Offering Price The Reorganization and the Offering--How
We Determined the Offering Range and the
$10.00 Price Per Share
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Outside Front Cover Page; The
Reorganization and the Offering
9. Legal Proceedings Legal Proceedings
10. Directors, Executive Officers, Promoters Management
and Control Persons
11. Security Ownership of Certain Beneficial Management
Owners and Management
12. Description of Securities Description of Capital Stock of
Westborough Financial Services, Inc.
13. Interest of Named Experts and Counsel Not Applicable
14. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
15. Organization Within Last Five Years Not Applicable
16. Description of Business Summary; Risk Factors; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business of Westborough Savings Bank;
Business of Westborough Financial
Services, Inc.; Management; Consolidated
Financial Statements
17. Management's Discussion and Analysis or Management's Discussion and Analysis of
Plan Financial Condition and Results of
Operations
18. Description of Property Business of Westborough Savings Bank--
Properties
19. Certain Relationships and Related Management--Certain Transactions with
Transactions Directors/Trustees and Executive Officers
20. Market for Common Equity and Related Front Cover Page; Summary--Market for the
Stockholder Matters Common Stock; Risk Factors--The market for
common stock will be limited; Market for
the Common Stock
21. Executive Compensation Management
22. Financial Statements Consolidated Financial Statements
23. Changes in and Disagreements With Not Applicable
Accountants on Accounting and Financial
Disclosure

PROSPECTUS
[LOGO]

WESTBOROUGH FINANCIAL SERVICES, INC.
PROPOSED HOLDING COMPANY FOR THE WESTBOROUGH BANK
UP TO 925,750 SHARES OF COMMON STOCK

estborough Financial Services, Inc. is a new corporation that is
offering shares of its common stock. The shares we are offering
represent less than half of the outstanding common stock of Westborough
Financial Services. Westborough Savings Bank, to be
W
renamed The Westborough Bank, formed Westborough Financial Services to own
Westborough Bank as part of a reorganization of our structure. As used in this
prospectus, the term "Westborough Savings" refers to the mutual savings bank
prior to the reorganization, and the term "Westborough Bank" refers to the stock
bank formed as a result of the reorganization. More than half of the outstanding
common stock of Westborough Financial Services will be owned by Westborough
Bancorp, MHC, a mutual holding company. The common stock of Westborough
Financial Services will be listed for trading on the OTC Bulletin Board under
the symbol "WFSI."

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

TERMS OF THE OFFERING
PRICE: $10.00 PER SHARE

MINIMUM MAXIMUM
------------ ------------

Number of shares................................................................... 595,000 805,000
Underwriting commissions and expenses.............................................. $ 98,230 $ 136,870
Net proceeds to Westborough Financial Services..................................... $ 5,445,990 $ 7,507,350
Net proceeds per share to Westborough Financial Services........................... $ 9.15 $ 9.33

WE MAY SELL UP TO 925,750 SHARES BECAUSE OF REGULATORY
CONSIDERATIONS OR CHANGES IN MARKET OR ECONOMIC CONDITIONS.

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

PLEASE READ THE RISK FACTORS BEGINNING ON PAGE 11.

These securities are not deposits or accounts and are not insured or guaranteed
by the Federal Deposit Insurance Corporation, the Depositors Insurance Fund or
any other governmental agency.

Neither the Securities and Exchange Commission, the Federal Deposit Insurance
Corporation, the Commissioner of Banks of the Commonwealth of Massachusetts nor
any state securities regulator has approved or disapproved these securities or
determined if this prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.

TRIDENT SECURITIES, INC.
[ ], 1999

[MAP OF THE WESTBOROUGH BANK BRANCH OFFICES]

SUMMARY

To more fully understand the offering, you should read this entire document
carefully, including the consolidated financial statements and the notes to the
consolidated financial statements.

OUR REORGANIZATION AND STOCK OFFERING

Westborough Savings is reorganizing into the mutual holding company
structure. As part of the reorganization, Westborough Financial Services is
offering shares of its common stock to the public. After the reorganization,
Westborough Financial Services will own Westborough Savings, which will be
renamed "The Westborough Bank."

THE COMPANIES

WESTBOROUGH SAVINGS BANK

Westborough Savings is a Massachusetts-chartered mutual savings bank. Our
mission is to serve as a community-oriented provider of traditional banking and
other financial services to individuals and small business organizations,
including residential and commercial real estate mortgages, consumer and
commercial loans and deposit instruments.

Westborough Savings has five full service branches located in the towns of
Westborough, Northborough and Shrewsbury, Massachusetts. We also operate a
non-public, self-contained office at the "Willows," a retirement community
located in Westborough. At March 31, 1999, we had assets of $167.5 million,
deposits of $143.0 million and equity of $19.6 million.

WESTBOROUGH FINANCIAL SERVICES, INC.

Westborough Financial Services will be the holding company for The
Westborough Bank after the reorganization. Westborough Financial Services has
not engaged in any business to date.

WESTBOROUGH BANCORP, MHC

Westborough Bancorp, MHC will own more than half of the outstanding common
stock of Westborough Financial Services after the reorganization. We do not
expect that Westborough Bancorp, MHC will engage in any business activity other
than owning a majority of the common stock of Westborough Financial Services.
Westborough Bancorp, MHC has not engaged in any business to date.

THE FOLLOWING ARE HIGHLIGHTS OF WESTBOROUGH SAVINGS' OPERATING STRATEGY:

- COMMUNITY BANKING.

Westborough Savings strives to remain a leader in meeting the financial
service needs of the local community and to provide quality service to the
individuals and small businesses in its market area.

- RESIDENTIAL LENDING.

Westborough Savings originates residential first mortgages, and at March
31, 1999, we had $78.6 million of residential first mortgage loans,
representing 88.7% of our total loan portfolio. We originate substantially
all of these loans for our own portfolio, rather than for sale, and we
service the loans we originate.

- CAPITAL STRENGTH AND PROFITABILITY.

Our policy has always been to maintain the financial strength of
Westborough Savings through conservative risk management, a sound financial
condition and consistent earnings. At March 31,

1999, our ratio of equity to assets was 11.71%, and for the six months
ended March 31, 1999 our return on average assets was 1.02% and our return
on average equity was 8.43%.

- ASSET QUALITY.

Through our commitment to residential lending, we have had low levels of
losses on loans and late payments. At March 31, 1999, we had no
non-performing assets, and our ratio of allowance for loan losses to total
loans before the allowance for loan losses was 0.98%. These ratios are
favorable compared to those of other savings institutions.

- INVESTMENT IN FACILITIES AND TECHNOLOGY.

We intend to significantly expand our facilities and technological
capabilities to better serve our customer and communities by utilizing
alternative delivery channels. We will continue to employ and expand the
use of automatic teller machines ("ATMs"), 24 hour telephone banking and
electronic fund transfer services, and intend to introduce Internet online
banking and online bill payment services. We also plan to renovate and
expand our main office to allow our executive and administrative functions
to be performed in a single facility.

- BRANCH EXPANSION.

We believe that a well positioned branch network is critical to maintaining
market share in the traditional community banking and small business
arenas. Our three year Business Plan contemplates the establishment or
acquisition of one or more branch locations in our market area.

- EXPANSION OF PRODUCT LINES.

We are making a commitment to small business lending as a natural outgrowth
of our more traditional community banking services. We are also planning to
expand our offering of non-traditional financial products, such as
insurance and annuities, either directly or through affiliates and to
introduce other financial services, such as fiduciary services, to better
position us as a full service financial institution.

DESCRIPTION OF OUR STRUCTURE AFTER THE REORGANIZATION

This chart shows our new structure, which is commonly referred to as a
mutual holding company structure, after the reorganization:

[LOGO]

PERSONS WHO CAN ORDER STOCK IN THE OFFERING

We are offering the shares of common stock of Westborough Financial Services
in what we call a "subscription offering" in the order of priority listed below:

(1) Depositors with accounts at Westborough Savings with total balances of
at least $50 on December 31, 1997;

(2) Our employee stock ownership plan, which will provide retirement
benefits to our employees; and

(3) Depositors with accounts at Westborough Savings with total balances of
at least $50 on December 31, 1998.

The shares of common stock not purchased in the subscription offering will
be offered in what we call a "community offering" to the residents of the towns
of Grafton, Hopkinton, Northborough, Shrewsbury, Southborough and Westborough,
Massachusetts. We also may offer shares of common stock not purchased in either
the subscription offering or community offering to the public through a selling
group of brokers on a best efforts basis.

TERMS OF THE OFFERING

We are offering between 595,000 and 805,000 shares of common stock of
Westborough Financial Services to the public. The number of shares we sell in
the offering may increase by 15% to 925,750 shares as a result of regulatory
considerations or changes in financial markets. If we increase the number of
shares we issue, you will not have the opportunity to change or cancel your
stock order. The offering price is $10.00 per share. Trident Securities will use
its best efforts to assist us in selling our stock.

HOW WE DETERMINED THE OFFERING RANGE AND THE $10.00 PRICE PER SHARE

The offering range is based on an independent appraisal of Westborough
Savings by RP Financial, LC., an appraisal firm experienced in appraisals of
savings institutions. RP Financial has estimated that our market value at May
21, 1999, is between $17.0 million and $23.0 million. This results in an
offering of between 595,000 and 805,000 shares of stock at an offering price of
$10.00 per share because we are only offering 35% of our stock to the public. RP
Financial's estimate of our market value was based in part upon our financial
condition and results of operations and the effect of the additional capital
raised in this offering. RP Financial's independent appraisal will be updated
before we complete our reorganization.

Two of the factors that RP Financial considered in determining our market
value were the price-to-book ratio and the price-to-earnings ratio or P/E ratio.
The price-to-book ratio represents the price per share of stock divided by its
book value per share. After completion of the reorganization, each share of
Westborough Financial Services common stock, including the shares we issue to
Westborough Bancorp, MHC, will have a book value of $12.58, assuming we sell
700,000 shares in the minority offering. This means that the price you pay for
each share in this offering will be 79.49% of the book value.

The P/E ratio represents the price per share of stock divided by earnings or
net income per share. In our case, for 1998, our P/E ratio would have been
14.9x, assuming that we sold 700,000 shares in the minority offering. Each of
the price-to-book ratio and the P/E ratio were calculated using information
contained in Westborough Bank's pro forma financial data.

The $10.00 price per share was determined by our Board of Trustees based
upon a number of factors, including the fact that $10.00 is the price per share
most commonly used in stock offerings involving reorganizations of savings
institutions.

LIMITS ON YOUR PURCHASE OF THE COMMON STOCK

Your orders for common stock will be limited in the following ways:

(1) the minimum order is 25 shares;

(2) in the subscription offering, the maximum amount that an individual with
his or her associates may purchase is $100,000;

(3) in the community offering, the maximum amount that an individual with
his or her associates may purchase is $100,000; and

(4) if we receive orders for a greater number of shares than we are
offering, then we will allocate the shares that we issue as described in
"The Reorganization and The Offering--Limitations on Common Stock
Purchases;" this may result in your receiving a smaller number of shares
than you ordered.

We may increase the $100,000 purchase limitation if we do not receive orders
for at least 595,000 shares. For additional information on these purchase
limitations see "The Reorganization and The Offering--Limitations on Common
Stock Purchases."

HOW YOU MAY PAY FOR YOUR SHARES

In the subscription offering and the community offering you may pay for your
shares only by:

(1) personal check, official bank check, money order or cash, if delivered
in person; or

(2) authorizing us to withdraw money from your deposit accounts maintained
with Westborough Savings.

YOU MAY NOT SELL OR TRANSFER YOUR SUBSCRIPTION RIGHTS

If you order stock in the subscription offering, you will be required to
state that you are purchasing the stock for yourself and that you have no
agreement or understanding to sell or transfer your rights. We intend to take
legal action against anyone who sells or gives away their subscription rights.
We will not accept your order if we have reason to believe that you sold or
transferred your subscription rights.

DEADLINE FOR ORDERS OF COMMON STOCK

If you wish to purchase shares, you must submit a properly completed stock
order form, together with payment for the shares, to the Stock Information
Center by 12:00 noon, Eastern Time, on , 1999, unless we extend this
deadline. You must submit your order forms by mail, overnight courier or by
dropping off your order form at any of our branch offices.

TERMINATION OF THE OFFERING

The subscription offering will terminate at 12:00 noon, Eastern Time, on
, 1999. We expect that the community offering will terminate at the same
time. We may extend this expiration date without notice to you, until ,
1999, unless regulators approve a later date. All further extensions, in the
aggregate, may not last beyond .

MARKET FOR THE COMMON STOCK

We expect the common stock to trade on the OTC Bulletin Board under the
symbol "WFSI." Trident Securities intends to make a market in the common stock
but it is under no obligation to do so.

HOW WE INTEND TO USE THE PROCEEDS WE RAISE FROM THE OFFERING

Assuming we sell 805,000 shares in the subscription offering, we intend to
distribute the net proceeds from the offering as follows:

- $3.8 million will be contributed to Westborough Bank;

- $644 thousand will be loaned to the employee stock ownership plan of
Westborough Bank to fund its purchase of common stock; and

- $3.1 million will be retained by Westborough Financial Services;

Westborough Financial Services may use the net proceeds retained from the
offering as a possible source of funds to invest in securities, to finance the
possible acquisition of other financial institutions or other businesses that
are related to banking, to repurchase common stock or to pay dividends and for
other general corporate purposes. Westborough Bank may use the proceeds it
receives to support the expansion of its lending activities and to expand its
operations through the establishment or acquisition of one or more additional
branch offices in its market area and the expansion and renovation of its main
office.

OUR POLICY REGARDING DIVIDENDS

Initially, we do not intend to pay dividends on the common stock. Any
decision to pay dividends in the future, including with respect to the amount
and timing of such dividends, will depend on number of factors. Such factors
include, among others:

- our financial condition;

- our results of operation;

- tax considerations;

- industry standards;

- general economic conditions; and

- regulatory restrictions that affect the payment of dividends by
Westborough Bank to Westborough Financial Services.

We do not guarantee that we will pay dividends, or that, if paid, we will not
reduce or eliminate dividends in the future.

OUR DIRECTORS, OFFICERS AND EMPLOYEES WILL HAVE ADDITIONAL COMPENSATION AND
BENEFIT PROGRAMS AFTER THE REORGANIZATION

We are adding a new benefit plan for our officers and employees at no cost
to them:

- EMPLOYEE STOCK OWNERSHIP PLAN. This retirement plan will cover most of our
employees. We will lend it money to buy up to 8% of the shares we sell in
the offering. It will buy them either in the offering or in the open
market. The plan will allocate the stock to employees over a period of at
least ten years as additional compensation for their services.

We are also adding the following termination pay arrangements:

- EMPLOYMENT AGREEMENTS. We are entering into employment agreements with Mr.
Joseph F. MacDonough, our President and Chief Executive Officer, and Mr.
John L. Casagrande, our Vice President and Treasurer. If we discharge one
of them without cause, if one of them resigns because we do not meet our
obligations under these agreements or following a change in control of
Westborough Financial Services, Inc., we must make a termination payment.

We also plan to add the following stock-based benefit plans for our
directors, officers and employees:

- STOCK OPTION PLAN. Under this plan, we may grant our officers, directors
and employees options to purchase our stock at a price that is set on the
date we grant the option. The price that we set cannot be less than our
stock's trading price when we grant the options, so the options will have
value only if our stock price increases. Recipients of options will have
up to ten years to exercise their options.

- MANAGEMENT RECOGNITION PLAN. This plan will allow selected officers,
directors and employees to receive shares of our stock, without making any
payment at all, if they work for us until the end of a specified service
period.

We will not implement a stock option plan or management recognition plan
unless our stockholders approve them. We do not expect to ask our stockholders
to approve these plans until at least six months after we complete the offering.
We expect to obtain the shares we would need for these plans through open market
stock purchases or from authorized but unissued shares.

The following table presents the dollar value of the shares that we expect
to grant under the employee stock ownership plan and the contemplated management
recognition plan and of those to be granted under the stock option plan, and the
percentage of Westborough Financial Services' outstanding common stock that will
be represented by these shares. We based the value of the shares for the
employee stock ownership plan and management recognition plan on a price of
$10.00 per share and the issuance of 805,000 shares of common stock.

VALUE OF PERCENTAGE OF
SHARES COMMON STOCK SOLD
BENEFIT PLAN GRANTED IN THE OFFERING
- ----------------------------------------------------------- ------------- -------------------

(IN THOUSANDS)
Employee stock ownership plan.............................. $ 644,000 8%
Stock option plan.......................................... -- 10%
Management recognition plan................................ $ 322,000 4%

POSSIBLE CONVERSION OF WESTBOROUGH BANCORP, MHC TO STOCK FORM

In the future, Westborough Bancorp, MHC will have authority to convert from
the mutual to capital stock form, in a transaction commonly known as a
"second-step conversion." If Westborough Bancorp, MHC were to undertake a
second-step conversion, Westborough Financial Services' public stockholders
would own approximately the same percentage of the resulting entity as they
owned prior to the second-step conversion. This percentage would be adjusted to
reflect the assets owned by Westborough Bancorp, MHC and any dividends waived by
Westborough Bancorp, MHC. The Board of Trustees has no current plan to undertake
a "second-step conversion" transaction and, under current regulatory
restrictions, may not do so for a period of three years following the
reorganization absent compelling and valid business reasons established to the
satisfaction of the Commissioner of the Massachusetts Division of Banks. For a
description of this possible second-step conversion, see "The Reorganization and
The Offering--Possible Conversion of Westborough Bancorp, MHC to Stock Form."

HOW YOU MAY OBTAIN ADDITIONAL INFORMATION REGARDING THE OFFERING

If you have any questions regarding the offering or the reorganization,
please call the Stock Information Center at (508) .

RISK FACTORS

YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK FACTORS BEFORE DECIDING
WHETHER TO INVEST IN OUR COMMON STOCK.

AFTER THE REORGANIZATION OUR RETURN ON AVERAGE EQUITY WILL BE LOW COMPARED TO
OTHER COMPANIES.
THIS COULD HURT THE PRICE OF OUR COMMON STOCK.

We will not be able to deploy the increased capital from this offering into
earning assets immediately. Our ability to profitably leverage our new capital
will be significantly affected by industry competition for loans and deposits.
Also, we intend to make significant investments in non-earning assets such as
facilities and technology. Initially, we intend to invest the net proceeds in
short-term investments which generally have lower yields than loans. This will
reduce our return on average equity to a level that will be lower than our
historical ratios. For the six months ended March 31, 1999, our return on
average equity was 8.43%. Until we can leverage our increased capital and grow
interest earning assets, we expect our return on equity to be below the industry
average, which may negatively impact the value of your stock.

OUR LOANS ARE CONCENTRATED IN A SMALL GEOGRAPHIC AREA.

Our loan portfolio is primarily secured by real estate located in the towns
of Westborough, Northborough, Shrewsbury and Grafton, Massachusetts.
Accordingly, the asset quality of our loan portfolio is largely dependent upon
the economy and unemployment rate in this area. A downturn in the economy in our
primary lending area would likely adversely affect our operations and
profitability.

WE MAY NOT SUCCESSFULLY EXPAND AND GROW.

Our future will depend on the success of increasing our loan portfolio,
developing a commercial loan expertise, developing new product lines and opening
new branches. Our ability to originate small business loans and expand product
lines will depend on market conditions in our primary market area. Small
business loans, however, are new to us and involve a higher degree of risk than
one-to four-family residential mortgage loans. As the volume of small business
loans in our loan portfolio increases, the corresponding risks and potential for
losses from these activities will also increase. The success of the branching
opportunities will, in turn, depend on our ability to integrate new branches
into our current operations and our success in attracting customers and a
sufficient amount of deposits to make the new branches profitable.

RISING INTEREST RATES MAY HURT OUR PROFITS.

To be profitable, we have to earn more money in interest and fees than we
pay as interest and other expenses. Of our total loan portfolio, 61.15% are
residential mortgage loans that have interest rates fixed for the term of the
loan. We originate loans with terms of up to 30 years, while 27.45% of our
deposit accounts consist of certificate of deposit accounts with remaining terms
to maturity of one year or less. If interest rates rise, the amount of interest
we pay on deposits is likely to increase more quickly than the amount of
interest we receive on our loans, mortgage-backed securities and investment
securities. This would cause our profits to decrease. Rising interest rates may
also reduce the value of our mortgage-backed securities and investment
securities. For additional information on our exposure to interest rates, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Management of Interest Rate Risk."

THE MARKET FOR COMMON STOCK WILL BE LIMITED.

Due to the small size of the offering, it is highly unlikely that an active
trading market for our stock will develop and be maintained. If an active market
does not develop, you may not be able to sell

your shares promptly or perhaps at all, or sell your shares at a price equal to
or above the price you paid for them. The common stock may not be appropriate as
a short-term investment.

WESTBOROUGH BANCORP, MHC'S VOTING CONTROL OVER WESTBOROUGH FINANCIAL SERVICES
MAY PREVENT TRANSACTIONS YOU WOULD LIKE.

Westborough Bancorp, MHC will own a majority of Westborough Financial
Services' common stock after the reorganization. Westborough Bancorp, MHC will
be managed by the same trustees/ directors and officers who manage Westborough
Savings. The Board of Trustees of Westborough Bancorp, MHC will control the
outcome of most matters put to a vote of stockholders of Westborough Financial
Services. We cannot assure you that the votes cast by Westborough Bancorp, MHC
will be in your personal best interests as a stockholder. For more information
regarding your lack of voting control over Westborough Financial Services, see
"Westborough Bancorp, MHC" and "Restrictions on Acquisition of Westborough
Financial Services and The Westborough Bank."

OUR INTENT TO REMAIN INDEPENDENT MAY NOT SUIT YOUR INVESTMENT OBJECTIVES.

Westborough Savings has operated as an independent community-oriented
savings institution since 1869. We intend to continue to operate as an
independent community-oriented savings institution following the reorganization.
Westborough Bank and Westborough Financial Services will be controlled by
Westborough Bancorp, MHC, and we have no current plans to alter this mutual
holding company structure in the future. ACCORDINGLY, YOU ARE URGED NOT TO
SUBSCRIBE FOR SHARES OF COMMON STOCK IF YOU ARE ANTICIPATING A SALE OF
WESTBOROUGH BANK OR WESTBOROUGH FINANCIAL SERVICES.

THE IMPLEMENTATION OF STOCK-BASED BENEFITS WILL INCREASE OUR FUTURE COMPENSATION
EXPENSE AND REDUCE OUR EARNINGS.

We intend to adopt a stock option plan that will provide for the granting of
options to purchase common stock, to adopt a management recognition plan that
will provide for awards of common stock to our eligible officers, employees and
directors and to have an employee stock ownership plan which will purchase
shares in the reorganization. These plans will increase our future costs of
compensating our directors and employees and reduce our earnings. The cost of
these plans will vary based on our stock price.

STRONG COMPETITION WITHIN OUR MARKET AREA MAY REDUCE OUR CUSTOMER BASE.

Competition in the banking and financial services industry is intense. We
have competed for customers by offering excellent service and competitive rates
on our loans and deposit products. We compete with commercial banks, savings
institutions, mortgage banking firms, credit unions, finance companies, mutual
funds, insurance companies, and brokerage and investment banking firms. Some of
these competitors have greater resources than we do and may offer services that
we do not provide. Our profitability depends upon our continued ability to
successfully compete in our market area.

THE YEAR 2000 PROBLEM COULD HURT OUR OPERATIONS AND OUR PROFITS AND COULD LOWER
THE VALUE OF YOUR STOCK.

We rely upon computers to conduct our daily business. Failure of any of our
computer systems, those of the parties we do business with or the public
infrastructure, including the electric and telephone companies, to process in
the new year may disrupt our ability to do routine business and to service our
customers. For example, we may not be able to process withdrawals or deposits,
prepare account statements or engage in any of the transactions that constitute
our normal operations. This could hurt our profits. For additional information
regarding the "Year 2000 Problem," see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Issues for the Year 2000."

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The summary information presented below at or for each of the years
presented is derived in part from the consolidated financial statements of
Westborough Savings. The following information is only a summary, and you should
read it in conjunction with our consolidated financial statements and notes
beginning on page F-1.

AT SEPTEMBER 30,
AT MARCH 31, ----------------------------------
1999 1998 1997 1996
------------ ---------- ---------- ----------

(IN THOUSANDS)
SELECTED FINANCIAL DATA:
Total assets................................................... $ 167,531 $ 158,523 $ 143,896 $ 140,218
Loans, net(1).................................................. 86,352 82,348 70,580 65,243
Investment securities (2)...................................... 63,967 60,107 61,654 62,743
Total deposits................................................. 142,971 135,962 125,170 120,282
Federal Home Loan Bank advances................................ 4,000 2,000 -- 3,000
Total surplus.................................................. 19,611 19,367 17,447 15,789
Allowance for loan losses...................................... 857 827 786 690
Non-accrual loans.............................................. -- -- -- --
Non-performing assets.......................................... -- 74 19 144

FOR THE SIX MONTHS
FOR THE YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
-------------------- -------------------------------

1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------

(IN THOUSANDS)

SELECTED OPERATING DATA:
Interest and dividend income..................................... $ 5,179 $ 4,952 $ 9,933 $ 9,461 $ 8,711
Total interest expense........................................... 2,429 2,272 4,557 4,426 4,037
--------- --------- --------- --------- ---------
Net interest and dividend income................................. 2,750 2,680 5,376 5,035 4,674
Provision for loan losses........................................ 25 20 39 96 105
--------- --------- --------- --------- ---------
Net interest and dividend income after provision for loan
losses......................................................... 2,725 2,660 5,337 4,939 4,569
Total other income............................................... 630 195 383 608 454
Total operating expense.......................................... 2,118 1,728 3,657 3,563 3,145
--------- --------- --------- --------- ---------
Income before income taxes....................................... 1,237 1,127 2,063 1,984 1,878
Provision for income taxes....................................... 413 413 750 676 695
--------- --------- --------- --------- ---------
Net income....................................................... $ 824 $ 714 $ 1,313 $ 1,308 $ 1,183
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

(FOOTNOTES ON NEXT PAGE)

AT OR FOR THE
SIX MONTHS ENDED AT OR FOR THE YEAR ENDED
MARCH 31, SEPTEMBER 30,
-------------------- -------------------------------

1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------

(IN THOUSANDS)

SELECTED FINANCIAL RATIOS AND OTHER DATA(3)
PERFORMANCE RATIOS:
Return on average assets..................................... 1.02% 0.97% 0.88% 0.93% 0.91%
Return on average equity..................................... 8.43 8.07 7.25 8.06 7.81
Average equity to average assets............................. 12.16 12.04 12.16 11.58 11.62
Equity to total assets at end of period...................... 11.71 12.20 12.22 12.12 11.26
Average interest rate spread................................. 2.97 3.24 3.20 3.24 3.25
Net interest margin(4)....................................... 3.55 3.80 3.76 3.74 3.74
Average interest earning assets to average interest bearing
liabilities................................................ 118.23 117.33 117.84 115.60 115.12
Total operating expense to average assets.................... 2.63 2.35 2.46 2.54 2.41
Efficiency ratio(5).......................................... 62.66 60.10 63.50 63.14 61.33
REGULATORY CAPITAL RATIOS:
Regulatory tier 1 leverage capital........................... 11.70 11.90 12.00 11.90 11.60
Tier 1 risk-based capital.................................... 21.50 24.00 21.80 22.90 26.10
Total risk-based capital..................................... 22.50 25.01 22.70 24.00 27.20
ASSET QUALITY RATIOS:
Non-performing loans as a percent of loans................... -- -- -- -- --
Non-performing assets as a percent of total assets........... -- -- 0.05 0.01 0.10
Allowance for loan losses as a percent of total loans before
the allowance for loan losses.............................. 0.98 1.06 0.99 1.10 1.05
NUMBER OF:
Full-service offices(6)...................................... 4 4 4 4 3
Full-time equivalent employees............................... 56 51 53 51 50

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

(1) Loans are shown net of deferred loan costs (fees), allowance for loan loss
and unadvanced loan funds.

(2) Includes Federal Home Loan Bank of Boston stock.

(3) Asset Quality Ratios and Regulatory Capital Ratios are end of period ratios.
Ratios for the period at or for the six months ended March 31 are
annualized.

(4) Net interest margin represents net interest income as a percentage of
average interest earning assets.

(5) The efficiency ratio represents the ratio of operating expenses divided by
the sum of net interest and dividend income and other income.

(6) The number of full-service offices shown at March 1999 does not include our
branch at the Willows or our new branch which opened in May 1999 and is
located in the Shaw's supermarket in Shrewsbury, Massachusetts.

WESTBOROUGH SAVINGS BANK

Westborough Savings is a Massachusetts-chartered mutual savings bank,
chartered in 1869. Westborough Savings is headquartered in Westborough,
Massachusetts, which is located 12 miles east of Worcester and 29 miles west of
Boston, Massachusetts. Our deposits are insured by the FDIC and the Depositors
Insurance Fund. We are examined and regulated by the Division of Banks of the
Commonwealth of Massachusetts and the FDIC. Westborough Savings Bank's executive
offices are located at 100 E. Main Street, Westborough, Massachusetts 01581 and
its telephone number is (508) 366-4111. Westborough Savings also maintains an
Internet web site located at www.westborosavings.com.

Westborough Savings is a community and customer-oriented retail bank
offering traditional deposit products, residential and commercial real estate
mortgage loans and, to a lesser extent, consumer and commercial loans. We
operate five full service banking offices located in the towns of Westborough,
Northborough and Shrewsbury, Massachusetts. We also operate a non-public
self-contained office at the "Willows," a retirement community located in
Westborough. Together, our offices serve our "primary market area" consisting of
Westborough, Northborough, Shrewsbury, Grafton, Southborough and Hopkinton,
Massachusetts.

At March 31, 1999, we had total loans of $88.6 million, of which $78.6
million, or 88.6%, were residential first mortgage loans. Of the residential
first mortgage loans outstanding at that date, 31.0% were adjustable-rate
mortgage loans and 69.0% were fixed-rate loans. We retain substantially all of
the loans that we originate. We also invest in mortgage-backed and investment
securities, consisting primarily of U.S. government, government agency and
corporate securities. Our investment portfolio equaled $64.0 million, or 38.2%
of our total assets at March 31, 1999. For further information on our operations
and financial condition, see "Business of Westborough Savings Bank."

WESTBOROUGH FINANCIAL SERVICES, INC.

Westborough Financial Services is a newly organized Massachusetts
corporation organized on , 1999. Westborough Financial Services has not
engaged in any business to date and will serve as a holding company of The
Westborough Bank (formerly known as Westborough Savings Bank) following the
reorganization. A majority of the outstanding shares of Westborough Financial
Services' common stock will be owned by Westborough Bancorp, MHC. Westborough
Financial Services' executive offices are located at 100 East Main Street,
Westborough, Massachusetts and its telephone number is (508) 366-4111.

WESTBOROUGH BANCORP, MHC

As part of our reorganization, Westborough Savings will organize Westborough
Bancorp, MHC as a Massachusetts-chartered mutual holding company which will be
registered as a bank holding company with the Federal Reserve Board. Persons who
had liquidation rights with respect to Westborough Savings as of the date of the
reorganization will continue to have liquidation rights solely with respect to
Westborough Bancorp, MHC. Their liquidation rights in Westborough Bancorp, MHC
will exist as long as they maintain a deposit account at Westborough Bank.
Westborough Bancorp, MHC's executive offices are located at 100 East Main
Street, Westborough, Massachusetts 01581 and its telephone number is (508)
366-4111.

Westborough Bancorp, MHC's principal assets will be the shares of common
stock of Westborough Financial Services that it receives in the reorganization
and approximately $100,000 that it receives as its initial capitalization. At
the present time, we expect that Westborough Bancorp, MHC will not engage in any
business activity other than its investment in a majority of the common stock of
Westborough Financial Services and the management of any cash dividends received
from Westborough Financial Services. Federal and state law and regulations
require that as long as Westborough Bancorp, MHC is in existence it must own a
majority of Westborough Financial Services' common stock.

HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING

The net proceeds will depend on the total number of shares of common stock
sold in the offering, which in turn will depend on RP Financial's appraisal,
regulatory and market considerations, and the expenses incurred in connection
with the offering. Although we will not be able to determine the actual net
proceeds from the sale of the common stock until we complete the offering, we
estimate the net proceeds to be between $5.4 million and $7.5 million.

WESTBOROUGH FINANCIAL SERVICES INTENDS TO DISTRIBUTE THE NET PROCEEDS FROM
THE OFFERING AS FOLLOWS:

NUMBER OF SHARES SOLD
--------------------------

595,000 805,000
------------ ------------
Offering proceeds................................................. $ 5,950,000 $ 8,050,000
Less: offering expenses........................................... 504,010 542,650
------------ ------------
Net offering proceeds............................................. 5,445,990 7,507,350
Less:
Proceeds contributed to Westborough Bank........................ 2,722,995 3,753,675
Proceeds used for loan to employee stock ownership plan......... 476,000 644,000
------------ ------------
Proceeds remaining for Westborough Financial Services............. $ 2,246,995 $ 3,109,675
------------ ------------
------------ ------------

If regulatory or market conditions change and we are required to sell
925,750 shares of stock, then we estimate the net offering proceeds to be
$8,692,632. If we sell 925,750 shares of stock, then our loan to the employee
stock ownership plan would be $741,000.

The net proceeds may vary because total expenses relating to the
reorganization may be more or less than our estimates. For example, our expenses
would increase if a syndicated community offering is used to sell shares not
purchased in the subscription offering and community offering. The net proceeds
will also vary if the number of shares to be sold in the offering are adjusted
to reflect a change in the estimated pro forma market value of Westborough
Financial Services and Westborough Bank. Payments for shares made through
withdrawals from existing deposit accounts will not result in the receipt of new
funds for investment by Westborough Bank but will result in a reduction of
Westborough Bank's deposits and interest expense as funds are transferred from
interest bearing certificates of deposit or other deposit accounts.

WESTBOROUGH FINANCIAL SERVICES MAY USE THE PROCEEDS IT RETAINS FROM THE
OFFERING:

(1) to invest in securities;

(2) to finance the possible acquisition of financial institutions or other
businesses that are related to banking;

(3) to repurchase shares of common stock issued in the offering; and

(4) for general corporate purposes.

WESTBOROUGH BANK MAY USE THE PROCEEDS IT RECEIVES FROM THE OFFERING:

(1) to fund new loans;

(2) to finance the possible establishment or acquisition of one or more
branch offices in its market area;

(3) to finance the expansion and renovation of its main office; and

(4) for general corporate purposes.

OUR POLICY REGARDING DIVIDENDS

We will have the authority to declare and pay dividends on our common stock
upon completion of the offering. However, initially, we do not intend to do so.
Any decision by our Board of Directors to pay dividends in the future, including
with respect to the amount and timing of such dividends, will depend on a number
of factors, including our financial condition, results of operations, tax
considerations, industry standards, economic conditions, regulatory restrictions
that affect the payment of dividends by Westborough Bank to Westborough
Financial Services and any other relevant factors. We cannot guarantee that we
will pay dividends, or that, if paid, we will not reduce or eliminate dividends
in the future.

If Westborough Financial Services pays dividends to its stockholders, it
will be required to pay dividends to Westborough Bancorp, MHC, unless
Westborough Bancorp, MHC elects to waive dividends. We do not currently
anticipate that Westborough Bancorp, MHC will waive dividends paid by
Westborough Financial Services. Any decision to waive dividends will be subject
to regulatory approval. See "Regulation of Westborough Savings Bank and
Westborough Financial Services, Inc.-- Dividend Waivers by Westborough Bancorp,
MHC."

As the principal asset of Westborough Financial Services, Westborough Bank
will provide the primary source of funds for the payment of dividends by
Westborough Financial Services. Westborough Bank, however, will not be permitted
to pay dividends on its common stock if its stockholders' equity would be
reduced below the amount required for the liquidation account. See "The
Reorganization and The Offering--Effects of the Reorganization--Depositors'
Rights If We Liquidate; Liquidation Account." Under FDIC regulations,
Westborough Bank is prohibited from paying dividends if, among other things, it
was not in compliance with applicable regulatory capital requirements. In
addition, Massachusetts law provides that dividends may be paid by Westborough
Bank only out of net profits and only to the extent that it does not impair its
capital stock and surplus accounts. Provided that Westborough Bank can meet the
above requirements, the net profits of Westborough Bank may be distributed as a
dividend so long as, after the distribution, either the capital stock and
surplus accounts of Westborough Bank equal at least 10% of its deposit
liabilities, or the surplus account of Westborough Bank equals 100% of its
capital stock account, subject to certain statutory exceptions.

Any payment of dividends by Westborough Bank to Westborough Financial
Services that would be deemed to be drawn out of Westborough Bank's bad debt
reserves, would require a payment of taxes at the then-current tax rate by
Westborough Bank on the amount of earnings deemed to be removed from bad debt
reserves for such distribution. Westborough Bank does not intend to make any
distribution to Westborough Financial Services that would create this type of a
tax liability. See "Taxation."

MARKET FOR THE COMMON STOCK

We have not previously issued common stock, and there is currently no
established market for the common stock. We expect the common stock to trade
under the symbol "WFSI" on the over-the-counter market with quotations available
through the OTC Bulletin Board after completion of the offering. Trident
Securities has advised us that it intends to make a market in the common stock
following the reorganization, but is under no obligation to do so. We will seek
to encourage and assist additional market makers to make a market for our common
stock.

The development of an active trading market depends on the existence of
willing buyers and sellers, the presence of which is not within our control, or
any market maker. The number of active buyers and sellers of the common stock at
any particular time may be limited. Under such circumstances, you could have
difficulty selling your shares on short notice, and, therefore, you should not
view the common stock as a short-term investment. We cannot assure you that an
active trading market for the common stock will develop or that, if it develops,
it will continue, nor can we assure you that if you purchase shares you will be
able to sell them at or above $10.00 per share.

REGULATORY CAPITAL COMPLIANCE

At March 31, 1999, we exceeded all regulatory capital requirements. Set
forth below is a summary of our capital computed under generally accepted
accounting principles ("GAAP") and our compliance with regulatory capital
standards at March 31, 1999, on a historical and pro forma basis. We have
assumed that the indicated number of shares were sold as of March 31, 1999 and
that Westborough Bank received 50% of the net proceeds from the offering. For
purposes of the table below, the amount expected to be loaned to the employee
stock ownership plan and the cost of the shares expected to be acquired by the
management recognition plan are deducted from pro forma regulatory capital. For
a discussion of the capital requirements applicable to Westborough Savings and
Westborough Bank, see "Regulation of Westborough Savings Bank and Westborough
Financial Services, Inc.--Federal Banking Regulation--Capital Requirements."

PRO FORMA AT MARCH 31, 1999 BASED UPON THE SALE AT $10.00 PER SHARE
-------------------------------------------------------------------------------------------------

925,750
SHARES
(15%
ABOVE
595,000 SHARES 700,000 SHARES 805,000 SHARES MAXIMUM
HISTORICAL AT (MINIMUM OF THE (MIDPOINT OF THE (MAXIMUM OF THE OF THE
MARCH 31, 1999 RANGE) RANGE) RANGE) RANGE)(1)
-------------------- -------------------- -------------------- -------------------- ---------

PERCENT PERCENT PERCENT PERCENT
OF OF OF OF
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS AMOUNT
--------- --------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)

Capital and Retained
Earnings under Generally
Accepted Accounting
Principles............... $ 19,611 11.71% $ 21,520 12.70% $ 21,910 12.90% $ 22,299 13.10% $ 22,747
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Leverage Capital:
Leverage Capital
level(3)................. $ 19,031 11.67% $ 20,940 12.69% $ 21,330 12.90% $ 21,719 13.10% $ 22,167
Requirement(4)............. 4,892 3.00 4,949 3.00 4,961 3.00 4,973 3.00 4,987
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Excess..................... $ 14,139 8.67% $ 15,991 9.69% $ 16,369 9.90% $ 16,746 10.10% $ 17,180
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Tier I Risk-Based Capital:
Capital level(3)(5)........ $ 19,031 21.52% $ 20,940 23.57% $ 21,330 23.99% $ 21,719 24.41% $ 22,166
Requirement................ 3,538 4.00 3,553 4.00 3,556 4.00 3,560 4.00 3,563
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Excess..................... $ 15,493 17.52% $ 17,387 19.57% $ 17,773 19.99% $ 18,159 20.41% $ 18,603
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Risk-Based Capital:
Capital level(3)(4)........ $ 19,888 22.48% $ 21,797 24.54% $ 22,187 24.95% $ 22,576 25.37% $ 23,024
Requirement(4)............. 7,076 8.00 7,107 8.00 7,113 8.00 7,119 8.00 7,127
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Excess..................... $ 12,812 14.98% $ 14,690 16.54% $ 15,074 16.95% $ 15,457 17.37% $ 15,897
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------

PERCENT
OF
ASSETS(2)
---------

Capital and Retained
Earnings under Generally
Accepted Accounting
Principles............... 13.33%
---------
---------
Leverage Capital:
Leverage Capital
level(3)................. 13.34%
Requirement(4)............. 3.00
---------
Excess..................... 10.34%
---------
---------
Tier I Risk-Based Capital:
Capital level(3)(5)........ 24.88%
Requirement................ 4.00
---------
Excess..................... 20.88%
---------
---------
Total Risk-Based Capital:
Capital level(3)(4)........ 25.85%
Requirement(4)............. 8.00
---------
Excess..................... 17.85%
---------
---------

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

(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the estimated price range of up to 15% as
a result of changes in market conditions or general financial and economic
conditions following the commencement of the offering.

(2) Leverage capital levels are shown as a percentage of "total assets," and
risk-based capital levels are calculated on the basis of a percentage of
"risk-weighted assets," each as defined in the FDIC regulations.

(3) Pro forma capital levels assume receipt by Westborough Bank of 50% of the
net proceeds from the shares of common stock sold at the minimum, midpoint
and maximum of the offering range. These levels assume funding by
Westborough Bank of the management recognition plan equal to 4% of the
common stock issued, including repayment of Westborough Financial Services'
loan to the employee stock ownership plan to enable the plan to purchase 8%
of the common stock issued.

(4) The current leverage capital requirement for savings banks is 3% of total
adjusted assets for savings banks that receive the highest supervisory
ratings for safety and soundness and that are not experiencing or
anticipating significant growth. The current leverage capital ratio
applicable to all other savings banks is 4% to 5%.

(5) Assumes net proceeds are invested in assets that carry risk-weighting equal
to the actual risk weighting of Westborough Savings' assets as of March 31,
1999.

CAPITALIZATION

The following table presents the historical deposits and capitalization of
Westborough Savings at March 31, 1999, and the pro forma capitalization of
Westborough Financial Services after giving effect to the reorganization, based
upon the sale of the number of shares shown below and the other assumptions set
forth under "Pro Forma Data." A change in the number of shares to be sold in the
offering may affect materially the capitalization.

COMPANY PRO FORMA BASED UPON SALE
AT $10.00 PER SHARE
------------------------------------------------------

925,750
595,00 700,000 805,000 SHARES
HISTORICAL SHARES SHARES SHARES (15% ABOVE
AS OF (MINIMUM (MIDPOINT (MAXIMUM MAXIMUM OF
MARCH 31, 1999 OF RANGE) OF RANGE) OF RANGE) RANGE) (1)
--------------- ----------- ----------- ----------- ---------------

(IN THOUSANDS)

Deposits(2)................................. $ 142,971 $ 142,971 $ 142,971 $ 142,971 $ 142,971
Borrowings.................................. 4,000 4,000 4,000 4,000 4,000
--------------- ----------- ----------- ----------- ---------------
Total deposits and borrowed funds........... $ 146,971 $ 146,971 $ 146,971 $ 146,971 $ 146,971
--------------- ----------- ----------- ----------- ---------------
--------------- ----------- ----------- ----------- ---------------
Stockholders' equity:
Preferred stock, $0.01 par value,
1,000,000 shares authorized; none to be
issued.................................. $ -- $ -- $ -- $ -- $ --
Common stock, $0.01 par value, 5,000,000
shares authorized; shares to be issued
as reflected(3)(4)...................... -- 17 20 23 26
Additional paid-in capital)(4)............ -- 5,429 6,457 7,484 8,667
Retained earnings(5)...................... 19,031 18,931 18,931 18,931 18,931
Accumulated other comprehensive income.... 580 580 580 580 580
Less:
Common stock acquired by the employee
stock ownership plan(6)................. -- (476) (560) (644) (741)
Common stock acquired by the management
recognition plan(7)..................... -- (238) (280) (322) (370)
--------------- ----------- ----------- ----------- ---------------
Total stockholders' equity.................. $ 19,611 $ 24,243 $ 25,148 $ 26,052 $ 27,093
--------------- ----------- ----------- ----------- ---------------
--------------- ----------- ----------- ----------- ---------------

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

(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the offering of up to 15% as a result of
regulatory considerations or changes in market or general financial and
economic conditions following the commencement of the offering.

(2) Does not reflect withdrawals from deposit accounts for the purchase of
common stock in the offering. Such withdrawals would reduce pro forma
deposits by the amount of such withdrawals.

(3) Reflects share to be issued to Westborough Bancorp, MHC as follows:
1,105,000 shares at the minimum, 1,300,000 shares at the midpoint, 1,495,000
shares at the maximum and 1,719,250 shares at 15% above the maximum.

(4) Reflects the issuance of shares sold in the offering at a value of $10.00
per share. No effect has been given to the issuance of additional shares of
common stock pursuant to Westborough Financial Services' proposed stock
option plan intended to be adopted by Westborough Financial Services and
presented for approval of stockholders at a meeting of the stockholders to
be held at least six months following completion of the offering.

(5) The retained earnings of Westborough Bank will be substantially restricted
after the offering. The reduction in historical retained earnings reflects
the $100,000 initial capitalization of Westborough Bancorp, MHC by
Westborough Bank.

(6) Assumes that 8% of the shares issued in connection with the offering will be
purchased by the employee stock ownership plan and that the funds used to
acquire such shares will be borrowed from Westborough Financial Services.
The common stock acquired by the employee stock ownership plan is reflected
as a reduction of stockholders' equity.

(7) Assumes that, subsequent to the offering, an amount equal to 4% of the
shares of common stock issued in the offering is purchased by a management
recognition plan through open market purchases. The proposed management
recognition plan is intended to be adopted by Westborough Financial Services
and presented for approval of stockholders at a meeting of stockholders to
be held at least six months following completion of the offering. The common
stock purchased by the management recognition plan is reflected as a
reduction of stockholders' equity.

PRO FORMA DATA

We can not determine the actual net proceeds from the sale of the common
stock until the offering is completed. However, we estimate that net proceeds
will be between $4.7 million and $6.5 million, or $7.6 million if the offering
range is increased by 15%, based upon the following assumptions:

- we will sell all shares of common stock in the subscription offering;

- we will pay Trident Securities a fee equal to 2.0% of the aggregate
purchase price for sales in the subscription offerings except for shares
sold to the employee stock ownership plan, and officers, trustees and
their immediate families; and

- total expenses, excluding the marketing fees paid to Trident Securities
will be approximately $405,780.

We calculated the pro forma consolidated net income and stockholders' equity
of Westborough Financial Services for the six months ended March 31, 1999 and
the year ended September 30, 1998, as if the common stock had been sold at the
beginning of the year and the net proceeds had been invested at 4.70% and 4.39%,
respectively. We chose these yields because they represent the yield on one-year
U.S. Government securities at the corresponding period. In light of changes in
interest rates in recent periods, we believe this rate more accurately reflects
pro forma reinvestment rates than the arithmetic average method. We assumed a
tax rate of 36% for both periods. This results in an after-tax yield of 3.01%
for the six months ended March 31, 1999 and 2.81% for the year ended September
30, 1998.

We calculated historical and pro forma per share amounts by dividing
historical and pro forma amounts of pro forma consolidated net income and
stockholders' equity by the indicated number of shares of common stock. We
adjusted these figures to give effect to the shares purchased by the employee
stock ownership plan. We computed per share amounts for each period as if the
common stock was outstanding at the beginning of the periods, but we did not
adjust per share historical or pro forma stockholders' equity to reflect the
earnings on the estimated net proceeds. As discussed under "How We Intend to Use
the Proceeds from the Offering," Westborough Financial Services intends to
retain 50% of the net proceeds from the offering and intends to make a loan to
the employee stock ownership plan to fund the employee stock ownership plan's
purchase of 8% of the common stock.

The following tables give effect to the management recognition plan, which
we expect to adopt following the reorganization and present, along with the
stock option plan, to stockholders for approval at an annual or special meeting
of stockholders to be held at least six months following the completion of the
reorganization. If the management recognition plan is approved by stockholders,
the management recognition plan will acquire an amount of common stock equal to
4% of the shares of common stock sold in the offering, either through open
market purchases or from authorized but unissued shares of common stock. On
preparing the following tables we assumed that stockholder approval has been
obtained and that the shares acquired by the management recognition plan are
purchased in the open market at the purchase price.

The following tables do not give effect to:

(1) the shares to be reserved for issuance under the stock option plan, which
requires stockholder approval at a meeting following the reorganization;

(2) withdrawals from deposit accounts for the purpose of purchasing common stock
in the reorganization;

(3) Westborough Financial Services' results of operations after the
reorganization; or

(4) the market price of the common stock after the reorganization.

The following pro forma information may not represent the financial effects
of the reorganization at the date on which the reorganization actually occurs
and you should not use the table to indicate future results of operations. Pro
forma stockholders' equity represents the difference between the stated amount
of assets and liabilities of Westborough Financial Services computed in
accordance with generally accepted accounting principles. We did not increase or
decrease stockholders' equity to reflect the difference between the carrying
value of loans and other assets and market value. Pro forma stockholders' equity
is not intended to represent the fair market value of the common stock and may
be different than amounts that would be available for distribution to
stockholders if we liquidated.

