FIRST INTERNATIONAL BANCORP INC
S-1, 1997-07-15
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<PAGE>
 
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 15, 1997


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

                                   FORM S-1
                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
                          ___________________________


                       FIRST INTERNATIONAL BANCORP, INC.
            (Exact name of registrant as specified in its charter)
 

<TABLE> 
<S>                                <C>                           <C>     
       DELAWARE                               6711                  06-1151731
(State or other jurisdiction of    (Primary Standard Industrial  (I.R.S. Employer
incorporation or organization)     Classification Code Numbers)  Identification No.)
</TABLE>

                             ONE COMMERCIAL PLAZA
                              HARTFORD, CT 06103
                                (860) 727-0700
  (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)

                          _________________________              

                                BRETT N. SILVERS
                      CHAIRMAN OF THE BOARD AND PRESIDENT
                       FIRST INTERNATIONAL BANCORP, INC.
                              ONE COMMERCIAL PLAZA
                              HARTFORD, CT  06103
                                 (860) 727-0700
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)
                                        
                         _________________________

                                WITH COPIES TO:
<TABLE>
<S>                             <C>                                <C>
NEAL J. CURTIN, ESQ.            LESLIE A. GALBRAITH                JAMES R. TANENBAUM, ESQ.
BINGHAM, DANA & GOULD LLP        EXECUTIVE VICE PRESIDENT,         STROOCK & STROOCK & LAVAN LLP                            
150 FEDERAL STREET              SECRETARY AND TREASURER            180 MAIDEN LANE              
BOSTON, MA 02110                FIRST INTERNATIONAL BANCORP, INC.  NEW YORK, NY  10038          
(617) 951-8437                  ONE COMMERCIAL PLAZA               (212) 806-5400               
FACSIMILE NO. (617) 951-8736    HARTFORD, CT  06103                FACSIMILE NO. (212) 806-6006  
                                (860) 241-2529                     
                                FACSIMILE NO. (860) 525-1220
 </TABLE>
 
       _________________________________________________________________

     Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.

     If the only securities being registered on this form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_] 


     If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [_]

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [_]  

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_] 

                          _________________________   

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
======================================================================================================================             
                                                                          PROPOSED                                                 
                                                        PROPOSED          MAXIMUM                                                  
                                      AMOUNT            MAXIMUM          AGGREGATE          AMOUNT OF                              
 TITLE OF EACH CLASS OF               TO BE         OFFERING PRICE        OFFERING       REGISTRATION FEE                          
 SECURITIES TO BE REGISTERED       REGISTERED(1)     PER SHARE(2)         PRICE(2)                                                 
 ---------------------------------------------------------------------------------------------------------------------             
<S>                               <C>               <C>                <C>               <C>                                       
Common Stock,                                                                                                                      
par value $0.10 per               [1,955,000]       $[12.00]           $[23,460,000]     $[7,115]                                  
share..................                                                                                                            
======================================================================================================================             
</TABLE>

(1) Includes 255,000 shares subject to the Underwriters' over-allotment option.
    See "Underwriting."
(2) Estimated solely for the purpose of calculating the registration fee in
    accordance with Rule 457 under the Securities Act of 1933, as amended.

                          _________________________      

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
 
                   SUBJECT TO COMPLETION - DATED _____, 1997
PROSPECTUS

- --------------------------------------------------------------------------------
                               1,700,000 SHARES

                   [LOGO] FIRST INTERNATIONAL BANCORP, INC.

                                 COMMON STOCK                                 
- --------------------------------------------------------------------------------

All of the 1,7000,000 shares of common stock, par share (the "Common Stock"),
offered hereby (the "Offering") are being sold by First International Bancorp,
Inc. (the "Company").

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

SEE "RISK FACTORS" ON PAGES 15 TO 21 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON
STOCK OFFERED HEREBY.

________________________________________________________________________________

 THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES 
  AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION NOR HAS THE 
   SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION 
       PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY 
            REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
                               
<TABLE>
<CAPTION> 
================================================================================
                                               UNDERWRITING
                                   PRICE TO    DISCOUNTS AND      PROCEEDS TO
                                   PUBLIC      COMMISSIONS(1)     COMPANY (2)
- --------------------------------------------------------------------------------
<S>                                <C>         <C>                <C>
PER SHARE....................        $               $                 $
- --------------------------------------------------------------------------------
TOTAL(3).....................        $               $                 $
================================================================================
</TABLE>

(1)  THE COMPANY HAS AGREED TO INDEMNIFY THE SEVERAL UNDERWRITERS AGAINST
     CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF
     1933.  SEE "UNDERWRITING."
(2)  BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED TO BE [$   ].
(3)  THE COMPANY HAS GRANTED THE UNDERWRITERS A 30-DAY OVER-ALLOTMENT OPTION TO
     PURCHASE UP TO 255,000 ADDITIONAL SHARES OF THE COMMON STOCK ON THE SAME
     TERMS AND CONDITIONS AS SET FORTH ABOVE.  IF ALL SUCH ADDITIONAL SHARES ARE
     PURCHASED BY THE UNDERWRITERS, THE TOTAL PRICE TO PUBLIC WILL BE [$   ], 
     THE TOTAL UNDERWRITING DISCOUNTS AND COMMISSIONS WILL BE $[___] AND
     THE TOTAL PROCEEDS TO COMPANY WILL BE [$   ].  SEE "UNDERWRITING."

________________________________________________________________________________



THE SHARES OF COMMON STOCK ARE OFFERED BY THE SEVERAL UNDERWRITERS SUBJECT TO
DELIVERY BY THE COMPANY AND ACCEPTANCE BY THE UNDERWRITERS, TO PRIOR SALE AND TO
WITHDRAWAL, CANCELLATION OR MODIFICATION OF THE OFFER WITHOUT NOTICE.  DELIVERY
OF THE SHARES TO THE UNDERWRITERS IS EXPECTED TO BE MADE AT THE OFFICE OF
PRUDENTIAL SECURITIES INCORPORATED, ONE NEW YORK PLAZA, NEW YORK, NEW YORK, ON
OR ABOUT _________, 1997.



PRUDENTIAL SECURITIES INCORPORATED            KEEFE, BRUYETTE & WOODS, INC.


    ,1997

     [RED-HERRING LANGUAGE - TO BE PLACED ON BINDER OF INITIAL PROSPECTUS]
[INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.]
<PAGE>
 
                       FIRST INTERNATIONAL BANCORP, INC.
                            THROUGH ITS SUBSIDIARY
                 FIRST NATIONAL BANK OF NEW ENGLAND (R) [LOGO]
                   FINANCING MANUFACTURERS WORLDWIDE /(SM)/



                                   [PICTURE]


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

                          __________________________

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

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

                                  THE COMPANY

    Overview

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

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

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

- --------------------------------------------------------------------------------
<PAGE>
 
- --------------------------------------------------------------------------------
    As of March 31, 1997, the Company had total assets of $162.2 million, total
balance sheet loans of $122.4 million, total deposits of $143.7 million and
total stockholders' equity of $15.1 million.  The Company had a total commercial
and international loan servicing portfolio of $344.6 million at December 31,
1996 which increased 9% to $376.6 million at March 31, 1997.  The total
portfolio serviced for investors increased 56% from $98.7 million at December
31, 1994 to $153.9 million at December 31, 1995, increased 73% to $265.8 million
at December 31, 1996 and increased 7% to $284.0 million at March 31, 1997. Net
income for the year ending December 31, 1996 was $3.2 million, and return on
average assets and return on average equity were 2.1% and 25.5%, respectively.
Net income for the quarter ending March 31, 1996 was $754,000 and increased 33%
to $1.0 million at March 31, 1997. As of March 31, 1997, the Bank was "well-
capitalized" for federal bank regulatory capital adequacy purposes.

    Loan Originations

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

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

    The Company's International Banking Department underwrites Ex-Im Bank
guaranteed loans to small and medium size manufacturers located throughout the
United States and in eight "Big Emerging Markets."  See "Business--International
Banking Services and Products."  International lending activities support trade
flows between the United States and the "Big Emerging Markets," which have grown
12% annually since 1990 and reached $473 billion in 1996.  The Company's
international lending teams operate from the Hartford, Connecticut headquarters
and are assisted in their efforts by contractual international marketing
representatives who are actively involved in providing financial, accounting,
consulting and/or engineering services to manufacturers in their home countries.
Contractual marketing arrangements have been established with professionals in
Brazil, Mexico, Poland, Turkey and India.  The Company began lending
internationally in 1994 and has increased its loan originations from $397,000 in
1994 to $1.8 million in 1995, $13.6 million in 1996 and $11.4 million for the
quarter ended March 31, 1997.

- --------------------------------------------------------------------------------
<PAGE>
 
- --------------------------------------------------------------------------------
    Underwriting

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

    Loan Sales

    The Company achieves high returns while meeting the growing credit needs of
its target market by selling a portion of its commercial and international loans
on a non-recourse, servicing-retained basis.  A separate Capital Markets
Department was established in 1996 to sell loans, including commercial and
international loans without federal guarantees.  The Capital Markets Department
directs its resources toward identifying non-government guarantee secondary loan
markets as a further means of mitigating credit risk, leveraging capital and
replenishing liquidity.  As of March 31, 1996, $10.8 million, or 6%, of the loan
portfolio serviced for investors did not have government guarantees or credit
enhancements compared to $49.2 million, or 17%, of such servicing portfolio as
of March 31, 1997.

    Deposits

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

    Strategy

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

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

- --------------------------------------------------------------------------------
<PAGE>
 
- --------------------------------------------------------------------------------


                                 THE OFFERING

Common Stock Offered Hereby........................... 1,700,000 shares
Common Stock to be outstanding after the Offering..... 7,474,052 shares (1)
Use of Proceeds....................................... The Company intends to
                                                       use the net proceeds from
                                                       the Offering to support
                                                       and expand the Company's
                                                       international and
                                                       domestic financial
                                                       activities.  A majority
                                                       of the proceeds will be
                                                       contributed to the Bank
                                                       for such purposes.  See
                                                       "Use of Proceeds."
Proposed Nasdaq National Market symbol................ FNCE
Risk Factors.......................................... Investors should
                                                       consider the risk factors
                                                       involved in connection
                                                       with an investment in
                                                       the Common Stock offered
                                                       hereby and the impact to
                                                       stockholders from various
                                                       events which could
                                                       adversely affect the
                                                       Company's business.  See
                                                       "Risk Factors."


__________________

(1)  Excludes 1,017,506 shares of Common Stock reserved for issuance under the
Company's stock option plans, of which 576,965 shares were subject to
outstanding options as of the date hereof.  See "Capitalization;" "Management -
Stock Option Plans" and "Shares Eligible for Future Sale."

 
 

- --------------------------------------------------------------------------------
 
<PAGE>
 
                      SUMMARY CONSOLIDATED FINANCIAL DATA
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                   FOR THE THREE
                                                FOR THE YEARS ENDED DECEMBER 31,               MONTHS ENDED MARCH 31,
                                         ---------------------------------------------        ------------------------
                                         1992      1993     1994      1995      1996              1996        1997
                                         ----      ----     ----      ----      ----              ----        ----
                                                                                                    (UNAUDITED)
<S>                                     <C>       <C>      <C>       <C>       <C>            <C>          <C>
INCOME STATEMENT DATA:
    Net interest income..............   $ 3,659   $ 3,668  $ 4,847   $ 6,732   $ 7,564        $ 1,840      $ 1,800
    Provision for possible
      loan losses....................    (1,773)   (2,225)  (1,683)   (1,237)   (3,487)          (349)        (368)
                                        -------   -------  -------   -------   -------        -------      -------
    Net interest income after
      provision  for possible
      loan losses....................     1,886     1,443    3,164     5,495     4,077          1,491        1,432

    Non-interest income:
    Service charges and other
      deposit fees...................       386       484      385       398       424            122           90
    Loan servicing income and
      fees...........................       164       288      493       896     1,475            270          527
    Gain on loan sales:
    SBA guaranteed...................     1,133     2,258    2,577     1,570     3,558          1,064        1,039
    USDA guaranteed..................         -         -      136       822       805            121          532
    Ex-Im working capital
      guaranteed.....................         -         -        -       104       201              7           21
    Ex-Im medium term
      guaranteed.....................         -         -        -       248       340             60          453
    Unguaranteed portions of
      SBA and USDA...................         -         -        -         -       842              -            -
    Other commercial.................         -         -        -        97        91              8          121
    Residential......................       113       153       17        18         7              1           56
                                        -------   -------  -------   -------   -------        -------      -------
    Total gain on loan sales.........     1,246     2,411    2,730     2,859     5,844          1,261        2,222
                                        -------   -------  -------   -------   -------        -------      -------
    Gain on branch sale..............         -         -        -         -     2,202              -            -
    Gain on securities...............       230       392        _         _         _              -            _
                                        -------   -------  -------  --------   -------        -------      -------
    Total non-interest income........     2,026     3,575    3,608     4,153     9,945          1,653        2,839
                                        -------   -------  -------   -------   -------        -------      -------

    Operating expenses...............    (3,756)   (4,576)  (5,129)   (6,128)   (8,425)        (1,809)      (2,496)
                                        -------   -------  -------   -------   -------        -------      -------

    Income before income taxes.......       156       442    1,643     3,520     5,597          1,335        1,775
    Provision for income taxes.......       (48)     (137)    (583)   (1,494)   (2,353)          (581)        (763)
                                        -------   -------  -------   -------   -------        -------      -------

    Net income.......................      $108      $305  $ 1,060    $2,026   $ 3,244           $754       $1,012
                                        =======   =======  =======   =======   =======        =======      =======
</TABLE>
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                                           AS OF
                                                          AS OF DECEMBER 31,                             MARCH 31,
                                           ------------------------------------------------           ----------------
                                           1992      1993       1994      1995         1996           1996        1997
                                           ----      ----       ----      ----         ----           ----        ----
                                                                                                        (UNAUDITED)
<S>                                  <C>          <C>        <C>        <C>          <C>           <C>         <C>
BALANCE SHEET DATA:
  Total assets....................     $105,663   $109,735   $125,609   $141,223     $161,642      $155,875    $162,173
  Loans:
    SBA...........................        4,928     11,324     29,939     37,873       31,692        43,556      36,617
    USDA..........................            -          -        535      3,265        3,211         4,671       3,879
    Ex-Im working capital.........            -          -          -        184        3,419           247       2,345
    Ex-Im medium term.............            -          -        153        120        2,067           100      12,155
    Other commercial..............       22,689     20,077     20,544     28,826       33,713        31,699      34,642
    Commercial mortgage...........        8,346     13,911     16,238     15,518       18,808        18,182      18,113
    Investment property
      mortgage....................       10,942      9,610      9,396      7,698        7,620         6,772       6,477
    Residential and other
      consumer....................       15,043     16,491     18,313     13,508       14,097        13,726       8,181
                                       --------   --------   --------   --------     --------      --------    --------

  Total loans.....................       61,948     71,413     95,118    106,992      114,627       118,953     122,409

Total cash and cash equivalents...       11,190     11,612      7,585     10,050       18,867        12,019      11,074
Total investment securities.......       26,015     19,727     13,981     11,631       15,874        10,617      16,130

Core deposits (1).................       51,911     63,719     76,622    104,379      105,414       107,015     107,285
Time deposits.....................       41,573     32,068     35,227     23,982       38,902        35,134      36,453
                                         ------     ------     ------     ------       ------        ------      ------
Total deposits....................       93,484     95,787    111,849    128,361      144,316       142,149     143,738

Total stockholders' equity........        8,518      8,823      9,675     11,602       14,216        12,224      15,067
</TABLE>

________________________
(1)  Represents checking and savings accounts.
<PAGE>
 
<TABLE>
<CAPTION>
   
                                                                                                               FOR THE  THREE
                                                    FOR THE YEARS ENDED DECEMBER 31,                        MONTHS ENDED MARCH 31,
                                            -----------------------------------------------------------    -----------------------

                                             1992         1993         1994         1995         1996         1996         1997
                                            -----         -----        -----       -----         ------      ------       -----
<S>                                       <C>          <C>          <C>          <C>          <C>          <C>          <C>
PER COMMON SHARE DATA:                                                                                           (unaudited)
   Net income per
   common share (2)....................   $     0.02   $     0.06   $     0.18   $     0.34   $      .54   $     0.13   $     0.17
   Book value per common share            $     1.63   $     1.69   $     1.84   $     2.19   $     2.63   $     2.30   $     2.77
   Average weighted shares (2).........    5,430,786    5,430,786    5,739,871    5,981,861    5,969,027    5,958,205    5,976,671
   Dividend payout ratio (2) (3).......            -            -            -         8.44%       21.03%       22.59%       16.89%

PERFORMANCE RATIOS:
   Net interest spread (4).............         3.61%        3.55%        4.35%        4.82%        4.79%        5.18%        4.15%
   Net interest margin (4)(5)..........         4.05%        3.97%        4.68%        5.56%        5.48%        5.75%        5.03%
   Return on average equity (4)........         1.30%        3.58%       11.70%       19.31%       25.49%       25.54%       28.28%
   Return  on average assets (4).......         0.11%        0.30%        0.93%        1.51%        2.06%        2.03%        2.53%
   Efficiency ratio (6)................        66.07%       63.18%       60.66%       56.29%       55.04%       51.79%       53.81%

ASSET QUALITY RATIOS:
   Allowance for loan losses as a
     percentage of loans...............         0.81%        2.00%        2.10%        1.87%        2.62%        1.68%        2.25%
   Allowance for loan losses as
     a percentage of non-performing
      loans............................            -       188.60%       89.06%      158.93%      133.23%      150.38%      111.01%
   Net charge-offs as a percentage of
     average outstanding loans (4).....         5.35%        1.97%        1.38%        1.24%        2.12%        0.51%        2.14%
   Total losses as a percentage of
     average outstanding loans serviced
      (4)(7)...........................         3.60%        1.16%         .69%        1.18%        1.33%         .23%        1.35%
   Provision for loan losses as
     a percentage  of average
     outstanding loans(4)..............         2.79%        3.38%        2.09%        1.24%        2.97%        1.25%        1.27%

CAPITAL RATIOS:
   Total capital (to
     risk-weighted assets).............        11.64%       10.77%        9.28%       10.73%       11.62%       10.12%       10.59%
   Tier 1 capital (8)
     (to risk-weighted assets).........        12.34%       12.03%       11.27%        9.47%       10.36%        8.87%        9.34%
   Tier 1 capital
     (to average assets)...............         8.21%        7.96%        7.87%        7.71%        8.44%        7.61%        8.69%

   Equity to assets ratio(9)...........         8.31%        8.33%        7.93%        7.84%        8.08%        7.97%        8.93%
 </TABLE>

________________________________________
(2)    Includes common stock equivalents associated with any Company stock
       options issued one year prior to the expected public offering date of
       September 1997. In accordance with Staff Accounting Bulletin Topic 4-D,
       for all periods presented, the effect of such equivalents was computed
       under the treasury stock method, assuming the repurchase of such options
       by the Company at an assumed offering price of $12.00 per share.
(3)    Represents cash dividends paid per share as a percentage of net income
       per share.
(4)    Annualized for the three month periods.
(5)    Calculated as the differential between interest income and interest
       expense as a percentage of average interest-bearing assets during the
       period presented.
(6)    Amount reflects non-interest expense as a percentage of net interest
       income plus non-interest income and excludes the gain on the branch sale
       for the year ended December 31, 1996.
(7)    Amount reflects the Company charge-offs on portfolio loans plus amounts
       paid by government guarantee agencies pursuant to guarantees on loans
       serviced by the Company, as a percentage of total loans serviced.
(8)    The Company's Tier 1 capital includes common equity, less goodwill and
       any disallowed intangibles.
(9)    Represents average equity as a percentage of average assets.
<PAGE>
 
<TABLE>
<CAPTION>
 
                                                                                             FOR THE THREE MONTHS 
                                         FOR THE YEARS ENDED DECEMBER 31,                        ENDED MARCH 31,
                                 ------------------------------------------------       --------------------------------
                                                                                                      (UNAUDITED)
                                      1992    1993     1994     1995      1996                1996               1997
                                   -------   -------  -------  -------  --------             ------             ------
<S>                                <C>       <C>      <C>      <C>      <C>                 <C>                <C> 
OPERATING DATA:
  Commercial Loan originations
  and sales:
    SBA loan originations........   $17,202  $28,879  $58,753  $37,522  $ 85,303            $25,562            $23,152
    SBA guaranteed loan
      sales......................    13,731   21,659   39,607   27,413    58,878             16,913             16,523   
    SBA unguaranteed loan
      sales......................         -        -        -        -    29,867                  -                  -       
 
    USDA loans originations......         -        -    2,825   19,241    12,700              2,080              7,479
    USDA guaranteed loan                  -        -    2,260   14,984    10,199              1,664              5,983         
      sales......................
    USDA unguaranteed loan                  
      sales......................         -        -        -        -     3,207                  -                  - 
 
    Ex-Im working capital
      loan originations..........         -        -        -    6,882    23,300              1,000              1,365
    Ex-Im working capital
      loan sales.................         -        -        -    2,632     8,614                447                758             

    Ex-Im medium term
      loan originations..........         -        -      397    1,814    13,617                451             11,429
    Ex-Im medium term
      loan sales.................         -        -      245    1,814    12,745                451             11,429 
 
    Other commercial loan
      sales......................         -        -        -    8,843     9,329              2,100              4,158
 
    Total commercial loan 
      sales......................   $13,731  $21,659  $42,112  $55,686  $132,839            $21,575            $38,851

  Commercial loans serviced
        for the Bank and others
        (at period end)..........   $66,631  $95,501 $157,557 $226,294  $344,622           $258,608           $376,566
</TABLE>

<PAGE>
 
                                 RISK FACTORS

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

    RISKS ASSOCIATED WITH GOVERNMENT GUARANTEE LOAN PROGRAMS.  A substantial
portion of the Company's business depends upon the continuation of various
government guarantee loan programs, such as the SBA, USDA and Ex-Im Bank loan
guarantee programs.  Of the total loans originated by the Company during the
year ended December 31, 1996 and the three months ended March 31, 1997,
approximately 73% and 84% by principal amount, respectively, were SBA loans,
USDA loans or Ex-Im Bank loans.  There can be no assurance that guarantee
programs currently used by the Company will continue to be available in their
present form.  The ongoing federal budget debate has included discussions about
the role and relevance of the loan guarantee programs used by the Company.  The
SBA experienced funding crises in 1993, 1994 and 1995 which impeded the Company
and other lenders from using the agency's programs consistently within their
intended guidelines.  In 1995, Congressional inaction on the budget closed the
SBA and Ex-Im Bank for 22 days.

    In May 1997, the SBA mistakenly projected a funding shortfall for the fiscal
year ended September 30, 1997 but corrected its prognosis after 30 days.  The
USDA has suggested that its Business and Industry Program (the "B and I
Program") will have a funding shortfall for the current federal fiscal year
ended September 30, 1997.  However, the USDA is currently evaluating alternative
sources of funds.

    The Ex-Im Bank charter is currently being evaluated by the federal
government for renewal, and while the Company believes renewal is likely, this
renewal process has prompted discussion concerning the continued relevance and
appropriate funding level for such a program.  The Company believes that the Ex-
Im Bank small business programs will be fully funded for the current fiscal
year.  Approximately 20% and 25% of the Company's originations were made under
Ex-Im Bank programs for the year ended December 31, 1996 and the three months
ended March 31, 1997, respectively.

    Any material increase in government guarantee loan program costs, reduction
in government risk coverage, or decrease in program availability may have a
material adverse impact on the Company's financial condition and results of
operations.
<PAGE>
 
    ABILITY OF THE COMPANY TO CONTINUE ITS GROWTH STRATEGY.  The Company has
achieved recent growth and profitability in its operations by following a non-
traditional operating strategy.  The Company derives a majority of its revenues
from non-interest income, principally gains on the sale of commercial and
international loans and related loan servicing income.  Such loan-related non-
interest income increased 92%, from $3.8 million in 1995 to $7.3 million in
1996, and 80% from the three months ended March 31, 1996 to the three months
ended March 31, 1997 as the Company originated and sold an increasing number of
loans on a servicing-retained basis.  Historical growth rates are not
necessarily indicative of future results, and it may become more difficult for
the Company to maintain historical rates of growth as it expands.  The Company's
ability to implement its strategy for continued growth of its commercial and
international loan origination and sale activities largely depends on its
ability to attract and retain new clients for the Company's services in a
competitive market and on the business growth of those clients.  This will
require the Company to achieve a greater share of its existing markets as well
as to successfully expand into new geographic markets, potentially requiring
additional personnel, new offices or new marketing representatives which could
affect the Company's profitability.  Moreover, as part of its growth strategy,
the Company expects to increase originations of non-government guarantee loans,
including international loans, which may result in increased credit and other
business risks associated with lending.  A significant loss in these activities
could have a material adverse effect on the Company's financial condition and
results of operations.  See "Business--Business Strategy."

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

    Realization of the servicing asset is subject to the prepayment and loss
characteristics of the underlying loan.  Estimates of prepayment rates are made
based on management's expectations of future prepayment rates, which are based,
in part, on the historic performance of the Company's loans and other
considerations.  No assurance can be given that management's estimates are
accurate.  If actual prepayments occur more quickly than management's estimates,
the carrying value of the servicing asset may have to be written down.
Furthermore, there is no active market for such servicing assets and, in some
cases, the Company is contractually prohibited from selling such servicing
rights and, therefore, there is no assurance that the Company would be able to
sell the servicing assets at their stated balance sheet values.  See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Accounting for Loan Sales."
<PAGE>
 
    ECONOMIC CONDITIONS; GEOGRAPHIC CONCENTRATION.  All of the Company's present
domestic lending activity is focused within the Northeast, and although the
Company's lending activity has recently expanded throughout the Northeast, there
remains a significant lending concentration in the State of Connecticut.  The
Company believes that certain parts of the Northeast have emerged more slowly
from the 1989-1992 recession than other areas of the country.  The Northeast has
been characterized as a region with certain economic risks, including higher
"embedded" costs of doing business, including higher taxes, fluctuating real
estate values and the declining importance of manufacturing as the key industry
in the region.  Although some of the Company's borrowers have diversified their
businesses from exclusive reliance on this region, continued economic
sluggishness in the Northeast combined with uncompetitive economic and
regulatory conditions, may limit the Company's ability to operate profitably.
Consequently, the Company has begun to expand its business beyond the Northeast;
however, there can be no assurance that local, regional, national and
international economic conditions affecting the supply of and demand for U.S.
manufactured products would not adversely affect the Company's profitability in
the future.  The Company's business may be adversely affected by periods of
economic slowdown or recession in the geographic markets served by the Company
which could negatively impact the Company's ability to attract and retain
deposits and originate loans, the ability of the Company's borrowers to repay
loans, the value of any collateral securing such loans, and consequently, the
financial condition and results of operations of the Company.  See "Business--
Loan Originations."

    COMMERCIAL LENDING RISKS.  At March 31, 1997, the Company's outstanding loan
portfolio was $122 million, of which commercial loans represented 93%, exposing
the Company to risks inherent in financing based upon analyses of credit risk,
including risks associated with the value of underlying collateral, especially
real estate, the adequacy of the documentation relating to such collateral and
other more intangible factors considered in making commercial loans.  Although
the Company provides an allowance for loan losses, the Company's profitability
may be negatively impacted by errors in risk analyses and by loan defaults.
Furthermore, the ability of certain borrowers to repay such loans may be
adversely affected by any downturn in general economic conditions.  Furthermore,
a decrease in pledged collateral value could occur due to changes in equipment
resale market conditions, the failure by users of collateral to properly
maintain and protect such other collateral or other events.  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

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

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

    POTENTIAL FOR POLITICAL AND ECONOMIC INSTABILITY IN FOREIGN MARKETS.  An
increasingly significant aspect of the Company's business focuses on borrowers
located in Mexico, Brazil, Turkey, India, Poland, Argentina, South Africa and
Indonesia.  These originations represented 7% and 22% of total loans originated
by the Company for the year ended December 31, 1996 and the three months ended
March 31, 1997, respectively.  The majority of such loans have been made to
borrowers in Brazil.  In these countries, some creditworthy middle market
borrowers have experienced difficulty in obtaining competitively priced
financing from their often unstable local financial services sectors.  To
varying degrees, each of these countries has experienced economic difficulties,
including periods of slow or negative growth, large government budget deficits,
high inflation, currency devaluation, government influence over the private
sector and unavailability of foreign exchange, including U.S. dollars.  Some of
these countries have a history of political and economic instability.  The
Company depends, to a significant extent, on the marketing efforts of foreign
professionals with whom the Company has established contractual relationships
for foreign loan origination.  Serious economic downturns or a return to non-
democratic forms of government in one or more of these countries, particularly
Brazil, could limit the ability of these foreign representatives as well as the
Company to effectively market the Company's loan and other products, thus
reducing the ability of the Company to originate international loans and
adversely affecting the Company's financial condition and results of operations.
See "Business--International Banking Services and Products."

    DEPENDENCE ON MARKETING REPRESENTATIVES.  The Company has contractual
marketing arrangements with various professional firms or individuals in its
targeted foreign markets for local solicitation and coordination of Ex-Im Bank
medium term loans.  There can be no assurance that these professionals will
continue to work on behalf of the Company, rather than with local or U.S.
<PAGE>
 
competitors.  In 1996, loan originations and related gains on loan sales from
such sources represented 10% of pre-tax income, excluding the non-recurring
branch sale gain, and such amounts represented 26% of pre-tax income for the
three months ended March 31, 1997.  International loan originations are expected
to represent an increasingly higher proportion of the Company's income in future
periods.  Accordingly, the loss of such marketing representatives could have a
material impact on the volume of Ex-Im Bank medium term loans originated and a
resulting material adverse effect on the Company's financial condition and
results of operations.  See "Business--International Banking--Big Emerging
Markets."

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

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

    CONCENTRATED OWNERSHIP INTEREST AND POSSIBLE EFFECT.  Following consummation
of the Offering, the Company's executive officers, directors and certain other
stockholders (the "Principal Owners") will beneficially own approximately 64.21%
of the outstanding shares of Common Stock (approximately 62.09% of such shares
of Common Stock if the Underwriters' over-allotment option is exercised in full)
(assuming no exercise of any outstanding stock options).  Accordingly, the
Principal Owners will be able to control the outcome of all matters required to
be submitted to the stockholders of the Company for approval, including
decisions relating to the election of the Board of Directors of the Company, the
determination of the day-to-day corporate and management
<PAGE>
 
policies of the Company. The Principal Owners will also be able to control the
outcome of any proposed merger or consolidation of the Company under applicable
Delaware law. In addition, the Principal Owners' significant ownership interest
in the Company may discourage third parties from seeking to acquire control of
the Company which may adversely affect the market price of the Common Stock. See
"Management;" "Principal Stockholders;" and "Description of Capital Stock--
Delaware Law and Certain Charter and By-Law Provisions."

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

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

    NO PRIOR TRADING MARKET; VOLATILITY OF STOCK PRICE.  Prior to the Offering,
there has been no public market for the Common Stock and there can be no
assurance that an active trading market will develop or be sustained after the
Offering or that if such a market develops, the market price will not decline
below the public offering price.  The public offering price of the Common Stock
will be determined through negotiations between the Company and the
Representatives (as defined) of the Underwriters, and may not be indicative of
future market prices.  See "Underwriting."  Among the factors to be considered
in making such a determination will be an assessment of the Company's results of
operations, an evaluation of the Company's management, the future prospects of
the Company and its industry in general, relative price to earnings and book
value ratios of securities of companies engaged in activities similar to those
of the Company, and the prevailing conditions in the securities market.  The
market price of the Common Stock could be subject to wide fluctuations in
response to quarter-to-quarter variations in operating results of the Company or
its competitors, changes in earnings estimates by analysts or changes in general
economic conditions.
 
    SHARES ELIGIBLE FOR FUTURE SALE.  Upon completion of the Offering, the
Company will have 7,474,052 shares of Common Stock outstanding (7,729,052 shares
if the Underwriters' over-allotment option is exercised in full), 2,353,806
shares (2,608,806 shares if the Underwriters' over-allotment option is exercised
in full) of which will be freely tradeable without restriction or the
requirement of future registration under the Securities Act of 1933, as amended
(the "Securities Act").  All of the remaining 5,120,248 shares of Common Stock
are either "restricted securities" as defined by Rule 144 promulgated under the
Securities Act or are held by persons who may be deemed "affiliates" of the
Company.  Of such shares, 289,459 shares will be eligible for sale without
restriction and without lock-up agreement in the public market immediately
following commencement of the Offering and 32,200 shares will become eligible
for sale without restriction 90 days following commencement of the Offering.
<PAGE>
 
    Certain of the Company's officers, directors and stockholders, owning upon
completion of the Offering, in the aggregate ___________ shares of Common Stock,
have agreed that they will not, subject to certain exceptions, for a period of
180 days from the date of this Prospectus, directly or indirectly, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or other capital stock of the Company or any
securities convertible into, or exercisable or exchangeable for, any shares of
Common Stock, or other capital stock of the Company without the prior written
consent of Prudential Securities Incorporated on behalf of the Underwriters.
Further, holders of outstanding stock options for, in the aggregate, an
additional ____________ shares of Common Stock are subject to 180 day lock-up
agreements with the Company and/or Prudential Securities Incorporated on behalf
of the Underwriters. The Company has agreed that it will not, for a period of
180 days from the date of this Prospectus, directly or indirectly, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or other capital stock of the Company or any
securities convertible into, or exercisable or exchangeable for, any shares of
Common Stock, or other capital stock of the Company without the prior written
consent of Prudential Securities Incorporated, on behalf of the Underwriters,
except that such agreement does not prevent the exercise of outstanding options
or the Company from granting additional options under the Company's stock option
plans. Prudential Securities Incorporated may, in its sole discretion and at any
time without notice, release all or any portion of the securities subject to
lock-up agreements.
 
    Upon the expiration of or release from such lock-up agreements, 4,183,638
shares will be eligible for immediate sale under Rule 144 or Rule 701 and
316,400 additional shares subject to outstanding vested stock options could also
be sold, subject in some cases to compliance with certain volume limitations.
 
    Sales of such shares in the future could adversely affect the prevailing
market price of the Common Stock.  No prediction can be made as to the effect,
if any, that future sales of shares or the availability of shares for sale will
have on the market price for Common Stock prevailing from time to time.  Sales
of substantial amounts of Common Stock in the public market, or the perception
of the availability of shares for sale, could adversely affect the prevailing
market price of the Common Stock and could impair the Company's ability to raise
capital through the sale of its equity securities.

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



                                
<PAGE>
 
                                USE OF PROCEEDS

     The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby, based on the public offering price of [$        ] per share (the
midpoint of the range set forth on the cover page of this Prospectus), after
deducting the underwriting discounts and commissions and estimated offering
expenses payable by the Company, are estimated to be [$_________] ([$________]
if the Underwriters' over-allotment option is exercised in full).

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


                                DIVIDEND POLICY


     Holders of the Common Stock are entitled to receive dividends when, as, and
if declared by the Board of Directors, out of funds legally available for such
purpose.  The Company has paid quarterly dividends to its stockholders since
October 1995.  For each quarter from October 1995 to April 1997, the Company
paid quarterly cash dividends equal to $.03 per share (adjusted to reflect the
Stock Split).

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

     Purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution in the pro forma book value of the Common Stock from the
public offering price.  The net tangible book value of the Company as of
March 31, 1997 was $14,795,250 or $2.56 per share of Common Stock after giving
effect to the Stock Split.  Net tangible book value per share represents the
amount of the Company's total tangible assets less total liabilities, divided by
the total number of shares of Common Stock outstanding.

     After giving effect to the sale of the 1,700,000 shares of the Common Stock
offered hereby and the receipt by the Company of the estimated net proceeds
therefrom, based on the public offering price of $    per share (the midpoint of
the estimated range set forth on the cover page of this Prospectus), and after
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company, the pro forma net tangible book value of the Company as
of March 31, 1997 would have been approximately $         , or $     per share.
This represents an immediate increase in net tangible book value of $     per
share to existing stockholders and an immediate and substantial dilution of
$     per share to new investors.  The following table illustrates this per
share dilution:

<TABLE>
<S>                                                                    <C>       <C>
 Assumed offering price per share..................................              $
    Net tangible book value per share as of March 31, 1997             $2.56
    Increase per share attributable to new stockholders                 
 Pro forma net tangible book value per share as of March 31, 1997..                
                                                                                 ------
 Dilution per share to new investors...............................              $ 
                                                                                 ======
</TABLE>

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

     The following table summarizes, as of July 15, 1997, after giving effect to
the sale of the shares of the Common Stock offered hereby, the number of shares
of Common Stock purchased from the Company, the total consideration paid and the
average price per share paid by existing stockholders and by purchasers of the
Common Stock in the Offering:

<TABLE> 
<CAPTION>         
                                                Shares Purchased                  Total Consideration      
                                                ----------------                  -------------------
 
                                          Number               Percent       Amount                Percent       Average   
                                                                                                                Price Paid
                                                                                                                 Per Share
                                                                                                                 ---------
<S>                                         <C>                <C>          <C>                    <C>         <C>        
Existing Stockholders.....................  5,774,052           77%         $ 8,811,914               %          $ 1.53
New Investors.............................  1,700,000           23%                                   %          $
                                            ---------          ---          -----------            ---
   Total..................................  7,474,052          100%         $                      100%
                                            =========          ===          ===========            ===
</TABLE>

     The foregoing table assumes no exercise of any stock options subsequent to
July 15, 1997.  As of July 15, 1997, an aggregate of 1,017,506 shares of Common
Stock were reserved but unissued under the Company's stock option plans and
options to purchase an aggregate of 576,965 shares at a weighted average
exercise price of $1.83 per share were outstanding.  To the extent such options
are exercised, there will be further dilution to new stockholders.
<PAGE>
 
                                CAPITALIZATION

     The following table sets forth the capitalization of the Company at March
31, 1997, and as adjusted to reflect the sale of the Common Stock offered hereby
and the receipt by the Company of the estimated net proceeds therefrom, based on
the public offering price of $[    ] per share (the midpoint of the estimated
range set forth on the cover page of this Prospectus) and after deducting the
underwriting discounts and commissions and estimated offering expenses of
$2,000,000 payable by the Company.  The information set forth below should be
read in conjunction with the consolidated financial statements and related notes
thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
                                                                                At March 31, 1997                  
                                                                      -------------------------------------
                                                                               Actual         As Adjusted (1)    
                                                                               ------         -----------        
<S>                                                                   <C>                    <C>                 
Stockholders' equity:                                                                                        
 Preferred Stock, $0.10 par value; 2,000,000 shares authorized and                                           
   no shares issued and outstanding...................................           $   -            $  -       
 Common Stock, $0.10 par value; 12,000,000 shares authorized and                 577,353         747,353           
   5,773,527 shares issued and outstanding, actual; 12,000,000 shares                                                              
   authorized and 7,473,527 shares issued and outstanding, as                                                                      
   adjusted...........................................................                                                             
 Paid-in capital in excess of par value...............................         8,233,410                 
 Stockholder note receivable..........................................          (953,967)       (862,452)          
 Unrealized holding loss on investments available for sale, net                  (82,460)        (82,460)          
 Retained earnings....................................................         7,292,725       7,127,725  
                                                                             -----------     -----------   

     Total stockholders' equity........................................      $15,067,061     $
                                                                             ===========     ===========       
</TABLE>

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

     Set forth below is a summary of regulatory minimum capital requirements,
the Bank's March 31, 1997 actual capital ratios and the Bank's capital ratios
adjusted to reflect the sale of the Common Stock offered hereby based on the
receipt by the Bank of at least 50% (an estimate) of the net proceeds therefrom.
See also "Regulation and Supervision--Capital Adequacy."

<TABLE>
<CAPTION>
                                             Regulatory              Pro Forma
                                             Minimum    Actual     As Adjusted
                                             -------    ------     -----------  
Bank regulatory capital ratios:     
<S>                                          <C>        <C>        <C>
  Risk-based:
    Tier 1..................................    4.00%       9.34%          %  
    Total...................................    8.00%      10.59%          %  
  Leverage..................................    4.00%       8.69%          %   
</TABLE>
<PAGE>
 
                     SELECTED CONSOLIDATED FINANCIAL DATA
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

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

<TABLE>
<CAPTION>
                                                                                                                FOR THE  THREE
                                                          FOR THE YEARS ENDED DECEMBER 31,                  MONTHS ENDED MARCH 31,
                                                      ----------------------------------------              ----------------------
                                                       1992      1993     1994     1995    1996                1996       1997
      
                                                                                                                  (UNAUDITED)
<S>                                                  <C>       <C>     <C>      <C>      <C>                  <C>        <C>
INCOME STATEMENT DATA:
  Net interest income...............................  $3,659    $3,668  $4,847   $6,732  $ 7,564               $1,840     $1,800   
  Provision for possible                                                                                                           
   loan losses......................................  (1,773)   (2,225) (1,683)  (1,237)  (3,487)                (349)      (368)   
                                                     -------   ------- -------  -------  -------              -------    -------
Net interest income after provision for 
 possible loan losses...............................   1,886     1,443   3,164    5,495    4,077                1,491      1,432 
                                                                      
Non-interest income:                                                  
Service charges and                                                   
 other deposit fees.................................     386       484     385      398      424                  122         90
Loan servicing income                                                 
 and fees...........................................     164       288     493      896    1,475                  270        527
Gain on loan sales:                                                   
SBA guaranteed......................................   1,133     2,258   2,577    1,570    3,558                1,064      1,039
USDA guaranteed.....................................       -         -     136      822      805                  121        532
Ex-Im working capital                                                 
 guaranteed.........................................       -         -       -      104      201                    7         21
Ex-Im medium term                                                     
 guaranteed.........................................       -         -       -      248      340                   60        453
Unguaranteed portions                                                 
 of SBA and USDA....................................       -         -       -        -      842                    -          -
Other commercial....................................       -         -       -       97       91                    8        121
Residential.........................................     113       153      17       18        7                    1         56
                                                     -------   ------- -------  -------  -------              -------    -------
Total gain on loan sales............................   1,246     2,411   2,730    2,859    5,844                1,261      2,222 
                                                     -------   ------- -------  -------  -------              -------    -------
Gain on branch sale.................................       -         -       -        -    2,202                    -          -  
Gain on securities..................................     230       392       -        -        -                    -          -  
                                                     -------   ------- -------  -------  -------              -------    -------
Total non-interest income...........................   2,026     3,575   3,608    4,153    9,945                1,653      2,839  
                                                     -------   ------- -------  -------  -------              -------    -------
Operating expenses..................................  (3,756)   (4,576) (5,129)  (6,128)  (8,425)              (1,809)    (2,496)  
                                                     -------   ------- -------  -------  -------              -------    -------

Income before income taxes..........................     156       442   1,643    3,520    5,597                1,335      1,775 

Provision for income taxes..........................     (48)     (137)   (583)  (1,494)  (2,353)                (581)      (763) 
                                                     -------   -------  ------   ------   ------              -------    -------
 Net income.........................................    $108      $305  $1,060   $2,026   $3,244                 $754     $1,012 
                                                     =======   =======  ======   ======   ======              =======    =======
</TABLE> 
 
<PAGE>
 
<TABLE>
<CAPTION>
 
 
                                                                                                             AS OF  
                                                    AS OF DECEMBER 31,                                      MARCH 31,  
                                          --------------------------------------                     ------------------------
                                                                                                                       
                                                   1992      1993        1994        1995      1996       1996          1997   
                                                   ----      ----        ----        ----      ----       ----          ----
                                                                                                              (UNAUDITED)    
BALANCE SHEET DATA:                                                                                                    
  <S>                                         <C>         <C>        <C>         <C>         <C>         <C>        <C>           
  Total assets..........................       $105,663   $109,735   $125,609    $141,223    $161,642    $155,875   $162,173
  Loans:
   SBA  ................................          4,928     11,324     29,939      37,873      31,692      43,556     36,617   
   USDA.................................              -          -        535       3,265       3,211       4,671      3,879   
   Ex-Im working capital................              -          -         -          184       3,419         247      2,345   
   Ex-Im medium term....................              -          -        153         120       2,067         100     12,155   
   Other commercial.....................         22,689     20,077     20,544      28,826      33,713      31,699     34,642   
   Commercial mortgage..................          8,346     13,911     16,238      15,518      18,808      18,182     18,113   
   Investment property                                                                                                 
    mortgage............................         10,942      9,610      9,396       7,698       7,620       6,772      6,477   
   Residential and other consumer.......         15,043     16,491     18,313      13,508      14,097      13,726      8,181  
                                               --------     ------   --------    --------    --------    --------   --------   

  Total loans...........................         61,948     71,413     95,118     106,992     114,627     118,953    122,409   
                                                                                                                       
Total cash and cash equivalents.........         11,190     11,612      7,585      10,050      18,867      12,019     11,074
Total investment securities.............         26,015     19,727     13,981      11,631      15,874      10,617     16,130    

Core deposits (1).......................         51,911     63,719     76,622     104,379     105,414     107,015    107,285   
Time deposits ..........................         41,573     32,068     35,227      23,982      38,902      35,134     36,453   
                                               --------     ------   --------    --------    --------    --------   --------   
Total deposits..........................         93,484     95,787    111,849     128,361     144,316     142,149    143,738   
                                                                                                                       
Total stockholders'                               
 equity ................................          8,518     8,823       9,675      11,602      14,216      12,224     15,067  
</TABLE>

________________________
(1)  Represents checking and savings accounts.
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                                      FOR THE  THREE               
                                                FOR THE YEARS ENDED DECEMBER 31,                  MONTHS ENDED MARCH 31,           
                                       --------------------------------------------------  -------------------------------------   
                                                                                                                                   
                                          1992         1993         1994         1995         1996         1996         1997       
                                       -----------  -----------  -----------  -----------  -----------  -----------  -----------   
                                                                                                              (unaudited)          
PER COMMON SHARE DATA:                                                                                                             
<S>                                    <C>          <C>          <C>          <C>          <C>          <C>          <C>           
   Net income per common share                                                                                                     
    (2).........................            $0.02        $0.06        $0.18        $0.34         $.54        $0.13        $0.17    
   Book value per common share..            $1.63        $1.69        $1.84        $2.19        $2.63        $2.30        $2.77    
   Average weighted shares (2)..        5,430,786    5,430,786    5,739,871    5,981,861    5,969,027    5,958,205    5,976,671    
   Dividend payout ratio (2) (3)                -            -            -         8.44%       21.03%       22.59%       16.89%   
                                                                                                                                   
PERFORMANCE RATIOS:                                                                                                                
   Net interest spread (4)......             3.61%        3.55%        4.35%        4.82%        4.79%        5.18%        4.15%   
   Net interest margin (4)(5)...             4.05%        3.97%        4.68%        5.56%        5.48%        5.75%        5.03%   
   Return on average equity (4).             1.30%        3.58%       11.70%       19.31%       25.49%       25.54%       28.28%   
   Return  on average assets (4)             0.11%        0.30%        0.93%        1.51%        2.06%        2.03%        2.53%   
   Efficiency ratio (6).........            66.07%       63.18%       60.66%       56.29%       55.04%       51.79%       53.81%   
                                                                                                                                   
ASSET QUALITY RATIOS:                                                                                                              
   Allowance for loan losses as                                                                                                    
    a percentage of loans.......             0.81%        2.00%        2.10%        1.87%        2.62%        1.68%        2.25%   
   Allowance for loan losses as                                                                                                    
     a percentage of                                                                                                               
      non-performing loans......                -       188.60%       89.06%      158.93%      133.23%      150.38%      111.01%   
   Net charge-offs as a                                                                                                            
    percentage of average                                                                                                          
    outstanding loans (4).......             5.35%        1.97%        1.38%        1.24%        2.12%        0.51%        2.14%   
   Total losses as a percentage                                                                                                    
    of average outstanding loans                                                                                                   
     serviced (4)(7)............             3.60%        1.16%         .69%        1.18%        1.33%         .23%        1.35%   
   Provision for loan losses as                                                                                                    
    a percentage of average                                                                                                        
     outstanding loans(4).......             2.79%        3.38%        2.09%        1.24%        2.97%        1.25%        1.27%   
                                                                                                                                   
CAPITAL RATIOS:                                                                                                                    
   Total capital (to                                                                                                               
     risk-weighted assets)......            11.64%       10.77%        9.28%       10.73%       11.62%       10.12%       10.59%   
   Tier 1 capital (8) (to                                                                                                          
    risk-weighted assets).......            12.34%       12.03%       11.27%        9.47%       10.36%        8.87%        9.34%   
   Tier 1 capital (to average                                                                                                      
    assets).....................             8.21%        7.96%        7.87%        7.71%        8.44%        7.61%        8.69%   
                                                                                                                                   
   Equity to assets ratio(9)....             8.31%        8.33%        7.93%        7.84%        8.08%        7.97%        8.93%    
 </TABLE>

________________________
(2)  Includes common stock equivalents associated with any Company stock options
     issued one year prior to the expected public offering date of September
     1997.  In accordance with Staff Accounting Bulletin Topic 4-D, for all
     periods presented, the effect of such equivalents was computed under the
     treasury stock method, assuming the repurchase of such options by the
     Company at an assumed offering price of $12.00 per share.
(3)  Represents cash dividends paid per share as a percentage of net income per
     share.
(4)  Annualized for the three month periods.
(5)  Calculated as the differential between interest income and interest expense
     as a percentage of average interest-bearing assets during the period
     presented.
(6)  Amount reflects non-interest expense as a percentage of net interest income
     plus non-interest income and excludes the gain on the branch sale for the
     year ended December 31, 1996.
(7)  Amount reflects the Company charge-offs on portfolio loans plus amounts
     paid by government guarantee agencies pursuant to guarantees on loans
     serviced by the Company, as a percentage of total loans serviced.
(8)  The Company's Tier 1 capital includes common equity, less goodwill and any
     disallowed intangibles.
(9)  Represents average equity as a percentage of average assets.
<PAGE>
 
<TABLE>
<CAPTION>
 
 
                                                                                                             FOR THE THREE       
                                                     FOR THE YEARS ENDED DECEMBER 31,                    MONTHS ENDED MARCH 31,  
                                           ---------------------------------------------------------  ---------------------------
                                                                                                                 (UNAUDITED) 

                                               1992          1993        1994        1995        1996         1996        1997
                                               ----          ----        ----        ----        ----         ----        ----  
<S>                                          <C>           <C>         <C>        <C>          <C>          <C>         <C> 
OPERATING DATA:
  Commercial Loan
   originations
  and sales:
    SBA loan originations...............     $17,202       $28,879     $ 58,753   $ 37,522     $ 85,303     $ 25,562    $ 23,152
    SBA guaranteed loan sales...........      13,731        21,659       39,607     27,413       58,878       16,913      16,523 
    SBA unguaranteed loan sales.........          -             -            -          -        29,867           -           - 
                                                                      
    USDA loans originations.............          -             -         2,825     19,241       12,700        2,080       7,479  
    USDA guaranteed loan sales..........          -             -         2,260     14,984       10,199        1,664       5,983 
    USDA unguaranteed loan sales........          -             -            -          -         3,207           -           -  
                                                                 
    Ex-Im working capital loan              
     originations.......................          -             -            -       6,882       23,300        1,000       1,365
    Ex-Im working capital loan sales....          -             -            -       2,632        8,614          447         758 
    Ex-Im medium term loan                                       
     originations.......................          -             -           397      1,814       13,617          451      11,429
    Ex-Im medium term loan sales........          -             -           245      1,814       12,745          451      11,429
                                                                                               
    Other commercial loan sales.........          -             -            -       8,843        9,329        2,100       4,158
     
    Total commercial loan sales.........     $13,731       $21,659     $ 42,112   $ 55,686     $132,839     $ 21,575    $ 38,851
     
Commercial loans serviced                                                               
  for the Bank and others                                                                
   (at period end)......................     $66,631       $95,501     $157,557   $226,294     $344,622     $258,608    $376,566   
 </TABLE>
<PAGE>
 
                     MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


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

     GENERAL

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

     Recent Growth

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

<TABLE>
<CAPTION>
                                                                  FOR THE THREE    
                                                                      MONTHS       
                           FOR THE YEARS ENDED DECEMBER 31,      ENDED MARCH 31,   
                           --------------------------------      ---------------   
                                              (NET INCOME IN THOUSANDS)            
                              1994     1995     1996             1996        1997  
                            ------   ------   ------            -----      ------  
    <S>                    <C>      <C>      <C>                <C>        <C>     
    Net income ............ $1,060   $2,026   $3,244            $ 754      $1,012  
    Earnings per share .... $  .18   $  .34   $  .54            $ .13      $  .17   
</TABLE>

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

     The following discussions make reference to average balances of certain
assets and liabilities as well as volume and rate changes. For further
information with respect to these matters see the tables set forth on pages 38,
39, 47 and 48.
<PAGE>
 
     ACCOUNTING FOR LOAN SALES

     Gains from loan sales and servicing income represented approximately 48%
and 60% of the total net interest income and non-interest income for the year
ended December 31, 1996 and the three months ended March 31, 1997, respectively.
Detailed below is a discussion of the relevant accounting principles governing
loan sales and servicing activities.

     SBA and USDA Loan Sales

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

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

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

     Management has defined adequate compensation as 40 basis points. The
constant prepayment rates utilized by the Company in estimating the lives of the
loans depend on the original term of the loan, industry and Company historical
data. Such constant prepayment rates range from 6% to 12% per annum. The
discount rate utilized in the net present value calculation is equal to 200
basis points above the stated note rate, which, for 1996 and the three-month
period ended March 31, 1997, was approximately 10-12%.
<PAGE>
 
     Actual prepayment rates may be affected by a variety of economic and other
factors, including prevailing interest rates and the availability of alternative
financing.  The effect of these factors varies depending on the types of loans.
Estimated prepayment rates are based on management's expectations of future
prepayments, and, while management believes that the term of amortization and
market interest rate on the variable rate loans somewhat reduce the prepayment
risk, there can be no assurance that management's prepayment estimates are
accurate.  If the actual prepayment rate of loans sold is higher than projected
at the time such loans were sold, the carrying value of the servicing asset
would be recorded by a charge to earnings.  Because the Company also recognizes
a discount on the retained loan, an adjustment to the discount would be made
which would partially offset the effect of the negative servicing adjustment.
If the actual prepayment rate for loans sold is lower than estimated, the
carrying value is not increased, although the total income would exceed
previously estimated amounts.