AT OR FOR THE SIX MONTHS ENDED MARCH 31, 1999
----------------------------------------------------

MAXIMUM AS
MINIMUM MIDPOINT MAXIMUM ADJUSTED
595,000 700,000 805,000 925,750
SHARES SHARES SHARES SHARES
AT $10.00 AT $10.00 AT $10.00 AT $10.00
PER SHARE PER SHARE PER SHARE PER SHARE(1)
----------- ----------- ----------- -------------

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Gross proceeds(2)................................................. $ 5,950 $ 7,000 $ 8,050 $ 9,258
Less: Expenses.................................................. (504) (523) (543) (565)
----------- ----------- ----------- -------------
Estimated net proceeds............................................ 5,446 6,477 7,507 8,693
Less: Common stock purchased by employee stock ownership
plan(3)....................................................... (476) (560) (644) (741)
Less: Common stock purchased by management recognition
plan(4)....................................................... (238) (280) (322) (370)
----------- ----------- ----------- -------------
Estimated net proceeds, as adjusted............................. $ 4,732 $ 5,637 $ 6,541 $ 7,582
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
FOR THE 6 MONTHS ENDED MARCH 31, 1999:
Consolidated net income:
Historical income............................................... $ 824 $ 824 $ 824 $ 824
Pro forma income on net proceeds(5)............................. 31 44 58 73
Pro forma employee stock ownership plan adjustment(3)........... (15) (18) (21) (24)
Pro forma management recognition plan adjustment(4)............. (15) (18) (21) (24)
----------- ----------- ----------- -------------
Pro forma net income........................................ $ 825 $ 832 $ 840 $ 849
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Per share net income:
Historical income............................................... $ 0.50 $ 0.42 $ 0.37 $ 0.32
Pro forma income on net proceeds(5)............................. 0.02 0.02 0.03 0.03
Pro forma employee stock ownership plan adjustment(3)(6)........ (0.01) (0.01) (0.01) (0.01)
Pro forma management recognition plan adjustment(4)............. (0.01) (0.01) (0.01) (0.01)
----------- ----------- ----------- -------------
Pro forma net income per share.............................. $ 0.50 $ 0.42 $ 0.38 $ 0.33
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
AT MARCH 31, 1999
Stockholders' equity:
Historical...................................................... $ 19,511 $ 19,511 $ 19,511 $ 19,511
Estimated net proceeds.......................................... 5,446 6,477 7,507 8,693
Less: Common stock acquired by employee stock ownership
plan(3)....................................................... (476) (560) (644) (741)
Less: Common stock acquired by management recognition plan(4)... (238) (280) (322) (370)
----------- ----------- ----------- -------------
Pro forma stockholders' equity.............................. $ 24,243 $ 25,148 $ 26,052 $ 27,093
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Stockholders' equity per share(7):
Historical...................................................... $ 11.48 $ 9.76 $ 8.48 $ 7.38
Estimated net proceeds.......................................... 3.20 3.24 3.26 3.29
Less: Common stock acquired by employee......... stock ownership
plan(3) (0.28) (0.28) (0.28) (0.28)
Less: Common stock acquired by management recognition plan(4)... (0.14) (0.14) (0.14) (0.14)
----------- ----------- ----------- -------------
Pro forma stockholders' equity per share.................... $ 14.26 $ 12.58 $ 11.32 $ 10.25
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Ratio of offering price to pro forma net income per share
(annualized)(8)................................................. 15.00x 17.86x 19.74x 22.73x
----------- ----------- ----------- -------------
Offering price as a percentage of pro forma stockholders' equity
per share(8).................................................... 70.13% 79.49% 88.34% 97.56%
----------- ----------- ----------- -------------

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

(1) We reserve the right to issue up to a total of 925,750 shares at $10.00 per
share, or 15% above the maximum of the offering range. Unless otherwise
required by the regulators, subscribers will not be given the right to
modify their subscriptions unless the aggregate purchase price of the common
stock is increased to exceed $9.3 million (i.e., 15% above the maximum of
the offering range.)

(2) Withdrawals from deposit accounts for the purchase of stock have not been
reflected in these adjustments. We estimate that approximately 20% of all
subscription orders may utilize funds currently on deposit at Westborough
Savings.

(3) Assumes 8% of the shares to be sold in the offering are purchased by the
employee stock ownership plan under all circumstances, and that the funds
used to purchase such shares are borrowed from Westborough Financial
Services. The approximate amount expected to be borrowed by the employee
stock ownership plan is reflected in this table as a reduction of capital.
Although repayment of such debt will be secured solely by the shares
purchased by the employee stock ownership plan, we expect to make
discretionary contributions to the employee stock ownership plan in an
amount at least equal to the principal and interest payments on the employee
stock ownership plan debt. Pro forma net income has been adjusted to give
effect to such contributions, based upon a fully amortizing debt with a
ten-year term. Since Westborough Financial Services will be providing the
employee stock ownership plan loan, only principal payments on the employee
stock ownership plan loan are reflected as employee compensation and
benefits expense. The provisions of SOP 93-6 have been applied for shares to
be acquired by the employee stock ownership plan and for purposes of
computing earnings per share.

(4) Assumes a number of issued and outstanding shares of common stock equal to
4% of the common stock to be sold in the offering will be purchased by the
management recognition plan. Before the management recognition plan is
implemented, it must be approved by the stockholders. The dollar amount of
the common stock possibly to be purchased by the management recognition plan
is based on $10.00 per share and represents unearned compensation and is
reflected as a reduction of capital. Such amount does not reflect possible
increases or decreases in the price per share after the offering. As we
accrue compensation expenses to reflect the vesting of such shares pursuant
to the management recognition plan, the charge against capital will be
reduced accordingly. In the event the shares issued under the management
recognition plan consist of shares of common stock newly issued and the
price per share in the offering, the per share financial condition and
result of operations of Westborough Financial Services would be
proportionately reduced and to the extent the interest of existing
stockholders would be diluted by approximately 4.0%.

(5) Pro forma income reflects planned capital expenditures of $2.5 million
expected to be made in the first half of 2000 for the expansion and
renovation of our executive office.

(6) Westborough Bank intends to record compensation expense related to the
employee stock option plan in accordance with SOP 93-6. As a result, to the
extent the value of the common stock appreciates over time, compensation
expense related to the employee stock ownership plan will increase. SOP 93-6
also changes the earnings per share computations for leveraged employee
stock ownership plans to include as outstanding only shares that have been
committed to be released to participants. For purposes of the preceding
table, it was assumed that the number of employee stock ownership plan
shares were committed to be released at March 31, 1999 was 42,380, 52,800,
63,220 and 73,703 for the minimum, midpoint, maximum and 15% above the
maximum of the offering range, respectively.

(7) Stockholders' equity per share data is based upon 1,700,000, 2,000,000,
2,300,000 and 2,645,000 shares outstanding representing shares sold in the
offering, and shares purchased by the employee stock ownership plan and
management recognition plan.

(8) Assuming 100% of the outstanding common stock of Westborough Financial
Services is issued to the public rather than 35%, the offering price as a
percentage of pro forma stockholders' equity per share would be 50.20% at
the minimum of the offering range, 54.87% at the midpoint of the offering
range, 58.92% at the maximum of the offering range and 62.97% at 15% above
the maximum of the offering range, and the ratio of the offering price to
pro forma net income per share would be 10.61x at the minimum of the
offering range, 12.13x at the midpoint of the offering range, 13.56x at the
maximum of the offering range and 15.11x at 15% above the maximum of the
offering range.

AT OR FOR THE YEAR ENDED SEPTEMBER 30, 1998
-------------------------------------------------

(IN THOUSAND EXCEPT PER SHARE AMOUNTS)

Gross proceeds(2)................................................. $ 5,950 $ 7,000 $ 8,050 $ 9,258
Less: Expenses.................................................. (504) (523) (543) (565)
----------- --------- ----------- ------------
Estimated net proceeds............................................ 5,446 6,477 7,507 8,693
Less: Common stock purchased by employee stock ownership
plan(3)....................................................... (476) (560) (644) (741)
Less: Common stock purchased by management recognition
plan(4)....................................................... (238) (280) (322) (370)
----------- --------- ----------- ------------
Estimated net proceeds, as adjusted............................. $ 4,732 $ 5,637 $ 6,541 $ 7,582
----------- --------- ----------- ------------
----------- --------- ----------- ------------
FOR THE 12 MONTHS ENDED SEPTEMBER 30, 1998:
Consolidated net income:
Historical income............................................... $ 1,313 $ 1,313 $ 1,313 $ 1,313
Pro forma income on net proceeds(5)............................. 57 83 108 137
Pro forma employee stock ownership plan adjustment(3)........... (30) (36) (41) (47)
Pro forma management recognition plan adjustment(4)............. (30) (36) (41) (47)
----------- --------- ----------- ------------
Pro forma net income........................................ $ 1,310 $ 1,324 $ 1,339 $ 1,356
----------- --------- ----------- ------------
----------- --------- ----------- ------------
Per share net income:
Historical income............................................... $ 0.79 $ 0.67 $ 0.59 $ 0.51
Pro forma income on net proceeds................................ 0.03 0.04 0.05 0.05
Pro forma employee stock ownership plan adjustment(3)(6)........ (0.02) (0.02) (0.02) (0.02)
Pro forma management recognition plan adjustment(4)............. (0.02) (0.02) (0.02) (0.02)
----------- --------- ----------- ------------
Pro forma net income per share.............................. $ 0.78 $ 0.67 $ 0.60 $ 0.52
----------- --------- ----------- ------------
----------- --------- ----------- ------------
AT SEPTEMBER 30, 1998
Stockholders' equity:
Historical...................................................... $ 19,267 $ 19,267 $ 19,267 $ 19,267
Estimated net proceeds.......................................... 5,446 6,477 7,507 8,693
Less: Common stock acquired by employee stock ownership
plan(3)....................................................... (476) (560) (644) (741)
Less: Common stock acquired by management recognition plan(4)... (238) (280) (322) (370)
----------- --------- ----------- ------------
Pro forma stockholders' equity.............................. $ 23,999 $ 24,904 $ 25,808 $ 26,849
----------- --------- ----------- ------------
----------- --------- ----------- ------------
Stockholders' equity per share (7):
Historical...................................................... $ 11.33 $ 9.63 $ 8.38 $ 7.28
Estimated net proceeds.......................................... 3.20 3.24 3.26 3.29
Less: Common stock acquired by employee stock ownership
plan(3)....................................................... (0.28) (0.28) (0.28) (0.28)
Less: Common stock acquired by management recognition plan(4)... (0.14) (0.14) (0.14) (0.14)
----------- --------- ----------- ------------
Pro forma stockholders' equity per share.................... $ 14.11 $ 12.45 $ 11.22 $ 10.15
----------- --------- ----------- ------------
----------- --------- ----------- ------------
Ratio of offering price to pro forma net income per share
(annualized)(8)................................................. 12.82x 14.93x 16.67x 19.23x
----------- --------- ----------- ------------
Offering price as a percentage of pro forma stockholders' equity
per share(8).................................................... 70.87% 80.32% 89.13% 98.52%
----------- --------- ----------- ------------

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

(1) We reserve the right to issue up to a total of 925,750 shares at $10.00 per
share, or 15% above the maximum of the Independent Valuation. Unless
otherwise required by the regulators, subscribers will not be given the
right to modify their subscriptions unless the aggregate purchase price of
the common stock is increased to exceed $9.3 million (i.e., 15% above the
maximum of the Independent Valuation.)

(5) Pro forma income reflects planned capital expenditures of $2.5 million
expected to be made in the first half of 2000 for the expansion and
renovation of our executive office.

(6) Westborough Bank intends to record compensation expense related to the
employee stock ownership plan in accordance with SOP 93-6. As a result, to
the extent the value of the common stock appreciates over time, compensation
expense related to the employee stock ownership plan will increase. SOP 93-6
also changes the earnings per share computations for leveraged employee
stock ownership plans to include as outstanding only shares that have been
committed to be released to participants. For purposes of the preceding
table, it was assumed that the number of employee stock ownership plan
shares were committed to be released at March 31, 1999 was 44,760, 55,600,
56,440 and 67,406 for the minimum, midpoint, maximum and 15% above the
maximum of the offering range, respectively.

WESTBOROUGH SAVINGS BANK
CONSOLIDATED STATEMENTS OF INCOME

These Consolidated Statements of Income of Westborough Savings for the years
ended September 30, 1998, 1997 and 1996 have been audited by Wolf & Company,
P.C., independent certified public accountants. The Independent Auditors' Report
thereon appears on page F-2 of this prospectus. These consolidated statements of
income should be read in conjunction with the Consolidated Financial Statements
and accompanying Notes to Consolidated Financial Statements in this prospectus
and "Management's Discussion and Analysis of the Financial Condition and Results
of Operations" beginning on page 29 of this prospectus. The consolidated
statements of income for the six month periods ended March 31, 1999 and 1998 are
unaudited, but in the opinion of management, reflect all adjustments necessary
for a fair presentation of the results for such periods. The results for the six
month period ended March 31, 1999 are not necessarily indicative of the results
of Westborough Savings for the entire year.

FOR THE SIX MONTHS
FOR THE YEAR ENDED
ENDED MARCH 31, SEPTEMBER 30,
-------------------- -------------------------------------

1999 1998 1998 1997 1996
--------- --------- --------------- --------- ---------

(UNAUDITED)
(IN THOUSANDS)

Interest and dividend income:
Interest and fees on loans............................... $ 3,124 $ 2,827 $ 5,884 $ 5,242 $ 4,868
Interest and dividends on investment securities:
Taxable interest......................................... 1,658 1,889 3,580 3,822 3,475
Non-taxable interest..................................... 27 -- 11 -- --
Dividends................................................ 168 74 152 131 103
Interest on federal funds sold........................... 126 118 228 219 181
Interest on short-term investments....................... 76 44 78 47 84
--------- --------- ------ --------- ---------
Total interest and dividend income................... 5,179 4,952 9,933 9,461 8,711
--------- --------- ------ --------- ---------
Interest expense:
Interest on deposits..................................... 2,374 2,272 4,555 4,285 4,037
Interest on borrowings................................... 55 -- 2 141 --
--------- --------- ------ --------- ---------
Total interest expense............................... 2,429 2,272 4,557 4,426 4,037
--------- --------- ------ --------- ---------
Net interest and dividend income..................... 2,750 2,680 5,376 5,035 4,674
Provision for loan losses.................................. 25 20 39 96 105
--------- --------- ------ --------- ---------
Net interest and dividend income, after provision for
loan losses........................................ 2,725 2,660 5,337 4,939 4,569
--------- --------- ------ --------- ---------
Other income:
Customer service fees.................................... 135 117 259 242 271
Loan fees................................................ 11 11 20 14 19
Income from covered call options......................... 187 -- -- -- --
Gain on sales and dispositions of securities, net........ 290 64 90 337 119
Miscellaneous............................................ 7 3 14 15 45
--------- --------- ------ --------- ---------
Total other income................................... 630 195 383 608 454
--------- --------- ------ --------- ---------
Operating expenses:
Salaries and employee benefits........................... 1,180 964 1,995 1,963 1,756
Occupancy and equipment expenses......................... 298 247 519 431 401
Data processing expenses................................. 109 83 183 153 169
Marketing expenses....................................... 73 63 144 162 110
Contributions............................................ 16 3 19 124 6
Professional fees........................................ 44 39 89 86 91
Other general and administrative expenses................ 398 329 708 644 612
--------- --------- ------ --------- ---------
Total operating expenses............................. 2,118 1,728 3,657 3,563 3,145
--------- --------- ------ --------- ---------
Income before income taxes........................... 1,237 1,127 2,063 1,984 1,878
Provision for income taxes................................. 413 413 750 676 695
--------- --------- ------ --------- ---------
Net income........................................... $ 824 $ 714 $ 1,313 $ 1,308 $ 1,183
--------- --------- ------ --------- ---------
--------- --------- ------ --------- ---------

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

THIS DISCUSSION AND ANALYSIS REFLECTS WESTBOROUGH SAVINGS' FINANCIAL STATEMENTS
AND OTHER RELEVANT STATISTICAL DATA AND IS INTENDED TO ENHANCE YOUR
UNDERSTANDING OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS. YOU SHOULD
READ THE INFORMATION IN THIS SECTION IN CONJUNCTION WITH WESTBOROUGH SAVINGS'
CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS IN THIS PROSPECTUS, AND THE OTHER STATISTICAL DATA PROVIDED
ELSEWHERE IN THIS PROSPECTUS.

GENERAL

Westborough Savings' results of operations depend primarily on net interest
income. Net interest income is the difference between the interest income we
earn on our interest-earning assets, primarily mortgage loans, mortgage-backed
securities and investment securities, and the interest we pay on our
interest-bearing liabilities, primarily certificates of deposit and savings
accounts. Our results of operations are also affected by our provision for loan
losses, other income, and operating expense. Operating expense consists
primarily of salaries and employee benefits, occupancy expenses and other
general and administrative expenses. Other income consists mainly of service
fees and charges, income from writing covered call options and gains on sales of
securities.

Our results of operations may also be affected significantly by general and
local economic and competitive conditions, particularly those with respect to
changes in market interest rates, government policies and actions of regulatory
authorities. Future changes in applicable law, regulations or government
policies may materially impact us. Additionally, our lending activity is
concentrated in loans secured by real estate located in Westborough,
Northborough, Shrewsbury and Grafton, Massachusetts. Accordingly, our results of
operations are affected by regional market and economic conditions.

FORWARD LOOKING STATEMENTS

This prospectus contains certain "forward-looking statements" which may be
identified by the use of such words as "believe," "expect," "anticipate,"
"should," "planned," "estimated" and "potential." Examples of forward-looking
statements include, but are not limited to, estimates with respect to our
financial condition, results of operations and business that are subject to
various factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general and local
economic conditions, changes in interest rates, deposit flows, demand for
mortgage and other loans, real estate values, and competition; changes in
accounting principles, policies, or guidelines; changes in legislation or
regulation; and other economic, competitive, governmental, regulatory, and
technological factors affecting our operations, pricing, products and services.

MANAGEMENT STRATEGY

Historically, Westborough Savings' primary management strategy has been to
offer savings and certificate of deposit accounts and residential mortgage loans
in the market area of Westborough, Massachusetts and surrounding communities. At
March 31, 1999, 88.7% of our loan portfolio consisted of one- to four-family
residential mortgage loans, with relatively few commercial real estate or
commercial loans in our portfolio. In recent years, we have adopted a
growth-oriented strategy that has focused on expanding our product lines and
services, providing expanded delivery systems for our customers and extending
our branch network. We believe that this business strategy is best for our long

term success and viability, and complements our existing commitment to high
quality customer service. In connection with our overall growth strategy, we
seek to:

(1) continue to focus on expanding our residential lending and retail banking
franchise, and increasing the number of households served within our market
area;

(2) expand our commercial banking products and services for small and medium
sized business, as a means to increase the yield on our loan portfolio and
to attract lower cost transaction deposit accounts;

(3) expand our branch network to increase our market share;

(4) increase the use of alternative delivery channels, such as on-line and
telephonic banking; and

(5) offer a variety of uninsured products and services as a means to compete for
an increased share of our customers' financial service business.

In order to create a platform for the accomplishment of our goals, we have
begun to make significant investments in Westborough Savings' physical
infrastructure and human and technological resources. Such investments have been
and, in the future, will be necessary to ensure that adequate resources are in
place to offer increased products and services. As a result, for a period of
time, we expect operating expenses to increase and net income to be adversely
impacted. We believe, however, that Westborough Bank's long-term profitability
should improve as we realize the benefits of diversified product lines and
market share growth.

Following the reorganization, we intend to apply proceeds from the offering
to further the objectives of our growth-oriented strategy. We may also use
proceeds from the offering to acquire branch offices and make other
acquisitions. See "How We Intend to Use the Proceeds from the Offering."

MANAGEMENT OF INTEREST RATE RISK

As a financial institution, a primary component of market risk is interest
rate volatility. Fluctuations in interest rates will ultimately impact both our
level of income and expense recorded on a large portion of our assets and
liabilities. Fluctuations in interest rates will also affect the market value of
all interest earning assets, other than those which possess a short term to
maturity.

During fiscal year 1998 through the date of this prospectus, we have
operated under a "flat yield curve" in a declining interest rate environment. A
flat yield curve environment features little difference in interest rates
offered on short-term and long-term investments. In that environment, we
experienced both increased interest rate competition related to loan
originations and above-average prepayment rates related to mortgage loans and
mortgage-backed securities, both of which adversely impact long-term
profitability. The flat yield curve environment and modest declines in market
interest rates experienced during fiscal year 1998 kept our interest rate spread
static compared to the prior year. This spread, however, has narrowed slightly
during the six months ended March 31, 1999. In addition, recent troubled
economic conditions in several nations throughout Europe, Asia, and South and
Central America have contributed to interest rate volatility for U.S. government
and agency obligations. We cannot predict at this time what, if any, effect
these conditions will have on the local and regional economy, and real estate
market.

Due to the nature of our operations, we are not subject to foreign currency
exchange or commodity price risk. On the other hand, our real estate loan
portfolio concentrated in the towns of Westborough, Northborough, Shrewsbury and
Grafton, Massachusetts, is subject to risks associated with the local economy.

The primary objective of our interest rate management strategy is to
optimize Westborough Savings' economic value and net income under likely market
rate scenarios. To achieve this objective we have developed policies and
procedures to assist senior management in evaluating and maintaining acceptable
levels of interest rate risk, liquidity risk and capital. In particular, we seek
to coordinate asset and liability decisions so that, under changing interest
rate scenarios, earnings will remain within an acceptable range.

Under our Asset/Liability Policy Statement, the Board of Investment is
charged with the responsibility to monitor senior management's compliance with
Westborough Savings' interest rate risk policies and procedures. Responsibility
for review, approval and establishment of, and exceptions to, interest rate risk
policies and procedures rests with the Asset/Liability Management Committee
("ALCO"). This committee is appointed by our President, subject to approval of
the Board of Investment. The committee generally consists of two members of the
Board of Trustees, the President, the Treasurer and the Senior Lending Officer.
The ALCO meets on a quarterly basis to discuss and monitor the market interest
rate environment as compared to interest rates that are offered on our products.
The ALCO presents periodic reports to the Board of Trustees at its regular
meetings, as well as a comprehensive quarterly report to the Board of
Investment. The quarterly reports address the results of activities and
strategies and the effect that changes in interest rates will have on our
results of operations and the value of our equity.

Historically, our lending activities have emphasized one- to four-family
residential mortgage loans, and our primary source of funds has been deposits.
In recent years, we have attempted to employ certain strategies to manage the
interest rate risk inherent in this asset/liability mix, including:

(1) investing in securities with relatively short maturities or call dates;

(2) maintaining through tiered-rate savings accounts and other programs a
concentration of less interest-rate-sensitive "core deposits;"

(3) emphasizing the origination and retention of adjustable-rate one- to
four-family loans;

(4) emphasizing commercial with short-term maturities; and

(5) borrowing funds from the Federal Home Loan Bank of Boston, which may be used
to originate fixed-rate loans with matching maturities.

We believe that the frequent repricing of our adjustable-rate mortgage loans
and adjustable-rate securities, which reduces the exposure to interest rate
fluctuations, will stabilize our net interest margin. Although we have
emphasized the origination of variable-rate mortgage products, the prevailing
low interest rate environment has resulted in the increased demand for
fixed-rate first mortgage loans. The result has been an increase in the
proportion of fixed-rate loans in our portfolio. This may have an adverse impact
on our net interest income, particularly in a rising interest rate environment.

In addition, the actual amount of time before mortgage loans and
mortgage-backed securities are repaid can be significantly impacted by changes
in mortgage prepayment rates and market interest rates. Mortgage prepayment
rates will vary due to a number of factors, including the regional economy in
the area where the underlying mortgages were originated, seasonal factors,
demographic variables and the assumability of the underlying mortgages. However,
the major factors affecting prepayment rates are prevailing interest rates,
related mortgage refinancing opportunities and competition. We monitor interest
rate sensitivity so that we can make adjustments to our asset and liability mix
on a timely basis.

GAP ANALYSIS. The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and liabilities are "interest rate
sensitive" and by monitoring a bank's interest rate sensitivity "gap." An asset
or liability is deemed to be interest rate sensitive within a specific time
period if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as

the difference between the amount of interest-earning assets maturing or
repricing within a specific time period and the amount of interest
bearing-liabilities maturing or repricing within that same time period. At March
31, 1999, Westborough Savings' cumulative one year gap position, the difference
between the amount of interest-earning assets maturing or repricing within one
year, and interest-bearing liabilities maturing or repricing within one year,
was a negative -26.37% of total assets. A gap is considered positive when the
amount of interest rate sensitive assets exceeds the amount of interest rate
sensitive liabilities. A gap is considered negative when the amount of interest
rate sensitive liabilities exceeds the amount of interest rate sensitive assets.
Accordingly, during a period of rising interest rates, an institution with a
negative gap position generally would not be in as favorable a position,
compared to an institution with a positive gap, to invest in higher yielding
assets. The resulting yield on the institution's assets generally would increase
at a slower rate than the increase in its cost of interest-bearing liabilities.
Conversely, during a period of falling interest rates, an institution with a
negative gap would tend to experience a repricing of its assets at a slower rate
than its interest-bearing liabilities which, consequently, would generally
result in its net interest income growing at a faster rate than an institution
with a positive gap position.

The following table sets forth the amortized cost of interest-earning assets
and interest-bearing liabilities outstanding at March 31, 1999, which are
anticipated by Westborough Savings, based upon certain assumptions, to reprice
or mature in each of the future time periods shown. Except as stated below, the
amount of assets and liabilities shown which reprice or mature during a
particular period were determined in accordance with the earlier term to
repricing or the contractual maturity of the asset or liability. The table sets
forth an approximation of the projected repricing of assets and liabilities at
March 31, 1999, on the basis of contractual maturities, anticipated prepayments
and scheduled rate adjustments within in a three month period and subsequent
projected time intervals. The loan amounts in the table reflect principal
balances expected to be redeployed and/or repriced as a result of contractual
amortization and anticipated prepayments of adjustable-rate and fixed rate
loans, and as a result of contractual rate adjustments on adjustable-rate loans.
The annual prepayment rate for loans (other than consumer loans) and
mortgage-backed securities is assumed to range between 8% and 12% depending upon
the type of loan, and the annual prepayment rate for consumer loans is assumed
to be 25%.

GAP TABLE

AMOUNTS MATURING OR REPRICING AS OF MARCH 31, 1999
-----------------------------------------------------------------------

LESS THAN 3 6 MONTHS TO
MONTHS 3-6 MONTHS 1 YEAR 1 TO 3 YEARS 3 TO 5 YEARS 5 TO 10 YEARS > 10 YRS.
------------- ----------- ------------- ------------- ------------- ------------- -----------
INTEREST EARNING ASSETS(1)
Short term investments
(2)...................... $ 9,880 $ -- $ -- $ -- $ -- $ -- $ --
Investment securities(3)... 11,042 504 3,052 20,546 7,077 5,391 1,864
Mortgage and assets backed
securities............... 96 0 998 317 1,127 11,953
Loans(4)................... 8,930 2,887 4,732 11,013 4,308 10,634 44,705
------ ----------- ------------- ------------- ------ ------------- -----------
Total interest earning
assets................... 29,852 3,487 7,784 32,557 11,702 17,152 58,522
------ ----------- ------------- ------------- ------ ------------- -----------
INTEREST-BEARING
LIABILITIES
NOW accounts(5)............ 1,353 1,353 1,353 1,353 -- -- 8,115
Regular and other savings
accounts(5).............. 6,374 6,374 6,374 6,374 -- -- 38,247
Money market deposit
accounts(5).............. 692 692 692 692 -- -- 4,148
Certificate of deposit
accounts................. 16,327 7,246 15,677 9,262 12 -- --
Federal Home Loan Bank
borrowings(6)............ -- -- -- 2,000 -- 2,000 --
Mortgage escrow deposits... 199 -- -- -- -- -- --
------ ----------- ------------- ------------- ------ ------------- -----------
Total interest bearing
liabilities.............. 24,945 15,665 24,096 19,681 12 2,000 50,510
------ ----------- ------------- ------------- ------ ------------- -----------
Interest sensitivity gap... (4,907) (12,178) (16,312) 12,876 11,690 15,152 8,012
Cumulative interest
sensitivity gap.......... (4,907) (7,271) (23,583) (10,707) (983) (16,135) 24,147
Cumulative interest
sensitivity gap as a
percent of total
assets................... 2.93% (4.34)% (14.08)% (6.39)% 0.59% 9.63% 14.41%
Cumulative interest
sensitivity gap as a
percent of total interest
earning assets........... 3.05% (4.51)% (14.64)% (6.65)% 0.61% 10.02% 14.99%
Cumulative interest
sensitivity gap as a
percent of total interest
bearing liabilities...... 3.58% (5.31)% (17.23)% (7.82)% 0.72% 11.79% 17.64%

TOTAL
---------
INTEREST EARNING ASSETS(1)
Short term investments
(2)...................... $ 9,880
Investment securities(3)... 49,476
Mortgage and assets backed
securities............... 14,491
Loans(4)................... 87,209
---------
Total interest earning
assets................... 161,056
---------
INTEREST-BEARING
LIABILITIES
NOW accounts(5)............ 13,527
Regular and other savings
accounts(5).............. 63,743
Money market deposit
accounts(5).............. 6,916
Certificate of deposit
accounts................. 48,524
Federal Home Loan Bank
borrowings(6)............ 4,000
Mortgage escrow deposits... 199
---------
Total interest bearing
liabilities.............. 136,909
---------
Interest sensitivity gap... 24,148
Cumulative interest
sensitivity gap..........
Cumulative interest
sensitivity gap as a
percent of total
assets...................
Cumulative interest
sensitivity gap as a
percent of total interest
earning assets...........
Cumulative interest
sensitivity gap as a
percent of total interest
bearing liabilities......

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

(1) Interest earning assets are included in the period in which the balances are
expected to be redeployed and/or repriced as a result of anticipated
prepayments, scheduled rate adjustment and contractual maturities.

(2) Short Term investments include Fed Funds, Bank Investment Fund and interest
earning amounts in the Federal Home Loan Bank of Boston.

(3) Investment securities are at market value. Common stock and stock in the
Federal Home Loan Bank are included in the less than 3 month column.

(4) Loans are principal balances, net of deferred loan costs and unadvanced
funds.

(5) 60% of NOW, regular and other savings and money market deposit accounts are
included in the over ten year period and the remaining allocated evenly
within the four intervals up to and including one to six years.

(6) Federal Home Loan Bank borrowings are categorized by contractual maturity
date.

Certain shortcomings are inherent in the method of analysis presented in the
gap table. For example, although certain assets and liabilities may have similar
maturities or periods to repricing, they may react in different degrees to
changes in market interest rates. Also, the interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets such as

adjustable-rate loans, have features which restrict changes in interest rates
both on a short-term basis and over the life of the asset. Further, in the event
of changes in interest rates, prepayment and early withdrawal levels would
likely deviate significantly from those assumed in calculating the table.
Finally, the ability of many borrowers to service their adjustable-rate loans
may decrease in the event of an interest rate increase.

ANALYSIS OF NET INTEREST INCOME

Net interest income represents the difference between the interest income we
earn on our interest-earning assets, such as mortgage loans, mortgage-backed
securities and investment securities, and the expense we pay on our
interest-bearing liabilities, such as deposits and borrowings. Net interest
income depends on our volume of interest-earning assets and interest-bearing
liabilities and the interest rates we earned or paid on them.

AVERAGE BALANCE SHEET

The following tables set forth certain information relating Westborough
Savings' financial condition and net interest income at and for the six months
ended March 31, 1999 and 1998 and for the years ended September 30, 1998, 1997
and 1996, and reflects the average yield on assets and average cost of
liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense by the average balance of assets or liabilities,
respectively, for the periods shown. Average balances are derived from average
daily balances. The yields include fees which are considered adjustments to
yields.

AT MARCH 31, FOR THE SIX MONTHS ENDED MARCH 31,
---------------------- -----------------------------------------------------------

1999 1999 1998
---------------------- ----------------------------------- ----------------------

AVERAGE AVERAGE
ACTUAL YIELD/ AVERAGE YIELD/ AVERAGE
BALANCE COST BALANCE INTEREST COST BALANCE INTEREST
--------- ----------- --------- ----------- ----------- --------- -----------
(IN THOUSANDS)

ASSETS:
INTEREST EARNING ASSETS:
Short term investments(1)............... $ 9,880 4.50% $ 8,900 $ 202 4.54% $ 5,427 $ 162
Investment securities(2)................ 63,967 6.01 61,981 1,853 5.98 63,370 1,963
Loans(3)................................ 86,352 7.30 84,136 3,124 7.43 72,298 2,827
--------- ----------- --------- ----------- ----------- --------- -----------
Total interest earning assets......... 160,199 6.61 155,017 5,179 6.68 141,095 4,952
Noninterest earning assets.............. 7,332 5,819 5,812
--------- --------- ---------
Total assets.......................... $ 167,531 $ 160,836 $ 146,907
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND EQUITY:
INTEREST BEARING LIABILITIES:
NOW accounts............................ $ 13,527 0.50% $ 13,123 $ 33 0.50% $ 11,095 $ 43
Savings accounts(4)..................... 63,942 3.44 61,114 1,033 3.38 54,171 891
Money market deposit accounts........... 6,916 2.95 6,827 101 2.96 8,811 129
Certificate of deposit accounts......... 48,524 5.14 47,659 1,207 5.07 46,180 1,209
--------- ----------- --------- ----------- ----------- --------- -----------
Total interest bearing deposits....... 132,909 3.74 128,723 2,374 3.69 120,257 2,272
Borrowed funds............................ 4,000 5.09 2,395 55 4.59 -- --
--------- ----------- --------- ----------- ----------- --------- -----------
Total interest bearing liabilities.... 136,909 3.78 131,118 2,429 3.71 120,257 2,272

Noninterest bearing deposits............ 10,261 9,317 7,935

Other noninterest bearing liabilities... 750 841 1,023
--------- --------- ---------
Total noninterest bearing
liabilities......................... 11,011 10,158 8,958
--------- --------- ---------
Total liabilities....................... 147,920 141,276 129,215
Total surplus........................... 19,611 19,560 17,692
--------- --------- ---------
Total liabilities and surplus........... $ 167,531 $ 160,836 $ 146,907
--------- --------- ---------
--------- --------- ---------
Net interest income....................... $ 2,750 $ 2,680
----------- -----------
----------- -----------
Net interest rate spread(5)............... 2.83% 2.97%
----------- -----------
----------- -----------
Net interest margin(6).................... 3.55%
-----------
-----------
Ratio of interest earning assets to
interest bearing liabilities............ 117.01% 118.23%
----------- -----------
----------- -----------

AVERAGE
YIELD/
COST
-----------

ASSETS:
INTEREST EARNING ASSETS:
Short term investments(1)............... 5.97%
Investment securities(2)................ 6.20
Loans(3)................................ 7.82
-----------
Total interest earning assets......... 7.02
Noninterest earning assets..............

Total assets..........................

LIABILITIES AND EQUITY:
INTEREST BEARING LIABILITIES:
NOW accounts............................ 0.78%
Savings accounts(4)..................... 3.29
Money market deposit accounts........... 2.93
Certificate of deposit accounts......... 5.24
-----------
Total interest bearing deposits....... 3.78
Borrowed funds............................ --
-----------
Total interest bearing liabilities.... 3.78
Noninterest bearing deposits............
Other noninterest bearing liabilities...

Total noninterest bearing
liabilities.........................

Total liabilities.......................
Total surplus...........................

Total liabilities and surplus...........

Net interest income.......................

Net interest rate spread(5)............... 3.24%
-----------
-----------
Net interest margin(6).................... 3.80%
-----------
-----------
Ratio of interest earning assets to
interest bearing liabilities............ 117.33%
-----------
-----------

(FOOTNOTES ON FOLLOWING PAGE)

FOR THE YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------------------------------

1998 1997 1996
----------------------------------- ----------------------------------- ----------------------

AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE
BALANCE INTEREST COST BALANCE INTEREST COST BALANCE INTEREST
--------- ----------- ----------- --------- ----------- ----------- --------- -----------
(IN THOUSANDS)

ASSETS:
INTEREST EARNING ASSETS:
Short term investments(1)....... $ 5,358 $ 306 5.71% $ 4,762 $ 266 5.59% $ 4,650 $ 265
Investment securities(2)........ 61,307 3,743 6.11 62,091 3,953 6.37 58,709 3,578
Loans(3)........................ 76,357 5,884 7.71 67,618 5,242 7.75 61,544 4,868
--------- ----------- --------- ----------- --------- -----------
Total interest earning
assets...................... 143,022 9,933 6.95 134,471 9,461 7.04 124,903 8,711
--------- ----------- --------- ----------- --------- -----------
Noninterest earning assets...... 5,857 5,701 5,541
--------- --------- ---------
Total assets.................. $ 148,879 $ 140,172 $ 130,444
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND EQUITY:
INTEREST BEARING LIABILITIES:
NOW accounts.................... $ 11,743 $ 73 0.62% $ 10,575 $ 108 1.02% $ 10,540 $ 119
Savings accounts(4)............. 55,403 1,848 3.34 46,959 1,457 3.10 37,265 1,006
Money market deposit accounts... 8,082 238 2.94 9,973 294 2.95 12,921 363
Certificate of deposit
accounts...................... 46,105 2,396 5.20 46,484 2,426 5.22 47,726 2,549
--------- ----------- --------- ----------- ---------
Total interest bearing
deposits.................... 121,333 4,555 3.75 113,991 4,285 3.76 108,452 4,037
Borrowed funds.................. 33 2 6.06 2,330 141 6.05 42 0
--------- ----------- --------- ----------- ---------
Total interest bearing
liabilities................. 121,366 4,557 3.75 116,321 4,426 3.80 108,494 4,037

Noninterest bearing deposits.... 8,480 6,590 5,613
Other noninterest bearing
liabilities................... 923 1,027 1,183
--------- --------- ---------
Total noninterest bearing
liabilities................. 9,403 7,617 6,796
Total liabilities............... 130,769 123,938 115,290
Total surplus................... 18,110 16,234 15,154
--------- --------- ---------
Total liabilities and surplus... $ 148,879 $ 140,172 $ 130,444
--------- --------- ---------
--------- --------- ---------
Net interest income............... $ 5,376 $ 5,035 $ 4,674
----------- ----------- -----------
----------- ----------- -----------
Net interest rate spread(5)....... 3.20% 3.24%
----------- -----------
----------- -----------
Net interest margin(6)............ 3.76% 3.74%
----------- -----------
----------- -----------
Ratio of interest earning assets
to interest bearing
liabilities..................... 117.84% 115.60%
----------- -----------
----------- -----------

AVERAGE
YIELD/
COST
-----------

ASSETS:
INTEREST EARNING ASSETS:
Short term investments(1)....... 5.70%
Investment securities(2)........ 6.09
Loans(3)........................ 7.91
-----------
Total interest earning
assets...................... 6.97

Noninterest earning assets......

Total assets..................

LIABILITIES AND EQUITY:
INTEREST BEARING LIABILITIES:
NOW accounts.................... 1.13%
Savings accounts(4)............. 2.70
Money market deposit accounts... 2.81
Certificate of deposit
accounts...................... 5.34
-----------
Total interest bearing
deposits.................... 3.72
Borrowed funds.................. 0.00
-----------
Total interest bearing
liabilities................. 3.72
Noninterest bearing deposits....
Other noninterest bearing
liabilities...................

Total noninterest bearing
liabilities.................
Total liabilities...............
Total surplus...................

Total liabilities and surplus...

Net interest income...............

Net interest rate spread(5)....... 3.25%
-----------
-----------
Net interest margin(6)............ 3.74%
-----------
-----------
Ratio of interest earning assets
to interest bearing
liabilities..................... 115.12%
-----------
-----------

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

(1) Short term investments includes federal funds sold.

(2) All investment securities are considered available for sale.

(3) Loans are net of deferred loan origination costs (fees), allowance for loan
losses and unadvanced funds.

(4) Savings accounts include the balance in mortgagors' escrow accounts.

(5) Net interest rate spread represents the difference between the weighted
average yield on interest earning assets and the weighted average cost of
interest bearing liabilities.

(6) Net interest margin represents net interest income as a percentage of
average interest earning assets.

RATE/VOLUME ANALYSIS. The following table presents the extent to which
changes in interest rates and changes in the volume of interest-earning assets
and interest-bearing liabilities have affected our interest income and interest
expense during the periods indicated. Information is provided in each category
with respect to:

(1) changes attributable to changes in volume (changes in volume multiplied
by prior rate);

(2) changes attributable to changes in rate (changes in rate multiplied by
prior volume); and

(3) the net change.

The changes attributable to the combined impact of volume and rate have been
allocated proportionately to the changes due to volume and the changes due to
rate.

FOR THE SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 1998
MARCH 31, 1999 COMPARED TO
COMPARED TO YEAR ENDED
SIX MONTHS ENDED MARCH 31, 1998
SEPTEMBER 30, 1997
INCREASE/(DECREASE) INCREASE/(DECREASE)
----------------------------------- ---------------------------------

DUE TO DUE TO
------------------------ ----------------------

VOLUME RATE NET VOLUME RATE NET
----------- ----------- --------- ----------- --------- ---------
(IN THOUSANDS)

Interest earning assets:
Short term investments(1)............................ $ 86 $ (46) $ 40 $ 34 $ 6 $ 40
Investment securities(2)............................. (42) (68) (110) (50) (160) (210)
Loans(3)............................................. 444 (147) 297 669 (27) 642
----- ----- --------- ----- --------- ---------
Total interest earning assets...................... 488 (261) 227 653 (181) 472
----- ----- --------- ----- --------- ---------
Interest bearing liabilities:
NOW accounts......................................... 7 (17) (10) 11 (46) (35)
Savings accounts(4).................................. 117 25 142 273 118 391
Money market deposit accounts........................ (29) 1 (28) (55) (1) (56)
Certificate of deposit accounts...................... 38 (40) (2) (21) (9) (30)
----- ----- --------- ----- --------- ---------
Total interest bearing deposits.................... 133 (31) 102 208 62 270
Borrowed funds....................................... 55 -- 55 (139) -- (139)
----- ----- --------- ----- --------- ---------
Total interest bearing liabilities................. 188 (31) 157 69 62 131
----- ----- --------- ----- --------- ---------
Net change in net interest income.................... $ 300 $ (230) $ 70 $ 584 $ (243) $ 341
----- ----- --------- ----- --------- ---------
----- ----- --------- ----- --------- ---------

YEAR ENDED SEPTEMBER 30, 1997

COMPARED TO YEAR ENDED

SEPTEMBER 30, 1996
INCREASE/(DECREASE)
---------------------------------

DUE TO
----------------------
VOLUME RATE NET
----------- --------- ---------

Interest earning assets:
Short term investments(1)............................ $ 6 $ (5) $ 1
Investment securities(2)............................. 209 166 375
Loans(3)............................................. 473 (99) 374
----- --------- ---------
Total interest earning assets...................... 688 62 750
----- --------- ---------
Interest bearing liabilities:
NOW accounts......................................... 1 (12) (11)
Savings accounts(4).................................. 287 164 451
Money market deposit accounts........................ (86) 17 (69)
Certificate of deposit accounts...................... (66) (57) (123)
----- --------- ---------
Total interest bearing deposits.................... 136 112 248
Borrowed funds....................................... 141 -- 141
----- --------- ---------
Total interest bearing liabilities................. 277 112 389
----- --------- ---------
Net change in net interest income.................... $ 411 $ (50) $ 361
----- --------- ---------
----- --------- ---------

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

(1) Short term investments includes federal funds sold.

(2) All investment securities are considered available for sale.

(3) Loans are net of deferred loan origination costs (fees), allowance for loan
losses and unadvanced loan funds.

(4) Savings accounts include the balance in mortgagors' escrow accounts.

COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1999 AND SEPTEMBER 30, 1998

During this six month period, Westborough Savings' total assets increased by
$9.0 million, or 5.7%, to $167.5 million at March 31, 1999 from $158.5 million
at September 30, 1998. Our asset growth reflected a $4.0 million increase in net
loans, primarily consisting of originations of fixed rate loans on residential
real estate. Net loans were $86.4 million, or 51.6% of total assets, at March
31, 1999 as compared to $82.3 million, or 51.9%, at September 30, 1998. Our
asset growth also reflected a $3.9 million net increase in securities available
for sale. Within the securities available for sale category, marketable equity
securities at March 31, 1999 were $8.0 million compared to $5.1 million at
September 30, 1998. The increase in loans and securities was funded through an
increase in deposits and Federal Home Loan Bank advances. Total deposits
increased by $7.0 million to $143.0 million at March 31, 1999 compared to $136.0
million at September 30, 1998. The increase in deposits was predominantly
attributable to Westborough Savings' tiered rate savings accounts and to
noninterest bearing commercial and demand deposit accounts. Total advances
outstanding from the Federal Home Loan Bank of Boston were $4.0 million at March
31, 1999 compared to $2.0 million at September 30, 1998. Total surplus increased
$244 thousand, or 1.3% to $19.6 million at March 31, 1999 compared to $19.4
million at September 30, 1998 as a result of net income of $824 thousand and a
decline in the net unrealized gain on securities available for sale of $580
thousand.

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997

Westborough Savings' total assets increased by $14.6 million, or 10.2%, to
$158.5 million at September 30, 1998 from $143.9 million at September 30, 1997.
Our asset growth reflected a $11.8 million increase in net loans due to
increased origination of fixed rate loans and commencement of our emphasis on
commercial and commercial real estate lending during 1998. Net loans were $82.3
million, or 51.9% of total assets, at September 30, 1998 as compared to $70.6
million, or 49.1% of total assets, at September 30, 1997. The increase in loans
was funded through an increase in deposits. Securities held by Westborough
Savings decreased by $1.6 million, or 2.6%, to $59.3 million at September 30,
1998 from $60.9 million at September 30, 1997. Total deposits increased by $10.8
million, or 8.6%, to $136.0 million at September 30, 1998 from $125.2 million at
September 30, 1997. Deposits increased due to increases in NOW, demand deposit
and tiered rate savings accounts. Total advances from the Federal Home Loan Bank
of Boston were $2.0 million at September 30, 1998 compared to none at September
30, 1997. Total equity increased by $1.9 million, or 11.0%, to $19.4 million at
September 30, 1998 from $17.5 million at September 30, 1997 as a result of net
income of $1.3 million and an increase in the net unrealized gain on securities
available for sale of $0.6 million.

COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND 1998

NET INCOME

Westborough Savings' net income depends primarily on its net interest
income, which is the difference between interest earned on interest earning
assets, consisting primarily of loans and securities, and the interest paid on
interest bearing liabilities, consisting primarily of deposits and borrowing.
Net interest income is the function of Westborough Savings' interest rate
spread, which is the difference between the average yield earned on interest
earning assets and the average rate paid on interest bearing liabilities, as
well as a function of the average volumes of interest earning assets as compared
to interest bearing liabilities. Westborough Savings' earnings were also
affected by its level of banking service fees, investment activity, and other
income, as well as its level of operating expenses, including salaries and
employee benefits, occupancy and equipment expenses, data processing, marketing
and other expenses.

Net income for the six months ended March 31, 1999 was $824 thousand
compared to $714 thousand for the six months ended March 31, 1998. The increase
was primarily due to an increase

in net gains on the sales and disposition of securities, income from options
written on equity securities held in our portfolio as part of our "covered call"
program and increased net interest income, offset by increases in the level of
operating expenses.

Our "covered call" program involves the sale of options which convey the
right, but not the obligation, to buyers to buy a particular stock held by
Westborough Savings at a particular price up to a certain expiration date. It is
"covered" because Westborough Savings holds the security in its portfolio.
Westborough Savings writes call options only on stock it desires to own, and
such sales represent an income enhancement to a stock purchased on its own
merit. However, Westborough Savings is willing to have the stock called if an
option is written and exercised. We expect to continue writing options on equity
securities which are held in our investment portfolio as a way to secure a gain
on appreciated securities.

INTEREST AND DIVIDEND INCOME

Total interest and dividend income increased by $227 thousand, or 4.6%, to
$5.2 million for the six months ended March 31, 1999 from $5.0 million for the
six months ended March 31, 1998. The increase was primarily due to an increase
in the average volume of interest earning assets offset by a decline in the
average rate earned on interest earning assets. Average loan balances increased
$11.8 million during this period and average short-term investments and
investment security balances increased by $2.1 million. However, the average
rate earned on investment securities and loans declined during this period and
reflected the effects on a generally declining interest rate environment for new
loans and investments. The average yield for the investment portfolio declined
to 5.98% for the six months ended March 31, 1999, from 6.20% for the six months
ended March 31, 1998. The average yield on loans declined to 7.43% for the six
months ended March 31, 1999 as compared to 7.82% for the six months ended March
31, 1998, reflecting the origination of loans at less than the yield on the
existing loan portfolio. The increase in average loan balances resulted
primarily from the origination and refinancing of one-to-four family fixed-rate
mortgage loans in a continuing low interest rate environment. We also
experienced an increase in the average volume of investments in equity
investments. The average balance of equity investments increased to $8.1 million
for the six months ended March 31, 1999 from $2.8 million for the six months
ended March 31, 1998. The additional investments were comprised of rated trust
preferred securities and equity securities.

INTEREST EXPENSE

Total interest expense increased by $157 thousand or 6.9%, to $2.4 million
for the six months ended March 31, 1999 from $2.3 million for the six months
ended March 31, 1998. The increase was primarily due to an increase in the
average volume of interest bearing liabilities offset by a decline in the
average rate paid on interest bearing liabilities. The average balance of
interest bearing liabilities increased by $10.9 million during the most recent
period and such increases occurred mostly in the savings account category. The
average balance of savings accounts for the six months ended March 31, 1999 was
$61.1 million as compared to an average balance for the six months ended March
31, 1998 of $54.2 million. Westborough Savings offers a tiered rate savings
account which has a rate that increases based upon rising balances. The
relatively low interest rate environment makes this type of deposit very
popular. Also during this period, the average balance of NOW and interest
bearing accounts for the six months ended March 31, 1999 was $13.1 million as
compared to an average balance for the six months ended March 31, 1998 of $11.1
million. Alternatively, during this period, the average balance of money market
deposit accounts for the six months ended March 31, 1999 was $6.8 million as
compared to an average balance for the six months ended March 31, 1998 of $8.8
million. Westborough Savings experienced a shift to tiered rate savings accounts
from money market deposit accounts, as customers searched for higher yielding
accounts. Borrowings from the Federal Home Loan Bank of Boston also increased
during this period to fund prospective loans. The average borrowing from the
Federal Home

Loan Bank for the six months ended March 31, 1999 was $2.4 million as compared
to $0 for the six months ended March 31, 1998. The average cost of all interest
bearing liabilities was 3.71% for the six months ended March 31, 1999, down from
3.78% for the period ended March 31, 1998. Due to a declining interest rate
market during the six month period ended March 31, 1999, as certificates of
deposit matured, they were generally reinvested at lower rates of interest.
Also, during this most recent period, we reduced the rate paid on NOW and
interest bearing checking accounts to 0.50% from 1.00%.