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

     Ex-Im Bank and Other Commercial Loan Sales

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

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

     COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997

     Net Income. Net income increased $246,000, or 33%, from $754,000 for the
three months ended March 31, 1996 to $1.0 million for the three months ended
March 31, 1997. This increase was primarily attributable to increased loan
production and the corresponding increases in gains on loans sold and loan
servicing fees, partially offset by a $687,000, or 38%, increase in non-interest
expense.

     Net Interest Income. Net interest income of $1.8 million remained flat for
the three months ended March 31, 1996 compared to the three months ended March
31, 1997 due to a decrease in the yield on assets due to loan sales and a shift
to more expensive deposits following the September 1996 branch sale. A $14
million, or 11%, increase in average earning assets was offset by a 72 basis
point decrease in net interest margin.

     The Company sold checking and savings accounts totaling $24 million from
its last suburban branch facility for a premium of approximately 9% in September
1996. The deposit base of the branch was comprised of personal accounts with an
average balance of $6,500; lower than the Company's average checking and savings
account balance of $33,000 as of March 31, 1997. The Company's sale of the
branch was part of its strategy of targeting commercial depository accounts of
small and medium size manufacturers and accounts of individuals who seek highly
personalized service.

     Interest Income. Interest income increased $37,000, or 1%, from $3.2
million for the three months ended March 31, 1996 to $3.3 million for the three
months ended March 31, 1997 due to a September 1996 bulk-loan sale of a loan
portfolio comprising the unguaranteed portions of SBA guaranteed loans totaling
$20 million to provide funding for the deposit liabilities transferred in the
branch sale, and a 10 basis point decrease in the average prime rate from the
three months ended March 31, 1996 compared to the three months ended March 31,
1997.

     Interest Expense. Interest expense increased $77,000, or 6%, from the three
months ended March 31, 1996 to the three months ended March 31, 1997, as the
average balance of interest-bearing deposits increased 4%, from $111.9 million
to $116.2 million, as deposits shifted to more expensive deposit products.

     Provision for Possible Loan Losses.  The provision for possible loan losses
totaled $349,000 for the three months ended March 31, 1996 compared to $368,000
for the three months ended March 31, 1997.  See "-- Allowance for Loan Losses."
<PAGE>
 
     Non-Interest Income.  Non-interest income is comprised of the following
items:

<TABLE>
<CAPTION>
                                                   FOR THE THREE MONTHS ENDED
                                                   --------------------------
                                                           MARCH 31,
                                                           ---------
                                                     1996               1997
                                                     ----               ----
         NON-INTEREST INCOME                           (DOLLARS IN THOUSANDS)
         <S>                                       <C>                  <C>
         Gain on loan sales:
           SBA loan sales...................        $1,064              $1,039
           USDA loan sales..................           121                 532
           Ex-Im working capital loan sales.             7                  21
           Ex-Im medium term loan sales.....            60                 453
           Other commercial loans...........             8                 121
           Residential loans................             1                  56
                                                    ------              ------
           Gain on loan sales...............         1,261               2,222
                                                          
         Loan servicing income and fees.....           270                 527
         Service charges and other                     122                  90
           deposit fees.....................        ------              ------
                                                          
           Total non-interest income........        $1,653              $2,839
                                                    ======              ======
</TABLE>

     The 72%, or $1.2 million, increase in non-interest income from the quarter
ended March 31, 1996 compared to the quarter ended March 31, 1997 was due to a
$961,000, or 76%, increase in the gain on the sale of loans and a $257,000, or
95%, increase in loan servicing income and fees. This growth corresponds to the
65% or, $95 million, increase in the average balance of commercial loans
serviced for others to $241 million for the three months ended March 31, 1997.
 
     The increase in SBA and USDA loan sale gains reflects the Company's
geographic expansion, while the Ex-Im Bank medium term loan sales increase
reflects stronger marketing relationships in the Big Emerging Markets, which
have begun to produce referrals for the Company's international loan officers.
The Company has sold other unguaranteed commercial loans on a servicing-
retained, non-recourse basis since 1995 but undertook a more systematic selling
program in 1997 as a number of buyers have been identified.  See "--Accounting
for Loan Sales" and "Business."
 
     Loan Servicing Income. Loan servicing income is comprised of servicing fees
received on loans sold on a servicing-retained basis, net of amortization of the
servicing asset. The amount of the servicing fee varies in accordance with the
terms  of the loan sale.  See "--Accounting for Loan Sales."



<PAGE>
 
<TABLE>
<CAPTION>
                                                   FOR THE THREE MONTHS ENDED 
                                                            MARCH 31,         
                                                 ------------------------------
        LOAN SERVICING INCOME AND FEES             1996                  1997 
                                                   ----                  ---- 
        Loan servicing income                        (DOLLARS IN THOUSANDS)   
        <S>                                      <C>                     <C>  
          SBA guaranteed loans................     $191                  $278 
          USDA guaranteed loans...............       17                    49 
          Ex-Im working capital loans.........        6                    38 
          Ex-Im medium term loans.............        -                    13 
          Other commercial loans..............       12                    21 
          Residential and consumer loans......       14                    13 
                                                   ----                  ----

             Total loan servicing income......      240                   412
        Other loan fees.......................       30                   115
                                                   ----                  ----

             Total loan servicing income           $270                  $527
              and fees........................     ====                  ====

        LOANS SERVICED FOR OTHERS
          AT THE END OF PERIOD
          Outstanding balance................. $173,949              $283,961
                                               ========              ========

          Number of loans.....................    1,114                 1,365
                                                  =====                 =====
</TABLE>

     The increase in loan servicing income reflects the growth of the respective
portfolios.  Loan servicing income as a percentage of loans serviced for others
was 55 basis points and 58 basis points, on an annualized basis, for the
quarters ended March 31, 1996 and 1997, respectively.  Other loan fees have
increased due to a greater demand from the Company's borrowers for letters of
credit.

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

<TABLE>
<CAPTION>
                                                       AT MARCH 31,           
                                                -------------------------     
      PORTFOLIO BALANCE                             1996         1997       
                                                    ----         ----       
                                                  (DOLLARS IN THOUSANDS)      
      <S>                                       <C>              <C>          
      Unguaranteed portions of                                                
       SBA loans............................     $43,556          $36,618     
       USDA loans...........................       4,671            3,878     
                                                 -------          -------     
          Total SBA and USDA loans..........      48,227           40,496    
                                                                              
      Less:                                                                   
       Discount.............................       2,655            2,398     
                                                 -------          -------     
              Net carrying value............     $45,572          $38,098 
                                                 =======          ======= 
                                                                              
      Discount on Retained                                                    
       SBA and USDA Loans                                                     
        Balance at beginning of period......      $2,300           $2,232     
         Current period sales...............         456              404     
         Accretion..........................        (101)            (238)    
                                                 --------          -------    
        Balance at end of period............      $2,655           $2,398     
                                                 ========          =======     
</TABLE>

<PAGE>
 
     The servicing asset for all loans sold is as follows:

<TABLE>
<CAPTION>
                                                AT MARCH 31,
                                        -------------------------
SERVICING ASSET                             1996         1997
                                            ----         ----
                                          (DOLLARS IN THOUSANDS)
<S>                                     <C>               <C>
Servicing on other loan sales
    Ex-Im medium term..................       $  208       $  705
    Other commercial...................          167          157
    Other consumer.....................           14            7
                                              ------       ------
             Total other servicing.....          389          869
Servicing on SBA and USDA loan sales
    SBA................................        2,512        3,277
    USDA...............................          486          453
                                              ------       ------
        Total SBA and USDA servicing...        2,998        3,730
                                              ------       ------
             TOTAL SERVICING ASSET.....       $3,387       $4,599
                                              ======       ======
</TABLE> 
 
     The activity in the servicing asset is detailed below:
   
<TABLE> 
<CAPTION> 
                                                AT MARCH 31,
                                         -------------------------
     SERVICING ASSET ACTIVITY                1996         1997
                                             ----         ----
                                          (DOLLARS IN THOUSANDS)
<S>                                      <C>               <C> 
Balance at beginning of period.........       $2,809       $4,138
  Current period sales.................          719          797
  Amortization.........................         (141)        (336)
                                              ------       ------
Balance at end of period...............       $3,387       $4,599
                                              ======       ======
</TABLE>

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

<TABLE>
<CAPTION>
                                             FOR THE THREE MONTHS ENDED
                                             --------------------------
                                                     MARCH 31,
                                          --------------------------------
                                             1996                  1997
                                             ----                  ----
NON-INTEREST EXPENSES                           (DOLLARS IN THOUSANDS)
<S>                                       <C>                   <C>
Salaries and benefits..................      $972                $1,680
Occupancy and equipment expense........       300                   360
FDIC and OCC...........................        21                    16
Outside services.......................        63                    53
Foreclosed property and collection,
net....................................       148                    (6)
Other..................................       305                   393
                                          -------                ------
Total non-interest expenses............    $1,809                $2,496
                                          =======                ======
</TABLE> 
 
<TABLE> 
<CAPTION> 
                                                             AT MARCH 31,
                                                   --------------------------------
SELECTED DATA                                        1996                    1997
                                                     ----                    ----
<S>                                              <C>                     <C> 
Total servicing portfolio.................       $292,900                $406,370
                                                 ========                ========

Number of loans serviced..................          1,114                   1,365
                                                    =====                   =====
Number of total personnel.................             80                      97
                                                       ==                      ==
Number of loan officers...................             18                      29
                                                       ==                      ==
</TABLE>
<PAGE>
 
     The 38%, or $687,000, increase in non-interest expense for the quarter
ended March 31, 1996 compared to the quarter ended March 31, 1997 reflects a 21%
increase in full-time employees, from 80 employees at March 31, 1996 to 97
employees at March 31, 1997. The increase in salaries and benefits also reflects
a shift in the mix of employees to more professionals following elimination of
eight clerical branch positions as a result of the September 1996 branch sale,
as well as a full quarter's expenses for the 26 new hires which occurred during
1996. The occupancy and equipment expense increase includes additional
headquarter space leased to house the new employees, and includes part of the
quarter's rental expense for the Morristown, New Jersey, Pittsburgh,
Pennsylvania and Washington, D.C. representative offices. The decrease in FDIC
and OCC assessments reflects a decrease in the statutory rate of the deposit
insurance premium. The outside services expense, comprised of legal and
accounting fees, decreased due to a decrease in the legal costs associated with
the establishment of international marketing representatives relationships and
other related diligence.

     Other non-interest expense is comprised of the following:

<TABLE>
<CAPTION>
                                                          FOR THE THREE MONTHS ENDED   
                                                                  MARCH 31,            
                                                          1996                  1997   
                                                          ----                  ----   
               OTHER NON-INTEREST EXPENSES                  (DOLLARS IN THOUSANDS)     
          <S>                                             <C>                   <C>    
          Office expenses.......................          $150                  $172    
          Marketing.............................           101                   151    
          Operating services....................            29                    29    
          Insurance.............................            17                    20    
          Other expenses........................             8                    21    
                                                          ----                  ----    
             Total other non-interest expenses..          $305                  $393    
                                                          ====                  ====    
</TABLE>

     Other non-interest expense increases reflect costs to support the growth of
personnel and the Company's geographic growth and more formalized marketing
efforts.
 
     The Company's efficiency ratios, calculated as the ratio of non-interest
expenses to the sum of net interest income and non-interest income were 52% and
54% for the three months ended March 31, 1996 and 1997, respectively.
 
     Income Taxes. The Company is subject to federal income tax and state income
taxes in Connecticut and the other states in which it operates representative
offices. The effective income tax rates for the three months ended March 31,
1996 and 1997 were 43.5% and 43.0%, respectively.
<PAGE>
 
     The following table sets forth the components of the Company's net interest
income and yields on average interest-earning assets and interest-bearing
liabilities.

<TABLE>
<CAPTION>
                                                             FOR THE THREE MONTHS ENDED
                                     ------------------------------------------------------------------------------
                                            MARCH 31, 1996                               MARCH 31, 1997
                                     ------------------------------   ---------------------------------------------

                                                    INTEREST    AVERAGE                   INTEREST       AVERAGE
                                         AVERAGE    EARNED/      YIELD/      AVERAGE      EARNED/         YIELD/
                                         BALANCE     PAID         RATE       BALANCE        PAID          RATE
                                     ------------------------------------------------------------------------------
<S>                                  <C>            <C>         <C>          <C>          <C>            <C> 
TOTAL EARNING ASSETS
  Loans............................
    Commercial.....................      $96,461      $2,666     11.06%      $98,713        $2,578        10.45%
    Residential....................       12,639         280      8.86%       12,461           250         8.03%
    Other consumer.................          593          15     10.17%        1,267            29         9.28%
                                             ---          --     ------        -----            --         -----
  Total loans......................      109,693       2,961     10.86%      112,441         2,857        10.16%

  Investment securities............       11,266         178      6.32%       15,844           235         5.93%
  Federal funds sold...............        6,401          83      5.22%       13,076           167         5.18%
                                           -----          --      -----       ------           ---         -----
  Total investment securities         
   and federal funds sold..........       17,667         261      5.92%       28,920           402         5.59%
                                          ------       -----      -----       ------           ---         -----

Total earning assets...............      127,360       3,222     10.12%      141,361         3,259         9.22%
                                                       -----     ------                      -----         -----

Total non-earning assets...........       20,950                              18,954
                                          ------                              ------

Total assets.......................     $148,310                            $160,315
                                        ========                            ========
INTEREST-BEARING LIABILITIES
  Deposits
    Interest bearing demand               
     deposits......................       $9,538         $69      2.91%       $6,885  
    Premier money market...........       59,204         784      5.33%       67,096           861         5.20%
    Other savings..................       13,770         118      3.45%        3,868            15         1.57%
    Certificates of deposit........       23,153         316      5.49%       31,815           450         5.74%
    IRA CD's.......................        6,182          86      5.60%        6,491            84         5.25%
                                           -----          --      -----        -----            --         -----
  Total deposits...................      111,847       1,373      4.94%      116,155         1,452         5.07%
  Other borrowings.................          723           9      5.56%          528             7         5.38%
                                             ---           -      -----          ---             -         -----
  Total interest bearing
    liabilities....................      112,570       1,382      4.94%      116,683         1,459         5.07%
                                         -------       -----      -----      -------         -----         -----

  Non-interest bearing liabilities
    Demand deposits................       22,577                              27,140
    Other liabilities..............        1,348                               2,176
                                           -----                               -----
  Total non-interest bearing              23,925                              29,316
   liabilities.....................
  Stockholders' equity.............       11,815                              14,316
                                          ------                              ------
  Total liabilities and
    stockholders' equity...........     $148,310                            $160,315
                                        ========                            ========
    NET INTEREST INCOME/NET
     INTEREST SPREAD...............                   $1,840      5.18%                     $1,800         4.15%
                                                      ======      =====                     ======         =====
    NET INTEREST MARGIN............                               5.75%                                    5.03%
                                                                  =====                                    =====
</TABLE>
<PAGE>
 
     The following rate/volume analysis shows the portions of the net change in
interest income due to changes in volume or rate. The changes in interest due to
both volume and rate have been allocated proportionally to changes due to volume
and changes due to rate.

<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED MARCH 31, 1996
                                                                                     COMPARED TO 1997
INCREASE (DECREASE) IN                                                                CHANGES DUE TO
                                                                   --------------------------------------------------
NET INTEREST INCOME DUE TO                                                  VOLUME            RATE           TOTAL
                                                                            ------            ----           -----
                                                                                   (DOLLARS IN THOUSANDS)
<S>                                                                <C>                         <C>            <C> 
Loans                                                                                                      
  Commercial loans............................................                 $ 59            $(147)         $ (88)
  Residential loans...........................................                   (4)             (26)           (30)
  Other consumer loans........................................                   17               (3)            14
                                                                               ----            -----          -----
       Total loans............................................                   72             (176)          (104)
                                                                                                           
Investment securities.........................................                   68              (11)            57
Federal funds sold............................................                   85               (1)            84
                                                                               ----            -----          -----
Total investments and federal funds sold......................                  153              (12)           141
                                                                               ----            -----          -----
       Total interest earning assets..........................                  225             (188)            37
                                                                                                           
Deposits                                                                                                   
  Interest bearing demand deposits............................                  (16)             (11)           (27)
  Premier money market savings................................                  101              (24)            77
  Other savings...............................................                  (38)             (65)          (103)
  Time deposits...............................................                  123               11            134
  IRA time deposits...........................................                    4               (6)            (2)
                                                                               ----            -----          -----
    Total deposits............................................                  174              (95)            79
FHLB advances.................................................                   (3)               -             (3)
                                                                               ----            -----          -----
                                                                                                           
Total interest-bearing liabilities............................                  171              (95)            76
                                                                               ----            -----          -----
                                                                                                           
Change in net interest income.................................                 $ 54            $ (93)         $ (39)
                                                                               ====            =====          =====
</TABLE>
<PAGE>
 
     COMPARISON OF THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

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

     The increase in net income from 1995 to 1996 reflects the continued
geographic expansion of the Company's U.S. and international commercial loan
origination activities. Geographic expansion contributed to a $3.5 million, or
92%, increase in lending-related non-interest income from 1995 to 1996. The loan
loss provision increased $2.3 million from 1995 to 1996 due to a $1.2 million
increase in charge-offs attributable to continued poor performance of the
investor mortgage portfolio, a line of business abandoned in 1990, and a $1
million increase in the allowance for loan losses to reflect the continued
growth of the Company's loan portfolio. See "--Allowance for Loan Losses." This
increase in the allowance for loan losses was offset by a $2.2 million gain
realized on the branch sale in September 1996.

     Net Interest Income.  Net interest income increased $1.9 million, or 39%,
from 1994 to 1995 resulting from an 88 basis point increase in the net interest
margin. The increase in net interest margin was attributable to changes in the
Company's asset and liability mix as the yield on assets increased faster than
the increased rate paid on deposits. Net interest income increased $832,000, or
12%, from $6.7 million in 1995 to $7.6 million in 1996 as growth more than
offset the net interest margin decrease of 8 basis points. Average interest-
earning assets increased $17.0 million, or 14%, while average interest-bearing
liabilities increased $16.1 million, or 16%, from 1995 to 1996. The higher asset
growth, however, was offset by a greater increase in the cost of deposits over
the yield on assets. The deposit cost increased due to a shift of the deposits
into higher rate money market savings and certificates of deposit used to
replace the sold retail deposits.

     Interest Income.  Interest income increased $3.6 million, or 45%, from $8.0
million in 1994 to $11.6 million in 1995 due to a 160 basis point increase in
the average Prime rate from 1994 to 1995, and a shift in the composition of
average interest-earning assets towards loan balances.  In 1994, 76% of
interest-earning assets were held in the form of higher yielding loans compared
to 81% held in such loans in 1995.  Interest income increased by $1.7 million,
or 15%, from $11.6 million in 1995 to $13.3 million in 1996 due primarily to a
$19.6 million increase in the average balance of commercial loans. This increase
was partially offset in 1996 by a lower yield on commercial loans due to a 25
basis point decrease in the Prime rate in February 1996.  The annual average
Prime rate decreased 50 basis points from 1995 to 1996.  The yield on loans also
decreased in the fourth quarter of 1996 due to a bulk-sale of unguaranteed
portions of SBA loans. Interest income on investment securities decreased
$104,000 due to a $2.4 million average balance decrease in the investment
portfolio.  Interest earned on federal funds sold increased 8% to $632,000 due
to a $2.0 million average balance increase maintained to fund loan demand
partially offset by a 25 basis point decrease in short-term interest rates in
February 1996.
<PAGE>
 
     Interest Expense.  Interest expense increased $1.7 million, or 55%, from
1994 to 1995 due to an increase in the average balance of the Company's
externally indexed money market accounts from $20.4 million in 1994 to $41.8
million in 1995, and a 180 basis point increase in the average rate of the
underlying external index of those accounts from 1994 to 1995. Interest expense
increased $872,000, or 18%, from 1995 to 1996, due principally to a $19.7
million increase in the average balance of the money market accounts from $41.8
million in 1995 to $61.5 million in 1996. The impact of the increase in these
account balances was partially offset by a 25 basis point reduction, in October
1995, of the margin added to the Company's external index. The reduction in the
margin was made after consideration of prevailing market rates; this action had
no discernible effect on the Company's ability to attract such deposits because
the Company maintained competitive rates.

     Provision for Possible Loan Losses.  The provision for possible loan losses
totaled $1.7 million in 1994, $1.2 million in 1995 and $3.5 million in 1996.
The provision is affected by net loan charge-offs, changes in the level and mix
of loans, changes in asset quality and general economic conditions.
Approximately 75% of the charge-offs for the period from January 1, 1994 to
March 31, 1997 are attributable to the Company's investor mortgage portfolio.
See "-- Allowance for Loan Losses."

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

<TABLE>
<CAPTION>
                                          FOR THE YEARS ENDED DECEMBER 31,    
                                          --------------------------------    
                                               (DOLLARS IN THOUSANDS)         
     NON-INTEREST INCOME                     1994       1995       1996      
                                             ----       ----       ----      
     <S>                                  <C>          <C>        <C>        
     Gain on loan sale                                                       
       SBA loan sales...................    $2,577     $1,570     $3,558     
       USDA loan sales..................       136        822        805     
       Ex-Im working capital loan                
        sales...........................         -        104        201 
       Ex-Im medium term loan                    
        sales...........................         -        248        340  
       Unguaranteed SBA and USDA                                             
         loan portions..................         -          -        842     
       Other commercial loans...........         -         97         91     
       Residential loans................        17         18          7     
                                            ------     ------     ------     
           Total gain on loan sales.....     2,730      2,859      5,844     
                                                                             
     Loan servicing income and fees.....       493        896      1,475     
     Gain on sale of branch.............         -          -      2,202     
     Service charges and other                                                
      deposit fees......................       385        398        424      
                                            ------     ------     ------      
           Total non-interest income....    $3,608     $4,153     $9,945     
                                            ======     ======     ======      
</TABLE>

     The non-interest income increase of $545,000, or 15%, from 1994 to 1995 was
attributable to a $403,000 increase in loan servicing income, which was directly
proportional to the increase in the average loan portfolio serviced for others
from year to year.  Gains on SBA loan sales decreased as limitations on loan
size were imposed by the SBA to preserve its funding.  Such limits resulted in a
decrease in the average balance of SBA loans originated from $556,000 in 1994 to
an average balance of $395,000 in 1995.  As a result of these loan limits, a
greater number of originations was required to yield the same return.  However,
this decrease in income from the sale of SBA loans was offset by increases in
gains on the sale of USDA and Ex-Im Bank loans as more opportunities for USDA
loans were identified and Ex-Im Bank marketing efforts increased.
<PAGE>
 
     The non-interest income increase of $5.8 million from 1995 to 1996 reflects
the non-recurring $2.2 million gain realized on the sale of the Company's
suburban branch facility and its deposits as well as increasing gains on the
sale of the guaranteed and unguaranteed portions of SBA and USDA loans. The
increased loan sales activity reflects the Company's addition of new regional
representative offices and the hiring of nine additional commercial loan
officers. The Company completed its first bulk-sale of the unguaranteed portions
of SBA and USDA loans in 1996. These sales, along with the on-going sales of
government guarantee loans on a servicing-retained basis, increased the loan
servicing portfolio, which resulted in an increase in servicing fees for the
year.

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

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

     The Company began selling certain unguaranteed portions of SBA and USDA
loans in 1996 on a non-recourse, servicing-retained basis. The unguaranteed
portion of such loans were sold above the carrying value and resulted in gains.
In 1996, gains from the sale of the unguaranteed portions of SBA and USDA loans
totaled $842,000 on sales of loans totaling $33.1 million. Many of these loans
sold were originated prior to 1996. The Company can give no assurance that it
will have a similar volume of loans available to sell and therefore that it will
attain similar gains in the future.
<PAGE>
 
     Loan servicing income comprises the servicing fees received on loans sold
on a servicing retained basis, net of amortization of the servicing asset.

<TABLE>
<CAPTION>
     LOAN SERVICING INCOME AND FEES                       FOR THE YEARS ENDED DECEMBER 31,
                                                          --------------------------------
                                                            1994        1995       1996   
                                                            ----        ----       ----   
                                                               (DOLLARS IN THOUSANDS)     
     <S>                                                  <C>          <C>         <C>    
     Loan servicing income                                                                
        SBA guaranteed loans..........................      $   442    $    766    $   921
        USDA guaranteed loans.........................            2          43        151
        Ex-Im working capital loans...................            -           7         56
        Ex-Im medium term loans.......................            -           -         43
        Other commercial loans........................            -          16         65
        Residential and consumer loans................           43          48         59
                                                            -------    --------   --------
           Total loan servicing income................          487         880      1,295
         Other loan fees..............................            6          16        180
                                                            -------    --------   --------
                                                                                          
           Total loan servicing income and fees.......      $   493    $    896   $  1,475
                                                            =======    ========   ========
                                                                                          
     Loans serviced for others (at end of period)                                         
        Outstanding balance...........................      $98,740    $153,850   $265,805
                                                            =======    ========   ========
        Number of loans...............................          925       1,075      1,302
                                                            =======    ========   ======== 
</TABLE>

     The increases in loan servicing income reflect the growth of the servicing
portfolios.  Stated as a percentage of the average balance of loans serviced for
others, loan servicing income totaled 49, 57 and 49 basis points for the years
ended December 31, 1994, 1995 and 1996, respectively.  This ratio will vary in
accordance with the mix of loans comprising the servicing portfolio and
generally will move in the same direction as the cost of servicing.
<PAGE>
 
     Data with respect to the retained portions of loans of SBA and USDA loan
sales and related accounts are detailed below.

<TABLE>
<CAPTION>
                                                                    AT  DECEMBER 31,
                                                          -----------------------------------
PORTFOLIO BALANCE                                           1994         1995         1996  
                                                            ----         ----         ----  
    Unguaranteed portions of                                      (DOLLARS IN THOUSANDS)   
<S>                                                       <C>          <C>          <C>     
  SBA loans..........................................     $29,908      $37,873      $31,691 
  USDA loans.........................................         535        3,265        3,211 
                                                          -------      -------      ------- 
     Total SBA and USDA loans........................      30,443       41,138       34,902 
                                                                                            
Less:                                                                                       
  Discount...........................................       1,792        2,300        2,232 
                                                          -------      -------      ------- 
     Net carrying value..............................     $28,651      $38,838      $32,670 
                                                          =======      =======      =======  

Discount on retained
  SBA and USDA loans

  Balance at beginning of period.....................     $   805      $ 1,792      $ 2,300 
  Current period sales...............................       1,089          839        1,512 
  Deletions due to sales.............................           -            -       (1,112)
  Accretion..........................................        (102)        (331)        (468)
                                                          -------      -------      ------- 
  Balance at end of year.............................     $ 1,792      $ 2,300      $ 2,232 
                                                          =======      =======      =======  
</TABLE>
 
The servicing assets for all loans sold is as follows:

<TABLE> 
<CAPTION> 
                                                                 AT  DECEMBER 31,
                                                          -----------------------------
SERVICING ASSET                                              1994      1995      1996
                                                             ----      ----      ----
Servicing on other loan sales                                  (DOLLARS IN THOUSANDS)
<S>                                                       <C>       <C>       <C> 
Ex-Im medium term....................................           -       161       374
Other commercial.....................................           -       140       173
Other consumer.......................................          14        16         8
                                                          -------   -------   -------
Total other servicing................................          14       317       555
 
Servicing on SBA and USDA loan
  sales
  SBA................................................     $ 2,031   $ 2,290   $ 3,100
  USDA...............................................          39       202       483
                                                          -------   -------   -------
 
Total SBA and USDA Servicing.........................       2,070     2,492     3,583
 
 
         TOTAL SERVICING ASSET.......................     $ 2,084   $ 2,809   $ 4,138
                                                          =======   =======   =======
</TABLE> 
 
The activity in the servicing asset is detailed below:

<TABLE> 
<CAPTION> 
                                                                   DECEMBER 31,
                                                          -----------------------------
SERVICING ASSET ACTIVITY                                     1994      1995      1996
                                                             ----      ----      ----
                                                               (DOLLARS IN THOUSANDS)
<S>                                                       <C>       <C>       <C> 
Balance at beginning of period.......................     $ 1,210   $ 2,084   $ 2,809
 Current period sales................................       1,040     1,127     1,979
 Amortization........................................        (166)     (402)     (650)
                                                          -------   -------   -------
Balance at end of period.............................     $ 2,084   $ 2,809   $ 4,138
                                                          =======   =======   =======
</TABLE>
<PAGE>
 
    Non-Interest Expense. Increases in non-interest expense reflect the
Company's growth over the periods as indicated below:

<TABLE>
<CAPTION>
                                                        FOR THE YEARS ENDED DECEMBER 31,
                                                        -------------------------------
          NON-INTEREST EXPENSE                            1994        1995         1996
                                                          ----        ----         ----
                                                           (DOLLARS IN THOUSANDS)
          <S>                                           <C>          <C>         <C>
          Salaries and benefits......................   $  2,485     $  3,399    $  4,963
          Occupancy and equipment expense............        837          980       1,236
          FDIC and OCC...............................        296          206          69
          Outside services...........................        198          210         231
          Foreclosed property and collection, net....        365          311         360
          Other......................................        948        1,022       1,566
                                                        --------     --------    --------
               Total non-interest expense............   $  5,129     $  6,128    $  8,425
                                                        ========     ========    ========

          SELECTED DATA

          Total servicing portfolio.............        $193,858     $260,842    $380,432
                                                        ========     ========    ========

          Number of loans serviced..............             925        1,075       1,302
                                                        ========     ========    ========
          Number of total personnel.............              54           70          96
                                                        ========     ========    ========
          Number of loan officers...............               7           12          26
                                                        ========     ========    ========
</TABLE>

    Non-interest expense increased 20%, or $1.0 million, from 1994 to 1995 which
reflects a 30% increase in the number of employees from 54 full-time employees
at December 31, 1994 to 70 full-time employees at December 31, 1995. Occupancy
and equipment expense increased 17% due to the cost of additional space leased
at the Hartford, Connecticut headquarters as well as a partial year's rental
expense for the representative offices in Boston and Springfield, Massachusetts
and Providence, Rhode Island. The FDIC and OCC assessments reflects a statutory
decrease in the FDIC Bank Insurance Fund assessment rate effective May 1995;
this rate may be increased at any time by the FDIC and fluctuates with the
Company's deposit base.

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

<TABLE>
<CAPTION>
                                                       FOR THE YEARS ENDED DECEMBER 31,
                                                       --------------------------------
          OTHER NON-INTEREST EXPENSES                      1994       1995        1996 
                                                           ----       ----        ---- 
                                                            (DOLLARS IN THOUSANDS)     
          <S>                                             <C>        <C>         <C>       
          Office expenses........................         $ 367      $  539      $  692
          Marketing..............................           156         288         632
          Operating services.....................           109         107         126
          Insurance..............................            62          61          62
          Other expenses.........................           204          27          52
          Loss on sale of equipment..............            50           -           2
                                                             --           -           -
                                                                                       
          Total other non-interest expense.......         $ 948      $1,022      $1,566
                                                          =====      ======      ====== 
</TABLE>

    The overall increase in other non-interest expense was only $74,000, or 8%,
from 1994 to 1995. However, the 1994 expenses included expenditures of $171,000
related to due diligence on an abandoned acquisition, offset by a $172,000
increase in office expenses in 1995, due to a 30% increase in personnel and a
$36,000, or 54%, increase in postage due to the introduction of an international
mass mailing program, and a 10% increase in the postal rates in January 1995.
The mass mailing program, based on proprietary information compiled by the
Company, was undertaken by the Company's international loan officers to reach
potential foreign-based buyers of U.S.-made goods prior to the time the Company
had relationships with local marketing representatives. The Company's
international loan officers have continued such mass mailing efforts on a more
limited scale to supplement referrals from the marketing representatives.
 
    The increase in office and marketing expense from 1995 to 1996 reflects
costs to support the growth of personnel over the periods and the Company's
geographically wider and more formalized marketing efforts. The $153,000, or
28%, increase in office expense from 1995 to 1996 includes a $54,000 increase in
telephone expense and $24,000 increase in postage. Such expenses increased as
international loan officers responded to inquiries from potential borrowers and
domestic commercial loan officers expanded their marketing efforts. The
$344,000, or 119%, increase in marketing expense from 1995 to 1996 reflects an
investment in the development of international marketing relationships and
marketing literature. The Company also engaged a public relations firm to create
various marketing pieces for use in mass mailing solicitations and other
expanded and regionalized calling efforts. International development efforts
included legal expenses, visits by Company officers to the locations of
prospective international marketing representatives and related due diligence,
as well as training in Connecticut of the international marketing
representatives. The Company's domestic and international loan officers also
incurred greater travel and other business development costs as they expanded
their marketing efforts, and the number of officers increased from 12 to 26.

    The Company's efficiency ratios, calculated as the ratio of non-interest
expenses to the sum of net interest income and non-interest income, excluding
the 1996 gain on the branch sale, were 61%, 56% and 55% for the years ended
December 31, 1994, 1995 and 1996, respectively.
 
    Income Taxes.  The effective income tax rates for the years ended December
31, 1994, 1995 and 1996 were 35.5%, 42.4% and 42.0%, respectively.  The 1994 tax
provision reflects utilization of a state net operating loss carryforward.
<PAGE>
 
    The following table sets forth the components of the Company's net interest
income and yield on average interest earning assets and rate on interest bearing
liabilities.

<TABLE>
<CAPTION>
                                                                          FOR THE YEARS ENDED
                             ----------------------------------------------------------------------------------------------
                                    DECEMBER 31, 1994             DECEMBER 31, 1995            DECEMBER 31, 1996
                             -----------------------------  -------------------------------  ------------------------------
                                       INTEREST   AVERAGE              INTEREST   AVERAGE               INTEREST   AVERAGE
                              AVERAGE   EARNED/    YIELD/     AVERAGE   EARNED/    YIELD/      AVERAGE   EARNED/    YIELD/
                              BALANCE    PAID       RATE      BALANCE    PAID       RATE       BALANCE    PAID       RATE
                             -----------------------------  -------------------------------  ------------------------------
                                                                (DOLLARS IN THOUSANDS)
<S>                          <C>       <C>        <C>       <C>        <C>        <C>         <C>       <C>        <C>
TOTAL EARNING ASSETS:
Loans
  Commercial..............   $ 61,400   $5,558      9.05%     $ 82,040   $ 8,976    10.94%    $101,656   $10,882      10.70%
  Residential.............     14,104    1,037      7.35%       14,472     1,152     7.96%      12,848     1,059       8.24%
  Other consumer..........      3,639      300      8.24%        1,388       138     9.94%         874        86       9.84%
                             --------   ------    ------      --------   -------   ------     --------   -------     ------
Total loans...............     79,143    6,895      8.71%       97,900    10,266    10.49%     115,378    12,027      10.42%
  Investment securities...     17,302      799      4.62%       12,921       750     5.80%      10,495       646       6.16%
  Federal funds sold......      7,202      303      4.21%       10,179       585     5.75%      12,153       632       5.20%
                             --------   ------    ------      --------   -------   ------     --------   -------     ------
  Total investment
   securities and federal
   funds sold.............     24,504    1,102      4.50%       23,100     1,335     5.78%      22,648     1,278       5.64%
                             --------   ------    ------      --------   -------   ------     --------   -------     ------
Total earning assets......    103,647    7,997      7.72%      121,000    11,601     9.59%     138,026    13,305       9.64%
Total non-earning assets..     10,644                           12,924                          19,466
                             --------                         --------                        --------
Total assets..............   $114,291                         $133,924                        $157,492
                             ========                         ========                        ========

INTEREST BEARING LIABILITIES:
  Deposits
   Interest bearing demand
    deposits..............   $ 14,953   $  211      1.41%     $  9,970   $   229     2.30%    $  8,705   $   241       2.77%
  Premier money market....     20,448      846      4.14%       41,822     2,417     5.78%      61,519     3,176       5.16% 
  Other savings...........     23,162      623      2.69%       16,462       425     2.58%      12,607       386       3.06%
  Certificates of deposit.     24,512    1,027      4.19%       25,626     1,356     5.29%      28,384     1,564       5.51% 
  IRA CD's................      5,784      253      4.37%        6,262       344     5.49%       6,436       347       5.39%
                             --------   ------    ------      --------   -------   ------     --------   -------     ------
  Total deposits..........     88,859    2,960      3.33%      100,142     4,771     4.76%     117,651     5,714       4.86%
  Other borrowings........      4,495      190      4.23%        1,999        98     4.90%         623        27       4.33%
                             --------   ------    ------      --------   -------   ------     --------   -------     ------
  Total interest bearing
   liabilities............     93,354    3,150      3.37%      102,141     4,869     4.77%     118,274     5,741       4.85%
                             --------   ------    ------      --------   -------   ------     --------   -------     ------
  Non-interest bearing
   liabilities:
  Demand deposits.........     11,400                           20,220                          24,862
  Other liabilities.......        476                            1,068                           1,630
                             --------                         --------                        --------
  Total non-interest
   bearing liabilities....     11,876                           21,288                          26,492
  Stockholders' equity....      9,061                           12,726
  Total liabilities and
   stockholders' equity...   $114,291                         $133,924                        $157,492 
                             ========                         ========                        ======== 
                             
  NET INTEREST INCOME/
     NET INTEREST SPREAD..              $4,847      4.35%                 $6,732     4.82%                $7,564       4.79%
                                        ======      ====                  ======     ====                 ======       ====

  NET INTEREST MARGIN.....                          4.68%                            5.56%                             5.48%
                                                    =====                            =====                             =====
</TABLE>
<PAGE>
 
    The following rate/volume analysis shows the portions of the net change in
interest income due to changes in volume or rate.  The changes in interest due
to both volume and rate have been allocated proportionally to changes due to
volume and changes due to rate.

<TABLE>
<CAPTION>
                                             YEAR ENDED DECEMBER 31,                        YEAR ENDED DECEMBER 31,
                                             1994 COMPARED TO 1995                           1995 COMPARED TO 1996
                                                CHANGES DUE TO:                                 CHANGES DUE TO:
                                                ---------------                                 ---------------
                                  VOLUME             RATE           TOTAL           VOLUME           RATE            TOTAL
                                  ------             ----           -----           ------           ----            -----
                                                                 (DOLLARS IN THOUSANDS)
<S>                               <C>               <C>             <C>              <C>             <C>             <C>
Increase (decrease) in net
 interest income due to:
Loans
  Commercial loans.............     $2,258          $1,160          $3,418           $2,100          $(194)          $1,906
  Residential loans............         29              86             115             (134)            41              (93)
  Other consumer loans.........       (224)             62            (162)             (51)            (1)             (52)
                                    ------          ------          ------           ------          -----           ------
  Total loans..................      2,063           1,308           3,371            1,915           (154)           1,761

Investment securities..........       (254)            205             (49)            (149)            45             (104)
Federal funds sold.............        171             111             282              103            (56)              47
                                    ------          ------          ------           ------          -----           ------
Total investments and
 federal funds sold............        (83)            316             233              (46)           (11)             (57)
                                    ------          ------          ------           ------          -----           ------
Total interest earning assets..      1,980           1,624           3,604            1,869           (165)           1,704

Deposits
  Interest-bearing demand            
   deposits....................       (114)            132              18              (35)            47               12 
  Premier money market               
   savings.....................      1,235             336           1,571            1,017           (258)             759 
  Other savings................       (173)            (25)           (198)            (118)            79              (39)
  Time deposits................         59             270             329              152             56              208
  IRA time deposits............         26              65              91                9             (6)               3
                                    ------          ------          ------           ------          -----           ------
Total deposits.................      1,033             778           1,811            1,025            (82)             943
FHLB advances..................       (122)             30             (92)             (60)           (11)             (71)

Total interest-bearing                                                                                                      
 liabilities...................        911             808           1,719              965            (93)             872 
                                    ------          ------          ------           ------          -----           ------ 

Change in interest income......     $1,069          $  816          $1,885           $  904          $ (72)          $  832
                                    ======          ======          ======           ======          =====           ======
</TABLE>
<PAGE>
 
FINANCIAL CONDITION
 
    General. Total assets increased $15.6 million, or 12%, from $125.6 million
at December 31, 1994 to $141.2 million at December 31, 1995, and $20.4 million,
or 15%, from $141.2 million at December 31, 1995 to $161.6 million at December
31, 1996. These increases reflect the increased loan portfolio and the
corresponding growth in deposits used to fund loan originations. Assets remained
relatively flat at $162.2 million at March 31, 1997 due to the $8 million, or 7%
increase, in loan originations offset by a similar decrease in cash and cash
equivalents.
 
    Cash and Cash Equivalents. Cash and cash equivalents have increased each
year as the Company maintains greater funds on hand as Federal Funds Sold,
providing overnight liquidity for the Company's increased volume of loan
originations. The March 31, 1997 balance of $11.1 million is less than the 1996
average balance of $17.0 million and reflects the balance sheet retention of
certain Ex-Im Bank guaranteed loans totaling $12.0 million which were sold in
April 1997.
 
    Investment Securities. The investment securities portfolio decreased $2.4
million, or 17%, from $14.0 million at December 31, 1994 to $11.6 million at
December 31, 1995 and increased $4.3 million, or 37%, from December 31, 1995 to
$15.9 million at December 31, 1996 and an additional $200,000, or 1% to $16.1
million at March 31, 1997. The portfolios are managed for liquidity and
security, rather than yield, and are comprised primarily of U.S. Treasury and
other U.S. government mortgage-backed securities and collateralized mortgage
obligations with average lives of less than five years. The portfolios are also
utilized to collateralize lines of credit with correspondent banks, providing
letter of credit facilities to supplement the Company's own product offerings.
 
    Loans. Loans increased $12 million, or 13%, from $95.1 million in 1994 to
$107.0 million in 1995, and increased $7.6 million, or 7%, from December 31,
1995 to $114.6 million at December 31, 1996 and increased $7.8 million, or 7%,
from December 31, 1996 to $122.4 million at March 31, 1997. The growth in the
portfolios resulted from the retained portions of SBA and USDA loans and was
partially offset by the sale from portfolio in 1996 of a total of $33.1 million
of the unguaranteed portions of SBA and USDA loans, many of which had been
originated in earlier years. This sale was undertaken to provide the funding
required for the September 1996 branch sale as well as to provide general
liquidity for originations and investment portfolio purchases.
 
    Allowance for Loan Losses.  The Company reviews the adequacy of the
allowance for loan losses quarterly.  The allowance totaled $2 million at
December 31, 1994 and at December 31, 1995.  The allowance for loan losses
increased $1 million, from $2 million at December 31, 1995 to $3 million at
December 31, 1996, to include a specific allocation for certain investor
property mortgage loans, and to reflect a general allocation to the commercial
loan portfolios due to increases in the outstanding loan balances.  The
allowance for loan losses decreased $250,000 from the December 31, 1996 balance
of $3 million to $2.75 million at March 31, 1997 reflecting the resolution of
certain investor property loans which had been reserved for in prior periods.
<PAGE>
 
<TABLE>
<CAPTION>
                                                 ACTIVITY IN THE ALLOWANCE FOR LOAN LOSSES
                                                                  AT DECEMBER 31,                     AT MARCH 31,
                                                      ------------------------------------        ---------------------
                                                           1994       1995          1996              1996       1997
                                                          ------     ------        ------            -----      -----
                                                               (DOLLARS IN THOUSANDS)
<S>                                                    <C>         <C>          <C>              <C>        <C>
Balance of allowance for loan
  losses at the beginning of the
  period.......................................        $ 1,425     $  2,000     $  2,000         $  2,000   $  3,000
Net charge-offs(1)
  Investor mortgage............................            691        1,073        1,717              363        610
  SBA..........................................              -           18          478                1          -
  USDA.........................................              -            -            -                -          -
  Commercial...................................            391          167          152              (15)        17
  Private......................................             23          (56)          17                -          -
  Ex-Im working capital........................              -            -            -                -          -
  Ex-Im medium term............................              -            -            -                -          -
  Construction.................................              -            4            -                -          -
  Residential and other consumer...............              3           31          123                -         (9)
                                                       -------     --------     --------         --------   --------
    Total charge-offs, net.....................          1,108        1,237        2,487              349        618

Provision for loan losses......................          1,683        1,237        3,487              349        368
                                                       -------     --------     --------         --------   --------
Balance of allowance for loan
  losses at end of period......................        $ 2,000     $  2,000     $  3,000         $  2,000   $  2,750
                                                       =======     ========     ========         ========   ========

Total loans....................................        $95,118     $106,992     $114,627         $118,953   $122,409
                                                       ========    =========    =========        =========  =========

Allowance to total loans.......................            2.1%         1.9%         2.6%             1.7%       2.3%
                                                       ========    =========    =========        =========  =========
 </TABLE>

    (1)Recoveries totaled $104,000, $84,000, $40,000, $17,000 and $11,000 for
    the years ended December 31, 1994, 1995 and 1996, and the three months ended
    March 31, 1996 and 1997, respectively, and are not material to the above
    analysis.
 
    Net charge-offs from the investor mortgage portfolio represented 62%, 87%,
69%, 104% and 99% of the total net charge-offs for the years ended December 31,
1994, 1995 and 1996, and the quarters ended March 31, 1996 and March 31, 1997,
respectively.  The Company's portfolio of investor mortgages is collateralized
by multi-family urban residential units located in various Connecticut inner
cities.  Following the recession in 1990, management determined that no new
loans collateralized by urban residential units would be made as the Company's
focus turned toward its current target market of small and medium size
manufacturers.  In the early 1990's the Company worked to resolve investor
mortgages related to certain urban residential loans by facilitating sales of
the troubled properties to experienced property managers who had an interest in
acquiring and rehabilitating them.  Due to deteriorating economic conditions in
Hartford and New Haven, Connecticut, many of these properties experienced cash
flow difficulties again in 1995 and 1996.  The Company increased the allocated
allowance for loan losses for such properties in 1996 and charged-off $610,000
of this additional allowance during the first quarter of 1997 upon resolution of
a long-outstanding loan from this portfolio.  The Company continues to monitor
this portfolio and, based on current information, believes that it maintains
appropriate reserves.  The outstanding balance of this portfolio at March 31,
1997 totaled $6.5 million and was comprised of  40 loans.
 
    The SBA net loan charge-offs for the year ended 1996 represented losses
realized on seven of the Company's 435 SBA loans after liquidation of the
collateral, and represent an annual loss
<PAGE>
 
ratio of 1.0% of the average balance of the unguaranteed portion of SBA loans
which were retained in the Company's portfolio.
 
     The following table sets forth the breakdown of the allowance for loan
losses by loan category at the dates indicated.  Management believes that the
allowance can be allocated by category only on an approximate basis, and
therefore allocation of the allowance to each category is not necessarily
indicative of future losses and does not restrict use of the allowance to absorb
losses in any category.  The unallocated portion of the allowance represents an
amount that is not specifically allocable to one of the loan portfolios.  All of
the loans included in the Company's portfolio are to domestic companies.  Loans
to foreign entities are 100% Ex-Im Bank guaranteed and sold at origination.

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,                                MARCH 31,
                                         ----------------------------------------------------------------     ----------
                                                  1992         1993          1994        1995        1996          1997
                                                  ----         ----          ----        ----        ----          ----
                                                                            (DOLLARS IN THOUSANDS)
<S>                                             <C>          <C>           <C>         <C>         <C>           <C>

ALLOCATION OF THE ALLOWANCE
  BY CATEGORY OF LOANS:
    Unguaranteed portions of:
    SBA and USDA loans.......................   $   37       $  147        $  338      $  563      $  491        $  689
    Ex-Im Bank working capital loans.........        -            -             -           2          44            44

    Commercial mortgage loans................       63          416           237         483         271           264
    Other commercial loans...................      195          346           353         316         475           438
    Investor mortgage loans..................       82          223           581         399       1,061           538
    Residential and other consumer loans.....       38           99           106          72         113            70
    Unallocated..............................       85          194           385         165         545           707
                                                ------       ------        ------      ------      ------        ------
    Total allowance for loan losses..........   $  500       $1,425        $2,000      $2,000      $3,000        $2,750
                                                ======       ======        ======      ======      ======        ======

PERCENT OF LOANS IN EACH
  CATEGORY TO TOTAL LOANS:
    Unguaranteed portions of:
    SBA and USDA loans.......................      8.0%        15.9%         32.0%       38.4%       30.4%         33.1%
    Ex-Im Bank working capital loans.........        -            -           0.2         0.3         4.8          11.8

    Commercial mortgage loans................     18.1         19.5          17.1        14.5        16.4          14.8
    Other commercial loans...................     36.6         28.1          21.6        26.9        29.4          28.3
    Investor mortgages loans.................     13.0         13.5           9.9         7.2         6.6           5.3
    Residential and other consumer loans.....     24.3         23.0          19.2        12.7        12.4           6.7
                                                ------       ------        ------       -----       -----         -----
Total........................................    100.0%       100.0%        100.0%      100.0%      100.0%        100.0%
                                                ======       ======        ======       =====       =====         =====
</TABLE>
<PAGE>
 
    The following table sets forth information regarding the Company's non-
performing loans at the dates indicated:

<TABLE>
<CAPTION>
                                                               NON-PERFORMING LOANS

                                                                   DECEMBER 31,
                                          -------------------------------------------------------------
                                                                                                           MARCH 31,
                                                                                                           ---------
                                              1992         1993        1994         1995        1995         1997
                                              ----         ----        ----         ----        ----         ----
                                                                      (Dollars in thousands)
<S>                                          <C>        <C>          <C>         <C>        <C>          <C>
COMMERCIAL:                                             
    Unguaranteed portions:                                                                                          
    SBA/USDA loans...................         $  -        $   -        $  -         $419        $188        $ 476(1)
    Ex-Im bank working capital                   -            -           -           -           -            -    
    loans............................    
                                                                                                                                  
    Commercial mortgage loans........                         -          703          -           -            -
    Other commercial loans...........            -            -          106          -          132           76
    Investor mortgages loans.........            -            755      1,437         839       1,853        1,184
CONSUMER.............................            -            -           -           -           79          396
                                             --------   ---------    --------    --------   ---------    ---------
TOTAL NON-PERFORMING                                                                                                              
  LOANS..............................         $  _           $755     $2,246      $1,258      $2,252       $2,132
                                             ========   =========    ========   =========   =========    ========= 
                                                                                                                                  
TOTAL NON-PERFORMING LOANS TO TOTAL                                                                                               
  LOANS..............................            _           1.06%      2.36%       1.18%       1.96%        1.74%
                                             ========   =========    ========   =========   =========    =========  

TOTAL NON-PERFORMING LOANS TO TOTAL                                                                                               
  ASSETS.............................            -             69%      1.79%        .89%       1.39%        1.31%
                                            =========   =========    ========   =========   =========    =========                  

ALLOWANCE TO TOTAL NON-                                                                                                           
  PERFORMING LOANS...................                         188%        89%        159%        133%         129%
                                            =========   =========    ========   =========   =========    =========     
</TABLE>

____________________
 /(1)/Excludes the Company's only guaranteed USDA loan not sold of $345,000
which is fully guaranteed as to the collection of principal and interest.
 
     The Company had no loans past due 90 days and accruing interest at any
period end as presented in the above table.
 
    Other Real Estate Owned.  It is the Company's policy, whenever possible,
not to take title to real property collateralizing loans, thereby avoiding
management time and any environmental liabilities associated with holding such
properties.  From the end of the 1994 to 1997 reporting periods discussed
herein, the highest balance of other real estate owned totaled $300,000.
 
    Receivable From Loans Sold.  Receivable from loans sold represents the
balance of loans sold for which funding has not yet been received.  Government
guaranteed loans are generally sold within a day of origination and settled
within 30 days of the trade date.  During this thirty day period, the Company
reviews and delivers closing documents to the investor.  The receivable balance
fluctuates with the month's loan sale activity and tends to be higher at any
quarter end due to increased loan closing activity.  The average balance of this
receivable was $2.6 million, $3.5 million and $8.0 million for the fiscal years
ended December 31, 1994, 1995 and 1996, respectively 
<PAGE>
 
and $6.3 million for the first quarter of 1997. The Company actively monitors
the settlement of loans to ensure that this source of liquidity is properly
managed.
 
    Prepaid Expenses and Other Assets. Prepaid Expenses and Other Assets is
comprised principally of servicing assets as discussed in "--Accounting for Loan
Sales."

<TABLE>
<CAPTION>
                                                          DECEMBER 31,             MARCH 31, 
                                                          ------------             --------- 
OTHER ASSETS                                        1994       1995       1996        1997   
                                                    ----       ----       ----        ----   
                                                      (DOLLARS IN THOUSANDS)                 
<S>                                                <C>        <C>         <C>         <C>    
Servicing assets.............................      $2,084     $2,809      $4,138       $4,599
Prepaid expenses and other assets............         226        280         631        1,195
                                                   ------     ------      ------       ------
                                                                                             
  Total other assets.........................      $2,310     $3,089      $4,769       $5,794
                                                   ======     ======      ======       ====== 
</TABLE>

    At December 31, 1996 and March 31, 1997, Prepaid Expenses and Other Assets
includes approximately $111,000 and $316,000, respectively, related to leasehold
improvement projects for staff additions and the refurbishment of the Company's
main branch facility. Such amounts were capitalized in the second quarter of
1997 as the projects were completed.
 
    Deposits.  Deposits are the Company's primary funding source and have
increased to sustain the Company's balance sheet growth.  See "Business--Funding
Sources."
 
    Federal Home Loan Bank of Boston Advances.  Federal Home Loan Bank ("FHLB")
advances were utilized in 1994 to "match fund" certain community reinvestment
initiatives and were repaid in 1995 when alternative, less expensive deposits
became available.  Since 1995, these advances have been utilized to  provide
short-term liquidity.  As of March 31, 1997, the Bank had a $2.9 million unused
line of credit from the FHLB and had the ability to borrow approximately $8.0
million from the FHLB under various term advance programs.  See "Business--
Funding Sources."
 
    Stockholders' Equity.  Stockholders' equity increased $1.9 million from $9.7
million at year end 1994 to $11.6 million at year end 1995, and $2.6 million
from year end 1995 to $14.2 million at year end 1996, and $900,000 to $15.1
million at March 31, 1997 due to the retention of earnings.  The Company has
paid quarterly dividends of $.03 per share (restated for the Stock Split) since
the fourth quarter of 1995.  As explained in Note 7 to the Company's
consolidated financial statements, the Company holds a note receivable from the
Company's Chairman of the Board and President related to the issuance of 614,600
shares of Common Stock (restated to reflect the Stock Split) in June 1994, the
repayment of which would result in an increase in stockholders' equity although
this note may be reduced or forgiven under certain circumstances.  See
"Management--Employment Agreements; Key-Man Insurance Policies."