NET INTEREST INCOME

For the six months ended March 31, 1999 and 1998, net interest income was
$2.8 million and $2.7 million, respectively. The $70 thousand increase in net
interest income was primarily attributable to a $3.1 million increase in average
net earning assets (interest earning assets less interest bearing liabilities),
coupled with a 0.27% decline in the net interest rate spread to 2.97% from
3.24%.

PROVISION FOR LOAN LOSSES

Westborough Savings records a provision for loan losses, which is charged to
earnings, in order to maintain the allowance for loan losses at a level which is
considered appropriate to absorb loan losses inherent in the existing portfolio.
In determining the appropriate level of the allowance for loan losses,
management considers past and anticipated loss experience, evaluations of real
estate collateral, current and anticipated economic conditions, volume and type
of lending and the levels of non-performing and other classified loans. The
amount of the allowance is based on estimates and the ultimate losses may vary
from such estimates. Management of Westborough Savings assesses the allowance
for loan losses on a quarterly basis and makes provisions for loan losses in
order to maintain the adequacy of the allowance.

Westborough Savings' provision increased by $5 thousand to $25 thousand for
the six months ended March 31, 1999 from $20 thousand for the six months ended
March 31, 1998. This moderate increase reflects our continued loan portfolio
growth, including commercial real estate loans. Westborough Savings has
historically had an extremely low level of non-performing loans. At March 31,
1999, we had no non-performing loans. As we expand our commercial lending,
however, increases in the provision are likely.

OTHER INCOME

Other income consists primarily of fee income for Westborough Savings'
services, gains and losses from the sale of securities and income from the sale
of options to buy common stock held in our portfolio at a certain price. Total
other income increased by $435 thousand to $630 thousand for the six months
ended March 31, 1999 from $195 thousand for the six month period ended March 31,
1998. Gains on the sale of securities, primarily common stocks, accounted for
approximately $226 thousand of the increase. Income from the sale of "covered
call" options accounted for $187 thousand of the increase in other income. To a
lesser extent, customer service fees increased $18 thousand during the period
due to higher volume of checking accounts.

OPERATING EXPENSE

For the six months ended March 31, 1999, operating expenses increased $390
thousand, to $2.1 million, from $1.7 million for the six month period ended
March 31, 1998. The increase was primarily due to a $216 thousand increase in
salaries and benefits, a $51 thousand increase in occupancy and equipment, a $26
thousand increase in data processing and a $65 thousand increase in other
general expenses.

Salary and benefits expenses increased mainly due to senior management
bonuses of $48 thousand, additional staff in marketing and commercial services,
retail staff incentive commissions and general increases in salary based upon
merit. Occupancy and equipment expenses increased due to occupancy expenses
associated with Westborough Savings' lease of space for its operations center
and also increased depreciation on equipment. Data processing expenses increased
due to a higher level of transaction-based activity and increases in expenses
associated with Westborough Savings' data processing service, NCR. Other general
expenses have increased primarily due to an increase in the frequency of board
meetings, mostly associated with strategic planning issues and meetings
concerning the formation of a mutual holding company. Operating expenses are
also expected to increase in future periods due to future branch, products and
service expansion, and the increased cost of operating as a mutual holding
company.

INCOME TAXES

Income tax expense was $413 thousand for the six months ended March 31,
1999, unchanged from the six month period ended March 31, 1998, representing an
effective income tax rate of 33.4% and 36.6% respectively. The lower effective
tax rate reflected, in part, the tax benefits associated with a higher level of
dividend received deductions on our increased level of investment securities.
The effective tax rate also reflects the utilization of two securities
investment subsidiaries to substantially reduce state income taxes.

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997

NET INCOME

Westborough Savings' net income remained stable at $1.3 million for the
years ended September 30, 1998 and 1997. The return on average assets and the
return on average equity for the year ended September 30, 1998 were 0.88% and
7.25%, respectively, compared to 0.93% and 8.06% for the year ended September
30, 1997.

INTEREST AND DIVIDEND INCOME

Total interest and dividend income increased by $472 thousand or 5.0% to
$9.9 million for the year ended September 30, 1998 from $9.5 million for the
year ended September 30, 1997. The increase in interest and dividend income was
primarily a result of a higher volume of loan originations. While the average
balance of loans increased $8.7 million during this period, the average rate for
those loans declined to 7.71%, from 7.75%.

INTEREST EXPENSE

Total interest expense increased by $131 thousand, or 3.0%, to $4.6 million
for the year ended September 30, 1998 from $4.4 million for the year ended
September 30, 1997. Interest expense on deposits increased $270 thousand, or
6.3%, from $4.3 million for the year ended September 30, 1997 to $4.6 million
for the year ended September 30, 1998. Interest expense on advances from the
Federal Home Loan Bank declined by $139 thousand for the year ended September
30, 1998 from $141 thousand for year ended September 30, 1997 compared to $2
thousand for year ended September 30, 1998 based on a lower average balance
during the period. The overall increase in interest expenses of $131 thousand
was primarily due to a higher average balance of interest bearing liabilities.
Average balances of savings accounts increased by $8.4 million for the year
ended September 30, 1998 compared to the year ended September 30, 1997.

NET INTEREST INCOME

Net interest income for the year ended September 30, 1998 was $5.4 million
as compared to $5.0 million for the year ended September 30, 1997. The $341
thousand, or 6.8%, increase can be attributed mainly to an increased balance of
interest earning assets, resulting from a greater volume of loan originations,
offset by an increased balance of interest bearing deposits. The average yield
on interest earning assets decreased 9 basis points to 6.95% for the year ended
September 30, 1998 from 7.04% for the year ended September 30, 1997, while the
average cost of interest bearing liabilities decreased by 5 basis points to
3.75% for the year ended September 30, 1998 from 3.80% for the year ended
September 30, 1997.

Westborough Savings' net interest rate spread, which reflects the difference
between the weighted average yield on interest earning assets and the weighted
average cost of interest bearing liabilities, declined 4 basis points to 3.20%
for the year ended September 30, 1998 compared to 3.24% for the year ended
September 30, 1997. The average balance of loans on real estate increased by
$8.1 million for the year ended September 30, 1998 compared to the year ended
September 30, 1997. The average balance of commercial loans increased by $733
thousand for the year ended September 30, 1998 compared to the year ended
September 30, 1997. However, due to customer refinancing of existing adjustable
and fixed rate loans from higher rates to lower rates, coupled with a declining
interest rate environment for new loans, the overall rate earned on our loan
portfolio declined to 7.71% for the year ended September 30, 1998 compared to
7.75% for the year ended September 30, 1997. The average balance of savings
accounts increased by $8.4 million for the year ended September 30, 1998
compared to the year ended September 30, 1997.

PROVISION FOR LOAN LOSSES

The allowance for loan losses is maintained through the provision for loan
losses which is a charge to operations. The provision for loan losses was $39
thousand for the year ended September 30, 1998 as compared to $96 thousand for
the year ended September 30, 1997. The higher provision in 1997 was established
to accommodate a higher level of commercial lending in the future. At September
30, 1998, the balance of the allowance for loan losses was $827 thousand, or
0.99% of total loans before the allowance for loan losses. During the year ended
September 30, 1998, there were no charge-offs against the allowance for loan
losses. At September 30, 1997, the balance of the allowance for loan losses was
$786 thousand, or 1.10% of total loans before the allowance for loan losses.
During the year ended September 30, 1997, there was $2 thousand in charge-offs
against the allowance for loan losses and $2 thousand in recoveries of
previously charged-off loans.

OTHER INCOME

Other income was $383 thousand for the year ended September 30, 1998
compared to $608 thousand for the year ended September 30, 1997. The $225
thousand, or 37.0% decrease, was primarily the result of a $247 thousand
decrease in the net gain on sale and disposition of securities offset by
moderate increases in customer service fees and loan fees due to higher volume.
This decrease is attributable, in part, to the establishment by Westborough
Savings of a private charitable foundation which we funded by a donation of
marketable equity securities with a fair value of $110 thousand at the date of
transfer. We anticipate increases to other income as we continue to expand the
volume of our deposit and lending relationships. It is also our goal to increase
its level of other income by continually considering additional sources of
revenue, including expanding the offering of various uninsured investment
products, including fixed-rate and variable annuities and mutual funds, through
relationships with third party broker-dealers and/or money managers and
affiliations with insurance agencies.

OPERATING EXPENSE

Operating expense for the year ended September 30, 1998 remained relatively
stable at $3.7 million when compared to the year ended September 30, 1997 in
which operating expense totaled $3.6 million. While the amounts of operating
expense were comparable, the 1998 period includes increased occupancy and
equipment expenses of $88 thousand associated with our leased operations
department space and equipment depreciation. Annual operating expenses are also
expected to increase in future periods due to future branch, product and service
expansion, and the increased cost of operating as a mutual holding company.

INCOME TAXES

Income tax expense was $750 thousand for the year ended September 30, 1998
as compared to $676 thousand for the year ended September 30, 1997, resulting in
an effective tax rate at September 30, 1998 of 36.4% compared to 34.1% for the
prior period. The effective tax rate reflects the utilization of two securities
investment subsidiaries to substantially reduce state income taxes and the
establishment of Westborough Savings' charitable foundation.

LIQUIDITY AND CAPITAL RESOURCES

The term "liquidity" refers to our ability to generate adequate amounts of
cash to fund loan originations, deposit withdrawals and operating expenses. Our
primary sources of funds are deposits, scheduled amortization and prepayments of
loan principal and mortgage-backed securities, maturities and calls of
investment securities and funds provided by our operations. We also have
expanded our use of borrowings from the Federal Home Loan Bank of Boston as part
of our management of interest rate risk. At March 31, 1999, we had $4.0 million
in outstanding borrowings.

Loan repayments and maturing investment securities are a relatively
predictable source of funds. However, deposit flows, calls of investment
securities and prepayments of loans and mortgage-backed securities are strongly
influenced by interest rates, general and local economic conditions and
competition in the marketplace. These factors reduce the predictability of the
timing of these sources of funds.

Our primary investing activities are the origination of one- to four-family
real estate and other loans, the purchase of mortgage-backed securities and the
purchase of investment securities. During the six months ended March 31, 1999
and the years ended September 30, 1998 and 1997, we originated loans of $22.0
million, $38.9 million and $34.1 million, respectively. Purchases of
mortgage-backed securities were $4.4 million for the six months ended March 31,
1999, and $6.4 million and $1.4 million for the years ended September 30, 1998
and 1997, respectively. Purchases of investment securities were $9.9 million for
the six months ended March 31, 1999, and $14.5 million and $11.1 million for the
years ended September 30, 1998 and 1997, respectively.

These investing activities were funded by deposit growth, principal payments
on mortgage loans and mortgage-backed securities, calls and maturities on
investment securities, Federal Home Loan Bank borrowings and funds provided by
our operating activities. Principal repayments on loans and mortgage-backed
securities totaled $20.1 million for the six months ended March 31, 1999 and
$30.9 million and $30.9 million for the years ended September 30, 1998 and 1997,
respectively. Maturities of investment securities totaled $4.0 million during
the six months ended March 31, 1999 and $1.3 million and $3.5 million during the
years ended September 30, 1998 and 1997, respectively. Sales and calls of
investment securities provided cash flows of $3.6 million, $18.0 million and
$8.0 million during the six months ended March 31, 1999 and the years ended
September 30, 1998 and 1997, respectively.

At March 31, 1999, Westborough Savings had loan commitments to borrowers of
$4.0 million, and available home equity lines of credit of $5.2 million. We had
no commitments to purchase mortgage-backed securities at March 31, 1999. Total
deposits increased $7.0 million, $10.8 million and $4.9 million during the six
months ended March 31, 1999 and the years ended September 30, 1998 and 1997,
respectively. Deposit flows are affected by the level of interest rates, the
interest rates and products offered by competitors and other factors.
Certificate of deposit accounts scheduled to mature within one year were $39.3
million at March 31, 1999. Based on our deposit retention experience and current
pricing strategy, we anticipate that a significant portion of these certificates
of deposit will remain with Westborough Savings. We are committed to maintaining
a strong liquidity position; therefore, we monitor our liquidity position on a
daily basis. We also periodically review liquidity information prepared by the
Depositors Insurance Fund and other available reports that compare our liquidity
with banks in our peer group. We anticipate that we will have sufficient funds
to meet our current funding commitments.

In May 1999, we expanded our retail banking franchise by opening an
additional branch location in the town of Shrewsbury. This branch is located in
the Shaws supermarket and start-up costs were approximately $300 thousand. In
the first half of 2000, we also plan to begin to expand our facilities by
constructing an addition to our existing executive office. The construction
expenses for this addition are expected to total approximately $2.5 million. We
anticipate that Westborough Bank will have sufficient funds to meet these
planned capital expenditures throughout 2000.

At March 31, 1999, we exceeded each of the applicable regulatory capital
requirements. Our leverage (tier 1) capital was approximately $19.0 million, or
11.7%. In order to be classified as "well-capitalized" by the FDIC we were
required to have leverage (tier 1) capital of $8.2 million, or 5.0%. To be
classified as a well-capitalized bank by the FDIC, we must also have a
risk-based total capital ratio of 10.0%. At March 31, 1999, we had a risk-based
total capital ratio of 22.5%. See "Regulation of Westborough Savings Bank and
Westborough Financial Services, Inc." for a discussion of the regulatory capital
requirements applicable to Westborough Savings, and see "Regulatory Capital
Compliance" for information regarding the impact of the offering on our capital
position.

Other than with respect to the capital expenditures that are to be made in
connection with our executive office as noted above, we do not anticipate any
material capital expenditures. Further, we do not have any balloon or other
payments due on any long-term obligations or any off-balance sheet items other
than the commitments and unused lines of credit noted above.

RECENT ACCOUNTING PRONOUNCEMENTS

In October 1995, the Financial Accounting Standards Board ("FASB") issued a
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." This Statement encourages all entities to adopt a
fair value based method of accounting for employee stock compensation plans,
whereby compensation cost is measured at the grant date based on the value of
the award and is recognized over the service period, which is usually the
vesting period. However, it also allows an entity to continue to measure
compensation cost for those plans using the intrinsic value based method of
accounting prescribed by Accounting Principle Board Opinion No. 25, "Accounting
for Stock Issued to Employees," whereby compensation cost is the excess, if any,
of the quoted market price of the stock at the grant date (or other measurement
date) over the amount an employee must pay to acquire the stock. Entities
electing to remain with the accounting in Opinion No. 25 must make pro forma
disclosures of net income and earnings per share, as if the fair value based
method of accounting had been applied.

The accounting requirements of this Statement are generally effective for
transactions entered into in fiscal years that begin after December 15, 1995.
The disclosure requirements of this Statement are generally effective for
financial statements for fiscal years beginning after December 15, 1995. It is

anticipated that we will adopt Opinion No. 25 for accounting treatment of stock
options and make the pro forma disclosures required by this Statement.

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share." This
statement establishes standards for computing and presenting earnings per share
and applies to entities with publicly held common stock or potential common
stock. This Statement simplifies the standards for computing earnings per share
previously found in Accounting Principles Board Opinion No. 14, "Earnings per
Share," and makes them comparable to international earnings per share standards.
It replaces the presentation of primary earnings per share with a presentation
of basic earnings per share. It also requires dual presentation of basic and
diluted earnings per share on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic earnings per share computation to the numerator and
denominator of the diluted earnings per share computation. This Statement is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted.

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

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" which establishes standards for the way
that public business enterprises report selected information about operating
segments in annual financial statements. This Statement requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. This Statement supersedes FASB
Statement No. 14, "Financial Reporting for Segments of a Business Enterprise."
Operating segments are components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. This Statement is effective for financial statements for periods
beginning after December 15, 1997 and is not expected to have a material impact
on us.

In February 1998, the FASB issued SFAS No. 132, "Employer's Disclosures
about Pensions and Other Postretirement Benefits," effective for fiscal years
beginning after December 15, 1997. The Statement revises employers' disclosures
about pension and other postretirement plans. It does not change the measurement
or recognition of those plans. The Statement standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practical, requires additional information on changes in the benefits
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that were previously required by
generally accepted accounting principles. We will adopt these disclosure
requirements beginning in the year ending September 30, 1999, and it is not
expected to have a material impact on us.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. This Statement standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity recognize those items
as assets or liabilities in the balance sheet and measure them at fair value. If
certain conditions are met, an entity

may elect to designate a derivative as follows: a hedge of the exposure or
changes in the fair value of a recognized asset or liability, or of an
unrecognized firm commitment that are attributable to a particular risk. A hedge
of the exposure to variability in the cash flows of a recognized asset or
liability, or of a forecasted transaction, that is attributable to a particular
risk. Or, a hedge of the foreign currency exposure of an unrecognized firm
commitment, an available-for-sale security, a forecasted transaction, or a net
investment in a foreign operation. This Statement generally provides for
matching the timing of the recognition of the gain or loss of the hedging
instrument with the recognition of the changes in the fair value of the item
being hedged. Depending on the type of hedge, such recognition will be in either
net income or other comprehensive income. For a derivative not designated as a
hedging instrument, changes in fair value are recognized in net income in the
period of change. Adoption of this Statement by us will require that changes in
fair value of covered call options be recognized in net income. Currently, such
changes are included in a separate component of surplus. We will adopt SFAS No.
133 commencing October 1, 1999, and it is not expected to have a material impact
on us.

YEAR 2000 READINESS DISCLOSURE

BACKGROUND. A significant challenge that is confronting the business
community, including Westborough Savings and its competitors, centers on the
inability of many computer systems and software applications to recognize the
Year 2000 (referred to as the "Y2K issue"). Many existing computer systems and
software applications originally were programmed to provide only two digits to
identify the calendar year. With the Year 2000 approaching, these systems and
applications may recognize "00" as 1900 rather than 2000. If the Y2K issue is
not resolved, our operations could be adversely affected due to the
date-sensitive nature of much of our financial information.

Financial institution regulators have focused on Y2K compliance in recent
years and have issued guidance concerning the responsibilities of our management
and our Board of Trustees. The Federal Financial Institutions Examination
Council ("FFIEC"), a group comprised of representatives from the various
financial institution regulators, has issued several interagency statements on
Y2K issues. These statements have required financial institutions to evaluate
their Y2K exposure, measure their risk of Y2K issues and prepare a plan to
remedy the Y2K issue. Financial institutions also are required to examine the
Y2K implications of their reliance on third-party vendors and the potential
impact of Y2K issues on customers, borrowers and suppliers.

RISK. Similar to other financial institutions and companies that utilize
computer technology, our operations may be significantly affected by the Y2K
issue because of our reliance on electronic data processing technology and
date-sensitive information. The Y2K issue also impacts other aspects of our
non-technical business processes. If the Y2K issue is not adequately addressed,
and systems are not modified to properly identify the Year 2000, computer
systems and software applications may fail or create erroneous information.

If we are affected by the Y2K issue, information that relies on dates, such
as interest calculations, loan payment schedules and other operating functions,
could be significantly incorrect. We may not be able to process withdrawals or
deposits, prepare account statements, or engage in any of the many transactions
that constitute our normal operations. Our inability to adequately address the
Y2K issue could also have a significant adverse effect on our suppliers and
service providers. Should we experience a Y2K failure that cannot readily be
fixed, it may result in a significant adverse impact on our financial condition
and results of operations.

STATE OF READINESS. We believe that technology plays a critical role in our
overall business strategy. We have attempted to stay current with technological
advances in the industry. In this regard, the Board of Trustees and senior
management have consistently supported investment in established and proven
technologies. Because of this philosophy, the Board of Trustees and senior
management have

been actively engaged in managing our Y2K project. Management has consistently
allocated both human and financial resources to this project to achieve the
objectives and time frames mandated by the FFIEC. As discussed below, we believe
that we have considered all material Y2K issues and that we are taking the
proper action to correct them.

We have identified the following mission critical systems: core account
processing, our internal general ledger system, automatic teller services,
electronic funds transfer and our internal network operating system. They are
provided or serviced by NCR, Interactive Planning Systems, Mellon, the Federal
Reserve Bank of Boston, and Novell, respectively. Each of the above listed
services or systems providers have provided Y2K remediated products which have
been tested internally and are being validated by management for Y2K compliance.
Based on testing to date, we believe that many of our applications critical to
daily operations are Y2K compliant.

Our Action Plan for the Year 2000, in accordance with regulatory guidance,
outlines our plans to achieve a successful transition to the Year 2000. The
following summarizes the various phases of our Y2K plan:

AWARENESS PHASE--This initial phase of the Y2K project involved the
appointment of a Y2K review team in June, 1997 lead by Westborough Savings'
Operations Officer, and the subsequent development of a formal Action Plan in
April, 1998. The review team, through the development of the Action Plan,
identified the issues to be resolved, defined objectives to be achieved and
outlined an approach to implement the objectives set forth in the Action Plan.

ASSESSMENT PHASE--During this phase, the review team developed an inventory
listing of all internal computer systems and software applications, as well as
third-party vendors and suppliers upon whom we rely for goods and services. We
also obtained copies of all computer-related licensing agreements and
maintenance contracts, which we reviewed to determine whether they addressed the
issue of Y2K compliance. Based upon this information, we corresponded with each
computer hardware manufacturer, software vendor, and other third party vendors
and suppliers requesting information regarding their Y2K readiness. The review
team evaluated each response received and, based upon such responses, determined
which computer systems and software applications were Y2K compliant. For those
that were not, the review team determined the appropriate corrective action
required and developed a plan for its implementation.

We also have reviewed our customer base to determine whether they pose any
significant Y2K risks. Our customer base consists primarily of individual
depositors and residential mortgage loan borrowers. Individually, these
customers are not likely to pose significant Y2K risks to our operations.
However, it is not possible at this time to evaluate the indirect risks that
could be faced if employers of our individual customers encounter unresolved Y2K
issues.

With respect to our commercial customers, we have corresponded with them
regarding Y2K risks, the nature and scope of the problem and remedial options
available to them. Further, we have asked them to complete a worksheet and
questionnaire regarding their Y2K readiness. Based upon our review of these
worksheets and questionnaires, we have concluded that these borrowers do not
represent a significant risk to our commercial loan portfolio. Nonetheless, we
intend to continue to monitor commercial customers throughout 1999 and early
2000 to mitigate any adverse impact to Westborough Savings' financial stability.
We also carefully consider the Y2K readiness of potential commercial borrowers
in the lending process.

RENOVATION PHASE--Our Operations Officer continues to work closely with the
providers of our mission-critical systems. These, as well as other significant
systems, have been upgraded to Y2K compliant versions of vendor-supported
software. In certain situations, we replaced or upgraded existing non-compliant
systems with new Y2K compliant hardware and software. We have relatively few
data transmission interfaces with third party servicers and substantially all of
these systems have been

renovated for Year 2000 compliance. We have no mission-critical systems that we
developed on our own.

The review team continues to monitor the Y2K progress of those third parties
who provide us with services or products to ensure that they are taking adequate
measures in addressing the Y2K issue. We are seeking written assurances from
these third parties as to their current Year 2000 compliance or that they are in
the process of addressing the Y2K issue. However, we can not assure you that
these third parties will be prepared for the Y2K issue. The failure of these
third parties to achieve Y2K compliance may have an adverse impact on our
operations.

VALIDATION/IMPLEMENTATION PHASES--The validation phase is considered to be
the most critical stage of the Y2K readiness process. It is designed to test the
ability of the renovated systems to accurately process date sensitive data. All
systems and software that have been tested are currently Y2K compliant. The
validation phase is being conducted in accordance with our Year 2000 Testing
Plan and has an estimated completion date of June 30, 1999.

USE OF RESOURCES. Managing theY2K project has resulted in additional direct
and indirect costs. Direct costs include charges by third-party software vendors
for product replacements, upgrades and enhancements, costs involved in testing
for Y2K compliance, costs for customer awareness programs, etc. Indirect costs
consist primarily of time devoted to the project by existing employees for
project development and implementation, the testing of systems, monitoring
third-party vendor and service provider progress, and the development of
contingency plans. The costs of the Y2K project have not been significant to
date, and we believe that the total cost of the project will not be material to
our results of operations or financial condition in any one year. Although we
currently estimate that the total cost of the Y2K project, excluding the
reallocation of internal resources, will be approximately $65 thousand, of which
we have already incurred $56 thousand, we cannot guarantee that such costs would
not become material in the future.

CONTINGENCY PLANNING. Regulatory guidance requires that we consider two
types of contingency planning:

(1) remediation contingency planning, which addresses the failure of an
institution to successfully fix, test or implement its Y2K readiness plan;
and

(2) business resumption contingency planning, which addresses the risks
associated with the failure of systems at critical dates, such as January 1,
2000.

The regulatory guidance provides that if a mission critical application or
system has been remediated, tested and implemented, a remediation contingency
plan is not required. Based on the overall progress of our Y2K project,
specifically the testing and implementation results relative to our mission
critical applications, our review team has concluded that a remediation
contingency plan is not required for such applications.

While we expect to complete our Y2K project in a timely manner, we cannot
guarantee that the systems of companies with whom we conduct business, will also
be completed in a timely manner. The failure of these entities to adequately
address the Y2K issue could adversely affect our ability to conduct business.

To address the risks associated with the failure of mission critical systems
at critical dates, we have developed a business resumption contingency plan to
augment our existing disaster recovery plan. This plan identifies our operating
systems, their criticality, and suggests alternative processing methods if
mission critical systems are adversely affected by the century date change.

We understand that certain events beyond our control may diminish our
ability to provide minimum levels of service. Management considers the
worst-case scenario to be extended power outages and loss of telecommunications.
Failure of these services will affect companies, individuals and

the government, and cannot be remedied by anyone other than the responsible
party. We are preparing to provide minimum levels of service during sporadic
power outages and temporary loss of communications. However, during extensive
losses of power and/or telecommunications, we may temporarily close our
operations.

For some systems, contingency plans will consist of using or reverting to
manual systems until the problems can be corrected. We, however, do not
anticipate any adverse material impact on our operations as a result of the Y2K
issue.

IMPACT OF INFLATION AND CHANGING PRICES

The Financial Statements and accompanying Notes of Westborough Savings have
been prepared in accordance with GAAP. GAAP generally requires the measurement
of financial position and operating results in terms of historical dollars
without consideration for changes in the relative purchasing power of money over
time due to inflation. The impact of inflation is reflected in the increased
cost of our operations. Unlike industrial companies, our assets and liabilities
are primarily monetary in nature. As a result, changes in market interest rates
have a greater impact on performance than do the effects of inflation.

BUSINESS OF WESTBOROUGH SAVINGS BANK

GENERAL

Westborough Savings is a community- and customer-oriented retail savings
bank offering traditional deposit products, residential real estate mortgage
loans and, to a lesser extent, consumer and commercial loans. In addition,
Westborough Savings purchases mortgage-backed securities, securities issued by
the U.S. Government and agencies and other investments permitted by applicable
laws and regulations. We retain substantially all of the loans we originate.

Our revenues are derived principally from interest on our mortgage loans and
mortgage-backed securities and interest and dividends on our investment
securities. Our primary sources of funds are deposits, scheduled amortization
and prepayments of loan principal and mortgage-backed securities, maturities and
calls of investment securities, funds provided by operations and borrowings. See
"--Source of Funds."

MARKET AREA

We conduct our operations out of our main office in Westborough,
Massachusetts. We also operate four other full service branches in the towns of
Westborough, Northborough and Shrewsbury, and a non-public, self-contained
office at the "Willows," a retirement community in Westborough. Our deposits are
gathered from the general public in these towns and the surrounding communities.
Our lending activities are concentrated primarily in the towns where we have
offices, as well as the town of Grafton. These towns are located in east central
Massachusetts, near the central Route 495 belt.

Our market area has grown steadily to achieve a blend of industry, office
parks and residences. The town of Westborough is approximately 12 miles east of
Worcester and 29 miles west of Boston, located at the junction of major
interstate highways constructed in the 1950s and 1960s. The convenient access
provided by Routes 20, 9, I-90 and I-495 has contributed to the diverse economic
base consisting of a retail and commercial section, and a high-tech
manufacturing section.

Among the largest employers in our market area are Data General Corporation,
New England Electric Systems, Massachusetts Electric Company, First Data
Investors and ASTRA Pharmaceutical. The Tufts University School of Veterinary
Medicine also is located in our market area. The unemployment rate for
Westborough was 2.2% as of September 1998, compared to the state unemployment
rate of 3.3% at that time.

Public transportation within our market area is expanding with the addition
of two new mass transit stations. The Massachusetts Bay Transportation Authority
is currently constructing a station in Grafton and has plans to construct a
station in Westborough in late 2000. These stations will provide direct access
to Worcester and Boston for residents in our market area.

Since 1980,our primary market area has experienced increases in both
population and households as individuals and families moved from urban areas
surrounding Boston to more outlying areas with lower cost and newer housing
stock. Estimated 1998 per capita annual income for residents of Westborough was
over $24 thousand, 34% above the Worcester County average and 21% above the
state average. Median household income in Westborough also exceeded the
county-wide average by 23%.

Our future growth opportunities will be influenced by the growth and
stability of the statewide and regional economies, other demographic population
trends and the competitive environment. We believe that we have developed
lending products and marketing strategies to address the diverse credit-related
needs of the residents in our market area.

COMPETITION

We face intense competition both in making loans and attracting deposits.
Central Massachusetts has a high concentration of financial institutions, many
of which are branches of large money center and regional banks which have
resulted from the consolidation of the banking industry in Massachusetts and
surrounding states. Some of these competitors have greater resources than we do
and may offer services that we do not provide.

Our competition for loans comes principally from commercial banks, savings
institutions, mortgage banking firms, credit unions, finance companies, mutual
funds, insurance companies and brokerage and investment banking firms. Our most
direct competition for deposits has historically come from commercial banks,
savings banks, savings and loan associations and credit unions. We face
additional competition for deposits from short-term money market funds and other
corporate and government securities funds and from brokerage firms and insurance
companies. As of June 30, 1998, our market share of deposits in Westborough was
26.3%.

LENDING ACTIVITIES

LOAN PORTFOLIO COMPOSITION. Our loan portfolio primarily consists of one-
to four-family residential first mortgage loans. To a lesser degree, the loan
portfolio includes commercial real estate loans, consumer loans and commercial
loans.

At March 31, 1999, we had total loans of $88.6 million, of which $78.6
million, or 88.7%, were residential first mortgage loans. Of residential first
mortgage loans outstanding at that date, 31.0% were adjustable-rate mortgage, or
ARM loans, and 69.0% were fixed-rate loans. The remainder of our loans at March
31, 1999, amounting to $10.0 million, or 11.3% of total loans, consisted
primarily of commercial real estate and consumer loans, including home equity
credit lines. Commercial real estate loans outstanding at March 31, 1999 totaled
approximately $3.1 million, or 3.5% of total loans. Commercial loans outstanding
at March 31, 1999 totaled $2.1 million, or 2.4% of total loans. Consumer loans
outstanding at March 31, 1999 totaled approximately $1.4 million, or 1.6% of
total loans.

Our loans are subject to federal and state law and regulations. The interest
rates we charge on loans are affected principally by the demand for loans, the
supply of money available for lending purposes and the interest rates offered by
our competitors. These factors are, in turn, affected by general and local
economic conditions, monetary policies of the federal government, including the
Federal Reserve Board, legislative tax policies and governmental budgetary
matters.

The following table presents the composition of our loan portfolio in dollar
amounts and in percentages of the total portfolio at the dates indicated.

AT MARCH 31, AT SEPTEMBER 30,
------------------------ --------------------------------------------------

1999 1998 1997
------------------------ ------------------------ ------------------------

PERCENT PERCENT PERCENT
OF OF OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)

REAL ESTATE LOANS:
Fixed rate mortgage............................ $ 54,207 61.15% $ 47,239 55.81% $ 29,450 40.64%
Variable rate mortgage......................... 24,354 27.48 27,384 32.36 33,812 46.66
Commercial..................................... 3,084 3.48 2,743 3.24 2,915 4.02
Home equity lines of credit.................... 3,503 3.95 3,918 4.63 3,859 5.33
----------- ----------- ----------- ----------- ----------- -----------
Total real estate loans.................... 85,148 96.06 81,284 96.04 70,036 96.65
----------- ----------- ----------- ----------- ----------- -----------
CONSUMER LOANS:
Personal....................................... 666 0.75 858 1.01 1,069 1.48
Deposit secured................................ 586 0.66 676 0.80 557 0.77
Home improvement............................... 129 0.15 132 0.16 73 0.10
----------- ----------- ----------- ----------- ----------- -----------
Total consumer loans....................... 1,381 1.56 1,666 1.97 1,699 2.35
----------- ----------- ----------- ----------- ----------- -----------
COMMERCIAL LOANS:
Commercial lines of credit..................... 705 0.80 599 0.71 293 0.40
Commercial installment......................... 1,401 1.58 1,087 1.28 437 0.60
----------- ----------- ----------- ----------- ----------- -----------
Total commercial loans..................... 2,106 2.38 1,686 1.99 730 1.00
----------- ----------- ----------- ----------- ----------- -----------

Total loans...................................... 88,635 100.00% 84,636 100.00% 72,465 100.00%
----------- ----------- -----------
----------- ----------- -----------
ADJUSTED BY:
Unadvanced loan funds.......................... (1,538) (1,570) (1,177)
Net deferred loan origination costs (fees)..... 112 109 78
----------- ----------- -----------
Total loans before allowance for loan loss..... 87,209 83,175 71,366
LESS:
Allowance for loan loss........................ (857) (827) (786)
----------- ----------- -----------
Net loans.................................... $ 86,352 $ 82,348 $ 70,580
----------- ----------- -----------
----------- ----------- -----------

1996
------------------------
PERCENT
OF
AMOUNT TOTAL
----------- -----------

REAL ESTATE LOANS:
Fixed rate mortgage............................ $ 27,599 41.35%
Variable rate mortgage......................... 30,674 45.96
Commercial..................................... 3,071 4.60
Home equity lines of credit.................... 3,221 4.83
----------- -----------
Total real estate loans.................... 64,565 96.74
----------- -----------
CONSUMER LOANS:
Personal....................................... 986 1.48
Deposit secured................................ 724 1.08
Home improvement............................... 83 0.12
----------- -----------
Total consumer loans....................... 1,793 2.68
----------- -----------
COMMERCIAL LOANS:
Commercial lines of credit..................... 227 0.34
Commercial installment......................... 160 0.24
----------- -----------
Total commercial loans..................... 387 0.58
----------- -----------
Total loans...................................... 66,745 100.00%
-----------
-----------
ADJUSTED BY:
Unadvanced loan funds.......................... (878)
Net deferred loan origination costs (fees)..... 66
-----------
Total loans before allowance for loan loss..... 65,933
LESS:
Allowance for loan loss........................ (690)
-----------
Net loans.................................... $ 65,243
-----------
-----------

LOAN MATURITY AND REPRICING. The following table sets forth certain
information as of March 31, 1999, regarding the dollar amount of loans maturing
in our portfolio based on their contractual terms to maturity. Demand loans
having no stated schedule of repayments and no stated maturity, and overdrafts
are reported as due in one year or less. Adjustable and floating rate loans are
included in the period in which interest rates are next scheduled to adjust
rather than the period in which they

contractually mature, and fixed-rate loans are included in the period in which
the final contractual repayment is due. This table does not include prepayments
on scheduled principal amortization.

AT MARCH 31, 1999
---------------------------------------------------------------

FIRST HOME EQUITY
MORTGAGE LINES OF COMMERCIAL CONSUMER TOTAL
LOANS CREDIT LOANS LOANS LOANS
----------- ------------- ----------- ----------- ---------

(IN THOUSANDS)

AMOUNTS DUE:
Within one year..................................... $ 10,568 $ 3,336 $ 2,094 $ 738 $ 16,736
After one year:
One to three years................................ 9,733 40 765 428 10,966
Three to five years............................... 3,284 -- 810 196 4,290
Five to ten years................................. 9,399 127 1,044 19 10,589
Ten to twenty years............................... 42,988 -- 477 -- 43,465
Over twenty years................................. 1,051 -- -- -- 1,051
----------- ------ ----------- ----------- ---------
Total amount due................................ $ 77,023 $ 3,503 $ 5,190 $ 1,381 $ 87,097
----------- ------ ----------- ----------- ---------
----------- ------ ----------- ----------- ---------
LESS:
Net deferred loan origination costs............... 112
Allowance for loan losses......................... (857)
---------
---------
Loans, net...................................... $ 86,352
---------
---------

The following table presents, as of March 31, 1999, the dollar amount of all
loans due after March 31, 2000, and whether these loans have fixed interest
rates or adjustable interest rates.

DUE AFTER MARCH 31, 2000
---------------------------------

FIXED ADJUSTABLE TOTAL
--------- ----------- ---------

(IN THOUSANDS)

First mortgage loans............................................................ $ 52,430 $ 14,025 $ 66,455
Home equity lines of credit..................................................... 167 -- 167
Commercial...................................................................... 2,063 1,033 3,096
Consumer........................................................................ 643 -- 643
--------- ----------- ---------
Total loans................................................................. $ 55,303 $ 15,058 $ 70,361
--------- ----------- ---------
--------- ----------- ---------

The following table presents our loan originations, sales and principal
payments for the periods indicated.

FOR THE SIX MONTHS FOR THE YEAR ENDED SEPTEMBER
ENDED MARCH 31, 30,
-------------------- -------------------------------

1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------

(IN THOUSANDS)

LOANS, NET:
Balance outstanding at beginning of period............... $ 82,348 $ 70,580 $ 70,580 $ 65,243 $ 57,779

ORIGINATIONS:
Mortgage loans:
Residential............................................ 18,245 11,785 32,346 25,928 19,630
Commercial............................................. 755 326 476 3,217 --
Home equity lines of credit............................ 1,554 1,382 3,397 3,187 2,173
--------- --------- --------- --------- ---------
Total mortgage originations.......................... 20,554 13,493 36,219 32,332 21,803
Commercial loans......................................... 940 526 1,438 865 334
Consumer loans........................................... 496 599 1,275 904 1,820
--------- --------- --------- --------- ---------
Total originations................................... 21,990 14,618 38,932 34,101 23,957
--------- --------- --------- --------- ---------
LESS:
Principal repayments, unadvanced funds and other, net:... (17,956) (9,775) (26,780) (28,548) (16,388)
Sale of mortgage loans, principal balance................ -- (87) (269) (120) --
Provision for loan losses................................ (25) (20) (39) (96) (105)
Net loan charge-offs..................................... (5) (1) (2) -- --
Transfers to foreclosed real estate...................... -- -- (74) -- --
--------- --------- --------- --------- ---------
Total deductions..................................... (17,986) (9,883) (27,164) (28,764) (16,493)
--------- --------- --------- --------- ---------
Net loan activity........................................ 4,004 4,735 11,768 5,337 7,464
--------- --------- --------- --------- ---------
Loans, net, end of period.............................. $ 86,352 $ 75,315 $ 82,348 $ 70,580 $ 65,243
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

RESIDENTIAL MORTGAGE LOANS. Our primary lending emphasis is the origination
of first mortgage loans secured by one- to four-family properties that serve as
the primary or secondary residence of the owner. As of March 31, 1999, loans on
one- to four-family residential properties accounted for 88.7% our total loan
portfolio.

Most of our loan originations are from existing or past customers, members
of our local communities or referrals from local real estate agents, attorneys
and builders. We believe that our branch network, particularly as it expands, is
a significant source of new loan generation. We also have a call program to real
estate agents in our market area to develop referral relationships between
agents and Westborough Savings.

We currently offer loans that conform to underwriting standards specified by
FannieMae ("conforming loans") and also originate non-conforming loans, as
described below. These loans may be fixed-rate one- to four- family mortgage
loans or adjustable-rate one- to four-family mortgage loans with maturities of
between 5 and 30 years. The non-conforming loans generally follow FannieMae
guidelines except that the loan amount exceeds FannieMae guidelines' maximum
limit of $240 thousand. The average size of our first mortgage loans originated
during the six months ended March 31, 1999 and the year ended September 30, 1998
was $151 thousand and $163 thousand, respectively. The average size of our first
mortgage loans was $103 thousand at March 31, 1999. We are an approved
seller/servicer for FannieMae. From time to time, we have sold loans in the
secondary

market although such sales have been infrequent. The loans that we sell are all
fixed-rate mortgage loans with terms of 30 years. Such loans, however, continue
to be serviced by Westborough Savings.

Our originations of first mortgage loans amounted to $18.2 million in the
six months ended March 31, 1999, $32.3 million in fiscal year 1998, $25.9
million in fiscal year 1997 and $19.6 million in fiscal year 1996. A significant
number of our first mortgage loan originations have been the result of
refinancing of our existing loans due to the relatively low interest rate levels
over the past three years.

We offer a variety of ARMs and fixed-rate one- to four-family mortgage loans
with maximum loan-to-value ratios that depend on the type of property and the
size of loan involved. The loan-to-value ratio is the loan amount divided by the
appraised value of the property. The loan-to-value ratio is a measure commonly
used by financial institutions to determine exposure to risk. The majority of
our loans on owner-occupied one- to four-family homes are originated with a
loan-to-value ratio of 80% or less. On occasion, under limited circumstances, we
have made loans on owner-occupied one- to four-family homes with a loan-to-value
ratio of up to 95%. In such cases, the borrower is required to obtain mortgage
insurance.

We currently offer fixed-rate mortgage loans with terms of 15, 20, 25 and 30
years secured by one- to four-family residences. We price our interest rates on
fixed rate loans to be competitive in light of market conditions.

We currently offer a variety of ARM loans secured by one- to four-family
residential properties that initially adjust after one year, three years, five
years or seven years. After the initial adjustment period, ARM loans adjust on
an annual basis. The ARM loans that we currently originate have a maximum 30
year amortization period and are subject to the same loan-to-value ratios
applicable to fixed-rate mortgage loans described above. The interest rates on
ARM loans fluctuate based upon a fixed spread above the average yield on United
States treasury securities and generally are subject to a maximum increase of 2%
per adjustment period and a limitation on the aggregate adjustment of 6% over
the life of the loan. We originated $6.1 million and $11.7 million of one- to
four-family ARM loans in the six months ended March 31, 1999 and the year ended
September 30, 1998, respectively. At March 31, 1999, 27.5% of our total loans
consisted of ARM loans.

The volume and types of ARM loans we originate have been affected by the
level of market interest rates, competition, consumer preferences and the
availability of funds. During 1998, we experienced a decreased demand for ARM
loans due to the continued low interest rate environment. Although we will
continue to offer ARM loans, we cannot guarantee that we will be able to
originate a sufficient volume of ARM loans to increase or maintain the
proportion that these loans bear to our total loans.

The retention of ARM loans in our loan portfolio helps reduce our exposure
to increases in interest rates. However, ARM loans can pose credit risks
different from the risks inherent in fixed-rate loans, primarily because as
interest rates rise, the underlying payments of the borrower may rise. This
increases the potential for default.

Our home equity credit line loans, which totaled $3.5 million, or 4.0% of
total loans at March 31, 1999, are fixed and adjustable-rate loans secured by a
first or second mortgage on owner-occupied one- to four-family residences
located in our market area. Interest rates on home equity credit lines are based
upon the "prime rate" as published in the "Money Rates" section of the WALL
STREET JOURNAL (the "index") with a minimum monthly principal payment of
one-half of 1% of the outstanding principal balance of the loan. The maximum
credit line available is equal to the lesser of $100 thousand and 80% of
Westborough Savings' appraisal of the property or 50% of the tax assessment on
the property, in each case less the first mortgage balance. Such loans also have
a maximum term of 15 years. The underwriting standards applicable to these loans
generally are the same as one- to four-family first

mortgage loans, except that the combined loan-to-value ratio, including the
balance of the first mortgage, cannot exceed 80% of the appraised value of the
property.

In conjunction with our residential mortgage lending, we offer construction
loans to the future occupants of single family homes. At March 31, 1999, $2.0
million, or 2.3% of our total loan portfolio consisted of gross residential
construction loans. Unadvanced funds on these loans amounted to $479 thousand at
March 31, 1999, resulting in a net balance of $1.5 million. These loans
typically have a term of twelve months and are structured to become permanent
loans upon the completion of construction. All such loans are secured by first
liens on the property and are subject to a maximum loan-to-value ratio of 80%,
which is based upon the anticipated value of the property. During the
construction period, the interest rate for construction loans to individuals is
50 basis points below the index. Loans involving construction financing present
a greater risk than loans for the purchase of existing homes since collateral
values and construction costs can only be estimated at the time the loan is
approved.

COMMERCIAL REAL ESTATE LOANS. Origination of loans secured by commercial
real estate is a growing area of lending for Westborough Savings. At March 31,
1999, commercial real estate mortgage loans totaled $3.1 million, or 3.5% of
total loans. These loans are generally secured by office buildings,
condominiums, retail establishments and churches located within our market area.

Our commercial real estate loans are offered on a fixed- and adjustable-rate
basis. Typical terms for such loans provide for a maximum seven-year repricing
term with a 20 year amortization and a balloon payment in five to seven years,
and an interest rate based upon the index. Loans on commercial properties are
also subject to a maximum loan-to-value ratio of 80% for the acquisition of the
property and 75% for refinancing of the property.

Pursuant to our underwriting standards, a number of factors are considered
before a commercial real estate loan is made. We evaluate qualifications and
financial condition of the borrower, including credit history, profitability and
expertise, as well as the value and condition of the underlying property.
Factors that we consider in evaluating the underlying property include the net
operating income of the mortgaged property before debt service and depreciation,
the debt service coverage ratio (the ratio of operating income to debt service)
and, as noted above, the ratio of the loan amount to the appraised value of the
property.

Loans secured by commercial real estate properties are generally larger and
involve a greater degree of credit risk than one- to four-family residential
mortgage loans. Such loans typically involve large balances to single borrowers
or groups of related borrowers. Because payments on loans secured by commercial
real estate properties are often dependent on the successful operation or
management of the properties, repayment of such loans may be subject to adverse
conditions in the real estate market or the economy. If the cash flow from the
project decreases, or if leases are not obtained or renewed, the borrower's
ability to repay the loan may be impaired.

Our real estate loan portfolio also includes construction loans to builders
and developers of residential properties within our market area. At March 31,
1999, $2.1 million, or 2.4% of our total loan portfolio, consisted of gross
commercial construction loans. Unadvanced funds on these loans amounted to $1.1
million at March 31, 1999, resulting in a net balance of $1.0 million.

Construction loans to builders typically are in amounts equal to 70% of the
value of the property upon completion. Construction loans generally have twelve
month terms with a floating interest rate based upon the index. In addition to
securing the loan with the property under construction, we generally obtain
personal guarantees from the borrower. The proceeds of such loans are disbursed
after certification by in-house personnel that specified stages of construction
have been completed.

Construction lending is generally considered to carry a higher level of risk
than permanent mortgage financing because of the uncertainty of the value of the
collateral upon completion.

Repayment of such loans are also dependent upon the successful completion of the
project and can be adversely affected by market conditions and other factors not
within the control of Westborough Savings or the borrower. We seek to control
such risks by tying the amount of the loan advanced to the completion of
construction and monitoring subcontractors to ensure that loan proceeds are
applied appropriately.

CONSUMER LOANS. At March 31, 1999, $1.4 million, or 1.6% of our total
loans, consisted of consumer loans such as personal, deposit secured and
fixed-rate home improvement loans. Consumer loans generally have shorter terms
to maturity, which reduces our exposure to changes in interest rates. Consumer
loans also carry higher rates of interest than do one- to four-family
residential mortgage loans. In addition, we believe that offering consumer loan
products helps to expand and create stronger ties to our existing customer base
by increasing the number of customer relationships and providing cross-marketing
opportunities.

Our personal loans consist of unsecured loans to individuals and secured
loans for the purchase of new and used automobiles. Our unsecured loans have a
maximum term of 48 months. The terms of our automobile loans generally are
determined by the age and condition of the vehicle. At March 31, 1999, our
personal loans totaled $666 thousand, or 0.75% of total loans.

We also make loans secured by deposit accounts up to 90% of the amount of
the depositor's savings account balance. The rate for such loans is 2.0% higher
than the rate paid on regular savings accounts and 3.0% higher than the rate
paid on term deposits. Deposit secured loans totaled $586 thousand, or 0.66% of
total loans at March 31, 1999.

We offer fixed-rate home improvement loans in amounts equal to that
available for home equity credit line loans as discussed above. These loans are
secured by owner-occupied one- to four-family residences for terms of up to 10
years. At March 31, 1999, these loans totaled $129 thousand, or 0.15% of total
loans. Interest rates on fixed-rate home improvement loans are periodically set
by our Loan Committee, consisting of our President, Treasurer and Senior Loan
Officer, after consultation with the Board of Investment and are based on market
conditions. The underwriting terms and procedures applicable to these loans are
substantially the same as for our home equity credit line loans.

COMMERCIAL LOANS. Westborough Savings recently has made a commitment to
small business lending by developing certain products and services for the small
and medium sized businesses located in our market area. Such services are
designed to give business owners borrowing opportunities for, among other
things, modernization, inventory, equipment, consolidation and working capital.
In addition, we have tailored certain products and services, such as our
business checking accounts and treasury and tax loan service, to better serve
the needs of local businesses. We have also become an approved lender of the
Small Business Administration. At March 31, 1999, $2.1 million, or 2.4%, of our
total loans consisted of commercial loans. We expect that commercial loans will
comprise a growing portion of our total loan portfolio in the future.

Commercial loans generally are limited to terms of five years or less.
Substantially all commercial loans have variable interest rates tied to the
prime rate. Whenever possible, we collateralize these loans with a lien on
commercial real estate or alternatively, with a lien on business assets and
equipment and the personal guarantees of the borrower's principal officers.

Our commercial services are administered by our loan department. Recently,
we hired an experienced commercial loan officer with considerable commercial
lending expertise, including 13 years of banking experience in Massachusetts and
personal ties to Westborough. We also intend to add additional qualified
employees as market conditions warrant.

Commercial loans generally are considered to involve a higher degree of risk
than residential mortgage loans because the primary collateral may be in the
form of intangible assets and/or inventory subject to market obsolescence.
Commercial loans also may involve relatively large loan balances to

single borrowers or groups of related borrowers, with the repayment of such
loans typically dependent on the successful operation and income stream of the
borrower. Such risks can be significantly affected by economic conditions. In
addition, commercial lending ordinarily requires substantially greater oversight
efforts compared to residential real estate lending. To minimize these risks, we
conduct periodic reviews of the commercial loan portfolio to ensure adherence to
underwriting standards and policy requirements.

LOAN APPROVAL PROCEDURES AND AUTHORITY. Our lending policies provide that
our Loan Committee has authority to approve one- to four-family mortgage loans
in amounts up to $250 thousand. One- to four-family mortgage loans in excess of
$250 thousand require the approval of our Board of Investment. Commercial real
estate loans in amounts up to $300 thousand must be approved by the Loan
Committee. All other commercial real estate loans must be approved by the Board
of Investment. Commercial and consumer loans in amounts up to $100 thousand may
be approved by our President, Treasurer or Senior Loan Officer. Together, these
individuals also may approve commercial and consumer loans in amounts up to $300
thousand.

The following generally describes our current lending procedures. Upon
receipt of a completed loan application from a prospective borrower, we order a
credit report and verify certain other information. If necessary, we obtain
additional financial or credit related information. We require an appraisal for
all mortgage loans, except for some loans made to refinance existing mortgage
loans. Appraisals are performed by a licensed or certified third-party appraisal
firms and are reviewed by our lending department. We require title insurance on
all mortgage loans, except for home equity credit lines and fixed-rate home
improvement loans. For these loans, we require evidence of previous title
insurance. We require borrowers to obtain hazard insurance and we may require
borrowers to obtain flood insurance prior to closing. For properties with a
private sewage disposal system, we also require evidence of compliance with
applicable law. Further, we require borrowers to advance funds on a monthly
basis together with each payment of principal and interest to a mortgage escrow
account from which we make disbursements for items such as real estate taxes,
flood insurance and private mortgage insurance premiums, if required.

ASSET QUALITY

One of our key operating objectives has been and continues to be to maintain
a high level of asset quality. Our concentration on one- to four-family mortgage
lending, our maintenance of sound credit standards for new loan originations and
relatively favorable economic and real estate market conditions have resulted in
historically low delinquency ratios and, in recent years, a low level of
non-performing assets. These factors have helped strengthen our financial
condition.

DELINQUENT LOANS AND FORECLOSED ASSETS. Management and the Loan Committee
perform a monthly review of all delinquent loans. One of the primary tools we
use to manage and control problem loans is our "Watch List." This list
identifies all of the loans or commitments that are considered to have
characteristics that could result in loss to us if not properly supervised. The
list is managed by the Loan Committee which, together with the Board of
Investment, meets periodically to discuss the status of the loans on the Watch
List and to add or delete loans from the list. At March 31, 1999, we had no
loans more than 90 days past due and had $279 thousand and $431 thousand in
assets classified as pass and substandard, respectively. No assets were
classified as special mention, doubtful or loss.

Westborough Savings had no non-performing assets at March 31, 1999 and 1998.

The following table presents information regarding non-accrual mortgage and
consumer and other loans, accruing loans delinquent 90 days or more, and
foreclosed real estate as of the dates indicated. At March 31, 1999 and
September 30, 1998, 1997, and 1996, we have no non-accrual loans.

AT MARCH 31, AT SEPTEMBER 30,
------------- -------------------------------

1999 1998 1997 1996
------------- --------- --------- ---------

(IN THOUSANDS)

Non-accrual first mortgage loans............................................. $ -- $ -- $ -- $ --
Non-accrual consumer and other loans......................................... -- -- -- --
Accruing loans delinquent 90 days or more.................................... -- 55 -- 9
------------- --------- --- ---------
Total non-performing and delinquent loans.................................... -- 55 -- 9

Foreclosed real estate, net.................................................. -- 74 19 144
------------- --------- --- ---------
Total non-performing assets and delinquent loans............................. $ -0- $ 129 $ 19 $ 153
------------- --------- --- ---------
------------- --------- --- ---------
Non-performing and delinquent loans to total loans........................... -- 0.06% -- 0.01%
Non-performing assets and delinquent loans to total assets................... -- 0.08% 0.01% 0.11%

At March 31, 1999, we were aware of seven loans in an aggregate amount of
$710 thousand that are not currently classified as nonaccrual or 90 days past
due but which may be so classified in the near future because of concerns over
the borrowers' ability to comply with repayment terms.

Loans are placed on nonaccrual status when they are 90 days past due or, in
the opinion of management, the collection of principal and interest is doubtful.
When we designate loans as non-accrual loans, we reverse outstanding interest
that we previously credited. We may recognize income in the period that we
collect it when the ultimate collectibility of principal is no longer in doubt.
We return a non-accrual loan to accrual status when none of its principal or
interest is due and unpaid or when it otherwise becomes well secured and in the
process of collection.

Impaired loans generally are individually assessed to determine whether a
loan's carrying value is not in excess of the fair value of the collateral or
the present value of the loan's cash flows. Groups of smaller balance loans,
however, are collectively evaluated for impairment. Accordingly, Westborough
Savings does not separately identify individual consumer loans for impairment
disclosures. We had no loans classified as impaired at March 31, 1999 and $269
thousand and $352 thousand loans classified as impaired at September 30, 1998
and September 30 1997, respectively. In addition at September 30, 1998 and 1997,
we had no loans classified as troubled debt restructurings, as defined in SFAS
No. 15.

Foreclosed real estate consists of property we acquired through foreclosure
or deed in lieu of foreclosure. Foreclosed real estate properties are initially
recorded at the lower of the investment in the loan or fair value. Thereafter,
we carry foreclosed real estate at fair value less estimated selling costs, net
of a valuation allowance account established through provisions charged to
income, which result from the ongoing periodic valuations of foreclosed real
estate properties.

ALLOWANCE FOR LOAN LOSSES. The following table presents the activity in our
allowance for loan losses at or for the periods indicated.

AT OR FOR THE SIX
MONTHS AT OR FOR
ENDED MARCH 31, THE YEAR ENDED SEPTEMBER 30,
-------------------- -------------------------------

1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------

(IN THOUSANDS)

Balance at beginning of period............................... $ 827 $ 786 $ 786 $ 690 $ 585
--------- --------- --------- --------- ---------
Provision for loan losses.................................... 25 20 39 96 105
--------- --------- --------- --------- ---------
Charge-offs:
Mortgage loans............................................. -- -- -- -- --
Commercial loans........................................... -- -- -- -- --
Consumer loans............................................. (6) -- -- (2) (8)
--------- --------- --------- --------- ---------
Total charge-offs........................................ (6) -- -- (2) (8)
Recoveries................................................... 11 1 2 2 8
--------- --------- --------- --------- ---------
Balance at end of period..................................... $ 857 $ 807 $ 827 $ 786 $ 690
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

Ratio of net charge-offs to average loans outstanding during
the period(1).............................................. (0.012)% (0.003)% (0.003)% 0.000% 0.000%

Allowance for loan losses as a percent of total loans before
the allowance for loan losses.............................. 0.98% 1.06% 0.99% 1.10% 1.05%

Allowance for loan losses as a percent of non-performing
loans...................................................... -- -- -- -- --

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

(1) Ratio is annualized for the six month periods.

The allowance for loan losses is a valuation account that reflects our
evaluation of the losses inherent in our loan portfolio. We maintain the
allowance through provisions for loan losses that we charge to income. We charge
losses on loans against the allowance for loan losses when we believe the
collection of loan principal is unlikely.

We establish the provision for loan losses after considering the results of
our review of delinquency and charge-off trends, the amount of the allowance for
loan losses in relation to the total loan balance, loan portfolio growth by type
of loan, generally accepted accounting principles and regulatory guidance. We
have applied this process consistently, and we have made minimal changes in the
assumptions used.

As part of our analysis, each month we prepare an allowance for loan loss
worksheet. This worksheet categorizes the entire loan portfolio by certain risk
characteristics such as loan type, guarantees associated with a group of loans
and payment status. Loans with known potential losses are categorized
separately. We assign potential loss factors to the categories on the basis of
our assessment of each category's status and the potential risk inherent in that
type of lending. We use this worksheet, together with loan portfolio balances
and delinquency reports, to evaluate the adequacy of the allowance for loan
losses. Other key factors we consider in this process are national, state and
local economic considerations, history of loan loss experience for major
credits, trends in charge-off recovery, past and current trends in delinquency,
trends in watch list activity, and trends in loan concentration.

Although we believe that we have established and maintained the allowance
for loan losses at adequate levels, future additions may be necessary if
economic and other conditions in the future differ substantially from the
current operating environment.

In addition, various regulatory agencies, as an integral part of their
examination process, periodically review our loan and foreclosed real estate
portfolios and the related allowance for loan losses and valuation allowance for
foreclosed real estate. These agencies, including the FDIC and the Massachusetts
Division of Banks, may require us to increase the allowance for loan losses or
the valuation allowance for foreclosed real estate based on their judgments of
information available to them at the time of their examination, thereby
adversely affecting our results of operations.

The following table presents our allocation of the allowance for loan losses
by loan category and the percentage of loans in each category to total loans at
the dates indicated.

AT
MARCH 31, AT SEPTEMBER 30,
------------------------------------------------------ ------------------------------------------------------

1999 1998 1998 1997
-------------------------- -------------------------- -------------------------- --------------------------

PERCENT OF PERCENT OF PERCENT OF PERCENT OF
LOANS IN LOANS IN LOANS IN LOANS IN
CATEGORY TO CATEGORY TO CATEGORY TO CATEGORY TO
LOAN CATEGORY AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS AMOUNT TOTAL LOANS
- -------------------- ----------- ------------- ----------- ------------- ----------- ------------- ----------- -------------
(IN THOUSANDS)

Real estate--
mortgage:
Residential(1).... $ 279 92.58% $ 281 92.40% $ 309 92.80% $ 253 92.63%
Commercial........ 208 3.48 190 4.00 184 3.24 289 4.02
Commercial loans
(2)............... 124 2.38 52 1.27 103 1.99 39 1.00
Consumer............ 17 1.56 25 2.33 24 1.97 27 2.35
Unallocated......... 229 -- 259 -- 207 -- 178 --
----- ------ ----- ------ ----- ------ ----- ------
Total allowance
for loan
losses........ $ 857 100.00% $ 807 100.00% $ 827 100.00% $ 786 100.00%
----- ------ ----- ------ ----- ------ ----- ------
----- ------ ----- ------ ----- ------ ----- ------

1996
--------------------------
PERCENT OF
LOANS IN
CATEGORY TO
LOAN CATEGORY AMOUNT TOTAL LOANS
- -------------------- ----------- -------------

Real estate--
mortgage:
Residential(1).... $ 265 92.14%
Commercial........ 272 4.60
Commercial loans
(2)............... -- 0.58
Consumer............ 50 2.68
Unallocated......... 103 --
----- ------
Total allowance
for loan
losses........ $ 690 100.00%
----- ------
----- ------

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

(1) Includes home equity lines of credit and construction loans.

(2) Prior to September 30, 1997, the allowance for loan losses for commercial
loans was included in consumer loans.

INVESTMENT ACTIVITIES

The Board of Trustees reviews and approves our investment policy on an
annual basis. The President and Treasurer, as authorized by the Board, implement
this policy. Management reports securities transactions to the Board of
Investment for review and approval on a monthly basis.

Our investment policy is designed primarily to manage the interest rate
sensitivity of our assets and liabilities, to generate a favorable return
without incurring undue interest rate and credit risk, to complement our lending
activities and to provide and maintain liquidity within established guidelines.
In establishing our investment strategies, we consider our interest rate
sensitivity, the types of securities to be held, liquidity and other factors.
Massachusetts chartered savings banks have authority to invest in various types
of assets, including U.S. Treasury obligations, securities of various federal
agencies, mortgage-backed securities, certain certificates of deposit of insured
banks and savings institutions, certain bankers' acceptances, repurchase
agreements, loans of federal funds, and, subject to certain limits, corporate
debt and equity securities, commercial paper and mutual funds.

As part of our investment strategy, we also engage in a "covered call"
program in which we write options on securities we hold. The sale of a covered
call conveys the right, but not the obligation, to the buyer to buy a particular
security held by us at a particular price up to a certain expiration date. The
sale is "covered" because we hold the security in our portfolio. Under this
program, we write options only on publicly traded securities we own. However, we
are willing to have the securities called if an option is written and exercised.

At March 31, 1999 and September 30, 1998, our liquidity ratio was 78.13% and
90.05%, respectively. For information regarding the carrying values, yields and
maturities of our investment securities and mortgage-backed securities, see
"--Carrying Values, Yields and Maturities."

At March 31, 1999, our U.S. Government and federal agency securities
portfolio totaled $20.9 million. This portfolio consists primarily of securities
with maturities of one to five years. Our agency debentures are callable on a
semi-annual basis following a holding period of twelve months. We generally do
not purchase structured notes, and at March 31, 1999, there were no structured
notes in our portfolio.

At March 31, 1999, our portfolio of other debt obligations totaled $19.8
million. Our policy generally requires that investment in corporate debt
obligations be limited to corporate bonds with an "A" rating or better by at
least one nationally recognized rating service at the time of purchase.

The fair market value of our marketable equity securities portfolio totaled
$8.0 million at March 31, 1999. These securities consisted of $4.6 million of
common stock, $208 thousand of preferred stock and $3.2 million of rated trust
preferred securities issued by financial institutions. Under our investment
policy, the aggregate amount of marketable equitable securities that we may
purchase may not exceed 10% of our total investment portfolio. Our policy also
has limitations against acquiring concentrations of such securities in any one
issuer or industry. We purchase marketable equity securities as growth
investments that can provide the opportunity for capital appreciation that is
taxed on a more favorable basis than operating income. There can be no assurance
that investment in marketable equity securities will appreciate in value and,
therefore, such investments involve higher risk than U.S. Government or federal
agency securities. Aggregate purchases of marketable equity securities totaled
$5.1 million for the six months ended March 31, 1999 and $3.9 million and $276
thousand for the years ended September 30, 1998 and 1997. At March 31, 1999,
pre-tax net unrealized gains on marketable equity securities amounted to $654
thousand.

Unless otherwise noted with respect to certain securities or required by
regulators or accounting standards, we classify securities available for sale at
the date of purchase. Available for sale securities are reported at fair market
value. We currently have no securities classified as trading. During fiscal

year 1998 and during the six months ended March 31, 1999, we sold investment
securities in the aggregate amounts of $17.9 million and $3.3 million,
respectively.

At March 31, 1999, our mortgage-backed securities, all of which were
classified as available for sale, totaled $13.6 million, or 8.1% of total
assets. We generally purchase mortgage-backed securities as a means to deploy
excess liquidity at more favorable yields than other investment alternatives. In
addition, mortgage-backed securities generate positive interest rate spreads
with minimal administrative expense and lower our overall credit risk due to the
fact that they are directly or indirectly insured or guaranteed.

At March 31, 1999, the mortgage-backed securities portfolio had a weighted
average yield of 6.29% and a market value of $13.6 million. Purchases of
mortgage-backed securities may decline in the future if we experience an
increase in demand for one- to four-family mortgage loans. We did not sell any
of our mortgage-backed securities during fiscal year 1998 or during the six
months ended March 31, 1999.

Mortgage-backed securities generally yield less than the loans that underlie
such securities because of the cost of payment guarantees or credit enhancements
that reduce credit risk. However, mortgage-backed securities are more liquid
than individual mortgage loans and may be used to collateralize our borrowings.
In general, mortgage-backed securities issued or guaranteed by GNMA, FannieMae
and FreddieMac are weighted at no more than 20% for risk-based capital purposes,
compared to the 50% risk weighting assigned to most non-securitized residential
mortgage loans.

While mortgage-backed securities carry a reduced credit risk as compared to
whole loans, they remain subject to the risk of a fluctuating interest rate
environment. Along with other factors, such as the geographic distribution of
the underlying mortgage loans, changes in interest rates may alter the
prepayment rate of those mortgage loans and affect both the prepayment rates and
value of mortgage-backed securities.

During the year ended September 30, 1997, we established a private
charitable foundation to provide grants to charitable organizations in the
Westborough area. The foundation is not a subsidiary of Westborough Savings, but
was funded by a donation from Westborough Savings of marketable equity
securities. These securities had a cost basis and fair value of $21 thousand and
$110 thousand, respectively, at the date of transfer. Such securities had been
classified as available for sale and, accordingly the transfer resulted in
Westborough Savings recognizing the unrealized appreciation of the securities of
$89 thousand in its consolidated statement of income.

The following table presents activity in our investment securities portfolio
(including Federal Home Loan Bank stock) for the periods indicated:

FOR THE SIX FOR THE YEAR ENDED SEPTEMBER
MONTHS ENDED 30,
-------------------- -------------------------------

1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------

(IN THOUSANDS)

Beginning balance....................................................... $ 60,107 $ 61,654 $ 61,654 $ 62,743 $ 57,371
Purchases............................................................. 14,302 10,407 20,880 12,517 28,705
Maturities............................................................ (4,000) (1,549) (1,250) (3,520) (3,550)
Sales and calls....................................................... (3,348) (5,275) (17,886) (7,653) (16,118)
Principal repayments.................................................. (2,305) (1,781) (4,214) (2,777) (3,300)
Premium and discount amortization, net................................ (47) (51) (88) (93) (200)
Charitable contributions in the form of equity securities............. -- -- -- (110) --
Recognition of expired options........................................ 187 -- -- -- --
Change in net unrealized gains........................................ (929) 211 1,011 547 (165)
--------- --------- --------- --------- ---------
Ending balance.......................................................... $ 63,967 $ 63,616 $ 60,107 $ 61,654 $ 62,743
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

The following table sets forth certain information regarding the amortized
cost and fair value of our securities at the dates indicated.

AT MARCH 31, AT SEPTEMBER 30,
---------------------- ----------------------------------------------
1999 1998 1997
---------------------- ---------------------- ----------------------
AMORTIZED FAIR AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE COST VALUE
----------- --------- ----------- --------- ----------- ---------

(IN THOUSANDS)
Debt securities:
U. S. Government obligations...................... $ 12,089 $ 12,347 $ 13,091 $ 13,579 $ 22,661 $ 22,867
Federal agency obligations........................ 8,506 8,513 9,504 9,660 10,428 10,427
Banking and finance obligations................... 5,531 5,525 5,534 5,624 4,539 4,564
Other bonds and obligations....................... 14,224 14,306 13,412 13,762 10,518 10,588
----------- --------- ----------- --------- ----------- ---------
Total debt securities......................... 40,350 40,691 41,541 42,625 48,146 48,446
----------- --------- ----------- --------- ----------- ---------
Mortgage-backed and mortgage-related securities:
FHLMC............................................. 1,582 1,598 2,079 2,139 3,233 3,234
FNMA.............................................. 5,781 5,773 4,021 4,063 2,912 2,889
GNMA.............................................. 3,292 3,277 4,185 4,192 4,044 4,077
Other............................................. 3,013 2,990 1,190 1,219 306 307
----------- --------- ----------- --------- ----------- ---------
Total mortgage-backed and mortgage-related
securities.................................. 13,668 13,638 11,475 11,613 10,495 10,507
----------- --------- ----------- --------- ----------- ---------
Asset-backed securities........................... 851 853 -- -- 243 330
Marketable equity securities...................... 7,369 8,023 4,433 5,107 1,168 1,654
Federal Home Loan Bank stock...................... 762 762 762 762 717 717
----------- --------- ----------- --------- ----------- ---------
Total securities.............................. $ 63,000 $ 63,967 $ 58,211 $ 60,107 $ 60,769 $ 61,654
----------- --------- ----------- --------- ----------- ---------
----------- --------- ----------- --------- ----------- ---------

1996
----------------------
AMORTIZED FAIR
COST VALUE
----------- ---------

Debt securities:
U. S. Government obligations...................... $ 22,211 $ 22,196
Federal agency obligations........................ 10,407 10,335
Banking and finance obligations................... 3,289 3,293
Other bonds and obligations....................... 12,362 12,278
----------- ---------
Total debt securities......................... 48,269 48,102
----------- ---------
Mortgage-backed and mortgage-related securities:
FHLMC............................................. 3,916 3,843
FNMA.............................................. 3,697 3,661
GNMA.............................................. 3,477 3,462
Other............................................. 353 359
----------- ---------
Total mortgage-backed and mortgage-related
securities.................................. 11,443 11,325
----------- ---------
Asset-backed securities........................... 911 1,012
Marketable equity securities...................... 1,139 1,661
Federal Home Loan Bank stock...................... 643 643
----------- ---------
Total securities.............................. $ 62,405 $ 62,743
----------- ---------
----------- ---------

The following table sets forth the amortized cost and fair value of our
mortgage-backed and mortgage-related securities, all of which were classified as
available for sale at the dates indicated.

AT MARCH 31, AT SEPTEMBER 30,
----------------------------------- -------------------------------------------------------------
1999 1998 1997
----------------------------------- ----------------------------------- ------------------------
PERCENT PERCENT PERCENT
AMORTIZED OF FAIR AMORTIZED OF FAIR AMORTIZED OF
COST TOTAL(1) VALUE COST TOTAL(1) VALUE COST TOTAL(1)
----------- ----------- --------- ----------- ----------- --------- ----------- -----------

(IN THOUSANDS)
Mortgage-backed and
mortgage-related
securities:
FHLMC............... $ 1,582 11.57% $ 1,598 $ 2,079 18.12% $ 2,139 $ 3,233 30.80%
FNMA................ 5,781 42.30 5,773 4,021 35.04 4,063 2,912 27.75
GNMA................ 3,292 24.09 3,277 4,185 36.47 4,192 4,044 38.53
Other............... 3,013 22.04 2,990 1,190 10.37 1,219 306 2.92
----------- ----------- --------- ----------- ----------- --------- ----------- -----------
Total mortgage-backed
and mortgage related
securities.......... $ 13,668 100.00% $ 13,638 $ 11,475 100.00% $ 11,613 $ 10,495 100.00%
----------- ----------- --------- ----------- ----------- --------- ----------- -----------
----------- ----------- --------- ----------- ----------- --------- ----------- -----------

1996
-----------------------------------
PERCENT
FAIR AMORTIZED OF FAIR
VALUE COST TOTAL(1) VALUE
--------- ----------- ----------- ---------

Mortgage-backed and
mortgage-related
securities:
FHLMC............... $ 3,234 $ 3,916 34.22% $ 3,843
FNMA................ 2,889 3,697 32.31 3,661
GNMA................ 4,077 3,477 30.39 3,462
Other............... 307 353 3.08 359
--------- ----------- ----------- ---------
Total mortgage-backed
and mortgage related
securities.......... $ 10,507 $ 11,443 100.00% $ 11,325
--------- ----------- ----------- ---------
--------- ----------- ----------- ---------

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

(1) Based on amortized cost.

CARRYING VALUES, YIELDS AND MATURITIES. The table below presents
information regarding the carrying values, weighted average yields and
contractual maturities of our investment securities and

mortgage-backed securities at March 31, 1999. Mortgage-backed securities are
presented by issuer. Yields on tax exempt obligations were not computed on a tax
equivalent basis.

AT MARCH 31, 1999
-----------------------------------------------------------------------------------------
MORE THAN ONE YEAR MORE THAN FIVE YEARS
MORE THAN
ONE YEAR OR LESS TO FIVE YEARS TO TEN YEARS TEN YEARS
------------------------ ------------------------ ------------------------ -----------
WEIGHTED WEIGHTED WEIGHTED
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT
----------- ----------- ----------- ----------- ----------- ----------- -----------

(IN THOUSANDS)
Debt securities:
U.S. Government obligations........ $ 2,041 6.59% $ 10,306 6.29% $ -- --% $ --
Federal agency obligations......... -- -- 4,544 6.62 3,969 6.21 --
Banking and finance obligations.... 1,509 6.24 3,531 6.30 485 6.01 --
Other bonds and obligations........ 2,263 6.35 9,242 6.49 937 4.95 1,864
----------- ----------- ----------- -----------
Total debt securities.............. 5,813 6.41 27,623 6.41 5,391 5.97 1,864
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Mortgage-backed and mortgage related
securities:
FHLMC.............................. 96 7.62 480 6.34 -- -- 1,022
FNMA............................... -- -- 835 6.45 274 6 4,664
GNMA............................... -- -- -- -- -- -- 3,277
Other.............................. -- -- -- -- -- -- 2,990
----------- ----------- ----------- -----------
Total mortgage backed and
mortgage related
securities:.................. 96 7.62 1,315 6.41 274 6 11,953
----------- ----------- ----------- -----------
Asset-backed securities............ -- -- -- -- 853 5.47 --
Marketable equity securities....... 8,023 -- -- -- -- -- --
Federal Home Loan Bank stock....... 762 -- -- -- -- -- --
----------- ----------- ----------- -----------
Total securities............... $ 14,694 6.43% $ 28,938 6.41% $ 6,518 5.91% $ 13,817
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

TOTAL
------------------------
WEIGHTED WEIGHTED
AVERAGE CARRYING AVERAGE
YIELD AMOUNT YIELD
----------- ----------- -----------

Debt securities:
U.S. Government obligations........ --% $ 12,347 6.34%
Federal agency obligations......... -- 8,513 6.43
Banking and finance obligations.... -- 5,525 6.26
Other bonds and obligations........ 5.86 14,306 6.28
-----------
Total debt securities.............. 5.86 40,691 6.33
-----------
-----------
Mortgage-backed and mortgage related
securities:
FHLMC.............................. 6.56 1,598 6.56
FNMA............................... 6.32 5,773 6.32
GNMA............................... 5.96 3,277 5.96
Other.............................. 6.45 2,990 6.45
-----------
Total mortgage backed and
mortgage related
securities:.................. 6.27 13,638 6.29
-----------
Asset-backed securities............ -- 853 5.47
Marketable equity securities....... -- 8,023 4.23
Federal Home Loan Bank stock....... -- 762 3.15
-----------
Total securities............... 6.22% $ 63,967 6.01%
-----------
-----------

SOURCES OF FUNDS

GENERAL. Deposits, scheduled amortization and prepayments of loan principal
and mortgage-backed securities, maturities and calls of investments securities
and funds provided by operations are our primary sources of funds for use in
lending, investing and for other general purposes. We also utilize borrowed
funds from the Federal Home Loan Bank of Boston to fund certain loans in
connection with our management of the interest rate sensitivity of our assets
and liabilities, as well as for other general purposes.

DEPOSITS. We offer a variety of deposit accounts having a range of interest
rates and terms. We currently offer regular savings deposits, NOW accounts,
personal and business demand accounts, money market accounts and certificates of
deposit. We also offer Individual Retirement Accounts ("IRAs"), which at March
31, 1999 totaled $9.8 million.

Deposit flows are influenced significantly by general and local economic
conditions, changes in prevailing interest rates, pricing of deposits and
competition. Our deposits are primarily obtained from areas surrounding our
offices, and we rely primarily on paying competitive rates, service and
long-standing relationships with customers to attract and retain these deposits.
We also have developed deposit products to attract and retain individual and
commercial depositors. One such product is a tiered-rate savings account in
which deposits over certain amounts earn interest at higher rates. Other
programs involve the introduction of commercial deposit products tailored to
small and medium sized businesses, such as our business and commercial checking
accounts. We do not use brokers to obtain deposits.

When we determine our deposit rates, we consider local competition, U.S.
Treasury securities offerings and the rates charged on other sources of funds.
Core deposits (defined as regular savings deposits, NOW accounts, money market
accounts and demand accounts) represented 66.06% of total deposits on March 31,
1999. At March 31, 1999, certificates of deposit with remaining terms to
maturity of less than one year amounted to $39.3 million. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Analysis of Net Interest Income" for information relating to the
average balances and costs of our deposit accounts for the six months ended
March 31, 1999 and 1998 and for the years ended September 30, 1998 and 1997.

The following table presents our deposit activity for the periods indicated.

FOR THE SIX
MONTHS ENDED
MARCH 31, FOR THE YEAR ENDED SEPTEMBER 30,
---------------------- ----------------------------------

1999 1998 1998 1997 1996
---------- ---------- ---------- ---------- ----------

(IN THOUSANDS)

Beginning balance.................................... $ 135,962 $ 125,170 $ 125,170 $ 120,282 $ 109,549
Net deposits......................................... 4,679 2,926 6,321 710 6,824
Interest credited on deposit accounts................ 2,330 2,230 4,471 4,178 3,909
---------- ---------- ---------- ---------- ----------
Ending balance....................................... $ 142,971 $ 130,326 $ 135,962 $ 125,170 $ 120,282
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Total increase in deposit accounts................... $ 7,009 $ 5,156 $ 10,792 $ 4,888 $ 10,733
Percentage increase.................................. 5.16% 4.12% 8.62% 4.06% 9.80%

At March 31, 1999, we had $9.8 million in certificates of deposit with
balances of $100,000 and over maturing as follows:

WEIGHTED
AVERAGE
AMOUNT RATE
--------- -----------

(IN THOUSANDS)
Maturity Period:
Three months or less.................................................... $ 2,228 4.87%
Over three months through six months.................................... 3,184 5.06
Over six months through 12 months....................................... 2,686 5.08
Over 12 months.......................................................... 1,749 5.51
--------- ---
Total..................................................................... $ 9,847 5.10%
--------- ---
--------- ---

The following table presents the distribution of our deposit accounts at the
dates indicated by dollar amount and percent of portfolio, and the weighted
average interest rate on each category of deposits.

AT MARCH 31, AT SEPTEMBER 30,
------------------------------------- ------------------------------------------------

1999 1998 1997
------------------------------------- ------------------------------------- ---------

WEIGHTED WEIGHTED
PERCENT AVERAGE PERCENT AVERAGE
OF TOTAL NOMINAL OF TOTAL NOMINAL
AMOUNT DEPOSITS RATE AMOUNT DEPOSITS RATE AMOUNT
--------- ----------- ------------- --------- ----------- ------------- ---------
(IN THOUSANDS)

Non-interest bearing accounts.... $ 10,261 7.18% --% $ 8,592 6.32% --% $ 6,910
Now accounts..................... 13,527 9.46 0.50 15,221 11.19 0.50 11,310
Savings accounts:
Regular........................ 28,128 19.67 2.60 28,239 20.77 2.60 31,001
Tiered rate.................... 35,615 24.91 4.11 29,733 21.87 4.33 20,729
--------- ----------- --- --------- ----------- --- ---------
Total savings accounts....... 63,743 44.58 3.44 57,972 42.64 3.49 51,730
Money market deposit accounts.... 6,916 4.84 2.95 7,218 5.31 2.95 9,003
--------- ----------- --- --------- ----------- --- ---------
Total non-certificate
accounts................... 94,447 66.06 2.61 89,003 65.46 2.60 78,953
--------- ----------- --- --------- ----------- --- ---------
Certificates of deposit
Due within 1 year.............. 39,250 27.45% 4.96 37,005 27.22 5.06 37,119
Over 1 year through 3 years.... 9,262 6.48 5.31 9,954 7.32 5.45 9,094
Over 3 years................... 12 0.01 5.12 -- -- -- 4
--------- ----------- --- --------- ----------- --- ---------
Total certificate accounts... 48,524 33.94 5.03 46,959 34.54 5.14 46,217
--------- ----------- --- --------- ----------- --- ---------
Total deposits............... $ 142,971 100.00% 3.43% $ 135,962 100.00% 3.48% $ 125,170
--------- ----------- --------- ----------- ---------
--------- ----------- --------- ----------- ---------

1996
-------------------------------------
WEIGHTED WEIGHTED
PERCENT OF AVERAGE PERCENT AVERAGE
TOTAL NOMINAL OF TOTAL NOMINAL
DEPOSITS RATE AMOUNT DEPOSITS RATE
----------- ------------- --------- ----------- -------------

Non-interest bearing accounts.... 5.52% --% $ 6,941 5.77% --%
Now accounts..................... 9.04 1.01 11,604 9.65 1.10
Savings accounts:
Regular........................ 24.77 2.60 34,423 28.62 2.60
Tiered rate.................... 16.56 4.47 8,126 6.75 4.56
----------- --- --------- ----------- ---
Total savings accounts....... 41.33 3.35 42.549 35.37 2.97
Money market deposit accounts.... 7.19 2.95 11,140 9.26 2.95
----------- --- --------- ----------- ---
Total non-certificate
accounts................... 63.08 2.68 72,234 60.05 2.38
----------- --- --------- ----------- ---
Certificates of deposit
Due within 1 year.............. 29.65 5.24 39,811 33.10 5.11
Over 1 year through 3 years.... 7.27 5.40 8,192 6.81 5.88
Over 3 years................... -- 5.50 45 0.04 5.35
----------- --- --------- ----------- ---
Total certificate accounts... 36.92 5.27 48,048 39.95 5.24
----------- --- --------- ----------- ---
Total deposits............... 100.00% 3.63% $ 120,282 100.00% 3.52%
----------- --------- -----------
----------- --------- -----------

BORROWINGS. We borrow funds from the Federal Home Loan Bank of Boston for
use in connection with our management of the interest rate sensitivity of our
assets and liabilities, as well as for other general purposes. These advances
are collateralized by certain of our mortgage loans and by our investment in the
stock of the Federal Home Loan Bank. The maximum amount that the Federal Home
Loan Bank will advance to its members, including Westborough Savings, fluctuates
from time to time in accordance with the Federal Home Loan Bank's policies. At
March 31, 1999, Westborough Savings had $4.0 million in outstanding advances
from the Federal Home Loan Bank and had the capacity to increase that amount to
$81.3 million based on the Westborough Savings' available qualified collateral.
We expect to continue to borrow from the Federal Home Loan Bank of Boston.

The following table presents certain information regarding our borrowed
funds at or for the periods ended on the dates indicated.

AT OR FOR THE SIX
MONTHS AT OR FOR THE
ENDED MARCH 31, YEAR ENDED SEPTEMBER 30,
-------------------- -------------------------------

1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------

(IN THOUSANDS)

Federal Home Loan Bank advances:
Average balance outstanding.................................... $ 2,395 -- $ 33 $ 2,330 $ 42
Maximum amount outstanding at any month-end during the
period....................................................... 4,000 -- 2,000 3,000 3,000
Balance outstanding at end of period........................... 4,000 -- 2,000 -- 3,000
Weighted average interest rate during the period............... 4.59% -- 6.06% 6.05% --
Weighted average interest rate at end of period................ 5.09% -- 5.29% -- 5.50%

SUBSIDIARY ACTIVITIES

ELI WHITNEY SECURITY CORPORATION. Eli Whitney Security Corporation is a
wholly-owned subsidiary of Westborough Savings. Eli Whitney was established in
1995 as a Massachusetts security corporation for the purpose of buying, selling
and holding investment securities on its own behalf and not as a broker. The
income earned on Eli Whitney's investment securities is subject to a
significantly lower rate of state tax than that assessed on income earned on
investment securities maintained by us. At March 31, 1999, Eli Whitney had total
assets of $12.1 million, virtually all of which were in investment securities.

ONE HUNDREDTH SECURITY CORPORATION. One Hundredth Security Corporation is a
wholly-owned subsidiary of Westborough Savings established in 1993. One
Hundredth is also a Massachusetts security corporation that was formed for the
purpose of buying, selling and holding investment securities on its own behalf
and not as a broker. The income earned on One Hundredth investment securities is
subject to a significantly lower rate of state tax than that assessed on income
earned on investment securities maintained by us. At March 31, 1999, One
Hundredth had total assets of $19.3 million, virtually all of which were in
investment securities.

THE HUNDREDTH CORPORATION. The Hundredth Corporation is a wholly-owned
subsidiary of Westborough Savings. The Hundredth Corporation was established in
1991 for the disposal of interests in real or personal property acquired by
Westborough Savings through foreclosure, deed in lieu of foreclosure or
otherwise. At March 31, 1999, The Hundredth Corporation had total assets of $75
thousand.

PROPERTIES

We currently conduct our business through our executive and administrative
offices and our six retail banking offices, five of which are full service
branches. As of March 31, 1999, the properties and leasehold improvements owned
by us had an aggregate net book value of $1.5 million.

ORIGINAL DATE
LEASED OR LEASED OR DATE OF LEASE
LOCATION OWNED ACQUIRED EXPIRATION DEPOSITS
- --------------------------------------------------------- --------- ------------- ------------- --------------

(IN THOUSANDS)
EXECUTIVE OFFICE:
100 E. Main Street..................................... Owned 06/10/75 -- $ 55,756
Westborough, MA

BRANCH OFFICES:(1)
33 W. Main Street...................................... Owned 05/01/54 -- $ 31,052
Westborough, MA

53 W. Main Street...................................... Owned 07/01/81 -- $ 39,533
Northborough, MA

19 Maple Avenue........................................ Leased 12/01/95 11/30/00 $ 10,616
Shrewsbury, MA

OTHER OFFICES:
The Willows(2)......................................... Leased 08/01/87 07/31/00 $ 6,014
One Lyman Street
Westborough, MA

Operations Center...................................... Leased 01/01/98 12/31/99 --
176 E. Main Street
Westborough, MA

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

(1) This listing does not include our new Shrewsbury branch which opened in May
1999 at Shaw's supermarket. The property in which this branch is located is
leased for a term beginning on May 1, 1999 and ending on April 30, 2004. The
aggregate amount of deposits held by this branch totaled $236 thousand at
June 1, 1999.

(2) This office provides limited retail banking services to the residents of the
Willows. It is not open to the general public and maintains restricted
operating hours.

LEGAL PROCEEDINGS

We are not involved in any pending legal proceeding other than routine legal
proceedings occurring in the ordinary course of business. We believe that these
routine legal proceedings, in the aggregate, are immaterial to our financial
condition and results of operation.

PERSONNEL

As of March 31, 1999, we had 45 full-time employees and 26 part-time
employees. The employees are not represented by a collective bargaining unit,
and we consider our relationship with our employees to be excellent.

BUSINESS OF WESTBOROUGH FINANCIAL SERVICES, INC.

Westborough Financial Services has not engaged in any business to date. Upon
completion of the reorganization, Westborough Financial Services will own The
Westborough Bank. Westborough Financial Services will retain up to 50% of the
net proceeds from the offering. We will invest our initial capital as discussed
in "How We Intend to Use the Proceeds from the Offering."

In the future, Westborough Financial Services may pursue other business
activities, including the acquisition of other financial institutions or other
entities, borrowing funds for investment in Westborough Bank and diversification
of Westborough Financial Services' operations. Westborough Financial Services
has no current plans for such activities. Our cash flow will depend upon
earnings from the investment of the portion of net proceeds we retain and any
dividends Westborough Financial Services receives from Westborough Bank.
Initially, Westborough Financial Services will neither own nor lease any
property, but will instead use the premises, equipment and furniture of
Westborough Bank. At the present time, we intend to employ only persons who are
officers of Westborough Bank to serve as officers of Westborough Financial
Services. However, we will use the support staff of Westborough Bank from time
to time. These persons will not be separately compensated by Westborough
Financial Services. Westborough Financial Services will hire additional
employees, as appropriate, to the extent it expands its business in the future.
See "How We Intend to Use the Proceeds from the Offering."

REGULATION OF WESTBOROUGH SAVINGS AND
WESTBOROUGH FINANCIAL SERVICES, INC.

GENERAL

Westborough Savings is a Massachusetts-chartered savings bank, and its
deposit accounts are insured up to applicable limits by the Federal Deposit
Insurance Corporation by the Bank Insurance Fund. Westborough Savings is subject
to extensive regulation, examination and supervision by the Commonwealth of
Massachusetts Division of Banks (the "Division") as its primary corporate
regulator, and by the FDIC as the deposit insurer. Westborough Savings must file
reports with the Division and the FDIC concerning its activities and financial
condition, and it must obtain regulatory approval prior to entering into certain
transactions, such as mergers with, or acquisitions of, other depository
institutions and opening or acquiring branch offices. The Division and the FDIC
conduct periodic examinations to assess our compliance with various regulatory
requirements. This regulation and supervision establishes a comprehensive
framework of activities in which a savings bank can engage and is intended
primarily for the protection of the deposit insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes.

Westborough Bancorp, MHC and Westborough Financial Services, as bank holding
companies controlling Westborough Bank, will be subject to the Bank Holding
Company Act of 1956, as amended, (the "BHCA") and the rules and regulations of
the Federal Reserve Board (the "FRB") under the BHCA and to the provisions of
the Massachusetts General Laws applicable to savings banks and other depository
institutions and their holding companies (the "Massachusetts banking laws") and
the regulations of the Division under the Massachusetts banking laws applicable
to bank holding companies. Westborough Bancorp, MHC and Westborough Financial
Services will be required to file reports with, and otherwise comply with the
rules and regulations of the FRB and the Division. Westborough Financial
Services will be required to file certain reports with, and otherwise comply
with, the rules and regulations of the Securities and Exchange Commission under
the federal securities laws.

Any change in such laws and regulations, whether by the Division, the FDIC,
or the FRB, or through legislation, could have a material adverse impact on
Westborough Bancorp, MHC, Westborough Financial Services and Westborough Savings
and their operations and stockholders.

CERTAIN OF THE LAWS AND REGULATIONS APPLICABLE TO WESTBOROUGH BANCORP, MHC,
WESTBOROUGH FINANCIAL SERVICES AND WESTBOROUGH SAVINGS ARE SUMMARIZED BELOW OR
ELSEWHERE IN THIS PROSPECTUS. THESE SUMMARIES DO NOT PURPORT TO BE COMPLETE AND
ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO SUCH LAWS AND REGULATIONS.

MASSACHUSETTS BANKING REGULATION

ACTIVITY POWERS. The Bank derives its lending, investment and other
activity powers primarily from the applicable provisions of the Massachusetts
banking laws and its related regulations. Under these laws and regulations,
savings banks, including Westborough Savings, generally may, invest in:

(1) real estate mortgages;

(2) consumer and commercial loans;

(3) specific types of debt securities, including certain corporate debt
securities and obligations of federal, state and local governments and
agencies;

(4) certain types of corporate equity securities; and

(5) certain other assets.

A savings bank may also invest pursuant to a "leeway" power that permits
investments not otherwise permitted by the Massachusetts banking laws. "Leeway"
investments must comply with a number of limitations on the individual and
aggregate amounts of "leeway" investments. A savings bank may also exercise
trust powers upon approval of the Division. Massachusetts savings banks may also
exercise any power and engage in any activity permissible for national banks in
accordance with regulations adopted by the Division with respect to such power
or activity. The exercise of these lending, investment and activity powers are
limited by federal law and the related regulations. See "--Federal Banking
Regulation--Activity Restrictions on State-Chartered Banks" below.

COMMUNITY REINVESTMENT ACT. Westborough Savings is also subject to
provisions of the Massachusetts banking laws that, like the provisions of the
federal Community Reinvestment Act ("CRA"), impose continuing and affirmative
obligations upon a banking institution organized in Massachusetts to serve the
credit needs of its local communities ("Massachusetts CRA"). The obligations of
the Massachusetts CRA are similar to those imposed by the CRA, and the Division
has adopted regulations to implement the Massachusetts CRA that are based on the
CRA. See "Federal Banking Regulation--Community Reinvestment Act." The Division
is required to consider a bank's Massachusetts CRA rating when reviewing the
bank's application to engage in certain transactions, including mergers, asset
purchases and the establishment of branch offices or automated teller machines,
and provides that such assessment may serve as a basis for the denial of any
such application. The Massachusetts CRA requires the Division to assess a bank's
compliance with the Massachusetts CRA and to make such assessment available to
the public. The latest Massachusetts CRA rating, received by letter, dated March
22, 1999, from the Division was a rating of "Satisfactory."

LOANS-TO-ONE-BORROWER LIMITATIONS. With specified exceptions, the total
obligations of a single borrower to a Massachusetts chartered savings bank may
not exceed 20% of the savings bank's surplus account. A savings bank may lend
additional amounts up to 100% of the bank's surplus account if secured by
collateral meeting the requirements of the Massachusetts banking laws.
Westborough Savings currently complies with applicable loans-to-one-borrower
limitations.

LOANS TO A BANK'S INSIDERS. Provisions of the Massachusetts banking laws
prohibit a savings bank from making a loan or otherwise extending credit to any
of its officers and directors or trustees and

prohibits any such officer, director or trustee from borrowing, otherwise
becoming indebted, or becoming liable for a loan or other extension of credit by
such bank to any other person except for any of the following loans after
approval by a majority of the all of the members of the bank's board of
investment, excluding any member involved in such loan or extension of credit:

(a) loan or extension of credit, secured or unsecured, to an officer of the
bank in an amount not exceeding $20,000;

(b) loan or extension of credit intended or secured for educational purposes
to an officer of the bank in an amount not exceeding $75,000;

(c) loan or extension of credit secured by a mortgage on residential real
estate to be occupied in whole or in part by the officer to whom the loan
or extension of credit is made, in an amount not exceeding $275,000;

(d) loan or extension of credit to a director or trustee of the bank who is
not also an officer of the bank in an amount permissible under the bank's
loan-to-one borrower limit. See "Massachusetts Banking
Regulation--Loans-to-One Borrower Limitations" above.

No such loan may be granted on with an interest rate or other terms that are
preferential in comparison to loans granted to persons not affiliated with the
savings bank.

DIVIDENDS. Under the Massachusetts banking laws, a stock savings bank may,
subject to several limitations, declare and pay a dividend on its capital stock,
which is the bank's common stock and any preferred stock, out of the bank's net
profits. A dividend may not be declared if the payment of the dividend would
impair the capital stock and surplus account of the savings bank. No dividend on
the bank's common stock may be paid unless dividends and any required payment
with respect to any preferred stock have been paid. No dividend may be paid from
net profits that are required to be added to the surplus account of the stock
savings bank. A stock savings bank is required to transfer net profits to its
surplus account to the extent necessary to

(a) increase the total of the capital stock and surplus account of the bank
to an amount equal to 10% of its deposit liabilities;

(b) increase the amount of the surplus account to an amount to equal to 50%
of the bank's common stock; and

(c) if the surplus account already amounts to 50% of the bank's common
stock, such amount of the net profits, not exceeding 50% of such net
profits, as necessary to increase the amount of the surplus account to an
amount equal to 50% of the bank's capital stock.

In addition, Federal law may also limit the amount of dividends that may be
paid by Westborough Savings. See "--Federal Banking Regulation--Prompt
Corrective Action" below.

EXAMINATION AND ENFORCEMENT. The Division is required to periodically
examine savings banks at least once every calendar year or at least one each 18
month period if the savings bank qualifies as well capitalized under the prompt
corrective action provisions of the Federal Deposit Insurance Act. See
"--Federal Banking Regulation--Prompt Corrective Action" below. The Division may
also examine a savings bank whenever the Division deems an examination
expedient. If the Division finds, after an inquiry, that any trustee, director
or officer of a savings bank has, among other things, violated any law related
to such bank or has conducted the business of such bank in an unsafe or unsound
manner, the Division may take various actions that could result in the
suspension or removal of such person as an officer, director or trustee of the
savings bank. If the Division determines that, among other things, a savings
bank has violated its charter or any Massachusetts law or is conducting its
business in an unsafe or unsound manner or is in an unsafe or unsound condition
to transact is banking business, the

Division may take possession of the property and business of the savings bank
and may, if the facts warrant, initiate the liquidation of the bank.

FEDERAL BANKING REGULATION

CAPITAL REQUIREMENTS. FDIC regulations require BIF-insured banks, such as
Westborough Savings, to maintain minimum levels of capital. The FDIC regulations
define two tiers, or classes, of capital.

Tier 1 capital is comprised of the sum of common stockholders' equity
(excluding the unrealized appreciation or depreciation, net of tax, from
available-for-sale securities), non-cumulative perpetual preferred stock
(including any related surplus) and minority interests in consolidated
subsidiaries, minus all intangible assets (other than qualifying servicing
rights), and any net unrealized loss on marketable equity securities.

The components of Tier 2 capital currently include cumulative perpetual
preferred stock, certain perpetual preferred stock for which the dividend rate
may be reset periodically, mandatory convertible securities, subordinated debt,
intermediate preferred stock and allowance for possible loan losses. Allowance
for possible loan losses includible in Tier 2 capital is limited to a maximum of
1.25% of risk-weighted assets. Overall, the amount of Tier 2 capital that may be
included in total capital can not exceed 100% of Tier 1 capital.

The FDIC regulations establish a minimum leverage capital requirement for
banks in the strongest financial and managerial condition, with a rating of 1
(the highest examination rating of the FDIC for banks) under the Uniform
Financial Institutions Rating System, of not less than a ratio of 3.0% of Tier 1
capital to total assets. For all other banks, the minimum leverage capital
requirement is 4.0%, unless a higher leverage capital ratio is warranted by the
particular circumstances or risk profile of the depository institution.

The FDIC regulations also require that savings banks meet a risk-based
capital standard. The risk-based capital standard requires the maintenance of a
ratio of total capital (which is defined as the sum of Tier 1 capital and Tier 2
capital) to risk-weighted assets of at least 8% and a ratio of Tier 1 capital to
risk-weighted assets of at least 4%. In determining the amount of risk-weighted
assets, all assets, plus certain off balance sheet items, are multiplied by a
risk-weight of 0% to 100%, based on the risks the FDIC believes are inherent in
the type of asset or item.