LIQUIDITY AND CAPITAL RESOURCES
 
    The Company's primary sources of liquidity and funding are its diverse
deposit base and loan sales and participations.  Secondary sources of liquidity
include FHLB advances and the sale of investments.  As an FDIC-insured
institution, the Bank may make available traditional business and consumer
depository products, including checking, savings and time deposit accounts.  See
"Business -- Funding Sources" for a discussion of marketing efforts regarding
this deposit base.
<PAGE>
 
    Management considers scheduled cash flows from existing clients and
borrowers and projected deposit levels as well as estimated liquidity needs from
maturing and disintermediating deposits, approved extensions of credit and
unadvanced commitments to existing borrowers, in determining the level and
maturity of deposits necessary to support operations.  Historically, the Company
has increased the level of deposits to support its planned loan growth.
Marketing efforts are focused on externally indexed "core accounts" of checking
and savings deposits, which have proven to be generally less interest rate
sensitive than time deposits.  The Company, in addition to its primary deposit
solicitation efforts, may, from time to time, target time deposit campaigns to
the general public in conjunction with anticipated liquidity needs in order to
better allow an appropriate matching of  its funding sources to its funding
needs.
 
    Average balances of deposits accounts increased $20 million from $100
million in 1994 to $120 million in 1995, and $22 million from 1995 to $143
million in 1996, with the majority of the increases in the savings account
balances.  The deposit base remained flat for the first quarter of 1997, with
the average balance of deposits totaling $143 million.
 
    The Company's liquidity position is monitored daily by management to
maintain a level of liquidity conducive to efficient operations and is
continuously evaluated as part of the asset/liability management process.  The
Company believes that its liquidity sources will continue to provide funding
sufficient to support operating activities, loan originations and commitments,
and deposit withdrawals.
 
    The Bank is subject to various regulatory capital requirements administered
by federal banking agencies.  Failure to meet minimum capital requirements can
result in certain mandatory and discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company's financial
condition.  The regulations require that the Bank meet specific capital adequacy
guidelines as calculated under regulatory accounting practices.  The Bank's
capital classification is also subject to qualitative judgments by the
regulators about interest rate risk, concentration of credit risk and other
factors.
 
    Quantitative measures established by regulations to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of Tier I capital to total average assets (as defined), and minimum
ratios of Tier I and total capital to risk weighted assets.  The Bank's actual
capital amounts and ratios are also presented in the table.  As the Company has
less than $150 million in assets, it is not subject to any additional capital
ratio requirements.
<PAGE>
 
<TABLE>
<CAPTION>
                                                                   REGULATORY
                                                                   ----------
                                                                   MINIMUM FOR              REGULATORY
                                                                   -----------              ----------
                                                                CAPITAL ADEQUACY           MINIMUM TO BE
                                                                ----------------           -------------
                                             ACTUAL                  PURPOSES             WELL CAPITALIZED
                                             ------                  --------             ----------------
                                      DOLLAR                    DOLLAR                    DOLLAR
                                      AMOUNT      RATIO         AMOUNT      RATIO         AMOUNT     RATIO
                                      ------      -----         ------      -----         ------     -----
                                                             (DOLLARS IN THOUSANDS)
<S>                                   <C>         <C>           <C>         <C>           <C>        <C>
AS OF DECEMBER 31, 1995
  Total capital
    (to risk weighted assets).......  $12,268     10.73%        $ 9,148     8.00%         $11,435    10.00%
  Tier I capital
    (to risk weighted assets).......   10,831      9.47%          4,574     4.00%           6,861     6.00%
  Tier I capital
    (to average assets).............   10,831      7.71%          5,622     4.00%           7,028     5.00%

AS OF DECEMBER 31, 1996
  Total capital
    (to risk weighted assets).......  $14,253     11.62%        $ 9,811     8.00%         $12,264    10.00%
  Tier I capital
    (to risk weighted assets).......   12,702     10.36%          4,905     4.00%           7,358     6.00%
  Tier I capital
    (to average assets).............   12,702      8.44%          6,017     4.00%           7,522     5.00%

AS OF MARCH 31, 1997
  Total capital
    (to risk weighted assets).......  $15,686     10.59%        $11,847     8.00%         $14,809    10.00%
  Tier I capital
    (to risk weighted assets).......   13,830      9.34%        $ 5,924     4.00%           8,883     6.00%
  Tier I capital
    (to average assets).............   13,830      8.69%        $ 6,363     4.00%           7,953     5.00%
</TABLE>

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

     For purposes of the following analysis, checking and savings accounts are
presented 20% in the 0-90 day period, 20% in the 91-180 day period, and 30% in
the 181-365 day period and 30% in


<PAGE>
 
the 1-5 year period. Although the elasticity of such deposits cannot be tied to
any one time period, these are the assumptions which have been developed by the
Company based on historical experience and are utilized for internal and
regulatory reporting purposes.

<TABLE>
<CAPTION>
                                                                                 AT MARCH 31, 1997
                                                  -------------------------------------------------------------------------------
                                                    0 TO 90      91 TO 180    181 TO 365     1 TO 5        OVER 5
                                                     DAYS          DAYS          DAYS         YEARS        YEARS         TOTAL
                                                  -----------   -----------   -----------  -----------   ----------   -----------
<S>                                               <C>           <C>           <C>          <C>           <C>          <C>
Commercial loans...........................         $87,224      $  2,746      $  5,492     $  9,650      $ 9,116      $114,228
Residential loans..........................             410         1,204         2,410        1,349        1,368         6,741
Other consumer loans.......................           1,054             5             9          328           44         1,440
Investments................................           2,477            93           502       11,656        1,402        16,130
Federal funds sold.........................           2,750             -             -            -            -         2,750
                                                  -------------------------------------------------------------------------------
     TOTAL.................................         $93,915      $  4,048      $  8,413     $ 22,983      $11,930      $141,289
                                                    =======      ========      ========     ========      =======      ========

Checking...................................           7,141         7,141        10,711       10,711            -        35,704
Money market savings.......................          13,526        13,526        20,290       20,290            -        67,632
Other savings..............................             796           796         1,194        1,194            -         3,980
Time deposits..............................           3,652         9,639        20,233        2,929            -        36,453
Treasury, tax and loan.....................           1,134             -             -            -            -         1,134
                                                  -------------------------------------------------------------------------------
     TOTAL.................................         $26,249      $ 31,102      $ 52,428     $ 35,124            -      $144,903
                                                    =======      ========      ========     ========      =======      ========

     Interest sensitivity
       gap.................................         $67,666      $(27,054)     $(44,015)    $(12,141)     $11,930      $ (3,614)
                                                  -------------------------------------------------------------------------------
     Cumulative gap........................         $67,666      $ 40,612      $ (3,403)    $(15,544)     $(3,614)
                                                    =======      ========      ========      =======      =======
     Cumulative gap as a
     percentage of total
     earning assets........................              48%           29%           (2%)        (11%)         (3%)
                                                  -------------------------------------------------------------------------------
</TABLE>

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

<PAGE>
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
     SFAS No. 125
 
     In June 1996, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities."  SFAS No. 125 requires that, after a transfer
of financial assets, an entity recognize the financial and servicing assets it
controls and the liabilities it has incurred, derecognize financial assets when
control has been surrendered, and derecognize liabilities when extinguished.
SFAS No. 125 is intended to provide consistent standards by which a company may
distinguish transfers of financial assets that are sales from transfers that are
secured borrowings.  SFAS No. 125 applies to transfers and servicing of
financial assets and extinguishment of liabilities occurring after December 31,
1996, and is to be applied prospectively; earlier or retroactive application is
not permitted.  Implementation of SFAS No. 125, beginning on January 1, 1997,
did not have a significant effect on the financial condition or results of
operations of the Company.
 
     SFAS No. 128
 
     In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
(i) replaces the presentation of primary earnings per share ("EPS") with a
presentation of basic EPS; (ii) requires dual presentation of basic and diluted
EPS on the face of the consolidated statements of income regardless of whether
basic and diluted EPS are the same; and (iii) requires a reconciliation of the
numerator and denominator used in computing basic and diluted EPS.  Basic EPS
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period.  Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity.  Diluted EPS is computed similarly to fully
diluted EPS pursuant to Accounting Principles Board Opinion No. 15.  SFAS No.
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods.  Earlier application is not
permitted.  SFAS No. 128 requires restatement of all prior-period EPS data
presented.
 
YEAR 2000 COMPLIANCE
 
     As the year 2000 approaches, a critical business issue has emerged
regarding how existing application software programs and operating systems can
accommodate this date value.  In brief, many existing application software
products in the marketplace were designed to only accommodate a two digit date
position which represents the year (e.g.,   '95 is stored on the system and
represents the year 1995).  As a result, the year 1999 (i.e., '99) could be the
maximum date value these systems will be able to accurately process.  Management
is in the process of working with its software vendors to assure that the
Company is prepared for the year 2000.  Management does not anticipate that the
Company will incur significant operating expenses or be required to invest
heavily in computer system improvements to be year 2000 compliant.
<PAGE>
 
                                   BUSINESS

GENERAL

     Overview

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

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

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

     As of March 31, 1997, the Company had total assets of $162.2 million, total
balance sheet loans of $122.4 million, total deposits of $143.7 million and
total stockholders' equity of $15.1 million. The Company had a total commercial
and international loan servicing portfolio of $344.6 million at December 31,
1996 which increased 9% to $376.6 million at March 31, 1997. The total portfolio
serviced for investors increased 56% from $98.7 million at December 31, 1994 to
$153.9 million at December 31, 1995, increased 73% to $265.8 million at December
31, 1996 and increased 7% to $284.0 million at March 31, 1997. Net income for
the year ending December 31, 1996 was $3.2 million, and return on average assets
and return on average equity were 2.1% and 25.5%, respectively. Net income for
the quarter ending March 31, 1996 was $754,000 and increased 33% to $1.0 million
at March 31, 1997. As of March 31, 1997, the Bank was "well-capitalized" for
federal bank regulatory capital adequacy purposes.

     Loan Originations

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

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

     The Company's International Banking Department underwrites Ex-Im Bank
guaranteed loans to small and medium size manufacturers located throughout the
United States and in eight "Big Emerging Markets." See "Business--International
Banking Services and Products." International lending activities support trade
flows between the United States and the "Big Emerging Markets," which have grown
12% annually since 1990 and reached $473 billion in 1996. The Company's
international lending teams operate from the Hartford, Connecticut headquarters
and are assisted in their efforts by contractual international marketing
representatives who are actively involved in providing financial, accounting,
consulting and/or engineering services to manufacturers in their home countries.
Contractual marketing arrangements have been established with professionals in
Brazil, Mexico, Poland, Turkey and India. The Company began lending
internationally in 1994 and has increased its loan originations from $397,000 in
1994 to $1.8 million in 1995, $13.6 million in 1996 and $11.4 million for the
quarter ended March 31, 1997.

     Underwriting

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

     Loan Sales

     The Company achieves high returns while meeting the growing credit needs of
its target market by selling a portion of its commercial and international loans
on a non-recourse, servicing-retained basis.  A separate Capital Markets
Department was established in 1996 to sell loans, including commercial and
international loans without federal guarantees.  The Capital Markets Department
directs its resources toward identifying non-government guaranteed secondary
loan markets as a further means of mitigating credit risk, leveraging capital
and replenishing liquidity.


<PAGE>
 
As of March 31, 1996, $10.8 million, or 6%, of the loan portfolio serviced for
investors did not have government guarantees or credit enhancements compared to
$49.2 million, or 17%, of such servicing portfolio as of March 31, 1997.

     Deposits

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

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

          EXPAND DOMESTIC LOAN ORIGINATION ACTIVITIES. Commercial lending teams
          currently operate from the Hartford, Connecticut headquarters as well
          as from eight regional loan production or "representative" offices,
          located in Boston and Springfield, Massachusetts, Providence, Rhode
          Island, Pittsburgh and Philadelphia, Pennsylvania, Morristown, New
          Jersey, Rochester, New York and the Washington, D.C. area. The Company
          intends to continue to expand in its established geographic markets by
          adding additional staff over the second half of 1997 and in 1998. In
          addition, the Company will continue to enter new markets by opening
          representative offices as marketing diligence is completed. In the
          fourth quarter of 1997, the Company plans to establish an office in
          Long Island, New York.

          INCREASE INTERNATIONAL PRESENCE IN "BIG EMERGING MARKETS." The
          International banking department operating from the Hartford,
          Connecticut headquarters is assisted in its efforts abroad by its
          contractual relationships with international marketing representatives
          in Brazil, Mexico, Poland, Turkey and India. The marketing
          representatives are actively involved in providing professional
          financial services to privately owned manufacturers in their home
          countries. The Company intends to continue to develop its network of
          marketing representatives and expand the nature of the services
          provided by the marketing representatives to increase the Company's
          presence in targeted countries. In the third quarter of 1997, the
          Company plans to establish similar contractual marketing relationships
          in Argentina, South Africa and Indonesia.

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

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

          UTILIZE PRIVATE BANKING TO PROVIDE STABLE, LOW-COST FUNDING AND
          ENHANCE CLIENT RELATIONS.  The Private Banking Department was
          established to provide stable, low-cost funding to the Company.
          Private banking services are offered to serve the personal needs of,
          and facilitate relationships with, the Company's existing clients and
          their principals and other private banking clients.  The Company
          intends to grow by expanding its deposit base by strengthening
          existing deposit relationships, soliciting deposits from individuals
          who seek highly personalized service and offering new products
          consistent with the needs of these clients.

LENDING ACTIVITIES AND POLICIES

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

<TABLE>
<CAPTION>
                                                       FOR THE YEAR ENDED         FOR THE THREE MONTHS ENDED
                                                        DECEMBER 31, 1996              MARCH 31, 1997     
                                                        ------------------             --------------     
                                                                                                          
LOAN ORIGINATIONS BY                           PRINCIPAL BALANCE   PERCENTAGE    PRINCIPAL      PERCENTAGE
                                               -----------------   ----------    ---------      ----------
DEPARTMENT                                                                        BALANCE                 
                                                                                  -------                 
                                                                     (DOLLARS IN THOUSANDS)
<S>                                            <C>                 <C>            <C>           <C> 
Domestic:
     SBA loans..............................         $ 85,303          50%          23,152          46%
     USDA loans.............................           12,700           7%           7,479          15%
     Other commercial loans.................           37,824          22%           6,410          13%
                                                     --------         ---          -------         ---
  Total domestic banking....................          135,827          79%          37,041          74%
                                                     --------         ---          -------         ---

International:
     Ex-Im working capital lines............           23,300          13%           1,365           3%
     Ex-Im medium term loans................           13,617           8%          11,429          23%
                                                     --------         ---          -------         ---
     Total international
         banking............................           36,917          21%          12,794          26%
                                                     --------         ---          -------         ---

     Total commercial loan
         originations.......................         $172,744         100%         $49,835         100%
                                                     ========         ===          =======         ===
</TABLE>
<PAGE>
 
MARKETING

     Domestic Commercial Banking

     The Company originates domestic loans through its network of 27 commercial
loan officers in nine offices who seek to establish long-term relationships with
their clients.  The Company believes it is uniquely positioned to serve its
domestic market through its ability to provide clients with a flexible
combination of lines of credit, term loans and mortgages for industrial property
and trade financing.  The Company generally utilizes the SBA, USDA and/or Ex-Im
Bank loan guarantee programs as a part of a financing package in light of an
applicant's particular situation.  The Company's participation in three
government guarantee loan programs enables it to provide its clients with longer
term loans than are typically available to small and medium size manufacturers.

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

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

     International Banking

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

     Internationally, the Company has established contractual marketing
relationships with professionals in five of the Big Emerging Markets who, during
the course of conducting their primary business of accounting, consulting and
equipment sales have frequent contact with local manufacturers who require
financing for their purchase of U.S. goods. These professionals are 
<PAGE>
 
located by the Company through its review of databases from the U.S. Department
of Commerce and direct private sector sources. Prior to entering into
relationships with these individuals, the Company conducts due diligence,
including visiting the prospective representative and conducting inquiries of
local professionals. The Company also requires that each representative be
trained in the Company's products and services at the Hartford, Connecticut
headquarters. The contractual marketing relationships generally provide for an
eighteen month term, with certain minimum loan origination volumes required of
the representative and a narrowly-defined expense reimbursement policy. Once the
foreign marketing representatives develop a lead with a potential borrower they
direct the prospect to the U.S.-based loan officer who completes the application
process. The marketing representative receives a negotiated fee when a loan
referral made to a Company international loan officer is originated. The
marketing representative assists the lender in obtaining certain information
from the applicant and in responding to inquiries of the applicant, but does not
have any direct underwriting responsibilities.

     The Company has contractual marketing relationships with firms in Brazil,
Mexico, Poland, Turkey and India.  However, $27.8 million, or 87%, of the $32.1
million medium term loan portfolio at March 31, 1997 represents loans to
borrowers in Brazil and Mexico.  This concentration of originations reflects the
length of time which the Company has been marketing to Brazil and Mexico and is
not expected to reflect the concentration of activity in the future as more
recently-added marketing relationships in Big Emerging Markets generate
referrals.  Loan origination activity does not begin until some months after the
date the marketing relationship is established as the Company's marketing
representatives are trained, marketing plans are developed and calling efforts
are undertaken prior to generating viable leads for the Company.

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

DOMESTIC COMMERCIAL BANKING SERVICES AND PRODUCTS

     Loan Products and the Origination Process

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

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

<TABLE>
<CAPTION>
                                                                 PERCENTAGE OF   
             INDUSTRY CLASSIFICATION                            TOTAL SERVICED  
             -----------------------                            --------------  
     <S>                                                        <C>             
     Manufacturing:                                                         
        Industrial and commercial machinery...................         17%
        Metal fabrication.....................................         12%
        Electronic and other electrical.......................          8%
        Transportation........................................          8%
        Other.................................................         12%
                                                                      ---
              Total manufacturing.............................         57%
                                                                    
     Wholesale/distribution...................................         12%
     Professional services....................................         10%
     Retail...................................................          6%
     Foreign..................................................          6%
     Other....................................................          9%
                                                                      ---
          Total...............................................        100%
                                                                      ===
</TABLE>

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

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

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

     The Company utilizes the SBA's 7(a) loan program for eligible borrowers.
Eight of the Company's nine offices have Preferred Lender status. Preferred
lender status allows the Bank to approve loans on behalf of the SBA, with the
national SBA processing center's concurrence that the applicant meets the SBA
eligibility requirements. The SBA generally completes its eligibility review
within 24 hours of submission. Eight of the Company's offices also have
Certified Lender status. Certified Lender status entitles the Bank to a 72-hour
turnaround of local district SBA approval of loan applications which require the
slightly expanded Certified Lender process. Examples of loans requiring such
extended processing are those used to refinance the Bank's existing debt or
another lender's SBA guaranteed loan. The majority of the Bank's SBA loans are,
however, processed under the expedited Preferred Lender Program. The preferred
authorities provide the Bank with a competitive advantage by allowing the Bank
to respond more quickly to customer requests. The Bank, however, usually is not
competing against a lender offering an SBA-guaranteed loan, but rather against a
lender offering a conventional loan on slightly different terms. The Company is
able to utilize the SBA 7(a) program to provide small business borrowers with
terms not otherwise available and, because the Company has preferred and
certified designations, it is not at a competitive disadvantage from a timing
standpoint.

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

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

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

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

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

     USDA Guaranteed Loan Originations

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

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

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

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

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

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

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

     Upon initial approval by a Senior Vice President, the credit memorandum
must be approved by the Credit Policy Officer, who reports to the Chief Credit
Officer. The Credit Policy Officer reviews the memorandum and supporting file
for compliance with internal Company credit policies as well as any applicable
government guarantee program parameters. If additional approvals are required,
the credit memorandum is forwarded to the appropriate parties as noted above. If
the financing package includes a government guarantee loan product, the
application is forwarded to the applicable government agency.
<PAGE>
 
     The Company performs a credit analysis of all applications, considering the
type and value of the asset(s) securing a loan, the characteristics of the
borrower, the industry of the borrower and the anticipated debt service ratio.
The Company requires that the borrower's most recently completed fiscal year's
results demonstrate that the borrower be able to service the debt by requiring a
pro forma debt service coverage ratio of at least 1.25 to 1. If the requested
funds are to be utilized for plant or line of business expansions, consideration
may also be given to projected results, and therefore certain loans may be
granted when the pro forma debt service coverage is less than 1.25 to 1.

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

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

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

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

INTERNATIONAL BANKING SERVICES AND PRODUCTS

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

<TABLE>
<CAPTION>
   DIVISION/TERRITORY         EX-IM PRODUCT USED           DESCRIPTION
   ------------------         ------------------           -----------
   <S>                        <C>                          <C>
   UNITED STATES              Working capital line of      One year revolving line
   (principally the           credit; 90% guaranteed;      of credit for U.S. manu-
   Northeast)                 indexed to U.S. Prime,       facturers collateralized
                              variable daily               by export accounts
                                                           receivable and inventory
 
   BIG EMERGING MARKETS       Medium term loan; 100%       3- to 5-year term loan
   (principally Mexico,       guaranteed; indexed to       to foreign purchasers
   Brazil, Argentina,         6-month LIBOR, variable      of qualified U.S. made
   India, Poland, Turkey,     semi-annually; U.S. dollar   equipment
   Indonesia and South
   Africa)
</TABLE>

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

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

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

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

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



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

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

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

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

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

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

     The Company has submitted an application to Ex-Im Bank to be among its
first medium term preferred lenders, which will enable it to obtain 20-day
turnaround on applications, but at this time all medium term loans must be
approved by Ex-Im Bank.

     In the event of default, Ex-Im Bank handles the liquidation of medium term
loans and pays the Company 100% of the principal balance, plus accrued interest.
See "--Delinquency and Collection Activities."
<PAGE>
 
    International Banking Underwriting
 
    International loan officers receive and assemble initial applications,
analyze the creditworthiness of proposed borrowers and prepare loan memoranda
and are assisted in this effort by administrative assistants who prepare the
required Ex-Im Bank loan application packages and credit analysts who format
the historical financial data provided by the client and conduct credit,
customer and vendor reference checks. For medium term loans, the local marketing
representative, if any, aids in the transaction by obtaining required financial
or operational data, and generally assisting in the loan origination and closing
process.
 
    The U.S. loan officer will visit the prospective borrower's place of
business and perform on-site inspections and the Company will generally instruct
its local marketing representative to make such inspections for foreign
borrowers. Although inventory serves as collateral for the working capital
lines of credit, other tangible assets are generally not taken as collateral
under the Ex-Im Bank loan programs, site inspections are conducted because such
information is helpful in assessing a borrower's operations.
 
    The approval process is substantially similar to that followed by the
commercial loan officers. The Credit Policy Officer reviews the memorandum and
supporting file for compliance with internal Company credit policies as well as
applicable Ex-Im Bank guarantee program parameters. As with the domestic
commercial lending, exceptions to the Company's and Ex-Im Bank's loan policies
are entertained on a case-by-case basis by the approving loan officers and
acceptance depends upon the overall creditworthiness of the applicant.
 
    Working capital lines of credit are collateralized by export-related
inventory and accounts receivable less than 90 days old; such collateral has
maximum prescribed collateral values of 75% and 90%, respectively. As is the
case with respect to commercial loans, the appropriateness of the collateral
value is determined based on the borrower's individual circumstance, and
applications exceeding the general standards may receive special consideration.
 
    Medium term loans are unsecured although debt service coverage and operating
history are reviewed in the underwriting process. The officer also considers
the availability to the borrower of U.S. dollars and other "hard" currency,
which generally does not pose a significant difficulty for the borrower, as many
are exporting goods to the U.S. or have access to fairly stable currency
markets.
 
    While most working capital lines of credit are within the Company's AA
Delegated Authority, applications exceeding the maximum collateral values or
other program criteria, as well as loans above the Company's authority, require
Ex-Im Bank approval. All medium term and any "exception" working capital
applications are forwarded to Ex-Im Bank for approval after all required
internal approvals are obtained.
 
<PAGE>
 
CAPITAL MARKETS AND LOAN SERVICING
 
    Loan Sales and Servicing
 
    As detailed below, the Company's loan origination and sales activities have
increased in volume and have become more expansive as new lending programs are
introduced and a more focused sales effort is undertaken.

<TABLE>
<CAPTION>
                                                                       DECEMBER 31,                       MARCH 31,         
                                                       ---------------------------------------------  ------------------    
                                                        1992     1993     1994      1995      1996      1996      1997      
                                                       -------  -------  -------  --------  --------  --------  --------    
                                                                                                                            
                                                                  (DOLLARS IN THOUSANDS)                                    
<S>                                                    <C>      <C>      <C>      <C>       <C>       <C>       <C>         
SBA LOANS
   Total loans originated                              $17,202  $28,879  $58,753  $ 37,552  $ 85,303  $ 25,562  $ 23,152
   Total number of loans originated.................        29       56      109        95       170        45        48
   Average loan originated..........................   $   593  $   516  $   556  $    395  $    460  $    568  $    482
   Total guaranteed loans sold......................   $13,731  $21,659  $39,607  $ 27,413  $ 58,878  $ 16,913  $ 16,523
   Total unguaranteed loans sold....................         -                 -         -  $ 29,867         -         -

USDA LOANS
   Total loans originated...........................         -        -  $ 2,825  $ 19,241  $ 12,700  $  2,080  $  7,479
   Total number of loans originated.................         -        -        2        12         6         1         3
   Average loan originated..........................         -        -  $ 1,413  $  1,603  $  2,117  $  2,080  $  2,493
   Total guaranteed loans sold......................         -        -  $ 2,260  $ 14,984  $ 10,199  $  1,664  $  5,983
   Total unguaranteed loans sold....................         -        -        -         -  $  3,207         -         -

EX-IM MEDIUM TERM LOANS
   Total loans originated...........................         -        -  $   397  $  1,814  $ 13,617  $    451  $ 11,429
   Total number of loans originated.................         -        -        2         7        26         2        15
   Average loan originated..........................         -        -  $   199  $    259  $    524  $    226  $    762
   Total guaranteed loans sold......................         -        -  $   245  $  1,814  $ 12,745  $    451  $ 11,429

EX-IM WORKING CAPITAL LINES
   Total loans originated...........................         -        -        -  $  6,882  $ 23,300  $  1,000  $  1,365
   Total number of loans originated.................         -        -        -         2        17         1         1
   Average loan originated..........................         -        -        -  $    574  $  1,371  $  1,000  $  1,365
   Total guaranteed advances sold...................         -        -        -  $  2,632  $  8,614  $    447  $    758

OTHER COMMERCIAL LOANS
   Total loans sold.................................         -        -        -  $  8,843  $  9,329  $  2,100  $  4,158
   Total number of  loans sold......................         -        -        -        18        23         7        13

  TOTAL LOANS SOLD..................................   $13,731  $21,659  $42,112  $ 55,686  $132,839  $ 21,575  $ 38,851
                                                       =======  =======  =======  ========  ========  ========  ========

LOANS SERVICED FOR OTHERS
  (AT PERIOD END)
   Total commercial loan............................   $19,725  $40,579  $80,752  $132,810  $244,092  $142,604  $262,339
    Total residential loans.........................   $12,899  $17,781  $17,988  $ 21,040  $ 21,713  $ 31,345  $ 21,622
   Total number commercial loans....................       411      482      590       739       984       793     1,046
   Total number residential loan....................       293      331      335       336       318       321       319
</TABLE>
<PAGE>
 
    Capital Markets Activities
 
    The Capital Markets Department was formally established in July 1996 to
assume responsibility for the non-recourse, servicing-retained sale of SBA, USDA
and Ex-Im Bank government guarantee loans and to investigate and find buyers and
markets for the sale of non-guaranteed mortgage, term and revolving commercial
loans on a non-recourse, servicing-retained basis.  The Capital Markets
Department activities allow the Company to reduce reliance on government
guarantee loan programs for revenue, leverage capital, replenish liquidity and
mitigate the risk of balance sheet exposure to a single borrower.
 
    The guaranteed portions of SBA and USDA loans are sold within one-day of
origination on a single loan basis to established brokers.  Brokers generally
pool the SBA guaranteed portions.  Although the Bank is an approved SBA pool
assembler, it has not undertaken this activity due to the additional liquidity
and resources required to fund and market the pools.  USDA loans are sold to
individual investors.  The guaranteed portions of the Ex-Im loans and lines of
credit are sold primarily to the Private Funding Export Funding Corporation
("PEFCO"), although additional private purchasers have been identified for these
products, and the Company expects that this investor base will become more
diversified during the second half of 1997.  PEFCO is a private corporation
established with the support of the United States Treasury and Ex-Im to assist
in the financing of exports of U.S. goods and services by direct loans to
foreign importers of U.S. made goods, and providing liquidity support for
certain Ex-Im guaranteed loans.  The Company is one of among approximately 50
PEFCO shareholders, with a common stock investment of $415,000 at March 31,
1997.
 
    SBA and USDA regulations permit the Company to sell a portion of the
unguaranteed amounts of the loans originated under their respective programs.
SBA regulations currently require a bank lender to retain an unguaranteed
interest equal to 10% of the SBA loan, and do not permit such a lender to
securitize any unguaranteed portions.  Finance companies and other "non-bank"
lenders are currently not restricted in the amount of unguaranteed portions
which may be sold or securitized.   The SBA, however, has published draft
regulations for comment which would allow banks to securitize or sell the
unguaranteed portions of SBA Loans subject to certain criteria designed to
ensure that originators retain a continuing economic interest in the loan.  The
proposed rules would most likely include a provision to reduce the required
unguaranteed retention to 5% of the total SBA loan, thereby allowing the Company
to sell a greater percentage of such unguaranteed loan portions, freeing up
capital and liquidity for future loan originations.  USDA regulations permit the
Company to sell unguaranteed portions equal to all but 5% of  the total USDA
loan.  Upon the sale of such unguaranteed portions, the Company shares in the
payment stream and collateral on a pari passu basis with all (guaranteed and
unguaranteed) investors, beginning with the initial collection.
 
    In 1996, sales of unguaranteed portions of SBA Loans and USDA loans totaled
approximately $29.9 million and $3.2 million, respectively, for a total gain of
$842,000.  A significant portion of the loans sold had been originated in 1994
and 1995 and, although originations are expected to continue to increase the
portfolio, there can be no assurance that this volume of loan sales will be
representative of on-going non-guaranteed loan sales activity.  At March 31,
1997, the Company had approximately $9.8 million in unguaranteed portions of SBA
<PAGE>
 
and USDA loans which could be sold under current regulations. The Company would
evaluate the return on the sales as well as the impact on net interest income
and alternative investment opportunities prior to selling any such amounts.
 
    The Capital Markets Department has developed a portfolio of buyers of non-
guaranteed mortgage loans, term loans and revolving lines of credit and devotes
substantial resources to the identification of such buyers. A primary objective
in the negotiation and sale of such loans is the Company's retention of sole
responsibility for borrower contact. Investors meet with borrowers only in rare
circumstances, and generally rely on the Company to prudently service and
monitor the lending relationship. The Company believes that this is important to
its clientele and that it reflects investor confidence in its servicing ability
and reputation.

    Loan Servicing Activities
 
    At March 31, 1997, the total loan portfolio serviced by the Company was
comprised of the following:

<TABLE>
<CAPTION>
                                                                            
                                                                                                  TOTAL            NUMBER OF       
                                                                                                  -----            ---------       
                                                            SERVICED FOR         COMPANY         BALANCE            LOANS          
                                                            ------------         -------         -------            -----          
LOAN TYPE                                                      OTHERS            BALANCE        SERVICED           SERVICED        
                                                               ------            -------        --------           --------        
                                                                                 (DOLLARS IN THOUSANDS)   
<S>                                                         <C>                  <C>            <C>                <C> 
Commercial banking portfolio:
   SBA loans.............................................        $181,720         $ 36,618       $218,338              500
   USDA loans............................................          32,159            3,878         36,037               23
   Business loans........................................           3,364           13,837         17,201              113
   Revolving lines of credit.............................             760           17,606         18,366              216
   Commercial mortgages..................................          13,396           18,113         31,509               84
   Investor property mortgages...........................             607            6,477          7,084               39
   Private loans.........................................               -            3,200          3,200               22
                                                                 --------         --------       --------            -----
    Total commercial banking.............................         232,006           99,729        331,735              997

International banking portfolio:
   Ex-Im medium term loans...............................          19,990           12,155         32,145               54
   Ex-Im working capital lines...........................          10,342            2,344         12,686               28
                                                                 --------         --------       --------            -----
    Total international banking..........................          30,332           14,499         44,831               82

Private banking portfolio:
   Residential mortgages.................................          17,498            6,744         24,242              320
   Other consumer loans..................................           4,125            1,437          5,562              228
                                                                 --------         --------       --------            -----
     Total private banking...............................          21,623            8,181         29,804              548

    Totals...............................................        $283,961         $122,409       $406,370            1,627
                                                                 ========         ========       ========            =====
</TABLE>

    The Company services substantially all of the loans it originates, whether
sold to investors or held in portfolio. Servicing includes collecting payments
from borrowers and remitting applicable payments and required reports to any
investors; accounting for principal, interest and any real estate tax or other
escrow receipts and payments; contacting delinquent borrowers; supervising
foreclosures; and liquidating collateral when required. Other than tasks
performed by the assigned loan officers, loan servicing functions are
centralized in the Hartford, Connecticut headquarters.
 
    The Company receives servicing fees on loans serviced for others in varying
amounts, as determined under the particular terms of the sale. Management
believes that servicing loans originated enhances the Company's relationship
with the borrower by allowing it to maintain 
<PAGE>
 
contact with borrower. This contact allows the Company to continue to market and
provide its loan and deposit products to the client who may need additional
financing or retail services. Further, such arrangements provide an additional
and profitable revenue stream that is less cyclical than the business of
originating and selling loans.
 
    After a loan is closed, the loan servicing department initially reviews the
loan files to confirm that loans were originated in accordance with any
applicable government guarantee program guidelines and Company policies.
Thereafter, the loan officers and the Loan Review Department conduct periodic
reviews of the borrower's financial condition.
 
DELINQUENCY AND COLLECTION ACTIVITIES
 
    The assigned loan officer retains responsibility for the routine collection
of his or her portfolio. The Company attempts to collect all loans on a 30-day
basis, leaving very few loans past due 30 days or more at any month end. An
officer's initial collection efforts generally begin when an account is 15 days
past due. At 20 days past due, a reminder notice is sent to the borrower and the
loan officer again attempts to contact the borrower to determine the reason for
the delinquency and if the account will be brought current.

   If a borrower is unable to make a payment within 30 days of the due date,
and has not made acceptable alternative arrangements with the Company, the
account is transferred to the Company's Loan Workout Officer for consideration
of additional collection procedures, including issuance of a demand letter and
possible liquidation of collateral.
 
    The Loan Workout Officer is responsible for contacting the borrower and
analyzing its current and projected financial condition; the reasons leading to
the delinquency; and the value of the collateral available to the Company; and
then proposing a workout plan to the Chief Credit Officer and other involved
members of Senior Management. The Loan Workout Officer will also provide any
required notices and generally seek to comply with any government guarantee
program or investor requirements.
 
    A loan is placed on non-accrual status when, in the Company's opinion, it is
unlikely that full collection of principal and interest will be made in
accordance with the original terms of the loan agreement. This determination is
generally made before a loan is 90 days delinquent and is reevaluated over the
course of the workout process, as more information becomes known. Any interest
accrued is charged-off against interest income when a loan is placed on non-
accrual.
 
    If a modification of loan terms or other acceptable workout cannot be
achieved within a reasonable time frame, the Company will liquidate the
collateral. The Company prefers not to take title to real property or equipment
unless required to facilitate the collection process. The Company solicits
assistance from the principals of the delinquent borrower to effect the
liquidation of any property, with title remaining in the borrower's name,
thereby avoiding a lengthy foreclosure or repossession process, and exposure to
the Company regarding environmental or other liability issues. The Company has
generally found the principals to be cooperative and able to assist the Company
in efficiently liquidating the collateral. The Company follows the same general
workout procedures for all commercial loans serviced.

<PAGE>
 
    If a loan carries an SBA guarantee, the responsible District SBA Office will
be notified of the delinquency and will be presented with a liquidation plan
within 60-90 days of such delinquency.  Unless the SBA objects, the Company will
carry out the terms of the liquidation plan.  As a Preferred Lender, the Bank
has responsibility and authority over liquidation procedures on all SBA
guaranteed loans serviced.  Any loss after liquidation of collateral is
allocated pro rata between the guaranteed and unguaranteed portions of the SBA
Loan.  After an SBA loan becomes 60-90 days past due, the SBA, at the Company's
request, will repurchase the guaranteed portion of the principal balance of the
SBA Loan at par from the investor, together with accrued interest covering a
period of up to 120 days.
 
    USDA procedures require that the Company file a liquidation plan when it is
believed action should be taken on a delinquent loan, which is generally when
the loan is 60-90 days delinquent.  The USDA has 30 days to review the plan.
The Company will then execute the approved plan or work with the USDA to arrive
at a mutually acceptable plan. Any loss after liquidation of collateral is
allocated pro rata between the guaranteed and unguaranteed portions of the USDA
loan.  The holder of the guaranteed portion may request that the USDA repurchase
the guaranteed portion at any time, or the Company will request repayment on
such holder's behalf when liquidation is complete.  The USDA does not impose any
restrictions on the number of days for which interest will be paid on the
guaranteed portions.
 
    The liquidation of delinquent working capital and medium term Ex-Im Bank
loans is handled by Ex-Im Bank.  The Company may submit a claim for repurchase
at any time between 30 and 120 days of a delinquent loan, plus 15 days post-
Company demand for payment against the borrower and individual guarantors, but
at no time may such claim be made more than 150 days after the delinquency.  Ex-
Im Bank will make payment under its guarantee 30 days after receipt and
acceptance of the Company's request.
 
    The Company retains responsibility for the proper documentation and
servicing of all loans serviced for others, and may incur losses related to such
loans if it is found to be negligent in carrying out these duties by a
guaranteeing agency or other investor.
 
    Unguaranteed loans or unguaranteed portions of loans held by investors are
subject to negotiated servicing agreements, although the agreements generally
provide the investor the option, after a loan becomes 60-90 days delinquent, of
assuming responsibility for all collection efforts.  If the Company is to be
responsible for such efforts, the agreements generally require that the investor
pre-approve liquidation actions.
 
CREDIT RISK MANAGEMENT
 
    The Executive Vice President-Chief Credit Officer has primary responsibility
for credit risk management, ensuring the appropriateness of underwriting
criteria, and the application thereof, the maintenance and application of
RISCOPE/sm/, the Company's proprietary commercial risk assessment model, and the
independent analyses of loans by the Loan Review Department.
 
    The Credit Policy Officer, who reports to the Chief Credit Officer, reviews
all credit memoranda for compliance with the requirements of government
guarantee programs and with Company credit policies.  If, based on the
particular facts and circumstances, policy exceptions are 
<PAGE>
 
proposed by the officers, the Credit Policy Officer will also ensure that all
appropriate policy exceptions are documented and approved by the approving
party, as the case may be. The Chief Credit Officer periodically evaluates the
nature and trends of such exceptions, reporting them quarterly to the Board of
Directors' Audit Committee.
 
    As a nationally-chartered bank, the Bank is required to "risk rate" its loan
portfolio, by monitoring current changes in the financial condition of the
borrower and overall economic trends and assigning numerical ratings to the
loans in  portfolio. The Company applies the regulatory definitions of the risk
ratings and has developed additional ratings for the "Pass" or uncriticized loan
category. Such a rating system, in conjunction with other available
quantitative and qualitative data, is utilized to assist management in its
quarterly evaluation of the adequacy of the allowance for loan losses.
 
    The assigned loan officer has primary responsibility for the risk ratings
and such officer's decisions are periodically reviewed by the Loan Review
department. The Company's risk ratings are based on consideration of the
borrower's operating cash flow and debt service coverage ability, industry,
product segment, market, earnings, assets and liabilities, management
experience, debt capacity and prior credit history with Company.
 
    The Company has developed a proprietary risk model, RISCOPE/sm/, used in the
initial underwriting and post-closing monitoring and risk rating process by the
officers and the Loan Review Department. RISCOPE/sm/ assists the Company in
quantifying the credit risk of commercial clients. The model takes into account
quantitative and qualitative factors and was designed after analysis of the
Company's primary client base: privately-owned small and medium size
manufacturers. RISCOPE/sm/ is intended to quantify credit risk with respect to
the probability of default and, therefore, assists management in risk rating
loans and providing an appropriate allowance for loan losses and targeting
additional management attention to weaker credits earlier than might otherwise
be done if payment default were the sole trigger for such actions.
 
    In accordance with the Bank Board of Directors' approved annual plan, the
Loan Review Department reviews the Company's loan portfolio to evaluate the
appropriateness of the officer risk ratings and analyzes overall trends in the
portfolio. The loan review results are reported to the Company's Audit
Committee quarterly.
 
PRIVATE BANKING

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

    The Private Banking Department targets commercial depository accounts of
small and medium size manufacturers as well as the personal accounts of their
principals by offering a full 

<PAGE>
 
array of deposit products to serve the personal needs of, and facilitate
relationships with, the Company's existing clients and their principals. As of
March 31, 1997, 54% of the $144 million in total deposits were in the form of
accounts from commercial clients. The private bankers administer deposits and
related services, such as automatic sweep accounts, merchant and corporate
credit card services, payroll processing, business and individual retirement
accounts, and international funds transfer and foreign exchange conversions.

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

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

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,           MARCH 31,      
                                                                  ------------           ---------      
DEPOSIT TYPE:                                              1994       1995       1996      1997         
                                                           ----       ----       ----      ----         
                                                                  (DOLLARS IN THOUSANDS)                
<S>                                                       <C>        <C>       <C>        <C>           
BUSINESS ACCOUNTS:                                                                                      
    Non-interest bearing checking..................       $ 14,643   $ 19,337  $ 27,485   $ 28,858
    Interest bearing checking......................          5,794      5,897     4,567      3,450
    Savings........................................         20,738     31,453    46,660     45,437
                                                          --------   --------  --------   --------
        Total business.............................         41,175     56,687    78,712     77,745
CONSUMER ACCOUNTS:
    Non-interest bearing checking..................          3,938      3,284       403        482
    Interest bearing checking......................          4,736      4,835     3,681      2,884
    Savings........................................         26,773     39,573    22,618     26,175
                                                          --------   --------  --------   --------
        Total consumer.............................         35,447     47,692    26,702     29,541
TIME DEPOSITS ACCOUNTS:
    Non-IRA time deposits..........................         29,365     17,904    32,372     30,082
    IRA time deposits..............................          5,862      6,078     6,530      6,371
                                                          --------   --------  --------   --------
       Total time deposits.........................         35,227     23,982    38,902     36,453
   Total deposits..................................       $111,849   $128,361  $144,316   $143,739
                                                          ========   ========  ========   ========

Externally indexed savings accounts
   included above..................................       $ 26,983   $ 57,310  $ 65,779   $ 67,632
                                                          ========   ========  ========   ========       
</TABLE>

    As of March 31, 1997, the average balances held in checking and savings
accounts were $15,400 and $36,600, respectively.  These balances are higher than
industry norms which the Company believes is attributable to the Company's focus
of attracting commercial deposits.  Management believes that such business
deposits are more stable than those obtained from a consumer deposit base.  The
Company does not generally compete with retail branches of other depository
institutions, but rather with mutual and money market funds, yet it retains the
advantage of FDIC insurance.  The Company's basic business cash management and
private banking savings accounts are variable rate money market accounts tied to
an external index published daily in The Wall Street Journal and are designed to
compete with money fund alternatives.
 
<PAGE>
 
    The following table sets forth, by account types the aggregate amount and
weighted average rate of the Company's deposits:

<TABLE>
<CAPTION>
 
                                                          DECEMBER 31,                                  MARCH 31,       
                                   ------------------------------------------------------          -------------------
                                     1994                    1995                  1996                   1997
                                  -----------             -----------          -----------             ----------
                                             Weighted                Weighted              Weighted                Weighted
                                             Average                  Average               Average                Average 
 DEPOSIT TYPE                  Amount          Rate       Amount       Rate     Amount       Rate      Amount       Rate
 ------------                  ------          ----       ------       ----     ------       ----      ------       ----
<S>                           <C>            <C>          <C>        <C>      <C>          <C>         <C>         <C>
  Transaction
    accounts:
Non-interest bearing
   checking................   $ 18,581          -%     $ 22,621         -%    $ 27,888         -%    $ 29,340           -%

Interest-bearing
   checking................     10,530       2.60        10,732      2.95        8,248      2.52        6,334        2.53
                              --------       ----      --------      ----     --------      ----     --------        ----
Subtotal...................     29,111        .94        33,353       .95       36,136       .57       35,674         .45

Savings accounts...........     47,511       4.06        71,026      5.14       69,278      5.09       71,612        5.00
Time deposits..............     35,227       4.67        23,982      5.43       38,902      5.55       36,453        5.71
                              --------       ----      --------      ----     --------      ----     --------        ----

Total  deposits............   $111,849       3.44%     $128,361      4.11%    $144,316      4.08%    $143,739        4.05%
                              ========       ====      ========      ====     ========      ====     ========        ====
</TABLE>

    The following table sets forth the Company's certificate of deposits over
$100,000 by time remaining until maturity as of March 31, 1997:

<TABLE>
<CAPTION>
 
                   MATURITY PERIOD                     CERTIFICATES OF DEPOSIT 
                   ---------------                     ----------------------- 
                                                       (Dollars in thousands)  
      <S>                                              <C>                     
      Three months or less............................        $  415
      Over three through six months...................         1,862
      Over six through twelve months..................         4,853
      Over one year...................................           577
                                                              ------
               Total Certificate of Deposits
                  over $100,000.......................        $7,707
                                                              ======
</TABLE>
 
    Additional funding for the Company's operations is also is available from
the following sources:
 
      On-going sales of guaranteed and non-guaranteed loans.  Proceeds from such
 loan sales totaled $137 million and $41 million for the year ended December 31,
 1996 and for the three months ended March 31, 1997, respectively.
 
      Federal Home Loan Bank of Boston advances.  Approximately $9.6 million was
 available in overnight and term borrowings from the Federal Home Loan Bank of
 Boston for short and longer term needs as of March 31, 1997.  Funding from this
 source has been, and is anticipated to be, used infrequently since the Company
 relies on lower cost core deposits, leaving advances available to fund
 temporary shortfalls.
 
      Federal funds sold.  Federal funds sold provide daily liquidity and are
 invested on an overnight basis.  Such investments had an average balance of $12
 million average balance for the year ended December 31, 1996 and $13 million
 for the three months ended March 31, 1997.  It has been the Company's policy
 that investment securities be generally comprised of U.S. government and agency
 bonds with an average term of less than five years.  Such investments 
<PAGE>
 
     will continue to comprise the majority of the portfolio after the Offering
     to enable use of such funds to higher yielding loans.

COMPETITION

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

INTELLECTUAL PROPERTY

    The Company possesses federal trademark for protection of the name, "First
National Bank of New England."  The Company has also applied for federal
protection of two of its servicemarks,  Financing Manufacturers Worldwide/sm/,
the Company's slogan, and RISCOPE/sm/, the Company's proprietary risk model.

LEGAL PROCEEDINGS

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

EMPLOYEES

    At March 31, 1997, the Company had 97 full-time employees.  The Company's
employees are not represented by a collective bargaining group, and the Company
considers its relations with its employees to be good.

PROPERTIES

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

HOLDING COMPANY REGULATION

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

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

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

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

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

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

REGULATION OF THE BANK

     General

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

     As a national bank, the Bank may be able to engage in certain activities
approved by the OCC which the FRB would not necessarily approve for the Company.
The OCC has been particularly aggressive in recent years in allowing national
banks to undertake an ever-increasing range of securities and insurance
activities.  Along these lines, pursuant to certain revisions to the OCC's
regulations pertaining to the national bank activities effective on December 31,
1996, national banks, among other things, are permitted, on a case-by-case
basis, to operate subsidiaries engaging in activities not permissible for the
Bank itself.  Although the revised regulations do not authorize any new
activities, it is expected that national banks, if eligible and if they obtain
the approval of the OCC, will use these regulations to expand further into the
businesses of underwriting insurance and securities.

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

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

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

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

     Capital Adequacy

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

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

     Banking organizations are required to maintain a risk-based capital ratio
of total capital (Tier 1 plus Tier 2) to risk-weighted assets of 8%, of which at
least 4% must be Tier 1 capital. The federal bank regulatory authorities may,
however, set higher capital requirements when a banking organization's
particular circumstances warrant. As a general matter, banking organizations are
expected to maintain capital ratios well above the regulatory minimums. The 
risk-based capital ratios of the Bank as of December 31, 1995, December 31, 1996
and March 31, 1997 are set forth under "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources."
<PAGE>
 
     In addition, federal bank regulatory authorities have established
guidelines for a minimum leverage ratio (Tier 1 capital to average total
assets). These guidelines provide for a minimum leverage ratio of 3% for banking
organizations that meet certain specified criteria, including excellent asset
quality, high liquidity, low interest rate exposure and the highest regulatory
rating. Banking organizations not meeting these criteria or which are
experiencing or anticipating significant growth are required to maintain a
leverage ratio which exceeds the 3% minimum by a least 100 to 200 basis points.
The leverage ratios of the Bank as of December 31, 1995, December 31, 1996 and
March 31, 1997 are set forth under "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources."

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

     Dividends

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

     OCC approval is required for the payment of dividends by the Bank in any
calendar year if the total of all dividends declared by the Bank in that year
exceeds the current year's net income combined with the retained net income of
the two preceding years.  "Retained net income" means the net income of a
specified period less any common or preferred stock dividends declared for that
period.  Moreover, no dividends may be paid by a national bank in excess of its
undivided profits account.  In addition, the FRB and the FDIC have issued policy
statements which provide that, as a general matter, insured banks and bank
holding companies may pay dividends only out of current operating earnings.  In
accordance with such regulatory restrictions, the Bank currently has the ability
to pay dividends, and on March 31, 1997 an aggregate of $6.2 million was
available for the payment of dividends to the Company without prior OCC
approval.

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

     FDICIA

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

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

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

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

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

     Reserve Requirements

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

COMMUNITY REINVESTMENT ACT

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

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

EXECUTIVE OFFICERS AND DIRECTORS

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

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

<TABLE>
<CAPTION>
           NAME             AGE                      POSITION
           ----             ---                      --------
<S>                         <C>       <C>
Brett N. Silvers(2)........  42       Chairman of the Board and President of the
                                      Company and the Bank
Brian J. Charlebois........  37       Executive Vice President-Chief Operating
                                      Officer and Director of the Bank
Leslie A. Galbraith........  35       Executive Vice President, Secretary and
                                      Treasurer of the Company and Executive Vice
                                      President, Chief Financial Officer and
                                      Director of the Bank
Michael R. Carter(1).......  42       Director of the Company and the Bank
Arnold L. Chase(3).........  45       Director of the Company and the Bank
Cheryl A. Chase, Esq.(3)...  43       Director of the Company and the Bank
Frank P. Longobardi(1).....  42       Director of the Company and the Bank
Bernard R. Waldman(2)......  76       Director of the Company and the Bank
William J. Anderson........  58       Executive Vice President and Director of the
                                      Bank
Craig M. Cooper............  40       Director of the Bank
David G. Sandberg..........  46       Director of the Bank
Kenneth R. Sonenclar.......  43       Director of the Bank
</TABLE>

__________
 (1) Term as Director of the Company expires at the  1998 Annual Meeting of the
     Company's stockholders.
 (2) Term as Director of the Company expires at the  1999 Annual Meeting of the
     Company's stockholders.
 (3) Term as Director of the Company expires at the  2000 Annual Meeting of the
     Company's stockholders.
<PAGE>
 
BIOGRAPHICAL INFORMATION OF EXECUTIVE OFFICERS AND DIRECTORS

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

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

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

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

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

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

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

     Bernard M. Waldman has been a Director of the Company since 1985 and a
Director of the Bank since 1976.  Mr. Waldman is currently retired.
<PAGE>
 
     William J. Anderson has been a Director of the Bank since 1993.  Since
joining the Bank in 1990, Mr. Anderson has been Senior Vice President of the
Bank and is currently Executive Vice President--Private Banking.

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

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

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

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

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

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

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

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

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

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

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

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

DIRECTOR'S COMPENSATION

     Directors of the Company are not compensated for attendance at meetings.
Currently, all non-employee directors of the Bank receive a director's fee of
five hundred fifty ($550) dollars for each Bank Board meeting attended.  In
addition, each non-employee director of the Bank receives a fee of two hundred
seventy-five ($275) dollars for all committee meetings attended, except for
meetings of the Loan Committee for which directors receive a fee of five hundred
fifty ($550) dollars for each meeting attended.

EXECUTIVE COMPENSATION

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

<TABLE>
<CAPTION>
                                                                        Long-Term
                                                                       Compensation
                                                                     Number of Shares
                                                                        Underlying           All Other
Name and Principal Position                  Salary       Bonus       Options Granted      Compensation(1)
- ---------------------------                  ------       -----       ---------------      ---------------
<S>                                         <C>           <C>        <C>                   <C>
Brett N. Silvers..................          $241,917      $---              ----                $6,870
 Chairman of the Board and President
 of the Company and the Bank
Leslie A. Galbraith...............           127,764      24,600           12,481                5,400
 Executive Vice President, Secretary
 and Treasurer of the Company
 and Executive Vice President and
 Chief Financial Officer of the Bank
Brian J. Charlebois...............           117,956      21,400           12,663                4,985
 Executive Vice President and
 Chief Operating Officer of the Bank
</TABLE>

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

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

                       OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                    Individual Grants
                            --------------------------------------------------------------------

                                              Percent of
                               Number of     Total Options
                                 Shares        Granted to
                               Underlying     Employees in     Exercise
                                Options        Fiscal 1996      Price
                                               -----------
Name                            Granted                       ($/share)      Expiration Date
- ----                            -------                       ---------      ---------------
<S>                            <C>           <C>              <C>            <C>
Brett N. Silvers...........       ---             ---            ---              ---
Leslie A. Galbraith........      12,481           9.6%          $2.19             2006
Brian J. Charlebois........      12,663           9.7%          $2.19             2006
</TABLE>
<PAGE>
 
     The following table sets forth certain information regarding the number of
shares of Common Stock received upon exercise of options during the last fiscal
year, the aggregate dollar value realized upon exercise and the total number of
unexercised options held by each of the Named Executive Officers as of December
31, 1996.
 
 
                AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                       AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                              Number of Securities
                             Number of Shares                Underlying Unexercised          Value of Unexercised in the
                               Acquired in      Value     Options  at Fiscal Year-End    Money Options at Fiscal Year-End (1)
                                                          ---------------------------    ------------------------------------
        Name                     Exercise      Realized  Exercisable(2)   Unexercisable    Exercisable       Unexercisable
        ----                     --------      --------  --------------   -------------    -----------       -------------
<S>                          <C>               <C>       <C>              <C>            <C>                 <C>
Brett N. Silvers.........           --            --           --              --              --                 --
Leslie A. Galbraith......           --            --         63,875           1,106           [   ]              [   ]
Brian J. Charlebois......           --            --         63,875           1,288           [   ]              [   ]
</TABLE>

_____________
(1)  There was no public market for Common Stock on December 31, 1996.
     Accordingly, solely for purposes of this table, the values in these columns
     have been calculated on the basis of the public offering price of $
     per share (rather than a determination of the fair market value of Common
     Stock on December 31, 1996), less the applicable option exercise price.

(2)  In January 1997, the Company granted stock options, none of which are
     currently exercisable, to Ms. Galbraith and Mr. Charlebois to purchase
     61,250 shares of Common Stock, at an option exercise price of $2.63 per
     share (as adjusted to reflect the Stock Split).

STOCK OPTION PLANS

     1996 Stock Option Plan.  The First International Bancorp, Inc. 1996 Stock
Option Plan (the "1996 Plan") was adopted by the Company Board on October 17,
1996 and was approved by the Company's stockholders on June 26, 1997.  The
aggregate number of shares of the Company's Common Stock available for awards
under the 1996 Plan is 701,106 shares.  The 1996 Plan provides for the grant or
award to officers and directors of the Company non-qualified options ("Stock
Options") to purchase shares of the Company's Common Stock.  The purpose of the
1996 Plan is to attract and retain outstanding directors and key employees
through the incentives of stock ownership.  As of July 15, 1997, 260,565 of the
701,106 shares reserved for issuance under the 1996 Plan were subject to
outstanding Stock Options at a weighted average exercise price of $2.56 per
share.

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

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

     The Company Board determines the prices at which Stock Options may be
exercised under the 1996 Plan, however, the exercise price must be at least 100%
of the fair market value (as determined under the terms of the 1996 Plan) of a
share of Common Stock on the date of grant; the exercise price for Stock Options
granted to directors will be 100% of the fair market value of the Common Stock
on the date of grant in all circumstances. The Company Board, as specified in
the 1996 Plan, estimates the fair market value of the Common Stock at each grant
date because prior to the Offering, there has been no active trading market for
the Common Stock. The Company Board's determination is based on current economic
conditions, characteristics of the Common Stock, the Company's financial
performance and other relevant factors. Stock Options must be exercised by the
tenth anniversary of the date of grant.
 
     1994 Incentive Stock Option Plan.  The 1994 Incentive Stock Plan (the "1994
Plan") was adopted by the Company Board on December 22, 1993 and was approved by
the Company's stockholders on March 17, 1994.  The aggregate number of shares of
the Common Stock available for awards under the 1994 Plan is 348,600 shares.
The 1994 Plan provides for the grant or award of incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").  Under the 1994 Plan, incentive stock options may be granted only to
such officers of the Company and the Bank as selected by the Company Board.  As
of July 15, 1997, 316,400 of the 348,600 shares reserved for issuance under the
1994 Plan were subject to outstanding stock options at a weighted average
exercise price of $1.83 per share.
 
     The 1994 Plan is administered by two or more members of the Company Board
who are not employees of the Company and who are "disinterested" directors, as
that term is defined in the 1994 Plan.  The Company Board will also determine,
subject to the express provisions of the 1994 Plan, the time or times at which
options are granted, the purchase price of the Common Stock, the number of
shares covered by each option, the term of the options and the terms and
provisions of the option agreements (which need not be identical).  The 1994
Plan requires that the purchase price of the Common Stock covered by each option
granted thereunder be not less than 100% of the fair market value of the Common
Stock on the date of grant, provided that 
<PAGE>
 
options granted to persons possessing voting power over more than 10% of the
Common Stock must be granted at a price not less than 110% of the fair market
value, as determined by the Company Board, on the date of grant.
 
     401(k) Plan.  The Company has adopted an employee profit-sharing plan
pursuant to Section 401(k) of the Code (the "401(k) Plan").  Under the 401(k)
Plan, eligible participants may defer portions of their salaries for future
receipt and the Company will match 75% of the deferral contribution made by such
participant up to a maximum deferral contribution of 6% of a participant's
compensation.
 
EMPLOYMENT AGREEMENTS; KEY-MAN INSURANCE POLICIES

     Brett N. Silvers entered into an employment agreement with the Company and
the Bank, dated as of June 30, 1994, as amended July 14, 1997, pursuant to which
Mr. Silvers is employed as the Chairman of the Board and President of the
Company and the Bank.  The employment agreement provides for a base annual
salary of $300,000 for the twelve month period ending March 31, 1998, increasing
by 5% on April 1st of each year thereafter, plus various benefits including club
memberships, life insurance, and use of an automobile.  The term of the
agreement extends through December 31, 2000.  If there is a material change in
the authority and responsibility of Mr. Silvers, Mr. Silvers will have the right
to terminate his employment and to receive severance pay equal to one year's
salary.  If the employment of Mr. Silvers is terminated by the Company without
cause (as defined in the agreement), Mr. Silvers will have the right to receive
severance pay equal to one year's salary.

     In addition to the base annual salary, the employment agreement
contemplates that the Company Board may award annual discretionary performance
bonuses to Mr. Silvers in 1998, 1999 and 2000. The interest accrued on the
promissory note delivered by Mr. Silvers to the Company in connection with Mr.
Silvers' purchase of Common Stock in 1994 (see "--Certain Transactions"), and
any interest that would have accrued in the future, will be forgiven by the
Company if the Offering is consummated; in addition to such forgiveness of
interest, the Company will pay a bonus to Mr. Silvers in the amount of his
resulting income tax liability. See "Certain Transactions." This forgiveness
will result in a charge to earnings for the quarter ended September 30, 1997 of
approximately $165,000 after income taxes if the Offering is completed.

     The principal balance of the Note will be canceled by the Company, and any
resulting income tax liability of Mr. Silvers will be paid by the Company, if
Mr. Silvers and his affiliates (the "Silvers Stockholders"), and Arnold L.
Chase, Cheryl A. Chase, Rhoda L. Chase, and David T. Chase and their affiliates
(the "Chase Stockholders"), at any time, cease in the aggregate (i) to
beneficially own at least 25% of the outstanding Common Stock of the Company, or
any successor thereto, (ii) to have the right to exercise at least 25% of the
aggregate voting power of the Company, or any successor thereto, (iii) to
beneficially own, directly or indirectly, at least 25% of the Common Stock of
the Bank, or any successor thereto, or (iv) to have the right to exercise,
directly or indirectly, at least 25% of the aggregate voting power of the Bank,
or any successor thereto.
<PAGE>
 
     The employment agreement also sets forth the agreement of the Chase
Stockholders that, if the Chase Stockholders enter into an agreement to sell all
or a majority of the shares of Common Stock of the Company owned by them, they
will cause the buyer to give Mr. Silvers the opportunity to sell the same
percentage of his shares of Common Stock of the Company as the Chase
Stockholders are selling, on the same terms as are applicable to the sale by the
Chase Stockholders.

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

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

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

     On April 15, 1994, the Company issued 175,600 shares (614,600 shares after
adjustment for the Stock Split) of Common Stock to Brett N. Silvers, Chairman of
the Board and President of the Company and the Bank, for an aggregate purchase
price of $1,037,796, or $5.91 per share ($1.69 per share after adjustment for
the Stock Split).  Mr. Silvers delivered to the Company, as payment of the
purchase price, $17,560 in cash and a promissory note in the principal amount of
$1,020,236 (the "Note").  To secure the payment of the Note, Mr. Silvers pledged
all 175,600 shares of the Common Stock to the Company.  No principal or interest
is payable under the Note prior to December 31, 2000.  The interest accrued on
the Note, and any interest that would have accrued in the future, will be
forgiven by the Company if the Offering is consummated resulting in a charge to 
net income of $165,000.  The principal balance of the Note will be cancelled by
the Company in certain circumstances.  In addition to any possible forgiveness,
the Company will provide a reimbursement to Mr. Silvers for all tax liabilities
associated with such forgiveness and bonus.  See "Management-Employment
Agreements; Key-Man Insurance Policies."

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

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

     The Bank has had, and expects to have in the future, various loan and other
banking transactions in the ordinary course of business with the directors,
executive officers and principal stockholders of the Company, the Bank and
entities with which such persons may be associated.  All such transactions: (i)
have been and will be made in the ordinary course of business; (ii) have been
and will be made on substantially the same terms, including interest rates and
collateral on loans, as those prevailing at the time for comparable transactions
with unrelated persons; and (iii) in the opinion of management do not and will
not involve more than the normal risk of collectability or otherwise present
other terms less favorable to the Bank than would otherwise be obtained with
unrelated persons.  As of March 31, 1997, the total dollar amount of extensions
of credit to directors and executive officers identified in "Management-
Executive Officers and Directors," those stockholders named in the table in
"Principal Stockholders" and any of their associates were approximately $2.4
million, which represented approximately 16% of total stockholders' equity as of
such date.
<PAGE>
 
                            PRINCIPAL STOCKHOLDERS

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

<TABLE>
<CAPTION>

                                             SHARES BENEFICIALLY                     SHARES BENEFICIALLY
                                               OWNED BEFORE THE                       OWNED AFTER THE
NAME AND ADDRESS OF BENEFICIAL OWNER            OFFERING (1) (2)                       OFFERING(1) (2)
- ------------------------------------         --------------------                   --------------------
                                           NUMBER              PERCENT              NUMBER           PERCENT
                                           -------             -------             -------           -------
<S>....................................  <C>                   <C>                <C>                <C>
Arnold L. Chase (3)....................  3,659,677             63.38%             3,659,677              48.97%

Cheryl A. Chase (4)....................  3,659,677             63.38%             3,659,677              48.97%

Rhoda L. Chase (5).....................  3,659,677             63.38%             3,659,677              48.97%

David T. Chase (6).....................  3,659,677             63.38%             3,659,677              48.97%

Brett N. Silvers (7)...................    632,699             10.96%               632,699               8.47%

Bernard M. Waldman (8).................    468,175              8.11%               468,175               6.26%

Anthony Gannuscio (9)
   c/o Fleet National Bank.............    289,457              5.01%               289,457               3.87%

William J. Anderson (10)...............     71,092              1.22%                71,092               *

Leslie A. Galbraith (10)...............     64,575              1.11%                64,575               *

Brian Charlebois (10)..................     63,875              1.09%                63,875               *

Craig M. Cooper (11)...................     22,050              *                    22,050               *

David Sandberg.........................      5,096              *                     5,096               *

Frank P. Longobardi (12)...............      1,050              *                     1,050               *

Kenneth R. Sonenclar...................      1,050              *                     1,050               *

Michael R. Carter......................        875              *                       875               *

ALL EXECUTIVE OFFICERS AND
DIRECTORS AS A GROUP (12 PERSONS)......  4,990,214             86.95%             4,990,214              67.17%
</TABLE> 
 
_______________________________ 
 
*Less than 1%


<PAGE>
 
(1)  Beneficial ownership is determined in accordance with the rules of the
     Securities and Exchange Commission (the "Commission") and includes voting
     or investment power with respect to the shares.  Shares of Common Stock
     subject to options currently exercisable within sixty (60) days following
     July 15, 1997, are deemed outstanding for computing the share ownership and
     percentage of the person holding such options, but are not deemed
     outstanding for computing the percentage of any other person.
(2)  The number of shares of Common Stock deemed outstanding prior to the
     Offering includes (i) 5,774,052 shares of Common Stock outstanding as of
     July 15, 1997 and (ii) 316,400 shares issuable pursuant to options held by
     persons which may be exercised within sixty (60) days of July 15, 1997.
     The number of shares of Common Stock deemed outstanding after the Offering
     includes the 1,700,000 shares of Common Stock offered hereby.
(3)  Includes (i) 1,354 shares owned in joint tenancy with Sandra M. Chase, his
     wife, (ii) 947,279 shares beneficially owned by Cheryl A. Chase, Mr.
     Chase's sister, (iii) 112,521 shares held by the Rothschild Trust Cayman
     Ltd. Trust, of which Cheryl A. Chase is the primary beneficiary, (iv)
     149,877 shares owned by David T. Chase, Mr. Chase's father, and (v)
     1,400,000 shares owned by Rhoda L. Chase, Mr. Chase's mother.  Mr. Chase
     disclaims beneficial ownership over all shares beneficially owned by Mr.
     Chase's sister, father and mother.
(4)  Includes (i) 1,050,000 shares owned by Arnold L. Chase, Ms. Chase's
     brother, (ii) 112,521 shares held by the Rothschild Trust Cayman Ltd.
     Trust, of which Ms. Chase is the primary beneficiary, (iii) 149,877 shares
     owned by David T. Chase, Ms. Chase's father and (iv) 1,400,000 shares owned
     by Rhoda L. Chase, Ms. Chase's mother.  Ms. Chase disclaims beneficial
     ownership over all shares beneficially owned by Ms. Chase's brother, mother
     and father.
(5)  Includes (i) 1,050,000 shares owned by Arnold L. Chase, Ms. Chase's son,
     (ii) 947,279 shares beneficially owned by Cheryl A. Chase, Ms. Chase's
     daughter, (iii) 112,521 shares held by the Rothschild Trust Cayman Ltd.
     Trust, of which Cheryl A. Chase is the primary beneficiary, and (iv)
     149,877 shares owned by David T. Chase, Ms. Chase's husband.  Ms. Chase
     disclaims beneficial ownership over all shares beneficially owned by Ms.
     Chase's children.
(6)  Includes (i) 1,050,000 shares owned by Arnold L. Chase, Mr. Chase's son,
     (ii) 947,279 shares beneficially owned by Cheryl A. Chase, Mr. Chase's
     daughter, (iii) 112,521 shares held by the Rothschild Trust Cayman Ltd.
     Trust, of which Cheryl A. Chase is the primary beneficiary, and (iv)
     1,400,000 shares owned by Rhoda L. Chase, Mr. Chase's wife.  Mr. Chase
     disclaims beneficial ownership over all shares beneficially owned by Mr.
     Chase's children.
(7)  Includes 17,748 shares held by Mr. Silvers' wife.
(8)  Includes (i) 225,592 shares owned by Bernice Waldman, Mr. Waldman's wife
     and (ii) 242,141 shares owned by Mr. Waldman's three adult children and
     grandchildren.  Mr. Waldman disclaims beneficial ownership over all shares
     beneficially owned by Mr. Waldman's children and grandchildren.
(9)  Under the terms of Mr. Gannuscio's agreement with Fleet National Bank,
     dated as of July 20, 1990, Fleet National Bank has voting power over such
     shares.
(10) Includes shares of Common Stock subject to options which were exercisable
     as of July 15, 1997 and options which will be exercisable within sixty (60)
     days of July 15, 1997.
(11) Includes 4,550 shares owned in joint tenancy with Valarie Cooper, Mr.
     Cooper's wife and 17,500 shares held by the pension account of Mr. Cooper's
     father.  Mr. Cooper disclaims beneficial ownership over all shares
     beneficially owned by Mr. Cooper's father.
(12) Includes 1,050 shares held in the name of Haggett, Longobardi & Co. LLC, of
     which Mr. Longobardi is a partner.
<PAGE>
 
                         DESCRIPTION OF CAPITAL STOCK

     The authorized capital stock of the Company consists of 12,000,000 shares
of Common Stock, par value $.10 per share, and 2,000,000 shares of Preferred
Stock, par value $.10 per share.

COMMON STOCK

     As of July 15, 1997, a total of 5,774,052 shares of Common Stock were
outstanding after giving effect to the Stock Split.  Based upon the number of
shares outstanding as of that date and giving effect to the issuance of the
shares of Common Stock offered by the Company pursuant to this Offering, there
will be 7,474,052 shares of Common Stock outstanding upon the closing of the
Offering.

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

PREFERRED STOCK

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

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

     The Charter and the Amended and Restated By-laws ("By-laws") provide that
any action required or permitted to be taken by the stockholders of the Company
may be taken only at a duly called annual or special meeting of the stockholders
and that special meetings may be called only by the Chairman of the Board of
Directors, the President, a majority of the entire Board of Directors of the
Company or by holders of at least 30% of the shares of the Common Stock. These
provisions could have the effect of delaying until the next annual stockholders
meeting stockholder actions which are favored by certain of the stockholders,
including actions to remove directors. These provisions may also discourage
another person or entity from making a tender offer for the Company's Common
Stock, because such person or entity, even if it acquired all or a majority of
the outstanding voting securities of the Company, would be able to take action
as a stockholder (such as electing new directors or approving a merger) only at
a duly called stockholders meeting, and not by written consent.

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

     The By-laws provide that for nominations for the Board of Directors or for
other business to be properly brought by a stockholder before an annual meeting
of stockholders, the stockholder must first have given timely notice thereof in
writing to the Secretary of the Company. To be timely, a stockholder's notice
generally must be delivered not later than 120 days in advance of the first
anniversary of the date that the Company's proxy statement to stockholders is
delivered in connection with the prior year's annual meeting of stockholders or
90 days prior to the date of the meeting if no such proxy statement was
delivered to the stockholders. The notice must contain, among other things,
certain information about the stockholder delivering the notice and, as
applicable, background information about each nominee or a description of the
proposed business to be brought before the meeting. Business transacted at a
special meeting is limited to the purposes for which the meeting is called.
<PAGE>
 
     The foregoing provisions could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire, control of the Company. See "Risk Factors--Effect of Anti-takeover
Provisions; and "Management--Employment Agreement; Key-Man Insurance Policies."

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

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

     TRANSFER AGENT AND REGISTRAR

     The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services LLC. 
<PAGE>
 
                        SHARES ELIGIBLE FOR FUTURE SALE


     Upon completion of the Offering, the Company will have outstanding
7,474,052 shares of Common Stock, assuming no exercise of options after July 15,
1997 (7,729,052 shares of the Underwriters over-allotment option is exercisable
in full).  Of these shares, the 1,700,000 shares offered hereby (1,955,000
shares if the Underwriters' over-allotment option is exercised in full) will be
freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act ("Rule 144") described below.  Of
the remaining 5,774,052 shares of Common Stock outstanding upon closing of the
Offering, 5,120,248 shares are either "restricted securities" as that term is
defined in Rule 144 or are held by persons who may be deemed "affiliates" of the
Company.  Of the remaining 5,774,052 shares, _________ shares are subject to
lock-up agreements (described below).

     Upon completion of the Offering, 289,457 shares will be eligible for
immediate sale without lock-up agreement pursuant to Rule 144(k) and, beginning
90 days after commencement of the Offering, 31,675 shares will become eligible
for sale pursuant to Rule 144 or Rule 701 under the Securities Act ("Rule 701").
Upon expiration of the lock-up agreements, an aggregate of 654,331 shares will
become immediately eligible for sale without restriction pursuant to Rule 144(k)
or Rule 701 (described below), and approximately 4,183,638 additional shares
will be eligible for sale subject to the timing, volume, and manner of sale
restrictions of Rule 144.  The 614,951 remaining shares will be subject to all
of the restrictions of Rule 144.  In addition, 316,925 additional shares of
Common Stock subject to outstanding and vested stock options could also be sold,
subject in some cases to compliance with certain volume limitations as described
below.

     In general, under Rule 144, as recently amended, a person (or persons
whose shares are aggregated) who has beneficially owned shares for at least one
year (including the holding period of any prior owner except an affiliate from
whom such shares were purchased) is entitled to sell in "brokers' transactions"
or to market makers, within any three-month period commencing 90 days after the
date of this Prospectus, a number of shares that does not exceed the greater of
(i) one percent of the number of shares of Common Stock then outstanding
(approximately 74,741 shares immediately after the completion of the Offering)
or (ii) generally, the average weekly trading volume in the Common Stock during
the four calendar weeks preceding the required filing of a weekly trading volume
in the Common Stock during the four calendar weeks preceding the required filing
of a Form 144 with respect to such sale.  Sales under Rule 144 are generally
subject to the availability of current public information about the Company.
Under Rule 144(k), a person who is not deemed to have been an affiliate of the
Company at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
(including the holding period of any prior owner other than an affiliate from
whom such shares were purchased), is entitled to sell such shares without having
to comply with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.  Under Rule 701, persons who purchase shares upon
exercise of options granted prior to the
<PAGE>
 
effective date of the Offering are entitled to sell such shares 90 days after
the effective date of the Offering in reliance on Rule 144, without having to
comply with the holding period requirements of Rule 144 and, in the case of non-
affiliates, without having to comply with the public information, volume
limitation or notice provisions of Rule 144.

     Pursuant to the lock-up agreements, certain of the Company's officers,
directors and stockholders, owning upon completion of the Offering, in the
aggregate, ________ shares of Common Stock, have executed agreements pursuant to
which each has agreed that, subject to certain exceptions, they will not, for a
period of 180 days from the date of this Prospectus, directly or indirectly,
offer, sell, offer to sell, contract to sell, pledge, grant any option to
purchase or otherwise sell or dispose (or announce any offer, sale, offer of
sale, pledge, contract of sale, grant of any option to purchase or other sale or
disposition) of any shares of Common Stock or other capital stock of the Company
or any securities convertible into, or exercisable or exchangeable for, any
shares of Common Stock, or other capital stock of the Company without the prior
written consent of Prudential Securities Incorporated, on behalf of the
Underwriters.  Further, holders of outstanding and vested stock options for, in
the aggregate, an additional 316,400 shares of Common Stock are subject to 180
day lock-up agreements with the Company and/or Prudential Securities
Incorporated on behalf of the Underwriters.  The Company has agreed that it will
not, for a period of 180 days from the date of this Prospectus, directly or
indirectly, offer, sell, offer to sell, contract to sell, pledge, grant any
option to purchase or otherwise sell or dispose (or announce any offer, sale,
offer of sale, contract of sale, pledge, grant of any option to purchase or
other sale or disposition) of any shares of Common Stock or other capital stock
of the Company or any securities convertible into, or exercisable or
exchangeable for, any shares of Common Stock, or other capital stock of the
Company without the prior written consent of Prudential Securities Incorporated,
on behalf of the Underwriters, except that such agreement does not prevent the
Company from granting additional options under the Company's stock option plans.
Prudential Securities Incorporated may in its sole discretion and at any time
without notice, release all or any portion of the securities subject to lock-up
agreements.

     Approximately 180 days after the date of this Prospectus, the Company
intends to file a Registration Statement on Form S-8 covering an aggregate of
approximately 1,017,506 shares of Common Stock that have been reserved for
issuance under the 1996 Stock Option Plan and 1994 Incentive Stock Option Plan,
thus permitting the resale of such shares in the public market without
restriction under the Securities Act.

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


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

<TABLE>
<CAPTION>
                                             NUMBER   
UNDERWRITER                                 OF SHARES
- -----------                                 --------- 
<S>                                         <C>
Prudential Securities Incorporated.......
Keefe, Bruyette & Woods, Inc.............
 
 
 
 
          Total                             ---------     


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

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

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

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

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

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

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

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

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

                                    EXPERTS

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

     The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock offered
hereby.  As permitted by the rules and regulations of the Commission, this
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto.  For further information with
respect to the Company and the shares of Common Stock offered hereby, reference
is hereby made to such Registration Statement and to the schedules and exhibits
filed as part thereof.  Statements contained in this Prospectus as to the
contents of any contract or any other document are not necessarily complete,
and, in each instance, if such contract or document is filed as an exhibit,
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.  Copies of the Registration Statement, including
all schedules and exhibits thereto, may be inspected, copied and obtained at
prescribed rates at the public reference facilities maintained by the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549 and at the Regional Offices of the Commission at Suite 1400, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, Thirteenth Floor, New York, New York 10048.  The Commission also
maintains a website at (http:\\www.sec.gov).

                         ANNUAL AND QUARTERLY REPORTS

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

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
Report of Independent Accountants........................................  F-2
 
Financial Statements of First International Bancorp
 
     Consolidated Balance Sheets as of March 31, 1997 (unaudited), and
     December 31, 1996 and 1995..........................................  F-3
 
     Consolidated Statements of Income for the three months ended
     March 31, 1997 and 1996 (unaudited) and the years ended
     December 31, 1996, 1995 and 1994....................................  F-5
 
     Consolidated Statements of Changes in Stockholders' Equity for the
     three months ended March 31, 1997 (unaudited) and the years ended
     December 31, 1996, 1995 and 1994....................................  F-6
 
     Consolidated Statements of Cash Flows for the three months ended
     March 31, 1997 and 1996 (unaudited) and the years ended December
     31, 1996, 1995 and 1994.............................................  F-8
 
     Notes to Consolidated Financial Statements..........................  F-10
</TABLE>

                                      F-1
<PAGE>
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
                       ---------------------------------

THE BOARD OF DIRECTORS AND STOCKHOLDERS
  OF FIRST INTERNATIONAL BANCORP, INC.

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

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

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



Coopers & Lybrand L.L.P.

Hartford, Connecticut
January 29, 1997
(except for Note 1, as it
relates to "Earnings Per
Share" and "Common Stock
Split", and Note 13 as to
which the date is 
June 26, 1997)

                                      F-2
<PAGE>
 
               FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
               ------------------------------------------------
                          CONSOLIDATED BALANCE SHEETS
                          ---------------------------
                                    
                                    ASSETS
                                    ------
<TABLE>
<CAPTION>
                                              AT MARCH 31,                AT DECEMBER 31,               
                                              -------------         ---------------------------         
                                                  1997                  1996           1995             
                                              -------------         -------------  ------------         
                                               (UNAUDITED)                                              
<S>                                           <C>                   <C>            <C>                   
Cash and due from banks.....................  $  8,324,099          $  5,866,653   $  5,250,477         
Federal funds sold..........................     2,750,000            13,000,000      4,800,000         
                                              ------------          ------------   ------------         
     Cash and cash equivalents..............    11,074,099            18,866,653     10,050,477         
                                                                                                        
Investment securities (Note 2):                                                                         
     Available for sale at fair value.......    11,807,068            11,523,795      6,642,123         
Held to maturity at amortized cost (fair 
  value $3,001,163, $3,055,997 and                        
  $4,104,322)...............................     3,035,528             3,062,478      4,116,443
     U.S. Agency stocks at cost.............     1,287,350             1,287,350        872,350         
Loans, net (Note 3).........................   117,404,174           109,452,484    102,731,649         
Accrued interest receivable.................     1,031,167               823,471        877,330         
Other real estate owned, net................             -                     -        300,000         
Premises and equipment, net (Note 4)........     1,690,285             1,515,180      1,270,273        
Receivable from loans sold (Note 1).........     9,048,746            10,341,091     11,272,960         
Prepaid expenses and other                                                                               
 assets (Note 3)............................     5,794,321             4,769,271      3,088,914         
                                              ------------          ------------   ------------          
                                                                                                        
     Total assets...........................  $162,172,738          $161,641,773   $141,222,519         
                                              ============          ============   ============         
 
                     LIABILITIES AND STOCKHOLDERS' EQUITY
                     ------------------------------------
 
Deposits (Note 5)...........................  $143,738,532          $144,316,149   $128,361,468
U.S. Treasury demand note...................     1,134,464             1,061,449        220,685
Accrued interest payable....................       558,080               621,609        298,076
Other liabilities...........................     1,674,601             1,426,991        740,666
                                              ------------          ------------   ------------
     Total liabilities......................   147,105,677           147,426,198    129,620,895
                                              ------------          ------------   ------------ 
 
Commitments and Contingencies
  (Notes 3 and 4)
 
Stockholders' equity (Notes 1,
  7, 8, 9 and 13):
  Common stock, $.10 par value,
  12,000,000   shares authorized;                                               
  5,773,527, 5,766,352 and
  5,753,227 shares issued and
  outstanding...............................       577,353               576,635        575,323
Preferred Stock, $.10 par value,
 2,000,000 shares authorized no                        
 shares issued and outstanding..............             -                     -              -
Paid-in capital in excess of par                 
 value......................................     8,233,410             8,221,659      8,201,885
Stockholder note receivable.................      (953,967)             (953,967)    (1,006,678)
Unrealized holding loss on investments  
 available-for-sale, net....................       (82,460)              (74,220)       (28,300)
Retained earnings...........................     7,292,725             6,445,468      3,859,394
                                              ------------          ------------   ------------
     Total stockholders' equity.............    15,067,061            14,215,575     11,601,624
                                              ------------          ------------   ------------
</TABLE> 
 
                                      F-3
<PAGE>
 
<TABLE> 
    <S>                                      <C>                    <C>            <C> 
     Total liabilities and
      stockholders' equity................... $162,172,738          $161,641,773   $141,222,519
                                              ============          ============   ============
</TABLE> 

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

                                      F-4
<PAGE>
 
               FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
               ------------------------------------------------
                       CONSOLIDATED STATEMENTS OF INCOME
                       ---------------------------------
<TABLE>
<CAPTION>                                                                              
                                                                                         THREE MONTHS ENDED  
                                          YEAR ENDED DECEMBER 31,                             MARCH 31,        
                                   -------------------------------------               -----------------------
                                      1996         1995         1994                      1997         1996  
                                   -----------  -----------  -----------               -----------  ----------
<S>                                <C>          <C>          <C>                       <C>          <C>      
                                                                                              (UNAUDITED)
INTEREST INCOME:                                                                                             
  Loans, including net fees......  $12,027,413  $10,265,578   $6,895,123               $2,857,477   $2,960,792
  Investment securities..........      646,059      750,300      799,499                  235,236      178,095
  Federal funds sold.............      631,967      585,073      302,756                  166,572       83,351
                                   -----------  -----------   ----------               ----------   ----------
       Total interest income.....   13,305,439   11,600,951    7,997,378                3,259,285    3,222,238  
                                   -----------  -----------   ----------               ----------   ----------   
INTEREST EXPENSE:
     Deposits....................    5,714,156    4,770,934    2,959,649                1,453,082    1,372,742
     Other.......................       27,229       97,790      190,719                    6,755        9,818
                                   -----------  -----------   ----------               ----------   ----------
          Total interest           
           expense...............    5,741,385    4,868,724    3,150,368                1,459,837    1,382,560  
                                   -----------  -----------   ----------               ----------   ---------- 
     Net interest income.........    7,564,054    6,732,227    4,847,010                1,799,448    1,839,678
PROVISION FOR POSSIBLE LOAN                                                                                    
     LOSSES......................    3,486,974    1,237,480    1,683,046                  367,700      349,110
                                   -----------  -----------   ----------               ----------   ----------
Net interest income after                                                                                      
  provision for possible                                                                                       
  loan losses....................    4,077,080    5,494,747    3,163,964                1,431,748    1,490,568
                                                                                                               
NON-INTEREST INCOME:                                                                                           
     Service charges and other                                                                                 
      deposit fees...............      423,887      397,874      385,404                   90,518      122,510
                                                                                                               
     Loan servicing income and                                                                                 
      fees.......................    1,475,392      896,387      492,961                  526,699      269,665
     Gain on sale of guaranteed                                                                                
      commercial loans...........    4,904,588    2,744,249    2,712,663                2,044,662    1,252,155
     Gain on sale of unguaranteed                                                                              
      portions of commercial           
      loans......................      841,700           --           --                       --           -- 
     Gain on sale of other                                                                                     
      commercial loans...........       91,317       97,033           --                  120,940        7,822
     Gain on residential loan                                                                                  
      sales......................        6,593       18,123       17,371                   56,272          940   
     Gain on branch sale.........    2,201,781           --           --                       --           --
                                   -----------  -----------   ----------               ----------   ----------
          Total non-interest       
           income................    9,945,258    4,153,666    3,608,399                2,839,091    1,653,092
                                   -----------  -----------   ----------               ----------   ---------- 
          Total operating          
           income................   14,022,338    9,648,413    6,772,363                4,270,839    3,143,660
                                   -----------  -----------   ----------               ----------   ---------- 
NON-INTEREST EXPENSE:                                                                                          
     Salaries and benefits.......    4,963,436    3,398,992    2,485,375                1,680,391      972,431
     Occupancy...................      773,776      572,940      492,895                  211,142      179,771
     Furniture and equipment.....      462,288      407,221      344,385                  147,951      118,489
     Outside services............      230,500      210,060      198,034                   53,439       63,279
     Foreclosed property and                                                                                   
      collection, net............      360,395      311,335      364,517                   (6,325)     148,458
     FDIC and OCC assessments....       69,208      205,630      295,842                   16,323       21,095
     Other.......................    1,565,618    1,021,606      948,375                  393,062      305,377
                                   -----------  -----------   ----------               ----------   ----------
          Total non-interest         
           expense...............    8,425,221    6,127,784    5,129,423                2,495,983    1,808,900   
                                   -----------  -----------   ----------               ----------   ----------   
</TABLE> 

                                      F-5
<PAGE>
 
<TABLE> 
<S>                                <C>          <C>           <C>                      <C>          <C> 
     Income before income                                                                                      
       taxes.....................    5,597,117    3,520,629    1,642,940                1,774,856    1,334,760
                                                                                                               
                                                                                                               
PROVISION FOR INCOME TAXES                                                                                     
     (NOTE 9)....................    2,352,781    1,494,400      583,000                  762,846      580,449
                                   -----------  -----------   ----------               ----------   ----------
                                                                                                               
     NET INCOME..................  $ 3,244,336  $ 2,026,229   $1,059,940               $1,012,010   $  754,311
                                   ===========  ===========   ==========               ==========   ==========
                                                                                                               
EARNINGS PER SHARE                                                                                             
                                   
     (NOTES 1 AND 7).............         $.54         $.34         $.18                     $.17         $.13
                                   ===========  ===========   ==========               ==========    ========== 
</TABLE>
   
   The accompanying notes are an integral part of the consolidated financial 
                                  statements.

                                      F-6
<PAGE>
 
               FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
               ------------------------------------------------
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
          ----------------------------------------------------------
   FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND THE YEARS ENDED
   -------------------------------------------------------------------------
                       DECEMBER 31, 1996, 1995 AND 1994
                       --------------------------------

<TABLE>
<CAPTION>
                                                    Paid-in Capital in                      Unrealized Holding
                                          Common       Excess of Par    Stockholder Note    Loss on Investments
                                           Stock          Value            Receivable        Available-for-Sale   Retained Earnings
                                        ----------  ------------------  ----------------  ----------------------  -----------------
<S>                                     <C>         <C>                 <C>               <C>                     <C>               
 BALANCE AT JANUARY 1, 1994...........    $522,582      $7,362,489                  $-                    $-           $  937,603

Issuance of 614,600 shares
 of common stock (Note 7).............      61,460         976,336          (1,020,236)                    -                    -
Repurchase and retirement
 of 28,550 shares
  of common stock (Note 7)............      (2,856)        (40,236)                  -                     -                    -
Unrealized holding loss,
 net of income taxes..................           -               -                   -              (182,000)                   -
1994 net income.......................           -               -                   -                     -           $1,059,940
                                        ----------  ------------------  ----------------  ----------------------  -----------------

 BALANCE AT DECEMBER 31, 1994.........     581,186       8,298,589          (1,020,236)             (182,000)           1,997,543

Repurchase and retirement
 of 62,132 shares of
  common stock (Note 7)...............      (6,213)       (102,529)                  -                     -                    -
Issuance of 3,500 shares
 of common stock under
  option plan (Note 8)................         350           5,825                   -                     -                    -
Dividend on common stock
 ($.03/share).........................           -               -                   -                     -             (164,378)
Principal payment on
 stockholder note
  receivable (Note 7).................           -               -              13,558                     -                    -
Reduction in unrealized
 holding loss, net of
  income taxes........................           -               -                   -               153,700                    -
1995 net income.......................           -               -                   -                     -            2,026,229
                                        ----------  ------------------  ----------------  ----------------------  -----------------

 BALANCE AT DECEMBER 31, 1995.........    $575,323      $8,201,885         $(1,006,678)             $(28,300)          $3,859,394

Repurchase and retirement
 of 7,875 shares of
  common stock (Note 7)...............        (788)        (21,071)                  -                     -                    -
Issuance of 21,000 shares
 of common stock under
  option plan (Note 8)................       2,100          40,845                   -                     -                    -
Dividends on common stock
 ($.11/share).........................           -               -                   -                     -             (658,262)
</TABLE>

                                      F-7
<PAGE>
 
               FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
               ------------------------------------------------
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
          ----------------------------------------------------------
   FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND THE YEARS ENDED
   -------------------------------------------------------------------------
                       DECEMBER 31, 1996, 1995 AND 1994
                       --------------------------------

<TABLE>
<CAPTION>
                                                    Paid-in Capital in                      Unrealized Holding
                                          Common       Excess of Par    Stockholder Note    Loss on Investments
                                           Stock          Value            Receivable        Available-for-Sale   Retained Earnings
                                        ----------  ------------------  ----------------  ----------------------  -----------------
<S>                                    <C>          <C>                 <C>               <C>                     <C>
Principal payment on
 stockholder note
 receivable (Note 7)..................         -                -              52,711                      -                   -
Increase in unrealized
 holding loss,
 net of income taxes..................         -                -                   -                (45,920)                  -
1996 net income.......................         -                -                   -                      -           3,244,336
                                       ---------        ---------           ---------               --------           ---------

 BALANCE AT DECEMBER 31, 1996......... $ 576,635    $   8,221,659       $    (953,967)    $          (74,220)     $    6,445,468

Issuance of 7,175 shares
 of common stock under
 option plan..........................       718           11,751                   -                      -                   -
Dividend on common stock ($.03/share).         -                -                   -                      -            (164,753)
 Increase in unrealized holding
 loss, net of income taxes............         -                -                   -                 (8,240)                  -
Net income............................         -                -                   -                      -           1,012,010
                                       ---------        ---------           ---------               --------           ---------

 BALANCE AT MARCH 31, 1997............ $ 577,353    $   8,233,410       $    (953,967)    $          (82,460)     $    7,292,725
                                       =========       ==========         ===========               ========          ==========
</TABLE>

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

                                      F-8
<PAGE>
 
               FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
               ------------------------------------------------
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     -------------------------------------

<TABLE>
<CAPTION>
                                                                                                      THREE MONTHS ENDED
                                                              YEAR ENDED DECEMBER 31,                      MARCH 31,
                                                    -----------------------------------------      --------------------------
                                                        1996           1995           1994            1997           1996
                                                    ------------   ------------   ------------     -----------   ------------
                                                                                                           (UNAUDITED)
<S>                                                 <C>            <C>            <C>              <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income...................................     $  3,244,336   $  2,026,229   $  1,059,940     $ 1,012,010   $    754,320
                                                    ------------   ------------   ------------     -----------   ------------
Adjustments to reconcile net income
  to net cash provided by operating
  activities:
    Depreciation and amortization..............          374,030        314,732        280,826         144,421         89,085
    Amortization of investment
      premiums, net............................           55,024         92,835        250,026           2,090         16,654
    Accretion of loan discount, net............        1,041,935        484,661        980,531         225,249        353,715
    Provision for possible loan
      losses...................................        3,486,974      1,237,480      1,683,046         367,700        349,110
    Provision for loss on other real
      estate owned.............................          200,000        280,000        330,345               -        102,000
    Increase in other liabilities..............          686,325        122,040        485,540         247,610        192,843
    (Increase) decrease in deferred
      loan costs...............................          (15,517)        35,082         16,449         (85,011)       (22,612)
    (Increase) decrease in accrued
      interest receivable......................           53,859       (193,936)      (147,164)       (207,696)      (117,042)
    Decrease (Increase) in accrued
      interest payable.........................          323,533           (779)        (2,889)        (63,529)        94,790
    Deferred income tax provision
      (benefit)................................         (248,824)       (52,554)        47,300               -              -
    Gain on sale of loans......................       (1,017,650)      (352,515)       437,479        (572,170)      (449,237)
    Decrease (increase) in prepaid
      expenses and other assets................         (463,084)    (4,250,866)    (4,044,442)        272,814     (2,083,017)
                                                    ------------   ------------   ------------     -----------   ------------

            Total adjustments..................        4,476,605     (2,283,820)       317,047         331,478     (1,473,711)
                                                    ------------   ------------   ------------     -----------   ------------
            Net cash provided by
              (used in) operating
               activities......................        7,720,941       (257,591)     1,376,987       1,343,488       (719,391)
                                                    ------------   ------------   ------------     -----------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net increase in loans........................      (10,216,577)   (12,758,589)   (25,221,962)     (7,887,458)   (11,860,318)
  Purchase of investment securities
    available for sale.........................      (10,513,906)    (1,497,969)    (3,498,428)       (497,500)      (499,219)
  Purchase of investment securities
    held to maturity...........................         (500,000)       (75,000)    (1,000,000)              -              -
  Purchase of equity securities................         (415,000)        (4,500)      (221,200)              -              -
  Proceeds from maturities and
    principal repayments of
    investment securities
    available for sale.........................        5,522,946      3,105,542      8,820,945         198,378        287,759
  Proceeds from maturities and
    principal repayments of
    investment securities held to
    maturity...................................        1,525,729        961,202      1,118,951          26,950      1,238,129
  Proceeds from sale of branch
    premises...................................          275,000              -              -               -              -
  Proceeds from sale of other real
    estate owned...............................          100,000              -        286,663               -
  Capital expenditures, net....................         (893,937)      (371,783)      (164,303)       (319,526)       (69,978)
                                                    ------------   ------------   ------------     -----------   ------------
            Net cash used in
              investing activities.............      (15,115,745)   (10,641,097)   (19,879,334)     (8,479,156)   (10,903,627)
                                                    ------------   ------------   ------------     -----------   ------------
</TABLE>

                                      F-9
<PAGE>
 
<TABLE> 
<S>                                                 <C>            <C>            <C>              <C>           <C> 
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase (decrease) in deposits..........       15,954,681     16,512,269     16,062,341        (577,617)    13,787,313
  Net increase (decrease) in other
    borrowings.................................          840,764       (105,647)      (498,500)         73,015        (44,715)
  Increase in FHLBB Advances...................                -              -      2,100,000               -              -
  Repayments of FHLBB Advances.................                -     (2,788,589)    (3,172,000)              -              -
  Proceeds from sale of common
    stock......................................           42,945          6,175         17,560          12,469              -
  Repurchase of common stock...................          (21,859)      (108,742)       (43,092)              -              -
  Dividend paid................................         (658,262)      (164,378)             -        (164,753)      (164,378)
  Principal payment on stockholder
  note receivable..............................           52,711         13,558              -               -         13,178
                                                    ------------   ------------   ------------     -----------   ------------

            Net cash provided by
            (used in) financing
            activities.........................       16,210,980     13,364,646     14,466,309        (656,886)    13,591,398
                                                    ------------   ------------   ------------     -----------   ------------

Net increase (decrease) in cash and
 cash equivalents..............................       8,816,176      2,465,958     (4,036,038)     (7,792,554)     1,968,380

Cash and cash equivalents at
  beginning of year............................       10,050,477      7,584,519     11,620,557      18,866,653     10,050,477
                                                    ------------   ------------   ------------     -----------   ------------
Cash and cash equivalents at end of
  year.........................................     $  8,866,653   $ 10,050,477   $  7,584,519      11,074,099     12,018,857
                                                    ============   ============   ============     ===========   ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION:

   Cash paid during the year for:
    Interest...................................     $  5,417,852   $  4,869,184   $  3,153,585     $ 7,523,366   $  1,287,993
    Income taxes...............................        2,664,259      1,693,483        289,127         124,400        369,677

    Non-cash items:
      Real estate acquired in
        settlement of loans....................     $          -   $    580,000   $          -     $         -   $          -
</TABLE>

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

                                      F-10
<PAGE>
 
               FIRST INTERNATIONAL BANCORP, INC. AND SUBSIDIARY
               ------------------------------------------------
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  ------------------------------------------

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
     -------------------------------------------

     BASIS OF PRESENTATION

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

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

     INVESTMENT SECURITIES

     Securities that may be sold as part of the Company's asset/liability or
     liquidity management, or in response to or in anticipation of changes in
     interest rates and resulting prepayment risk, or for other similar factors,
     are classified as available-for-sale and carried at fair market value.
     Unrealized holding gains and losses on such securities are reported net of
     related taxes as a separate component of stockholders' equity.  Debt
     securities that the Company has the ability and positive intent to hold to
     maturity are 

                                     F-11
<PAGE>
 
     classified as held-to-maturity and carried at amortized cost. Realized
     gains and losses on the sales of all investment securities are reported in
     earnings and computed using the specific identification cost basis.
     Declines in the market value of investment securities that are deemed to be
     other than temporary are charged to income.

     LOANS

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

     In May 1995, the Financial Accounting Standards Board (the "FASB") issued
     Statement of Financial Accounting Standards No. 122, "Accounting for
     Mortgage Servicing Rights," - an amendment of FASB Statement No. 65 (SFAS
     122), which the Company adopted on January 1, 1996. SFAS 122 amends FASB
     Statement No. 65, "Accounting for Certain Mortgage Banking Activities," to
     provide that a mortgage banking enterprise recognize as separate assets
     rights to service mortgage loans for others, however those servicing rights
     are acquired.  It also requires the Company to assess its capitalized
     mortgage servicing rights for impairment based on the fair value of those
     rights.  The adoption of this statement did not have a material impact on
     the Company's financial condition or its results of operations.

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

     Receivable from loans sold and gain on commercial loan sales are primarily
     attributable to the sale of commercial loans which have been at least
     partially guaranteed by the SBA, the USDA and Ex-Im Bank.  The Company is
     required to retain at least 10% of the unguaranteed portions of SBA and 5%
     of the unguaranteed portions of USDA loans.  Transactions are generally
     settled within 30 days of the sale.  The gains are calculated in accordance
     with Emerging Issues Task Force Issue No. 88-11 (EITF 88-11), which

                                      F-12
<PAGE>
 
     requires that the gain on the sale of a portion of a loan be based on the
     relative fair market values of the loan sold and the loan retained.  A
     portion of the gain on commercial loan sales is due to an excess servicing
     asset which represents the present value of the differential between the
     servicing fee received by the Bank and the sum of the Bank's costs and a
     normal profit after considering the estimated effects of prepayments.  The
     discount rate utilized in calculating the excess servicing asset
     approximates the market rate an investor would demand on a risk-adjusted
     basis.  The excess servicing asset is amortized as a charge to non-interest
     income over the estimated lives of the underlying loans.  The excess
     servicing asset is carried at the lower of amortized cost or net realizable
     value.

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

     LOAN ORIGINATION FEES (COSTS)

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

     PROVISION/ALLOWANCE FOR POSSIBLE LOAN LOSSES

     On January 1, 1995, the Company adopted Statement of Financial Accounting
     Standards No. 114 "Accounting by Creditors for Impairment of a Loan" and
     No. 118 "Accounting by Creditors for Impairment of a Loan -- Income
     Recognition and Disclosures" (SFAS 114 and 118).  SFAS 114 and 118 require
     creditors to evaluate the collectibility of impaired loans, as defined
     below, based on the present value of expected future cash flows discounted
     at the historical effective interest rate, except that all collateral-
     dependent loans are measured for collectibility of contractual principal
     and interest based on the estimated fair value of the collateral.  As
     permitted by the Statements, smaller-balance homogeneous loans consisting
     of residential mortgages and consumer loans are evaluated for
     collectibility by the Company based on historical loss experience rather
     than on an individual loan-by-loan basis.  The Company considers a loan to
     be impaired for SFAS 114 and 118 purposes when, based on current
     information and events, it is probable that it will be unable to collect
     all amounts of contractual interest and principal as scheduled in the loan
     agreement.  Such loans are placed on non-accrual when such determination is
     made.  An insignificant delay of under 60 days or a 10% shortfall in the
     amount of the payment is not an event that, when considered in isolation,
     would automatically cause the Company to consider a loan to be impaired for
     purposes of SFAS 114 and 118.  The Company evaluates all impaired loans,
     other than small balance loans, on an individual loan-by-loan basis; it
     does not aggregate impaired loans into major risk classifications.  The
     Company places a loan on nonaccrual status when it is 90 days or more past
     due or when, in management's assessment, the full collectability of
     principal 

                                      F-13
<PAGE>
 
     and interest is uncertain. Except for certain restructured loans, impaired
     loans are loans that are on nonaccrual status.

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

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

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

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

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

     OTHER REAL ESTATE OWNED

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

     PREMISES AND EQUIPMENT

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

                                      F-14
<PAGE>
 
     INCOME TAXES

     Income taxes are provided based on the asset/liability method of
     accounting.  Deferred income taxes and tax benefits are recognized for the
     future income tax consequences attributable to differences between the
     financial statement carrying amounts of existing assets and liabilities and
     their respective tax bases.  Deferred tax assets and liabilities are
     measured using enacted tax rates expected to apply to taxable income in the
     years in which those temporary differences are expected to be recovered or
     settled.  A valuation allowance is established when it is more likely than
     not that some portion of the deferred tax asset will not be realized.

     EARNINGS PER SHARE

     Earnings per share have been computed based on the weighted average
     outstanding shares (December 31, 1996 - 5,969,027; 1995 - 5,981,861; 1994 -
     5,739,871; and March 31, 1997 - 5,976,671; 1996 -5,958,205).  In accordance
     with Staff Accounting Bulletin Topic 4-D, for all periods presented,
     earnings per share have been computed by including common stock equivalents
     associated with the Company's stock options issued one year prior to the
     expected public offering date of September 1997.  The effect of such
     equivalents was computed under the treasury stock method, assuming the
     repurchase of such options at an assumed offering price of $12.00 per
     share.  (See Notes 8 and 13.)

     STOCK OPTION PLANS

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

     COMMON STOCK SPLIT

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

                                      F-15
<PAGE>
 
     STATEMENT OF CASH FLOWS

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

     RECLASSIFICATIONS

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

     UNAUDITED INFORMATION

     The unaudited financial statements and related notes as of March 31, 1997
     and for the three-month periods ended March 31, 1997 and 1996 reflect, in
     the opinion of management, all adjustments (which include only normal
     recurring adjustments) necessary to fairly present the statements of
     operations, cash flows and balance sheets as of and for the periods
     presented.  These unaudited financial statements should be read in
     conjunction with the audited financial statements and related notes
     thereto.  The results for the interim period presented are not necessarily
     indicative of results to be expected for the full year.

2.   INVESTMENT SECURITIES:
     --------------------- 

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

<TABLE>
<CAPTION>
                                  MARCH 31, 1997         GROSS            GROSS            ESTIMATED
                                    AMORTIZED          UNREALIZED       UNREALIZED            FAIR
                                       COST              GAINS            LOSSES             VALUE
                                  --------------       ----------       -----------       -----------
      <S>                         <C>                  <C>              <C>               <C>
      AVAILABLE FOR SALE          
      U.S. Treasury               
        obligations...............   $11,012,005           $1,018        $(135,523)       $10,877,500
      U.S. Government             
        mortgaged backed          
        securities................       934,654            2,847           (7,933)           929,568
                                     -----------           ------        ---------        -----------
                                  
                                     $11,946,659           $3,865        $(143,456)       $11,807,068
                                     ===========           ======        =========        ===========
      HELD TO MATURITY            
      U.S. Government             
        mortgaged backed          
        securities................   $ 1,885,528           $2,521        $ (36,886)       $ 1,851,163
      Debt securities             
        of foreign                             
        governments...............     1,150,000                -                -          1,150,000
                                     -----------           ------        ---------        -----------
                                     $ 3,035,528           $2,521        $ (36,886)       $ 3,001,163 
                                     ===========           ======        =========        ===========          
</TABLE>

                                      F-16
<PAGE>
 
<TABLE>
<CAPTION>
                                                    DECEMBER 31, 1996        GROSS            GROSS           ESTIMATED
                                                        AMORTIZED          UNREALIZED      UNREALIZED           FAIR
                                                          COST               GAINS           LOSSES             VALUE
                                                    -----------------      ----------      -----------       -----------
 <S>                                                <C>                    <C>             <C>               <C>         
 AVAILABLE FOR SALE                                                                                   
 U.S. Treasury obligations..................              $10,515,353        $  2,424       $ (62,777)       $10,455,000
 U.S. Government mortgaged 
  backed securities.........................                1,134,272           7,665         (73,142)         1,068,795
                                                          -----------        --------      ----------        -----------
                                                                                                      
                                                          $11,649,625        $ 10,089       $(135,919)       $11,523,795
                                                          ===========        ========      ==========        ===========
 HELD TO MATURITY                                                                                     
 U.S. Government mortgaged backed 
  securities................................              $ 1,912,478        $ 14,489       $ (20,970)       $ 1,905,997
 Debt securities of foreign                                                                                          
  governments...............................                1,150,000               -               -          1,150,000
                                                          -----------        --------      ----------        ----------- 
                                                          $ 3,062,478        $ 14,489       $ (20,970)       $ 3,055,997 
                                                          ===========        ========      ==========        ===========
<CAPTION> 

                                                    DECEMBER 31, 1996        GROSS            GROSS           ESTIMATED 
                                                        AMORTIZED          UNREALIZED      UNREALIZED           FAIR 
                                                          COST               GAINS           LOSSES             VALUE
                                                    -----------------      ----------      -----------       -----------
 <S>                                                <C>                    <C>             <C>               <C>        
 AVAILABLE FOR SALE
 U.S. Treasury obligations..................              $ 1,499,949        $  9,425       $       -        $ 1,509,374
 U.S. Government mortgaged backed
  securities................................                5,185,674          23,495         (76,420)         5,132,749
                                                          -----------        --------      ----------        -----------  

                                                          $ 6,685,623        $ 32,920       $ (76,420)       $ 6,642,123
                                                          ===========        ========      ==========        ===========  
 
 HELD TO MATURITY
 U.S. Government mortgaged backed
  securities................................              $ 3,451,443        $ 10,372       $ (22,493)       $ 3,439,322
 Debt securities of foreign
  governments...............................                  665,000               -               -            665,000
                                                          -----------        --------      ----------        ----------- 
                                                          $ 4,116,443        $ 10,372       $ (22,493)       $ 4,104,322
                                                          ===========        ========      ==========        ===========  
</TABLE> 
 
Stock securities are comprised of the following:

<TABLE> 
<CAPTION> 
                                                                  March 31       December 31
                                                                  --------       -----------
                                                                   1997        1996           1995
                                                                   ----        ----           ----
<S>                                                            <C>            <C>             <C>    
Federal Reserve Bank..............................             $  224,150     $   224,150      $ 224,150
Federal Home Loan Bank of Boston..................                648,200         648,200        648,200
Private Export Funding Corporation................                415,000         415,000              -
                                                               ----------       ---------      ---------
                                                               $1,287,350     $ 1,287,350      $ 872,350   
                                                               ===========     ===========     ==========   
</TABLE>

                                      F-17



<PAGE>
 
At March 31, 1997 and December 31, 1996, investments with a carrying value of
$12,222,027 and $12,330,392, respectively, were pledged to collateralize public
and government deposits, as required by law, and certain of the Bank's lines of
credit.  There were no sales of debt securities in the three months ended March
31, 1997, and the years ended December 31, 1996 and 1995.