The federal banking agencies, including the FDIC, have also adopted
regulations to require an assessment of an institution's exposure to declines in
the economic value of a bank's capital due to changes in interest rates when
assessing the bank's capital adequacy. Under such a risk assessment, examiners
will evaluate a bank's capital for interest rate risk on a case-by-case basis,
with consideration of both quantitative and qualitative factors. According to
the agencies, applicable considerations include the quality of the bank's
interest rate risk management process, the overall financial condition of the
bank and the level of other risks at the bank for which capital is needed.
Institutions with significant interest rate risk may be required to hold
additional capital. The agencies also issued a joint policy statement providing
guidance on interest rate risk management, including a discussion of the
critical factors affecting the agencies' evaluation of interest rate risk in
connection with capital adequacy.

The following table shows Westborough Savings' leverage ratio, its Tier 1
risk-based capital ratio, and its total risk-based capital ratio, at March 31,
1999:

AS OF MARCH 31, 1999
-----------------------------------------------------------------------------------

HISTORICAL PRO PRO FORMA
CAPITAL PERCENT OF FORMA PERCENT OF CAPITAL PERCENT OF
(IN THOUSANDS) ASSETS(2) CAPITA1(1) ASSETS(2) REQUIREMENTS ASSETS(2)
-------------- ----------- ----------- ----------- ------------- -------------
Regulatory Tier 1 leverage capital............ $ 19,031 11.67% $ 21,330 12.90% $ 4,961 3.00%
Tier 1 risk-based capital..................... $ 19,031 21.52% $ 21,330 23.99% $ 3,556 4.00%
Total risk-based capital...................... $ 19,888 22.48% $ 22,187 24.95% $ 7,113 8.00%

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

(1) Based on the midpoint of the Current Valuation Range.

(2) For purposes of calculating Regulatory Tier 1 leverage capital, assets are
based on adjusted total leverage assets. In calculating Tier 1 risk based
capital and total risk-based capital, assets are based on total
risk-weighted assets.

As the table shows, Westborough Savings exceeded the minimum capital
adequacy requirements at the date indicated.

ACTIVITY RESTRICTIONS ON STATE-CHARTERED BANKS. Section 24 of the Federal
Deposit Insurance Act, as amended (the "FDIA"), which was added by the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), generally
limits the activities and investments of state-chartered FDIC insured banks and
their subsidiaries to those permissible for federally chartered national banks
and their subsidiaries, unless such activities and investments are specifically
exempted by Section 24 or consented to by the FDIC.

Section 24 provides an exception for investments by a bank in common and
preferred stocks listed on a national securities exchange or the shares of
registered investment companies if

(1) the bank held such types of investments during the 14-month period from
September 30, 1990 through November 26, 1991;

(2) the state in which the bank is chartered permitted such investments as of
September 30, 1991; and

(3) the bank notifies the FDIC and obtains approval from the FDIC to make or
retain such investments. Upon receiving such FDIC approval, an institution's
investment in such equity securities will be subject to an aggregate limit
up to the amount of its Tier 1 capital.

Westborough Savings received approval from the FDIC to retain and acquire such
equity investments subject to a maximum permissible investment equal to the
lesser of 100% of Westborough Savings' Tier 1 capital or the maximum permissible
amount specified by the Massachusetts banking laws. Section 24 also provides an
exception for majority owned subsidiaries of a bank, but Section 24 limits the
activities of such subsidiaries are limited to those permissible for a national
bank, permissible under Section 24 of the FDIA and the FDIC regulations issued
pursuant thereto, or as approved by the FDIC.

Before making a new investment or engaging in a new activity not permissible
for a national bank or otherwise permissible under Section 24 of the FDIC
regulations thereunder, an insured bank must seek approval from the FDIC to make
such investment or engage in such activity. The FDIC will not approve the
activity unless the bank meets its minimum capital requirements and the FDIC
determines that the activity does not present a significant risk to the FDIC
insurance funds.

ENFORCEMENT. The FDIC has extensive enforcement authority over insured
savings banks, including Westborough Savings. This enforcement authority
includes, among other things, the ability to assess civil money penalties, to
issue cease and desist orders and to remove directors and officers. In

general, these enforcement actions may be initiated in response to violations of
laws and regulations and to unsafe or unsound practices.

The FDIC is required, with certain exceptions, to appoint a receiver or
conservator for an insured state bank if that bank is "critically
undercapitalized." For this purpose, "critically undercapitalized" means having
a ratio of tangible capital to total assets of less than 2%. The FDIC may also
appoint a conservator or receiver for a state bank on the basis of the
institution's financial condition or upon the occurrence of certain events,
including:

(1) insolvency (whereby the assets of the bank are less than its liabilities to
depositors and others);

(2) substantial dissipation of assets or earnings through violations of law or
unsafe or unsound practices;

(3) existence of an unsafe or unsound condition to transact business;

(4) likelihood that the bank will be unable to meet the demands of its
depositors or to pay its obligations in the normal course of business; and

(5) insufficient capital, or the incurring or likely incurring of losses that
will deplete substantially all of the institution's capital with no
reasonable prospect of replenishment of capital without federal assistance.

DEPOSIT INSURANCE. Pursuant to FDICIA, the FDIC established a system for
setting deposit insurance premiums based upon the risks a particular bank or
savings association posed to its deposit insurance funds. Under the risk-based
deposit insurance assessment system, the FDIC assigns an institution to one of
three capital categories based on the institution's financial information, as of
the reporting period ending six months before the assessment period. The three
capital categories are (1) well capitalized, (2) adequately capitalized and (3)
undercapitalized. The FDIC also assigns an institution to one of three
supervisory subcategories within each capital group. With respect to the capital
ratios, institutions are classified as well capitalized, adequately capitalized
or under capitalization using ratios that are substantially similar to the
prompt corrective action capital ratios discussed below. The FDIC also assigns
an institution to supervisory subgroup based on a supervisory evaluation
provided to the FDIC by the institution's primary federal regulator and
information that the FDIC determines to be relevant to the institution's
financial condition and the risk posed to the deposit insurance funds (which may
include, if applicable, information provided by the institution's state
supervisor).

An institution's assessment rate depends on the capital category and
supervisory category to which it is assigned. Under the final risk-based
assessment system, there are nine assessment risk classifications (I.E.,
combinations of capital groups and supervisory subgroups) to which different
assessment rates are applied. Assessment rates for deposit insurance currently
range from 0 basis points to 27 basis points. The capital and supervisory
subgroup to which an institution is assigned by the FDIC is confidential and may
not be disclosed. A bank's rate of deposit insurance assessments will depend
upon the category and subcategory to which the bank is assigned by the FDIC. Any
increase in insurance assessments could have an adverse effect on the earnings
of insured institutions, including Westborough Savings.

Under the Deposit Insurance Funds Act of 1996 (the "Funds Act"), the
assessment base for the payments on the bonds (the "FICO bonds") issued in the
late 1980's by the Financing Corporation to recapitalize the now defunct Federal
Savings and Loan Insurance Corporation was expanded to include, beginning
January 1, 1997, the deposits of BIF-insured institutions, such as Westborough
Savings. Until December 31, 1999, or such earlier date on which the last savings
association ceases to exist, the rate of assessment for BIF-assessable deposits
will be one-fifth of the rate imposed on deposits insured by the Savings
Association Insurance Fund (the "SAIF"). The annual rate of assessments for the
payments on

the FICO bonds for the quarterly period beginning on January 1, 1999 was 0.0122%
for BIF-assessable deposits and 0.0610% for SAIF-assessable deposits.

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

TRANSACTIONS WITH AFFILIATES OF WESTBOROUGH SAVINGS. Transactions between
an insured bank, such as Westborough Savings, and any of its affiliates is
governed by Sections 23A and 23B of the Federal Reserve Act. An affiliate of a
bank is any company or entity that controls, is controlled by or is under common
control with the bank. Currently, a subsidiary of a bank that is not also a
depository institution is not treated as an affiliate of the bank for purposes
of Sections 23A and 23B, but the FRB has proposed treating any subsidiary of a
bank that is engaged in activities not permissible for bank holding companies
under the Bank Holding Company Act of 1956, as amended, as an affiliate for
purposes of Sections 23A and 23B. Sections 23A and 23B (1) limit the extent to
which the bank or its subsidiaries may engage in "covered transactions" with any
one affiliate to an amount equal to 10% of such bank's capital stock and
surplus, and limit on all such transactions with all affiliates to an amount
equal to 20% of such capital stock and surplus and (2) require that all such
transactions be on terms that are consistent with safe and sound banking
practices. The term "covered transaction" includes the making of loans, purchase
of assets, issuance of guarantees and other similar types of transactions.
Further, most loans by a bank to any of its affiliates must be secured by
collateral in amounts ranging from 100 to 130 percent of the loan amounts. In
addition, any covered transaction by a bank with an affiliate and any purchase
of assets or services by a bank from an affiliate must be on terms that are
substantially the same, or at least as favorable, to the bank as those that
would be provided to a non-affiliate.

PROHIBITIONS AGAINST TYING ARRANGEMENTS. Banks are subject to the
prohibitions of 12 U.S.C. Section 1972 on certain tying arrangements. A
depository institution is prohibited, subject to certain exceptions, from
extending credit to or offering any other service, or fixing or varying the
consideration for such extension of credit or service, on the condition that the
customer obtain some additional service from the institution or certain of its
affiliates or not obtain services of a competitor of the institution.

UNIFORM REAL ESTATE LENDING STANDARDS. Pursuant to FDICIA, the federal
banking agencies adopted uniform regulations prescribing standards for
extensions of credit that are secured by liens on interests in real estate or
made for the purpose of financing the construction of a building or other
improvements to real estate. Under the joint regulations adopted by the federal
banking agencies, all insured depository institutions must adopt and maintain
written policies that establish appropriate limits and standards for extensions
of credit that are secured by liens or interests in real estate or are made for
the purpose of financing permanent improvements to real estate. These policies
must establish loan portfolio diversification standards, prudent underwriting
standards (including loan-to-value limits) that are clear and measurable, loan
administration procedures, and documentation, approval and reporting
requirements. The real estate lending policies must reflect consideration of the
Interagency Guidelines for Real Estate Lending Policies that have been adopted
by the federal bank regulators.

The Interagency Guidelines, among other things, require a depository
institution to establish internal loan-to-value limits for real estate loans
that are not in excess of the following supervisory limits:

(1) for loans secured by raw land, the supervisory loan-to-value limit is 65% of
the value of the collateral;

(2) for land development loans (I.E., loans for the purpose of improving
unimproved property prior to the erection of structures), the supervisory
limit is 75%;

(3) for loans for the construction of commercial, multi-family or other
non-residential property, the supervisory limit is 80%;

(4) for loans for the construction of one- to four-family properties, the
supervisory limit is 85%; and

(5) for loans secured by other improved property (E.G., farmland, completed
commercial property and other income-producing property including non-owner
occupied, one- to four-family property), the limit is 85%.

Although no supervisory loan-to-value limit has been established for
owner-occupied, one to four-family and home equity loans, the Interagency
Guidelines state that for any such loan with a loan-to-value ratio that equals
or exceeds 90% at origination, an institution should require appropriate credit
enhancement in the form of either mortgage insurance or readily marketable
collateral.

COMMUNITY REINVESTMENT ACT. Under the Community Reinvestment Act (the
"CRA"), any insured depository institution, including Westborough Savings, has a
continuing and affirmative obligation consistent with its safe and sound
operation to help meet the credit needs of its entire community, including low
and moderate income neighborhoods. The CRA does not establish specific lending
requirements or programs for financial institutions nor does it limit an
institution's discretion to develop the types of products and services that it
believes are best suited to its particular community. The CRA requires the FDIC,
in connection with its examination of a savings bank, to assess the depository
institution's record of meeting the credit needs of its community and to take
such record into account in its evaluation of certain applications by such
institution, including applications for additional branches and acquisitions.

Among other things, the current CRA regulations replace the prior
process-based assessment factors with a new evaluation system that rates an
institution based on its actual performance in meeting community needs. In
particular, the current evaluation system focuses on three tests:

(1) a lending test, to evaluate the institution's record of making loans in its
service areas;

(2) an investment test, to evaluate the institution's record of investing in
community development projects, affordable housing, and programs benefitting
low or moderate income individuals and businesses; and

(3) a service test, to evaluate the institution's delivery of services through
its branches, ATMs and other offices.

For a small bank, which is a bank with less than $250 million in assets in
the year prior to the CRA examination, such as Westborough Savings, the CRA
assessment will be based on

(1) the bank's loan-to-deposit ratio;

(2) the percentage of the bank's loans and any other appropriate lending related
activities located in the bank's assessment areas;

(3) the bank's record of lending to, and other appropriate lending related
activities for borrowers of different income levels and businesses and farms
of different sizes;

(4) the geographic distribution of the bank's loans; and

(5) the bank's record in acting in response to written complaints about the
bank's performance in helping to meet the credit needs of its assessment
areas.

The CRA requires the FDIC to provide a written evaluation of an
institution's CRA performance utilizing a four-tiered descriptive rating system
and requires public disclosure of an institution's CRA rating. Westborough
Savings received a "satisfactory" rating in its CRA examination conducted by the
FDIC on March 1, 1999

SAFETY AND SOUNDNESS STANDARDS. Pursuant to the requirements of FDICIA, as
amended by the Riegle Community Development and Regulatory Improvement Act of
1994, each federal banking agency, including the FDIC, has adopted guidelines
establishing general standards relating to internal controls, information and
internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, asset quality, earnings, and compensation, fees and
benefits. In general, the guidelines require, among other things, appropriate
systems and practices to identify and manage the risks and exposures specified
in the guidelines. The guidelines prohibit excessive compensation as an unsafe
and unsound practice and describe compensation as excessive when the amounts
paid are unreasonable or disproportionate to the services performed by an
executive officer, employee, director, or principal stockholder.

In addition, the FDIC adopted regulations to require a bank that is given
notice by the FDIC that it is not satisfying any of such safety and soundness
standards to submit a compliance plan to the FDIC. If, after being so notified,
a bank fails to submit an acceptable compliance plan or fails in any material
respect to implement an accepted compliance plan, the FDIC may issue an order
directing corrective and other actions of the types to which a significantly
undercapitalized institution is subject under the "prompt corrective action"
provisions of FDICIA. If a bank fails to comply with such an order, the FDIC may
seek to enforce such an order in judicial proceedings and to impose civil
monetary penalties.

PROMPT CORRECTIVE ACTION. FDICIA also established a system of prompt
corrective action to resolve the problems of undercapitalized institutions. The
FDIC, as well as the other federal banking regulators, adopted regulations
governing the supervisory actions that may be taken against undercapitalized
institutions. The regulations establish five categories, consisting of "well
capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized" and "critically undercapitalized." The FDIC's regulations
defines the five capital categories as follows: Generally, an institution will
be treated as "well capitalized" if its ratio of total capital to risk-weighted
assets is at least 10%, its ratio of Tier 1 capital to risk-weighted assets is
at least 6%, its ratio of Tier 1 capital to total assets is at least 5%, and it
is not subject to any order or directive by the FDIC to meet a specific capital
level. An institution will be treated as "adequately capitalized" if its ratio
of total capital to risk-weighted assets is at least 8%, its ratio of Tier 1
capital to risk-weighted assets is at least 4%, and its ratio of Tier 1 capital
to total assets is at least 4% (3% if the bank receives the highest rating under
the Uniform Financial Institutions Rating System) and it is not a
well-capitalized institution. An institution that has total risk-based capital
of less than 8%, Tier 1 risk-based-capital of less than 4% or a leverage ratio
that is less than 4% (or less than 3% if the institution is rated a composite
"1" under the Uniform Financial Institutions Rating System) would be considered
to be "undercapitalized." An institution that has total risk-based capital of
less than 6%, Tier 1 capital of less than 3% or a leverage ratio that is less
than 3% would be considered to be "significantly undercapitalized," and an
institution that has a tangible capital to assets ratio equal to or less than 2%
would be deemed to be "critically undercapitalized."

The severity of the action authorized or required to be taken under the
prompt corrective action regulations increases as a bank's capital decreases
within the three undercapitalized categories. All banks are prohibited from
paying dividends or other capital distributions or paying management fees to

any controlling person if, following such distribution, the bank would be
undercapitalized. The FDIC is required to monitor closely the condition of an
undercapitalized bank and to restrict the growth of its assets. An
undercapitalized bank is required to file a capital restoration plan within 45
days of the date the bank receives notice that it is within any of the three
undercapitalized categories, and the plan must be guaranteed by any parent
holding company. The aggregate liability of a parent holding company is limited
to the lesser of:

(1) an amount equal to the five percent of the bank's total assets at the time
it became "undercapitalized," and

(2) the amount that is necessary (or would have been necessary) to bring the
bank into compliance with all capital standards applicable with respect to
such bank as of the time it fails to comply with the plan.

If a bank fails to submit an acceptable plan, it is treated as if it were
"significantly undercapitalized." Banks that are significantly or critically
undercapitalized are subject to a wider range of regulatory requirements and
restrictions.

The FDIC has a broad range of grounds under which it may appoint a receiver
or conservator for an insured depositary bank. If one or more grounds exist for
appointing a conservator or receiver for a bank, the FDIC may require the bank
to issue additional debt or stock, sell assets, be acquired by a depository bank
holding company or combine with another depository bank. Under FDICIA, the FDIC
is required to appoint a receiver or a conservator for a critically
undercapitalized bank within 90 days after the bank becomes critically
undercapitalized or to take such other action that would better achieve the
purposes of the prompt corrective action provisions. Such alternative action can
be renewed for successive 90-day periods. However, if the bank continues to be
critically undercapitalized on average during the quarter that begins 270 days
after it first became critically undercapitalized, a receiver must be appointed,
unless the FDIC makes certain findings that the bank is viable.

LOANS TO A BANK'S INSIDERS. A bank's loans to its executive officers,
directors, any owner of 10% or more of its stock (each, an "insider") and any of
certain entities affiliated to any such person (an insider's related interest)
are subject to the conditions and limitations imposed by Section 22(h) of the
Federal Reserve Act and the FRB's Regulation O thereunder. Under these
restrictions, the aggregate amount of the loans to any insider and the insider's
related interests may not exceed the loans-to-one-borrower limit applicable to
national banks, which is comparable to the loans-to-one-borrower limit
applicable to Westborough Savings' loans. See "Massachusetts Banking
Regulation--Loans-to-One Borrower Limitations." All loans by a bank to all
insiders and insiders' related interests in the aggregate may not exceed the
bank's unimpaired capital and unimpaired surplus. With certain exceptions, loans
to an executive officer, other than loans for the education of the officer's
children and certain loans secured by the officer's residence, may not exceed
the lesser of (1) $100,000 or (2) the greater of $25,000 or 2.5% of the bank's
capital and unimpaired surplus. Regulation O also requires that any proposed
loan to an insider or a related interest of that insider be approved in advance
by a majority of the Board of Trustees of the bank, with any interested director
not participating in the voting, if such loan, when aggregated with any existing
loans to that insider and the insider's related interests, would exceed either
(1) $500,000 or (2) the greater of $25,000 or 5% of the bank's unimpaired
capital and surplus. Generally, such loans must be made on substantially the
same terms as, and follow credit underwriting procedures that are not less
stringent than, those that are prevailing at the time for comparable
transactions with other persons. An exception is made for extensions of credit
made pursuant to a benefit or compensation plan of a bank that is widely
available to employees of the bank and that does not give any preference to
insiders of the bank over other employees of the bank.

In addition, provisions of the BHCA prohibit extensions of credit to a
bank's insiders and their related interests by any other institution that has a
correspondent banking relationship with the bank,

unless such extension of credit is on substantially the same terms as those
prevailing at the time for comparable transactions with other persons and does
not involve more than the normal risk of repayment or present other unfavorable
features.

FEDERAL RESERVE SYSTEM

Under FRB regulations, Westborough Savings is required to maintain
non-interest-earning reserves against its transaction accounts (primarily NOW
and regular checking accounts). The FRB regulations generally require that
reserves of 3% must be maintained against aggregate transaction accounts of
$46.5 million or less (subject to adjustment by the FRB) and an initial reserve
of $1.4 million plus 10% (subject to adjustment by the FRB between 8% and 14%)
against that portion of total transaction accounts in excess of $46.5 million.
The first $4.9 million of otherwise reservable balances (subject to adjustments
by the FRB) are exempted from the reserve requirements. Westborough Savings is
in compliance with the foregoing requirements. Because required reserves must be
maintained in the form of either vault cash, a non-interest-bearing account at a
Federal Reserve Bank or a pass-through account as defined by the FRB, the effect
of this reserve requirement is to reduce Westborough Savings' interest-earning
assets.

HOLDING COMPANY REGULATION

FEDERAL REGULATION. After the reorganization, Westborough Bancorp, MHC and
Westborough Financial Services will be governed as bank holding companies. Bank
holding companies are subject to examination, regulation and periodic reporting
under the BHCA, as administered by the FRB. The FRB has adopted capital adequacy
guidelines for bank holding companies on a consolidated basis substantially
similar to those of the FDIC for Westborough Savings. As of December 31, 1998,
Westborough Financial Services' total capital and Tier 1 capital ratios for
Westborough Bancorp, MHC and Westborough Financial Services would, on a pro
forma basis, exceed these minimum capital requirements. See "Regulatory Capital
Compliance."

Regulations of the FRB provide that a bank holding company must serve as a
source of strength to any of its subsidiary banks and must not conduct its
activities in an unsafe or unsound manner. Under the prompt corrective action
provisions of FDICIA, a bank holding company parent of an undercapitalized
subsidiary bank would be directed to guarantee, within limitations, the capital
restoration plan that is required of such an undercapitalized bank. See
"--Federal Banking Regulation--Prompt Corrective Action" above. If the
undercapitalized bank fails to file an acceptable capital restoration plan or
fails to implement an accepted plan, the Federal Reserve Board may prohibit the
bank holding company parent of the undercapitalized bank from paying any
dividend or making any other form of capital distribution without the prior
approval of the FRB.

As bank holding companies, Westborough Bancorp, MHC and Westborough
Financial Services will be required to obtain the prior approval of the FRB to
acquire all, or substantially all, of the assets of any bank or bank holding
company. Prior FRB approval will be required for Westborough Bancorp, MHC or
Westborough Financial Services to acquire direct or indirect ownership or
control of any voting securities of any bank or bank holding company if, after
giving effect to such acquisition, it would, directly or indirectly, own or
control more than 5% of any class of voting shares of such bank or bank holding
company.

A bank holding company is required to give the FRB prior written notice of
any purchase or redemption of its outstanding equity securities if the gross
consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, will be equal to 10% or more of the company's consolidated net worth.
The FRB may disapprove such a purchase or redemption if it determines that the
proposal would constitute an unsafe and unsound practice, or would violate any
law, regulation, FRB order or

directive, or any condition imposed by, or written agreement with, the FRB. Such
notice and approval is not required for a bank holding company that would be
treated as "well capitalized" under applicable regulations of the FRB, that has
received a composite "1" or "2" rating at its most recent bank holding company
inspection by the FRB, and that is not the subject of any unresolved supervisory
issues.

In addition, a bank holding company is generally prohibited from engaging
in, or acquiring direct or indirect control of any company engaged in,
non-banking activities. One of the principal exceptions to this prohibition is
for activities found by the FRB to be so closely related to banking or managing
or controlling banks as to be a proper incident thereto. Some of the principal
activities that the FRB has determined by regulation to be so closely related to
banking as to be a proper incident thereto are:

(1) making or servicing loans;

(2) performing certain data processing services;

(3) providing discount brokerage services;

(4) acting as fiduciary, investment or financial advisor;

(5) leasing personal or real property;

(6) making investments in corporations or projects designed primarily to promote
community welfare; and

(7) acquiring a savings and loan association.

Under the Federal Deposit Insurance Act, depository institutions are liable
to the FDIC for losses suffered or anticipated by the FDIC in connection with
the default of a commonly controlled depository institution or any assistance
provided by the FDIC to such an institution in danger of default. This law would
have potential applicability if Westborough Bancorp, MHC or Westborough
Financial Services ever acquired as a separate subsidiary a depository
institution in addition to Westborough Bank.

MASSACHUSETTS REGULATION. Under the Massachusetts banking laws, a company
owning or controlling two or more banking institutions, including a savings
bank, is regulated as a bank holding company. The term "company" is defined by
the Massachusetts banking laws similarly to the definition of "company" under
the BHCA. Each Massachusetts bank holding company must:

(a) Obtain the approval of the Massachusetts Board of Bank Incorporation
before engaging in certain transactions, such as the acquisition of more
than 5% of the voting stock of another banking institution; and

(b) Must register, and file certain reports, with the Division and is
subject to examination by the Division.

Westborough Bancorp, MHC or Westborough Financial Services will become a
Massachusetts bank holding company if they acquire a second banking institution
and hold and operate it separately from Westborough Bank.

ACQUISITION OF WESTBOROUGH FINANCIAL SERVICES, INC.

Under federal law, no person may acquire control of Westborough Financial
Services or Westborough Bank without first obtaining, as summarized below,
approval of such acquisition of control by the FRB.

FEDERAL RESTRICTIONS. Under the federal Change in Bank Control Act (the
"CBCA"), any person (including a company), or group acting in concert, seeking
to acquire 10% or more of the outstanding

shares of Westborough Financial Services' common stock will be required to
submit prior notice to the FRB, unless the FRB has found that the acquisition of
such shares will not result in a change in control of Westborough Financial
Services. Under the BHCA, the FRB has 60 days within which to act on such
notices, taking into consideration certain factors, including the financial and
managerial resources of the acquiror, the convenience and needs of the
communities served by Westborough Financial Services and Westborough Bank, and
the anti-trust effects of the acquisition. Under the BHCA, any company would be
required to obtain prior approval from the FRB before it may obtain "control,"
within the meaning of the BHCA, of Westborough Financial Services. The term
"control" is defined generally under the BHCA to mean the ownership or power to
vote 25% more of any class of voting securities of an institution or the ability
to control in any manner the election of a majority of the institution's
directors.

MASSACHUSETTS RESTRICTIONS. Under the Massachusetts banking laws, the prior
approval of the Division is required before any person may acquire a
Massachusetts bank holding company, such as Westborough Financial Services. For
this purpose, the term "person" is defined broadly to mean a natural person or a
corporation, company, partnership, or other forms of organized entities. The
term "acquire" is defined differently for an existing bank holding company and
for other companies or persons. A bank holding company will be treated as
"acquiring" a Massachusetts bank holding company if the bank holding company
acquires more than 5% of any class of the voting shares of the bank holding
company. Any other person will be treated as "acquiring" a Massachusetts bank
holding company if it acquires ownership or control of more than 25% of any
class of the voting shares of the bank holding company.

DIVIDEND WAIVERS BY WESTBOROUGH BANCORP, MHC

Certain mutual holding companies have waived the receipt of dividends
declared by its savings institution subsidiary. Any such dividend waiver by
Westborough Bancorp, MHC will be subject to the following restrictions:

MASSACHUSETTS RESTRICTIONS. Under applicable Massachusetts regulations, a
mutual holding company may not waive any dividends to be paid by any of its
subsidiary institutions if any shares of the stock to which the waiver would
apply is held by an insider (any officer, director, or corporator of the mutual
holding company or a subsidiary banking institution) or a stock benefit plan of
the mutual holding company unless prior written notice of the waiver has been
given to the Division and the Division does not object to the waiver. The
Division may not object to a dividend waiver notice if:

(a) The waiver would not be detrimental to the safe and sound operation of
the subsidiary banking institution, and

(b) The board of directors of the mutual holding company expressly
determines, as evidenced by a resolution of the board of directors, that
such waiver is consistent with the directors' fiduciary duties to the
mutual members of the mutual holding company.

FEDERAL RESTRICTIONS. In connection with its approval of the
reorganization, however, it is expected that the Federal Reserve Board will
impose certain conditions on the waiver by Westborough Bancorp, MHC of dividends
paid on the common stock by Westborough Financial Services. In particular, the
Federal Reserve Board is expected to require that Westborough Bancorp, MHC
obtain the prior approval of the Federal Reserve Board before Westborough
Bancorp, MHC may waive any dividends from Westborough Financial Services. As of
the date hereof, we are not aware that the Federal Reserve Board has given its
approval to any waiver of dividends by any mutual holding company that has
requested such approval.

We also expect that the terms of the Federal Reserve Board approval of the
reorganization will require that the amount of any dividends waived by
Westborough Bancorp, MHC will not be available

for payment to its public stockholders of Westborough Financial Services (i.e.,
stockholders except for Westborough Bancorp, MHC) and that such amount will be
excluded from Westborough Financial Services' capital for purposes of
calculating dividends payable to the public stockholders. Moreover, Westborough
Savings is required to maintain the cumulative amount of dividends waived by
Westborough Bancorp, MHC in a restricted capital account that would be added to
the liquidation account established in the reorganization. This amount would not
be available for distribution to public stockholders. See "The Reorganization
and The Offering--Effects of the Reorganization--Depositors' Rights If We
Liquidate; Liquidation Account." The restricted capital account and liquidation
account amounts would not be reflected in Westborough Bank's financial
statements, but would be considered as a notational or memorandum account of
Westborough Bank. These accounts would be maintained in accordance with the
laws, rules, regulations and policies of the Division of Banks and the plan of
reorganization. The plan of reorganization also provides that if Westborough
Bancorp, MHC converts to stock form in the future, (commonly referred to as a
second step conversion), any waived dividends would reduce the percentage of the
converted company's shares of common stock issued to public stockholders in
connection with any such transaction. For additional information regarding the
possible second step conversion of Westborough Bancorp, MHC, see "The
Reorganization and The Offering-- Possible Conversion of Westborough Bancorp,
MHC to Stock Form."

Westborough Bancorp, MHC does not expect initially to waive dividends
declared by Westborough Financial Services. If Westborough Bancorp, MHC decides
that it is in its best interest to waive a particular dividend to be paid by
Westborough Financial Services and the Federal Reserve Board approves such
waiver, then Westborough Financial Services would pay such dividend only to its
public stockholders. The amount of the dividend waived by Westborough Bancorp,
MHC would be treated in the manner described above. Westborough Bancorp, MHC's
decision as to whether or not to waive a particular dividend will depend on a
number of factors, including Westborough Bancorp, MHC's capital needs, the
investment alternatives available to Westborough Bancorp, MHC as compared to
those available to Westborough Financial Services, and the possibility of
regulatory approvals. We can not guarantee:

- that after the reorganization, Westborough Bancorp, MHC will waive
dividends paid by Westborough Financial Services;

- that if the application is made to waive a dividend, that the Federal
Reserve Board will approve such dividend waiver request; or

- what conditions might be imposed by the Federal Reserve Board on any
dividend waiver.

TAXATION

FEDERAL

GENERAL. The following discussion is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to
Westborough Bank, Westborough Bancorp, MHC or Westborough Financial Services.
For federal income tax purposes, we report income on the basis of a taxable year
ending September 30, using the accrual method of accounting, and we are
generally subject to federal income taxation in the same manner as other
corporations. Following the reorganization, Westborough Bank and Westborough
Financial Services will constitute an affiliated group of corporations and,
therefore, will be eligible to report their income on a consolidated basis.
Because MHC will own less than 80% of the common stock, it will not be a member
of such affiliated group and will report its income on a separate return.
Westborough Savings is not currently under audit by the Internal Revenue Service
("IRS"), but its September 30, 1994 return was audited in 1996.

BAD DEBT RESERVES. Pursuant to the Small Business Job Protection Act of
1996, we are no longer permitted to use the percentage of income method of
accounting for bad debts, and is now recapturing (taking into income) over a
multi-year period a portion of the balance of its tax bad debt reserve as of
September 30, 1996. Since we have already provided a deferred tax liability
equal to the amount of such recapture, the recapture will not adversely impact
Westborough Bank's financial condition or results of operations.

DISTRIBUTIONS. To the extent that Westborough Bank makes "non-dividend
distributions" to stockholders, such distributions will be considered to result
in distributions from our unrecaptured tax bad debt reserve "base year reserve,"
I.E., its reserve as of September 30, 1987, to the extent thereof and then from
its supplemental reserve for losses on loans, and an amount based on the amount
distributed will be included in Westborough Bank's taxable income. Non-dividend
distributions include distributions in excess of our current and accumulated
earnings and profits, distributions in redemption of stock and distributions in
partial or complete liquidation. However, distributions paid out of our current
or accumulated earnings and profits, as calculated for federal income tax
purposes, will not constitute non-dividend distributions and, therefore, will
not be included in our income.

The amount of additional taxable income created from a non-dividend
distribution is equal to the lesser of our base year reserve and supplemental
reserve for losses on loans or an amount that, when reduced by the tax
attributable to the income, is equal to the amount of the distribution. Thus, in
certain situations, approximately one and one-half times the non-dividend
distribution would be includible in gross income for federal income tax
purposes, assuming a 34% federal corporate income tax rate. We do not intend to
pay dividends that would result in the recapture of any portion of its bad debt
reserves.

CORPORATE ALTERNATIVE MINIMUM TAX. The Internal Revenue Code of 1986, as
amended, imposes a tax ("AMT") on alternative minimum taxable income ("AMTI") at
a rate of 20%. Only 90% of AMTI can be offset by net operating loss carryovers
of which we currently have none. AMTI is also adjusted by determining the tax
treatment of certain items in a manner that negates the deferral of income
resulting from the regular tax treatment of those items. We have not been
subject to AMT during the past five years.

ELIMINATION OF DIVIDENDS; DIVIDENDS RECEIVED DEDUCTION. Westborough
Financial Services may exclude from its income 100% of dividends received from
Westborough Bank as a member of the same affiliated group of corporations.
Because, following the reorganization, Westborough Bancorp, MHC will not be a
member of such affiliated group, it will not qualify for such 100% dividends
exclusion, but will be entitled to deduct 80% of the dividends it receives from
Westborough Financial Services so long as it owns more than 20% of the common
stock.

STATE

We file Massachusetts Savings Institution income tax returns. Generally, the
income of savings institutions in Massachusetts, which is calculated based on
federal taxable income, subject to certain adjustments, is subject to
Massachusetts tax. We are not currently under audit with respect to its
Massachusetts income tax returns and our state tax returns have not been audited
for the past five years.

Westborough Financial Services will be required to file a Massachusetts
income tax return and will generally be subject to a state income tax rate that
is the same tax rate as the tax rate for savings institutions in Massachusetts.
However, if Westborough Financial Services meets certain requirements, it may be
eligible to elect to be taxed as a Massachusetts Security Corporation, which
would allow Westborough Financial Services to be taxed at a rate that is
currently lower than income tax rates for savings institutions in Massachusetts.

MANAGEMENT

SHARED MANAGEMENT STRUCTURE

Westborough Financial Services' has the same directors and executive
officers as the current trustees and executive officers of Westborough Savings.
We expect that Westborough Financial Services and Westborough Bank will continue
to have common directors and common executive officers until there is a business
reason to establish separate management structures.

To date, Westborough Savings has compensated its trustees and executive
officers for their services. Westborough Financial Services does not pay any
additional compensation. We expect to continue this practice after the
reorganization until we have a business reason to establish separate
compensation programs. Until then, we expect Westborough Financial Services to
reimburse Westborough Savings and, following the reorganization, Westborough
Bank for a part of the compensation paid to each director and executive officer
that is proportionate to the amount of time which he or she devotes to
performing services for Westborough Financial Services.

DIRECTORS

COMPOSITION OF OUR BOARDS. We have 16 directors. Each director belongs to
one of three groups with staggered 3-year terms of office. Six directors are in
Group One and have terms expiring in 2000. Five directors are in Group Two and
have terms expiring in 2001. Five directors are in Group Three and have terms
expiring in 2002. At each of Westborough Financial Services' annual stockholder
meetings, the stockholders will elect directors to fill the seats of the
directors whose terms are expiring in that year and any vacant seats.
Westborough Financial Services, as Westborough Bank's sole stockholder, will
elect Westborough Bank's directors.

WHO OUR DIRECTORS ARE. The following table states our directors' names,
their ages, their positions, the years when they began serving as directors
(including time spent on the Board of Trustees of Westborough Savings in mutual
form before the reorganization) and the years when their current terms of office
as directors will expire:

BANK
TRUSTEE TERM
NAME AGE POSITIONS SINCE EXPIRES
- ----------------------------- --- ---------------------------------------------------------- ----------- -----------

Nelson P. Ball............... 68 Director of the Bank and WFSI 1980 2001
Edward S. Bilzerian.......... 66 Director of the Bank and WFSI 1993 2002
David E. Carlstrom........... 65 Director of the Bank and WFSI 1976 2000
John L. Casagrande........... 52 Vice President, Treasurer and Director of the Bank and 1994 2000
WFSI
William W. Cotting, Jr....... 52 Director of the Bank and WFSI 1988 2000
Robert G. Daniel............. 70 Director of the Bank and WFSI 1969 2001
Earl W. Hutt................. 72 Director of the Bank and WFSI 1988 2001
Walter A. Kinell, Jr......... 70 Chairman of the Bank and WFSI 1967 2000
Robert A. Klugman............ 48 Director of the Bank and WFSI 1991 2000
Roger B. Leland.............. 69 Director of the Bank and WFSI 1974 2001
Joseph F. MacDonough......... 53 President, Chief Executive Officer and Director of the 1982 2001
Bank and WFSI
Paul F. McGrath.............. 52 Director of the Bank and WFSI 1993 2002
Charlotte C. Spinney......... 63 Director of the Bank and WFSI 1991 2002
Phyllis A. Stone............. 56 Director of the Bank and WFSI 1999 2002
James E. Tashjian............ 58 Director of the Bank and WFSI 1973 2002
Daniel G. Tear............... 72 Director of the Bank and WFSI 1985 2000

OUR DIRECTORS' BACKGROUNDS. The business experience of each of our
directors is as follows:

NELSON P. BALL is the owner of Ball Financial Services, Co., located in
Westborough, Massachusetts. He has served as a financial services advisor for
over 20 years and is a member of the National Association of Securities Dealers,
Inc.

EDWARD S. BILZERIAN is President of Bilzerian Consulting Group, Inc., a
privately held company located in Worcester, Massachusetts, specializing in
small business turnarounds. He has been self-employed for over ten years.

DAVID E. CARLSTROM has served as President of Carlstrom Pressed Metal Co.,
Inc. for over 25 years. Carlstrom Pressed Metal is located in Westborough,
Massachusetts.

JOHN L. CASAGRANDE has served as the Vice President and Treasurer of
Westborough Savings since 1993. He joined Westborough Savings after having been
employed as a senior bank officer and certified public accountant for over 15
years at various times by several financial institutions (including mutual and
stock institutions) and the accounting firm of Peat Marwick.

WILLIAM W. COTTING JR. has been an attorney in private practice for over 20
years. His practice is located in Northborough, Massachusetts.

ROBERT G. DANIEL was employed in various capacities, including President and
Treasurer, at Carlson Daniel Insurance Agency, Inc., located in Westborough,
Massachusetts from 1958 to 1994. Mr. Daniel sold insurance from 1994 to 1996 for
Allied American Agency following its acquisition of Carlson Daniel. Mr. Daniel
currently serves as President and Treasurer of Westborough Insurance Agency,
Inc., a non-active corporation used as a vehicle for payments from Allied
American as negotiated in connection with the acquisition of Carlson Daniel.

EARL H. HUTT has served as an investment advisor and portfolio manager for
private industry for over 20 years.

WALTER A. KINELL, JR. has been Chairman of the Board since 1994. Mr. Kinell
joined Westborough Savings in 1949 as an assistant treasurer, became President
and Chief Executive Officer in 1969 and retired from this position in 1994.

ROBERT A. KLUGMAN, M.D. has practiced general medicine in Westborough,
Massachusetts for over 20 years.

ROBERT B. LELAND has practiced estate, tax and real estate law at Leland Law
Associates for over 30 years. During that time, he also served as an insurance
broker, selling life and casualty insurance products, through Leland Insurance
Agency, Inc. Leland Law Associates and Leland Insurance Agency are located in
Northborough, Massachusetts.

JOSEPH F. MACDONOUGH has served as President and Chief Executive Officer of
Westborough Savings since 1994. He joined Westborough Savings in 1981 and served
as Vice President and Treasurer until his appointment as President. Mr.
MacDonough serves on the Board of Trustees of the Savings Bank Employees'
Retirement Association and is a certified public accountant.

PAUL F. MCGRATH is a certified public accountant and has served as President
of Mottle McGrath Braney & Flynn, P.C. for over five years. Mottle McGrath is a
certified public accounting firm, located in Worcester, Massachusetts, that
provides accounting, tax and business advisory services throughout central New
England.

CHARLOTTE C. SPINNEY has been a social studies teacher at Westborough High
School for 41 years. During that time, she created the curriculum for the
community service component of the school's Sociology course.

PHYLLIS A. STONE has served as Vice President and Treasurer of Comey Oil
Co., Inc., located in Westborough, Massachusetts, for the past three years.
Prior to her appointment as Vice President, she served in various other
capacities within Comey Oil for over 30 years. She is past Treasurer of the
Regatta Point Community Sailing Inc. of Worcester, Massachusetts.

JAMES E. TASHJIAN is a partner in the law firm of Tashjian, Simsarian &
Wickstrom, located in Westborough, Massachusetts. He has engaged in the general
practice of law for over 30 years.

DANIEL G. TEAR has served as a consultant to businesses in the area of
management psychology for the past 30 years.

MEETINGS OF THE BOARD OF DIRECTORS AND ITS COMMITTEES

Our Boards of Directors meet on a quarterly basis and may hold additional
special meetings. During 1998, Westborough Savings' Board of Trustees held five
regular meetings and no special meetings.

The Boards of Directors of Westborough Bank and Westborough Financial
Services maintain Executive (which in the case of Westborough Savings was known
as the Board of Investment), Auditing, Compensation, and Long Range Planning
Committees with identical compositions. Westborough Bank's Board of Directors
also maintains an Asset/Liability Management Committee. No committee of
Westborough Financial Services' Board of Directors held any meetings in 1998.

The Executive Committee (formerly known as the Board of Investment) consists
of Messrs. Carlstrom, Daniel, Klugman, Leland, MacDonough and Tashjian, with Mr.
MacDonough serving as Chairman. The Executive Committee exercises the powers of
the Board of Directors in between its meetings. The Board of Investment met 52
times during 1998.

The Auditing Committee consists of Messrs. Bilzerian, Hutt and McGrath, with
Mr. Hutt serving as Chairman. This committee reviews the annual audit prepared
by the independent accountants, recommends the appointment of accountants and
receives reports from the firm of Healy and Healy, independent auditors. It met
four times during 1998.

The Compensation Committee consists of Messrs. Carlstrom, Daniel and Leland,
with Mr. Daniel serving as Chairman. This committee provides advice and
recommendations to the Board of Directors in the areas of employee salaries and
benefit programs. It met three times during 1998.

The Long Range Planning Committee consists of Mr. Leland who is Chairman and
Messrs. Carlstrom, Daniel, Kinell, Klugman, MacDonough, Tashjian and Tear. This
Committee sets long range goals and objectives and develops plans for their
achievement. It met seven times during 1998.

Westborough Savings' Asset/Liability Management Committee consists of
Messrs. Casagrande, Daniel, Kinell, Tautkas and MacDonough, who serves as the
Chairman. This committee has general oversight of Westborough Savings
investments and the management of its interest rate risk. It met three times
during 1998.

DIRECTOR COMPENSATION

MEETING FEES. Westborough Savings pays a fee of $200 to each of its
non-management trustees for attendance at each board meeting and each meeting of
a committee of which they are members, with the Chairman of each committee
receiving a fee of $225. Westborough Savings paid fees totaling approximately
$92,000 to its non-employee trustees for the year ended September 30, 1998.

We anticipate that the directors will be eligible to participate in the
stock option and management recognition plans expected to be implemented
following the completion of the reorganization.

EXECUTIVE OFFICERS

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS. In addition to Messrs. Casagrande
and MacDonough, Westborough Financial Services and Westborough Savings have the
following executive officers:

VICKIE A. BOUVIER has worked for Westborough Savings since 1976 and has been
the Vice President, Operations Officer since 1994.

ALEXANDER P. TAUTKAS is currently the Vice President and Senior Loan Officer
of Westborough Savings, an office which he has held since 1997. He is
responsible in this capacity for Westborough Savings' loan portfolio. He has
been employed by Westborough Savings in various positions since 1977.

MARGARET I. DUQUETTE has worked for Westborough Savings as its Director of
Human Resources since 1997. Prior to 1997, she held the position of Director of
Human Resources at Bay State Savings Bank in Worcester, Massachusetts where she
worked for 19 years.

EXECUTIVE OFFICER COMPENSATION

SUMMARY COMPENSATION TABLE. The following table provides information about
the compensation paid for 1998 to our Chief Executive Officer and any other
executive officers whose total annual salary and bonus for 1998 was at least
$100,000.

ANNUAL COMPENSATION
------------------------------------------------------ LONG TERM
NAME AND OTHER ANNUAL COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) (1) LTIP PAYOUTS ($)
- --------------------------------- --------- ---------- --------------- ------------------------- ---------------------

Joseph F. MacDonough President
and Chief Executive Officer.... 1998 $ 156,846 -- -- --

NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION (2)
- --------------------------------- ----------------

Joseph F. MacDonough President
and Chief Executive Officer.... $ 48,485

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

(1) Westborough Savings provides Mr. MacDonough with certain non-cash benefits
and perquisites, such as the use of an automobile, club membership dues and
certain other personal benefits, the aggregate value of which did not exceed
the lesser of $50,000 or 10% of the total annual salary and annual bonus
reported for him in the Summary Compensation Table.

(2) Includes the dollar value of the benefit to Mr. MacDonough of the premiums
paid by Westborough Savings under his split dollar life insurance
arrangement and Westborough Savings' contributions on behalf of Mr.
MacDonough to its 401(k) plan. The full amount of the premiums paid by
Westborough Savings under the split dollar life insurance arrangement will
be refunded to it from the proceeds of the split dollar life insurance
policy.

EMPLOYMENT AGREEMENTS

Effective upon the reorganization, Westborough Financial Services intends to
enter into separate employment agreements with Messrs. MacDonough and Casagrande
to secure their services as President and Chief Executive Officer, and Vice
President and Treasurer, respectively. The employment agreements will provide
for an initial term of three years in the case of Mr. MacDonough, and two years
in the case of Mr. Casagrande. Commencing on the first anniversary of the
effective date of each agreement, and continuing on each anniversary date
thereafter, the employment agreements may be extended, after review by the
Compensation Committee of the Board of the executive's performance, for an
additional one-year period, so that the remaining term will be three years in
the case of Mr. MacDonough, and two years in the case of Mr. Casagrande. The
current base salaries for Mr. MacDonough and Mr. Casagrande are $ and
$ , respectively. The employment agreements provide for each executive's
base salary to be reviewed annually by the Board, and it is anticipated that
each executive's base salary will be adjusted based on his job performance and
the overall performance of Westborough Financial Services and Westborough Bank.
In addition to base

salary, each employment agreement provides for participation in stock,
retirement, and welfare benefit plans and eligibility for fringe benefits
applicable to executive personnel.

Westborough Financial Services may terminate each executive's employment at
any time with or without cause, and each executive may resign at any time
provided he provides 30 days prior written notice and fully cooperates in the
transition of his duties. In the event an executive's employment is terminated
without cause during the term of the employment agreement, the executive will be
entitled to severance benefits. These severance benefits include a lump sum
payment equal to the present value of the base salary and bonus payments that
would have been made to the executive for the remaining term of his employment
agreement, assuming the executive would have been awarded a bonus for each year
remaining in the agreement term equal to the highest annual bonus paid to him in
the preceding three year period and paid his base salary during the remaining
agreement term at the annual rate in effect as of the termination. In addition,
the executive will be entitled to continue his participation in the group life,
health, dental, accidental death and long-term disability plans sponsored by
Westborough Bank for the remaining term of his employment agreement. The same
severance benefits will be payable if the executive resigns during the term of
the employment agreement following: failure of the Board to reappoint the
executive to the position provided for in his employment agreement; failure of
Westborough Financial Services to vest in the executive the duties set forth in
the agreement, if not cured; and Westborough Financial Services' material breach
of the agreement. The employment agreements also provide certain uninsured
benefits in the event the executive's employment terminates because of death or
disability.

In the event executive resigns for any reason or is terminated without cause
following a change in control of Westborough Financial Services or Westborough
Bank, he will be entitled to the severance benefits described above except that
in the event of a change in control the lump sum benefit payable to the
executive will not be less than 2.99 multiplied by the executive's average
annual compensation for the preceding five years.

If Westborough Financial Services or Westborough Bank experiences a change
in ownership, a change in effective ownership or control or a change in the
ownership of a substantial portion of their assets as contemplated by section
280G of the Internal Revenue Code, a portion of any severance payments under the
employment agreements might constitute an "excess parachute payment" under
current federal tax laws. Any excess parachute payment would be subject to a 20%
federal excise tax payable by the executive. Neither Westborough Bank nor
Westborough Financial Services could claim a federal income tax deduction for an
excess parachute payment. The employment agreements require Westborough
Financial Services to indemnify each executive against the financial effects of
the excise tax.

BENEFIT PLANS

PENSION PLANS. Westborough Savings maintains a tax-qualified pension plan
that covers substantially all employees who are age 21 and have at least one
year of service. The following table

shows the estimated aggregate benefits payable under the pension plan upon
retirement at age 65 with various years of service and average compensation
combinations.

YEARS OF SERVICE
AVERAGE ---------------------------------------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------

$100,000......... $ 24,948 $ 33,265 $ 41,581 $ 41,581 $ 41,581
$125,000......... $ 31,886 $ 42,515 $ 53,143 $ 53,143 $ 53,143
$150,000......... $ 38,823 $ 51,765 $ 64,706 $ 64,706 $ 64,706
$160,000......... $ 41,598 $ 55,465 $ 69,331 $ 69,331 $ 69,331
$175,000......... $ 41,598 $ 55,465 $ 69,331 $ 69,331 $ 69,331
$200,000......... $ 41,598 $ 55,465 $ 69,331 $ 69,331 $ 69,331
$300,000......... $ 41,598 $ 55,465 $ 69,331 $ 69,331 $ 69,331
$400,000......... $ 41,598 $ 55,465 $ 69,331 $ 69,331 $ 69,331

The benefits shown in the preceding table are annual benefits payable in the
form of a single life annuity and are not subject to any deduction for Social
Security benefits or other offset amounts. At September 30, 1998, Mr.
MacDonough's average compensation and estimated years of service were $142,525
and 20.9 years of service.