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

<TABLE>
<CAPTION>
 
                                                                                      Weighted                         
                                                   Amortized           Fair            Average                        
                                                      Cost            Value             Yield                         
                                                  ------------     ------------       ---------                       
<S>                                               <C>              <C>                <C>                             
March 31, 1997
- --------------
Available for sale
  Due in one year or less......................    $ 1,498,841      $ 1,495,625           5.46%
  Due after one year through five years........      9,513,164        9,381,876           5.82
  Mortgage-backed securities...................        934,654          929,567           7.38
                                                   -----------      -----------           ----
                                                   $11,946,659      $11,807,068           5.90%
                                                   ===========      ===========           ====
Held to maturity
  Due after one year through five years........    $   550,000      $   550,000           7.88%
  Due after five years through ten years.......        600,000          600,000           7.50
  Mortgage-backed securities...................      1,885,528        1,851,163           5.62
                                                   -----------      -----------           ----
                                                   $ 3,035,528      $ 3,001,163           6.41%
                                                   ===========      ===========           ====
</TABLE> 

<TABLE> 
<CAPTION> 
                                                   Amortized          Fair
                                                     Cost             Value
                                                   --------         ---------
<S>                                                <C>              <C> 
December 31, 1996
- -----------------
Available for sale
  Due in one year or less......................    $   998,200      $ 1,000,626
  Due after one year through five years........      9,517,153        9,454,374
  Mortgage-backed securities...................      1,134,272        1,068,795
                                                   -----------      -----------
                                                   $11,649,625      $11,523,795
                                                   ===========      ===========
Held to maturity
  Due after one year through five years........    $   350,000      $   350,000
  Due after five years through ten years.......        800,000          800,000
  Mortgage-backed securities...................      1,912,478        1,905,997
                                                   -----------      -----------
                                                   $ 3,062,478      $ 3,055,997
                                                   ===========      ===========

December 31, 1995
- -----------------
Available for sale
  Due in one year or less......................    $ 1,499,949      $ 1,509,374
  Due after one year through five years........        999,725        1,010,500
  Mortgage-backed securities...................      4,185,949        4,122,249
                                                   -----------      -----------
                                                   $ 6,685,623      $ 6,642,123
                                                   ===========      ===========
Held to maturity
  Due after one year or less...................    $    15,000      $    15,000
  Due after one year through five years........      1,150,000        1,150,000
  Due after five years through ten years.......        500,000          500,000
  Mortgage-backed securities...................      2,451,443        2,439,322
                                                   -----------      -----------
                                                   $ 4,116,443      $ 4,104,322
                                                   ===========      ===========
</TABLE>

                                      F-18
<PAGE>

3.   LOANS:
     -----
 
The outstanding balances of loans originated and held by the Bank are as
follows:

<TABLE>
<CAPTION>
                                                      MARCH 31,            DECEMBER 31,
                                                   -------------  ----------------------------
                                                       1997           1996           1995
                                                   -------------  -------------  -------------
     <S>                                           <C>            <C>            <C>
     Commercial and industrial...................  $ 72,347,513   $ 61,435,058   $ 47,276,930
     
     Commercial real estate......................    41,879,959     39,094,984     46,207,535
     Residential real estate.....................     6,746,410     12,843,235     12,951,738
     Consumer loans and lines of credit..........     1,434,806      1,253,483        555,815
                                                   ------------   ------------   ------------
        Total loans..............................   122,408,688    114,626,760    106,992,018
 
     Less:  Discount on retained loans...........     2,406,248      2,240,999      2,311,575
          Allowance for possible loan losses.....     2,750,000      3,000,000      2,000,000
          Net deferred loan origination costs....      (151,734)       (66,723)       (51,206)
                                                   ------------   ------------   ------------
              Loans, net.........................  $117,404,174   $109,452,484   $102,731,649
                                                   ============   ============   ============
</TABLE>

Approximately 40% of the commercial industrial and commercial real estate loans
at each period end are the unguaranteed portions of loans originated under the
federal guarantee programs discussed in Note 1.  At December 31, 1996, the
Company had fixed and variable rate loans with maturities greater than one year
totaling $8,685,484 and $88,917,228, respectively.

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

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,                                  
                                                                   ---------------------------                          
     GUARANTEED LOANS:                            MARCH 31, 1997       1996           1995                              
     ------------------                           ---------------  -------------  ------------                          
     <S>                                          <C>              <C>            <C>                                   
      SBA........................................  $153,874,449     $145,620,429   $ 98,738,201 
      USDA.......................................    28,980,162       26,900,567     17,323,504                         
      Ex-Im Bank.................................    30,331,779       26,669,557      8,018,309                         
      FHLMC......................................    17,497,627       17,731,007     17,825,600                         
                                                   ------------     ------------    -----------                         
                                                    230,684,017      216,921,560    141,905,614                         
                                                                                                                        
      UNGUARANTEED PORTIONS                                                                                             
      AND UNGUARANTEED LOANS:                                                                                           
     ------------------------                                                                                           
                                                                                                                        
      SBA........................................    27,845,866       28,813,955              -                         
      USDA.......................................     3,178,764        3,191,257              -                         
      Other commercial...........................    18,127,418       12,895,857      8,730,134                         
      Home equity lines..........................     4,124,661        3,982,247      3,214,303                         
                                                   ------------     ------------    -----------                         
                                                    $53,276,709      $48,883,316    $11,944,437                         
                                                   ------------     ------------    -----------        
</TABLE> 

                                     F-19
<PAGE>
 
<TABLE> 
<S>                                                                     <C>              <C>            <C> 
 Total loans
 Serviced for others..............................................      $283,960,726     $265,804,876   $153,850,051
                                                                        ============     ============   ============
</TABLE> 
 
The following amounts are included in Loans, net:
 
<TABLE> 
<CAPTION> 
                                                                           MARCH 31,                 DECEMBER 31,
                                                                         ------------       --------------------------------
 DISCOUNT ON RETAINED LOANS                                                 1997              1996           1995          1994
                                                                         ------------     ------------   ------------   -----------
 <S>                                                                     <C>              <C>            <C>            <C> 
 Balance at beginning of
  period..........................................................       $  2,240,999     $  2,311,575   $  1,791,953   $   805,463
  Discount on current period
   sales..........................................................            405,378        1,509,724        851,602     1,089,367
  Deletions due to sales..........................................            (60,000)      (1,112,511)             -             -
  Accretion.......................................................           (180,129)        (467,789)      (331,980)     (102,877)
                                                                         ------------     ------------   ------------   -----------
 Balance at end of period.........................................       $  2,406,248     $  2,240,999   $  2,311,575   $ 1,791,953
                                                                         ============     ============   ============   ===========
</TABLE> 
 
The following amounts are included in Prepaid expenses and other
 assets:
 
<TABLE> 
<CAPTION> 
 SERVICING ASSETS                                                                  MARCH 31,                 DECEMBER 31,
                                                                                   ---------       -----------------------------    
                                                                             1997             1996           1995          1994
                                                                         -----------      ----------     ----------     ---------  
 <S>                                                                     <C>              <C>            <C>            <C>  
 Balance at beginning of period...................................       $  4,137,836     $  2,808,930   $  2,084,329   $ 1,209,820
  Servicing on current
  period sales....................................................            796,582        1,978,810      1,126,723     1,040,276
  Amortization....................................................           (335,720)        (649,904)      (402,122)     (165,767)
                                                                         ------------     ------------   ------------   -----------
 Balance at end of period.........................................       $  4,598,698     $  4,137,836   $  2,808,930   $ 2,084,329
                                                                         ============     ============   ============   ===========
</TABLE> 
 
Changes in the Allowance for possible loan losses were as follows:
 
<TABLE> 
<CAPTION> 
                                                                                   MARCH 31,               DECEMBER 31,
                                                                                   ---------     -------------------------------    
                                                                             1997            1996           1995          1994
                                                                        ------------      ----------     ----------     ---------  
 <S>                                                                    <C>               <C>            <C>            <C>  
 Balance at beginning of period...................................       $  3,000,000     $  2,000,000   $  2,000,000   $ 1,425,000
  Provision charged to income.....................................            367,700        3,486,974      1,237,480     1,683,046
 Recoveries on loans previously
  charged off.....................................................             11,366           39,827         84,341       103,501
  Loans charged off...............................................           (629,066)      (2,526,801)    (1,321,821)   (1,211,547)
                                                                         ------------     ------------   ------------   -----------
 Balance at end of period.........................................       $  2,750,000     $  3,000,000   $  2,000,000   $ 2,000,000
                                                                         ============     ============   ============   ===========
</TABLE>

                                     F-20



<PAGE>
 
Certain information with regard to impaired loans is detailed below:

<TABLE>
<CAPTION>
                                                 
                                            MARCH 31,                     DECEMBER  31,       
                                            ----------         -------------------------------
                                               1997               1996                 1995   
                                            ----------         ----------           ----------
  <S>                                       <C>                <C>                  <C>     
     Impaired loans.......................  $1,982,520         $2,172,830           $1,258,451
     Allocated allowance..................     358,745            543,145              680,000
     Average recorded investment..........   2,151,857          1,669,654            1,904,393
     Interest income recognized...........       5,646            124,515               26,566 
</TABLE>

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

Nonaccrual loans totaled $2,378,974, $2,251,710 and $1,258,451 at March 31,
1997, December 31, 1996 and 1995, respectively.  There were no loans over 90
days and still accruing interest at each period end presented.

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

Loans to principal stockholders, directors, companies of which directors are
principal owners, individuals directly related to or affiliated with directors,
and executive officers aggregated $2,408,000, $2,570,000 and $2,784,000 at March
31, 1997, December 31, 1996 and 1995, respectively.  During 1997 and 1996,
repayments and sales amounted to $162,000 and $414,000, respectively.  Advances
under new or existing loans totaled $200,000 in 1996.

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

Outstanding credit commitments are detailed below:

<TABLE>
<CAPTION>
                                                     MARCH 31,                        DECEMBER 31,      
                                                    -----------          -------------------------------
                                                       1997                 1996                1995    
                                                    -----------          -----------         -----------
     <S>                                            <C>                  <C>                 <C>        
     Commercial lines of credit................     $23,109,371          $24,393,670         $18,814,000
     Consumer lines of credit..................         375,518              229,067             217,000
     Performance letters of credit.............      11,898,619            1,435,172             740,400
     Financial letters of credit...............       1,630,933            1,392,447           1,227,600
                                                    -----------          -----------         -----------
                                                    $37,014,441          $27,450,356         $20,999,000
                                                    ===========          ===========         =========== 
</TABLE>

At March 31, 1997 and December 31, 1996, letters of credit totaling $11,865,000
and $1,392,447, respectively, carry the guarantee of Ex-Im Bank.

                                     F-21
<PAGE>
 
Commitments to extend such credit are agreements to lend to a client as long as
there is no violation of any condition established in the contract.  Commitments
generally have fixed expiration dates or other termination clauses and may
require the payment of a fee.  Since some of the agreements may expire without
being drawn upon or may be terminated by the Bank, these amounts do not
necessarily represent a future cash requirement of the Bank.  Prior to entering
into any agreement to extend credit, the Bank evaluates the client's
creditworthiness in accordance with loan underwriting standards as approved by
the Board of Directors. The amount of collateral obtained, if deemed necessary,
is based on management's credit evaluation of the client.  Collateral for
commercial loan commitments varies but may include accounts receivable,
inventory, property, plant and equipment and commercial real estate.

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

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

                                     F-22
<PAGE>
 
4.   PREMISES, EQUIPMENT AND LEASES:
     ------------------------------ 
<TABLE>
<CAPTION>
 
                                                  MARCH 31,                      DECEMBER 31,            
                                                  ----------            ------------------------------- 
                                                     1997                  1996                 1995    
                                                  ----------            ----------           ---------- 
     <S>                                          <C>                   <C>                  <C>        
     Land..................................       $        -            $        -           $   12,700 
     Buildings and leasehold improvements..        1,011,655             1,001,610            1,014,120 
     Furniture, fixtures and equipment.....        2,483,209             2,173,727            2,006,401 
                                                  ----------            ----------           ---------- 
                                                   3,494,864             3,175,337            3,033,221                
                                                                                                        
     Less: Accumulated depreciation and                                                                 
      amortization.........................        1,804,579             1,660,157            1,762,948 
                                                  ----------            ----------           ---------- 
                                                                                                        
       Premises and equipment, net.........       $1,690,285            $1,515,180           $1,270,273 
                                                  ==========            ==========           ==========  
</TABLE>

Each of the leases provide for minimum and contingent rentals and include
renewal options. Total rental expense for the three months ended March 31, 1997
and the years ended December 31, 1996, 1995 and 1994 was $193,763, $636,196,
$455,719 and $374,587, respectively.  Minimum future obligations for premises
under noncancelable leases are as follows:

<TABLE>
<CAPTION>
          Year Ended                             Operating Leases
          ----------                             ----------------
          <S>                                    <C>       
             1997                                  $   751,756   
             1998                                      197,508 
             1999                                      197,527 
             2000                                      154,530 
             2001                                       29,598 
                                                   ----------- 
                                                    $1,330,919
                                                   =========== 
</TABLE> 
 
5.   DEPOSITS:
     --------- 

<TABLE> 
<CAPTION> 
                                                     March 31,                    December 31,             
                                                   ------------           --------------------------             
                                                       1997                   1996          1995              
                                                   ------------           ------------  ------------       
     <S>                                           <C>                    <C>           <C>  
     Non-interest bearing checking...              $ 29,340,125           $ 27,887,496  $ 22,621,086        
                                                                                                           
     Interest-bearing checking.......                 6,333,560              8,248,470    10,731,941       
     Savings.........................                71,611,624             69,277,894    71,026,141       
     Time deposits under $100,000....                28,746,032             37,085,188    21,716,052       
     Time deposits $100,000 or more..                 7,707,191              1,817,101     2,266,248       
                                                   ------------           ------------  ------------       
               Total deposits........              $143,738,532           $144,316,149  $128,361,468       
                                                   ============           ============  ============        
</TABLE> 

                                     F-23
<PAGE>
 
6.   FEDERAL HOME LOAN BANK OF BOSTON ADVANCES:
     ----------------------------------------- 

The Bank has a $2,870,000 unused line of credit from the Federal Home Loan Bank
of Boston (FHLBB) and currently has the ability to borrow approximately
$8,000,000 from the FHLBB under various term advance programs.  Any outstanding
advances from the FHLBB are collateralized by holdings of stock in the FHLBB,
mortgage loans on residential properties and certain U.S. Treasury and Agency-
issued securities.

7.   STOCKHOLDERS' EQUITY:
     -------------------- 

STOCKHOLDER NOTE RECEIVABLE:

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

Although the stock is legally outstanding, since a note was accepted in exchange
for a portion of the issue price, the note receivable is presented as a separate
component of stockholders' equity, and only as repayments of principal are
received does this sale of stock serve to increase stockholders' equity.
Because these shares are legally outstanding, they are included in the earnings
per share calculations as of the date of issuance.

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

REPURCHASE AND RETIREMENT OF COMMON STOCK:

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

                                     F-24

<PAGE>
 
DIVIDENDS:

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

REGULATORY CAPITAL REQUIREMENTS:

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

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


<TABLE>
<CAPTION>       
                                                                             TO BE WELL CAPITALIZED
                                                       FOR CAPITAL           UNDER PROMPT CORRECTIVE
                                                   -------------------      -------------------------
                                ACTUAL RATIOS       ADEQUACY PURPOSES           ACTION PROVISIONS
                                -------------       -----------------           -----------------  
AS OF MARCH 31, 1997:          AMOUNT     RATIO     AMOUNT      RATIO           AMOUNT       RATIO
                               -------   ------     ------      -----           ------       -----
<S>                         <C>          <C>      <C>            <C>         <C>             <C>
Total Capital
  (to Risk Weighted
    Assets)...............  $15,685,975  10.59%   $11,847,312     8.00%      $14,809,140     10.00%  
Tier I Capital                                                                                       
  (to Risk Weighted                                                                                  
    Assets)...............   13,829,829   9.34%     5,923,656     4.00%        8,883,484      6.00%  
Tier I Capital                                                                                       
  (to Average                                                                                        
     Assets)..............   13,829,829   8.69%     6,362,524     4.00%        7,953,155      5.00%   

AS OF DECEMBER 31, 1996:
Total Capital
  (to Risk Weighted
   Assets)...............   $14,253,389  11.62%   $ 9,811,221   8.00%       $12,264,027    10.00%
Tier I Capital
</TABLE> 

                                     F-25
<PAGE>
 
<TABLE> 
<S>                         <C>          <C>      <C>           <C>         <C>            <C>  
  (to Risk Weighted
    Assets)...............   12,702,275  10.36%     4,905,611   4.00%         7,358,416     6.00%
Tier I Capital
  (to Average
    Assets)...............   12,702,275   8.44%     6,017,340   4.00%         7,521,675     5.00%
 
AS OF DECEMBER 31, 1995:
Total Capital
  (to Risk Weighted
    Assets................  $12,267,631  10.73%   $ 9,148,252   8.00%       $11,435,315    10.00%
Tier I Capital
  (to Risk Weighted
    Assets)...............   10,831,172   9.47%     4,574,126   4.00%        6,861,189      6.00%
Tier I Capital
  (to Average Weighted
    Assets................   10,831,172   7.71%     5,622,007   4.00%        7,027,509      5.00%
</TABLE>

 8. STOCK INCENTIVE PLAN:
    ------------------- 

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

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

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

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

<TABLE>
<CAPTION>
     1994 Incentive Stock Option Plan                                  
     --------------------------------                                  
                                                            Average    
                                                  Option     Option    
                                                  Shares     Price     
                                                 -------    -------    
     <S>                                       <C>        <C>          
     Outstanding at January 1, 1994                  -          -      
       Granted..............................   178,500     $1.689
                                               -------      -----  
     Outstanding at December 31, 1994.......   178,500      1.689  
       Granted..............................   131,250      1.840       
</TABLE> 

                                     F-26
<PAGE>
 
<TABLE> 
     <S>                                       <C>        <C>     
       Exercised............................    (3,500)     1.764
       Cancelled............................    (1,750)     1.840
     Outstanding at December 31, 1995.......   304,500      1.752
       Granted..............................    83,650      2.191
       Exercised............................   (21,000)     2.045
       Cancelled............................   (37,538)     1.866
                                               --------    ------
     Outstanding at December 31, 1996.......   329,612      1.832
       Exercised............................    (7,175)     1.738
       Cancelled............................    (5,512)     2.191
                                               --------    ------
     Outstanding at March 31, 1997..........   316,925     $1.828
                                               ========    ======
                                                                 
       1996 Stock Option Plan                                    
       ----------------------                                    
                                                                 
     Outstanding at January 1, 1996.........         -          -
       Granted..............................    46,662      2.191
       Cancelled............................    (1,568)     2.191
                                               --------          
     Outstanding at December 31, 1996.......    45,094      2.191
       Granted..............................   255,462      2.631
       Cancelled............................   (39,991)     2.603
                                               --------    ------
     Outstanding at March 31, 1997..........   260,565     $2.560
                                               ========    ======    
</TABLE>

     There is no compensation expense for any options granted in 1996 or 1995
based on the minimum value methodology of SFAS 123, assuming a four year
expected life and annual dividends ranging from 6.2% to 7.7% of the exercise
prices.


9.   INCOME TAXES:
     -------------

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

<TABLE>
<CAPTION>
                                             1996        1995      1994
                                             -----       -----     -----
     <S>                                  <C>          <C>         <C> 
     Current Provision (Benefit):                                            
       Federal.........................   $1,883,002   $1,155,382  $  530,700
       State...........................      718,603      391,572       5,000
                                          ----------   ----------  -----------

                                           2,601,605    1,546,954     535,700

     Deferred Provision (Benefit):
       Federal.........................     (183,844)     (60,086)     51,900 
       State...........................      (64,980)      36,132      17,500 
       Benefit from state net
        Operating loss carryforward ...            -      (28,600)    (22,100)
                                          ----------   ----------  -----------
                                            (248,824)     (52,554)     47,300
                                          ----------   ----------  -----------
     Total provision
       for income taxes................   $2,352,781   $1,494,400  $  583,000
                                          ==========   ==========  ===========  
</TABLE> 

                                     F-27
<PAGE>
 
The effective tax rates differ from the federal statutory rate due to state 
taxes, net of the federal benefit.

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

<TABLE> 
<CAPTION> 
                                 1996                       1995 
                                ------                     ------       
                          Federal    State            Federal     State 
                          -------    ------           -------    ------ 
   <S>                    <C>        <C>              <C>       <C> 
   Deferred tax                                                              
    liabilities:                                                            
     Allowance for                                                          
      possible loan                                                         
       losses...........  $     (-) $     (-)         $(77,395) $(27,418)   
     Depreciation          (56,232)  (19,403)          (67,221)  (23,814)   
     Deferred loan                                                          
      costs.............   (20,304)   (7,006)          (15,538)   (5,505)   
     Other                  (5,656)     (603)             (389)     (137)   
                          --------   --------          --------  --------  
                           (82,192)  (27,012)         (160,543)  (56,874)    
                                             
   Deferred tax                                                           
    assets:                                                               
     Reserve for                                                          
      other real                                                          
      estate owned......         -         -             84,966   30,100  
                                             
     Reserve for                                                             
      investment                                                            
      securities                                                            
      available for                                                         
      sale...........       38,235    13,545            11,232    3,968     
                                                                            
     Allowance for                                                          
      possible loan                                                         
      losses.........      152,366    52,575                 -         -    
     Other                  92,408    31,886            54,316     19,242   
                          --------   --------          --------  --------
                                                                            
                           283,009    98,006           150,514     53,310   
                                                                            
     Net deferred                                                           
      tax asset                                                             
      (liability)....     $200,817  $ 70,994          $(10,029) $  (3,564)  
                          ========   ========          ========  ========
</TABLE>

                                     F-28
<PAGE>
 
A valuation allowance was provided against the deferred state tax assets in 1994
to reflect the possibility that all or a portion of these assets may not have
been realized due to a lack of sufficient taxable income in the future. The
valuation allowance decreased $24,200 and $198,901 in 1995 and 1994,
respectively, due principally to the utilization of state loss carryforwards to
offset taxable income for those years.

10.  EMPLOYEE BENEFIT PLAN:
     --------------------- 

The Company maintains a contributory savings plan which qualifies under Section
401(k) of the Internal Revenue Code for employees meeting certain service
requirements. Eligible employees may make contributions to the Plan based on
specified percentages of their compensation. In 1996, the Company matched 75% of
their contribution, up to 6% of compensation. The matching contribution was 50%
in prior years. The Company's matching contributions were $29,970, $95,740,
$55,679 and $43,807 for the three months ended March 31, 1997 and the years
ended December 31, 1996, 1995 and 1994, respectively.

11.  ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS:
     ---------------------------------------------- 

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

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

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

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

                                     F-29
<PAGE>
 
LOANS:  The fair values for loans are estimated using discounted cash flow
analyses, and interest rates currently being offered for loans with similar
terms to borrowers of similar credit quality.

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

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

<TABLE>
<CAPTION>
                                                              December 31,             December 31,               
                                                          --------------------    ---------------------           
                                                                  1996                     1995                   
                                                            ---------------          ----------------             
                                                                                                                  
                                                    Carrying     Estimated       Carrying     Estimated           
                                                    Value       Fair Value       Value       Fair Value           
                                                  ------------  ------------   ------------  ------------         
<S>                                               <C>           <C>           <C>           <C>                   
FINANCIAL ASSETS                                                                                                  
Cash and due from banks....................       $  5,866,653  $  5,866,653  $  5,250,477  $  5,250,477          
Federal funds sold.........................         13,000,000    13,000,000     4,800,000     4,800,000          
Securities available for sale..............         11,523,795    11,523,795     6,642,123     6,642,123          
Securities held to maturity................          3,062,478     3,055,997     4,116,443     4,104,322          
Loans......................................        109,452,484   108,910,302   102,731,649   102,628,830          
Accrued interest receivable................            823,471       823,471       877,330       877,330          
                                                                                                                  
FINANCIAL LIABILITIES                                                                                             
Deposits                                                                                                          
  Checking.................................       $ 36,135,966  $ 36,135,966  $ 33,353,027  $ 33,353,027          
  Savings..................................         69,277,894    69,277,894    71,026,141    71,026,141          
  Time deposits............................         38,902,289    39,078,984    23,982,300    24,046,909          
U.S. Treasury Demand Note..................          1,061,449     1,061,449       220,685       220,685          
Accrued interest payable...................            621,609       621,609       298,076       298,076          
</TABLE>

                                     F-30
<PAGE>
 
12.  PARENT COMPANY FINANCIAL INFORMATION:
     ------------------------------------ 

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

- -------------------------------------------------------------------------------
FIRST INTERNATIONAL BANCORP, INC.
CONDENSED BALANCE SHEETS
- -------------------------------------------------------------------------------

<TABLE> 
<CAPTION> 
ASSETS                                                            March 31,                 December 31,          
                                                                  ---------              -------------------      
                                                                     1997                1996           1995      
                                                                   --------            -------        -------     
                                                                (Unaudited)                                        
<S>                                                             <C>                    <C>          <C>       
Cash on deposit with Bank subsidiary.......................     $    29,004            $    21,288  $   190,753
Investment in the Bank.....................................      15,038,057             14,194,288   11,410,871 
                                                                -----------           ------------  ----------- 
                                                                $15,067,061            $14,215,576  $11,601,624 
                                                                ===========           ============  ===========  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Stockholders' equity.......................................     $15,067,061           $14,215,576   $11,601,624
                                                                -----------           ------------  ----------- 
                                                                $15,067,061           $14,215,576   $11,601,624
                                                                ===========           ============  ===========  
</TABLE> 
 
- -------------------------------------------------------------------------------
FIRST INTERNATIONAL BANCORP, INC.
CONDENSED STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
 
<TABLE> 
<CAPTION> 
                                                   For the Three Months    For the Years Ended December 31,    
                                                                           --------------------------------    
                                                     Ended March 31,                                           
                                                     ---------------                                           
                                                       (Unaudited)                                             
                                                                                                               
                                                   1997         1996         1996        1995        1994      
                                                -----------  -----------  -----------  ----------  ----------  
<S>                                             <C>          <C>          <C>          <C>         <C> 
Dividends from Bank                             $   160,000  $   125,000  $   415,000  $  430,000  $  100,000  
  subsidiary..............................                                                                     
Equity in undistributed net                         852,010      629,311    2,829,336   1,596,229     958,019  
  income of the Bank......................                                                                     
Other, net................................                -            -            -           -       1,921  
                                                -----------  -----------  -----------  ----------  ----------  
Net income................................      $ 1,012,010  $   754,311  $ 3,244,336  $2,026,229  $1,059,940  
                                                ===========  ===========  ===========  ==========  ==========   
</TABLE>

                                     F-31
<PAGE>
 
- -------------------------------------------------------------------------------
FIRST INTERNATIONAL BANCORP, INC.
CONDENSED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
 
                                                                                                Three Months Ended
                                                          Year Ended December 31,                    March 31,
                                                      1996          1995         1994            1997             1996    
                                                  ------------   -----------   ----------     -----------      ----------  
                                                                                                        (Unaudited)
<S>                                               <C>            <C>           <C>            <C>              <C> 
Net income...................................      $ 3,244,336   $ 2,026,229   $1,059,940       $1,012,010        $ 754,311  
Adjustments to reconcile net income to                                                                                       
 net cash provided by operating                                                                                              
 activities:                                                                                                                 
Equity in undistributed net income of                                                                                        
 subsidiaries................................       (2,829,336)   (1,596,229)    (958,375)        (852,010)        (754,311) 
                                                   -----------   -----------   ----------       ----------        ---------  
Net Cash provided by operations:.............          415,000       430,000      101,565          160,000           -       
Cash flows from investing activities:                                                                                        
Return of capital from Investcorp............           -             -            22,342            -               -       
Decrease in other investments................           -             -               652            -               -       
Increase in Bank investment..................           -             -          (250,000)           -               -       
                                                   -----------   -----------   ----------       ----------        ---------  
Net cash used in                                                                                                             
   investing activities......................           -             -          (227,006)           -               -       
                                                   -----------   -----------   ----------       ----------        ---------  
Cash flows from financing activities:                                                                                        
Issuance of common stock.....................           42,945         6,175       17,560           12,469           -       
Repurchase of common stock...................          (21,859)     (108,742)     (43,092)           -               -       
Dividend paid................................         (658,262)     (164,378)       -             (164,753)        (164,378) 
Principal payment on stockholder                                                                                             
note receivable                                         52,711        13,558        -                -               13,178  
                                                   -----------   -----------   ----------       ----------        ---------  
Net cash used in financing activities........                                                                                
                                                      (584,465)     (253,387)     (25,532)        (152,284)        (151,200) 
                                                   -----------   -----------   ----------       ----------        ---------  
Net increase (decrease) in cash and                                                                                          
cash equivalents                                      (169,465)      176,613     (150,973)           7,716         (151,200) 
                                                   -----------   -----------   ----------       ----------        ---------  
Cash and cash equivalents beginning of                                                                                       
 year .......................................          190,753        14,140      165,113           21,288          190,753  
                                                   -----------   -----------   ----------       ----------        ---------  
Cash and cash equivalents end of year              $    21,288   $   190,753   $   14,140       $   29,004        $  39,553  
                                                   ===========   ===========   ==========       ==========        =========   
</TABLE>

13.  SUBSEQUENT EVENT:
     ---------------- 

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

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

                                     F-32
<PAGE>
 
================================================================================
 
NO DEALER, SALES REPRESENTATIVE, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION
OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
 
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
                              ___________________
 
                               TABLE OF CONTENTS
 
<TABLE> 
<CAPTION> 
                                                                            Page
                                                                            ----
<S>                                                                      <C> 
Prospectus Summary......................................................      3
Risk Factors............................................................     11
Use of Proceeds.........................................................     19
Dividend Policy.........................................................     19
Dilution................................................................     20 
Capitalization..........................................................     21
Selected Consolidated Financial Data....................................     22
Management's Discussion and
  Analysis of Financial Condition
  and Results of Operations.............................................     26
Business................................................................     54
Regulation and Supervision..............................................     78
Management..............................................................     84
Certain Transactions....................................................     93
Principal Stockholders..................................................     94
Description of Capital Stock............................................     96
Shares Eligible for Future Sale.........................................     99
Underwriting............................................................    101
Legal Matters...........................................................    104
Experts.................................................................    104
Additional Information..................................................    105
Index to Financial Statements...........................................
</TABLE> 

                              ___________________
 
 
 
 
 
                              [1,700,000] Shares
 
 
 
 
 
                                    [LOGO]
 
                       FIRST INTERNATIONAL BANCORP, INC.
 
 
                                 COMMON STOCK
 
 
                             ____________________

                                  PROSPECTUS
                             ____________________
 
 
 
                      PRUDENTIAL SECURITIES INCORPORATED
                         KEEFE, BRUYETTE & WOODS, INC.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                              , 1997
 
 
 
 
================================================================================
<PAGE>
 
                                    PART II

                    INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

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

<TABLE>
<CAPTION>
                                                           TOTAL               
                                                         ------------          
<S>                                                      <C>
SEC Registration Fee.................................    $    7,750
NASD Fees............................................    $    2,846
NASDAQ Listing Fees..................................    $   36,186
Printing and Engraving Expenses......................    $*
Legal Fees and Expenses..............................    $*
Accountants' Fees and Expenses.......................    $*
Expenses of Qualification Under State
   Securities Laws, Including Attorneys' Fees........    $*
Transfer Agent and Registrar's Fees..................    $*
Miscellaneous Costs..................................    $*
                                                         ------------
               Total.................................    $*
                                                         ============
</TABLE> 

__________
*To be provided by amendment.
 
ITEM 14. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES

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

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

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

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

                                      II-1
<PAGE>
 
      The Registrant has, from time to time, issued an aggregate of 9,200 shares
(32,220 shares as adjusted for the 3.5-for-1 stock split effected by the
Registrant in August 1997) of restricted Common Stock to various employees upon
the exercise of options granted pursuant to the Company's 1994 Incentive Stock
Option Plan for aggregate consideration of $62,739.50 at an average exercise
price of $6.82 per share ($1.95 per share as adjusted for the 3.5-for-1 stock
split effected by the Registrant in August 1997).

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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


EXHIBITS
- --------

*1.1  Form of Underwriting Agreement.
 3.1  Amended and Restated Certificate of Incorporation of the Registrant.
 3.2  Amended and Restated By-laws of the Registrant.
 4.1  Specimen Common Stock Certificate.
*5.1  Opinion of Bingham, Dana & Gould LLP with respect to the legality of the
      shares being registered.
 10.1 Employment Agreement among Registrant, First National Bank of New England
      (the "Bank") and Brett N. Silvers; as amended by Letter Agreement, dated
      July 14, 1997.
 10.2 Promissory Note of Brett N. Silvers, payable to the Registrant, dated June
      30, 1994, as amended.
 10.3 Stock Pledge Agreement, dated June 30, 1994, between the Registrant and
      Brett N. Silvers, as amended.
 10.4 Amended and Restated 1996 Stock Option Plan.
 10.5 1994 Incentive Stock Option Plan, as amended.
 10.6 401(k) Plan.
*10.7 Hartford office lease
 11.1 Computation of Income Per Share.
 21.1 Subsidiaries of Registrant.
 23.1 Consent of Coopers & Lybrand L.L.P.
*23.2 Consent of Bingham, Dana & Gould LLP, counsel to Registrant (included in
      Exhibit 5.1).
 24.1 Power of Attorney (included in signature page to Registration Statement).
 27   Financial Data Schedule
__________________
      *  To be filed by amendment

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

                                      II-2
<PAGE>
 
ITEM 17. UNDERTAKINGS

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

      The undersigned Registrant hereby undertakes:

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

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

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

                                      II-3
<PAGE>
 
                                  SIGNATURES

      Pursuant to the requirements of the Securities Act of 1933, the
registrant, First International Bancorp, Inc., certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing on Form S-1
and has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Hartford, State of
Connecticut, on this 15th day of July, 1997.

                       FIRST INTERNATIONAL BANCORP, INC.

                           /s/ Brett N. Silvers
                       By:________________________
                          Brett N. Silvers
                          Chairman of the Board and
                          President

                               POWER OF ATTORNEY

     Each person whose signature appears below hereby appoints Brett N. Silvers
and Leslie A. Galbraith each of them severally, acting alone and without the
other, his/her true and lawful attorney-in-fact with the authority to execute in
the name of each such person, and to file with the Securities and Exchange
Commission, together with any exhibits thereto and other documents therewith,
any and all amendments (including without limitation post-effective amendments)
to this Registration Statement necessary or advisable to enable the Registrant
to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof, which amendments may make such other changes in the
Registration Statement as the aforesaid attorney-in-fact executing the same
deems appropriate.

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
 
        Signature                  Title                               Date
        ---------                  -----                               ----
 
/s/  Brett N. Silvers                           
___________________________  Chairman of the Board                 July 15, 1997
     Brett N. Silvers        and President  

/s/  Michael R. Carter                        
___________________________  Director                              July 15, 1997
     Michael R. Carter

/s/  Arnold L. Chase                        
___________________________  Director                              July 15, 1997
     Arnold L. Chase

/s/  Cheryl A. Chase                        
___________________________  Director                              July 15, 1997
     Cheryl A. Chase

/s/  Frank P. Longobardi                        
___________________________  Director                              July 15, 1997
     Frank P. Longobardi

                                      II-4
<PAGE>

/s/  Bernard M. Waldman
___________________________  Director                              July 15, 1997
     Bernard M. Waldman

/s/  Leslie A. Galbraith                        
___________________________  Executive Vice President, Secretary   July 15, 1997
     Leslie A. Galbraith     and Treasurer 

                                      II-5
<PAGE>

Exhibit 
  No.          Description
- -------        -----------

*1.1      Form of Underwriting Agreement.
 3.1      Amended and Restated Certificate of Incorporation of the Registrant.
 3.2      Amended and Restated By-laws of the Registrant.
 4.1      Specimen Common Stock Certificate.
*5.1      Opinion of Bingham, Dana & Gould LLP with respect to the legality of
          the shares being registered.
 10.1     Employment Agreement among Registrant, First National Bank of New
          England (the "Bank") and Brett N. Silvers; as amended by Letter
          Agreement, dated July 14, 1997.
 10.2     Promissory Note of Brett N. Silvers, payable to the Registrant, dated
          June 30, 1994, as amended.
 10.3     Stock Pledge Agreement, dated June 30, 1994, between the Registrant
          and Brett N. Silvers, as amended.
 10.4     Amended and Restated 1996 Stock Option Plan.
 10.5     1994 Incentive Stock Option Plan, as amended.
 10.6     401(k) Plan.
*10.7     Hartford office lease
 11.1     Computation of Income Per Share.
 21.1     Subsidiaries of Registrant.
 23.1     Consent of Coopers & Lybrand L.L.P.
*23.2     Consent of Bingham, Dana & Gould LLP, counsel to Registrant (included
          in Exhibit 5.1).
 24.1     Power of Attorney (included in signature page to Registration
          Statement).
 27       Financial Data Schedule
__________________
          *  To be filed by amendment

<PAGE>

                                                                     EXHIBIT 3.1
 
                     RESTATED CERTIFICATE OF INCORPORATION
                                      OF
                       FIRST INTERNATIONAL BANCORP, INC.


     FIRST INTERNATIONAL BANCORP, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies that (i) the original Certificate of 
Incorporation of First Regional Bancorp, Inc. was filed by the Corporation with 
the Secretary of State of Delaware on August 9, 1985, (ii) the original Restated
Certificate of Incorporation of the Corporation was filed by the Corporation
with the Secretary of State of Delaware on May 21, 1986, (iii) this Restated
Certificate of Incorporation was duly adopted in accordance with the provisions
of Sections 242 and 245 of the Delaware General Corporation Law, and (iv) the
Restated Certificate of Incorporation restates, integrates and further amends
the Corporation's current Restated Certificate of Incorporation, as heretofore
amended, to read in its entirety as follows:

     FIRST.  The name of the Corporation is FIRST INTERNATIONAL BANCORP, INC.

     SECOND. The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware.  The name of the Corporation's
registered agent at such address is Corporation Trust Company.

     THIRD.  The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.  The Corporation is to have a prepetual existence.

     FOURTH. The total number of shares of all classes of stock that the
Corporation shall have authority to issue is 14,000,000, consisting solely of:

     12,000,000 shares of common stock, $.10 par value per share ("Common
                Stock"); and

     2,000,000 shares of preferred stock, $.10 par value per share ("Preferred
               Stock").

     Upon filing of this Amended and Restated Certificate of Incorporation, each
share of Common Stock issued and outstanding or held in treasury as of July 14,
1997, shall be changed into three and one-half shares (3.5) of fully paid and
non-assessable shares of Common Stock.
<PAGE>
 
     The following is a statement of the powers, designations, preferences,
privileges, and relative, participating, optional, and other special rights of
the Preferred Stock and Common Stock, respectively:

     1.   PREFERRED STOCK.  The Board of Directors is hereby expressly
authorized to provide for, designate and issue, out of the authorized but
unissued shares of Preferred Stock, one or more other series of Preferred Stock,
subject to the terms and conditions set forth herein.  Before any shares of any
such series are issued, the Board of Directors shall fix, and hereby is
expressly empowered to fix, by resolution or resolutions, the following
provisions of the shares of any such series:

          (a)  the designation of such series, the number of shares to
constitute such series and the stated value thereof, if different from the par
value thereof;

          (b)  whether the shares of such series shall have voting rights or
powers, in addition to any voting rights required by law, and, if so, the terms
of such voting rights or powers, which may be full or limited;

          (c)  the dividends, if any, payable on such series, whether any such
dividends shall be cumulative, and, if so, from what dates, the conditions and
dates upon which such dividends shall be payable, the preference or relation
which such dividends shall bear to the dividends payable on any shares of stock
of any other class or series;

          (d)  whether the shares of such class or series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;

          (e)  the amount or amounts payable with respect to shares of such
class or series upon, and the rights of the holders of such class or series in,
the voluntary or involuntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the Corporation;

          (f)  whether the shares of such class or series shall be subject to
the operation of a retirement or sinking fund and, if so, the extent to and
manner in which any such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such class or series for retirement or
other corporate purposes and the terms and provisions relative to the operation
thereof;

          (g)  whether the shares of such class or series shall be convertible
into, or exchangeable for, shares of stock of any other class or series of any
other securities and, if so, the price or prices or the rate or rates of
<PAGE>
 
conversion or exchange and the method, if any, of adjusting the same, and any
other terms and conditions of conversion or exchange;

          (h)  the limitations and restrictions, if any, to be effective while
any shares of such class or series are outstanding upon the payment of dividends
or the making of other distributions on, and upon the purchase, redemption or
other acquisition by the Corporation of, the Common Stock or shares of stock of
any other class or series;

          (i)  the conditions or restrictions, if any, to be effective while any
shares of such class or series are outstanding upon the creation of indebtedness
of the Corporation or upon the issue of any additional stock, including
additional shares of such class or series or of any other class or series; and

          (j)  any other powers, designations, preferences and relative,
participating, optional or other special rights, and any qualifications,
limitations or restrictions thereof.

          The powers, designations, preferences and relative, participating,
optional or other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.  The Board of
Directors is hereby expressly authorized from time to time to increase (but not
above the total number of authorized shares of Preferred Stock) or decrease (but
not below the number of shares thereof then outstanding) the number of shares of
stock of any series of Preferred Stock designated to any one or more series of
Preferred Stock pursuant to this Section 1.  Different series of Preferred Stock
shall not be construed to constitute different classes of stock for purposes of
voting by classes unless expressly so provided in the resolution or resolutions
adopted by the Board of Directors creating or establishing any such series of
Preferred Stock.  No resolution, vote, or consent of the holders of the capital
stock of the Corporation shall be required in connection with the creation or
issuance of any shares of any series of Preferred Stock authorized by and
complying with the conditions of this Restated Certificate of Incorporation, the
right to any such resolution, vote, or consent being expressly waived by all
present and future holders of the capital stock of the Corporation.

          At such time as no shares of any series of Preferred Stock that may be
issued from time to time remain issued and outstanding, including without
limitation because all of such shares have been converted into shares of Common
Stock in accordance with this Restated Certificate of Incorporation, all
authorized shares of such series of Preferred Stock, automatically and without
further actions, shall be reclassified as authorized but unissued shares of
<PAGE>
 
undesignated Preferred Stock of no particular class or series, and any and all
of such shares may thereafter be issued by the Board of Directors of the Company
in one or more series, and the terms of any such series may be determined by the
Board of Directors, as provided in this Section 1.

     2.   COMMON STOCK
          
     2.1. Increase or Decrease in Authorized Number.  The number of authorized
shares of Common Stock may be increased or decreased (but not below the combined
number of shares thereof then outstanding by the affirmative vote of the holders
of the majority of the stock of the Corporation entitled to vote, irrespective
of the provisions of Section 242(b)(2) of the Delaware General Corporation Law.

     2.2. Voting Rights.  Except as otherwise required by law, and subject to
the voting rights provided to the holders of any series of Preferred Stock, the
holders of Common Stock shall have full voting rights and powers to vote on all
matters submitted to stockholders of the Corporation for vote, consent or
approval, and each holder of Common Stock shall be entitled to one vote for each
share of Common Stock held of record by such holder.

     2.3. Dividend, Liquidation and Other Rights.  Each share of Common Stock
issued and outstanding shall be identical in all respects with each other such
share, and no dividends shall be paid on any shares of Common Stock unless the
same dividend is paid on all shares of Common Stock outstanding at the time of
such payment.  Except for and subject to those rights expressly granted to the
holders of Preferred Stock and except as may be provided by the laws of the
State of Delaware, the holders of Common Stock shall have all other rights of
stockholders, including, without limitation, (a) the right to receive dividends,
when and as declared by the Board of Directors, out of assets lawfully available
therefor, and (b) in the event of any distribution of assets upon a liquidation
or otherwise, the right to receive ratably and equally all the assets and funds
of the Corporation remaining after the payment to the holders of the Preferred
Stock or of any other class or series of stock ranking senior to the Common
Stock upon liquidation of the specific preferential amounts which they are
entitled to receive upon such liquidation.


     FIFTH. The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation and for defining
and regulating the powers of the Corporation and its directors and stockholders
and are in furtherance and not in limitation of the powers conferred upon the
Corporation by statute:

          (a) The Board of Directors shall have the power and authority to
     adopt, amend or repeal any or all of the By-Laws of the Corporation,
<PAGE>
 
     subject only to such limitations, if any, as may be from time to time
     imposed by other provisions of this Restated Certificate of Incorporation,
     by law, or by the By-Laws.

          (b) A director of the Corporation shall not, in the absence of fraud,
     be disqualified by his office from dealing or contracting with the
     Corporation either as a vendor, purchaser or otherwise, nor in the absence
     of fraud shall a director of the Corporation be liable to account to the
     Corporation for any profit realized by him from or through any transaction
     or contract of the Corporation by reason of the fact that he, or any firm
     of which he is a member, or any corporation of which he is an officer,
     director or stockholder, was interested in such transaction or contract if
     such transaction or contract has been authorized, approved or ratified in
     the manner provided in the Delaware General Corporation Law for
     authorization, approval or ratification of transactions or contracts
     between the Corporation and one or more of its directors or officers, or
     between the Corporation and any other corporation, partnership,
     association, or other organization in which one or more of its directors or
     officers are directors or officers, or have a financial interest.

          (c) Elections of directors need not be by written ballot unless the
     By-Laws of the Corporation shall so provide.  Meetings of the Board of
     Directors and stockholders may be held within or without the State of
     Delaware, as the By-Laws may provide.  The books of the Corporation may be
     kept (subject to any statutory provision) outside the State of Delaware at
     such place or places as may be designated from time to time by the Board of
     Directors or in the By-Laws of the Corporation.
 
     SIXTH. Any action required or permitted to be taken by the stockholders
of the Corporation may be taken only at a duly called annual or special meeting
of the stockholders, and not by written consent in lieu of such a meeting.
Subject to the right, if any, of the holders of any series of Preferred Stock to
call special meetings of stockholders of the Corporation, special meetings of
stockholders of the Corporation may be called only by the Chairman of the Board
of Directors, the President, a majority of the total number of directors which
the Corporation would have if there were no vacancies, or by the holders of
record of at least 30% of the outstanding shares of Common Stock.

     SEVENTH.  (a) No director shall be personally liable to the Corporation or
its stockholders for monetary damages for any breach of fiduciary duty by such
director in his capacity as a director; provided, however, that a director shall
be liable to the extent provided by applicable law (i) for the breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or 
<PAGE>
 
a knowing violation of law, (iii) pursuant to Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which the director
derived an improper personal benefit.

          (b) The Corporation shall, to the fullest extent permitted by Section
145 of the Delaware General Corporation Law, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

          (c) Expenses incurred by an officer or director of the Corporation in
defending a civil or criminal action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such officer or
director to repay such amount if it shall be ultimately determined that such
officer or director is not entitled to be indemnified by the Corporation as
authorized by the Delaware General Corporation Law.  Such expenses incurred by
other employees and agents of the Corporation may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.

          (d) No amendment to or repeal of this Article Seventh shall apply to
or have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal, nor shall any such amendment or
repeal apply to or have any effect on the obligation of the Corporation to pay
in advance expenses incurred by an officer or director of the Corporation in
defending any action, suit or proceeding arising out of or with respect to any
acts or omissions occurring prior to such amendment or repeal.
<PAGE>
 
     IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of
Incorporation to be signed by its President and attested by its Secretary this
8th day of July, 1997.
           
                                 FIRST INTERNATIONAL BANCORP, INC.



                                 By /s/ Brett N. Silvers
                                   -------------------------------
                                   Brett N. Silvers
                                   Chairman and President

ATTEST:


/s/ Leslie A. Galbraith
- -----------------------------
Name:  Leslie A. Galbraith
Title: Secretary

 

<PAGE>

                                                                     EXHIBIT 3.2

                                  B Y L A W S

                                      OF

                       FIRST INTERNATIONAL BANCORP, INC.

                           (A Delaware Corporation)

                                   ARTICLE I

                                    Offices

     Section 1.  Principal Office. The principal office of First International
Bancorp, Inc. (the "Corporation") shall be in the City of Hartford, County of
Hartford, State of Connecticut.

     Section 2.  Other Offices. The Corporation may have a principal or other
office at such other place or places, either within or without the State of
Delaware, as the Board of Directors may from time to time determine or as shall
be necessary or appropriate for the conduct of the business of the Corporation.

                                   ARTICLE II

                            Meetings of Stockholders

     Section 1.  Place of Meetings. All meetings of stockholders for the
election of directors shall be held in Hartford, Connecticut or at such place or
places, within or without the State of Delaware, as may from time to time be
fixed by the Board of Directors, or as shall be specified in the respective
notices or waivers of notice thereof. The Board of Directors shall fix the place
for the holding of such meetings, and at least ten (10) days' notice shall be
given to the stockholders of the place so fixed in the manner set forth in
Section 4 of this Article II.

     Section 2.  Annual Meetings. The annual meeting of stockholders for the
election of directors and the transaction of other business shall be held
sometime during the first six months of each calendar year. At each annual
meeting the stockholders entitled to vote shall elect a Board of Directors and
<PAGE>
 
may transact such other corporate business as may be brought before the meeting.

     If the election of directors shall not be held on the day designated for
the annual meeting, or at any adjournment thereof, the Board of Directors shall
cause a special meeting of the stockholders for the election of directors to be
held as soon thereafter as may be convenient. At such special meeting the
stockholders may elect directors and transact other business with the same force
and effect as at an annual meeting of the stockholders duly called and held.

     Section 3.  Special Meetings. A special meeting of the stockholders (or of
any class thereof entitled to vote) for any purpose or purposes may be called at
any time by the Chairman of the Board, the President or by order of the Board of
Directors and shall be called by the President or Secretary upon the written
request of stockholders holding of record at least thirty percent (30%) of the
outstanding shares of stock of the Corporation entitled to vote at such meeting.
Such written request shall state the purpose or purposes for which such meeting
is to be called.

    Section 4.  Notice of Meetings. Except as otherwise expressly required by
law, notice of each meeting of stockholders, whether annual or special, shall be
given at least ten (10) days before the date on which the meeting is to be held
to each stockholder of record entitled to vote thereat by delivering a notice
thereof to him personally or by mailing such notice in a postage prepaid
envelope directed to him at his address as it appears on the stock ledger of the
Corporation, unless he shall have filed with the Secretary of the Corporation a
written request that notices intended for him be directed to another address, in
which case such notice shall be directed to him at the address designated in
such request. Every notice of a special meeting of the stockholders, besides
stating the time and place of the meeting, shall state briefly the objects or
purposes thereof. Notices of any meeting of stockholders 
<PAGE>
 
shall not be required to be given to any stockholder who shall attend such
meeting in person or by proxy; and, if any stockholder shall, in person or by
attorney thereunto authorized, in writing or by telegraph, waive notice of any
meeting of the stockholders, whether prior to or after such meeting, notice
thereof need not be given to him. Notice of any adjourned meeting of the
stockholders shall not be required to be given, except as expressly required by
law. Any previously scheduled meeting of the stockholders may be postponed, and
any special meeting of the stockholders may be canceled, by resolution of the
Board of Directors upon public notice given prior to the date previously
scheduled for such meeting of stockholders.

     Section 5.  Notice of Stockholder Business and Nominations.

                 (a) Nomination of Directors. Only persons who are nominated in
     accordance with the procedures set forth in these Bylaws shall be eligible
     to serve as directors. Nominations of persons for election to the Board of
     Directors may be made at a meeting of stockholders (a) by or at the
     direction of the Board of Directors or (b) by any stockholder of the
     Corporation who is a stockholder of record at the time of giving of notice
     for the election of directors at the meeting and who complies with the
     notice procedures set forth in this Section 5(a). Such nominations, other
     than those made by or at the direction of the Board of Directors, shall be
     made pursuant to timely notice in writing to the Secretary of the
     Corporation. To be timely, a stockholder's notice shall be delivered to the
     Secretary of the Corporation not less than 120 and not more than 150 days
     prior to the first anniversary of the date of the Corporation's proxy
     statement delivered to stockholders in connection with the preceding year's
     annual meeting, or if the date of the annual meeting is 
<PAGE>
 
     more than 30 days before or more than 60 days after such anniversary, or if
     no proxy statement was delivered to stockholders by the Corporation in
     connection with the preceding year's annual meeting, such notice must be
     delivered not earlier than 90 days prior to such annual meeting and not
     later than the later of (a) 60 days prior to the annual meeting or (b) 10
     days following the date on which public announcement of the date of such
     annual meeting is first made by the Corporation. With respect to special
     meetings of stockholders, such notice must be delivered to the Secretary of
     the Corporation not more than 90 days prior to such meeting and not later
     than the later of (1) 60 days prior to such meeting or (2) 10 days
     following the date on which public announcement of the date of such meeting
     is first made by the Corporation. Such stockholder's notice shall set forth
     (a) as to each person whom the stockholder proposes to nominate for
     election or reelection as a director, all information relating to such
     person that is required to be disclosed in solicitations of proxies for
     election of directors, or is otherwise required, in each case pursuant to
     Regulation 14A under the Securities Exchange Act of 1934, as amended
     (including such person's written consent to being named in the proxy
     statement as a nominee and to serving as a director if elected), and (b) as
     to the stockholder giving the notice (i) the name and address, as they
     appear on the Corporation's books, of such stockholder and (ii) the class
     and number of shares of the Corporation which are beneficially owned by
     such stockholder. At the request of the Board of Directors, any person
     nominated by the Board of Directors for election as a director shall
     furnish to the Secretary of the Corporation that information required to be
     set forth in a stockholder's notice of nomination which pertains to the
     nominee. No person shall be eligible to serve as a director of the
     Corporation unless nominated in accordance with the procedures set forth in
     this Section 5(a). The chairman of the meeting shall, if the facts warrant,
     determine and declare to the meeting that a 
<PAGE>
 
     nomination was not made in accordance with the procedures prescribed by the
     Bylaws, and if he should so determine, he shall so declare to the meeting
     and the defective nomination shall be disregarded. Notwithstanding the
     foregoing provisions of this Section 5(a), a stockholder shall also comply
     with all applicable requirements of the Securities Exchange Act of 1934, as
     amended, and the rules and regulations thereunder with respect to the
     matters set forth in this Section 5(a).

                 (b) Notice of Business. At any meeting of the stockholders,
     only such business shall be conducted as shall have been brought before the
     meeting (a) by or at the direction of the Board of Directors or (b) by any
     stockholder of the Corporation who is a stockholder of record at the time
     of giving of the notice provided for in this Section 5(b), who shall be
     entitled to vote at such meeting and who complies with the notice
     procedures set forth in this Section 5(b). For business to be properly
     brought before a stockholder meeting by a stockholder, the stockholder must
     have given timely notice thereof in writing to the Secretary of the
     Corporation. To be timely, a stockholder's notice shall be delivered to the
     Secretary of the Corporation not less than 120 and not more than 150 days
     prior to the first anniversary of the date of the Corporation's proxy
     statement delivered to stockholders in connection with the preceding year's
     annual meeting, or if the date of the annual meeting is more than 30 days
     before or more than 60 days after such anniversary, or if no proxy
     statement was delivered to stockholders by the Corporation in connection
     with the preceding year's annual meeting, such notice must be delivered not
     earlier than 90 days prior to such annual meeting and not 
<PAGE>
 
     later than the later of (a) 60 days prior to the annual meeting or (b) 10
     days following the date on which public announcement of the date of such
     annual meeting is first made by the Corporation. With respect to special
     meetings of stockholders, such notice must be delivered to the Secretary of
     the Corporation not more than 90 days prior to such meeting and not later
     than the later of (1) 60 days prior to such meeting or (2) 10 days
     following the date on which public announcement of the date of such meeting
     is first made by the Corporation. A stockholder's notice to the Secretary
     shall set forth as to each matter the stockholder proposes to bring before
     the meeting (a) a brief description of the business desired to be brought
     before the meeting and the reasons for conducting such business at the
     meeting; (b) the name and address, as they appear on the Corporation's
     books, of the stockholder proposing such business, (c) the class and number
     of shares of the Corporation which are beneficially owned by the
     stockholder, and (d) any material interest of the stockholder in such
     business. Notwithstanding anything in the Bylaws to the contrary, no
     business shall be conducted at a stockholder meeting except (i) in
     accordance with the procedures set forth in this Section 5(b) or (ii) with
     respect to nominations of persons for election as directors of the
     Corporation, in accordance with the provisions of Section 5(a) hereof. The
     Chairman of the meeting shall, if the facts warrant, determine and declare
     to the meeting that business was not properly brought before the meeting
     and in accordance with the provisions of the Bylaws, and if he should so
     determine, he shall so declare to the meeting and any such business not
     properly brought before the meeting shall not be transacted.
     Notwithstanding the foregoing provisions of this Section 5(b), a
     stockholder shall also comply with all applicable requirements of the
     Securities Exchange Act of 1934, as amended, and the 
<PAGE>
 
     rules and regulations thereunder with respect to the matters set forth in
     this Section.

     Section 6.  List of Stockholders. It shall be the duty of the Secretary or
other officer of the Corporation who shall have charge of the stock ledger to
prepare and make, at least ten (10) days before every election of directors, a
complete list of the stockholders entitled to vote thereat, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in his name. Such list shall be open for ten (10) days at
the place where said election is to be held or at some other specified place
within the City of Hartford, County of Hartford, State of Connecticut for the
examination of any stockholder during ordinary business hours and shall be
produced and kept at the time and place of the meeting during the whole time
thereof and be available for the inspection of any stockholder who may be
present. The original or duplicate stock ledger shall be the only evidence as to
who are the stockholders entitled to examine such list or the books of the
Corporation or to vote in person or by proxy at such election.

     Section 7.  Quorum and Adjournment. At each meeting of the stockholders,
the holders of record of a majority of the issued and outstanding stock of the
Corporation entitled to vote at such meeting, present in person or by proxy,
shall constitute a quorum for the transaction of business, except where
otherwise provided by law, the Certificate of Incorporation or these Bylaws. Any
officer entitled to preside at, or act as Secretary of, such meeting shall have,
whether or not there is such a quorum, the power to adjourn the meeting from
time to time without notice other than announcement at the meeting. At any such
adjourned meeting at which a quorum shall be present any business may be
transacted which might have been transacted at the meeting originally called,
<PAGE>
 
but only those stockholders entitled to vote at the meeting as originally
noticed shall be entitled to vote at any adjournment or adjournments thereof.

     Section 8.  Voting. Except as otherwise provided in the Certificate of
Incorporation, at every meeting of stockholders each holder of record of the
issued and outstanding stock of the Corporation to vote at such meeting shall be
entitled to one vote in person or by proxy for each such share of stock entitled
to vote held by such stockholder, but no proxy shall be voted after three (3)
months from its date unless the proxy provides for a longer period, and, except
where the transfer books of the Corporation shall have been closed or a date
shall have been fixed as the record date for the determination of stockholders
entitled to vote, no share of stock shall be voted at any election for directors
which shall have been transferred on the books of the Corporation within twenty
(20) days next preceding such election of directors. The Corporation shall not
be entitled to vote any shares of its own stock which it may own directly or
indirectly. At all meetings of the stockholders, a quorum being present, all
matters shall be decided by majority vote of the shares of stock entitled to
vote held by stockholders present in person or by proxy, except as otherwise
required by the laws of the State of Delaware. Unless demanded by a stockholder
of the Corporation present in person or by proxy at any meeting of the
stockholders and entitled to vote thereat or so directed by the Chairman of the
meeting or required by the laws of the State of Delaware, the vote thereat on
any question need not be by ballot. Unless otherwise provided in the Certificate
of Incorporation, all elections of directors shall be by ballot. On a vote by
ballot, each ballot shall be signed by the stockholder voting, or in his name by
his proxy, if there be such proxy, and shall state the number of shares voted by
him and the number of votes to which each share is entitled.
<PAGE>
 
     Section 9.  No Stockholder Action By Written Consent. Any action required
or permitted to be taken by the stockholders must be effected at an annual or
special meeting of stockholders called according to the provisions of these
Bylaws and may not be effected by written consent by such stockholders in lieu
of such a meeting.

                                  ARTICLE III

                               Board of Directors

     Section 1.  General Power. The property, business and affairs of the
Corporation shall be managed by the Board of Directors.

     Section 2.  Number and Term of Office. The number of directors shall be
fixed from time to time by resolution of the Board of Directors but shall not be
less than three (3). Directors need not be stockholders.

     The Board of Directors shall be divided into three classes of directors,
each class to be of substantially identical size, such that one class will serve
as directors until the 1998 Annual Meeting of the Corporation's stockholders, a
second class will serve as directors until the 1999 Annual Meeting of the
Corporation's stockholders, and a third class will serve as directors until the
2000 Annual Meeting of the Corporation's stockholders, and thereafter the number
of directors equal to that number in the class whose term expires at the time of
such subsequent annual meeting will be elected to hold office until the third
succeeding annual meeting. Members of the Board of Directors shall hold office
until the annual meeting of stockholders for the year in which their term is
scheduled to expire as set forth above in this Section 2 and their respective
successors are duly elected and qualified or until their earlier death,
incapacity, resignation, or removal. Except as the Delaware General Corporation
Law may otherwise require, in the interim between 
<PAGE>
 
annual meetings of stockholders or special meetings of stockholders called for
the election of directors and/or for the removal of one or more directors and
for the filling of any vacancy in that connection, any vacancies or new
directorships in the Board of Directors, including unfilled vacancies or new
directorships resulting from the removal of directors for cause or any increase
in the number of directors, may be filled only by the vote of a majority of the
remaining directors then in office, although less than a quorum, or by the sole
remaining director.

     Section 3.  Quorum and Manner of Acting. Unless otherwise provided by law,
the presence of one half (1/2) of the whole Board of Directors, and in any case
not less than three (3) directors, shall be necessary to constitute a quorum for
the transaction of business. In the absence of a quorum, a majority of the
directors present may adjourn the meeting from time to time until a quorum shall
be present. Notice of any adjourned meeting need not be given. At all meetings
of the directors, a quorum being present, all matters shall be decided by the
affirmative vote of a majority of the directors present, except as otherwise
required by the laws of the State of Delaware.

     Section 4.  Place of Meetings, Books and Records. The Board of Directors
may hold its meetings and keep the books and records of the Corporation at such
place or places within or without the State of Delaware, as the Board may from
time to time determine.

     Section 5.  Annual Meeting. As promptly as practicable after each annual
meeting of stockholders for the election of directors, the Board of Directors
shall meet for the purpose of organization, the election of officers and the
transaction of other business. Such meeting may be held at any other time or
place as shall be specified in a notice given, as hereinafter provided for
special meetings of the Board of Directors or in a waiver of notice thereof
signed by all the directors.
<PAGE>
 
     Section 6.  Regular Meetings. Regular meetings of the Board of Directors
may be held at such time and place, within or without the State of Delaware, as
shall from time to time be determined by the Board of Directors. After there has
been such determination, and notice thereof has been given to each member of the
Board of Directors, regular meetings may be held without further notice being
given.

     Section 7.  Special Meetings and Notice Thereof. Special meetings of the
Board of Directors shall be held whenever called by the Chairman of the Board,
the President or by a majority of the directors. Notice of meeting shall be
mailed to each director, addressed to him at his residence or usual place of
business, at least two (2) days before the date on which the meeting is to be
held, or shall be sent to him at such place by telegraph, cable, or be delivered
personally or by telephone, not later than the day before the day on which such
meeting is to be held. Each such notice shall state the time and place of the
meeting and the purpose thereof. In lieu of the notice to be given as set forth
above, a waiver thereof in writing, signed by the director or directors entitled
to said notice, whether before or after the time stated therein shall be deemed
equivalent thereto for purposes of this Section 7. No notice to or waiver by any
director with respect to any special meeting shall be required if such director
shall be present at said meeting.

     Section 8.  Telephonic Participation in Meetings. Members of the Board of
Directors or any committee designated by such board may participate in a meeting
of the Board of Directors or committee thereof by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting pursuant to
this section shall constitute presence in person at such meeting.

     Section 9.  Resignation. Any director of the Corporation may resign at any
time by giving written notice thereof to the Chairman of the Board, the
<PAGE>
 
President or the Secretary of the Corporation. The resignation of any director
shall take effect upon receipt of notice thereof or at such later time as shall
be specified in such notice; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. When
one or more directors shall resign from the Board, effective at a future date, a
majority of the directors then in office including those who have so resigned
shall have the power to fill such vacancy or vacancies, the vote thereon to take
effect when such resignation or resignations shall become effective.

     Section 10.  Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director, unless otherwise provided by the Certificate of
Incorporation or the laws of the State of Delaware.

     Section 11.  Compensation of Directors. The Board of Directors shall have
the power to fix the compensation of directors and members of committees of the
Board. The directors may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors and/or a stated annual fee (some or all
of which may be paid in the form of capital stock of the Corporation) as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.

     Section 12.  Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more directors of the Corporation, which, to the
extent provided in the resolution or in these Bylaws, shall have and may
<PAGE>
 
exercise such powers of the Board in the management of the business and affairs
of the Corporation as the Board may by resolution determine and specify in the
respective resolutions appointing them, subject to such restrictions as may be
contained in the Certificate of Incorporation. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors. The committees shall keep regular
minutes of their proceedings and report the same to the Board when required. A
majority of all the members of any such committee may fix its rules of
procedure, determine its action and fix the time and place, whether within or
without the State of Delaware, of its meetings and specify what notice thereof,
if any, shall be given, unless the Board of Directors shall otherwise by
resolution provide. The Board of Directors shall have the power to change the
membership of any such committee at any time to fill vacancies thereof and to
discharge any such committee, either with or without cause, at any time.

     Section 13.  Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if prior to such action a written consent thereto is
signed by all members of the Board or of such committee, as the case may be, and
such written consent is filed with the minutes or proceedings of the Board or
committee.

                                   ARTICLE IV

                                    Officers

     Section 1.  Number. The principal officers of the Corporation shall be a
Chairman of the Board, a President, one or more Vice Presidents, a Treasurer and
a Secretary. The Corporation may also have, at the discretion of the Board of
Directors, such other officers as may be appointed in accordance with the
<PAGE>
 
provisions of these Bylaws. One person may hold the offices and perform the
duties of any two or more of said offices, except the offices and duties of
President and Secretary.

     Section 2.  Election or Appointment and Term of Office. The principal
officers of the Corporation shall be chosen annually by the Board of Directors
at the annual meeting thereof. Each such officer shall hold the office until his
successor shall have been duly chosen and shall qualify, or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.

     Section 3.  Subordinate Officers. In addition to the principal officers
enumerated in Section 1 of this Article IV, the Corporation may have one or more
Assistant Treasurers, one or more Assistant Secretaries and such other officers,
agents and employees as the Board of Directors may deem necessary, each of whom,
shall hold office for such period, have such authority and perform such duties
as the Chairman of the Board, the President or the Board of Directors may from
time to time determine. The Board of Directors may delegate to any principal
officer the power to appoint and to remove any such subordinate officers, agents
or employees.

     Section 4.  Removal. Any officer may be removed, either with or without
cause, at any time, by resolution adopted by the Board of Directors at any
regular meeting of the Board or at any special meeting of the Board called for
that purpose at which a quorum is present.

     Section 5.  Resignations. Any officer may resign at any time by giving
written notice to the Chairman of the Board or to the Board of Directors or to
the President or to the Secretary. Any such resignation shall take effect upon
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
<PAGE>
 
     Section 6.  Vacancies. A vacancy in any office may be filled for the
unexpired portion of the term in the manner prescribed in these Bylaws for
election or appointment to such office for such term.

     Section 7.  Chairman of the Board. The Chairman of the Board shall preside
at all meetings of stockholders and at all meetings of the Board of Directors.
He shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.

     Section 8.  President. The President shall be the chief executive officer
of the Corporation and as such shall have general supervision of the affairs of
the Corporation, subject to the control of the Board of Directors. He shall be
exofficio a member of all standing committees except the Audit Committee. In the
absence of the Chairman of the Board, the President shall preside at all
meetings of stockholders and at all meetings of the Board of Directors. Subject
to the control and discretion of the Board of Directors, the President may enter
into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation. In general, he shall perform all duties incident to
the office of President, as herein defined, and all such other duties as from
time to time may be assigned to him by the Board of Directors.

     Section 9.  Vice Presidents. The Vice Presidents in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President. They shall perform such other duties and have such
other powers as the Chairman of the Board, the President or the Board of
Directors may from time to time prescribe.

     Section 10.  Treasurer. The Treasurer shall have charge and custody of, and
be responsible for, all funds and securities of the Corporation and shall
<PAGE>
 
deposit all such funds in the name of the Corporation in such banks or other
depositories as shall be selected by the Board of Directors. He shall exhibit at
all reasonable times his books of account and records to any of the directors of
the Corporation upon application during business hours at the office of the
Corporation where such books and records shall be kept; when requested by the
Board of Directors, he shall render a statement of the condition of the finances
of the Corporation at any meeting of the Board or at the annual meeting of
stockholders; he shall receive, and give receipt for, moneys due and payable to
the Corporation from any source whatsoever; and in general, he shall perform all
the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned to him by the Chairman of the Board, the President
or the Board of Directors.

     Section 11.  Secretary. The Secretary, if present, shall act as secretary
at all meetings of the Board of Directors and of the stockholders and keep the
minutes thereof in a book or books to be provided for that purpose; he shall see
that all notices required to be given by the Corporation are duly given and
served; he shall have charge of the stock records of the Corporation; he shall
see that all reports, statements and other documents required by law are
properly kept and filed; and in general, he shall perform all the duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the Chairman of the Board, the President or the Board
of Directors.

     Section 12.  Salaries. The salaries of the principal officers shall be
fixed from time to time by the Board of Directors, and the salaries of any other
officers may be fixed by the Chairman of Board or the President.
<PAGE>
 
                                   ARTICLE V

                                Indemnification

     The Corporation shall have power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.

     The Corporation shall have the power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
<PAGE>
 
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Corporation unless and only to the extent that the Delaware Court of
Chancery or the Court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.

     To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in the first two paragraphs of this
Article V, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.

     Any indemnification under either the first or second paragraph of this
Article V (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in the particular
paragraph. Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum of disinterested directors
<PAGE>
 
so directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.

     Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount, unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as
authorized in this Article V.

     The indemnification provided by this Article V shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.

     The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article V.
<PAGE>
 
                                  ARTICLE VI

                           Shares and Their Transfer

     Section 1.  Certificate for Stock. Every stockholder of the Corporation
shall be entitled to a certificate or certificates, to be in such form as the
Board of Directors shall prescribe, certifying the number of shares of the
capital stock of the Corporation owned by him.

     Section 2.  Stock Certificates. Any stock certificate which certifies the
number of shares owned by any holder of stock of the Corporation shall be
numbered in the order in which it shall be issued and shall be signed by the
Chairman of the Board or the President or any Vice President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the Corporation and shall have the seal of the Corporation affixed thereto;
provided, however, that, where any such certificate is signed (1) by a transfer
agent as provided in Section 6 of this Article VI, or an assistant transfer
agent or (2) by a transfer clerk acting on behalf of the Corporation and a
registrar, if the Board shall by resolution so authorize, the signature of such
Chairman of the Board, President, Vice President, Treasurer, Secretary,
Assistant Treasurer or Assistant Secretary and the seal of the Corporation may
be facsimiles thereof. In case any officer or officers of the Corporation who
shall have signed, or whose facsimile signature or signatures shall have been
used on any such certificate shall cease to be such officer or officers, whether
by reason of death, resignation or otherwise, before such certificate shall have
been delivered by the Corporation, such certificate may nevertheless be adopted
by the Corporation and be issued and delivered as though the person or persons
who signed such certificate, or whose facsimile signature or signatures shall
have been affixed thereto, had not ceased to be such officer or officers.
<PAGE>
 
     Section 3.  Stock Ledger. A record shall be kept by the Secretary, transfer
agent or by any other officer, employee or agent designated by the Board of
Directors of the name of the holder of the stock represented by such
certificate, the number of shares represented by such certificate, and the date
thereof, and in case of cancellation, the date of cancellation.

     Section 4.  Cancellation. Every certificate surrendered to the Corporation
for exchange or transfer shall be cancelled, and no new certificate or
certificates shall be issued in exchange for any existing certificate until such
existing certificate shall have been so cancelled, except in cases provided for
in Section 8 of this Article VI.

     Section 5.  Fractional Share Interests. The Corporation may, but shall not
be required to, issue fractions of a share. If the Corporation does not issue
fractions of a share, it shall (i) arrange for the disposition of fractional
interests by those entitled thereto, (ii) pay in cash the fair value of
fractions of a share as of the time when those entitled to receive such
fractions are determined, or (iii) issue scrip or warrants in registered or
bearer form which shall entitle the holder to receive a certificate for a full
share upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share shall, but scrip or warrants shall not unless
otherwise provided therein, entitle the holder to exercise voting rights, to
receive dividends thereon, and to participate in any of the assets of the
Corporation in the event of liquidation. The Board of Directors may cause scrip
or warrants to be issued subject to the conditions that they shall become void
if not exchanged for certificates representing full shares before a specified
date, or subject to the conditions that the shares for which scrip or warrants
are exchangeable may be sold by the Corporation and the proceeds thereof
distributed to the holders of scrip or warrants, or subject to any other
conditions which the Board of Directors may impose.
<PAGE>
 
     Section 6.  Transfer of Stock. Transfer of shares of the capital stock of
the Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation or with a
transfer clerk or a transfer agent appointed as provided in Section 7 of this
Article VI, and on surrender of the certificate or certificates for such shares
properly endorsed and the payment of all taxes due thereon. The person in whose
name shares of stock stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation; provided, however,
that whenever any transfer of shares shall be made for collateral security, and
not absolutely, such fact, if known to the Secretary of the Corporation, shall
be so expressed in the entry of transfer.

     Section 7.  Regulations. The Board of Directors may make such rules and
regulations as it may deem expedient, not inconsistent with the Certificate of
Incorporation or these Bylaws, concerning the issue, transfer and registration
of certificates for shares of the stock of the Corporation. It may appoint, or
authorize any principal officer or officers to appoint, one or more transfer
clerks or one or more transfer agents and one or more registrars, and may
require all certificates of stock to bear the signature or signatures of any of
them.

     Section 8.  Lost, Stolen, Mutilated or Destroyed Certificates. As a
condition to the issue of a new certificate of stock in the place of any
certificate theretofore issued and alleged to have been lost, stolen, mutilated
or destroyed, the Board of Directors, in its discretion, may require the owner
of any such certificate or his legal representatives, to give the Corporation a
bond in such sum and in such form as it may direct to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss,
theft, mutilation or destruction of any such certificate or the issuance of 
<PAGE>
 
such new certificate. Proper evidence of such loss, theft, mutilation or
destruction shall be procured for the Board of Directors, if required. The Board
of Directors, in its discretion, may authorize the issuance of such new
certificate without any bond when in its judgment it is proper to do so.

     Section 9.  Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than fifty (50) nor less than ten (10) days before the
date of such meeting, nor more than fifty (50) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.

                                  ARTICLE VII

                            Miscellaneous Provisions

     Section 1.  Corporate Seal. The Corporation shall have a corporate seal
which shall be in the form of a circle and shall bear the name of the
Corporation and words and figures showing that it was incorporated in the State
of Delaware in the year 1985. The Secretary shall be the custodian of the seal.
The Board of Directors may authorize a duplicate seal to be kept and used by any
other officer.

     Section 2.  Fiscal Year. The fiscal year of the Corporation shall be as
specified by the Board of Directors.
<PAGE>
 
     Section 3.  Voting of Stocks Owned by the Corporation. The Board of
Directors may authorize any person on behalf of the Corporation to attend, vote
and grant proxies to be used at any meeting of stockholders of any corporation
(except this Corporation) in which the Corporation may hold stock.

     Section 4.  Dividends. Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, out of funds legally available
therefor, at any regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the Corporation available
for dividends such sum or sums as the directors from time to time in their
discretion may deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors may deem conducive to the interests of the Corporation.

<PAGE>
 
                                                                     EXHIBIT 4.1

<TABLE> 
         <S>                                                                     <C> 
           NUMBER                                                                     SHARES
       
         FB


                               FIRST INTERNATIONAL BANCORP, INC.                   SEE REVERSE FOR
                                                                                 CERTAIN DEFINITIONS

                     INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE         CUSIP 32054Q 10 0

THIS CERTIFIES THAT





IS THE OWNER OF

                      FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE $.10 PER SHARE OF

                                                 FIRST INTERNATIONAL BANCORP, INC.
                                                       CERTIFICATE OF STOCK

WITNESS

Dated
                                        [SEAL OF FIRST INTERNATIONAL BANCORP APPEARS HERE]

           [SIGNATURE APPEARS HERE]                                                            [SIGNATURE APPEARS HERE]

                          TREASURER                                                                           PRESIDENT

COUNTERSIGNED:
        MELLON SECURITIES TRUST COMPANY
                      (NEW YORK)        TRANSFER AGENT
BY

                                      AUTHORIZED SIGNATURE

</TABLE> 
<PAGE>
 
      The following abbreviations, when used in the inscription on the face of 
this certificate, shall be construed as though they were written out in full 
according to applicable laws or regulations:
<TABLE> 
      <S>                                                 <C> 
      TEN COM --as tenants in common                      UNIF GIFT MIN ACT --..........Custodian...........
      TEN ENT --as tenants by the entireties                                    (Cust)             (Minor)
      JT TEN  --as joint tenants with right of                                under Uniform Gifts to Minors
                survivorship and not as tenants                               Act...............
                in common                                                            (State)
</TABLE> 

   Additional abbreviations may also be used though not in the above lists.

      For Value Received,__________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
   IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------

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



________________________________________________________________________________
 (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________ Shares
of the capital stock represented by the within Certificate, and do hereby 
irrevocably constitute and appoint

______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with 
full power of substitution in the premises.

Dated __________________________



             -------------------------------------------------------------------
             THE SIGNATURE OF THIS AGREEMENT MUST CORRESPOND WITH THE NOTICE:
             NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
             PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
             WHATEVER.

<PAGE>

                                                                    EXHIBIT 10.1
 

                             EMPLOYMENT AGREEMENT

                                     AMONG

                      FIRST INTERNATIONAL BANCORP, INC.,

                      FIRST NATIONAL BANK OF CONNECTICUT

                                      AND

                               BRETT N. SILVERS

                                APRIL 15, 1994

<PAGE>
 
                              EMPLOYMENT AGREEMENT

     THIS AGREEMENT is made and entered as of the 15th day of April, 1994 by and
among First International Bancorp, Inc. ("FIB") , a Delaware corporation with
its headquarters at One Commercial Plaza, Hartford, Connecticut, First National
Bank of Connecticut ("FNB") , a national banking association with its
headquarters at One Commercial Plaza, Hartford, Connecticut, and Brett N.
Silvers ("Employee"), of 51 Brenway Drive, West Hartford, Connecticut.

                                  WITNESSETH:

     WHEREAS, Employee desires to be employed by FIB and FNB under the terms and
conditions herein set forth; and

     WHEREAS, FIB and FNB desire to secure the services of Employee on the terms
herein set forth; and

     WHEREAS, Employee is willing to enter into this Agreement on
     said terms;

     NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto, intending to be legally bound, do hereby
mutually covenant and agree as follows:

     1.  Employment.

     FIB hereby agrees to employ Employee as Chairman, President and Chief
Executive Officer and FNB hereby agrees to employ Employee as Chairman,
President and Chief Executive Officer for the Term of Employment, as defined in
Section 2.1, and Employee accepts said employment and agrees to serve in such
capacities upon the terms and conditions hereinafter set forth.
<PAGE>
 
     2.  Definitions.

     2.1  "Term of Employment" shall mean the period commencing as of April 1,
1994 and ending March 31, 2000.  Notwithstanding the foregoing, the Term of
Employment shall end upon the occurrence of any of the following events:

     (a)  Employee's termination for "Cause" (as defined in Section 2.3);

     (b)  unilateral termination of Employee's employment by Employee other than
          as permitted under Section 5.2;

     (c)  the death of Employee; or

     (d)  ninety days after the commencement of the "Permanent Disability" of
          Employee (as defined in Section 2.2).

     2.2 Employee's "Permanent Disability," as this phrase is used throughout
this Agreement, shall mean employee's disability as defined under the long-term
disability insurance policy maintained for Employee pursuant to Section 4(b).

     2.3  "Cause," as this term is used throughout this Agreement, shall mean
(1) any material neglect of duty, material misconduct, material malfeasance,
fraud, dishonesty or act of gross negligence in the course of employment, or (2)
illegal conduct involving moral turpitude or other conduct materially injurious
to the reputation of FIB or FNB.

     3.  Duties of Employment.

     Employee agrees that, so long as he shall be employed by FIB and FNB,
Employee shall perform all duties assigned or delegated to him under the by-laws
of FIB and FNB or from time to time by the Boards of Directors of FIB and FNB
consistent with his positions as set forth in Section 1, and shall 
<PAGE>
 
perform all acts and services customarily associated with such positions,
devoting his best efforts and attention to the advancement of the interests and
business of FIB and FNB. Employee shall not be engaged in or concerned with any
other duties or business interests which are competitive or inconsistent with
the interests and business of FIB and FNB. It is understood that Employee may
also hold outside directorships and have duties related to the business
interests of the Controlling Stockholders of FIB (as defined herein) which may,
from time to time, require minor portions of his time, but which shall not
interfere or be inconsistent with his duties hereunder.

     Employee shall be a voting member of all committees of the Board of
Directors of FIB and FNB, now or hereafter existing, except any audit committee.

     It is anticipated that new directors may be added to the Boards of
Directors of FIB and FNB.  Employee shall be consulted with prior to the
appointment of any such new directors, and the Boards of Directors of, FIB and
FNB shall consider any candidates for nomination as directors which Employee may
propose.

     Subject to any budget, policies and/or guidelines established by the Boards
of Directors of FIB or FNB, Employee shall have sole authority to (a) hire,
terminate, reassign, demote, promote and determine compensation levels for
employees of FIB and FNB; and (b) negotiate and enter into reasonable contracts
on behalf of FIB and FNB for all professional services required in the ordinary
course of business, including without limitation, public relations and legal
services.
<PAGE>
 
     Subject to any policies and/or guidelines established by the Boards of
Directors of FNB, (a) Employee shall have the authority to extend individual
secured loans of up to $750,000 without the prior approval of the Board of
Directors of FNB; and (b) Employee shall have the authority to extend individual
secured loans over $750,000 and individual unsecured loans with the prior
approval of the Board of Directors of FNB.  Such Board of Directors shall
establish policies or guidelines as to when a loan is considered "secured" or
"unsecured".

     Employee shall have administrative authority from FIB's Board of Directors
and FNB's Board of Directors to implement FIB's business and financial plan and
FNB's business and financial plan, respectively, as adopted and amended from
time to time.  Such business and financial plans, including on an annual basis
the preparation of a budget for FIB, which budget shall be prepared on a
consolidated basis and shall be inclusive of the budget for FNB, shall be
subject to review and approval by FIB's Board of Directors and FNB's Board of
Directors, respectively.

     4.  Compensation.

     During the Term of Employment, FIB and FNB shall pay to Employee as
compensation and provide as benefits for the services to be rendered by him
hereunder the following:

     (a)  FIB and FNB shall together pay to Employee an aggregate salary at the
          rate of TWO HUNDRED TWENTY-FIVE THOUSAND DOLLARS ($225,000) per year,
          beginning retroactively from April 1, 1994, and increasing by five
          percent (5%) on April 1st of each year thereafter.  Such compensation
          shall be payable in accordance with normal payroll practices of FIB
          and FNB.  The Boards of Directors of FIB and FNB 
<PAGE>
 
          shall determine as between themselves the part of such compensation
          which FIB and FNB shall each pay, but their obligation hereunder as
          between themselves and Employee shall be a joint and several
          obligation to pay Employee's entire compensation.

     (b)  FNB shall provide comprehensive health, dental, disability and life
          insurance for Employee and his current and future dependents
          comparable to such coverage provided for officers of FNB generally.

     (c)  Employee shall be entitled to four (4) weeks of paid vacation time in
          each of the first, second, third, fourth, fifth and sixth years of the
          Term of Employment. Employee shall also be entitled to reasonable paid
          time for attending professional meetings within the policies and/or
          guidelines approved by the Boards of Directors of FIB or FNB.

     (d)  FNB shall permit Employee exclusive and unlimited use of an automobile
          for the Term of Employment of a comparative model to that now used by
          Employee.  FNB shall also pay for all automobile insurance (which
          shall include liability coverage of not less than $300,000 per person
          and $300,000 per accident) for Employee, provided that Employee is
          insurable at standard rates (or, if Employee is not insurable at
          standard rates, FNB shall pay the amount that would have 
<PAGE>
 
          been payable at standard rates), and all upkeep, maintenance, repair
          and parking expenses incurred in the ordinary course of business.

     (e)  FNB shall pay for membership for Employee at The Hartford Club and
          Tumblebrook Country Club, as well as all reasonable and necessary
          business expenses incurred by Employee within the guidelines and/or
          policies established by the Board of Directors of FNB, including,
          without limitation, travel, food, entertainment, professional
          publications, professional meeting expenses, and professional society
          dues; provided that Employee provides FNB with such receipts, vouchers
          and other evidence of such expenditures as may be reasonably required
          by FNB.

     (f)  Promptly upon executing this Agreement, FIB and FNB shall together pay
          to Employee a signing bonus of Seventeen Thousand, Five Hundred Sixty
          Dollars ($17,560.00).

     5.   Termination of Employment.

     5.1  If Employee's employment is terminated by FIB and/or FNB during the
Term of Employment for any reason other than Cause, Employee shall be entitled
to receive, and FNB and FIB shall be obligated to immediately pay to Employee,
the following:

     (a)  FIB and FNB shall together pay to Employee severance pay in an
          aggregate lump sum amount equal to twelve (12) months of Employee's
          aggregate salary, calculated using Employee's then current rate of
          salary, described in Section 4(a).  The Boards of Directors of FIB and
          FNB shall determine the part of such compensation which FIB and FNB
<PAGE>
 
          shall each pay, but their obligation hereunder as between themselves
          and Employee shall be a joint and several obligation to pay Employee's
          entire compensation.

     (b)  Employee shall be entitled to interest on such severance pay from the
          termination date until it is paid, at FNB's prime rate, and to
          reimbursement of any reasonable counsel fees incurred to collect such
          pay.

The above payment shall relieve FIB and FNB of any further obligations under
this Agreement other than for amounts accrued but not paid as of the date of
such termination.

     5.2  (a) Employee shall have the right during the Term of Employment, at
          his sole option, by thirty (30) days' advance written notice to the
          Board of Directors of FIB and FNB, to terminate his services hereunder
          at any time within the 90 days after the occurrence of any action by
          FIB and/or FNB, which, without Employee's express written consent,
          materially changes Employee's authority and responsibility as set
          forth herein, including without limitation, any material change in
          Employee's authority and responsibility occurring after a Change in
          Control of FIB or FNB.  Termination of Employee Is services under this
          Section 5.2 shall be deemed a unilateral, involuntary termination of
          employment by FIB and FNB and shall be governed by the provisions of
          Section 5.1 hereof.  Employee shall have no further obligation under
          this Agreement in the event of termination of Employee's services
          under this Section 5.2, provided, however, that the provisions of
          Section 7 shall continue to remain in force, and the provisions of
          Section 8.1 shall continue to remain in force 
<PAGE>
 
          unless (i) a Change-in-Control has occurred and (ii) the price per
          share of Common Stock of FIB paid to the Controlling Stockholders in
          connection with the Change-in-Control is less than $5.92 per share,
          and (iii) Employee agrees in writing to waive his rights to receive
          severance pay pursuant to Section 5.1(a).

     (b)  As used in this Agreement, a "Change in Control" shall be deemed to
          have taken place if: (i) any person becomes the beneficial owner of 20
          percent or more of the total number of voting shares of FIB or FNB at
          a time when the Controlling Stockholders own less voting shares than
          such other person or at a time when the Controlling Stockholders do
          not have the right to elect a majority of the directors of FIB and FNB
          or when the Controlling Stockholders have agreed or authorized that
          some other person or persons shall have the right to designate or
          direct which directors shall be nominated or voted for by the
          Controlling Stockholders; (ii) any person has entered into an
          agreement or received an option to acquire beneficial ownership of 25
          percent or more of the total number of voting shares of FIB or FNB,
          whether or not the requisite regulatory approval for such acquisition
          has been received; or (iii) as a result of, or in connection with, any
          cash tender or exchange offer, merger, or other business combination,
          sale of assets or contested election, or any combination of the
          foregoing transactions, the persons who were directors of FIB or FNB
          before such transaction and any of the Controlling 
<PAGE>
 
         Stockholders and any employee of an affiliate of any of the Controlling
         Stockholders shall cease to constitute at least two-thirds of the
         respective Boards of Directors thereof or of any successor institution.
         For purposes of this Section 5.2(b), a "Person" includes an individual,
         corporation, partnership, trust or group acting in concert. A person
         for these purposes shall be deemed to be a beneficial owner as that
         term is used in Rule 13d-3 under the Securities Exchange Act of 1934.

     5.3 If the employment of Employee shall terminate due to Employee's death
or Permanent Disability or at a time other than during the Term of Employment,
or if said employment shall be terminated for Cause, or if Employee shall
unilaterally terminate his employment other than as permitted under Section
5.2, all payments and benefits that would have been due to Employee under this
Agreement on or after the date of such termination shall cease, and FIB and FNB
shall have no further obligations under this Agreement other than for amounts
accrued but not paid as of the date of such termination.
     6.  Insurance on Life of Employee.

     FIB and FNB shall procure a term life insurance policy on the life of
Employee in the amount of $3,000,000, provided that Employee is insurable at
approximately standard rates, to be issued by a life insurance company licensed
to transact business within the State of Connecticut by the Connecticut
Commissioner of Insurance. The insurance policy so procured shall remain in
<PAGE>
 
full force and effect during the term of this Agreement; shall be paid for
entirely by FIB and FNB; and shall designate that FIB and FNB, together, are the
beneficiaries of $2,000,000 of the benefits thereof and that the wife of the
Employee, or her assignee(s), is the beneficiary of $1,000,000 of the benefits
thereof.  Employee hereby agrees to be available for such medical and other
examinations and inquiries as the insurance carrier may reasonably request.

     7.  Confidential Information.

     Employee understands that in the course of his employment by FIB and FNB,
Employee will receive confidential or proprietary information or trade secrets
concerning the business, loans, financial affairs, customers, policies,
procedures, guidelines, plans and prospects of FIB and FNB, and which FIB and
FNB desire to protect.  Employee agrees that he will not at any time during or
after the Term of Employment reveal to anyone outside FIB and FNB, except to
comply with requirements of law or regulatory authorities with jurisdiction over
FIB or FNB, and except to counsel or independent auditors for FIB or FNB or
Employee, or use for his own benefit or the benefit of any other person, any
such information that has been designated as confidential or proprietary 
by FIB and FNB or understood by Employee to be confidential or proprietary
without specific written authorization by an authorized officer of FIB and FNB.
Employee further agrees not to use any such confidential or proprietary
<PAGE>
 
information or trade secrets in competing with FIB and FNB at any time during or
after the Term of Employment unless such information (a) becomes generally
available to the public, other than as a result of a disclosure by Employee, or
(b) becomes available to Employee on a non-confidential basis from a source
other than FIB or FNB or their advisors, provided that such source is not known
by the Employee to be bound by any obligation of secrecy to FIB or FNB or
another party.

     8.  Covenants by Employee Not to Compete With Employer.

     8.1  Upon termination of Employee's employment by FIB and FNB for any
reason, Employee covenants and agrees that he will not at any time during the
one (1) year period following such termination directly or indirectly in any
manner or under any circumstances or conditions whatsoever be or become
interested, as an individual, partner, principal, agent, clerk, employee,
stockholder, officer, director, trustee, or in any other capacity whatsoever,
except as a nominal owner of stock of a public corporation, in any other
business in any way in competition with the business of FIB or FNB within
Hartford County in the State of Connecticut or within any other town in the
State of Connecticut in which FIB or FNB does business at the time of such
termination, and Employee shall not seek to hire any employee of FIB or FNB to
engage in such a competitive business.  The foregoing sentence shall not prevent
Employee from becoming an employee of a bank or a competing business wherever
located, including within Hartford County, provided that the Employee's
principal responsibilities shall not be to oversee the administration of the
bank's or the competing business' United States Small Business Administration
and United States Export/Import Bank financing programs, and that such 
<PAGE>
 
financing programs do not constitute a material part of the business of such
competing business. To the extent that Employee violates any of the prohibitions
of this Section 8.1, Employee shall not be entitled to any severance pay from
FIB or FNB pursuant to this Agreement and shall be required to repay to FIB or
FNB any such severance pay so received.

     8.2  The parties hereto believe that the restrictive covenants of Section
8.1 are reasonable.  However, if at any time it shall be determined by any court
of competent jurisdiction that Section 8.1 or any portion of it, as written, is
unenforceable because the restrictions are unreasonable, the parties hereto
agree that such portions as shall have been determined to be unreasonably
restrictive shall thereupon be deemed to be amended so as to make such
restrictions reasonable in the determination of such court, and the said
covenants, as so modified, shall be enforceable between the parties to the same
extent as if such amendments had been made prior to the date of any alleged
breach of said covenants.

     9.  Tag-Along Rights.
     
     If the Controlling Stockholders, or any of them, as defined herein, enter
into an agreement for the sale to an unrelated third party of all or a majority
of the Common Stock held by the Controlling Stockholders collectively (the "Co-
Sale Shares"), then Employee shall have the right (the "Co-Sale Right") , but
not the obligation, to require that the Controlling Stockholders cause the
proposed purchaser to purchase Employee's shares of FIB Common Stock at the same
price per share and upon the same terms and conditions as have been agreed to by
the Controlling Stockholders (the "Co-Sale Offer"), and in the same proportion
as the shares to be sold by the Controlling Stockholders bear to the total
number of shares of FIB Common Stock owned by the Controlling 
<PAGE>
 
Stockholders. (For example, if the Controlling Stockholders sell 70% of the
shares of FIB Common Stock owned of record by them, then the Employee shall have
the right, pursuant to this Section 9, to require the proposed purchaser to
purchase 70% of the shares of FIB Common Stock owned by him at the same price
per share and upon the same terms and conditions.) The selling Controlling
Stockholders shall give prompt written notice to Employee of any such proposed
sale, and shall specify the terms and conditions of the Co-Sale Offer, the name
of the proposed transferee and, if the transfer is to be made pursuant to a
written offer from a third party, a copy of the offer received from a third
party shall be attached thereto. Employee shall have 30 days after receiving
such notice to notify the selling Controlling Stockholders whether Employee
desires to sell his shares on such terms. As used herein, the "Controlling
Stockholders" are the Chase Interests (Arnold Chase, Cheryl Chase Freedman,
Rhoda L. Chase and David T. Chase) and the parents, other family members,
affiliates, successors and assigns of each of them.

     10.  Notices.

     All notices under this Agreement shall be in writing and shall be deemed
effective when delivered in person or by recognized overnight delivery service
to Employee or to FIB or FNB, or if mailed, postage prepaid, registered or
certified mail, addressed, in the case of Employee, to his last known address as
carried on the personnel records of FIB and FNB, and, in the case of FIB and
FNB, to their corporate headquarters, attention of the Corporate Secretary, or
<PAGE>
 
to such other address as the party to be notified may specify by notice to the
other party pursuant to this paragraph.

     11. Successors and Assigns.

     The rights and obligations of FIB and FNB under this Agreement shall inure
to the benefit of and shall be binding upon the successors and assigns of FIB
and FNB, including, without limitation, any corporation, individual or other
person or entity which may acquire all or substantially all of the assets and
business of FIB or FNB or with or into which FIB or FNB may be consolidated or
merged.

     12. Arbitration.

     Any dispute which may arise between the parties hereto shall be determined
by an arbitrator mutually agreed upon by the parties in writing.  The arbitrator
shall have at least five (5) years of experience in employment law and shall
decide any claim or dispute to arise hereunder in accordance with the terms of
this Agreement.  If the parties shall fail to agree upon an arbitrator within
five days after a written demand, delivered as provided for notices under
Section 10, for arbitration hereunder is made, each party shall have the right
within the succeeding ten days to select an arbitrator (the failure by either
party to exercise such right within said ten days will be equivalent to a
consent to the selection of the other party's arbitrator by mutual agreement);
within twenty days after such selection, if two arbitrators are selected, the
two arbitrators shall select a third arbitrator.  The arbitrators shall have at
least five (5) years of experience in employment law and shall 
<PAGE>
 
decide any claim or dispute to arise hereunder in accordance with the terms of
this Agreement. The decision of the arbitrator or of the majority of the
arbitrators, as the case may be, shall not include any award for punitive
damages or penalties, but the Arbitrator or arbitrators may award or prorate
attorneys fees in accordance with Section 5.1(c) hereof, if applicable, and
otherwise in accordance with his or their judgment as to who is the prevailing
party in the arbitration. An arbitration award rendered in accordance with this
Agreement shall be binding and conclusive upon the parties. The costs of
arbitration shall be borne equally, except that each party shall bear the cost
of his/its counsel and experts, if any.

     13.  Severability.

     If any of the terms or conditions of this Agreement shall be declared void
or unenforceable by any court or administrative body of competent jurisdiction,
such term or condition shall be deemed severable from the remainder of this
Agreement, and the other terms and conditions of this Agreement shall continue
to be valid and enforceable.

     14.  Construction.

     This Agreement shall be construed under the laws of the State of
Connecticut.  Section headings are for convenience only and shall not be
considered a part of the terms and provisions of the Agreement.

     15.  Guaranty.

     FIB hereby unconditionally guarantees all of the obligations of FNB set
forth in this Agreement and FNB hereby unconditionally guarantees all of the
obligations of FIB set forth in this Agreement.
<PAGE>
 
     IN WITNESS WHEREOF, FIB and FNB have caused this Agreement to be executed
by duly authorized officers and Employee has hereunto set his hand as of this
date first above written.

                              FIRST INTERNATIONAL BANCORP, INC.


                              By /s/ Leslie A. Galbraith
                                -------------------------------
                                Leslie A. Galbraith
                                Its Executive Vice President


                              FIRST NATIONAL BANK OF CONNECTICUT


                              By /s/ Leslie A. Galbraith
                                -------------------------------
                                Leslie A. Galbraith
                                Its Executive Vice President


                              /s/ Brett N. Silvers  
                              ---------------------------------
                              Brett N. Silvers


     The undersigned hereby agree to be bound by the provisions set forth in
Section 9 of the above Employment Agreement among First International Bancorp,
Inc., First National Bank of Connecticut and Brett N. Silvers dated as of April
15, 1994.

     Dated at Hartford, Connecticut, as of this 15th day of April, 1994.



                              /s/ David T. Chase
                              --------------------------------- 
                              David T. Chase


                              /s/ Rhoda L. Chase
                              --------------------------------- 
                              Rhoda L. Chase
<PAGE>
                              /s/ Arnold Chase   
                              --------------------------------- 
                              Arnold Chase


                              /s/ Cheryl Chase Freedman   
                              --------------------------------- 
                              Cheryl Chase Freedman
<PAGE>
 
                                       July 14, 1997

Mr. Brett N. Silvers
51 Brenway Drive
West Hartford, CT  06117-3011

Dear Brett:

     Reference is made to the following:

     A. that certain Promissory Note (the "Note") in the original principal
amount of $1,020,236 dated June 30, 1994 from you, Brett N. Silvers ("Silvers"),
to First International Bancorp, Inc. ("FIB");

     B. that certain Employment Agreement (the "Employment Agreement") dated as
of April 15, 1994 among Silvers, FIB and First National Bank of Connecticut (now
known as First National Bank of New England) ("FNB"); and

     C. that certain Stock Pledge Agreement (the "Stock Pledge Agreement") dated
April 15, 1994 between Silvers and FIB.

     Silvers, FIB and FNB agree as follows:

     1.  The Note is modified as follows:

         2. The reference to "March 31, 2000" in the first sentence of the
     second paragraph on the first page is deleted in its entirety and 
     "December 31, 2000" is substituted in its place.

         3. The following is added to the end of the second paragraph on the
     first page:

         "Further, regardless of whether the Target is met, notwithstanding the
         interest rate and payment required above, no interest shall be payable
         under this note if the Payee consummates a public offering of common
         stock prior to December 31, 1997."

         4. The second sentence in the fourth paragraph on the first page is
     deleted in its entirety, such deletion to be effective as of December 31,
     1996 (and therefore shall be effective with respect to any dividend paid
     after December 31, 1996).

     1. The Employment Agreement is modified as follows:
<PAGE>
 
         (a) The first sentence in Section 2.1 is deleted in its entirety and
     the following is substituted in its place:

         ""Term of Employment" shall mean the period commencing as of April 1,
         1994 and ending December 31, 2000."

         (b) The first sentence in Section 4(a) on page 5 is deleted in its
     entirety and the following is substituted in its place:

         "FIB and FNB shall together pay to Employee an aggregate salary at a
     rate of (i) THREE HUNDRED THOUSAND DOLLARS ($300,000) per year, beginning
     retroactively from April 1, 1997, and increasing by five percent (5%) on
     April 1st of each year thereafter."

         (c) The following are added as Subsections (g), (h), (i) and (j)
     immediately following Subsection (f) of Section 4:

         "(g)  FIB and FNB may, as determined by and at the sole discretion of
         the Boards of Directors of FIB and FNB, together pay to Employee a
         cash bonus during each of 1998, 1999 and 2000.

         (h) FIB and FNB shall together pay to Employee a cash bonus equal to
         the sum of (i) the increase in Employee's State and Federal tax
         liability resulting from the forgiveness of interest as provided for in
         that certain Promissory Note dated June 30, 1994 from Employee to FIB
         in the original principal amount of $1,020,236, as amended by a certain
         letter agreement dated July __, 1997 among Employee, FIB and FNB (the
         "Note"), plus (ii) the increase in Employee's State and Federal tax
         liability resulting from the payment of the amount paid to Employee
         pursuant to (i) above.

         (i) Upon a Change in Control during the Term of Employment, regardless
         of whether or not Employee's employment hereunder is subsequently
         terminated by FIB and/or FNB or by Employee for any reason whatsoever,
         FIB and FNB shall together pay to Employee a cash bonus equal to the
         sum of (i) an amount equal to the principal and interest then
         outstanding under the Note, plus (ii) the increase in Employee's State
         and Federal tax liability resulting from the payment of the amount paid
         to Employee pursuant to (i) above (plus any increase in such tax
         liability as a result of this clause (ii)).
<PAGE>
 
         (j) The bonuses described in Sections 4(h) and (i) above shall be paid
         within 10 days after FNB receives notice from Employee as to the
         amounts of such taxes. Employee shall provide to FNB such tax returns
         (or certificates of Employee's accountant in lieu thereof) or tax
         information as may be reasonably requested by FNB in order to confirm
         the amounts of such taxes. The Boards of Directors of FIB and FNB shall
         determine as between themselves the part of any bonuses which FIB and
         FNB shall each pay, but their obligation hereunder as between
         themselves and Employee shall be a joint and several obligation to pay
         the entire amount of each bonus under Sections 4(h) and (i) above."

         (c) The last sentence of Section 9 is deleted in its entirety and the
     following is substituted in its place:

         "As used in the Employment Agreement, "Controlling Stockholders" means
         Arnold Chase, Cheryl Chase, Rhoda L. Chase, David T. Chase and the
         parents, other family members, affiliates and heirs of each of them."

         (d) Section 5.2(b) is deleted in its entirety and the following is
     substituted in its place:

         "(b) As used in this Agreement, a "Change in Control" shall be deemed
         to have taken place if the Controlling Stockholders and Employee cease,
         in the aggregate, (A) to beneficially own at least 25% of the Common
         Stock of FIB or of any successor thereto, (B) to have the right to
         exercise at least 25% of the aggregate voting power of FIB or of any
         successor thereto, (C) to beneficially own, directly or indirectly, at
         least 25% of the Common Stock of FNB or of any successor thereto, or
         (D) to have the right to exercise, directly or indirectly, at least 25%
         of the aggregate voting power of FNB or of any successor thereto. For
         purposes of this paragraph, "Employee" includes any family members of
         Employee and any trusts, partnerships or other entities as to which the
         sole beneficiaries are Employee and/or family members of Employee."

     2.  The Stock Pledge Agreement is modified as follows:

         (a) The fourth and fifth sentences of Section 1 are deleted in their
     entirety and the following sentences are substituted in their place:
<PAGE>
 
         "The Pledgee shall hold the Stock as security for the payment of and
         performance of the Obligations and Pledgor shall not encumber, assign
         or dispose of the Stock except in accordance with the provisions of
         this Agreement and except that Pledgor shall have the right to transfer
         the Stock, subject to the first lien security interest granted in this
         Agreement, to one or more family members of Pledgor and/or trusts as to
         which the sole beneficiaries are Pledgor and/or family members of
         Pledgor. However, Pledgor shall have the right at any time or times to
         sell all or any of the Stock, free and clear of the lien of Pledgee, so
         long as the proceeds of such sale are applied first to reduce the
         balance, if any, of the Obligations."

         (b) The following sentence is added to the end of Section 2:

         "Notwithstanding the foregoing, Pledgor shall be entitled to receive
         and retain all cash dividends and all other distributions paid after
         December 31, 1996 with respect to the Stock."

     Except to the extent expressly amended herein, the Employment Agreement,
the Note and the Stock Pledge Agreement remain unmodified and in full force and
effect in accordance with their respective terms.

     Please sign in the space provided below to indicate your acceptance of the
foregoing, whereupon the provisions of this letter shall take effect.

                                  Very truly yours,

                                  FIRST INTERNATIONAL BANCORP, INC.


                                  By: /s/ Leslie A. Galbraith
                                      ---------------------------------
                                      Leslie A. Galbraith
                                      Its Executive Vice President

                                  FIRST NATIONAL BANK OF NEW ENGLAND


                                  By: /s/ Leslie A. Galbraith
                                      ---------------------------------
                                      Leslie A. Galbraith
                                      Its Executive Vice President
<PAGE>
 
Agreed to and Accepted this
14th day of July, 1997.


/s/ Brett N. Silvers
- ---------------------------------
Brett N. Silvers


The undersigned hereby consent to
the modifications to the Employment
Agreement act forth herein.

/s/ David T. Chase 
- ----------------------------------
David T. Chase

/s/ Rhoda L. Chase
- ----------------------------------
Rhoda L. Chase

/s/ Arnold Chase
- ---------------------------------- 
Arnold Chase

/s/ Cheryl Chase
- ----------------------------------
Cheryl Chase

<PAGE>
                                                                    EXHIBIT 10.2


 
                                PROMISSORY NOTE



$1,020,236                                                         June 30, 1994


     FOR VALUE RECEIVED, the undersigned Brett N. Silvers (hereinafter called
"Maker") promises to pay to the order of First International Bancorp, Inc.
(hereinafter called "Payee") at its address at One Commercial Plaza, Hartford,
Connecticut, or at such other place as the holder hereof (including the Payee,
hereinafter referred to as "Holder") may designate in lawful money of the United
States, the principal sum of One Million Twenty Thousand Two Hundred Thirty-Six
Dollars ($1,020,236), together with interest on the unpaid balance of this note,
beginning as of the date hereof, at an interest rate of seven (7%) percent per
annum, together with all expenses, including reasonable attorneys, fees,
incurred in any action to collect this note.

    The principal of this note, together with accrued interest, shall be due and
payable in full on March 31, 2000.  Such interest shall be calculated as simple
interest, rather than being compounded.  However, if the Cumulative Consolidated
Net Income of First International Bancorp, Inc. ("FIB") for its 1994, 1995,
1996, 1997, 1998, and 1999 fiscal years equals or exceeds $20,000,000
("Target"), then, notwithstanding the interest rate and payment required above,
no interest shall be payable under this note.