Mr. MacDonough and Mr. Casagrande are entitled to supplemental retirement
benefits under an Executive Supplemental Compensation Agreement each has entered
into with Westborough Savings. Under each agreement, the executive is entitled
to an annual retirement benefit, payable at age 65 in the form of a single life
annuity, equal to 70% of his benefit computation base in the case of Mr.
MacDonough and 50.4% of his benefit computation base in the case of Mr.
Casagrande, but REDUCED by the sum of: 2% multiplied by the executive's annual
primary Social Security benefit multiplied by his years of service, PLUS his
annual retirement benefit under any tax-qualified pension plan, PLUS the annual
annuity payable to the executive under his Split Dollar Agreement. Under the
agreements, the executive's benefit computation base is his average annual
compensation during the 12 consecutive calendar quarters in which his
compensation is the highest.

401(K) PLAN. Westborough Savings maintains a tax-qualified 401(k) defined
contribution plan for employees who have attained age 21 and have at least one
year of service. Eligible employees may take pre-tax contributions to the plan
through salary reduction elections from 1% to 15% of annual compensation,
subject to limitations of the Internal Revenue Code (for 1998, the annual limit
was $10,000). Westborough Savings makes a matching contribution to the plan
equal to 25% of the first four percent of annual compensation contributed to the
plan on a pre-tax basis by the eligible employee.

This plan has an individual account for each participant's contributions and
allows each participant to direct the investment of his or her account. As of
the completion of the reorganization, one permitted investment will be
Westborough Financial Services' common stock. The plan itself is not an eligible
account holder. However, participants who are eligible account holders may use
their subscription rights to purchase stock for their plan accounts in the
initial offering. This plan will purchase common stock for other participants
from Westborough Financial Services in the initial offering, to the extent that
shares are available to investors who are not eligible account holders, and in
open market transactions. Participants will direct the voting of shares
purchased for their plan accounts.

EMPLOYEE STOCK OWNERSHIP PLAN. This plan is a tax-qualified plan that
covers substantially all employees of Westborough Bank and Westborough Financial
Services who have at least one year of service and have attained age 21 and will
take effect at the completion of the reorganization.

Westborough Financial Services intends to lend this plan enough money to
purchase 8% of the shares issued to investors other than Westborough Bancorp,
MHC. The plan will purchase these shares

from Westborough Financial Services to the extent that shares are available
after filling the subscriptions of eligible account holders. Otherwise, the plan
will purchase these shares in private transactions or on the open market after
completion of the reorganization to the extent that shares are available for
purchase on reasonable terms. If this plan cannot purchase the shares that it
wants directly from Westborough Financial Services in the offering, there is no
assurance that it will purchase shares after the reorganization, or that such
purchases will occur during any particular time period or at any particular
price.

Although contributions to this plan will be discretionary, Westborough Bank
intends to contribute enough money each year to make the required principal and
interest payments on the loan from Westborough Financial Services. It is
expected that this loan will be for a term of 10 years and will call for level
annual payments of principal and interest. The plan will initially pledge the
shares it purchases as collateral for the loan and hold them in a suspense
account.

The plan will not distribute the pledged shares right away. Instead, it will
release a portion of the pledged shares annually. The plan will allocate the
shares released each year among the accounts of participants in proportion to
their base salary for the year. For example, if a participant's base salary for
a year represents 1% of the total base salaries of all participants for the
year, the plan would allocate to that participant 1% of the shares released for
the year. Participants direct the voting of shares allocated to their accounts.
Shares in the suspense account will usually be voted in a way that mirrors the
votes which participants cast for shares in their individual accounts.

This plan may purchase additional shares in the future, and may do so using
borrowed funds, cash dividends, periodic employer contributions or other cash
flow.

BENEFIT RESTORATION PLAN. Effective as of the reorganization, Westborough
Financial Services intends to adopt a Benefit Restoration Plan for Mr.
MacDonough. This plan will provide Mr. MacDonough with the benefits that would
otherwise be due to him as a participant in the pension plan, the 401(k) plan
and the employee stock ownership plan if such benefits were not limited by
certain provisions of the Internal Revenue Code.

FUTURE STOCK BENEFIT PLANS

STOCK OPTION PLAN. We intend to implement a stock option plan for our
directors and officers after the reorganization. Applicable regulations prohibit
us from implementing this plan until six months after the reorganization. If we
implement this plan within one year after the reorganization, applicable
regulations require that we first obtain the approval of the holders of a
majority of the outstanding shares of Westborough Financial Services that are
not owned by Westborough Bancorp, MHC. We have not decided whether we will
implement this plan before or after the one-year anniversary of the
reorganization.

We expect to adopt a stock option plan that will authorize the Compensation
Committee to grant options to purchase up to 10% of the shares issued to
investors other than Westborough Bancorp, MHC over a period of 10 years. The
Compensation Committee will decide which directors and officers will receive
options and what the terms of those options will be. However, no stock option
will permit its recipient to purchase shares at a price that is less than the
fair market value of a share on the date the option is granted, and no option
will have a term that is longer than 10 years. If we implement a stock option
plan before the first anniversary of the reorganization, applicable regulations
will require that we observe the following restrictions:

- We must limit the total number of shares that are optioned to outside
directors to 30% of the shares authorized for the plan.

- We must also limit the number of shares that are optioned to any one
outside director to 5% of the shares authorized for the plan and the
number of shares that are optioned to any executive officer to 25% of the
shares that are authorized for the plan.

- We must not permit the options to become vested at a more rapid rate than
20% per year beginning on the first anniversary of stockholder approval of
the plan.

- We must not permit accelerated vesting for any reason other than death or
disability.

After the first anniversary of the reorganization, we may amend the plan to
change or remove these restrictions. If we adopt a stock option plan within one
year after the reorganization, we expect to amend the plan later to remove these
restrictions and to provide for accelerated vesting in cases of retirement and
change of control.

We may obtain the shares needed for this plan by issuing additional shares
or through stock repurchases. Because we cannot issue new shares that would
reduce Westborough Bancorp, MHC's ownership position to less than a majority of
Westborough Financial Services' outstanding shares, we expect to obtain most or
all of the shares for this plan through stock repurchases.

We expect the stock option plan will permit the Compensation Committee to
grant either incentive stock options that qualify for special federal income tax
treatment or non-qualified stock options that do not qualify for special
treatment. Incentive stock options may be granted only to employees and will not
create federal income tax consequences when they are granted. If they are
exercised during employment or within three months after termination of
employment, the exercise will not create federal income tax consequences either.
When the shares acquired on exercise of an incentive stock option are resold,
the seller must pay federal income taxes on the amount by which the sales price
exceeds the purchase price. This amount will be taxed at capital gains rates if
the sale occurs at least two years after the option was granted and at least one
year after the option was exercised. Otherwise, it is taxed as ordinary income.

Non-qualified stock options may be granted to either employees or
non-employees such as directors, consultants and other service providers.
Incentive stock options that are exercised more than three months after
termination of employment are treated as non-qualified stock options.
Non-qualified stock options will not create federal income tax consequences when
they are granted. When they are exercised, federal income taxes must be paid on
the amount by which the fair market value of the shares acquired by exercising
the option exceeds the exercise price. When the shares acquired on exercise of a
non-qualified stock option are resold, the seller must pay federal income taxes
on the amount by which the sales price exceeds the purchase price plus the
amount included in ordinary income when the option was exercised. This amount
will be taxed at capital gains rates, which will vary depending upon the time
that has elapsed since the exercise of the option.

Westborough Financial Services and Westborough Bank will recognize
compensation expense for accounting purposes when stock options are exercised.
The measurement of this expense will depend on whether treasury shares or newly
issued shares are used to complete the option exercise. When a non-qualified
stock option is exercised, Westborough Financial Services and Westborough
Savings may be allowed a federal income tax deduction for the same amount that
the option holder includes in his or her ordinary income. This amount may be the
same as the related compensation expense or it may be different. When an
incentive stock option is exercised, there is no tax deduction unless the shares
acquired are resold sooner than two years after the option was granted or one
year after the option was exercised.

MANAGEMENT RECOGNITION PLAN. We intend to implement a management
recognition plan for our directors and officers after the reorganization.
Applicable regulations prohibit us from implementing this plan until 6 months
after the reorganization. If we implement this plan within one year after the
reorganization, the regulations require that we first obtain the approval of the
holders of a majority of

the outstanding shares of Westborough Financial Services that are not held by
Westborough Bancorp, MHC. We have not decided whether we will implement this
plan before or after the one-year anniversary of the reorganization.

We expect to adopt a management recognition plan that will authorize the
Compensation Committee to make restricted stock awards of up to 4% of the shares
issued to investors other than Westborough Bancorp, MHC. The Compensation
Committee will decide which directors and officers will receive restricted stock
and what the terms of those awards will be. If we implement a management
recognition plan before the first anniversary of the reorganization, applicable
regulations will require that we observe the following restrictions:

- We must limit the total number of shares that are awarded to outside
directors to 30% of the shares authorized for the plan.

- We must also limit the number of shares that are awarded to any one
outside director to 5% of the shares authorized for the plan and the
number of shares that are awarded to any executive officer to 25% of the
shares that are authorized for the plan.

- We must not permit the awards to become vested at a more rapid rate than
20% per year beginning on the first anniversary of stockholder approval of
the plan.

- We must not permit accelerated vesting for any reason other than death or
disability.

After the first anniversary of the reorganization, we may amend the plan to
change or remove these restrictions. If we adopt a management recognition plan
within one year after the reorganization, we expect to amend the plan later to
remove these restrictions and to provide for accelerated vesting in cases of
retirement and change of control.

Restricted stock awards under this plan may feature employment restrictions
that require continued employment for a period of time for the award to be
vested. They may feature restrictions that require the achievement of specified
corporate or individual performance goals for the award to be vested. Or, they
may feature a combination of employment and performance restrictions. Awards are
not vested unless the specified employment restrictions and performance goals
are met. However, pending vesting, the award recipient may have voting and
dividend rights. When an award becomes vested, the recipient must include the
current fair market value of the vested shares in his income for federal income
tax purposes. Westborough Financial Services and Westborough Bank may be allowed
a federal income tax deduction in the same amount. Depending on the nature of
the restrictions attached to the restricted stock award, Westborough Financial
Services and Westborough Bank may have to recognize a compensation expense for
accounting purposes ratably over the vesting period or in a single charge when
the performance conditions are satisfied.

CERTAIN TRANSACTIONS WITH DIRECTORS/TRUSTEES AND EXECUTIVE OFFICERS

We do not make loans to our executive officers or employees. However, we do
make loans to our trustees/directors. These loans bear interest at the same rate
as loans offered to non-trustee/director borrowers and have the same
underwriting terms that apply to non-trustee/director borrowers.

We retain the law firm of Tashjian, Simsarian & Wickstrom. Mr. James
Tashjian, a director of Westborough Financial Services and Westborough Bank, and
a trustee of Westborough Bancorp, MHC, has been a partner of Tashjian, Simsarian
& Wickstrom since 1995. For 1998, the firm received approximately $75 thousand
from borrowers of Westborough Savings to review loan documentation.

PROPOSED PURCHASES OF COMMON STOCK BY MANAGEMENT

The following table presents, for each of our trustees and executive
officers, the amount of stock they wish to purchase in the offering. We have
assumed that a sufficient number of shares will be available to satisfy their
subscriptions. The amounts include shares that may be purchased through
individual retirement accounts and by associates of the trustees and executive
officers. Collectively our trustees and executive officers expect to purchase a
total of shares, or % of shares we sell in the offering (assuming the
sale of 700,000 shares of common stock).

NUMBER
NAME AMOUNT OF SHARES
- ------------------------------------------------------------------------ --------- -----------

Directors:

Walter A. Kinell, Jr.
Nelson P. Ball
Edward S. Bilzerian
David E. Carlstrom
John L. Casagrande
William W. Cotting, Jr.
Robert G. Daniel
Earl H. Hutt
Robert A. Klugman
Roger B. Leland
Joseph F. MacDonough $ 50,000 5,000
Paul F. McGrath
Charlotte C. Spinney
Phyliss A. Stone
James E. Tashjian
Daniel G. Tear

Executive Officers who are not Directors:

Vickie A. Bouvier
Alexander P. Tautkas
Margaret I. Duquette

THE REORGANIZATION AND THE OFFERING

THE BOARD OF TRUSTEES OF WESTBOROUGH SAVINGS HAS ADOPTED AND THE
COMMISSIONER OF THE DIVISION OF BANKS OF THE COMMONWEALTH OF MASSACHUSETTS HAS
APPROVED THE PLAN OF REORGANIZATION, SUBJECT TO APPROVAL BY WESTBOROUGH SAVINGS'
CORPORATORS OF THE PLAN AND THE SATISFACTION OF CERTAIN OTHER CONDITIONS.

APPROVAL BY THE COMMISSIONER DOES NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE REORGANIZATION BY THE COMMISSIONER.

GENERAL

On March 15, 1999, Westborough Savings' Board of Trustees unanimously
adopted the plan of reorganization pursuant to which Westborough Savings Bank
will reorganize into a mutual holding company structure. This reorganization
includes the formation of an intermediate stock holding company, Westborough
Financial Services and the offering by Westborough Financial Services of a
minority of its shares to depositors of Westborough Savings and certain other
persons. Under the terms of the plan of reorganization, Westborough Financial
Services will own The Westborough Bank, and Westborough Bancorp, MHC will own
more than half of Westborough Financial Services. The reorganization will be
effected as described under "--Tax Aspects" or in any other manner that is
permitted by the Division and the FDIC and is consistent with the intent of the
plan of reorganization. See "Description of Our Structure after the
Reorganization" in the Summary section of this prospectus for a chart which
reflects our structure after the reorganization.

Westborough Financial Services and Westborough Bancorp, MHC have requested
approval from the Federal Reserve Bank of Boston to become bank holding
companies and to acquire Westborough Bank. The plan of reorganization was
approved by the Division, and Westborough Savings has received a notice of
intent not to object to the plan of reorganization from the FDIC, subject to,
among other things, approval of the plan of reorganization by the corporators of
Westborough Savings.

Westborough Savings has called a special meeting for this purpose which will
be held on , 1999. The plan of reorganization must be approved by an
affirmative vote of at least a majority of Westborough Savings' corporators and
a majority of Westborough Savings' independent corporators, who must constitute
not less than 60% of all corporators. An independent corporator is one who is
not an employee, officer, trustee or significant borrower of Westborough
Savings. We will complete the reorganization only upon completion of the sale of
the shares of common stock offered in this prospectus and approval of the plan
of reorganization by the voting corporators.

The aggregate price of the shares of common stock to be issued in the
reorganization will be within the offering range. The offering range has been
established by the Board of Trustees to be between $5,950,000 and $8,050,000 and
is based upon an independent appraisal of the estimated pro forma market value
of the common stock of Westborough Financial Services. The appraisal was
prepared by RP Financial, a consulting firm experienced in the valuation and
appraisal of savings institutions. All shares of common stock to be issued and
sold in the reorganization will be sold at the same price ($10.00) per share.
The independent appraisal will be affirmed or, if necessary, updated at the
completion of the offering. See "--How We Determined the Offering Range and the
$10.00 Price Per Share" for additional information as to the determination of
the estimated pro forma market value of the common stock.

THE FOLLOWING IS A BRIEF SUMMARY OF PERTINENT ASPECTS OF THE REORGANIZATION.
THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PROVISIONS OF THE
PLAN OF REORGANIZATION. A COPY OF THE PLAN IS AVAILABLE FROM WESTBOROUGH SAVINGS
UPON REQUEST AND IS AVAILABLE FOR INSPECTION AT THE OFFICES OF WESTBOROUGH
SAVINGS AND AT THE DIVISION OF BANKS. THE PLAN IS ALSO FILED AS AN EXHIBIT TO
THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART, COPIES OF WHICH
MAY BE OBTAINED FROM THE SEC. SEE "WHERE YOU CAN FIND ADDITIONAL INFORMATION."

REASONS FOR THE REORGANIZATION

Formation of The Westborough Bank as a capital stock savings bank subsidiary
of Westborough Financial Services will permit Westborough Financial Services to
issue common stock, which is a source of capital not available to mutual savings
banks.

Westborough Savings' mutual form of ownership will be preserved in
Westborough Bancorp, MHC. Westborough Bancorp, MHC, as a mutual savings bank
holding company, will own at least a majority of the common stock of Westborough
Financial Services as long as Westborough Bancorp, MHC remains in existence. The
reorganization will allow Westborough Savings to achieve certain benefits of a
stock company without a loss of control that is possible in a full savings
institution conversion from mutual to stock form. In a standard conversion, a
newly converted savings institution or its newly formed holding company sells
100% of its common stock in a single stock offering. The mutual holding company
structure also will give Westborough Financial Services flexibility to issue its
common stock at various times and in varying amounts as market conditions
permit, rather than in a single stock offering. This makes the deployment of the
capital that we raise more manageable.

The proceeds from the sale of common stock of Westborough Financial Services
will provide Westborough Bank with new capital, which will support future
diversification of its product lines and market share growth. In particular,
such proceeds will enhance Westborough Bank's ability to expand its franchise
through increased lending, make necessary capital investments in facilities and
technology, diversify products offered to its customers and establish additional
branch locations. The reorganization also will enable Westborough Financial
Services and Westborough Bank to better manage its capital by providing broader
investment opportunities through the holding company structure, and by enabling
Westborough Bank to distribute capital to stockholders of Westborough Financial
Services in the form of dividends.

The ability of Westborough Financial Services to sell additional common
stock also will enable Westborough Financial Services and Westborough Bank to
increase their capital in response to any future regulatory capital requirement
levels. While Westborough Savings currently exceeds all regulatory capital
requirements, the sale of common stock in connection with the reorganization
will assist Westborough Bank with the orderly preservation and expansion of its
capital base and will provide flexibility to respond to sudden and unanticipated
capital needs.

After completion of the reorganization, the unissued common and preferred
stock authorized by Westborough Financial Services' Articles of Organization
will permit Westborough Financial Services to raise additional equity capital
through further sales of securities and to issue securities in connection with
possible acquisitions, subject to market conditions and any required regulatory
approval of an offering. Westborough Financial Services, however, currently has
no plans with respect to additional offerings of securities. Following the
reorganization, we intend to use stock-related incentive programs to attract and
retain executive and other personnel for itself and its subsidiaries. See
"Management."

The mutual holding company form of organization will provide additional
flexibility to diversify our business activities through acquisitions of or
mergers with both mutual and stock savings institutions, as well as other
companies. Although there are no current arrangements, understandings or
agreements, written or oral, regarding any such opportunities, Westborough
Financial Services will be in a position after the reorganization to take
advantage of any such favorable opportunities that may arise. See "How We Intend
to Use the Proceeds from the Offering" for a description of our intended use of
proceeds.

While there are benefits associated with the mutual holding company form of
organization, this form of organization involves additional costs associated
with its maintenance and regulation, including additional administrative
expenses, taxes, regulatory filings and examination fees.

After considering the advantages and disadvantages of the reorganization, as
well as applicable fiduciary duties, the Board of Trustees of Westborough
Savings unanimously approved the reorganization as being in the best interests
of Westborough Savings, its depositors and the communities it serves.

EFFECTS OF THE REORGANIZATION

GENERAL. Each depositor in a mutual savings bank has both a deposit account
in the institution and a pro rata ownership interest in the equity of the
savings institution based upon the balance in the depositor's account. This
interest may only be realized in the event of a liquidation of the savings
institution. However, this ownership interest is tied to the depositor's account
and has no tangible market value separate from such deposit account. Any
depositor who opens a deposit account obtains a pro rata ownership interest in
the equity of the institution without any additional payment beyond the amount
of the deposit. A depositor who reduces or closes such depositor's account
receives the balance in the account but receives nothing for such depositor's
ownership interest in the equity of the institution, which is lost to the extent
that the balance in the account is reduced. Consequently, depositors of a mutual
savings bank have no way to realize the value of their ownership interest,
except in the unlikely event that the mutual savings bank is liquidated. In such
event, the depositors of record at that time would share pro rata in any
residual surplus and reserves after other claims, including claims of depositors
to the amounts of their deposits, are paid.

When a mutual savings bank converts to stock form, permanent
non-withdrawable capital stock is created to represent the ownership of the
institution's equity and the former pro rata ownership of depositors is
thereafter represented exclusively by their liquidation rights. SUCH CAPITAL
STOCK IS SEPARATE AND APART FROM DEPOSIT ACCOUNTS AND CANNOT BE AND IS NOT
INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL AGENCY. Certificates are issued to
evidence ownership of the capital stock. The stock certificates are
transferable, and, therefore, the stock may be sold or traded with no effect on
any deposit account the seller may hold in the institution.

CONTINUITY. While the reorganization is being accomplished, and after
completion of the reorganization, the routine business of Westborough Bank of
accepting deposits and making loans will continue without interruption.
Westborough Bank will continue to be subject to regulation by the Division and
the FDIC. After the reorganization, Westborough Bank will continue to provide
services for depositors and borrowers under current policies by its management
and staff.

The Board of Trustees and corporators serving Westborough Savings
immediately before the reorganization will serve as the Board of Directors of
Westborough Bank and the corporators of Westborough Bancorp, MHC, respectively,
after the reorganization. The directors of Westborough Financial Services and
the trustees of Westborough Bancorp, MHC will consist of all of the individuals
currently serving on the Board of Trustees of Westborough Savings. We anticipate
that all officers of Westborough Savings serving immediately before the
reorganization will retain their positions after the reorganization. See
"Management."

DEPOSIT ACCOUNTS AND LOANS. Under the plan of reorganization, each
depositor in Westborough Savings at the time of the reorganization will
automatically continue as a depositor of Westborough Bank after the
reorganization. Each deposit account will remain the same with respect to
deposit balance, interest rate and other terms, except to the extent affected by
withdrawals made to purchase common stock in the offering. See "--Procedure for
Purchasing Shares in Subscription and Community Offerings." Each deposit account
will be insured by the FDIC and the Depositors Insurance Fund to the same extent
as before the reorganization. Depositors will continue to hold their existing
certificates of deposit, passbooks and other evidences of their accounts.

Furthermore, no loan outstanding from Westborough Savings will be affected
by the reorganization, and the amount, interest rate, maturity and security for
each loan will remain as they were contractually fixed prior to the
reorganization.

VOTING RIGHTS OF DEPOSITORS. Voting rights and control of Westborough
Savings, as a mutual savings bank, are vested in the Board of Trustees. After
the reorganization, direction of Westborough Bank will be under the control of
the Board of Directors of Westborough Bank. Westborough Financial Services, as
the holder of all of the outstanding common stock of Westborough Bank, will have
exclusive voting rights with respect to any matters concerning Westborough Bank
requiring stockholder approval, including the election of directors of
Westborough Bank.

After the reorganization, the holders of the common stock of Westborough
Financial Services will have exclusive voting rights with respect to any matters
concerning Westborough Financial Services. These voting rights will be exclusive
except to the extent Westborough Financial Services in the future issues
preferred stock with voting rights. Each holder of common stock will be entitled
to vote on any matters to be considered by Westborough Financial Services'
stockholders, including the election of directors of Westborough Financial
Services, subject to the restrictions and limitations set forth in Westborough
Financial Services' Articles of Organization discussed below.

By virtue of its ownership of a majority of the outstanding shares of common
stock, Westborough Bancorp, MHC will be able to elect all members of the Board
of Directors of Westborough Financial Services and generally will be able to
control the outcome of most matters presented to the stockholders of Westborough
Financial Services for resolution by vote. However, current regulations and
regulatory policies require that adoption of a stock option plan, management
recognition plan or second step conversion of Westborough Bancorp, MHC be
approved by a majority vote of the shares held by the public stockholders (I.E.,
all stockholders except Westborough Bancorp, MHC).

Westborough Bancorp, MHC will be controlled by its Board of Trustees, which
will initially consist of the current trustees of Westborough Savings. Following
the reorganization, approximately one-third of the trustees of Westborough
Bancorp, MHC will be elected annually by the corporators of Westborough Bancorp,
MHC. The initial corporators of Westborough Bancorp, MHC will consist of all of
the corporators of Westborough Savings at the time of the reorganization.
Thereafter, corporators of Westborough Bancorp, MHC will be nominated by the
Board of Trustees and elected by the corporators pursuant to the Bylaws of
Westborough Bancorp, MHC.

DEPOSITORS' RIGHTS IF WE LIQUIDATE; LIQUIDATION ACCOUNT. In the unlikely
event of a complete liquidation of Westborough Savings in its current mutual
form, each depositor would receive a pro rata share of any assets of Westborough
Savings remaining after payment of claims of all creditors (including the claims
of all depositors to the withdrawable value of their accounts). Each depositor's
pro rata share of such liquidating distribution would be in the same proportion
as the value of such depositor's deposit account was to the total value of all
deposit accounts in Westborough Savings at the time of liquidation.

Upon a complete liquidation of Westborough Bank after the reorganization,
each depositor would have a claim as a creditor of the same general priority as
the claims of all other general creditors of Westborough Bank. However, except
as described below, a depositor's claim would be solely for the amount of the
balance in such depositor's deposit account plus accrued interest. Such
depositor would not have an interest in the value or assets of Westborough Bank
above that amount. Instead, the holder of Westborough Bank's common stock (I.E.,
Westborough Financial Services) would be entitled to any assets remaining upon a
liquidation of Westborough Bank.

The plan of reorganization provides for the establishment, upon the
completion of the reorganization, of a special "liquidation account" for the
benefit of eligible account holders and supplemental eligible account holders in
an amount equal to the net worth of Westborough Savings as

of the date of its latest balance sheet contained in this prospectus. Upon a
complete liquidation of Westborough Bank after the reorganization, each eligible
account holder and supplemental eligible account holder, who continues to
maintain such account holder's deposit account at Westborough Bank, would be
entitled to an interest in the liquidation account prior to any payment to the
holders of Westborough Bank's capital stock. Each eligible account holder and
supplemental eligible account holder will have a pro rata interest in the total
liquidation account for the account holder's deposit accounts based on the
proportion that the aggregate balance of such person's qualifying deposit
accounts on December 31, 1997 (the eligibility record date) and December 31,
1998 (the supplemental eligibility record date), as applicable, bore to the
aggregate balance of all qualifying deposit accounts of all eligible account
holders and supplemental eligible account holders. For this purpose, qualifying
deposit accounts include all savings, certificate of deposit, demand, negotiable
orders of withdrawal (NOW), money market and passbook accounts maintained at
Westborough Bank (excluding any escrow accounts).

If, however, on any annual closing date (I.E., the anniversary of the
eligibility record date or supplemental eligibility record date, as applicable)
of Westborough Savings, commencing on or after the effective date of the
reorganization, the amount in any deposit account is less than the amount in
such deposit account on December 31, 1997 (with respect to an eligible account
holder), or December 31, 1998 (with respect to a supplemental eligible account
holder) or any other annual closing date, then the interest in the liquidation
account relating to the deposit account would be reduced from time to time by
the proportion of any such reduction, and such interest will cease to exist if
such deposit account is closed. For purposes of the liquidation account,
certificates of deposit will be deemed to be closed upon maturity regardless of
renewal. In addition, no interest in the liquidation account would ever be
increased despite any subsequent increase in the related deposit account.

Any assets remaining after the above liquidation rights of eligible account
holders and supplemental eligible account holders are satisfied would be
distributed to Westborough Financial Services as the sole stockholder of
Westborough Bank.

Upon a complete liquidation of Westborough Financial Services, each holder
of shares of the common stock of Westborough Financial Services, including
Westborough Bancorp, MHC, would be entitled to receive a pro rata share of
Westborough Financial Services' assets, following payment of all debts,
liabilities and claims of greater priority of or against Westborough Financial
Services including the rights of depositors in the liquidation account of
Westborough Bank, if any.

If liquidation of Westborough Bancorp, MHC occurs following completion of
the reorganization, all depositors of Westborough Bank at that time will be
entitled, pro rata to the value of their deposit accounts, to a distribution of
any assets of Westborough Bancorp, MHC remaining after payment of all debts and
claims of creditors.

TAX ASPECTS. The reorganization may be effected in any manner approved by
the Division that is consistent with the purposes of the plan of reorganization
and applicable law, regulations and policies. However, Westborough Savings
intends to consummate the reorganization using a series of transactions as
described below. This structure enables Westborough Savings to retain all of its
historical tax attributes and produces significant savings to Westborough
Savings because it simplifies regulatory approvals and conditions associated
with the completion of the reorganization.

The merger structure will be accomplished as follows:

(1) Corporators of Westborough Savings will organize a Massachusetts chartered
de novo mutual savings bank, known as Westborough De Novo Savings Bank;

(2) De Novo Savings Bank will reorganize into a Massachusetts chartered mutual
holding company and will form a de novo stock savings bank subsidiary
("Interim"), and all of the assets and liabilities of De Novo Savings Bank
will be transferred to Westborough Bank;

(3) Westborough Savings will merge with and into Interim with Westborough Bank
as the resulting entity;

(4) Westborough Bancorp, MHC will organize Westborough Financial Services as a
separate wholly-owned subsidiary of Westborough Bancorp, MHC;

(5) Westborough Bancorp, MHC will contribute all of the shares of the common
stock of Westborough Bank to Westborough Financial Services, which will
result in Westborough Bancorp, MHC owning 100% of the common stock of
Westborough Financial Services and Westborough Financial Services owning
100% of the common stock of Westborough Bank; and

(6) Westborough Financial Services will offer to sell up to 49% of its common
stock pursuant to the plan of reorganization.

The transactions described in steps two through five will occur
simultaneously, and the transaction described in step 6 will occur as soon as
practicable thereafter and as part of the reorganization. As a result of the
reorganization, Westborough Financial Services will be a majority-owned
subsidiary of Westborough Bancorp, MHC and Westborough Bank will be a
wholly-owned subsidiary of Westborough Financial Services. Pursuant to the
reorganization, the holders of deposit accounts in Westborough Savings will
become holders of deposit accounts in Westborough Bank in the same amount and on
the same terms and conditions, and will hold liquidation interests in
Westborough Bancorp, MHC substantially similar to the liquidation interests in
Westborough Savings.

Under this structure: (i) the conversion is intended to be a tax-free
reorganization under Code section 368(a)(1)(F); and (ii) the exchange of the
shares of Westborough Bank's initial common stock deemed constructively received
by depositors for liquidation interests in Westborough Bancorp, MHC (the
"Exchange") is intended to be a tax-free exchange under Code section 351.

Under the plan of reorganization, consummation of the reorganization is
conditioned upon, among other things, the prior receipt by Westborough Savings
of either a private letter ruling from the IRS and from the Massachusetts taxing
authorities or an opinion of Thacher Proffitt & Wood as to the federal income
tax consequences and from Wolf & Co., P.C. as to the Massachusetts income tax
consequences of the reorganization to Westborough Savings (in both its mutual
and stock form), Westborough Financial Services and the eligible account holders
and supplemental account holders. In Revenue Procedure 96-3, 1996-1 I.R.B. 82,
the IRS announced that it will not rule on whether a transaction qualifies as a
tax-free reorganization under Code section 368(a)(1)(F) or as a tax-free
exchange of stock for stock in the formation of a holding company under Code
section 351, but that it will rule on significant sub-issues that must be
resolved to determine whether the transaction qualifies under either of these
Code sections.

Westborough Savings has requested a private letter ruling from the IRS
regarding certain significant sub-issues associated with the reorganization.
Based in part upon this private letter ruling and certain representations of
Westborough Savings or its officers. Thacher Proffitt & Wood will issue its
opinion regarding certain federal income tax consequences of the reorganization.
We can not assure you that we will obtain a private letter ruling.

In the following discussion, "Mutual Bank" refers to Westborough Savings
before the reorganization and "Stock Bank" refers to Westborough Savings after
the reorganization.

With regard to the reorganization, Thacher Proffitt & Wood intends to issue
an opinion that:

(1) the conversion will constitute a "reorganization" under Code section
368(a)(1)(F), and Westborough Savings (in either its status as Mutual Bank
or Stock Bank) will recognize no gain or loss as a result of the conversion;

(2) the basis of each asset of Mutual Bank received by Stock Bank in the
conversion will be the same as Mutual Bank's basis for such asset
immediately prior to the conversion;

(3) the holding period of each asset of Mutual Bank received by Stock Bank in
the reorganization will include the period during which such asset was held
by Mutual Bank prior to the conversion;

(4) For purposes of Code section 381(b), Stock Bank will be treated as if there
had been no conversion and, accordingly, the taxable year of the Mutual Bank
will not end on the effective date and the tax attributes of Mutual Bank
(subject to application of Code sections 381, 382, and 384), including
Mutual Bank's tax bad debt reserves and earnings and profits, will be taken
into account by Stock Bank as if there had been no conversion;

(5) Mutual Bank's qualifying depositors will recognize no gain or loss upon
their constructive receipt of shares of Stock Bank common stock solely in
exchange for their interest (I.E., liquidation rights) in Mutual Bank;

(6) no gain or loss will be recognized by the depositors of Westborough Savings
(formerly Mutual Bank) upon the transfer to Westborough Bancorp, MHC of
shares of Stock Bank common stock they constructively received in the
conversion in exchange for interests (I.E., liquidation rights) in
Westborough Bancorp, MHC; and

(7) no gain or loss will be recognized by depositors of Mutual Bank upon the
issuance to them of deposits in Stock Bank in the same dollar amount as
their deposits in the Mutual Bank.

Unlike private rulings of the IRS, an opinion of counsel is not binding on
the IRS and the IRS could disagree with conclusions reached in the opinion. If
there is a disagreement, we can not guarantee that the IRS would not prevail in
a judicial or administrative proceeding.

Wolf & Co., P.C. intends to opine, subject to the limitations and
qualifications in its opinion, that, for purposes of the Massachusetts corporate
income tax, the reorganization will not become a taxable transaction to
Westborough Savings (in either its status as Mutual Bank or Stock Bank),
Westborough Bancorp, MHC, Westborough Financial Services, the stockholders of
Westborough Financial Services or the depositors of Westborough Savings.

ACCOUNTING CONSEQUENCES. The reorganization will be accounted for in a
manner similar to a pooling-of-interests under generally accepted accounting
principles. Accordingly, the carrying value of our assets, liabilities, and
capital will be unaffected by the reorganization and will be reflected in the
Westborough Financial Services' and Westborough Bank's consolidated financial
statements based on their historical amounts.

HOW WE DETERMINED THE OFFERING RANGE AND THE $10.00 PRICE PER SHARE

The plan of reorganization requires that the purchase price of the common
stock must be based on the appraised pro forma market value of the common stock,
as determined on the basis of an independent valuation. Westborough Savings and
Westborough Financial Services have retained RP Financial to make the
independent valuation. RP Financial's fees for its services in making such
appraisal are estimated to be $27,500. Westborough Savings and Westborough
Financial Services will indemnify RP Financial and its employees and affiliates
against losses (including any losses in connection with claims under the federal
securities laws) arising out of its services as appraiser, except where RP
Financial's liability results from its negligence or bad faith.

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An appraisal has been made by RP Financial in reliance upon the information
contained in this prospectus, including the financial statements. RP Financial
also considered the following factors, among others:

- the present and projected operating results and financial condition of
Westborough Financial Services and Westborough Savings, and the economic
and demographic conditions in Westborough Savings' existing market area;

- historical, financial and other information relating to Westborough
Savings;

- a comparative evaluation of the operating and financial statistics of
Westborough Savings with those of other similarly situated publicly traded
mutual holding companies, savings associations and savings institutions
located in New England;

- the aggregate size of the offering of the common stock;

- the impact of the reorganization on Westborough Savings' equity and
earnings potential;

- the proposed dividend policy of Westborough Financial Services and
Westborough Bank; and

- the trading market for securities of comparable institutions and general
conditions in the market for such securities.

Two of the factors that RP Financial considered in determining our market
value were the price-to-book ratio and the price-to-earnings ratio or P/E ratio.
The price-to-book ratio represents the price per share of stock divided by its
book value per share. After completion of the reorganization, each share of
Westborough Financial Services common stock, including the shares we issue to
Westborough Bancorp, MHC, will have a book value of $12.58, assuming we sell 700
thousand shares in the minority offering. This means that the price you pay for
each share in this offering will be 79.49% of the book value.

The P/E ratio represents the price per share of stock divided by earnings or
net income per share. In our case, for 1998, our P/E ratio as adjusted to
reflect the issuance of our stock in the offering, would have been 14.9x,
assuming we sold 700 thousand shares of stock.

On the basis of the foregoing, RP Financial has advised Westborough
Financial Services and Westborough Savings that, in its opinion, dated May 21,
1999, the estimated pro forma market value of the common stock on a fully
converted basis ranged from a minimum of $17.0 million to a maximum of $23.0
million with a midpoint of $20.0 million (the "estimated valuation range").

The Board of Trustees of Westborough Savings held a meeting to review and
discuss the original appraisal report prepared by RP Financial. Representatives
of RP Financial participated in the meeting to explain the contents of the
appraisal report. The Board of Trustees reviewed the methods that RP Financial
used to determine the pro forma market value of the common stock and the
appropriateness of the assumptions that RP Financial used in determining this
value. The Board of Trustees determined that 35% of the shares to be issued by
Westborough Financial Services will be offered to public stockholders. In
addition the Board of Trustees determined that the common stock will be sold at
$10.00 per share, which is the price most commonly used in stock offerings
involving converting savings institutions.

The Board of Trustees established an offering range of $5.95 million to $8.1
million, with a midpoint of $7.0 million. Westborough Financial Services expects
to issue between 595,000 and 805,000 shares of common stock. The offering range
takes into account that Westborough Bank must be a majority-owned subsidiary of
Westborough Financial Services or Westborough Bancorp, MHC as long as
Westborough Bancorp, MHC is in existence. The estimated valuation range and the
offering range may be amended with the approval of the Division and FDIC (if
required), due to subsequent

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developments in the financial condition of Westborough Financial Services or
Westborough Savings or market conditions generally.

THE VALUATION PREPARED BY RP FINANCIAL IS NOT INTENDED, AND MUST NOT BE
CONSTRUED, AS A RECOMMENDATION OF ANY KIND AS TO THE ADVISABILITY OF PURCHASING
SUCH SHARES. RP FINANCIAL DID NOT INDEPENDENTLY VERIFY THE FINANCIAL STATEMENTS
AND OTHER INFORMATION PROVIDED BY WESTBOROUGH SAVINGS, NOR DID RP FINANCIAL
VALUE INDEPENDENTLY THE ASSETS OR LIABILITIES OF WESTBOROUGH SAVINGS. THE
VALUATION CONSIDERS WESTBOROUGH SAVINGS AS A GOING CONCERN AND SHOULD NOT BE
CONSIDERED AS AN INDICATION OF THE LIQUIDATION VALUE OF WESTBOROUGH SAVINGS.
MOREOVER, BECAUSE SUCH VALUATION IS NECESSARILY BASED UPON ESTIMATES AND
PROJECTIONS OF A NUMBER OF MATTERS, ALL OF WHICH ARE SUBJECT TO CHANGE FROM TIME
TO TIME, NO ASSURANCE CAN BE GIVEN THAT PERSONS PURCHASING SUCH SHARES IN THE
REORGANIZATION WILL THEREAFTER BE ABLE TO SELL SUCH SHARES AT PRICES AT OR ABOVE
THE PURCHASE PRICE.

The maximum of the estimated valuation range may be increased up to 15% and
the number of shares of common stock to be issued in the reorganization may be
increased to 925,750 shares due to regulatory considerations, changes in the
market and general financial and economic conditions without the resolicitation
of subscribers. See "--Limitations on Common Stock Purchases" as to the method
of distribution and allocation of additional shares that may be issued in the
event of an increase in the estimated valuation range to fill unfilled orders in
the subscription and community offerings.

We may not sell any shares of common stock unless RP Financial confirms to
Westborough Savings, Westborough Financial Services, the Division and the FDIC
that, to the best of its knowledge, nothing of a material nature has occurred
which, taking into account all relevant factors, would cause RP Financial to
conclude that the aggregate value of the common stock is incompatible with its
estimate of the pro forma market value of the common stock at the conclusion of
the offering.

If RP Financial confirms at the conclusion of the offering that the pro
forma market value of the common stock is not more than the maximum and not less
than the minimum of the estimated valuation range then, with the approval of the
Division and the FDIC, the number of shares of common stock to be issued in the
offering will be not more than 805,000 shares and not less than 595,000 shares.
If RP Financial concludes that the pro forma market value of the common stock is
greater than the maximum of the estimated valuation range but not more than 15%
above the maximum of the estimated valuation range, then the number of shares of
common stock to be issued may be increased to not more than 925,750 shares. In
addition, all shares purchased in the offering will be purchased for the
purchase price of $10.00 per share. If the number of shares issued in the
reorganization is increased due to an increase of up to 15% in the estimated
valuation range to reflect changes in market or financial conditions, persons
who subscribed for the maximum number of shares will not be given the
opportunity to subscribe for any additional shares. See "--Limitations on Common
Stock Purchases."

If RP Financial concludes that the pro forma market value of the common
stock is either more than 15% above the maximum of the estimated valuation range
or less than the minimum of the estimated valuation range, Westborough Savings
and Westborough Financial Services, after consulting with the Division and the
FDIC, may:

(1) terminate the Plan and return all funds promptly with interest at
Westborough Savings' passbook rate of interest on payments made by check,
bank check or money order;

(2) establish a new estimated valuation range and either;

(a) hold new subscription and community offerings; or

(b) provide subscribers the opportunity to change or cancel their orders (a
"resolicitation"); or

(3) take such other actions as permitted by the Division and the FDIC in order
to complete the reorganization.

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If a resolicitation is commenced, unless an affirmative response is received
from a subscriber within a designated period of time, all funds will be promptly
returned to the subscriber as described above.

An increase in the number of shares to be issued in the reorganization as a
result of an increase in the estimated pro forma market value of common stock
would decrease both a subscriber's ownership interest and Westborough Financial
Services' pro forma net earnings and stockholders' equity on a per share basis
while increasing pro forma net earnings and stockholders' equity on an aggregate
basis. A decrease in the number of shares to be issued in the reorganization
would increase both a subscriber's ownership interest and Westborough Financial
Services, Inc' pro forma net earnings and stockholders' equity on a per share
basis while decreasing pro forma net earnings and stockholders' equity on an
aggregate basis. For a presentation of the effects of such changes see "Pro
Forma Data."

If all shares of common stock are not sold through the subscription and
community offerings, then Westborough Savings and Westborough Financial Services
expect to offer the remaining shares in a syndicated community offering, which
would commence during or just after the subscription offering. See "--Syndicated
Community Offering."

Copies of the appraisal report of RP Financial, including any amendments
thereto, and the detailed memorandum of the appraiser setting forth the method
and assumptions for such appraisal are available for inspection at the main
office of Westborough Savings and the other locations specified under "Where You
Can Find Additional Information."

SUBSCRIPTION OFFERING AND SUBSCRIPTION RIGHTS

In accordance with the plan of reorganization, rights to subscribe for the
purchase of common stock have been granted under the plan of reorganization to
the following persons in the following order of priority:

(1) depositors with deposits in Westborough Savings with balances aggregating
$50 or more ("qualifying deposits") as of December 31, 1997 ("eligible
account holders"); for this purpose, deposit accounts include any
withdrawable deposits offered by Westborough Savings, including negotiable
orders of withdrawal (NOW), certificates of deposit, demand deposits and IRA
and Keogh plans for which Westborough Savings acts as custodian or trustee;

(2) tax-qualified employee benefit plans of Westborough Financial Services,
Westborough Savings or Westborough Bancorp, MHC, including the employee
stock ownership plan;

(3) depositors with qualifying deposits in Westborough Savings on December 31,
1998, other than those depositors who would otherwise qualify as eligible
account holders ("supplemental eligible account holders").

All subscriptions received will be subject to the availability of common
stock after satisfaction of all subscriptions of all persons having prior rights
in the subscription offering and to the maximum and minimum purchase limitations
set forth in the plan of reorganization and as described below under
"--Limitations on Common Stock Purchases."

PRIORITY 1: ELIGIBLE ACCOUNT HOLDERS. Each eligible account holder will
receive, as first priority and without payment therefor, non-transferable rights
to subscribe for shares of common stock in the subscription offering.
Subscriptions by eligible account holders are subject to maximum and minimum
purchase limitations. See "--Limitations on Common Stock Purchases."

If there are not sufficient shares available to satisfy all subscriptions,
shares first will be allocated so as to permit each subscribing eligible account
holder to purchase a number of shares sufficient to make such eligible account
holder's total allocation equal to the lesser of 100 shares or the number of
shares subscribed for. Thereafter, unallocated shares will be allocated among
the remaining subscribing

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eligible account holders whose subscriptions remain unfilled in the proportion
that the amounts of their respective aggregate qualifying deposits bear to the
total amount of qualifying deposits of all remaining eligible account holders
whose subscriptions remain unfilled. However, no fractional shares shall be
issued.

To ensure a proper allocation of stock, each eligible account holder must
list on his or her stock order form all deposit accounts in which such eligible
account holder had an ownership interest at December 31, 1997. Failure to list
an account could result in fewer shares being allocated than if all accounts had
been disclosed. The subscription rights of eligible account holders who are also
trustees or executive officers of Westborough Savings or their associates will
be subordinated to the subscription rights of other eligible account holders to
the extent attributable to increased deposits in the one-year period preceding
December 31, 1997.

PRIORITY 2: THE TAX-QUALIFIED EMPLOYEE BENEFIT PLANS. To the extent that
there are sufficient shares remaining after satisfaction of the subscriptions by
eligible account holders, the tax-qualified employee benefit plans, including
the employee stock ownership plan, will receive, as a second priority and
without payment therefor, non-transferable subscription rights to purchase up to
10% of the common stock to be issued in the offering. As a tax-qualified
employee benefit plan, the employee stock ownership plan intends to purchase 8%
of the shares to be issued in the offering, or 47,600 shares, based on the
issuance of 595,000 shares at the minimum of the offering range or 64,400 shares
based on the issuance of 805,000 at the maximum of the offering range.
Subscriptions by the employee stock ownership plan will not be aggregated with
shares of common stock purchased directly by or which are otherwise attributable
to any other participants in the subscription and community offerings, including
subscriptions of any of Westborough Savings' trustees, officers, employees or
associates thereof. To the extent shares are not available in the offering to
fill all or part of the purchase order of the employee stock ownership plan,
this plan intends to purchase shares in private transactions or on the open
market after completion of the offering.

PRIORITY 3: SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDERS. Each supplemental
eligible account holder will receive, as a third priority and without payment
therefor, non-transferable rights to subscribe for shares of common stock in the
subscription offering. Subscriptions by supplemental eligible account holders
are subject to maximum and minimum purchase limitations. See "--Limitations on
Common Stock Purchases."

If there are not sufficient shares available to satisfy all subscriptions of
all supplemental eligible account holders, after purchases by eligible account
holders and the tax-qualified employee benefit plans, available shares first
will be allocated among subscribing supplemental eligible account holders so as
to permit each supplemental eligible account holder to purchase a number of
shares sufficient to make such supplemental eligible account holder's total
allocation equal to the lesser of 100 shares or the number of shares subscribed
for. Thereafter, unallocated shares will be allocated among the remaining
subscribing supplemental eligible account holders whose subscriptions remain
unfilled in the proportion that the amounts of their respective aggregate
qualifying deposits bear to the total amount of qualifying deposits of all
remaining supplemental eligible account holders whose subscriptions remain
unfilled. However, no fractional shares shall be issued.

To ensure a proper allocation of stock, each supplemental eligible account
holder must list on his or her stock order form all deposit accounts in which
such supplemental eligible account holder had an ownership interest at December
31, 1998. Failure to list an account could result in fewer shares being
allocated than if all accounts had been disclosed.

EXPIRATION DATE FOR THE SUBSCRIPTION OFFERING. The subscription offering
will expire at 12:00 noon, Eastern Time, on , 1999, unless we extend this
period for an initial period of up to 45 days. We may further extend this period
for additional 60 day periods with the approval of the Division and, if

104

necessary, the FDIC. Subscription rights which have not been exercised prior to
the expiration date, as extended, will become void.

If all shares have not been subscribed for or sold by the expiration date,
as extended, all funds delivered to Westborough Savings will be returned with
interest promptly to the subscribers and all withdrawal authorizations will be
canceled. If an extension beyond the 45-day period following the expiration date
is granted, Westborough Savings will notify subscribers of the extension of time
and of any rights of subscribers to change or cancel their orders. Each
extension may not exceed 60 days, and all extensions, in the aggregate, may not
last beyond .

PERSONS IN NON-QUALIFIED STATES OR FOREIGN COUNTRIES. Westborough Financial
Services and Westborough Savings will make reasonable efforts to comply with the
securities laws of all states in the United States in which persons entitled to
subscribe for stock pursuant to the plan or reorganization reside. However,
Westborough Savings and Westborough Financial Services are not required to offer
stock in the subscription offering to any person who resides in a foreign
country.

COMMUNITY OFFERING

To the extent that shares remain available for purchase after satisfaction
of all subscriptions received in the subscription offering, Westborough Savings
may offer shares pursuant to the plan of reorganization in the community
offering to residents in the towns of Grafton, Hopkinton, Northborough,
Shrewsbury, Southborough and Westborough (the "Community"). The term "residents"
includes persons who occupy a dwelling within the Community and establish an
ongoing physical presence within it, together with an indication that such
presence is not merely transitory in nature (the determination of resident
status will be made by Westborough Savings, in its sole discretion).

Orders received in the community offering are subject to maximum and minimum
purchase limitations. See "--Limitations on Common Stock Purchases." The
community offering, if any, shall commence concurrently with or subsequent to
the commencement of the subscription offering and shall terminate no later than
45 days after the expiration of the subscription offering unless extended by
Westborough Savings and Westborough Financial Services, with the approval of the
Division and the FDIC, if necessary.