     Maker agrees that (i) if Maker shall fail to pay any sum due under this
note within ten (10) days after receiving notice from the Holder that such
amount is due; or (ii) if Maker shall suffer or permit the filing by or against
it of any petition for adjudication, arrangement, reorganization or the like
under any bankruptcy or insolvency law or make an assignment for the benefit of
creditors, and if, in the case of an involuntary petition, such petition is not
dismissed within thirty (90) days of the filing thereof (each of the events and
circumstances in (i) and (ii) being events of default), then, upon the happening
of any of such event, the entire indebtedness with accrued interest thereon (if
any) due under this note shall be immediately due and payable at the option of
the Holder.

     Maker may prepay any amounts on account of principal at any time without
the imposition of any fee or penalty.  In addition, if any dividends of cash or
marketable securities are paid upon the FIB stock pledged by Maker as collateral
for this note, the Holder shall have the right to retain or receive 
<PAGE>
 
as a prepayment upon the account of principal of this note an amount equal to
75% of the amount of the dividend received by Maker.

     Notwithstanding any other provision hereof, in enforcing the provisions
hereof, the Holder shall not have the right to attach or execute upon any asset
of Maker unless and until the Holder shall have exhausted its remedies pursuant
to the Stock Pledge Agreement entered into between the Maker and the Payee this
day (that is, unless and until all of the shares of FIB Common Stock, par value
$.10 per share, pledged by Maker as collateral for this Note have been sold, and
the proceeds thereof have been applied to the obligations of Maker set forth in
this note).

     This note shall be governed by and construed in accordance with the laws of
the State of Connecticut.

     Dated this 30th day of June, 1994.

                                              /s/ Brett N. Silvers
                                              -----------------------------
                                              BRETT N. SILVERS

<PAGE>
                                                                    EXHIBIT 10.3


 
                             STOCK PLEDGE AGREEMENT

                                    BETWEEN

                       FIRST INTERNATIONAL BANCORP, INC.

                                      AND

                                BRETT N. SILVERS

                                 JUNE 30, 1994
<PAGE>
 
                             STOCK PLEDGE AGREEMENT



    AGREEMENT dated this 30th day of June, 1994, by and between BRETT N.
SILVERS, of West Hartford, Connecticut ("Pledgor") , and FIRST INTERNATIONAL
BANCORP, INC., a Delaware corporation ("Pledgee").

                              W I T N E S S E T H:

     WHEREAS, Pledgor is indebted to Pledgee pursuant to a Promissory Note dated
June 30, 1994, in the principal amount of $1,020,236 (the "Note"); and

    WHEREAS, such indebtedness is being incurred by Pledgor in connection with
Pledgor's purchase from Pledgee of 175,600 shares of Common Stock of Pledgee
(the "Stock"); and

     WHEREAS, Pledgor has agreed to pledge the Stock to Pledgee as collateral
for the Note, on the terms set forth herein.

     NOW, THEREFORE, it is hereby agreed as follows:

     1.  Pledge.  As collateral for the Note and any substitutions or
replacements for the Note (collectively, the "Obligations"), Pledgor hereby
pledges, assigns and delivers to the Pledgee and grants to Pledgee a first lien
security interest in the Stock.  The Pledgor will deliver or cause to be
delivered to Pledgee, as soon as it is received by Pledgor or becomes available
to Pledgor from the issuer or any transfer agent for the issuer, a certificate
evidencing the ownership of the Stock.  Contemporaneously herewith, Pledgor is
delivering to Pledgee a stock power executed in blank with respect to the Stock.
The Pledgee shall hold the Stock as security for the payment of and performance
of the Obligations and Pledgor shall not encumber, assign or dispose of the
Stock except in accordance with the provisions of this Agreement.  However,
Pledgor shall have the right at any time or times to sell up to 75% of the
Stock, free and clear of the lien of Pledgee, so long as the proceeds of such
sale are applied first to reduce the balance, if any, of the Obligations.

     2.  Dividends and Other Rights.  If the Pledgor becomes entitled to receive
or receives cash dividends or any other distribution with respect to the Stock
(other than additional common stock of Pledgee), Pledgor shall be entitled to
retain or receive 25% of such dividend or distribution.  Pledgee shall be
entitled to retain or receive 75% of such dividend or distribution, which shall
be applied as a reduction of the principal amount of the Obligations (except
that, if the dividend or distribution is not cash or marketable securities, the
75% received by Pledgee shall be held as additional collateral for the
Obligations).

     3.  Representation.  The Pledgor warrants and represents that (i) the Stock
is duly and validly pledged to the Pledgee; and (ii) Pledgor has good title to
all the Stock, free and clear of all pledges and other encumbrances.

     4.  Stock Adjustments or Additions.  In the event that during the term of
this pledge any stock dividend is declared or made, or if any reclassification,
readjustment or other change is made in the capital structure of the Company
<PAGE>
 
(collectively, "Stock Dividend or Change"), 100% of all new, substituted and
additional shares or securities of the Company issued to or acquired by Pledgor
by reason of such Stock Dividend or Change shall be forthwith delivered to the
Pledgee to be held by it under this Agreement, and the term "Stock" shall be
deemed to include such shares or securities.

     5.  Term.  The pledge shall terminate upon payment of and performance of
all Obligations.  Upon termination of this pledge, any Stock still held
hereunder shall be delivered forthwith to the Pledgor.

     6.  Default.  The Pledgee shall have all of the rights and remedies with
respect to the Stock subject to the Uniform Commercial Code in force in
Connecticut on the date hereof (the "Code").  Upon the occurrence of an event of
default under the Note, and during the, continuation thereof, the Pledgee may
(i) cause all or any part of the Stock to be transferred into its name or into
the name of its nominee or nominees, and (ii) apply the Stock against the
payment or performance of the Obligations.  Pledgor agrees that because of the
Securities Act of 1933, as amended, or any other laws or regulations, and for
other reasons, there may be legal and/or practical restrictions or limitations
affecting Pledgee in any attempts to dispose of certain portions of the Stock
and for enforcement of its rights.  For these reasons, Pledgee is hereby
authorized by Pledgor, but not obligated, in the event of the occurrence of an
event of default under the Documents, to sell all or any part of the Stock at
private sale, subject to investment letter or in any other manner which will not
require the Stock, or any part thereof, to be registered in accordance with the
Securities Act of 1933, as amended, or the rules and regulations promulgated
thereunder, or any other law or regulation, at a commercially reasonable price
obtainable by Pledgee at any such private sale or other disposition in the
manner mentioned above.  Pledgee is also hereby authorized by Pledgor, but not
obligated, to take such actions, give such notices, obtain such consents, and do
such other things as Pledgee may deem to be required or appropriate in the event
of sale or disposition of any of the Stock.  Pledgee may in its discretion
approach a restricted number of potential purchasers and Pledgor acknowledges
that a sale under such circumstances may yield a lower price for the Stock, or
any part or parts thereof, than would otherwise be obtainable if same were
either offered to a large number of potential purchasers, or registered and sold
in the open market.  Pledgor agrees (a) that in the event Pledgee shall upon the
occurrence of an event of default under the Documents (an "Event of Default"),
sell the Stock, or any portion thereof, at such private sale or sales, Pledgee
shall have the right to rely upon the advice and opinion of any member firm of a
national securities exchange as to the commercially reasonably price obtainable
upon such a private sale thereof, and (b) that such reliance shall be conclusive
evidence that Pledgee handled such matter in a commercially reasonable manner
under the Code.

     7.  Voting.  Until the occurrence of an event of default under the Note,
Pledgor shall have the exclusive right to vote the Stock, at any and all
meetings of the shareholders of the Company.  Following the occurrence of an
event of default under the Note, and during the continuance thereof, Pledgee
shall have the right, after either giving written notice thereof to Pledgor that
it intends thereafter to do so or after transferring the shares into the name of
Pledgee or its nominee, at its sole discretion and without liability therefor,
to cause such shares not to be voted.
<PAGE>
 
     8.  Duty of Care.  Beyond the exercise of reasonable care to assure the
safe custody of the certificates evidencing Stock while held hereunder, the
Pledgee shall have no duty or liability to collect any sums due in respect
thereof or to protect or preserve rights pertaining thereto, and shall be
relieved of all responsibility for the Stock upon surrendering the same to the
Pledgor.

     9.  Remedies Not Exclusive.  The rights and remedies herein provided are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law, including without limitation, the rights and remedies of a
secured party under the Uniform Commercial Code in force in Connecticut on the
date hereof and as may be amended from time to time.

     10.  Effect.  This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.

     11.  Applicable Law.  This Agreement shall be governed by and construed
according to the laws of the State of Connecticut and may not be amended except
in writing.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.


                              FIRST INTERNATIONAL BANCORP, INC.

                              /s/ Leslie A. Galbraith
                              ---------------------------------------- 
                              Leslie A. Galbraith
                              Its Executive Vice President

                              /s/ Brett N. Silvers
                              ----------------------------------------  
                              Brett N. Silvers

<PAGE>

                                                                    EXHIBIT 10.4


                       FIRST INTERNATIONAL BANCORP, INC.
                  AMENDED AND RESTATED 1996 STOCK OPTION PLANS

          1. Purpose of the Plan. The purpose of the 1996 Stock Option Plans is
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to certain key Directors and
officers of FIRST INTERNATIONAL BANCORP, INC. and any subsidiaries which FIRST
INTERNATIONAL BANCORP, INC. presently owns or controls or may hereafter organize
or acquire, and to promote the success of the business.

          2. Definitions. As used herein the following definitions shall apply.

              (a) "Bank Holding Company" shall mean FIRST INTERNATIONAL BANCORP,
INC. or any direct or indirect subsidiary now owned or hereafter acquired by
Bank Holding Company.

              (b) "Board" shall mean the Board of Directors of FIRST
INTERNATIONAL BANCORP, INC.

              (c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.

              (d) "Common Stock" shall mean the Common Stock of the Bank Holding
Company.

              (e) "Directors" means Directors of First International Bancorp,
Inc. or of any direct or indirect subsidiary now owned or hereafter acquired by
First International Bancorp, Inc.

              (f) "Employee" shall mean a regular, salaried full-time employee
(as the term "employee" is used in Section 422 of the Code) of the Bank Holding
Company or one of its subsidiaries, as the term "subsidiary corporation" is
defined in Section 424 of the code.

              (g) "Option" shall mean a stock option granted pursuant to the
Plan.

              (h) "Option Price" shall mean the price determined by the Board
pursuant to the Plan.

              (i) "Optioned Stock" shall mean the stock subject to an Option
granted pursuant to the Plan.
<PAGE>
 
              (j) "Optionee" shall mean an Employee who received an Option.

              (k) "Plan" or "Plans" shall mean collectively the Amended and
Restated 1996 Stock Option Plans. Although the Plans shall be subject to the
same terms and conditions except as otherwise expressly stated herein, they
shall be deemed to be two Plans. One of the Plans encompasses Options granted to
the Directors, while Options will be granted on the terms set forth herein
without discretion by the Board with respect thereto; the other Plan encompasses
Options granted to persons other than Directors, which Options will be granted
as and when determined by the Board.

              (l) "Share" shall mean a share of Common Stock of the Bank Holding
Company as adjusted in accordance with Section 12 of the Plan.

          3. Stock Subject to the Plan. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the plan is Two hundred thousand three hundred sixteen (200,316) of
Common Stock of the Bank Holding Company. Such Shares may be authorized but
unissued shares.

          If an option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
other Options under the Plan.

          4. Administration of the Plan.
             

              (a) Procedure. The Plan shall be administered by the Board. The
Board may act hereunder through a Committee of two or more Directors (a
"Committee"). References herein to the granting of Options by the Board, the
authority of the Board, and the decisions, determinations and interpretations of
the Board are intended to include any Options granted by the Committee, exercise
of authority by the Committee, and any decisions, determinations and
interpretations by the Committee.

              (b) Powers of the Board. Subject to the provisions of the Plan,
the Board shall have the authority: (i) to grant to any officer who is an
Employee an Option to purchase Shares of the Bank Holding Company, which shall
be conditioned on the execution by such officer of a Stock Option Agreement
substantially in the form of Exhibit A hereto (with such modifications as the
<PAGE>
 
Board may desire, within the terms of this Plan and within the requirements of
law); (ii) to determine the Option Price for any Shares to be issued pursuant to
an Option granted under the Plan, the officer to whom, and the time or times at
which, Options shall be granted, and the number of Shares to be represented by
each Option, the time or times at which Options may be exercised, and the term
of each Option which in no event shall be more than ten (10) years from the date
of the grant of the Option; (iii) to interpret the Plan; (iv) to prescribe,
amend and rescind rules and regulations relating to the Plan; (v) to determine
the terms and provisions of each Option granted under the Plan (which need not
be identical) and, with the consent of the holder thereof, to modify or amend
each Option; (vi) to authorize any person to execute on behalf of the Bank
Holding Company any instrument required to effectuate the grant of an Option
previously granted by the Board; and (vii) to make all other determinations
deemed necessary or advisable for the administration of the Plan. Options shall
be granted to members of the Board of Directors of the Company only pursuant to
section 4(e) below.

              (c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.

              (d) Minimum Grants to Officers. The grants of Options pursuant to
Section 4(b) above shall include the following (in addition to any other Options
that may be granted):

                    (i) Each Vice President, Senior Vice President, and
Executive Vice President of the Company employed by the Bank Holding Company
prior to January 1, 1996 shall receive, on the date that this Plan is adopted by
the Board, an Option to purchase the number of shares by which the Applicable
Initial Option exceeds the sum of (A) the number of Shares that each such person
had the option to buy from the Bank Holding Company immediately prior to the
adoption of this Plan by the Board, plus (B) the number of Shares purchased by
such Employee from the Bank Holding Company at any time prior to the adoption of
the Plan pursuant to the exercise of a stock option (regardless of whether such
existing or previous options were granted pursuant to an option plan and
regardless of whether such existing options were vested or immediately
exercisable). For the purposes of this Plan, the "Applicable Initial Option"
shall be the number of Shares obtained by (A) taking the Compensation Percentage
Amount of each such person's aggregate (i.e., cumulative) base salary since the
date of such person's employment by the Bank Holding Company, and (B) dividing
such Compensation Percentage Amount by the fair market value 
<PAGE>
 
of each Share, as determined by the Board on the date that this Plan is adopted
by the Board, and the "Compensation Percentage Amount" is 5% of such cumulative
base salary for Vice Presidents, 10% of such cumulative base salary for Senior
Vice Presidents, and 20% of such cumulative base salary for Executive Vice
Presidents.

                    (ii) Each Vice President, Senior Vice President, and
Executive Vice President of the Bank Holding Company shall receive, at such time
as the Board shall determine during the first 4 months of each fiscal year of
the Company while such person continues to hold such position, an option to
purchase the number of Shares equal to their Applicable Additional Option. For
the purposes hereof, the "Applicable Additional Option" shall be the number of
shares obtained by (A) taking the Compensation Percentage Amount (as defined in
clause (i) above) of each such person's annual base salary as of the end of the
immediately preceding fiscal year of the Company, and (B) dividing such
Compensation Percentage amount by the fair market value of each Share, as
determined by the Board on the date that the Options are granted.

              (e) Grants to Directors. Options to Directors shall be granted
only pursuant to this Section 4(e). On January 15 of each year during the term
of the Plan, Commencing January 15, 1998, each Director who attended at least
80% of the meetings of the Board of Directors of the Bank Holding Company
(including for such purpose meetings of committees of which such person is a
member) shall receive an Option to purchase 500 shares of Common Stock. Each
such Option shall remain outstanding for a term of ten years. If a person is a
Director of a subsidiary or subsidiaries but not a Director of First
International Bancorp, Inc., then such person's attendance at the meetings of
the board of directors of such subsidiary or subsidiaries shall determine
whether such person receives an Option for such year hereunder. If a person is a
Director of First International Bancorp, Inc., then such person's attendance at
the meetings of its Board (and not any meetings of the board of directors of any
subsidiary) shall determine whether such person receives an Option for such year
hereunder. The Option Price for Options granted hereunder to Directors shall be
the fair market value of the Shares on the applicable January 15. If the Shares
are traded on a stock exchange on the applicable January 15, the fair market
value for Options granted to Directors shall be the closing price on the primary
stock exchange on which the Shares are traded; if the Shares are not traded on a
stock exchange but are publicly traded, the fair market value for Options
granted to Directors shall be the average of the closing bid and asked prices on
such date; if the Shares are not publicly traded, the fair 
<PAGE>
 
market value shall be such price per Share as is determined by a disinterested
Committee of the Board.

          5. Eligibility. Options under the Plan may be granted only (a) to
members of the Board of Directors of the Bank Holding Company, or (b) to
officers who are Employees and who have been appointed as a Vice President or a
higher position with the Bank Holding Company as the Board shall select. An
officer or Director who has been granted an Option may, if such officer or
Director is otherwise eligible, be granted an additional Option or Options.

          6. Term of Plan. The Plan shall become effective upon its adoption by
the Board; subject, however, to approval by the holders of at least two-thirds
of the outstanding stock of each class of the Bank Holding Company within twelve
(12) months thereafter. The exercise of any Option granted prior to such
shareholder approval shall be conditioned on such shareholder approval. The Plan
shall continue in effect for a term of ten (10) years unless sooner terminated
under Section 14 of the Plan.

          7. Term of Option. The term of each Option granted under the Plan
shall be no greater than ten (10) years from the date of grant thereof.

          8. Option Price. The Option Price for the Shares to be issued pursuant
to any such Option granted under the Plan (except for Options granted to
Directors) shall be any price determined by the Board; provided, however, such
Option Price shall in no event be less than one hundred percent (100%) of the
fair market value per share of the Bank Holding Company's Common Stock at the
date of the grant of the Option, as determined by the Board.

          9. Vesting. Except as the Board may otherwise provide in an Optionee's
written Stock Option Agreement and except for Options granted hereunder to
Directors, the Option shall be 25% vested one year after the granting of the
option; 50% vested after two years; 75% vested after 3 years; and 100% vested
after 4 years. An Option may not be exercised for a number of shares (including
previous exercises under such Option) that is greater than the percentage of the
Option that has vested.

         10. Exercise of Option.

             (a) Procedure for Exercise. Any Option granted hereunder shall be
exercisable on such terms and conditions as are set forth in the Stock Option
Agreement entered into between the Bank Holding Company and the Optionee with
respect to the grant of such Option. The Option Price of the Shares as to which
<PAGE>
 
an Option shall be exercised shall be paid in full at the time of exercise, at
the election of the Optionee, in cash or currency of the United States of
America, certified check or bank cashier's check.

          An Option shall be exercised when written notice of such exercise has
been given to the Bank Holding Company in accordance with the terms of the
Optionee's Stock Option Agreement by the person entitled to exercise the Option
and payment as described above for the Shares with respect to which the Option
is exercised has been received by the Bank Holding Company accompanied by any
other representations or agreements required by the terms of this Plan or the
Optionee's Stock Option Agreement granted hereunder.

              (b) Termination of Employment or Cessation of Directorship. If an
Optionee ceases to be a Director or an Employee of the Bank Holding Company for
any reason, whether voluntary or involuntary, with or without cause, including
without limitation retirement (but not including termination due to death or
permanent disability (as such term is used in Section 22(e)(3) of the Code), the
Option will automatically expire as of the date of the termination of such
Optionee's directorship or employment as the case may be. The Plan shall not
confer upon any Optionee any right with respect to continuation of directorship
or employment by the Bank Holding Company, nor shall it interfere in any way
with such Employee's right or the Bank Holding Company's right to terminate such
Director's term or Employee's employment at any time. If the Optionee's
directorship or employment is terminated due to the Optionee's death or
permanent disability, the Optionee (or the personal representative of the
Optionee, as applicable) may exercise the vested portion of the Option during
the 90 day period commencing on the date that the Optionee's employment is
terminated.

         11. Non-Transferability of Options. Except to the extent expressly
provided in Section 10(b) above, the Option may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner and may be exercised,
during the lifetime of the Optionee, only by the Optionee.

         12. Adjustment Upon Changes in Capitalization. In the event there is
any change in the Common Stock through the declaration of stock dividends, or
through recapitalization resulting in a stock split, or combination or exchange
of Shares, or otherwise, the Board shall appropriately adjust the number of
class of Shares covered by any Option but which are unexercised, as well as the
price to be paid therefor so as to equal the same number of Shares that a 
<PAGE>
 
record holder of an equal number of Shares immediately prior to such event would
own or be entitled to receive after the happening of such event. Any such
adjustment shall be determined by the Board as to Options other than those held
by Directors, but Options held by Directors shall be adjusted in the same
manner. In the event of any such change in the outstanding Common Stock, the
Board shall appropriately adjust the aggregate number and class of shares
available under the Plan.

          In the case of any such change in the Common Stock, the aggregate
option price in each Optionee's Stock Option Agreement of all the Shares covered
thereby prior to such change, shall be the aggregate option price for all the
shares or other securities substituted for such shares or to which such shares
are adjusted, and the Option Price per share after such change shall be
determined accordingly.

          In the case of any consolidation of the Bank Holding Company with, or
merger of the Bank Holding Company into, any other corporation (other than a
consolidation or merger in which the Bank Holding Company is the continuing
corporation), or in case of any sale or transfer of all or substantially all of
the assets of the Bank Holding Company, and, in particular, in the event of the
acquisition of the majority of the Common Stock of the Bank Holding Company by a
holding company, the Corporation formed by such consolidation or the corporation
into which the Bank Holding Company shall have been merged or the corporation
which shall have acquired such assets or Common Stock, as the case may be (the
"Acquiring Corporation"), shall execute and deliver to each Optionee a
supplemental stock option agreement providing that the Holder of each Option
then outstanding shall have the right, during the period such Option shall be
outstanding pursuant to its terms, to exercise such Option (to the extent
vested) as to the kind and amount of shares of stock receivable upon such
acquisition, consolidation, merger, sale or transfer by a holder, immediately
prior to such acquisition, consolidation, merger, sale or transfer, of the total
number of shares subject to the Option. Such supplemental stock option agreement
shall provide for adjustments which shall be as nearly equivalent as may be
practical to the adjustments provided for in this Article. The provisions of
this Section shall similarly apply to successive acquisitions, consolidations,
mergers, sales or transfers. The supplemental stock option agreement shall also
provide for the exercise of Options using stock of the corporation which is the
subject of the Option.

          No fractional Shares of the Common Stock shall be issuable on account
of any action aforesaid, and the aggregate number of Shares into which Shares
then
<PAGE>
 
covered by the Option when changed as a result of such action shall be reduced
to the largest number of whole shares resulting from such action, unless the
Board (or in the event of an acquisition, consolidation, merger, sale or
transfer as described above, the Board of Directors of the Acquiring
Corporation), in its discretion, shall determine to issue scrip certificates. In
such event, the scrip certificates shall be in a form and have such terms and
conditions as the Board (or the Board of Directors of Acquiring Corporation, as
the case may be) in its discretion shall prescribe.

         13. Time of Granting Options. The date of grant of an Option under the
Plan other than Options granted to Directors shall, for all purposes, be the
date on which the Board makes the determination granting such Option. Notice of
the determination shall be given to each Employee to whom an Option is so
granted within a reasonable time after the date of such grant. Options to
Directors shall be granted at the times provided for in Section 4(e) above.

         14. Amendment and Termination of the Plan.

             (a) Amendment. The Board, without approval of the shareholders, may
amend the Plan from time to time in such respects as the Board may deem
desirable; provided, however, the Board may not extend the term of the Plan,
increase or decrease the aggregate number of Shares subject to the Plan (except
as provided in Section 12 of the Plan), or alter the class of employees eligible
to receive Options without the approval of the Bank Holding Company's
shareholders; and further provided that the Board may not amend Sections 4(e)
and 9 more than once every six months, other than to comport with changes in the
Code, the Employee Retirement Income Security Act, or the rules thereunder.

             (b) Termination. The Board, without approval of the shareholders,
may at any time terminate the Plan.

             (c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated and shall be deemed to incorporate the terms of this Plan
as it existed on the dates the Options were granted.

         15. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an Option granted under the Plan unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
<PAGE>
 
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the
rules and regulations promulgated thereunder, the requirements of any stock
exchange upon which the Shares may then be listed, and the applicable counsel
for the Bank Holding Company with respect to such compliance.

         As a condition to the exercise of an Option, the Bank Holding Company
may require a person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Bank Holding Company such a representation is
necessary or desirable under any of the aforementioned relevant provisions of
law.

         16. Reservation of Shares. The Bank Holding Company, during the term of
this Plan, will at all times reserve and keep available, the number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

         Inability of the Bank Holding Company to obtain from any regulatory
body having jurisdiction such as authority as is deemed by the Bank Holding
Company's counsel to be necessary for the lawful issuance and sale of any shares
hereunder shall relieve the Bank Holding Company of any liability with respect
of the non-issuance or sale of such Shares as to which such requisite authority
shall not have been obtained.

         17. Use of Proceeds. All proceeds received by the Bank Holding Company
under the Plan shall be used for its general corporate purposes.

         18. Tax Withholding Requirement. The Board may require the Optionee, in
the Optionee's Stock Option Agreement, to agree to remit to the Bank Holding
Company any amount of federal, state or local taxes required to be withheld by
the Bank Holding Company in connection with the issuance of the Shares.

<PAGE>
                                                                    EXHIBIT 10.5

 
                       FIRST INTERNATIONAL BANCORP, INC.
                        1994 INCENTIVE STOCK OPTION PLAN



     1.  Purpose of the Plan.  The purpose of this 1994 Incentive Stock, Option
Plan is to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to certain key
officers of FIRST INTERNATIONAL BANCORP, INC. and any subsidiaries which FIRST
INTERNATIONAL BANCORP, INC. presently owns or controls or may hereafter organize
or acquire, and to promote the success of the business.

     2.  Definitions.  As used herein, the following definitions shall apply:

     (a) "Bank Holding Company" shall mean FIRST INTERNATIONAL BANCORP, INC. or
any subsidiary now owned or hereafter acquired by Bank Holding Company.

     (b) "Board" shall mean the Board of Directors of FIRST INTERNATIONAL
BANCORP, INC.

     (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (d) "Common Stock" shall mean the Common Stock of the Bank Holding Company.

     (e) "Employee" shall mean a regular, salaried employee (as the term
"employee" is used in Section 422 of the Code) of the Bank Holding Company or
one of its subsidiaries, as the term "subsidiary corporation" is defined in
Section 424 of the code.

     (f) "Option" shall mean a stock option granted pursuant to the Plan.


     (g) "Option Price" shall mean the price determined by the Board pursuant to
the Plan.

     (h) "Optioned Stock" shall mean the stock subject to an option granted
pursuant to the Plan.

     (i) "Optionee" shall mean an Employee who received an Option.

     (j) "Plan" shall mean this 1994 Incentive Stock Option Plan.
<PAGE>
 
     (k) "Share" shall mean a share of Common Stock of the Bank Holding Company
as adjusted in accordance with Section 12 of the Plan.

     (l) "10% Shareholder" shall mean an individual who immediately after an
option is granted hereunder owns, within the meaning of Section 422(b)(6) of the
Code, stock possessing more than 10% of the total combined voting power of all
classes of stock of the Bank Holding Company and its subsidiaries.

     3.  Stock Subject to the Plan.  Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is eighty thousand two hundred seventy five (80,275) Shares of
Common Stock of the Bank Holding Company.  Such Shares may be authorized but
unissued shares.

     If an option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for other
Option(s) under the Plan.

     4.  Administration of the Plan

     (a) Procedure.  The Plan shall be administered by a committee of two or
more members of the Board who are not employees of the Bank Holding Company and
who are "disinterested" directors.  For these purposes, a director shall be
"disinterested" if he or she does not, during one year prior to serving as an
administrator of this Plan, or during such service, receive a grant or award of
equity securities of the Bank Holding Company under this Plan or any other plan
of the Bank Holding Company or its affiliates; provided, however, that grants or
awards of equity securities may be made to directors who are Plan administrators
if such grants or awards would not disqualify such directors from being
"disinterested" under Rule 16b-3(c)(2) of the Securities and Exchange
Commission.

     (b) Powers of the Board.  Subject to the provisions of the Plan, the Board
shall have the authority:  (i) to grant to any officer who is an Employee an
Option to purchase Shares of the Bank Holding Company, which shall be
conditioned on the execution by such officer of a Stock Option Agreement
substantially in the form of Exhibit A hereto (with such modifications as the
Board may desire, within the terms of this Plan and with the requirements of
law); (ii) to determine the option Price for any Shares to be issued pursuant to
an Option granted under the Plan, the officer to whom, and the time or times at
which Options shall be granted, and the number of Shares to be represented by
each Option, the time or times at which Options may be exercised and the term of
each option which in no event shall be more than ten (10) years from 
<PAGE>
 
the date of the grant of the Option; (iii) to interpret the Plan; (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan; (v) to
determine the terms and provisions of each Option granted under the Plan (which
need not be identical) and, with the consent of the holder thereof, to modify or
amend each Option; (vi) to authorize any person to execute on behalf of the Bank
Holding Company any instrument required to effectuate the grant of an Option
previously granted by the Board; and (vii) to make all other determinations
deemed necessary or advisable for the administration of the Plan. It is intended
that Options issued hereunder shall qualify as "incentive stock options" under
Section 422 of the Code, and the Board shall administer the Plan in order to
preserve the characterization of options granted pursuant hereto as incentive
stock options.

     (c) Effect of Board's Decision.  All decisions, determinations and
interpretations or the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.

     5.  Eligibility. Options under the Plan may be granted only to key
executive officers who are Employees and who have been appointed as a Vice
President or a higher position with the Bank Holding Company as the Board shall
select.  An officer who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.

     6.  Term of Plan.  The Plan shall become effective upon its adoption by the
Board; subject, however, to approval by (i) holders of at least two-thirds of
the outstanding stock of each class of the Bank Holding Company within twelve
(12) months thereafter.  The exercise of any Option granted prior to such
shareholder approval shall be conditioned on such shareholder approval.  The
Plan shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 14 of the Plan.

     7.  Term of Option.  Unless otherwise provided in the terms of an Option,
the term or each Option granted under the Plan shall be no greater than ten (10)
years from the date of grant thereof; provided, however, if the Optionee owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Bank Holding Company at the time the option is
granted, the term of the option shall be no greater than five (5) years from the
date of grant thereof.

     8.  Option Price.  The Option Price for the Shares to be issued pursuant to
any such option granted under the Plan shall be any price determined by the
Board; provided, however, such Option Price shall in no event be less than one
hundred percent (100%) of the fair market value per share of the Bank Holding
Company's Common Stock at the date of the grant of the Option.  However, if an
Optionee owns stock possessing more than ten percent (10%) of the total 
<PAGE>
 
combined voting power of all classes of stock of the Bank Holding Company at the
time the Option is granted, the Option Price shall be at least one hundred and
ten percent (110%) of the fair market value of the Bank Holding Company's Common
Stock at the date of the grant of the Option.

     9.  Vesting.  Except as the Board may otherwise provide in an Optionee's
written Stock Option Agreement, the Option shall be one hundred percent (100%)
vested and may be exercised immediately by the Optionee.

     10. Exercise of Option.

     (a) Procedure for Exercise.  Any Option granted hereunder shall be
exercisable on such terms and conditions as are set forth in the Stock Option
Agreement entered into between the Bank Holding Company and the Optionee on the
grant of such Option.  The Option Price of the Shares as to which an Option
shall be exercised shall be paid in full at the time of exercise, at the
election of the Optionee, in cash or currency of the United States of America,
certified check or bank check.

     An Option shall be exercised when written notice of such exercise has been
given to the Bank Holding Company in accordance with the terms of the Optionee's
Stock Option Agreement by the person entitled to exercise the Option and payment
as described above for the Shares with respect to which the Option is exercised
has been received by the Bank Holding Company accompanied by any other
representatives or agreements required by the terms of this Plan or the
Optionee's Stock Option Agreement granted hereunder.

     (b) Limitation on Option Exercise.  If, during any calendar year, the
Optionee has Options hereunder or options under any other plan of the Bank
Holding Company that are exercisable for the first time and the aggregate fair
market value of the stock received pursuant to such Option or options exceeds
$100,000 (as of the date of grant) then Options in excess of $100,000 shall not
be treated as Incentive Stock Options. In the event that an Optionee holds
Options that are exercisable for the first time which are valued in excess of
$100,000, the Bank Holding Company will designate the stock acquired pursuant to
the exercise of an Option (up to the first $100,000) as incentive stock option
stock by issuing separate stock certificates and identifying such certificates
as incentive stock option stock on its stock transfer records.

     (c) Termination of Employment.  If an Optionee ceases to be an Employee of
the Bank Holding Company for any reason including, but no limited to, death,
permanent disability (as such term is used in Section 22(e)(3) of the Code) or
termination of employment as a result of retirement or otherwise, the Option
will automatically expire as of the date of such Optionee's death, permanent
disability or termination of employment. The Plan shall not confer upon any
<PAGE>
 
Optionee any right with respect to continuation of employment by such bank, nor
shall it interfere in any way with his right or the Bank Holding Company's right
to terminate his employment at any time.

     11. Non-Transferability of Options.  The Option may not be any manner and
may be exercised, during the lifetime of the Optionee, only by the Optionee.

     12. Adjustment Upon Changes in Capitalization.  In the event there is any
change in the Common Stock through the declaration of stock dividends, or
through recapitalization resulting in a stock split, or combination or exchange
of Shares, or otherwise, the Board shall appropriately adjust the number or
class of Shares covered by any Option but which are unexercised, as well as the
price to be paid therefore so as to equal the same number of Shares that a
record holder of an equal number of Shares immediately prior to such event would
own or be entitled to receive after the happening of such event.  In the event
of any such change in the outstanding Common Stock, the Board shall
appropriately adjust the aggregate number and class of shares available under
the Plan.

     In the case of any such change in the Common Stock, the aggregate option
price in each Optionee's Stock Option Agreement of all the Shares covered
thereby prior to such change, shall be the aggregate option price for all the
shares or other securities substituted for such shares or to which such shares
are adjusted, and the Option Price per share after such change shall be
determined accordingly.

     In case of any consolidation of the Bank Holding Company with, or merger of
the Bank Holding Company into, any other corporation (other than a consolidation
or merger in which the Bank Holding Company is the continuing corporation), or
in case of any sale or transfer of all or substantially all of the assets of the
Bank Holding Company, and, in particular, in the event of the acquisition of the
majority of the Common Stock of the Bank Holding Company by a holding company,
the Corporation formed by such consolidation or the corporation into which the
Bank Holding Company shall have been merged or the corporation which shall have
acquired such assets or Common Stock, as the case may be (the "Acquiring
Corporation"), shall execute and deliver to each Optionee a supplemental stock
option agreement providing that the Holder of each option then outstanding shall
have the right, during the period such option shall be outstanding pursuant to
its terms, to exercise such option as to the kind and amount of shares of stock
receivable upon such acquisition, consolidation, merger, sale or transfer by a
holder, immediately prior to such acquisition, consolidation, merger, sale or
transfer, of the total number of shares subject to the Option.  Such
supplemental stock option agreement shall provide for adjustments which shall be
as nearly equivalent as may be practical to the adjustments provided for in this
Article.  The provisions of this Section 
<PAGE>
 
shall similarly apply to successive acquisitions, consolidations, mergers, sales
or transfers. The supplemental stock option agreement shall also provide for the
exercise of Options using stock of the corporation which is the subject of the
Option.

     No fractional Shares of the Common stock shall be issuable on account of
any action aforesaid, and the aggregate number of Shares into which Shares then
covered by the Option when changed as a result of such action shall be reduced
to the largest number of whole shares resulting from such action unless the
Board (or in the event of an acquisition, consolidation, merger, sale or
transfer as described above, the Board of Directors of the Acquiring
corporation), in its discretion, shall determine to issue scrip certificates, in
such event, shall be in a form and have such terms and conditions as the Board
(or the Board of Directors of Acquiring Corporation, as the case may be) in its
discretion shall prescribe.

     13. Time of Granting Options.  The date of grant of an Option under the
Plan shall, for all purposes, be the date on which the Board makes the
determination granting such Option.  Notice of the determination shall be given
to each Employee to whom an Option is so granted within a reasonable time after
the date of such grant.

     14. Amendment and Termination of the Plan.

     (a) Amendment.  The Board, without approval of the shareholders, may amend
the Plan from time to time in such respects as the Board may deem desirable,
provided, however, the Board may not extend the term of the Plan, increase or
decrease the aggregate number of Shares subject to the Plan (except as provided
in Section 12 of the Plan), or alter the class of employees eligible to receive
Options without the approval of the Bank Holding Company's shareholders.

     (b) Termination.  The Board, without approval of the shareholders, may at
any time terminate the Plan.

     (c) Effect of Amendment of Termination.  Any such amendment or termination
of the Plan shall not affect Options already granted and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated and shall be deemed to incorporate the terms of this plan as it
existed on the dates the Options were granted.

     15. Conditions Upon Issuance of Shares.  Shares shall not be issued with
respect to an Option granted under the Plan unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
<PAGE>
 
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the
rules and regulations promulgated thereunder, the requirements of any stock
exchange upon which the Shares may then be listed, and the applicable state
securities laws, and shall be further subject to the approval of counsel for the
Bank Holding Company with respect to such compliance.

     As a condition to the exercise of an Option, the Bank Holding Company may
require a person exercising such Option to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Bank Holding Company such a representation is
necessary or desirable under any of the aforementioned relevant provisions of
law.

     16. Reservation of Shares.  The Bank Holding company, during the term of
this Plan, will at all times reserve and keep available, the number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

     Inability of the Bank Holding Company to obtain from any regulatory body
having jurisdiction such authority as is deemed by the Bank Holding Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder
shall relieve the Bank Holding company of any liability with respect of the non-
issuance or sale of such Shares as to which such requisite authority shall not
have been obtained.

     17. Use of Proceeds.  All proceeds received by the Bank Holding Company
under the Plan shall be used for its general corporate purposes.

     18. Tax Withholding Requirement.  The Board may require the remit to the
Bank Holding Company any amount of federal, state or local taxes required to be
withheld by the Bank Holding Company in the event the Optionee disposes Shares
received pursuant to the exercise of an option without satisfying the holding
period requirements of Section 422(a)(1) of the code.

<PAGE>
                                                                    EXHIBIT 10.6


 
                       FIRST INTERNATIONAL BANCORP, INC.

                                  401(K) PLAN

                           SUMMARY PLAN DESCRIPTION

<PAGE>
 
<TABLE>
<CAPTION>
 
 
                          SUMMARY PLAN DESCRIPTION
                              TABLE OF CONTENTS

 
                                                                      Page
<S>                  <C>                                              <C>
                                                        
Section I            INTRODUCTION                                       1
                                                        
Section II           PLAN DATA                                          1
                                                        
                     Agent For Service of Legal Process                 1
                     Effective Date                                     1
                     Employer                                           1
                     Plan Administrator                                 1
                     Plan Year                                          1
                     Trustee                                            2
                     Type Of Administration                             2
                                                        
Section III          DEFINITIONS                                        2
                                                        
                     Break in Service                                   2
                     Compensation                                       2
                     Disability                                         3
                     Early Retirement                                   3
                     Effective Date                                     3
                     Elective Deferral                                  3
                     Entry Date                                         3
                     Family Member                                      3
                     Highly Compensated Employee                        3
                     Hour of Service                                    4
                     Maternity/Paternity Leave                          4
                     Normal Retirement Age                              4
                     Spouse                                             4
                     Year of Service                                    5
                                                        
Section IV           ELIGIBILITY REQUIREMENTS AND       
                     PARTICIPATION                                      5
</TABLE> 

                                                        
<PAGE>
 
Section V            EMPLOYEE CONTRIBUTIONS                             5
                                                        
                     Elective Deferrals                                 5
                     Voluntary Contributions                            6
                     Rollover And Transfer Contributions                6
                                                        
                                                        
                                                        
Section VI           EMPLOYER CONTRIBUTIONS                             6
                                                        
                     Contribution Formula                               6
                     Eligibility for Allocation                         7
                                                        
Section VII          GOVERNMENT REGULATIONS                             7
                                                        
Section VIII         PARTICIPANT ACCOUNTS                               8
                                                        
Section IX           VESTING                                            8
                                                        
                     Determining Vested Benefit                         8
                     Payment of Vested Benefit                          9
                     Loss of Benefits                                   9
                     Forfeitures                                       10
                     Reemployment                                      10
                                                        
Section X            TOP-HEAVY RULES                                   11

Section XI           RETIREMENT BENEFITS AND            
                     DISTRIBUTIONS                                     12
                                                        
                     Retirement Benefits                               12
                     Distributions During Employment                   12
                     Beneficiary                                       13
                     Death Benefits                                    13
                     Form Of Payment                                   13
                     Rollover Of Payment                               14
                     Time Of Payment                                   14
                                                        
Section XII          INVESTMENTS                                       15
                                                        
                     Employee Investment Direction                     15
                                                        
<PAGE>
 
<TABLE> 
<S>                  <C>                                               <C> 
                     Insurance Policies                                15
                     Participant Loans                                 15
                                                        
Section XIII         ADMINISTRATION                                    15
                                                        
                     Plan Administrator                                16
                     Trustee                                           16
                                                        
Section XIV          AMENDMENT AND TERMINATION                         17
                                                        
Section XV           LEGAL PROVISIONS                                  17
                                                        
                     Rights Of Participants                            17
                     Fiduciary Responsibility                          18
                     Employment Rights                                 18
                     Benefit Insurance                                 18
                     Claims Procedure                                  18
                     Assignment                                        19
                     Questions                                         19
                     Conflicts With Plan                               19
</TABLE>
<PAGE>
 
     I. INTRODUCTION
 
        First International Bancorp, Inc. and First National Bank of New England
     (the "Company") have established a 401(k) plan to help supplement your
     retirement income. Under the program, the Company may make contributions to
     a Trust Fund which will pay you a benefit at termination of employment or
     retirement. Details about how the Plan works are contained in this summary.
     While the summary describes the principal provisions of the Plan, it does
     not include every limitation or detail. Every attempt has been made to
     provide concise and accurate information. If, however, there is a
     discrepancy between this booklet and the official Plan document, the Plan
     document shall govern. You may obtain a copy of the Plan document from
     Leslie Galbraith.
 
     II.  PLAN DATA
 
     A.   Agent For Service Of Legal Process.
 
          The Plan Administrator is the agent for service of legal process.
 
     B.   EFFECTIVE DATE.
 
          The Effective Date of the Plan is October 1, 1990.
 
     C.   EMPLOYERS:  First International Bancorp, Inc. and
                      First National Bank of New England
                      
                     Address: One Commercial Plaza
                              Hartford, CT 06103
 
     D.   PLAN ADMINISTRATOR.
 
          First International Bancorp, Inc. is the Plan Administrator.
 
          Tax I.D. No.:  06-1151731
 
     E.   PLAN YEAR.
 
          The 12 month period beginning on January 1 and ending on December 31.
<PAGE>
 
     F.     TRUSTEE:
 
            Advest Bank
            Address:   280 Trumbull Street
                       Hartford, CT 06103
 
     G.     TYPE OF ADMINISTRATION.
 
            Trust Fund.
 
     III. DEFINITIONS
 
     A.     BREAK IN SERVICE

            A Plan Year during which you are not credited with or are not paid
         for more than 500 Hours of Service. If you go into the military service
         of the United States, you are not considered terminated as long as you
         return to work within the time required by law. If you separate from
         employment and incur a Break in Service, all contributions to your
         various accounts are suspended. [See special rules relating to
         maternity and paternity below.] If a Break in Service occurs and you
         return to full time employment with the Company your rights are
         explained in the Section entitled "VESTING".
 
     B.     COMPENSATION.
 
            Your total salary, pay, or earned income from the Employer, as
         reflected on Tax Form W-2, which is subject to withholding when earned
         (Code section 3401(a) Compensation), but bonuses, taxable fringe
         benefits and taxable moving expense reimbursements are excluded.
 
            Only amounts earned while you were eligible to participate will be
         considered. Compensation, as defined above, will include amounts
         received by you during the Plan Year. Compensation includes any amounts
         which you defer pursuant to a 401(k) salary deferral agreement, as well
         as any elective deferrals made to a cafeteria or flexible benefits plan
         of the Company.
 
            The maximum amount of Compensation that will be considered under
         this Plan for the 1996 Plan Year is $150,000.
<PAGE>
 
     C.   DISABILITY.
 
          A potentially permanent illness or injury, as certified to by a
     physician who is approved by the Company which prevents you for a period of
     at least 12 months from engaging in work for which you are qualified.
 
     D.   EARLY RETIREMENT.
 
          A Participant may not retire early under this Plan.
 
     E.   EFFECTIVE DATE.
 
          The date on which the Plan starts or an amendment is effective.
 
     F.   ELECTIVE DEFERRAL.
 
          Employer contributions made to the Plan at your election, instead of
     being given to you as cash as part of your salary. You can elect to defer a
     portion of your salary, instead of receiving it in cash, and the Company
     will contribute it to the Plan on your behalf.
 
     G.   ENTRY DATE.
 
          You will begin participation in the Plan on the Entry Date. The Entry
     Dates for this Plan are the first day of the month coinciding with or
     following the date on which you satisfy the eligibility requirements.
 
     H.   FAMILY MEMBER.
 
          The Spouse or lineal ascendant or descendant (or Spouse thereof) of
     either a more than 5% owner of the Company or one of the ten highest
     compensated Highly Compensated Employees of the Company.
 
     I.   HIGHLY COMPENSATED EMPLOYEE.
 
          Any Employee who during the current or prior Plan Year (1) was a more
     than 5% owner, (2) received more than $75,000 in Compensation, as adjusted
     for inflation, (3) received more than $50,000 in Compensation, as adjusted
     for inflation, and was in the top 20% of Employees when ranked by
     Compensation, or (4) was an 
<PAGE>
 
     officer receiving more than $45,000 in Compensation, as adjusted for
     inflation. Family members of any 5% owner, or Highly Compensated Employee
     in the group of the ten Employees with the greatest Compensation, will be
     combined as if they were one person for purposes of Compensation and
     contributions. If you are not currently or never were Highly Compensated,
     or a Family Member of a Highly Compensated Employee, you are a Nonhighly
     Compensated Employee.
 
     J.   HOUR OF SERVICE
 
          You will receive credit for each hour you are (1) paid for being on
     your job, (2) paid even if you are not at work (vacation, sickness, leave
     of absence, or Disability), or (3) paid for back pay if hours were not
     already counted. A maximum of 501 hours will be credited in any year for
     periods during which you are not at work but are paid. Hours of Service
     will be calculated based on actual hours.
 
     K.   MATERNITY/PATERNITY LEAVE
 
          You may be eligible for additional Hours of Service if you leave
     employment, even if temporarily, due to childbirth or adoption. If this is
     the case, you will be credited with enough Hours (up to 501) of Service to
     prevent a Break in Service, either in the year you leave employment or the
     following year. For example, if you have 750 Hours of Service in the year
     that your child is born, you would not get any more hours credited for that
     Plan Year since you do not have a Break in Service. Therefore, if you do
     not return to employment in the following year, you will get 501 Hours of
     Service so you will not have a Break in Service in that year.
 
     L.   NORMAL RETIREMENT AGE.
 
          The attainment of age 65.
 
     M.   SPOUSE.
 
          The person to whom you are or were legally married, or your common law
     Spouse if common law marriage is recognized by the state in which you live.
     A former Spouse may be treated as a "Spouse" under this definition only if
     recognized as such under a Qualified Domestic Relations Order as explained
     at Section XV(F) of this Summary Plan Description.
 
<PAGE>
 
     N.   YEAR OF SERVICE.
 
          ELIGIBILITY
 
          For purposes of determining your eligibility to participate in the
     Plan, a Year of Service is a 12-consecutive month period beginning on your
     date of hire during which you are credited with at least 1,000 Hours of
     Service.
 
          VESTING
 
          For purposes of determining whether or not you are vested in your
     account balance, a Year of Service is any calendar year during which you
     are credited with 1,000 Hours of Service.
 
 IV. ELIGIBILITY REQUIREMENTS AND PARTICIPATION
 
     The Service requirement for Elective Deferrals and Employer contributions
 is 1 Year of Service. Only nonunion employees are eligible to participate in
 the Plan.
 
     Your participation in the Plan will begin on the first day of the month and
 complete 1 Year of Service.
 

V.   EMPLOYEE CONTRIBUTIONS
 
     A.   ELECTIVE DEFERRALS
 
          As an eligible Employee, you may authorize the Company to withhold
     from 1% to 15% of your Compensation, not to exceed $9,500 in the 1996
     calendar year (this amount is adjusted each year for inflation), and to
     deposit such amount in the Plan fund. If you participated in a similar plan
     of an unrelated employer and your Elective Deferrals under this Plan and
     the other plan exceed the $9,500 limit (or other limit as adjusted by
     inflation) for a given year, you must designate one of the Plans as
     receiving an excess amount. If you choose this Plan as the one receiving
     the excess, you must notify the Plan Administrator by March 1 of the
     following year so that the excess and any income thereon may be returned to
     you by April 15. You may increase, decrease, or terminate your Elective
     Deferral percentage on the first day of any month. You may stop your
<PAGE>
 
     Elective Deferrals at any time. If you stop your savings, you will have to
     wait until the next first day of the month to resume your savings. The
     Company may also reduce or terminate your withholding if required to
     maintain the Plan's qualified status.
 
   B.     VOLUNTARY CONTRIBUTIONS
 
          You may not make personal after-tax contributions to the Plan.
 
   C.     ROLLOVER AND TRANSFER CONTRIBUTIONS
 
          Rollover Contributions are permitted. You need not have met the Plan's
     eligibility requirements in order to make a Rollover Contribution.

          Transfer Contributions are permitted. You need not have met the Plan's
     eligibility requirements in order to make a Transfer Contribution. The
     Company can refuse to allow Transfer Contributions to this Plan if the
     transfer will affect the plan's ability to offer lump sum distributions as
     the normal form of distribution.
 
          A rollover or transfer of your retirement benefits may occur from
     another qualified retirement plan or special individual retirement
     arrangement (known as a "conduit" IRA) to this Plan. If you have already
     received a lump sum payment from another qualified retirement plan, or if
     you received payment from another qualified plan and placed it in a
     separate "conduit" IRA, you may be eligible to redeposit that payment (plus
     earnings in the IRA) to this Plan. If you believe you qualify for a
     transfer or rollover, see the Plan Administrator for more details. The last
     day you may make a rollover contribution to this Plan is the sixtieth day
     after you receive the distribution from the other plan (or IRA). A transfer
     occurs when the trustee of the old plan transfers your assets to this Plan,
     without allowing the exercise of Spousal consent rights, if applicable.
     Also, see Section XI(F) on direct rollovers.
<PAGE>
 
VI.       EMPLOYER CONTRIBUTIONS
 
     A.      CONTRIBUTION FORMULA.
 
             1.   Elective Deferrals:
 
                  The Company will contribute all Compensation which you elected
             to defer to the Plan, within the limits outlined in Section V(A).
 
 
             2.   Matching Contributions:
 
                  The Company will match 75% of the first 6% of your
             contribution to the Plan.
 
             3.   Discretionary Profit Sharing Contributions:
 
                  The Company may contribute an amount determined in its sole
              judgement. Such contribution shall be allocated to Participants in
              proportion to each Participant's Compensation, after taking into
              account the Employer's Social Security.
 
             4.   Qualified Non-Elective Contributions:
 
                  The Company may in its sole judgement contribute an additional
             amount. This additional contribution, if any, will be allocated to
             only Non-highly Compensated Participants, in proportion to each
             eligible Employee's Compensation as a ratio of all eligible
             Employees' Compensation. These contributions will be nonforfeitable
             and subject to withdrawal restrictions.

     B.      ELIGIBILITY FOR ALLOCATION.
 
             Matching contributions, if any, will be made to all Participants
        who actually defer Compensation under the Plan.
 
             The Employer's profit sharing contribution, if any, will be
        allocated among all Participants who have completed at least 1,000 Hours
        of Service during the Plan Year and are employed at the end of the Plan
        Year.
<PAGE>
 
           The Company shall also allocate a contribution for each Participant
        who separated from employment during the Plan Year, if the Participant
        terminated as a result of retirement, Disability or death.
 
VII.    GOVERNMENT REGULATIONS
 
        The federal government sets certain limitations on the level of
     contributions which may be made to a Plan such as this. There is also a
     "percentage" limitation which means that the percentage of Compensation
     which you may contribute depends on the average percentage of Compensation
     that the other Participants are contributing. Simply stated, all
     Participants are divided into two categories: Highly Compensated and Non-
     highly Compensated. The average contributions that the Highly Compensated
     group may make is based on the average contribution that the Non-highly
     Compensated make. If a Highly Compensated Participant is contributing more
     than he or she is allowed, the excess plus or minus any gain or loss will
     be returned. Keep in mind that if you are a 5% owner of the Company or one
     of the ten highest paid Highly Compensated Employees, your Family Member's
     contribution percentage and Compensation will be combined with yours for
     purposes of determining your contributions under the Plan.
 
VIII.   PARTICIPANT ACCOUNTS
 
        The Employer will set up a record keeping account in your name to show
     the value of your retirement benefit. The Employer will make the following
     additions to your account:
 
     A.       your Elective Deferrals, Matching, Profit Sharing or Qualified
         Nonelective Contribution, if any,
 
     B.       the amount of your Transfer and Rollover Contributions, if any,
         and
  
     C.       your share of investment earnings and appreciation, if any, in the
         value of investments.
 
         The Company will make the following subtractions from your account:
 
     D.       any withdrawals or distributions made to you,
<PAGE>
 
     E.       your share of investment losses and depreciation in the value of
         the investments, and
 
     F.       your share of administrative fees and expenses paid out of the
         Plan, if applicable.
 
         The Company will value all of your accounts quarterly.
 
     IX. VESTING
 
     A.    DETERMINING VESTED BENEFITS.
 
           Vesting refers to your earning or acquiring a nonforfeitable right to
         the full amount of your account. Any Qualified Non-Elective
         Contribution, Elective Deferral, Rollover Contribution or Transfer
         Contribution, plus or minus any earnings or losses, is always 100%
         vested and cannot be forfeited for any reason. Any account balances
         transferred from the Financial Institutions Thrift Plan, plus or minus
         any earnings or losses, are also 100% vested and cannot be forfeited
         for any reason.
 