THE OPPORTUNITY TO SUBSCRIBE FOR SHARES OF COMMON STOCK IN THE COMMUNITY
OFFERING CATEGORY IS SUBJECT TO THE RIGHT OF WESTBOROUGH SAVINGS AND WESTBOROUGH
FINANCIAL SERVICES, IN THEIR DISCRETION, TO ACCEPT OR REJECT ANY SUCH ORDERS IN
WHOLE OR IN PART EITHER AT THE TIME OF RECEIPT OF AN ORDER OR AS SOON AS
PRACTICABLE FOLLOWING THE EXPIRATION DATE. IF WESTBOROUGH FINANCIAL SERVICES
REJECTS A SUBSCRIPTION IN PART, THE SUBSCRIBER WILL NOT HAVE THE RIGHT TO CANCEL
THE REMAINDER OF HIS OR HER SUBSCRIPTION.

If there is an oversubscription for shares in the community offering, shares
will be allocated on a priority basis in the following order: natural persons
residing in the Community, any other person subscribing for shares in the
community offering such that each person may receive 1,000 shares, and on a pro
rata basis to such persons based on the amount of their respective
subscriptions. If an oversubscription occurs in the other depositors category,
shares will be allocated first to each subscriber whose order is accepted by
Westborough Savings in an amount equal to the lesser of 100 shares or the number
of shares subscribed for by each such subscriber, if possible. Thereafter, we
will allocate the unallocated shares among such subscribers whose order remains
unsatisfied in the same proportion that each such subscriber's qualifying
deposit bears to the total amount of qualifying deposits of all subscribers
whose subscriptions remain unfilled.

MARKETING ARRANGEMENTS

TRIDENT SECURITIES, INC. Westborough Savings, Westborough Financial
Services and Westborough Bancorp, MHC have engaged Trident Securities as a
financial and sales agent in connection with the

105

offering of the common stock. Trident Securities has agreed to use its best
efforts to assist Westborough Financial Services with the solicitation of
subscriptions and orders for shares of common stock in the offering.

Trident Securities will receive fees for services provided in connection
with the offering equal to 2.0% of the aggregate purchase price of common stock
sold in the offering. No fees will be paid to Trident Securities with respect to
any shares of common stock purchased by any trustee, executive officer, employee
or employee benefit plan of Westborough Savings or Westborough Financial
Services. Additionally, no fees will be paid to Trident Securities with respect
to any shares of common stock purchased by associates of Westborough Savings'
trustees or executive officers. If there is a syndicated community offering, we
will pay Trident Securities a fee equal to % of the aggregate purchase price
of common stock sold in the syndicated community offering. However, the
aggregate fees payable to Trident Securities and any selected dealers in
connection with any syndicated community offering will not exceed 4.5% of the
aggregate purchase price of the common stock sold in the syndicated community
offering. Total fees to Trident Securities, Inc. are estimated to be $98,230 and
$136,870 at the minimum and the maximum of the offering range, respectively. See
"Pro Forma Data" for the assumptions used to arrive at these estimates. Trident
Securities will also be reimbursed for its reasonable out-of-pocket expenses,
including legal fees of up to $30 thousand and non-legal expenses up to a
maximum of $15 thousand.

DIRECTORS/TRUSTEES AND EMPLOYEES. Directors and executive officers of
Westborough Financial Services and trustees and executive officers Westborough
Savings may participate in the solicitation of offers to purchase common stock.
Other employees of Westborough Savings may participate in the offering in
ministerial capacities or provide clerical work in effecting a sales
transaction. Such other employees have been instructed not to solicit offers to
purchase common stock or provide advice regarding the purchase of common stock.
Westborough Financial Services will rely on Rule 3a4-1 under the Exchange Act,
and sales of common stock will be conducted within the requirements of Rule
3a4-1, so as to permit directors, trustees and employees to participate in the
sale of common stock. No director or trustee, as the case may be, or employee of
Westborough Financial Services or Westborough Savings will be compensated in
connection with his or her participation by the payment of commissions or other
remuneration based either directly or indirectly on transactions in common
stock.

PROCEDURE FOR PURCHASING SHARES IN SUBSCRIPTION AND COMMUNITY OFFERINGS

USE OF ORDER FORMS. To purchase shares in the subscription offering and the
community offering, an executed order form with the required payment for each
share subscribed for, or with appropriate authorization for withdrawal from a
subscriber's deposit account at Westborough Savings (which may be given by
completing the appropriate blanks in the stock order form), must be received by
Westborough Savings by 12:00 noon, Eastern Time, on the expiration date. You
must submit your order form by mail or overnight courier, or may drop off your
order forms at any of our branch offices. Stock order forms which are not
received by such time or are executed defectively or are received without full
payment (or correct withdrawal instructions) are not required to be accepted. In
addition, we are not obligated to accept orders submitted on photocopied or
facsimiled order forms. We have the power to waive or permit the correction of
incomplete or improperly executed forms, but do not represent that we will do
so. Once received, an executed order form may not be modified, amended or
rescinded without our consent unless subscribers are resolicited or the
reorganization has not been completed within 45 days after the end of the
subscription offering, unless such 45 day period has been extended.

In order to ensure that eligible account holders and supplemental eligible
account holders are properly identified as to their stock purchase eligibility
and priority, depositors must list on the stock order form all deposit accounts
as of the applicable eligibility record date giving all names in each account
and the account numbers.

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To ensure that each purchaser receives a prospectus at least 48 hours prior
to the expiration date for the offering, in accordance with Rule 15c2-8 of the
Exchange Act, no prospectus will be mailed later than five days prior to such
date or hand delivered any later than two days prior to such date. Execution of
the stock order form will confirm receipt or delivery in accordance with Rule
15c2-8. Order forms will only be distributed when preceded or accompanied by a
prospectus.

PAYMENT FOR SHARES. Payment for subscriptions may be made by cash, if hand
delivered, check, bank check, money order or by authorization of withdrawal from
deposit accounts maintained with Westborough Savings. Interest will be paid on
payments made by cash, check, bank check or money order at Westborough Savings'
passbook rate (as opposed to tiered rate) of interest from the date payment is
received until the completion or termination of the reorganization. If payment
is made by authorization of withdrawal from deposit accounts, the funds
authorized to be withdrawn will continue to accrue interest at the contractual
rates until completion or termination of the reorganization, but a hold
immediately will be placed on such funds, thereby making them unavailable to the
depositor.

If a subscriber validly authorizes Westborough Savings to withdraw the
amount of the purchase price from a deposit account at Westborough Savings, the
withdrawal will be made as of the completion of the reorganization. Westborough
Savings will waive any applicable penalties for early withdrawal from
certificates of deposit. If the remaining balance in a certificate account is
reduced below the applicable minimum balance requirement at the time that the
funds actually are transferred under the authorization, the certificate will be
canceled at the time of the withdrawal, without penalty, and the remaining
balance will be converted into a statement savings account and will earn
interest at the passbook rate.

The employee stock ownership plan will not be required to pay for the shares
subscribed for at the time it subscribes. Rather, the employee stock ownership
plan may pay for such shares of common stock subscribed for at the purchase
price upon completion of the offering; PROVIDED, that there is in force from the
time of its subscription until such time, a loan commitment acceptable to
Westborough Financial Services from an unrelated financial institution or
Westborough Financial Services to lend to the employee stock ownership plan the
aggregate purchase price of the shares for which it subscribed. Westborough
Financial Services intends to provide such a loan to the employee stock
ownership plan.

Owners of self-directed IRAs may use the assets of such IRAs to purchase
shares of common stock in the subscription and community offerings, provided
that such IRAs are not maintained at Westborough Savings. Persons with IRAs
maintained at Westborough Savings must have their accounts transferred to an
unaffiliated institution or broker to purchase shares of common stock in the
subscription and community offerings. In addition, the provisions of ERISA and
IRS regulations require that officers, trustees and ten percent stockholders who
use self-directed IRA funds to purchase shares of common stock in the
subscription and community offerings make such purchases for the exclusive
benefit of the IRAs. Instructions on how to transfer IRAs maintained at
Westborough Savings can be obtained from the stock information center.
Depositors interested in using funds in an IRA to purchase common stock should
contact the stock information center as soon as possible.

Certificates representing shares of common stock purchased will be mailed to
purchasers to the addresses specified in properly completed order forms, as soon
as practicable following completion of the sale of all shares of common stock.
Any certificates returned as undeliverable will be disposed of in accordance
with applicable law.

RESTRICTIONS ON TRANSFER OF SUBSCRIPTION RIGHTS AND SHARES OF COMMON STOCK

Prior to the completion of the reorganization, regulations prohibit any
person with subscription rights from transferring or entering into any agreement
or understanding to transfer the legal or beneficial ownership of the
subscription rights issued under the plan of reorganization or the shares of
common stock to be issued upon their exercise. Such rights may be exercised only
by the person to

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whom they are granted and only for such person's account. Each person exercising
such subscription rights will be required to certify that such person is
purchasing shares solely for such person's own account and that such person has
no agreement or understanding regarding the sale or transfer of such shares. The
regulations also prohibit any person from offering or making an announcement of
an offer or an intent to make an offer to purchase such subscription rights or
shares of common stock prior to the completion of the reorganization.

WESTBOROUGH SAVINGS AND WESTBOROUGH FINANCIAL SERVICES WILL PURSUE ANY AND
ALL LEGAL AND EQUITABLE REMEDIES (INCLUDING FORFEITURE) IN THE EVENT THEY BECOME
AWARE OF THE TRANSFER OF SUBSCRIPTION RIGHTS AND WILL NOT HONOR ORDERS KNOWN BY
THEM TO INVOLVE THE TRANSFER OF SUCH RIGHTS.

SYNDICATED COMMUNITY OFFERING

The plan of reorganization provides that all shares of common stock not
purchased in the subscription offering or the community offering may be offered
for sale to the general public in a syndicated community offering on a best
efforts basis through a selling group of broker-dealers to be arranged by
Trident Securities acting as agent of Westborough Financial Services. Trident
Securities has not selected any particular broker-dealers to participate in a
syndicated community offering. Westborough Financial Services and Westborough
Savings have reserved the right to reject orders in whole or in part in their
sole discretion in the syndicated community offering. If Westborough Financial
Services or Westborough Savings rejects an order in part, the subscriber will
not have the right to cancel the remainder of his or her subscription. Neither
Trident Securities nor any registered broker-dealer shall have any obligation to
take or purchase any shares of the common stock in the syndicated community
offering. However, Trident Securities has agreed to use its best efforts in the
sale of shares in any syndicated community offering.

The syndicated community offering will terminate no more than 45 days
following the expiration date, unless extended by Westborough Financial Services
with the approval of the Division and FDIC. Such extensions may not be beyond
. See "--How We Determined the Offering Range and the $10.00 Price Per
Share" above for a discussion of rights of subscribers, if any, in the event an
extension is granted.

LIMITATIONS ON COMMON STOCK PURCHASES

The plan of reorganization includes the following limitations on the number
of shares of common stock which may be purchased during the reorganization:

(1) The aggregate amount of outstanding common stock of Westborough Financial
Services owned or controlled by persons other than Westborough Bancorp, MHC,
at the close of the offering will be less than 50% of Westborough Financial
Services' total outstanding common stock;

(2) No subscription for fewer than 25 shares will be accepted;

(3) Except for the tax qualified employee benefit plans, the maximum amount of
shares of common stock subscribed for or purchased in all categories of the
reorganization by any person, together with associates of, and groups of
persons acting in concert with, such persons, shall not exceed $100,000;

(4) Each eligible account holder may subscribe for and purchase common stock in
the subscription offering in an amount up to $100,000, subject to increase
as described below;

(5) The tax-qualified employee benefit plans are permitted to purchase up to 10%
of the shares of common stock issued in the offering and, as a tax-qualified
employee benefit plan, the employee stock ownership plan intends to purchase
8% of the shares of common stock issued in the offering;

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(6) Each supplemental eligible account holder may subscribe for and purchase
common stock in the subscription offering in an amount up to $100,000,
subject to increase as described below;

(7) Persons purchasing shares of common stock in the community offering,
together with associates of and groups of persons acting in concert with
such persons, may purchase common stock in the community offering in an
amount up to $100,000, subject to increase as described below;

(8) The trustees, officers and corporators of Westborough Savings and their
associates in the aggregate, excluding purchases by the tax-qualified
employee benefit plans, may purchase up to 32% of the outstanding shares
held by persons other than Westborough Bancorp, MHC at the close of the
offering;

(9) The trustees, officers and corporators of Westborough Savings and their
associates in the aggregate, excluding purchases by the tax-qualified
employee benefit plans, may purchase up to 32% of the stockholders' equity
of Westborough Financial Services held by persons other than Westborough
Bancorp, MHC.

Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the corporators
of Westborough Savings, the $100,000 individual amount permitted to be
subscribed for may be increased up to a maximum of 5% of the shares offered for
sale in the offering, exclusive of an increase in the total number of shares
issued due to an increase in the offering range of up to 15% (I.E., up to
925,750 shares), at the sole discretion of Westborough Financial Services and
Westborough Savings. It is currently anticipated that the individual and overall
maximum purchase limitations may be increased if, after a community offering,
Westborough Financial Services has not received subscriptions for an aggregate
amount equal to at least the minimum of the offering range. If the maximum
purchase limitations are increased, subscribers for the maximum amount will be
given the opportunity to increase their subscriptions up to the then applicable
limit. Requests to purchase additional shares of common stock under this
provision will be determined by the Board of Directors of Westborough Financial
Services and the Board of Trustees of Westborough Savings and, if approved,
allocated on a pro rata basis giving priority in accordance with the priorities
set forth in the plan of reorganization and described herein.

If we sell 925,750 shares, the additional shares will be allocated in
accordance with the priorities and procedures described in "--Subscription
Offering and Subscription Rights" and "--Community Offering."

The term "associate" of a person is defined to mean:

(1) any corporation or organization (other than Westborough Financial Services,
Westborough Bancorp, MHC, Westborough Savings or a majority-owned subsidiary
of Westborough Savings) of which such person is a director, officer or
partner or is directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities;

(2) any trust or other estate in which such person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar
fiduciary capacity; and

(3) any relative or spouse of such person, or any relative of such spouse, who
has the same home as such person or who is a director or officer of
Westborough Financial Services, Westborough Bancorp, MHC, Westborough
Savings or any subsidiary of Westborough Bancorp, MHC or Westborough
Financial Services or any affiliate thereof; and

(4) any person "acting in concert" with any of the persons or entities specified
in clauses (1) through (3) above; provide, however, that any tax-qualified
or non-tax-qualified employee plan will not be deemed to be an associate of
any director, trustee or officer of Westborough Bancorp, MHC, Westborough
Financial Services or Westborough Saving, for purposes of aggregating total
shares that may be acquired or held by directors, trustees and officers and
their associates

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We have the sole discretion to determine whether prospective purchasers are
"associates" or "acting in concert."

Trustees, directors and officers are not treated as associates of each other
solely by virtue of holding such positions.

CERTAIN RESTRICTIONS ON PURCHASE OR TRANSFER OF SHARES AFTER THE REORGANIZATION

All shares of common stock purchased in connection with the reorganization
by a director, trustee or an executive officer of Westborough Savings,
Westborough Bancorp, MHC or Westborough Financial Services, or their associates,
will be subject to a restriction that the shares not be sold for a period of one
year following the reorganization, except in the event of the death or judicial
declaration of incompetence of such director, trustee or executive officer. Each
certificate for restricted shares will bear a legend giving notice of this
restriction on transfer, and instructions will be issued to the effect that any
transfer within such time period of any certificate or record ownership of such
shares other than as provided above is a violation of the restriction. Any
shares of common stock issued at a later date as a stock dividend, stock split,
or otherwise, with respect to such restricted stock will be subject to the same
restrictions. The directors and executive officers of Westborough Financial
Services and Westborough Savings will also be subject to the federal insider
trading rules and any other applicable requirements of the federal securities
laws.

Purchases of outstanding shares of common stock of Westborough Financial
Services by directors, trustees, corporators or executive officers of
Westborough Financial Services, Westborough Bancorp, MHC or Westborough Bank
(and any person who was a trustee, corporator or executive officer of
Westborough Savings; a trustee, corporator or executive officer of Westborough
Bancorp, MHC or a director or executive officer of Westborough Financial
Services at any time after the date on which the Board of Trustees of
Westborough Savings adopted the plan of reorganization), and their associates
during the three-year period following reorganization may be made only through a
broker or dealer registered with the SEC, except with the prior written approval
of the Division. This restriction does not apply, however, to negotiated
transactions involving more than 1% of the outstanding common stock, or
purchases of common stock made and held by any tax-qualified or
non-tax-qualified employee plan of Westborough Bank or Westborough Financial
Services. In addition, no officer or director of Westborough Bank or their
associates may purchase capital stock from Westborough Bank for a period of
three years following the reorganization.

INTERPRETATION, AMENDMENT AND TERMINATION

All interpretations of the plan of reorganization by the Board of Trustees
of Westborough Savings will be final, subject to the authority of the Division
and FDIC. The plan of reorganization provides that, if deemed necessary or
desirable by the Board of Trustees of Westborough Savings, the plan of
reorganization may be substantively amended by a majority vote of the Board of
Trustees as a result of comments from regulatory authorities or otherwise, at
any time prior to approval of the plan by the corporators. Amendment of the plan
of reorganization thereafter requires a majority vote of the Board of Trustees
and the approval of the Division and the FDIC. The plan of reorganization shall
be terminated if the reorganization is not completed within 24 months from the
date on which the corporators of Westborough Savings approve the plan, and such
time may not be extended by Westborough Savings. The plan of reorganization may
be terminated by a majority vote of the Board of Trustees of Westborough Savings
at any time prior to date of the special meeting of corporators, and thereafter
by such a vote with the approval of the Division and the FDIC.

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POSSIBLE CONVERSION OF WESTBOROUGH BANCORP, MHC TO STOCK FORM

Federal and state regulations and the plan of reorganization permit
Westborough Bancorp, MHC to convert from mutual to stock form. Such a
transaction is commonly known as a "second-step conversion." There can be no
assurance when, if ever, a second-step conversion will occur, and the Board of
Trustees has no current intention or plan to undertake a second-step conversion.
If a second-step conversion does not occur, Westborough Bancorp, MHC will always
own a majority of the common stock of Westborough Financial Services. The Board
of Trustees of Westborough Bancorp, MHC and the Board of Directors of
Westborough Financial Services will not undertake a second-step conversion for
three years following the offering, unless compelling and valid business reasons
exist to do so.

In a second-step conversion, Westborough Bancorp, MHC would merge with and
into Westborough Bank or Westborough Financial Services, with Westborough Bank
or Westborough Financial Services as the resulting entity. Certain depositors of
Westborough Bank would receive the right to subscribe for additional shares of
Westborough Financial Services. The additional shares of common stock of the
holding company issued in the second step conversion would be sold at their
aggregate pro forma market value.

In a second-step conversion, each share of common stock outstanding
immediately prior to the completion of the second-step conversion held by
persons other than Westborough Bancorp, MHC would be automatically converted
into and become the right to receive a number of shares of common stock of
Westborough Financial Services determined pursuant to an exchange ratio. This
exchange ratio would ensure that after the second-step conversion, subject to
the adjustments described below (if required by the applicable banking
regulators) and any adjustment to reflect the receipt of cash in lieu of
fractional shares, the percentage of the to-be-outstanding shares of the
resulting entity issued to stockholders other than Westborough Bancorp, MHC in
exchange for their common stock would be equal to the percentage of the
outstanding shares of common stock held by public stockholders immediately prior
to the second-step conversion.

As set forth in the plan of reorganization, the percentage of the
to-be-outstanding shares of the resulting entity issued in exchange for public
shares would be adjusted to reflect the aggregate amount of dividends waived by
Westborough Bancorp, MHC, if any, and the market value of the assets of
Westborough Bancorp, MHC, other than common stock of Westborough Financial
Services. Pursuant to this adjustment, the percentage of the to-be outstanding
shares of the resulting entity issued to public stockholders in exchange for
their minority shares (the "Adjusted Minority Ownership Percentage") is equal to
the percentage of the outstanding shares of common stock held by public
stockholders multiplied by the dividend waiver fraction. The dividend waiver
fraction is equal to the product of:

- a fraction, of which the numerator is equal to Westborough Financial
Services' stockholders' equity at the time of the second-step conversion
less the aggregate amount of dividends waived by Westborough Bancorp, MHC,
and the denominator is equal to Westborough Financial Services'
stockholders' equity at the time of the second-step conversion, and

- a fraction, of which the numerator is equal to the appraised pro forma
market value of the resulting entity in the second-step conversion minus
the value of Westborough Bancorp, MHC's assets other than common stock and
the denominator is equal to the appraised pro forma market value of the
resulting entity in the second-step conversion.

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RESTRICTIONS ON ACQUISITION OF WESTBOROUGH FINANCIAL SERVICES
AND WESTBOROUGH SAVINGS

GENERAL

The plan of reorganization provides for the reorganization of Westborough
Savings in which a mutual holding company and stock holding company are formed,
and Westborough Savings is reorganized from the mutual to the stock form of
organization. See "The Reorganization and The Offering--General." Certain
provisions in Westborough Financial Services' Articles of Organization and
Bylaws and in its benefit plans and agreements entered into in connection with
the reorganization, together with provisions of the Massachusetts General Laws
("MGL") and certain governing regulatory restrictions, may have anti-takeover
effects.

MUTUAL HOLDING COMPANY STRUCTURE

The mutual holding company structure will restrict the ability of our
stockholders to effect a change of control of management because, as long as
Westborough Bancorp, MHC remains in existence as a mutual holding company, it
will control a majority of our voting stock. Moreover, the trustees of
Westborough Bancorp, MHC will be the directors of Westborough Financial Services
and Westborough Bank. Westborough Bancorp, MHC will be able to elect all of the
members of the Board of Directors of Westborough Financial Services and, as a
general matter, will be able to control the outcome of most matters presented to
the stockholders of Westborough Financial Services for vote. Therefore, a change
in control of Westborough Financial Services or Westborough Bank cannot occur
unless Westborough Bancorp, MHC, first converts to the stock form of
organization or is dissolved. See "The Reorganization and The Offering--Possible
Conversion of Westborough Bancorp, MHC to Stock Form."

WESTBOROUGH FINANCIAL SERVICES, INC.'S ARTICLES OF ORGANIZATION AND BYLAWS

Westborough Financial Services' Articles of Organization and Bylaws contain
a number of provisions, relating to corporate governance and certain rights of
stockholders, that might discourage future takeover attempts. As a result,
stockholders who might desire to participate in such transactions may not have
an opportunity to do so. In addition, such provisions will also render the
removal of the Board of Directors or management of Westborough Financial
Services more difficult.

THE FOLLOWING DESCRIPTION IS NECESSARILY GENERAL AND QUALIFIED BY REFERENCE
TO THE ARTICLES OF ORGANIZATION AND BYLAWS. SEE "WHERE YOU CAN FIND ADDITIONAL
INFORMATION" AS TO HOW TO OBTAIN A COPY OF THESE DOCUMENTS.

DIRECTORS. Certain provisions of Westborough Financial Services' Articles
of Organization and Bylaws will impede changes in control of the Board of
Directors. Westborough Financial Services' Articles of Organization provide that
the Board of Directors will be divided into three classes, with directors in
each class elected for three-year staggered terms except for the initial
directors. Thus, it would take two annual elections to replace a majority of
Westborough Financial Services' Board. Westborough Financial Services' Articles
of Organization provide that the size of the Board of Directors may be increased
or decreased only by a majority vote of the Board. The Articles of Organization
also provide that any vacancy occurring in the Board of Directors, including a
vacancy created by an increase in the number of directors, shall be filled for
the remainder of the unexpired term by a majority vote of the directors then in
office. Finally, the Articles of Organization and Bylaws impose certain notice
and information requirements in connection with the nomination by stockholders
of candidates for election to the Board of Directors or the proposal by
stockholders of business to be acted upon at an annual meeting of stockholders.

112

The Articles of Organization provide that a director may only be removed for
cause by the affirmative vote of either two-thirds of the authorized Board of
Directors of Westborough Financial Services, or 80% of the shares eligible to
vote. In the absence of these provisions, the vote of the holders of a majority
of the shares of Westborough Financial Services could remove the entire Board,
with or without cause, and replace it with persons of such holders' choice.

RESTRICTIONS ON CALL OF SPECIAL MEETINGS. The Articles of Organization
provide that a special meeting of stockholders may be called by a majority of
the authorized Board of Directors of Westborough Financial Services or the
affirmative vote of a majority of the disinterested directors then in office,
or, upon written application, by stockholders holding at least 80% of the
capital stock entitled to vote at the meeting.

VOTES OF STOCKHOLDERS. The Articles of Organization prohibit cumulative
voting for the election of directors. No cumulative voting means that
Westborough Bancorp, MHC, as the holder of a majority of the shares voted at a
meeting of stockholder, may elect all directors of Westborough Financial
Services to be elected at that meeting. This could prevent public stockholder
representation on Westborough Financial Services' Board of Directors. In
addition, the Articles of Organization also provides that any action required or
permitted to be taken by the stockholders of Westborough Financial Services may
be taken only at an annual or special meeting and prohibits stockholder action
by written consent in lieu of a meeting.

AUTHORIZATION OF PREFERRED STOCK. The Articles of Organization authorize
one million shares of serial preferred stock, par value $0.01 per share.
Westborough Financial Services is authorized to issue preferred stock from time
to time in one or more series subject to applicable provisions of law, and the
Board of Directors is authorized to fix the designations, and relative
preferences, limitations, voting rights, if any, including without limitation,
offering rights of such shares (which could be multiple or as a separate class).
In the event of a proposed merger, tender offer or other attempt to gain control
of Westborough Financial Services that the Board of Directors does not approve,
it might be possible for the Board of Directors to authorize the issuance of a
series of preferred stock with rights and preferences that would impede that
completion of the transaction. An effect of the possible issuance of preferred
stock, therefore may be to deter a future attempt to gain control of Westborough
Financial Services. The Board of Directors has no present plan or understanding
to issue any preferred stock.

STOCKHOLDER VOTE REQUIRED TO APPROVE BUSINESS COMBINATIONS WITH PRINCIPAL
STOCKHOLDERS. The Articles of Organization requires the approval of the holders
of at least 80% of Westborough Financial Services' outstanding shares of voting
stock to approve certain "Business Combinations" and related transactions.

The vote of at least 80% of the stockholders is required in connection with
any transaction involving an Interested Stockholder except in cases where the
proposed transaction has been approved in advance by a majority of those members
of Westborough Financial Services' Board of Directors who are unaffiliated with
the Interested Stockholder and were directors prior to the time when the
Interested Stockholder became an Interested Stockholder. However, if the
proposed transaction meets certain conditions set forth in the Articles of
Organization designed to afford the stockholders a fair price in consideration
for their shares, approval of only a majority of the outstanding shares of
voting stock would be sufficient.

The term "Interested Stockholder" is defined to include, among others, any
individual, corporation, partnership or other entity (other than Westborough
Bancorp, MHC, Westborough Financial Services or its subsidiary or any employee
benefit plan maintained by Westborough Financial Services or its subsidiary)
which owns beneficially or controls, directly or indirectly, more than 5% of the
outstanding shares of voting stock of Westborough Financial Services.

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A "Business Combination" means:

(1) any merger or consolidation of Westborough Financial Services or any
of its subsidiaries with or into any Interested Stockholder or its
affiliate;

(2) any sale, lease, exchange, mortgage, pledge, transfer, or other
disposition to or with any Interested Stockholder or its affiliate of 25% or
more of the assets of Westborough Financial Services or combined assets of
Westborough Financial Services and its subsidiary;

(3) the issuance or transfer to any Interested Stockholder or its
affiliate by Westborough Financial Services (or any subsidiary) of any
securities of Westborough Financial Services in exchange for cash,
securities or other property having an aggregate fair market value equaling
or exceeding 25% of the combined fair market value of the outstanding common
stock of Westborough Financial Services and its subsidiaries, except for any
issuance or transfer pursuant to an employee benefit plan of Westborough
Financial Services or any subsidiary;

(4) the adoption of any plan for the liquidation or dissolution of
Westborough Financial Services proposed by or on behalf of any Interested
Stockholder or its affiliate; and

(5) any reclassification of securities, recapitalization, merger or
consolidation of Westborough Financial Services which has the effect of
increasing the proportionate share of common stock or any class of equity or
convertible securities of Westborough Financial Services owned directly or
indirectly by an Interested Stockholder or its affiliate.

EVALUATION OF OFFERS. The Articles of Organization further provides that
the Board of Directors of Westborough Financial Services shall when evaluating
any offer to Westborough Financial Services from another party to:

- make a tender offer or exchange offer for any outstanding equity security
of Westborough Financial Services;

- merge or consolidate Westborough Financial Services with another
corporation or entity; or

- purchase or otherwise acquire all or substantially all of the properties
and assets of Westborough Financial Services;

in connection with the exercise of its judgment in determining what is in
the best interest of Westborough Financial Services and its stockholders, give
due consideration to the extent permitted by law to all relevant factors,
including, without limitation, Westborough Financial Services' employees,
suppliers, creditors and customers; the economy of the state, region and nation;
community and societal considerations; and the long- and short-term interests of
Westborough Financial Services and its stockholders, including the possibility
that these interests will be best served by the continued independence of
Westborough Financial Services.

By having these standards in the Articles of Organization of Westborough
Financial Services, the Board of Directors may be in a stronger position to
oppose such a transaction if the Board concludes that the transaction would not
be in the best interests of Westborough Financial Services, even if the price
offered is significantly greater than the then market price of any equity
security of Westborough Financial Services.

AMENDMENT TO ARTICLES OF ORGANIZATION AND BYLAWS. The Articles of
Organization may be amended by the affirmative vote of 80% of the total votes
eligible to be cast by stockholders, voting together as a single class;
provided, however, that if at least two-thirds of the Directors recommend
approval of the amendment, then such amendment shall require the affirmative
vote of a majority of the total votes eligible to cast by stockholder, voting
together as a single class.

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The Bylaws may be amended by the affirmative vote of two-thirds of the Board
of Directors of Westborough Financial Services or the affirmative vote of at
least 80% of the total votes eligible to be cast by stockholders, voting
together as a single class. These provisions could have the effect of
discouraging a tender offer or other takeover attempt where the ability to make
fundamental changes through Bylaw amendments is an important element of the
takeover strategy of the acquiror.

ANTI-TAKEOVER EFFECTS OF WESTBOROUGH FINANCIAL SERVICES, INC.'S ARTICLES OF
ORGANIZATION, BYLAWS AND BENEFIT PLANS ADOPTED IN THE REORGANIZATION

The provisions described above are intended to reduce Westborough Financial
Services' vulnerability to takeover attempts and certain other transactions
which have not been negotiated with and approved by members of its Board of
Directors. The provisions of the employment agreements, the management
recognition plan and the stock option plan to be established may also discourage
takeover attempts by increasing the costs to be incurred by Westborough Bank and
Westborough Financial Services in the event of a takeover. See
"Management--Employment Agreements," and "--Benefits."

Westborough Financial Services' Board of Directors believes that the
provisions of the Articles of Organization, Bylaws and benefit plans to be
established are in the best interests of Westborough Financial Services and its
stockholders. An unsolicited non-negotiated proposal can seriously disrupt the
business and management of a corporation and cause it great expense.
Accordingly, the Board of Directors believes it is in the best interests of
Westborough Financial Services and its stockholders to encourage potential
acquirors to negotiate directly with management and that these provisions will
encourage such negotiations and discourage non-negotiated takeover attempts. It
is also the Board of Directors' view that these provisions should not discourage
persons from proposing a merger or other transaction at a price that reflects
the true value of Westborough Financial Services and that otherwise is in the
best interests of all stockholders.

REGULATORY RESTRICTIONS

FEDERAL CHANGE IN BANK CONTROL ACT. Federal law provides that no person,
acting directly or indirectly or through or in concert with one or more other
persons, may acquire control of a bank unless the FDIC has been given 60 days
prior written notice. For this purpose, the term "control" means the acquisition
of the ownership, control or holding of the power to vote 25% or more of any
class of a bank holding company's voting stock, and the term "company" includes
an individual, corporation, partnership, and various other entities, acting
individually or in concert. In addition, an acquiring person is presumed to
acquire control if the person acquires the ownership, control or holding of the
power to vote of 10% or more of any class of the holding company's voting stock
if (a) Westborough Financial Services' shares are registered pursuant to Section
12 of the Exchange Act or (b) no other person will own, control or hold the
power to vote a greater percentage of that class of voting securities. The
Federal Reserve Board is authorized by the change in bank control act and its
own regulations to disapprove a proposed transaction on certain specified
grounds. Accordingly, the prior approval of the Federal Reserve Bank would be
required before any person could acquire 10% or more of the Common Stock of
Westborough Financial Services.

FEDERAL BANK HOLDING COMPANY ACT. Federal law provides that no company may
acquire control of a bank holding company without the prior approval of the
Federal Reserve. Any company that acquires control becomes a "bank holding
company" subject to registration, examination and regulation by the Federal
Reserve. Pursuant to federal regulations, the term "company" is defined to
include banks, corporations, partnerships, associations, and certain trusts and
other entities, and the term "control" is deemed to exist if a company has
voting control of at least 25% of any class of a bank's voting stock, and may be
found to exist if a company controls in any manner the election of a majority of
the directors of the bank or has the power to exercise a controlling influence
over the management or policies of the bank. In addition, a bank holding company
must obtain Federal Reserve Board approval

115

prior to acquiring voting control of more than 5% of any class of voting stock
of a bank or another bank holding company. The foregoing restrictions do not
apply to the acquisition of stock by one or more tax-qualified employee stock
benefit plans, provided that the plan or plans do not have beneficial ownership
in the aggregate of more than 25 percent of any class of our equity security.

An acquisition of control of a bank that requires the prior approval of the
Federal Reserve Board under the Bank Holding Company Act is not subject to the
notice requirements of the Change in Bank Control Act. Accordingly, the prior
approval of the Federal Reserve Board under the Bank Holding Company Act would
be required (a) before any bank holding company could acquire 5% or more of the
common stock of Westborough Financial Services and (b) before any other company
could acquire 25% or more of the common stock of Westborough Financial Services.

The Federal Reserve may prohibit an acquisition of control if:

(1) it would result in a monopoly or substantially lessen competition;

(2) the financial condition of the acquiring person might jeopardize the
financial stability of the institution; or

(3) the competence, experience or integrity of the acquiring person
indicates that it would not be in the interest of the depositors or of the
public to permit the acquisition of control by such person.

MASSACHUSETTS BANKING LAW. Massachusetts banking law also prohibits any
"company," defined to include banking institutions as well as corporations, from
directly or indirectly controlling the voting power of 25% or more of the voting
stock of two or more banking institutions without the prior approval of the
Board of Bank Incorporation. Additionally, an out-of-state company which already
directly or indirectly controls voting power of 25% or more of the voting stock
of two or more banking institutions may not also acquire direct or indirect
ownership or control of more than 5% of the voting stock of a Massachusetts
banking institution without the prior approval of the Board of Bank
Incorporation. Finally, for a period of three years following completion of a
conversion to stock form, no person may directly or indirectly offer to acquire
or acquire beneficial ownership of more than 10% of any class of equity security
of a converting mutual savings bank without prior written approval of the Board
of Bank Incorporation.

116

DESCRIPTION OF CAPITAL STOCK OF WESTBOROUGH FINANCIAL SERVICES, INC.

GENERAL

Westborough Financial Services is authorized to issue five million
(5,000,000) shares of common stock having a par value of $.01 per share and one
million (1,000,000) shares of preferred stock having a par value of $.01 per
share. Westborough Financial Services currently expects to sell 805,000 shares
of common stock (or 925,750 in the event of an increase of 15% in the Estimated
Valuation Range) to purchasers of common stock in the offering. In addition,
Westborough Financial Services expects to issue 1,495,000 shares of the common
stock to Westborough Bancorp, MHC (or 1,719,250 in the event of an increase of
15% in the Estimated Valuation Range). Westborough Financial Services will not
issue any shares of preferred stock in the offering. Except as discussed above
in "Restrictions on Acquisition of Westborough Financial Services, Inc. and
Westborough Savings," each share of Westborough Financial Services' common stock
will have the same relative rights as, and will be identical in all respects
with, every other share of common stock. Upon payment of the purchase price for
the common stock in accordance with the plan of reorganization, all such stock
will be duly authorized, fully paid and non-assessable.

The shares of common stock:

- are not deposit accounts and are subject to investment risk;

- are not insured or guaranteed by the FDIC, or any other government agency;
and

- are not guaranteed by Westborough Financial Services, Westborough Bancorp,
MHC or Westborough Savings.

COMMON STOCK

DIVIDENDS. Westborough Financial Services can pay dividends from net
profits if, as and when declared by its Board of Directors. The payment of
dividends by Westborough Financial Services is subject to limitations which are
imposed by law. See "Our Policy Regarding Dividends" and "Regulation of
Westborough Savings Bank and Westborough Financial Services, Inc." Westborough
Bancorp, MHC currently does not intend to waive any dividends paid by
Westborough Financial Services. The owners of common stock of Westborough
Financial Services, including Westborough Bancorp, MHC, will be entitled to
receive and share equally in such dividends as may be declared by the Board of
Directors out of funds legally available therefor. If Westborough Financial
Services issues preferred stock, the holders of the preferred stock may have a
priority over the holders of the common stock with respect to dividends.

VOTING RIGHTS. Upon the effective date of the reorganization, the holders
of common stock of Westborough Financial Services will possess exclusive voting
rights in Westborough Financial Services. They will elect Westborough Financial
Services' Board of Directors and act on such other matters as are required to be
presented to them under law or Westborough Financial Services' Articles of
Organization or as are otherwise presented to them by the Board of Directors.
Each holder of common stock will be entitled to one vote per share and will not
have any right to cumulate votes in the election of directors. Under certain
circumstances, shares in excess of 10% of Westborough Financial Services' common
stock, exclusive of the shares held by Westborough Bancorp, MHC, may be
considered "Excess Shares" and may therefore not be entitled to vote. See
"Restrictions on Acquisition of Westborough Financial Services, Inc. and
Westborough Savings." If Westborough Financial Services issues preferred stock,
holders of the preferred stock may also possess voting rights. Certain matters,
including the removal of directors, the approval of business combinations and
amending the Articles of Organization or Bylaws, generally requires an 80%
stockholder vote. See "Restrictions on Acquisition of Westborough Financial
Services, Inc. and Westborough Savings."

117

LIQUIDATION. In the event of any liquidation, dissolution or winding up of
Westborough Bank, Westborough Financial Services, as owner of Westborough Bank's
capital stock, would be entitled to receive, after payment or provision for
payment of all debts and liabilities of Westborough Bank (including all deposit
accounts and accrued interest thereon) and after distribution of the balance in
the special liquidation account to eligible account holders and the supplemental
eligible account holders (see "The Reorganization and The Offering--Effects of
the Reorganization--Liquidation Rights"), all assets of Westborough Bank
available for distribution. In the event of liquidation, dissolution or winding
up of Westborough Financial Services, the holders of its common stock would be
entitled to receive, after payment or provision for payment of all its debts and
liabilities, all of the assets of Westborough Financial Services available for
distribution. If preferred stock is issued, the holders thereof may have a
priority over the holders of the common stock in the event of the liquidation or
dissolution.

PREEMPTIVE RIGHTS; REDEMPTION. Holders of the common stock of Westborough
Financial Services will not be entitled to preemptive rights with respect to any
shares which may be issued. The common stock is not subject to redemption.

PREFERRED STOCK

Westborough Financial Services will not issue any shares of its authorized
preferred stock in the reorganization. We may issue with such preferences and
designations as the Board of Directors may from time to time determine. The
Board of Directors can, without stockholder approval, issue preferred stock with
voting, dividend, liquidation and conversion rights which could dilute the
voting strength of the holders of the common stock and may assist management in
impeding an unfriendly takeover or attempted change in control.

LEGAL AND TAX OPINIONS

Thacher Proffitt & Wood, Washington, D.C. will issue its opinion to us of
the legality of the issuance of the common stock being offered and certain
matters relating to the reorganization and federal taxation. Certain matters
relating to state taxation will be passed upon for us by Wolf & Company, P.C.,
Boston, Massachusetts. Certain legal matters will be passed upon for Trident
Securities, Inc. by Housley Kantarian & Bronstein, P.C., Washington, D.C.

EXPERTS

The consolidated balance sheets of Westborough Savings as of September 30,
1998 and 1997 and consolidated statements of income, changes in surplus and cash
flows for each of the three years ended September 30, 1998, 1997 and 1996 have
been included in this prospectus in reliance upon the report of Wolf & Company,
P.C., independent certified public accountants, appearing elsewhere in this
prospectus, and upon the authority of said firm as experts in accounting and
auditing.

RP Financial has consented to the publication in this document of a summary
of its letter to Westborough Savings setting forth its opinion as to the
estimated pro forma market value of Westborough Savings in the reorganized form
and its opinion setting forth the value of subscription rights and to the use of
its name and statements with respect to it appearing in this document.

REGISTRATION REQUIREMENTS

Our common stock is registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). We will be subject to the
information, proxy solicitation, insider trading restrictions, tender offer
rules, periodic reporting and other requirements of the SEC under the Exchange
Act. We may not deregister the common stock under the Exchange Act for a period
of at least three years following the reorganization.

118

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We are subject to the informational requirements of the Exchange Act and
must file reports and other information with the SEC.

We have filed with the SEC a registration statement on Form SB-2 under the
Securities Act of 1933, as amended, with respect to the common stock offered in
this document. As permitted by the rules and regulations of the SEC, this
document does not contain all the information set forth in the registration
statement. You may examine this information without charge at the public
reference facilities of the SEC located at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain copies of this material from the SEC at prescribed
rates. You may obtain information on the operations of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet address
("web site") that contains reports, proxy and information statements and other
information regarding registrants, including Westborough Financial Services,
that file electronically with the SEC. The address for this web site is
"http://www.sec.gov."

The statements contained in this document as to the contents of any contract
or other document filed as an exhibit to the Form SB-2 are, of necessity, brief
descriptions and are not necessarily complete; each such statement is qualified
by reference to such contract or document.

A copy of Westborough Financial Services' Articles of Organization and
Bylaws, as well as those of Westborough Bank and Westborough Bancorp, MHC, are
available without charge from Westborough Savings. Copies of the plan of
reorganization are also available from Westborough Savings without charge.

Westborough Savings has filed an application for the establishment of a
mutual holding company and associated stock issuance with the Board of Bank
Incorporation and the Division of Banks of the Commonwealth of Massachusetts. In
addition, Westborough Savings has filed copies of that application with the
FDIC. Westborough Financial Services has filed an application with the Federal
Reserve Bank of Boston to become a bank holding company. This prospectus omits
certain information contained in those applications.

119

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
WESTBOROUGH SAVINGS BANK

Independent Auditors' Report........................................................... F-2

Consolidated Balance Sheets as of March 31, 1999 (unaudited) and September 30, 1998 and
1997................................................................................. F-3

Consolidated Statements of Income for the Six Months Ended March 31, 1999 and 1998
(unaudited) and for the Years Ended September 30, 1998, 1997 and 1996................ 28

Consolidated Statements of Changes in Surplus for the Six Months Ended March 31, 1999
(unaudited) and for the Years Ended September 30, 1998, 1997 and 1996................ F-4

Consolidated Statements of Cash Flows for the Six Months Ended March 31, 1999 and 1998
(unaudited) and for the Years Ended September 30, 1998, 1997 and 1996................ F-5

Notes to Consolidated Financial Statements............................................. F-6

OTHER SCHEDULES ARE OMITTED AS THEY ARE NOT REQUIRED OR ARE NOT APPLICABLE
OR THE REQUIRED INFORMATION IS SHOWN IN THE CONSOLIDATED FINANCIAL STATEMENTS OR
RELATED NOTES THERETO.

FINANCIAL STATEMENTS OF WESTBOROUGH BANCORP, MHC AND WESTBOROUGH FINANCIAL
SERVICES, INC. HAVE NOT BEEN PROVIDED BECAUSE THEY HAVE CONDUCTED NO OPERATIONS.
WESTBOROUGH BANCORP, MHC HAS NOT YET BEEN ORGANIZED AND WESTBOROUGH FINANCIAL
SERVICES, INC. HAS NO ASSETS AND NO LIABILITIES.

F-1

INDEPENDENT AUDITORS' REPORT

The Audit Committee
Westborough Savings Bank
Westborough, Massachusetts

We have audited the accompanying consolidated balance sheets of Westborough
Savings Bank and subsidiaries as of September 30, 1998 and 1997, and the related
consolidated statements of income, changes in surplus and cash flows for each of
the years in the three-year period ended September 30, 1998. These consolidated
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Westborough
Savings Bank and subsidiaries as of September 30, 1998 and 1997, and the results
of their operations and their cash flows for each of the years in the three-year
period ended September 30, 1998, in conformity with generally accepted
accounting principles.

WOLF & COMPANY, P.C.
Boston, Massachusetts
November 9, 1998, except for Note 15 as to which the
date is March 15, 1999

F-2

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

SEPTEMBER 30,
MARCH 31, ----------------------
1999 1998 1997
----------- ---------- ----------

(UNAUDITED)
ASSETS
Cash and due from banks..................................................... $ 3,701 $ 2,698 $ 2,884
Federal funds sold.......................................................... 6,122 6,659 4,660
Short-term investments...................................................... 3,758 3,084 366
----------- ---------- ----------
Total cash and cash equivalents......................................... 13,581 12,441 7,910

Securities available for sale............................................... 63,205 59,345 60,937
Federal Home Loan Bank stock, at cost....................................... 762 762 717
Loans, net.................................................................. 86,352 82,348 70,580
Foreclosed real estate, net................................................. -- 74 19
Banking premises and equipment, net......................................... 1,546 1,522 1,473
Accrued interest receivable................................................. 1,128 1,116 1,170
Deferred income tax asset................................................... 130 -- 290
Other assets................................................................ 827 915 800
----------- ---------- ----------
$ 167,531 $ 158,523 $ 143,896
----------- ---------- ----------
----------- ---------- ----------
LIABILITIES AND SURPLUS
Deposits.................................................................... $ 142,971 $ 135,962 $ 125,170
Federal Home Loan Bank advances............................................. 4,000 2,000 --
Mortgagors' escrow accounts................................................. 199 218 180
Accrued taxes and expenses.................................................. 705 960 1,063
Other liabilities........................................................... 45 16 36
----------- ---------- ----------
Total liabilities....................................................... 147,920 139,156 126,449
----------- ---------- ----------
Commitments and contingencies

Surplus..................................................................... 19,031 18,207 16,894
Accumulated other comprehensive income...................................... 580 1,160 553
----------- ---------- ----------
Total surplus........................................................... 19,611 19,367 17,447
----------- ---------- ----------
$ 167,531 $ 158,523 $ 143,896
----------- ---------- ----------
----------- ---------- ----------

See accompanying notes to consolidated financial statements.

F-3

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SURPLUS

SIX MONTHS ENDED MARCH 31, 1999 (UNAUDITED) AND THE
YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996.

(IN THOUSANDS)

ACCUMULATED
OTHER
COMPREHENSIVE TOTAL
SURPLUS INCOME SURPLUS
--------- --------------- ---------

Balance at September 30, 1995............................................... $ 14,403 $ 292 $ 14,695
---------
Comprehensive income:
Net income................................................................ 1,183 -- 1,183
Change in net unrealized gain on securities available for sale, after
reclassication adjustment and tax effects............................... -- (89) (89)
---------
Total comprehensive income............................................ 1,094
--------- ------ ---------
Balance at September 30, 1996............................................... 15,586 203 15,789
---------
Comprehensive income:
Net income................................................................ 1,308 -- 1,308
Change in net unrealized gain on securities available for sale, after
reclassication adjustment and tax effects............................... -- 350 350
---------
Total comprehensive income............................................ 1,658
--------- ------ ---------
Balance at September 30, 1997............................................... 16,894 553 17,447
---------
Comprehensive income:
Net income................................................................ 1,313 -- 1,313
Change in net unrealized gain on securities available for sale, after
reclassication adjustment and tax effects............................... -- 607 607
---------
Total comprehensive income............................................ 1,920
--------- ------ ---------
Balance at September 30, 1998............................................... 18,207 1,160 19,367
---------
Comprehensive income (unaudited):
Net income................................................................ 824 -- 824
Change in net unrealized gain on securities available for sale, after
reclassication adjustment and tax effects............................... -- (580) (580)
---------
Total comprehensive income............................................ 244
--------- ------ ---------
Balance at March 31, 1999 (unaudited)....................................... $ 19,031 $ 580 $ 19,611
--------- ------ ---------
--------- ------ ---------

See accompanying notes to consolidated financial statements.

F-4

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

SIX MONTHS ENDED
MARCH 31, YEARS ENDED SEPTEMBER 30,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------

(UNAUDITED)
Cash flows from operating activities:
Net income........................................................ $ 824 $ 714 $ 1,313 $ 1,308 $ 1,183
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses....................................... 25 20 39 96 105
Charitable contribution in the form of equity securities........ -- -- -- 110 --
(Credit) provision for losses on foreclosed real estate......... -- (18) (22) -- 44
Amortization of premiums on securities.......................... 47 51 88 93 200
Amortization of net deferred loan (fees) cost................... (3) (12) (31) (9) 10
Depreciation and amortization expense........................... 134 109 228 206 165
Gain on sales and dispositions of securities, net............... (290) (64) (90) (337) (119)
Recognition of expired covered call options..................... (187) -- -- -- --
Loans originated for sale....................................... -- (87) (269) (120) --
Proceeds from loan sales........................................ -- 87 269 120 --
Decrease (increase) in accrued interest receivable.............. (12) (50) 54 (72) (162)
Deferred income tax provision (benefit)......................... 46 70 59 (37) (98)
Other, net...................................................... 35 (92) (411) (54) (401)
--------- --------- --------- --------- ---------
Net cash provided by operating activities..................... 619 728 1,227 1,304 927
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Proceeds from sales and calls of securities available
for sale.......................................................... 3,638 5,339 17,976 7,990 16,237
Proceeds from maturities of securities available for sale......... 4,000 1,549 1,250 3,520 3,550
Purchase of securities available for sale......................... (14,302) (10,362) (20,835) (12,442) (28,661)
Principal payments received on mortgage and
asset-backed securities........................................... 2,305 1,781 4,214 2,777 3,300
Purchase of Federal Home Loan Bank stock.......................... -- (45) (45) (75) (44)
Loans originated, net of principal payments....................... (4,026) (4,743) (11,850) (5,424) (7,579)
Proceeds from sales of foreclosed real estate..................... 74 50 57 164 140
Capitalized costs associated with foreclosed real estate.......... -- (13) (16) (39) (125)
Purchase of banking premises and equipment........................ (158) (112) (277) (285) (386)
--------- --------- --------- --------- ---------
Net cash used by investing activities............................. (8,469) (6,556) (9,526) (3,814) (13,568)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Net increase in deposits.......................................... 7,009 5,156 10,792 4,888 10,733
Proceeds from Federal Home Loan Bank advances..................... 2,000 -- 2,000 -- 3,000
Repayment of Federal Home Loan Bank advances...................... -- -- -- (3,000) --
Net increase (decrease) in mortgagors' escrow accounts............ (19) 8 38 43 49
--------- --------- --------- --------- ---------
Net cash provided by financing activities....................... 8,990 5,164 12,830 1,931 13,782
--------- --------- --------- --------- ---------
Net change in cash and cash equivalents............................. 1,140 (664) 4,531 (579) 1,141
Cash and cash equivalents at beginning of period.................... 12,441 7,910 7,910 8,489 7,348
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period.......................... $ 13,581 $ 7,246 $ 12,441 $ 7,910 $ 8,489
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental cash flow information:
Interest paid on deposits......................................... $ 2,373 $ 2,271 $ 4,556 $ 4,284 $ 4,037
Interest paid on Federal Home Loan Bank advances.................. 38 -- -- 132 --
Income taxes paid................................................. 378 539 835 656 789
Transfer from loans to foreclosed real estate..................... -- -- 74 -- --
Transfer of securities from held to maturity to available for
sale............................................................ -- -- -- -- 17,174

See accompanying notes to consolidated financial statements.

F-5

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION AND PRESENTATION

The consolidated financial statements include the accounts of Westborough
Savings Bank (the "Bank") and its wholly-owned subsidiaries, The Hundredth
Corporation, which owns foreclosed real estate and the One Hundredth Security
Corporation and Eli Whitney Security Corporation, which are Massachusetts
security corporations. All significant intercompany balances and transactions
have been eliminated in consolidation.

With respect to information for the six months ended March 31, 1999 and
1998, which is unaudited, in the opinion of management, all adjustments
necessary for a fair presentation of such interim periods have been included and
are of a normal recurring nature. Results for the six months ended March 31,
1999 are not necessarily indicative of the results that may be expected for the
year ended September 30, 1999.

USE OF ESTIMATES

In preparing consolidated financial statements in conformity with generally
accepted accounting principles ("GAAP"), management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the consolidated balance sheet and reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. The determination of the allowance for losses
on loans is a material estimate that is particularly susceptible to significant
change in the near term.

BUSINESS

The Bank provides a variety of financial services to individuals and small
businesses through its five offices in Westborough, Northborough and Shrewsbury,
Massachusetts. Its primary deposit products are checking, savings and term
certificate accounts and its primary lending products are residential mortgage
loans.

RECLASSIFICATIONS

Certain amounts have been reclassified in the 1998, 1997 and 1996
consolidated financial statements to conform to the 1999 presentation.

CASH EQUIVALENTS

Cash equivalents include amounts due from banks, federal funds sold on a
daily basis and short-term investments.

SECURITIES AVAILABLE FOR SALE

Investments classified as "available for sale" are reflected on the
consolidated balance sheet at fair value, with unrealized gains and losses
excluded from earnings and reported in accumulated other comprehensive income.

F-6

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Purchase premiums and discounts are amortized to earnings by the interest
method over the terms of the investments. Declines in the value of investments
that are deemed to be other than temporary are reflected in earnings when
identified. Gains and losses on disposition of investments are computed by the
specific identification method.

LOANS

The Bank grants mortgage, commercial and consumer loans to its customers. A
substantial portion of the loan portfolio consists of mortgage loans in
Westborough and the surrounding communities. The ability of the Bank's debtors
to honor their contracts is dependent upon the local economy and the local real
estate market.

Loans that management has the intent and ability to hold for the foreseeable
future or until maturity or pay-off generally are reported at their outstanding
unpaid principal balances adjusted for the allowance for loan losses and
deferred costs on originated loans. Interest income is accrued on the unpaid
principal balance. Net loan origination costs are deferred and recognized as an
adjustment of the related loan yield using the interest method.

The accrual of interest on mortgage and commercial loans is discontinued
when in the judgment of management the collection of principal or interest is
doubtful.

All interest accrued but not collected for loans that are placed on
nonaccrual or charged off is reversed against interest income. The interest on
these loans is accounted for on the cash-basis until qualifying for return to
accrual. Loans are returned to accrual status when all the principal and
interest amounts contractually due are brought current and future payments are
reasonably assured.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is established as losses are estimated to have
occurred through a provision for loan losses charged to earnings. Loan losses
are charged against the allowance when management believes the uncollectibility
of a loan balance is confirmed. Subsequent recoveries, if any, are credited to
the allowance.

The allowance for loan losses is evaluated on a regular basis by management
and is based upon management's periodic review of the collectibility of the
loans in light of historical experience, the nature and volume of the loan
portfolio, adverse situations that may affect the borrower's ability to repay,
estimated value of any underlying collateral and prevailing economic conditions.
This evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events,
it is probable that the Bank will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. Impairment is measured on a loan by loan basis by either the present
value of expected future cash flows discounted at the loan's effective interest
rate, the loan's obtainable market price, or the fair value of the collateral if
the loan is collateral dependent.

F-7

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Substantially all of the Bank's loans which have been identified as impaired
have been measured by the fair value of existing collateral.

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

FORECLOSED REAL ESTATE

Assets acquired through, or in lieu of, loan foreclosure are held for sale
and are initially recorded at fair value at the date of foreclosure,
establishing a new cost basis. Subsequent to foreclosure, valuations are
periodically performed by management and the assets are carried at the lower of
carrying amount or fair value, less cost to sell. Revenue and expenses from
operations and changes in the valuation allowance are included in net expenses
from foreclosed assets.

BANKING PREMISES AND EQUIPMENT

Land is carried at cost. Buildings, leasehold improvements and equipment are
stated at cost, less accumulated depreciation and amortization, computed on the
straight-line method over the estimated useful lives of the assets.

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

TRANSFERS OF FINANCIAL ASSETS

Transfers of financial assets are accounted for as sales, when control over
the assets has been surrendered. Control over transferred assets is deemed to be
surrendered when (1) the assets have been isolated from the Bank, (2) the
transferee obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets, and (3)
the Bank does not maintain effective control over the transferred assets through
an agreement to repurchase them before their maturity.

RETIREMENT PLAN

The Bank accounts for pension benefits on the net periodic pension cost
method for financial reporting purposes. This method recognizes the compensation
cost of an employee's pension benefit over the employee's approximate service
period. Pension costs are funded in the year of accrual using the aggregate cost
method.

ADVERTISING COSTS

All advertising costs are expensed as incurred.

F-8

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES

Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax assets or
liabilities are expected to be realized or settled. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted accordingly
through the provision for income taxes. The Bank's base amount of its federal
income tax reserve for loan losses that arose before 1987 is a permanent
difference for which there is no recognition of a deferred tax liability.
However, the allowance for loan losses maintained for financial reporting
purposes is treated as a temporary difference with allowable recognition of a
related deferred tax asset, if it is deemed realizable.

COMPREHENSIVE INCOME

The Bank adopted Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income," as of October 1, 1998. Accounting
principles generally require that recognized revenue, expenses, gains and losses
be included in net income. Although certain changes in assets and liabilities,
such as unrealized gains and losses on securities available for sale are
reported as a separate component of the surplus section of the balance sheet,
such items, along with net income, are components of comprehensive income. The
adoption of SFAS No. 130 had no effect on the Bank's net income or surplus.

The components of the change in accumulated other comprehensive income and
related tax effects are as follows:

SIX MONTHS YEARS ENDED
ENDED SEPTEMBER 30,
MARCH 31, --------------------
1999 1998 1997
------------- --------- ---------

(UNAUDITED)
Unrealized holding gains on securities
available for sale.......................................... $ (639) $ 1,101 $ 884
Reclassification adjustment for gains
realized in income.......................................... (290) (90) (337)
----- --------- ---------
Net unrealized gains.......................................... (929) 1,011 547
Tax effect.................................................... 349 (404) (197)
----- --------- ---------
Net-of-tax amount............................................. $ (580) $ 607 $ 350
----- --------- ---------
----- --------- ---------

RECENT ACCOUNTING PRONOUNCEMENTS

In February 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," effective for fiscal years beginning after December 15, 1997. The
Statement revises employers' disclosures about pension and other postretirement
benefit plans. It does not change the measurement or recognition of those plans.
The Statement standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practical, requires additional information
on changes in the benefits obligations and fair values of plan assets that will
facilitate financial analysis, and eliminates certain disclosures that were

F-9

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
previously required by GAAP. The Bank will adopt these disclosure requirements
beginning in the year ending September 30, 1999.

In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. This Statement standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity recognize those items
as assets or liabilities in the balance sheet and measure them at fair value. If
certain conditions are met, an entity may elect to designate a derivative as
follows: a hedge of the exposure to changes in the fair value of a recognized
asset or liability, or of an unrecognized firm commitment that is attributable
to a particular risk; a hedge of the exposure to variability in the cash flows
of a recognized asset or liability, or of a forecasted transaction, that is
attributable to a particular risk; or, a hedge of the foreign currency exposure
of an unrecognized firm commitment, an available-for-sale security, a forecasted
transaction, or a net investment in a foreign operation. This Statement
generally provides for matching the timing of the recognition of the gain or
loss on the hedging instrument with the recognition of the changes in the fair
value of the item being hedged. Depending on the type of hedge, such recognition
will be in either net income or other comprehensive income. For a derivative not
designated as a hedging instrument, changes in fair value are recognized in net
income in the period of change. Adoption of this Statement by the Bank will
require that changes in fair value of covered call options be recognized in net
income. Currently, such changes are included in accumulated other comprehensive
income. The Bank will adopt SFAS No. 133 commencing October 1, 1999.

2. SHORT-TERM INVESTMENTS

Short-term investments consist of funds invested in money market funds. The
fair value at March 31, 1999 and September 30, 1998 and 1997 approximates the
carrying value and the funds are available on a daily basis.

3. SECURITIES AVAILABLE FOR SALE

The amortized cost and estimated fair value of securities available for
sale, with gross unrealized gains and losses, is as follows:

MARCH 31, 1999
--------------------------------------------------

GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ------------- ---------

(UNAUDITED)

U.S. Government obligations.................. $ 12,089 $ 258 $ -- $ 12,347
Federal agency obligations................... 8,506 47 40 8,513
Banking and finance obligations.............. 5,531 27 33 5,525
Mortgage-backed securities................... 13,668 30 60 13,638
Asset-backed securities...................... 851 2 -- 853
Other bonds and obligations.................. 14,224 131 49 14,306
----------- ----------- ----- ---------
Total debt securities.................... 54,869 495 182 55,182
Marketable equity securities................. 7,369 1,170 516 8,023
----------- ----------- ----- ---------
Total securities available for sale...... $ 62,238 $ 1,665 $ 698 $ 63,205
----------- ----------- ----- ---------
----------- ----------- ----- ---------

F-10

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

3. SECURITIES AVAILABLE FOR SALE (CONTINUED)

SEPTEMBER 30, 1998
--------------------------------------------------

GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ------------- ---------
U.S. Government obligations.................... $ 13,091 $ 488 $ -- $ 13,579
Federal agency obligations..................... 9,504 156 -- 9,660
Banking and finance obligations................ 5,534 90 -- 5,624
Mortgage-backed securities..................... 11,475 150 12 11,613
Other bonds and obligations.................... 13,412 350 -- 13,762
----------- ----------- ----- ---------
Total debt securities...................... 53,016 1,234 12 54,238
Marketable equity securities................... 4,433 935 261 5,107
----------- ----------- ----- ---------
Total securities available for sale........ $ 57,449 $ 2,169 $ 273 $ 59,345
----------- ----------- ----- ---------
----------- ----------- ----- ---------

SEPTEMBER 30, 1997
--------------------------------------------------

GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ----------- ------------- ---------
U.S. Government obligations.................... $ 22,661 $ 237 $ 31 $ 22,867
Federal agency obligations..................... 10,428 33 34 10,427
Banking and finance obligations................ 4,539 26 1 4,564
Mortgage-backed securities..................... 10,495 55 43 10,507
Asset-backed securities........................ 243 89 2 330
Other bonds and obligations.................... 10,518 77 7 10,588
----------- ----------- ----- ---------
Total debt securities...................... 58,884 517 118 59,283
Marketable equity securities................... 1,168 491 5 1,654
----------- ----------- ----- ---------
Total securities available for sale........ $ 60,052 $ 1,008 $ 123 $ 60,937
----------- ----------- ----- ---------
----------- ----------- ----- ---------

During the year ended September 30, 1997, the Bank established a private
charitable foundation (the "Foundation") to provide grants to charitable
organizations in the Westborough area. The Foundation is not a subsidiary of the
Bank. The Foundation was funded by a donation from the Bank of marketable equity
securities with a cost basis and fair value of $21 and $110, respectively, at
the date of transfer. Such securities had been classified as available for sale
and, accordingly, the transfer resulted in the Bank recognizing the unrealized
appreciation of the securities of $89 in the consolidated statement of income.

Proceeds from sales and calls of investment securities amounted to $3,638
and $5,339 for the six months ended March 31, 1999 and 1998 (unaudited),
respectively. Gross gains of $294 and $65, and gross losses of $4 and $1 were
realized during the six months ended March 31, 1999 and 1998 (unaudited),
respectively.

Proceeds from sales and calls of investment securities amounted to $17,976,
$7,990 and $16,237 for the years ended September 30, 1998, 1997 and 1996,
respectively. Gross realized gains amounted to $122, $252 and $150,
respectively. Gross realized losses amounted to $32, $4 and $31, respectively.

F-11

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

3. SECURITIES AVAILABLE FOR SALE (CONTINUED)
At March 31, 1999 (unaudited) and September 30, 1998, the Bank has pledged
U.S. Government obligations with an amortized cost of $497 and $500 and a fair
value of $500 and $504, respectively, as collateral against the Bank's treasury,
tax and loan account.

The amortized cost and estimated fair value of debt securities by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because issuers may have the right to call or prepay
obligations with or without call or prepayment penalties.

MARCH 31, 1999 SEPTEMBER 30, 1998
---------------------- ----------------------

AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
----------- --------- ----------- ---------

(UNAUDITED)

Within 1 year.................................. $ 5,774 $ 5,813 $ 9,520 $ 9,572
Over 1 year through 5 years.................... 27,216 27,623 30,005 30,987
Over 5 years through 10 years.................. 5,494 5,391 2,016 2,066
Over 10 years.................................. 1,866 1,864 -- --
----------- --------- ----------- ---------
40,350 40,691 41,541 42,625
Mortgage and asset-backed securities........... 14,519 14,491 11,475 11,613
----------- --------- ----------- ---------
$ 54,869 $ 55,182 $ 53,016 $ 54,238
----------- --------- ----------- ---------
----------- --------- ----------- ---------

F-12

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

4. LOANS

A summary of the balances of loans follows:

SEPTEMBER 30,
MARCH 31, --------------------
1999 1998 1997
----------- --------- ---------

(UNAUDITED)
Mortgage loans on real estate:
Fixed rate............................................... $ 54,207 $ 47,239 $ 29,450
Variable rate............................................ 24,354 27,384 33,812
Commercial............................................... 3,084 2,743 2,915
Home equity lines-of-credit.............................. 3,503 3,918 3,859
----------- --------- ---------
Total mortgage loans................................... 85,148 81,284 70,036
----------- --------- ---------

Personal loans............................................. 666 858 1,069
Deposit secured loans...................................... 586 676 557
Home improvement loans..................................... 129 132 73
Commercial lines-of-credit................................. 705 599 293
Commercial installment..................................... 1,401 1,087 437
----------- --------- ---------
Total other loans...................................... 3,487 3,352 2,429
----------- --------- ---------
Total loans............................................ 88,635 84,636 72,465

Due to borrowers on incomplete loans....................... (1,538) (1,570) (1,177)
Net deferred loan costs.................................... 112 109 78
Allowance for loan losses.................................. (857) (827) (786)
----------- --------- ---------
Loans, net............................................. $ 86,352 $ 82,348 $ 70,580
----------- --------- ---------
----------- --------- ---------

An analysis of the allowance for loan losses follows:

SIX MONTHS ENDED
MARCH 31, YEARS ENDED SEPTEMBER 30,
-------------------- -------------------------------

1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------

(UNAUDITED)

Balance at beginning of period.................. $ 827 $ 786 $ 786 $ 690 $ 585
Provision for loan losses....................... 25 20 39 96 105
Charge-offs..................................... (6) -- -- (2) (8)
Recoveries...................................... 11 1 2 2 8
--------- --------- --------- --------- ---------
Balance at end of period........................ $ 857 $ 807 $ 827 $ 786 $ 690
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

The Bank has sold mortgage loans in the secondary mortgage market and has
retained the servicing responsibility and receives fees for the services
provided. Total loans serviced for others at March 31, 1999 (unaudited) and
September 30, 1998 and 1997 amounted to $1,020 $1,402 and $1,187, respectively.
Total loans sold during the six months ended March 31, 1999 and 1998 (unaudited)
and the years ended September 30, 1998, 1997 and 1996 amounted to $0, $87, $269,
$120 and $0,

F-13

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

4. LOANS (CONTINUED)
respectively. Mortgage loans serviced for others are not included in the
accompanying consolidated balance sheets.

The following is a summary of impaired loans:

SEPTEMBER 30,
MARCH 31, --------------------
1999 1998 1997
--------------- --------- ---------

(UNAUDITED)
Total impaired loans (no valuation allowance).................... $ -- $ 269 $ 352
--- --------- ---------
--- --------- ---------

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

SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30,
MARCH 31,
---------------------- -------------------------------

1999 1998 1998 1997 1996
----- --------- --------- --------- ---------

(UNAUDITED)

Average balance of impaired loans.................. $ -- $ 288 $ 283 $ 423 $ 360
--- --------- --------- --------- ---------
--- --------- --------- --------- ---------
Interest income recognized on impaired
loans on the accrual method...................... $ -- $ 9 $ 19 $ 28 $ 28
--- --------- --------- --------- ---------
--- --------- --------- --------- ---------

5. FORECLOSED REAL ESTATE

Foreclosed real estate consists of real estate acquired in settlement of
loans as follows:

SEPTEMBER 30,
MARCH 31, --------------------
1999 1998 1997
------------- --------- ---------

(UNAUDITED)
Real estate acquired in settlement of loans................... $ -- $ 74 $ --
Participation loan-land development........................... 21 22 227
Less allowance for losses on foreclosed real estate........... (21) (22) (208)
----- --------- ---
Foreclosed real estate, net............................... $ -- $ 74 $ 19
----- --------- ---
----- --------- ---

F-14

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

6. BANKING PREMISES AND EQUIPMENT

A summary of the cost and accumulated depreciation and amortization of
banking premises and equipment and their estimated useful lives follows:

SEPTEMBER 30,
MARCH 31, -------------------- ESTIMATED
1999 1998 1997 USEFUL LIVES
----------- --------- --------- --------------

(UNAUDITED)
Banking premises:
Land..................................... $ 222 $ 222 $ 222
Buildings................................ 1,206 1,206 1,166 10-50 years
Leasehold improvements................... 126 126 126 5 years
Equipment.................................. 2,199 2,041 1,829 4-25 years
----------- --------- ---------
3,753 3,595 3,343
Less accumulated depreciation
and amortization......................... (2,207) (2,073) (1,870)
----------- --------- ---------
$ 1,546 $ 1,522 $ 1,473
----------- --------- ---------
----------- --------- ---------

Depreciation and amortization expense for the six months ended March 31,
1999 and 1998 (unaudited) and the years ended September 30, 1998, 1997 and 1996
amounted to $134, $109, $228, $206 and $165, respectively.

7. DEPOSITS

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

SEPTEMBER 30,
MARCH 31, ----------------------
1999 1998 1997
----------- ---------- ----------

(UNAUDITED)
Non-interest bearing accounts........................... $ 10,261 $ 8,592 $ 6,910
NOW accounts............................................ 13,527 15,221 11,310
Regular and other savings accounts...................... 63,743 57,972 51,730
Money market deposit accounts........................... 6,916 7,218 9,003
----------- ---------- ----------
Total non-certificate accounts...................... 94,447 89,003 78,953
----------- ---------- ----------

Six-month money market certificates..................... 9,087 8,624 7,840
Other term deposit certificates......................... 39,437 38,335 38,377
----------- ---------- ----------
Total certificate accounts.......................... 48,524 46,959 46,217
----------- ---------- ----------
Total deposits...................................... $ 142,971 $ 135,962 $ 125,170
----------- ---------- ----------
----------- ---------- ----------

Certificate accounts greater than $100 amounted to approximately $9,847,
$9,535 and $8,071 at March 31, 1999 (unaudited) and September 30, 1998 and 1997,
respectively.

F-15

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

7. DEPOSITS (CONTINUED)
A summary of certificates, by maturity, is as follows:

MARCH 31, 1999 SEPTEMBER 30, 1998 SEPTEMBER 30, 1997
---------------------- ---------------------- ----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE AMOUNT RATE
--------- ----------- --------- ----------- --------- -----------

(UNAUDITED)
Within 1 year........................ $ 39,250 4.96% $ 37,005 5.06% $ 37,119 5.24%
Over 1 year through 3 years.......... 9,262 5.31 9,954 5.45 9,094 5.40
Over 3 years......................... 12 5.12 -- -- 4 5.50
--------- --------- ---------
$ 48,524 5.03% $ 46,959 5.14% $ 46,217 5.27%
--------- --------- ---------
--------- --------- ---------

8. FEDERAL HOME LOAN BANK ADVANCES

Federal Home Loan Bank advances, secured by a blanket lien on qualified
collateral, are as follows:

WEIGHTED
MATURING DURING AVERAGE
THE YEAR ENDING INTEREST MARCH 31, SEPTEMBER 30,
SEPTEMBER 30, RATE 1999 1998
- ------------------- ----------- ----------- -------------

(UNAUDITED)
2001 5.29% $ 2,000 $ 2,000
2009 4.88% 2,000 --
----------- ------
$ 4,000 $ 2,000
----------- ------
----------- ------

The Bank also has an available line of credit with the Federal Home Loan
Bank of Boston ("FHLB") at an interest rate the adjusts daily. Borrowings under
the line are limited to 2% of the Bank's total assets. All borrowings from the
Federal Home Loan Bank of Boston are secured by a blanket lien on qualified
collateral, defined principally as 75% of the carrying value of first mortgage
loans on owner-occupied residential property and 90% of the market value of U.S.
Government and federal agency securities. As of March 31, 1999 (unaudited) and
September 30, 1998 and 1997, there were no advances outstanding on the line of
credit.

F-16

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

9. INCOME TAXES

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

SIX MONTHS ENDED
YEARS ENDED
MARCH 31, SEPTEMBER 30,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------

(UNAUDITED)
Current income tax provision:
Federal............................................. $ 335 $ 320 $ 661 $ 631 $ 662
State............................................... 32 23 30 82 131
--------- --------- --------- --------- ---------
367 343 691 713 793
--------- --------- --------- --------- ---------
Deferred income tax provision (benefit):
Federal............................................. 34 52 44 (28) (72)
State............................................... 12 18 15 (9) (26)
--------- --------- --------- --------- ---------
46 70 59 (37) (98)
--------- --------- --------- --------- ---------
Total provision for income taxes.................. $ 413 $ 413 $ 750 $ 676 $ 695
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------

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

SIX MONTHS ENDED
YEARS ENDED
MARCH 31, SEPTEMBER 30,
-------------------- -------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- --------- ---------

(UNAUDITED)
Statutory rate................................ 34.0% 34.0% 34.0% 34.0% 34.0%
Increase (decrease) resulting from:
State taxes, net of federal tax benefit..... 2.3 2.4 1.4 2.4 3.7
Dividends received deduction................ (3.0) (1.0) (1.2) (1.0) (0.8)
Contribution of appreciated stock........... -- -- -- (1.5) --
Other, net.................................. 0.1 1.2 2.2 0.2 0.1
--- --- --- --- ---
Effective tax rates....................... 33.4% 36.6% 36.4% 34.1% 37.0%
--- --- --- --- ---
--- --- --- --- ---

F-17

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

9. INCOME TAXES (CONTINUED)
The components of the net deferred tax asset (liability) are as follows:

SEPTEMBER 30,
MARCH 31, --------------------
1999 1998 1997
------------- --------- ---------

(UNAUDITED)
Deferred tax asset:
Federal....................................................... $ 526 $ 565 $ 590
State......................................................... 181 195 198
----- --------- ---------
707 760 788
----- --------- ---------
Deferred tax liability:
Federal....................................................... (436) (746) (391)
State......................................................... (141) (187) (107)
----- --------- ---------
(577) (933) (498)
----- --------- ---------
Net deferred tax asset (liability).............................. $ 130 $ (173) $ 290
----- --------- ---------
----- --------- ---------

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

SEPTEMBER 30,
MARCH 31, --------------------
1999 1998 1997
------------- --------- ---------

(UNAUDITED)
Employee benefit plans......................................... $ 280 $ 346 $ 364
Allowance for loan losses...................................... 409 397 386
Net unrealized gain on securities available for sale........... (387) (736) (332)
Depreciation and amortization.................................. (116) (125) (86)
Net deferred loan costs........................................ (46) (45) (32)
Other, net..................................................... (10) (10) (10)
----- --------- ---------
Net deferred tax asset (liability)............................. $ 130 $ (173) $ 290
----- --------- ---------
----- --------- ---------

A summary of the change in the net deferred tax asset (liability) is as
follows:

SIX MONTHS ENDED
MARCH 31, YEARS ENDED SEPTEMBER 30,
------------------------ -------------------------------
1999 1998 1998 1997 1996
------------- --------- --------- --------- ---------

(UNAUDITED)
Balance at beginning of period.......... $ (173) $ 290 $ 290 $ 450 $ 276
Deferred tax (provision) benefit........ (46) (70) (59) 37 98
Deferred tax effect on net unrealized
gain on securities available for
sale.................................. 349 (84) (404) (197) 76
----- --------- --------- --------- ---------
Balance at end of period................ $ 130 $ 136 $ (173) $ 290 $ 450
----- --------- --------- --------- ---------
----- --------- --------- --------- ---------

F-18

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

9. INCOME TAXES (CONTINUED)
There was no valuation reserve as of March 31, 1999 (unaudited) and
September 30, 1998 and 1997.

The federal income tax reserve for loan losses at the Bank's base year
amounted to approximately $2,420. If any portion of the reserve is used for
purposes other than to absorb loan losses, approximately 150% of the amount
actually used (limited to the amount of the reserve) would be subject to
taxation in the fiscal year in which used. As the Bank intends to use the
reserve to only absorb loan losses, a deferred income tax liability of
approximately $990 has not been provided.

10. MINIMUM REGULATORY CAPITAL REQUIREMENTS

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

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
to follow) of total and Tier 1 capital (as defined) to risk-weighted assets (as
defined). Management believes, as of March 31, 1999 and September 30, 1998 and
1997, that the Bank meets all capital adequacy requirements to which it is
subject.

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

F-19

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

10. MINIMUM REGULATORY CAPITAL REQUIREMENTS (CONTINUED)

The Bank's actual and minimum required capital amounts and ratios as of
March 31, 1999 (unaudited) and September 30, 1998 and 1997 are as follows:

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

MARCH 31, 1999:
(UNAUDITED)
Total capital (to risk weighted assets)............. $ 19,888 22.5% $ 7,076 8.0% $ 8,845 10.0%
Tier 1 capital (to risk weighted assets)............ 19,031 21.5 3,538 4.0 5,307 6.0
Tier 1 capital (to average assets).................. 19,031 11.7 4,892- 3.0- 8,154 5.0
8,154 5.0
SEPTEMBER 30, 1998:
Total capital (to risk weighted assets)............. $ 19,034 22.7% $ 6,697 8.0% $ 8,372 10.0%
Tier 1 capital (to risk weighted assets)............ 18,207 21.8 3,349 4.0 5,023 6.0
Tier 1 capital (to average assets).................. 18,207 12.0 4,562- 3.0- 7,603 5.0
7,603 5.0
SEPTEMBER 30, 1997:
Total capital (to risk weighted assets)............. $ 17,680 24.0% $ 5,907 8.0% $ 7,383 10.0%
Tier 1 capital (to risk weighted assets)............ 16,894 22.9 2,953 4.0 4,430 6.0
Tier 1 capital (to average assets).................. 16,894 11.9 4,247- 3.0- 7,078 5.0
7,078 5.0

11. EMPLOYEE BENEFIT PLANS

PENSION PLAN

The Bank provides basic and supplemental pension benefits for eligible
employees through the Savings Banks Employees Retirement Association ("SBERA")
Pension Plan. Each employee reaching the age of 21 and having completed at least
1,000 hours of service in one consecutive twelve-month period, beginning with
such employee's date of employment, automatically becomes a participant in the
retirement plan. All participants are fully vested after three years of service.

F-20

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

11. EMPLOYEE BENEFIT PLANS (CONTINUED)
Net periodic pension cost consists of the following:

PLAN YEARS ENDED
OCTOBER 31,
-------------------------------

1998 1997 1996
--------- --------- ---------
Service cost--benefits earned during year........................... $ 136 $ 108 $ 113
Interest cost on projected benefits................................. 125 119 113
Return on plan assets............................................... (127) (115) (100)
Net amortization and deferral....................................... 3 3 3
Amortization of net gain............................................ (20) (20) (2)
--------- --------- ---------
$ 117 $ 95 $ 127
--------- --------- ---------
--------- --------- ---------

Total pension expense for the six months ended March 31, 1999 and 1998
(unaudited) and the years ended September 30, 1998, 1997 and 1996 amounted to
$52, $54, $105, $110 and $109, respectively.

According to SBERA, the funded status of the plan is as follows:

OCTOBER 31,
--------------------

1998 1997
--------- ---------
Plan assets at fair value.................................................. $ 1,808 $ 1,594
Actuarial present value of projected benefit obligation (substantially all
vested).................................................................. (1,951) (1,727)
--------- ---------
Excess of projected benefit obligation over plan assets.................... (143) (133)
Unamortized net obligation since adoption of SFAS No. 87................... 37 40
Unrecognized net gain...................................................... (385) (413)
--------- ---------
Accrued pension cost....................................................... $ (491) $ (506)
--------- ---------
--------- ---------

The accumulated benefit obligation (substantially all vested) at October 31,
1998 (latest available) amounted to $1,081 which was less than the plan assets
at fair value which amounted to $1,808.

Actuarial assumptions used in accounting were:

1998 1997
--------- ---------

Discount rate on benefit obligations........................................... 7.25% 7.50%
Expected long-term rate of return on plan assets............................... 8.00 8.00
Annual salary increases........................................................ 6.00 6.00

INCENTIVE COMPENSATION PLAN

Management and employees of the Bank participate in an annual incentive
compensation plan which is based on a percentage of the Bank's annual net
profits (as defined) and other factors and objectives set forth and administered
by the Board of Investment. Incentive compensation expense for

F-21

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

11. EMPLOYEE BENEFIT PLANS (CONTINUED)
the six months ended March 31, 1999 and 1998 (unaudited) and the years ended
September 30, 1998, 1997 and 1996 amounted to $83, $44, $113, $128 and $102,
respectively.

401(K) PLAN

The Bank has a 401(k) Plan whereby each employee reaching the age of 21 and
having completed at least 1,000 hours of service in a twelve-month period,
beginning with date of employment, automatically becomes a participant in the
Plan. Employees may contribute up to 15% of their compensation subject to
certain limits based on federal tax laws. The Bank makes matching contributions
equal to 25% of the first 4% of an employee's compensation contributed to the
Plan. All participants are fully vested. For the six months ended March 31, 1999
and 1998 (unaudited) and the years ended September 30, 1998, 1997 and 1996,
expense attributable to the Plan amounted to $7, $6, $12, $10 and $8,
respectively.

SUPPLEMENTAL RETIREMENT PLANS

The Bank provides supplemental retirement benefits to certain executive
officers and trustees. In connection with the supplemental retirement plans, the
Bank has purchased life insurance contracts and has entered into split-dollar
life insurance agreements with certain participants.

12. COMMITMENTS AND CONTINGENCIES

In the normal course of business, there are outstanding commitments and
contingencies which are not reflected in the accompanying consolidated balance
sheets.

LOAN COMMITMENTS

The Bank is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, which involve
elements of credit and interest rate risk in excess of the amount recognized in
the accompanying consolidated balance sheets. The contract amount of these
instruments reflects the extent of involvement the Bank has in these particular
classes of financial instruments.

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

F-22

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
A summary of financial instruments whose contract amounts represent credit
risk consist of:

SEPTEMBER 30,
MARCH 31, --------------------
1999 1998 1997
----------- --------- ---------

(UNAUDITED)
Commitments to grant residential mortgage loans.............. $ 2,847 $ 2,787 $ 1,129
Commitments to grant construction loans...................... 1,081 1,182 405
Commitments to grant commercial mortgage loans............... 140 450 2,900
Unadvanced funds on home equity lines-of-credit.............. 5,180 5,362 3,705
Unadvanced funds on commercial lines-of-credit............... 970 736 581

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Unadvanced
funds on lines-of-credit have fixed expiration dates and may expire without
being drawn upon. Therefore, the total commitment amount does not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. Except for commercial lines-of-credit,
these financial instruments are secured by mortgage liens on real estate.

OPERATING LEASE COMMITMENTS

Pursuant to the terms of noncancelable lease agreements in effect at March
31, 1999 (unaudited) and September 30, 1998, pertaining to banking premises and
equipment, future minimum rent commitments are as follows:

MARCH 31, SEPTEMBER 30,
YEARS ENDING SEPTEMBER 30, 1999 1998
- ------------------------------------------------------------------ ------------- ---------------

(UNAUDITED)
1999.............................................................. $ 62 $ 82
2000.............................................................. 96 46
2001.............................................................. 55 6
2002.............................................................. 50 --
2003.............................................................. 50 --
Thereafter........................................................ 29 --
----- -----
$ 342 $ 134
----- -----
----- -----

The leases contain options to extend for periods from two to ten years. The
cost of such rentals is not included above. Total rent expense for the six
months ended March 31, 1999 and 1998 (unaudited) and the years ended September
30, 1998, 1997, and 1996 amounted to $47, $26, $73, $44 and $42, respectively.

During February 1999, the Bank entered into a lease agreement for a
supermarket branch office in Shrewsbury, Massachusetts. The office is scheduled
to open in May 1999. (Unaudited)

F-23

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
CONTINGENCIES

Various legal claims may arise from time to time and, in the opinion of
management, these claims will have no material effect on the Bank's consolidated
financial statements.

13. RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Bank has granted loans to its
Trustees. At March 31, 1999 (unaudited) and September 30, 1998 and 1997, the
amount of such loans, which exceeded $60 in the aggregate to each related party,
was approximately $374, $382 and $384, respectively. Such loans are made in the
ordinary course of business at the Bank's normal credit terms, including
interest rate and collateral requirements, and do not represent more than a
normal risk of collection.

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

CASH AND CASH EQUIVALENTS: The carrying amounts of cash and due from
banks, federal funds sold and short-term investments approximate fair value.

SECURITIES AVAILABLE FOR SALE: Fair values for securities available for
sale are based on quoted market prices, where available. If quoted market
prices are not available, fair values are based on quoted market prices of
comparable instruments.

FEDERAL HOME LOAN BANK STOCK: The carrying amount approximates fair
value.

LOANS: For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying values.
Fair values for other types of loans are estimated using discounted cash
flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. Fair values for
non-performing loans are estimated using discounted cash flow analyses or
underlying collateral values, where applicable.

DEPOSITS: The fair values for non-certificate accounts are, by
definition, equal to the amount payable on demand at the reporting date
(i.e., their carrying amounts). Fair values for certificate accounts are
estimated using a discounted cash flow calculation that applies interest
rates currently

F-24

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

14. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
being offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.

FEDERAL HOME LOAN BANK ADVANCES: The fair value is based upon the Bank's
current incremental borrowing rate for a similar advance.

ACCRUED INTEREST: The carrying amounts of accrued interest approximate
fair value.

OFF-BALANCE SHEET INSTRUMENTS: Fair values for off-balance sheet lending
com-mitments are based on fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and
the counterparties' credit standing. The estimated fair value of off-balance
sheet financial instruments at March 31, 1999 (unaudited) and September 30,
1998 and 1997, was immaterial.

The carrying amounts and related estimated fair values of the Bank's
financial instruments are as follows:

SEPTEMBER 30,
------------------------------------------

MARCH 31, 1999 1998 1997
---------------------- -------------------- --------------------

CARRYING FAIR CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE AMOUNT VALUE
----------- --------- --------- --------- --------- ---------
(UNAUDITED)

Financial assets:
Cash and cash equivalents............................ $ 13,581 $ 13,581 $ 12,441 $ 12,441 $ 7,910 $ 7,910
Securities available for sale........................ 63,205 63,205 59,345 59,345 60,937 60,937
Federal Home Loan Bank stock......................... 762 762 762 762 717 717
Loans, net........................................... 86,352 87,884 82,348 84,714 70,580 71,594
Accrued interest receivable.......................... 1,128 1,128 1,116 1,116 1,170 1,170

Financial liabilities:
Deposits............................................. 142,971 143,078 135,962 135,954 125,170 125,205
Federal Home Loan Bank advances...................... 4,000 3,793 2,000 2,000 -- --

15. PLAN OF REORGANIZATION (UNAUDITED)

On March 15, 1999, the Board of Trustees of Westborough Savings Bank voted
to reorganize from a Massachusetts chartered mutual savings bank into a mutual
holding company. Westborough Bancorp, MHC, will own more than half of an
intermediate stock holding company, Westborough Financial Services, Inc., which
in turn will own 100% of Westborough Savings Bank. The reorganization is subject
to approval by various state and federal regulatory banking agencies and the
Bank's Corporators.

As part of the Reorganization, the Bank will establish a liquidation account
for the benefit of eligible and supplemental eligible account holders. The
liquidation account will be reduced annually to the extent that such account
holders have reduced their qualifying deposits as of each anniversary date.
Subsequent increases will not restore an account holder's interest in the
liquidation account. In the event of a complete liquidation, each eligible
account holder will be entitled to receive balances for accounts held by them.

F-25

WESTBOROUGH SAVINGS BANK AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1999 AND 1998 (UNAUDITED) AND SEPTEMBER 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)

15. PLAN OF REORGANIZATION (UNAUDITED) (CONTINUED)
In addition, the Company/Bank intends to establish an Employees' Stock
Ownership Plan, a Stock Option Plan, a Management Recognition Plan, and enter
into employment agreements with certain officers.

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

Reorganization costs will be deferred and deducted from the proceeds of the
shares sold. If the Reorganization is not completed, all costs will be expensed.
As of March 31, 1999, no offering costs have been incurred.

F-26

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

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO
SELL, OR THE SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
WOULD BE UNLAWFUL. THE AFFAIRS OF WESTBOROUGH SAVINGS OR WESTBOROUGH FINANCIAL
SERVICES MAY CHANGE AFTER THE DATE OF THIS PROSPECTUS. DELIVERY OF THIS DOCUMENT
AND THE SALES OF SHARES MADE HEREUNDER DOES NOT MEAN OTHERWISE.

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

TABLE OF CONTENTS

PAGE
----

Summary................................................................... 3
Risk Factors.............................................................. 11
Selected Consolidated Financial and Other Data............................ 14
Westborough Savings Bank.................................................. 16
Westborough Financial Services, Inc....................................... 16
Westborough Bancorp, MHC.................................................. 16
How We Intend to Use the Proceeds from the Offering....................... 17
Our Policy Regarding Dividends............................................ 18
Market for the Common Stock............................................... 19
Regulatory Capital Compliance............................................. 20
Capitalization............................................................ 21
Pro Forma Data............................................................ 22
Westborough Savings Bank Consolidated Statements of Income................ 28
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 29
Business of Westborough Savings Bank...................................... 53
Business of Westborough Financial Services, Inc........................... 79
Regulation of Westborough Savings and Westborough Financial Services,
Inc...................................................................... 79
Taxation.................................................................. 95
the Reorganization and the Offering....................................... 110
Restrictions on Acquisition of Westborough Financial Services and
Westborough Savings...................................................... 132
Description of Capital Stock of Westborough Financial Services, Inc....... 138
Legal and Tax Opinions.................................................... 139
Experts................................................................... 140
Registration Requirements................................................. 140
Where You Can Find Additional Information................................. 140
Index to Financial Statements............................................. F-1

UNTIL THE LATER OF , 1999 OR 25 DAYS AFTER COMMENCEMENT OF THE
OFFERING, ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

UP TO 925,750 SHARES OF
COMMON STOCK

WESTBOROUGH FINANCIAL SERVICES, INC.
PROPOSED HOLDING COMPANY
FOR THE WESTBOROUGH BANK

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

PROSPECTUS

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

TRIDENT SECURITIES, INC.

[ ], 1999

THACHER PROFFITT & WOOD,
WASHINGTON, D.C.

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

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article VI, Section 6.7 of the Articles of Organization of Westborough
Financial Services, Inc. (the "Company") provides that any person involved in a
proceeding by reason of his or her position as a director, officer, employee or
agent of the Company or another corporation, partnership, joint venture, trust
or other enterprise, will be indemnified and held harmless to the fullest extent
allowed by the Massachusetts Business Corporation Law. Such persons are
indemnified against all expense, liability and loss caused by acts in good faith
and reasonably believed to be in the best interests of the Company. Proceedings
initiated by the indemnitee himself must be authorized by the Board of Directors
of the Company, except for suits brought to enforce a right to indemnification.
Section 6.7 further provides that the Company may maintain insurance to protect
itself and any director, officer, employee or agent against any expense, whether
or not the Company would have the power under the Massachusetts Business
Corporation Law to indemnify such person for the expense. Section 6.7
additionally grants the Company the right to execute independent indemnification
contracts on any terms not prohibited by law.

Article VI, Section 6.8 of the Company's Articles of Organization relieves
directors from personal liability for breaches of their fiduciary duties.
However, Section 6.8 does not eliminate or limit such liability (i) for any
breach of a director's duty of loyalty to the Company or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Sections 61 or 62 of Chapter 156B of
the General Laws of the Commonwealth of Massachusetts, or (iv) with respect to
any transaction from which the director derived an improper personal benefit.

Article XI of The Westborough Bank's (the "Bank") Bylaws provide that it
shall indemnify any person against whom an action is brought or threatened
because that person is or was a legal representative, director, officer,
employee or agent of the Bank, provided that such person acted in good faith in
the reasonable belief that such action was in, or not opposed to, the best
interest of the Bank.

Article VI of the Bylaws of Westborough, MHC (the "Mutual Company") provides
for indemnification of officers, corporators, trustees and employees for actions
taken in good faith and reasonably believed to be in the best interests of the
Mutual Company. Article VI also contains provisions on insurance and independent
indemnification contracts that are similar to the provisions of Section 6.7 of
the Company's Articles of Organization.

The Company is party to an Employment Agreement with each of Messrs. Joseph
F. MacDonough and John L. Casagrande (the "Senior Executives"). These Employment
Agreements provide for the Company to indemnify and insure the Senior Executives
against personal liability for acts or omissions in connection with service to
the Company or the Bank. The insurance coverage provided to the Senior
Executives is required to be of the same scope and on the same terms and
conditions as the coverage (if any) provided to other current or former officers
or directors of the Company and the Bank. The Company must also indemnify the
Senior Executives to the fullest extent and on the most favorable terms and
conditions that similar indemnification is offered to any current or former
director or officer of the Company, the Bank, or any subsidiary or affiliate
thereof.

II-1

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Massachusetts Division of Banks fees.............................. $ 5,000
SEC Registration Fees (1)......................................... 2,574
National Association of Securities Dealers filing fees............ 1,500
Printing, postage and mailing..................................... 40,000
Legal fees and expenses........................................... 200,000
Accounting fees and expenses...................................... 70,000
Appraiser's fees and expenses (including business plan)........... 40,000
Underwriter's fees and expenses (excluding counsel fees).......... 140,000
Underwriter's counsel fees and expenses........................... 30,000
Conversion agent fees and expenses................................ 5,000
Certificate printing.............................................. 1,500
Blue Sky fees and expenses (including fees of counsel)............ 5,000
Miscellaneous..................................................... 4,794
---------
Total....................................................... $ 545,780
---------
---------

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

(1) Actual expenses based upon the registration and sale of 925,750 shares each
at $10.00 per share. All other expenses are estimated.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

None.

ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:

(a) LIST OF EXHIBITS. (Filed herewith unless otherwise noted.)

EXHIBIT DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------

1.1 Engagement Letter, dated March 16, 1999, between Westborough Savings Bank and Trident Securities, Inc.

1.2 Form of Agency Agreement, between Westborough Savings Bank and Trident Securities, Inc.*

2.1 Plan of Reorganization from Mutual Savings Bank to Mutual Holding Company and Stock Issuance Plan of
Westborough Savings Bank

3.1 Articles of Organization of Westborough Financial Services, Inc.

3.2 Bylaws of Westborough Financial Services, Inc.

3.3 Articles of Organization of The Westborough Bank

3.4 Bylaws of The Westborough Bank

3.5 Charter of Westborough Bancorp, MHC

3.6 Bylaws of Westborough Bancorp, MHC

4.1 Articles of Organization of Westborough Financial Services, Inc. (See Exhibit 3.1)

4.2 Bylaws of Westborough Financial Services, Inc. (See Exhibit 3.2)

4.3 Form of Stock Certificate of Westborough Financial Services, Inc.

II-2

EXHIBIT DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------

5.1 Form of Opinion of Thacher Proffitt & Wood regarding legality of securities to be registered

8.1 Form of Opinion of Thacher Proffitt & Wood regarding federal tax matters*

8.2 Form of Opinion of Wolf & Company, P.C. regarding state and local tax matters*

8.3 Letter from RP Financial, LC. regarding subscription rights

10.1 Form of Employee Stock Ownership Plan of Westborough Financial Services, Inc.

10.2 Form of Benefit Restoration Plan of Westborough Financial Services, Inc.

10.3 Form of Employment Agreement, between Joseph F. MacDonough and Westborough Financial Services, Inc.

10.4 Form of Employment Agreement, between John L. Casagrande and Westborough Financial Services, Inc.

21.1 Subsidiaries of the Registrant

23.1 Consent of Thacher Proffitt & Wood (included in Exhibits 5.1 and 8.1 to this Registration Statement)

23.2 Consent of Wolf & Company, P.C.

23.3 Consent of RP Financial, LC.

24.1 Powers of Attorney (included in Signature Page of this Registration Statement)

27.1 Financial Data Schedule (only filed in electronic format)

99.1 Appraisal Report of RP Financial, LC.*

99.2 Draft marketing materials to be used in connection with the offering*

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

* To be filed by amendment.

(b) FINANCIAL STATEMENT SCHEDULES.

Consolidated financial statements of Westborough Savings Bank as of and
for the years ended September 30, 1997 and 1998 and as of and for the six
months ended March 31, 1999 (included in pp. F-1-F-33 of the Prospectus).

ITEM 28. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the agent at the
closing specified in the Agency Agreement, certificates in such denominations
and registered in such names as required by the agent to permit prompt delivery
to each purchaser.

The undersigned Registrant hereby undertakes that:

(1) 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.

(2) 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

In accordance with to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the town of Westborough, Commonwealth of Massachusetts, as of
June 4, 1999.

WESTBOROUGH FINANCIAL SERVICES, INC.

BY: /S/ JOSEPH F. MACDONOUGH
-----------------------------------------
Joseph F. MacDonough
PRESIDENT AND CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Joseph F. MacDonough and John L. Casagrande as
the true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities to sign the Form SB-2 Registration Statement and any and
all amendments thereto, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the U.S. Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.

II-4

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

NAME TITLE DATE
- ------------------------------ --------------------------- -------------------

Director, President and
/s/ JOSEPH F. MACDONOUGH Chief Executive Officer
- ------------------------------ (principal executive June 4, 1999
Joseph F. Macdonough officer) Joseph F.
MacDonough

/s/ JOHN L. CASAGRANDE Vice President and
- ------------------------------ Treasurer (principal June 4, 1999
John L. Casagrande accounting officer)

/s/ NELSON P. BALL Director
- ------------------------------ June 4, 1999
Nelson P. Ball

/s/ EDWARD S. BILZERIAN Director
- ------------------------------ June 4, 1999
Edward S. Bilzerian

/s/ DAVID E. CARLSTROM Director
- ------------------------------ June 4, 1999
David E. Carlstrom

/s/ WILLIAM W. COTTING, JR. Director
- ------------------------------ June 4, 1999
William W. Cotting, Jr.

/s/ ROBERT G. DANIEL Director
- ------------------------------ June 4, 1999
Robert G. Daniel

/s/ EARL H. HUTT Director
- ------------------------------ June 4, 1999
Earl H. Hutt

/s/ WALTER A. KINELL, JR. Director
- ------------------------------ June 4, 1999
Walter A. Kinell, Jr.

/s/ ROBERT A. KLUGMAN Director
- ------------------------------ June 4, 1999
Robert A. Klugman

/s/ ROGER B. LELAND Director
- ------------------------------ June 4, 1999
Roger B. Leland

/s/ PAUL F. MCGRATH Director
- ------------------------------ June 4, 1999
Paul F. Mcgrath

/s/ CHARLOTTE C. SPINNEY Director
- ------------------------------ June 4, 1999
Charlotte C. Spinney

/s/ PHYLLIS A. STONE Director
- ------------------------------ June 4, 1999
Phyllis A. Stone

/s/ JAMES E. TASHJIAN Director
- ------------------------------ June 4, 1999
James E. Tashjian

/s/ DANIEL G. TEAR Director
- ------------------------------ June 4, 1999
Daniel G. Tear

II-5