           All Matching and Profit Sharing Contributions will vest under the
         following schedule:

<TABLE> 
<CAPTION>  
           Years of Service      Vested Percent
           <S>                   <C> 
           1 Year of Service           20%
           2 Years of Service          40%
           3 Years of Service          60%
           4 Years of Service          80%
           5 Years of Service         100%
</TABLE> 
 
           You are considered to complete one Year of Service for purposes of
         vesting upon the completion of 1,000 Hours of Service at any time
         during the Plan Year. Service prior to the Effective Date of the Plan
         is counted for purposes of vesting. Service with First Regional
         Bancorp, Inc., First National Bank of Connecticut or First Regional
         Investcorp, Inc. is also counted for purposes of vesting. You
         automatically become fully vested, regardless of the vesting table,
         upon the attainment of Normal Retirement Age, upon retirement due to
         Disability, upon death, and upon termination of the Plan.
<PAGE>
 
     B.    PAYMENT OF VESTED BENEFIT.
 
           If you separate from Service before your retirement, death, or
        Disability, you may request early payment of your vested benefit by
        submitting a written request to the Plan Administrator. If your Vested
        Account Balance at the time of termination or at the time of any prior
        distributions exceeds or exceeded $3,500, you may defer the payment of
        your benefit until April 1 of the calendar year following the calendar
        year during which you attain age 70-1/2.
 
           The portion of your account balance in which you are not entitled is
       called a "forfeiture" and remains in the Plan. Forfeitures of Employer
       Matching Contributions are used to reduce the Employer's Matching
       Contributions for the year or to pay Plan administrative expenses.
       Forfeitures of Employer discretionary profit sharing and Top Heavy
       Contributions shall be given to all Plan Participants.
 
     C.    LOSS OF BENEFITS.
 
           There are only two events which can cause loss of all or a portion of
       your account. One is termination of employment before you are 100% vested
       according to the vesting table described at IX(A) and the other is a
       decrease in the value of your account from investment losses or
       administrative expenses and other costs of maintaining the Plan.
 
     D.    FORFEITURES
 
           The Company will forfeit the nonvested portion of your account as of
       the Plan Year end immediately following the date of payment of your
       Vested Account Balance. If you have not received a distribution of your
       vested balance, your nonvested portion will be forfeited at the end of
       the Plan Year during which you incur your fifth consecutive one-year
       Break in Service.
 
     E.    REEMPLOYMENT.
 
           If you were a Participant in the Plan and you terminated Service with
       the Company and then are later reemployed, you will become a Participant
       as of the next Entry Date after returning to employment. All Years of
       Service will be counted when calculating your vested percentage in your
       new account balance. The following rules apply in connection with
       reemployed Participants:
<PAGE>
 
     1.    TERMINATED PARTIALLY VESTED PARTICIPANTS.
 
           If you had a vested interest, received a distribution of that
       interest and your nonvested interest was forfeited away, you have the
       right to repay the amount you received. If you choose to repay, the
       nonvested portion of your Employer account will be reinstated. Such
       repayment must be made within five years after your date of reemployment,
       or if earlier, prior to your incurring five consecutive one-year Breaks
       in Service. If you do not repay the amount you received, the nonvested
       portion of your Employer accounts will be permanently forfeited. Whether
       you repay or not, your prior Service will count toward vesting Service
       for future Employer contributions.
 
           For example, assume that you terminate your job with your current
       Employer. At the time of termination you had accrued a total benefit of
       $10,000 under the retirement Plan. Although this amount had been
       allocated to your account, you were only 40% vested in that amount when
       you left. You decided to take a distribution of your Vested Account
       Balance (40% of $10,000, or $4,000) when you quit. The nonvested balance
       of your account ($6,000) was forfeited. Three years later you became
       reemployed by the same Employer. Since you were reemployed within five
       years, you have the right to repay the $4,000 distribution you received
       when you quit. You would have to repay the $4,000 within five years of
       being rehired. If you do so, the nonvested portion of your account
       ($6,000) will be restored to your account. After restoration, you will be
       vested in 40% of this account, but your vested percentage will increase
       based on your Years of Service after your reemployment. Your prior
       Service will always count towards vesting of Employer contributions which
       you receive after reemployment, whether or not you decide to repay and
       restore your prior account.
 
     2.    TERMINATED NON-VESTED PARTICIPANTS.
 
           If you were not vested in any portion of your Employer contribution
       sub-account prior to your separation from Service and if you have a Break
       in Service, but then are reemployed before incurring five consecutive 
       one-year Breaks in Service, you will be credited for vesting with all 
       pre-break and post-break Service. Your prior account balance will
<PAGE>
 
                   automatically be restored and you will continue to vest in
                   that account. If you are reemployed after incurring five
                   consecutive one-year Breaks in Service, you will lose your
                   account balance, but your prior Service will still count
                   towards vesting in your new account balance.
 
X.            TOP-HEAVY RULES
 
              A "top-heavy" plan is one in which more than 60% of the
         contributions or benefits are attributable to certain "key employees",
         such as owners, officers and stockholders. The Plan Administrator is
         responsible for determining each year if the Plan is top-heavy. If the
         Plan becomes top-heavy, special rules apply to the allocation of the
         Employer's contribution. These special rules require that only eligible
         Participants who are not key employees of the Company will generally
         receive an allocation of the Company contribution equal to the lesser
         of 3% of Compensation or a uniform percentage of Compensation for all
         Participants. For example, the minimum allocation requirement would be
         satisfied if all Participants received an allocation equal to 2% of
         their Compensation. All Participants are entitled to receive a minimum
         allocation upon completing at least one Hour of Service in the top-
         heavy Plan Year provided they are employed on the last day of the Plan
         Year.
 
XI.           RETIREMENT BENEFITS AND DISTRIBUTIONS
 
          A.      RETIREMENT BENEFITS.
 
              The full value of your account balance is generally payable at
          Normal Retirement Age. If you work beyond your Normal Retirement Age,
          and have not separated from Service, you can request commencement of
          benefit payments. In either event, you will continue to fully
          participate in the Plan. The latest commencement date for payment of
          your benefits is generally April 1 of the year following your
          attainment of age 70-1/2, even if you are still employed.
 
          B.       DISTRIBUTIONS DURING EMPLOYMENT.
 
                   Benefits are not normally payable prior to your separation
          from employment. There are several possible exceptions to this rule.
          You can always withdraw all or any part of your Rollover
          Contributions. Transfer Contributions may be withdrawn only if they
          originate from plans meeting certain safe-harbor provisions.
<PAGE>
 
               Hardship withdrawals are allowed. If permitted, you may file a
          written request for a Hardship withdrawal of Elective Deferrals
          (excluding earnings thereon). Spousal consent is not required for a
          Hardship Withdrawal. Prior to receiving a Hardship distribution, you
          must take any other nontaxable distribution and borrow the maximum
          nontaxable loan amount allowed under this Plan. Note that if the
          effect of the loan would be to increase the amount of your financing,
          you do not have to take the loan. For example, if you need funds to
          purchase a principal residence and a Plan loan would disqualify you
          from obtaining other necessary financing, you do not have to take the
          loan. Hardship withdrawals may be authorized by the Company for the
          following reasons:
 
          1.       to assist you in purchasing a personal residence which is
              your primary place of residence (not including mortgage payments),
 
          2.       to assist you in paying tuition and related educational
              expenses, including room and board, for you, your Spouse, or your
              dependents for the next twelve months of post-secondary education,
 
          3.       to assist you in paying expenses incurred or necessary on
              behalf of you, your Spouse, or your dependents for
              hospitalization, doctor or surgery expenses which are not covered
              by insurance, or
 
          4.       to prevent your eviction from or foreclosure on your
              principal residence.
 
               Any Hardship withdrawal is limited to the amount needed to meet
          the financial need, plus the amount necessary to pay any Federal
          income or other taxes imposed as a result of the hardship withdrawal.
          Hardship withdrawals must be approved by the Company and will be
          administered in a nondiscriminatory manner. Such withdrawals will not
          affect your eligibility to continue to participate in Employer
          contributions to the Plan, but there will be a one-year mandatory
          suspension of your right to make Elective Deferrals under the Plan.
          Any withdrawals you receive under these rules may not be recontributed
          to the Plan and may be subject to taxation, as well as an additional
          10% penalty tax if the withdrawal is received before 
<PAGE>
 
          you reach age 59-1/2. These withdrawals may also be subject to a
          mandatory 20% withholding for income tax purpose, depending on the law
          then in effect.
 
     C.       BENEFICIARY.
 
              Every Participant or former Participant may designate a person or
          persons who are to receive benefits under the Plan in the event of his
          or her death. The designation must be made on a form provided by and
          returned to the Plan Administrator. You may change your designation at
          any time. If you are married, your beneficiary will automatically be
          your Spouse. If you and your Spouse wish to waive this automatic
          designation, you must complete a beneficiary designation. The form
          must be signed by you and, if applicable, your Spouse's signature must
          be witnessed by a Notary Public.
 
     D.       DEATH BENEFITS.
 
              In the event of your death, the full value of your account is
          payable to your beneficiary in a lump sum.
 
     E.       FORM OF PAYMENT.
 
              When benefits become due, you or your representative should apply
          to the Company requesting payment of your account. The form of payment
          is lump sum or installments.
 
 
     F.       ROLLOVER OF PAYMENT.
 
              If your benefits qualify as eligible rollovers, you have the
          option of having them paid directly to you when they become due or
          having them directly rolled over to another qualified plan or an IRA.
          If you do not choose to have the benefits directly rolled over, the
          Plan is required to automatically withhold 20% of your payment for tax
          purposes. If you do choose to have the payment made to you, you still
          have the option of rolling over the payment yourself to a qualified
          plan or an IRA within 60 days (first check with a tax advisor to make
          sure it is an eligible rollover). However, 20% of your payment will
          still be withheld. The following example illustrates how this works:
 
              For example, if you have $10,000 in your Vested Balance and choose
          to have the payment of your benefits made directly to an IRA 
<PAGE>
 
          or another qualified plan, the entire $10,000 will be transferred to
          the trustee of the other plan or the IRA, and you will treat the
          entire amount as a rollover on your tax return so that you will not
          pay taxes on the entire amount. If you choose NOT to have the account
          transferred directly to an IRA or qualified plan, 20% or $2,000 will
          automatically be withheld from your payment. Thus, you will receive
          only $8,000 as a distribution of your benefits. In order to roll the
          entire amount over into your IRA, you would have to come up with
          $2,000 out of your own pocket to make up the difference. If this is
          done, the $2,000 which was withheld may be returned when you file your
          taxes at the end of the year. If you are unable to produce the extra
          cash, the rollover amount will only be $8,000, and the other $2,000
          which was withheld will be treated as taxable income to you. If you
          are under age 59-1/2 when you receive your benefit payment, the
          withheld amount will also be subject to the 10% early distribution
          penalty.
 
              Minimum required distributions at age 70-1/2 are not eligible for
          rollover and therefore will also not be subject to the 20% mandatory
          withholding. There are also several operational exceptions and a "de
          minimis" exception for payments of less than $200.
 
          G.  TIME OF PAYMENT.
 
          1.       If you retire, become disabled, or die, payments will start
              as soon as administratively feasible following the close of the
              valuation period during which a distribution is requested or is
              otherwise payable.
 
          2.       If you terminate for a reason other than death, Disability,
              or retirement, payments will start as soon as administratively
              feasible following the close of the valuation period during which
              a distribution is requested or is otherwise payable.
 
XII.      INVESTMENTS
 
      A.      EMPLOYEE INVESTMENT DIRECTION
 
              You may direct the investment of Elective Deferral, Matching,
          Profit Sharing, Qualified Non-Elective, Rollover and Transfer
          contributions to the Plan among the mutual funds listed in the
          enrollment package.
<PAGE>
 
             The procedures for making an election are shown in a separate
         election form which can be obtained from the Plan Administrator.

             Note that this Plan intends to satisfy ERISA Section 404(c). In
         doing so plan fiduciaries are required to provide sufficient
         information to you so that you may make informed decisions with respect
         to investments. Plan fiduciaries may then be relieved from liability
         for investments that you make. For further information regarding a
         description of your available investment selections and the procedures
         for investing among them, please contact Leslie Galbraith.
 
     B.      INSURANCE POLICIES.
 
             Insurance policies are not permitted as an investment of the Plan.
 
         C.  PARTICIPANT LOANS.
 
             Participant loans are permitted under this Plan. Repayments of
         principal and interest shall be repaid to your individual account. The
         interest rate for the loan shall be the prime rate listed in the Wall
         Street Journal plus 1%. A Participant can borrow the lesser of 50% of
         their vested account balance or $50,000. The minimum loan is $1,000. A
         loan can be taken for any reason. Loans can be for no longer than a 
         5-year term, except for the purchase of a principal residence. Loans
         must be repaid through payroll deductions. In order to get a loan from
         the Plan, you must make application to the Plan Administrator.
 
XIII.    ADMINISTRATION
 
         The Plan will be administered by the following parties:
 
     A.      PLAN ADMINISTRATOR
 
             The Company is the party who has established the Plan and who has
         overall control and authority over administration of the Plan. The
         Company's duties as Plan Administrator include:
<PAGE>
 
          1.       appointing the Plan's professional advisors needed to
               administer the Plan including, but not limited to, an accountant,
               attorney, actuary, or administrator,

          2.       directing the Trustee with respect to payments from the Fund,
 
          3.       communicating with Employees regarding their participation
               and benefits under the Plan, including the administration of all
               claims procedures and domestic relations orders,
 
          4.       filing any returns and reports with the Internal Revenue
               Service, Department of Labor, or any other governmental agency,
 
<PAGE>
 
          5.       reviewing and approving any financial reports, investment
               reviews, or other reports prepared by any party appointed by the
               Employer,
 
          6.       establishing a funding policy and investment objectives
               consistent with the purposes of the Plan and the Employee
               Retirement Income Security Act of 1974, and
 
          7.       construing and resolving any question of Plan interpretation.
               The Plan Administrator's interpretation and application thereof
               is final.
 
     B.        Trustee.
   
               The Trustee shall be responsible for the administration of
          investments held in the Fund. These duties shall include:
 
          1.       receiving contributions under the terms of the Plan,
 
          2.       investing Plan assets, unless investment responsibility is
               delegated to another party,
 
          3.       making distributions from the Fund in accordance with written
               instructions received from the Plan Administrator,
 
          4.       keeping accounts and records of the financial transactions of
               the Fund, and
 
<PAGE>
 
          5.       rendering an annual report of the Fund showing the financial
               transactions for the Plan Year.
 
XIV.      AMENDMENT AND TERMINATION
 
          The Company may amend the Plan at any time, provided that no amendment
     will divert any part of the plan's assets to any purpose other than for the
     exclusive benefit of you and the other Participants in the Plan or
     eliminate an optional form of benefit. The Company may also terminate the
     Plan. In the event of an actual Plan termination, or partial Plan
     termination which affects you, all amounts credited to your account will be
     fully vested and will be paid to you as directed by the Company. Depending
     on the facts and circumstances, a partial termination may be found to occur
     where a significant number of Employees are terminated by the Company or
     excluded from Plan participation. In case of a partial termination, only
     those affected will become 100% vested.

XV.       LEGAL PROVISIONS
 
     A.      RIGHTS OF PARTICIPANTS
 
             As a Plan Participant, you have certain rights and protections
          under the Employee Retirement Income Security Act of 1974 (ERISA). The
          law says that you are entitled to:
 
          1.       Examine, without charge, all documents relating to the
               operation of the Plan and any documents filed with the U.S
               Department of Labor. These documents are available for review in
               the Company's offices during regular business hours.

          2.       Obtain copies of all Plan documents and other Plan
               information upon written request to the Company. The Company may
               impose a reasonable charge for producing the copies.
 
          3.       Receive from the Company at least once each year a summary of
               the Plan's annual financial report.
 
          4.       Obtain, at least once a year, a statement of the total
               benefits accrued for you, and your nonforfeitable (vested)
               benefits, if any. The Plan provides that you will receive this
               statement automatically. If you are not vested, you may request a
               statement showing the date when your account will begin to become
               nonforfeitable.
 
<PAGE>
 
          5.       File suit in a federal court, if any materials requested are
               not received within 30 days of your request, unless the materials
               were not sent because of matters beyond the control of the
               Company. If you are improperly denied access to information you
               are entitled to receive, the Company may be required to pay up to
               $100 for each day's delay until the information is provided to
               you.
 
     B.        FIDUCIARY RESPONSIBILITY.
 
               ERISA also imposes obligations upon the persons who are
          responsible for the operation of the Plan. These persons are referred
          to as "fiduciaries." Fiduciaries must act solely in your interest as a
          Plan Participant and they must exercise prudence in the performance of
          their duties. Fiduciaries who violate ERISA may be removed and
          required to reimburse any losses they have caused you or other
          Participants in the Plan.

     C.        EMPLOYMENT RIGHTS.
 
               Participation in the Plan is not a guarantee of employment.
          However, the Company may not fire you or discriminate against you to
          prevent you from becoming eligible for the Plan or from obtaining a
          benefit or exercising your rights under ERISA.
 
     D.        BENEFIT INSURANCE.
 
               Your benefits under this Plan are not insured by the Pension
          Benefit Guaranty Corporation since the law does not require
          termination insurance for this type of Plan.

     E.        CLAIMS PROCEDURE.
 
               If you feel you are entitled to a benefit under the Plan, mail or
          deliver your written claim to the Plan Administrator. The Plan
          Administrator will notify you, your beneficiary, or authorized
          representative of the action taken within 60 days of receipt of the
          claim. If you believe that you are improperly denied a benefit in full
          or in part, the Company must give you a written explanation of the
          reason for the denial. If the Company denies your claim, you may,
          within 60 days after receiving the denial, submit a written
<PAGE>
 
          request asking the Company to review your claim for benefits. Any such
          request should be accompanied by documents or records in support of
          your appeal. You, your beneficiary, or your authorized representative
          may review pertinent documents and submit issues and comments in
          writing. If you get no satisfaction from the Company, you have the
          right to request assistance from the U.S. Department of Labor or you
          can file suit in a state or federal court. Service of legal process
          may be made upon the Plan Trustee or the Plan Administrator. If you
          are successful in your lawsuit, the court may require the Company to
          pay your legal costs, including your attorney's fees. If you lose, and
          the court finds that your claim is frivolous, you may be required to
          pay the Company's legal fees.
 
     F.        Assignment.
 
               Your rights and benefits under this Plan cannot be assigned,
          sold, transferred or pledged by you or reached by your creditors
          (subject to state law) or anyone else except under a Qualified
          Domestic Relations Order (QDRO). A QDRO is a court order issued under
          state domestic relations law relating to divorce, legal separation,
          custody or support proceedings. The QDRO recognizes the right of
          someone other than you to receive your Plan benefits. You will be
          notified if a QDRO relating to your Plan benefits is received.
          Finally, receipt of a QDRO will allow for an earlier than normal
          distribution to the persons other than the Participant listed in the
          order.
 
     G.        Questions.
 
               If you have any questions about this statement of your rights
          under ERISA, please contact the Company or the nearest Area Office of
          the U.S. Labor-Management Service Administration, Department of Labor.

     H.        Conflicts With Plan.
 
               This booklet is not the Plan document, but only a Summary Plan
          Description of its principal provisions and not every limitation or
          detail of the Plan is included. Every attempt has been made to provide
          concise and accurate information. However, if there is a discrepancy
          between this booklet and the official Plan document, the Plan document
          shall prevail.
<PAGE>
 
                            ADOPTION AGREEMENT FOR
                         THE ADVEST, INC. 401(K) PLAN
                    NON-STANDARDIZED 401(K) PROFIT SHARING
                                PLAN AND TRUST


     The undersigned Employer adopts the Advest, Inc. Non-Standardized 401(k)
Profit Sharing Plan for those Employees who shall qualify as Participants
hereunder, to be known as the

A1       First International Bancorp, Inc. 401(k) Plan
             (Enter Plan Name)

It shall be effective as of the date specified below.  The Employer hereby
selects the following Plan specifications:

CAUTION:  The failure to properly fill out this Adoption Agreement may result in
disqualification of the Plan.

EMPLOYER INFORMATION

B1   Name of Employer:  First International Bancorp, Inc.
 
B2   Address:  1 Commercial Plaza
               Hartford, CT 06103

     Telephone:  (860) 727-0700

B3   Employer Identification Number: 06-1151731

B4   Date Business Commenced: 1955

B5   TYPE OF ENTITY

     a.       S Corporation                     
     b.       Professional Service Corporation  
     c. (X)   Corporation                       
     d.       Sole Proprietorship               
     e.       Partnership                       
     f.       Other                              

     AND, is the Employer a member of ...

          g.  a controlled group?    (X)  Yes   ( )  No          
          h.  an affiliated service group?    ( )  Yes    (X)  No 

          Copyright 1992-N Advest, Inc.
<PAGE>
 
B6   NAME(S) OF TRUSTEE(S)       Advest Bank
 
B7   TRUSTEES' ADDRESS           280 Trumbull Street                    
                                 Hartford, CT 06103

B8   LOCATION OF EMPLOYER'S PRINCIPAL OFFICE:
 
     a. (X) State        b. ( )  Commonwealth of Connecticut and this Plan and
                                 Trust shall be governed under the same.

B9   EMPLOYER FISCAL YEAR means the 12 consecutive month period commencing
     on January 1 and ending on December 31.

     PLAN INFORMATION

C1   EFFECTIVE DATE

     This Adoption Agreement of the Advest, Inc. Nonstandardized 401(k) Profit
     Sharing Plan and Trust shall:

     a.   establish a new Plan and Trust effective as of _____________
          (hereinafter called the "Effective Date").

     b.   (X) constitute an amendment and restatement in its entirety of a
          previously established qualified Plan and Trust of the Employer which
          was effective ______________ October 1, 1990 (hereinafter called the
          "Effective Date").  Except as specifically provided in the Plan, the
          effective date of this amendment and restatement is January 1, 1996. -
          (For TRA 1986 amendments, enter the first day of the first Plan Year
          beginning in 1989).

C2   PLAN YEAR means the 12 consecutive month period:

     Commencing on a. January 1 (e.g., January 1st) and ending on 
     b. December 31.

     IS THERE A SHORT PLAN YEAR?
     c. (X)  No
     d. ( )  Yes, beginning ____________ and ending ______________.

C3   ANNIVERSARY DATE of Plan (Annual Valuation Date)

     a.  December 31

C4   PLAN NUMBER assigned by the Employer (select one)

     a. ( ) 001  b.(X) 002  c.( ) 003   d.( ) Other
<PAGE>
 
C5   NAME OF PLAN ADMINISTRATOR (Document provides for the Employer to appoint
     an Administrator. If none is named, the Employer will become the
     Administrator.)

     a.  Employer (Use Employer Address)

     b.  Name:
         Address:
         Telephone:
         Administrator's I.D. Number:   -

C6   PLAN'S AGENT FOR SERVICE OF LEGAL PROCESS

     a. (X)  Employer (Use Employer Address)
     b.      Name
             Address

     ELIGIBILITY, VESTING AND RETIREMENT AGE

D1   ELIGIBLE EMPLOYEES (Plan Section 1.15) shall mean:

     a. ( ) all Employees who have satisfied the eligibility requirements.
     b. (X) all Employees who have satisfied the eligibility requirements except
            those checked below:
         1.  ( ) Employees paid by commission only.
         2.  ( ) Employees hourly paid.
         3.  ( ) Employees paid by salary.
         4.  (X) Employees whose employment is governed by a collective
                 bargaining agreement between the Employer and "employee
                 representatives" under which retirement benefits were the
                 subject of good faith bargaining. For this purpose, the term
                 "employee representatives" does not include any organization
                 more than half of whose members are employees who are owners,
                 officers, or executives of the Employer.
         5.  ( ) Highly Compensated Employees.
         6.  (X) Employees who are nonresident aliens who received no earned
                 income (within the meaning of Code Section 911(d)(2)) from the
                 Employer which constitutes income from sources within the
                 United States (within the meaning of Code Section 861(a)(3))
         7.  ( ) Other:

     NOTE: For purposes of this section, the term Employee shall include all
Employees of this Employer, any Affiliated Employer, and any leased employees
deemed to be Employees under Code Section 414(n) or 414(o).
<PAGE>
 
D2   EMPLOYEES OF AFFILIATED EMPLOYERS (Plan Section 1.16)

     Employees of Affiliated Employers:

     a. ( ) will not or N/A
     b. (X) will be treated as Employees of the Employer adopting the Plan.

NOTE: If D2b is elected, each Affiliated Employer should execute this Adoption
Agreement as a participating Employer.

D3   HOURS OF SERVICE (Plan Section 1.31) will be determined on the basis of the
     method selected below.  Only one method may be selected.  The method
     selected will be applied to all Employees covered under the Plan.

     a. (X) On the basis of actual hours for which an Employee is paid or
            entitled to payment.
     b. ( ) On the basis of days worked.  An Employee will be credited with ten
            (10) Hours of Service if under the Plan such Employee would be
            credited with at least one (1) Hour of Service during the day.
     c. ( ) On the basis of weeks worked. An Employee will be credited with
            forty-five (45) Hours of Service if under the Plan such Employee
            would be credited with at least one (1) Hour of Service during the
            week.
     d. ( ) On the basis of semi-monthly payroll periods. An Employee will be
            credited with ninety-five (95) Hours of Service if under the Plan
            such Employee would be credited with at least one (1) Hour of
            Service during the semi-monthly payroll period.
     e. ( ) On the basis of months worked.  An Employee will be credited with
            one hundred ninety (190) Hours of Service if under the Plan such
            Employee would be credited with at least one (1) Hour of Service
            during the month.

D4   CONDITIONS OF ELIGIBILITY (Plan Section 3.1) (Check either a OR b and c,
     and if applicable, d)

     Any Eligible Employee will be eligible to participate in the Plan if such
     Eligible Employee has satisfied the service and age requirements, if any,
     specified below:

     a. ( ) NO AGE OR SERVICE REQUIRED.
<PAGE>
 
     b. (X) SERVICE REQUIREMENT. (may not exceed 1 year)

            1. ( )   None
            2. ( )   1/2 Year of Service
            3. (X)   1 Year of Service
            4. ( )   Other:

     NOTE:  If the Year(s) of Service selected is or includes a fractional year,
            an Employee will not be required to complete any specified number of
            Hours of Service to receive credit for such fractional year. If
            expressed in Months of Service, an Employee will not be required to
            complete any specified number of Hours of Service in a particular
            month.

     c. (X) AGE REQUIREMENT (may not exceed 21)

            1. (X)  N/A - No Age Requirement.
            2. ( )  20-1/2
            3. ( )  21
            4. ( )  Other:

     d.     ( )  FOR NEW PLANS ONLY - Regardless of any of the above age or
                 service requirements, any Eligible Employee who was employed on
                 the Effective Date of the Plan shall be eligible to participate
                 hereunder and shall enter the Plan as of such date.

D5   EFFECTIVE DATE OF PARTICIPATION (Plan Section 3.2)

     An Eligible Employee shall become a Participant as of:

     a. ( ) the first day of the Plan Year in which he met the requirements.
     b. ( ) the first day of the Plan Year in which he met the requirements, if
            he met the requirements in the first 6 months of the Plan Year, or
            as of the first day of the next succeeding Plan Year if he met the
            requirements in the last 6 months of the Plan Year.
     c. ( ) the earlier of the first day of the seventh month or the first day
            of the Plan Year coinciding with or next following the date on which
            he met the requirements.
     d. ( ) the first day of the Plan Year next following the date on which he
            met the requirements.  (Eligibility must be 1/2 Year of Service or
            less and age 20 1/2 or less.)
     e. (X) the first day of the month coinciding with or next following the
            date on which he met the requirements.
<PAGE>
 
     f. ( ) other: the first day of the Plan Year, the first day of the fourth
            month, the first day of the seventh month or the first day of the
            tenth month following the day on which he met the requirements;
            provided that an Employee who has satisfied the maximum age and
            service requirements that are permissible in Section D3 above and
            who is otherwise entitled to participate, shall commence
            participation no later than the earlier of (a) 6 months after such
            requirements are satisfied, or (b) the first day of the first Plan
            Year after such requirements are satisfied, unless the Employee
            separates from service before such participation date.

D6   VESTING OF PARTICIPANT'S INTEREST (Plan Section 6.4(b))

     The vesting schedule, based on number of Years of Service, shall be as
     follows:

     a. (X) 100% upon entering Plan. (Required if eligibility requirement is
            greater than one (1) Year of Service.) This provision applies only
            to account balances transferred from the Financial Institutions
            Thrift Plan
 
     b. ( )    0-2 years      0%  c. ( )    0-4 years           0%
                 3 years    100%              5 years         100%
 
     d. ( )    0-1 year       0%  e. ( )      1 year           25%
                 2 years     20%              2 years          50%
                 3 years     40%              3 years          75%
                 4 years     60%              4 years         100%
                 5 years     80%
                 6 years    100%
 
     f. (X)      1 year      20%  g. ( )    0-2 years           0%
                 2 years     40%              3 years          20%
                 3 years     60%              4 years          40%
                 4 years     80%              5 years          60%
                 5 years    100%              6 years          80%
                                              7 years         100%

     h. ( ) Other - Must be at least as liberal as either c or g above.
 
          Years of Service ____________ Percentage
 
D7   FOR AMENDED PLANS (Plan Section 6.4(f)) If the vesting schedule has been
     amended to a less favorable schedule, enter the preamended schedule below:
<PAGE>
 
        a. (X) Vesting schedule has not been amended or amended schedule is more
               favorable in all years.

        b. ( ) Years of Service Percentage
 
D8   TOP HEAVY VESTING (Plan Section 6.4(c)) If this Plan becomes a Top Heavy
     Plan, the following vesting schedule, based on number of Years of Service,
     for such Plan Year and each succeeding Plan Year, whether or not the Plan
     is a Top Heavy Plan, shall apply and shall be treated as a Plan amendment
     pursuant to this Plan. Once effective, this schedule shall also apply to
     any contributions made prior to the effective date of Code Section 416
     and/or before the Plan became a Top Heavy Plan.
 
     a.  (X)  (A schedule more favorable than D6a, b,e or f was selected)
 
     b.        0-1 years      0%    c.  0-2 years        0%
                 2 years     20%          3 years      100%
                 3 years     40%
                 4 years     60%
                 5 years     80%
                 6 years    100%

     NOTE: This section does not apply to the Account balances of any
     Participant who does not have an Hour of Service after the Plan has
     initially become top heavy. Such Participant's Account balance attributable
     to Employer contributions and Forfeitures will be determined without regard
     to this section.

D9   VESTING (Plan Section 6.4(h)) In determining Years of Service for vesting
     purposes, Years of Service attributable to the following shall be
     EXCLUDED:

     a.     Service prior to the Effective Date of the Plan or a predecessor
plan.
     b. (X) N/A.
     c.     Service prior to the time an Employee attained age 18.  
     d. (X) N/A.

D10  PLAN SHALL RECOGNIZE SERVICE WITH PREDECESSOR EMPLOYER

     a.   No.
     b.   (X)  Yes: Years of Service with First Regional Bancorp, Inc., First
National Bank of Connecticut or First Regional Investcorp, Inc. shall be
recognized for the purpose of this Plan.
<PAGE>
 
     NOTE:  If the predecessor Employer maintained this qualified Plan, then
     Years of Service with such predecessor Employer shall be recognized
     pursuant to Section 1.74 and b. must be marked.

D11  NORMAL RETIREMENT AGE ("NRA")  (Plan Section 1.42) means:

     a.  (X) the date a Participant attains his 65th birthday. (not to exceed
             65th)
     b.      the later of the date a Participant attains his 65th birthday (not
             to exceed 65th) or the
     c.      5th (not to exceed 5th) anniversary of the first day of the Plan
             Year in which participation in the Plan commenced.

D12  NORMAL RETIREMENT DATE (Plan Section 1.43) shall commence:

         a.  as of the Participant's "NRA".

               OR (must select b. or c. AND 1. or 2.)

         b.  (X)  as of the first day of the month ...
         c.       as of the Anniversary Date ...

              1.  (X) coinciding with or next following the Participant's "NRA".
              2.      nearest the Participant's "NRA".

D13  EARLY RETIREMENT DATE (Plan Section 1.12) means the:

         a.  (X)  No Early Retirement provision provided.
         b.       date on which a Participant ...
         c.       first day of the month coinciding with or next following the
                  date on which a Participant ...
         d.       Anniversary Date coinciding with or next following the date on
                  which a Participant ...

         AND, if b, c or d was selected ...

              1.  attains his _______ birthday and has
              2.  completed at least ________ Years of Service.

CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS

E1   a.   COMPENSATION (Plan Section 1.9) with respect to any Participant means:

          1.     415 Compensation.
          2. (X) Compensation reportable as wages on Form W-2.
<PAGE>
 
     b.   COMPENSATION shall be

          1.   (X)  actually paid (must be selected if Plan is integrated)
          2.   accrued

     c.   HOWEVER, for non-intregated plans, Compensation shall exclude (select
all that apply):
 
          1.   ( )  N/A. No exclusions.                               
          2.   ( )  overtime.                                         
          3.   (X)  bonuses.                                          
          4.   ( )  commissions.                                      
          5.   (X)  other: taxable fringe benefits or moving expenses  

       d.    FOR PURPOSES OF THIS SECTION E1, Compensation shall be based on:

          1.   (X)  the Plan Year.
          2.        the Fiscal Year coinciding with or ending within the Plan
                    Year.
          3.        the Calendar Year coinciding with or ending within the Plan
                    Year.

    NOTE:     The Limitation Year shall be the same as the year on which
Compensation is based.

    e.   HOWEVER, for an Employee's first year of participation, Compensation
shall be recognized as of:

          1.   ( )  the first day of the Plan Year.
          2.   (X)  the date the Participant entered the Plan.

    f.   IN ADDITION, COMPENSATION and 414(s) Compensation 1. (x) shall 2. ( )
shall not include compensation which is not currently includible in the
Participant's gross income by reason of the application of Code Sections 125,
402(a)(8), 402(h)(1)(B), or 403(b).

E2   SALARY REDUCTION ARRANGEMENT ELECTIVE CONTRIBUTION
    (Plan Section 4.2) Each Employee may elect to have his Compensation reduced
by:

     a.          %
     b.          up to         %
     c.  (X)     from 1% to 15%
     d.          up to the maximum percentage allowable not to exceed the limits
                 of Code Sections 401(k), 404 and 415.
     AND...

     e.  A Participant may elect to commence salary reductions as of the
           beginning of each month (ENTER AT LEAST ONE DATE OR PERIOD). A
           Participant may modify the amount of salary reductions as of the
           beginning of each month (ENTER AT LEAST ONE DATE OR PERIOD).

     AND...

           Shall cash bonuses paid within 2-1/2 months after the end of the Plan
Year be subject to the salary reduction election?

           f.       Yes
           g.   (X) No

E3   FORMULA FOR DETERMINING EMPLOYER'S MATCHING CONTRIBUTION

             (Plan Section 4.1(b))

    a.    N/A. There shall be no matching contributions.
    b.    (X)  The Employer shall make matching contributions equal to 75% (e.g.
               50%) of the Participant's salary reductions.
    c.    The Employer may make matching contributions equal to a discretionary
          percentage, to be determined by the Employer, of the Participant's
          salary reductions.
    d.    The Employer shall make matching contributions equal to the sum of %
          of the portion of the Participant's salary reduction which does not
          exceed % of the Participant's Compensation plus % of the portion of
          the Participant's salary reduction which exceeds % of the
          Participant's Compensation, but does not exceed % of the Participant's
          Compensation.
    e.    The Employer shall make matching contributions equal to the percentage
          determined under the following schedule:
<PAGE>
 
                   Participant's Total             Matching Percentage
                   Years of Service

      FOR PLANS WITH MATCHING CONTRIBUTIONS

    f.   Matching contributions g. ( ) shall h. (X) shall not be used in
         satisfying the deferral percentage tests. (If used, full vesting and
         restrictions on withdrawals will apply and the match will be deemed to
         be an Elective Contribution).

         For Plan Years beginning prior to 1990, a Year of Service i. ( ) shall

    j.   ( ) shall not be required in order to share in the matching
             contributions.
            
         For Plan Years beginning after 1989, a Year of Service shall not be
required in order to share in the matching contributions.

 
    k.   (X) In determining matching contributions, only salary reductions up to
             6% of a Participant's Compensation will be matched.

    l.   ( ) N/A

    m.       The matching contribution made on behalf of a Participant for any
             Plan Year shall not exceed $ .

    n.   (X) N/A

    n.   (X) matching contributions shall be made on behalf of
           1.  (X) all Participants.
           2.  only Non-Highly Compensated Employees

E4 WILL A DISCRETIONARY EMPLOYER CONTRIBUTION BE PROVIDED (OTHER THAN A
DISCRETIONARY MATCHING OR QUALIFIED NON-ELECTIVE CONTRIBUTION)  (Plan Section
4.1)?

    a.   No.
    b.   Yes, the Employer may make a discretionary contribution out of its
         current or accumulated Net Profit.
    c.   (X) Yes, the Employer may make a discretionary contribution which is
         not limited to its current or accumulated Net Profit.

    IF YES (b. or c. is selected above), the Employer's discretionary
contribution shall be allocated as follows:

    d.   FOR A NON-INTEGRATED PLAN

    The Employer discretionary contribution for the Plan Year shall be allocated
in the same ratio as each Participant's Compensation bears to the total of such
Compensation of all Participants.

    e.   (X)  FOR AN INTEGRATED PLAN
<PAGE>
 
    The Employer discretionary contribution for the Plan Year shall be allocated
in accordance with Plan Section 4.4(b)(3) based on a Participant's Compensation
in excess of:

         f.   (X)  The Taxable Wage Base.
         g.   ( )  The greater of $10,000 or 20% of the Taxable Wage Base.
         h.   ( )  % of the Taxable Wage Base.  (See Note below)
         i.   ( )  $                    (see Note below)

    NOTE:   The integration percentage of 5.7% shall be reduced to:

              1.  4.3% if h. or i. above is more than 20% and less than or equal
                  to 80% of the Taxable Wage Base.
              2.  5.4% if h. or i. above is less than 100% and more than 80% of
                  the Taxable Wage Base.
 
    E5  QUALIFIED NON-ELECTIVE CONTRIBUTIONS (Plan Section 4.1)


         a.   ( )  N/A. There shall be no in Sections 4.6 Qualified Non-Elective
                   and 4.8. Contributions except as provided
         b.   ( )  The Employer shall make a Qualified Non-Elective Contribution
                   equal to % of the total Compensation of all Participants
                   eligible to share in the allocations.
         c.   (X)  The Employer may make a Qualified Non-Elective Contribution
                   in an amount to be determined by the Employer.

    E6  FORFEITURES (Plan Section 4.4(e))

         a.   Forfeitures of contributions other than matching contributions
shall be...

              1.  ( ) added to the Employer's contribution under the Plan.
              2.  (X) allocated to all Participants eligible to share in the
allocations in the same proportion that each Participant's Compensation for the
year bears to the Compensation of all Participants for such year.

         b.   Forfeitures of matching contributions shall be ...

              1.  ( ) N/A.  No matching contributions or match is fully vested.
              2.  (X) used to reduce the Employer's matching contribution.
              3.  ( ) allocated to all Participants eligible to share in the
                      allocations in proportion to each such Participant's
                      Compensation for the year.
              4.  ( ) allocated to all Non-Highly Compensated Employees eligible
                      to share in the allocations in proportion to each such
                      Participant's Compensation for the year.
<PAGE>
 
E7 ALLOCATIONS TO ACTIVE PARTICIPANTS (Plan Section 4.4) With respect to Plan
    Years beginning after 1989, a Participant...

    a.   (X) shall (Plan may become discriminatory)

    b.   shall not be required to complete a Year of Service to share in any 
         Non-Elective Contributions (other than matching contributions) or
         Qualified Non-Elective Contributions. For Plan Years beginning before
         1990, the Plan provides that a Participant must complete a Year of
         Service to share in the allocations.

E8 ALLOCATIONS TO TERMINATED PARTICIPANTS (Plan Section 4.4(1))

    Any Participant who terminated employment during the Plan Year (i.e., not
actively employed on the last day of the Plan Year) for reasons other than
death, Total and Permanent Disability or retirement:

    a.   With respect to Employer Non-Elective Contributions (other than
         matching), Qualified Non-Elective Contributions, and Forfeitures:

      1. For Plan Years beginning after 1989,

         i.   ( )  N/A, Plan does not provide for such contributions.
         ii.  ( )  shall share in the allocations provided such Participant
                   completed more than 500 Hours of Service.
         iii. ( )  shall share in such allocations provided such Participant
                   completed a Year of Service.
         iv.  (X)  shall not share in such allocations, regardless of Hours of
                   Service.

      2. For Plan Years beginning before 1990,

         i.   (X)  N/A, new Plan, or same as for Plan years beginning after 
                   1989.
         ii.  ( )  shall share in such allocations provided such Participant
                   completed a Year of Service.
         iii. ( )  shall not share in such allocations, regardless of hours of
                   Service.

     NOTE:  If a.1.iii or iv is selected, the Plan could violate minimum
participation and coverage requirements under Code Sections 401(a)(26) and 410.

    b.  With respect to the allocation of Employer Matching contributions, a
        Participant:

      1. For Plan Years beginning after 1989,
<PAGE>
 
         i.   ( )  N/A, Plan does not provide for matching contributions.
         ii.  (X)  shall share in the allocations, regardless of Hours of
                   Service.
         iii. ( )  shall share in the allocations provided such Participant
                   completed more than 500 Hours of Service.
         iv.  ( )  shall share in the allocations provided such Participant
                   completed more than 500 Hours of Service.
         v.   ( )  shall not share in such allocations, regardless of Hours of
                   Service.

      2. For Plan Years beginning before 1990,

         i.   (X)  N/A, new Plan, or same as years beginning after 1989.
         ii.  ( )  shall share in the allocations, regardless of Hours of
                   Service.
         iii. ( )  shall share in such allocations provided such Participant
                   completed a Year of Service.
         iv.  ( )  shall not share in such allocations, regardless of Hours of
                   Service.

     NOTE:  If b.1.iv or v is selected, the Plan could violate minimum
participation and coverage requirements under Code Section 401(a)(26) and 410.

E9   ALLOCATIONS OF EARNINGS (Plan Section 4.4(c))

    Allocations of earnings with respect to amounts contributed to the Plan
after the previous Anniversary Date or other valuation date shall be
determined...

    a.   ( )  by using a weighted average.
    b.   ( )  by treating one-half of all such contributions as being a part of
              the Participant's nonsegregated account balance as of the previous
              Anniversary Date or valuation date.
    c.   ( )  by using the method specified in Section 4.4(c).
    d.   (X)  other


E10  LIMITATIONS ON ALLOCATIONS (Plan Section 4.9)

    a.   If any Participant is or was covered under another qualified defined
         contribution plan maintained by the Employer, other than a Master or
         Prototype Plan, or if the Employer maintains a welfare benefit fund, as
         defined in Code Section 419(e), or an individual medical account, as
         defined in Code Section 415(1)(2), under which amounts are treated as
         Annual Additions with respect to any Participant in this Plan:

         1.  (X) N/A.
<PAGE>
 
           2.  The provisions of Section 4.9(b) of the Plan will apply as if the
               other plan were a Master or Prototype Plan.
           3.  Provide the method under which the Plans will limit total Annual
               Additions to the maximum Permissible Amount, and will properly
               reduce any Excess Amounts, in a manner that precludes Employer
               discretion.

      b.   If any Participant is or ever has been a Participant in a defined
           benefit plan maintained by the Employer:

         1.  (X)   N/A.
         2.  In any Limitation Year, the Annual Additions credited to the
             Participant under this Plan may not cause the sum of the Defined
             Benefit fraction and the Defined Contribution Fraction to exceed
             1.0. If the Employer's contribution that would otherwise be made on
             the Participant's behalf during the limitation year would cause the
             1.0 limitation to be exceeded, the rate of contribution under this
             Plan will be reduced so that the sum of the fractions equals 1.0.
             If the 1.0 limitation is exceeded because of an Excess Amount, such
             Excess Amount will be reduced in accordance with Section 4.9(a)(4)
             of the Plan.
         3.  Provide the method under which the Plans involved will satisfy the
             1.0 limitation in a manner that precludes Employer discretion.

E11  DISTRIBUTIONS UPON DEATH (Plan Section 6.6(h))
     Distributions upon the death of a Participant prior to receiving any
benefits shall ...

    a. (X) be made pursuant to the election of the Participant or beneficiary.
    b.     begin within 1 year of death for a designated beneficiary and be
           payable over the life (or over a period not exceeding the life
           expectancy) of such beneficiary, except that if the beneficiary is
           the Participant's spouse, begin within the time the Participant would
           have attained age 70 1/2.
    c.     be made within 5 years of death for all beneficiaries.
    d.     other

El2  LIFE EXPECTANCIES (Plan Section 6.5(f)) for minimum distributions required
pursuant to Code Section 401(a)(9) shall ...

    a. (X) be recalculated at the Participant's election.
    b.     be recalculated.
    c.     not be recalculated.

E13  CONDITIONS FOR DISTRIBUTIONS UPON TERMINATION
Distributions upon termination of employment pursuant to Section 6.4(a) of the
Plan shall not be made unless the following conditions have been satisfied:

    a. (X) N/A.  Immediate Distributions may be made at Participant's election.
    b. ( ) The Participant has incurred 1-Year Break(s) in Service.
    c. ( ) The Participant has reached his or her Early or Normal Retirement
           Age.
    d. ( ) Distributions may be made at the Participant's election on or after
           the Anniversary Date following termination of employment.
    e. ( ) Other

E14  FORM OF DISTRIBUTIONS (Plan Sections 6.5 and 6.6) Distributions under the
     Plan may be made...

    a.   1.  ( )  in lump sums.
         2.  (X)  in lump sums or installments.

    b.   AND, pursuant to Plan Section 6.13,

         1.  (X)  no annuities are allowed (avoids Joint and Survivor rules).
         2.       annuities are allowed (Plan Section 6.13 shall not apply).

    NOTE:   b.1. above may not be elected if this is an amendment to a plan
which permitted annuities as a form of distribution or if this Plan has accepted
a plan to plan transfer of assets from a plan which permitted annuities as a
form of distribution.

    c.   AND may be made in...
         1.       cash only (except for insurance or annuity contracts).
         2.  (X)  cash or property.

     TOP HEAVY REQUIREMENTS
<PAGE>
 
Fl   TOP HEAVY DUPLICATIONS (Plan Section  4.4(i)):  When a Non-Key Employee is
a Participant in this Plan and a Defined Benefit Plan maintained by the
Employer, indicate which method shall be utilized to avoid duplication of top
heavy minimum benefits.

    a.   (X) The Employer does not maintain a Defined Benefit Plan.
    b.   ( ) A minimum, non-integrated contribution of 5% of each Non-Key
             Employee's total Compensation shall be provided in this Plan, as
             specified in Section 4.4(i). (The Defined Benefit and Defined
             Contribution Fractions will be computed using 100% if this choice
             is selected.)
    c.       A minimum, non-integrated contribution of 7-1/2% of each Non-Key
             Employee's total Compensation shall be provided in this Plan, as
             specified in Section 4.4(i). (If this choice is selected, the
             Defined Benefit and Defined Contribution Fractions will be computed
             using 125% for all Plan Years in which the Plan is Top Heavy, but
             not Super Top Heavy.)
<PAGE>
 
    d.       Specify the method under which the Plans will provide top heavy
             minimum benefits for Non-Key Employees that will preclude Employer
             discretion and avoid inadvertent omissions, including any
             adjustments required under Code Section 415(e).

F2   PRESENT VALUE OF ACCRUED BENEFIT (Plan Section 2.2) for Top Heavy purposes
where the Employer maintains a Defined Benefit Plan in addition to this Plan,
shall be based on ...

    a.   (X)  N/A.  The Employer does not maintain a defined benefit plan.
    b.        Interest Rate:
              Mortality Table:

F3   TOP HEAVY DUPLICATIONS: Employer maintaining two (2) or more Defined
Contribution Plans (other than paired plans).

    a.   (X)   N/A.
    b.   A minimum, non-integrated contribution of 3% of each Non-Key Employee's
         total Compensation shall be provided in the Money Purchase Plan (or
         other plan subject to Code Section 412), where the Employer maintains
         two (2) or more non-paired Defined Contribution Plans.
    c.   Specify the method under which the Plans will provide top heavy minimum
         benefits for Non-Key Employees that will preclude Employer discretion
         and avoid inadvertent omissions, including any adjustments required
         under Code Section 415(e).

      MISCELLANEOUS

G1   LOANS TO PARTICIPANTS (Plan Section 7.4)

    a.   (X)  Yes, loans may be made up to $50,000 or 1/2 Vested interest.
    b.        No, loans may not be made.

    If  YES,  (check all that apply) ...

    c.   (X)  loans shall be treated as a Directed Investment.
    d.   loans shall only be made for hardship or financial necessity.
    e.   (X)  the minimum loan shall be $1,000.
    f.   $10,000 de minimis loans may be made regardless of Vested interest.
         (If selected, plan may need security in addition to Vested interest)


 
  NOTE:   Department of Labor Regulations require the adoption of a separate
          written loan program setting forth the requirements outlined in Plan
          Section 7.4.
          
G2   DIRECTED INVESTMENT ACCOUNTS (Plan Section 4.13) are permitted for the
interest in any one or more accounts. 

    a.   (X)  Yes, regardless of the Participant's Vested interest in the Plan.
    b.   ( )  Yes, but only with respect to the Participant's Vested interest
              in the Plan.
    c.   ( )  Yes, but only  with  respect to those accounts which are 100%
              Vested.
    d.   ( )  No directed investments are permitted.

G3   TRANSFERS  FROM QUALIFIED PLANS (Plan Section 4.11)

    a.   (X)  Yes, transfers from qualified plans (and rollovers) will be
              allowed.
    b.   ( )  No, transfers from qualified plans (and rollovers) will not be
              allowed.

    AND,  transfers shall be permitted...

    c.   (X)  from any Employee, even if not a Participant.
    d.   ( )  from Participants only.

G4   EMPLOYEES' VOLUNTARY CONTRIBUTIONS (Plan Section 4.12)

    a.   ( )  Yes, Voluntary Contributions are allowed subject to the limits of
              Section 4.7.
    b.   (X)  No, Voluntary Contributions will not be allowed.

     NOTE:  TRA 1986 subjects voluntary contributions to strict discrimination
rules.

G5   HARDSHIP DISTRIBUTIONS (Plan Section 6.11)
<PAGE>
 
    a.       Yes, from any accounts which are 100% Vested.
    b.   (X) Yes, from Participant's Elective Account only.
    c.       Yes, but limited to the Participant's Account only.
    d.       No.

     NOTE: Distributions from a Participant's Elective Account are limited to
the portion of such account attributable to such Participant's Deferred
Compensation and earnings attributable thereto up to December 31, 1988. Also
<PAGE>
 
hardship distributions are not permitted from a Participant's Qualified Non-
Elective Account.

G6   PRERETIREMENT DISTRIBUTION (Plan Section 6.10)

         a.  (X) If a Participant has reached the age of 59-1/2, distributions
             may be made, at the Participant's election, from any accounts which
             are 100% Vested without requiring the Participant to terminate
             employment.

         b.  No preretirement distribution may be made.
  
     NOTE: Distributions from a Participant's Elective Account and Qualified 
Non-Elective Account are not permitted prior to age 59 1/2.

     The adopting Employer may not rely on an opinion letter issued by the
National Office of the Internal Revenue Service as evidence that the Plan is
qualified under Code Section 401.  In order to obtain reliance with respect to
plan qualification, the Employer must apply to the appropriate Key District
Office for a determination letter.

     This Adoption Agreement may be used only in conjunction with basic Plan
document #03.  This Adoption Agreement and the basic Plan document shall
together be known as Advest, Inc. Non-Standardized 401(k) Profit Sharing Plan
#-03-001.

     The adoption of this Plan, its qualification by the IRS, and the related
tax consequences are the responsibility of the Employer and its independent tax
and legal advisors.

     Advest, Inc. will notify the Employer of any amendments made to the Plan or
of the discontinuance or abandonment of the Plan provided this Plan has been
acknowledged by Advest, Inc. or its authorized representative.  Furthermore, in
order to be  eligible to receive such notification, we agree to notify Advest,
Inc. of any change in address.
<PAGE>
 
     IN WITNESS WHEREOF, the Employer and Trustee hereby cause this Plan to be
executed on this 26st day of January, 1996.  Furthermore, this Plan may not be
used unless acknowledged by Advest, Inc. or its authorized representative.

     EMPLOYER:

     First International Bancorp, Inc.
 
     By:

                                    Leslie A. Galbraith

 
     PARTICIPATING EMPLOYER:

     First National Bank of New England
         (enter name)


     By:

     This Plan may not be used, and shall not be deemed to be a Prototype Plan,
unless an authorized representative of Advest, Inc. has acknowledged the use of
the Plan. Such acknowledgment is for administerial purposes only. It
acknowledges that the Employer is using the Plan but does not represent that
this Plan, including the choices selected on the Adoption Agreement, has been
reviewed by a representative of the sponsor or constitutes a qualified
retirement plan.


     Advest, Inc.


     By:


     With regard to any questions regarding the provisions of the Plan, adoption
of the Plan, or the effect of an opinion letter from the IRS, call or, write
(this information must be completed by the sponsor of this Plan or its
designated representative):

     Name      Leslie A. Galbraith

     Address   1 Commercial Plaza
               Hartford, CT 06103
               Telephone (860) 727-0700

<PAGE>
 
                                                                    EXHIBIT 11.1

               STATEMENT REGARDING THE COMPUTATION OF NET INCOME
                    PER COMMON AND COMMON EQUIVALENT SHARES


<TABLE> 
<CAPTION> 


                                                                                                             For the Three 
                                                         For the years ended December 31,                 Months Ended March 31,
                                                   ---------------------------------------------    -------------------------------
                                                       1996             1995              1994              1997             1996   
                                                       ----             ----              ----              ----             ----
<S>                                            <C>               <C>                <C>              <C>               <C>     
Historical - primary (1):        
   Weighted average issued common            
   stock outstanding.............................  5,764,049        5,776,883          5,534,893        5,771,693         5,753,227 
Weighted average common stock equivalents (2)....    204,978          204,978            204,978          204,978           204,978 
                                                  ----------       ----------         ----------       ----------        ---------- 

Weighted average number of common and
 common equivalent shares outstanding............  5,969,027        5,981,861          5,739,871        5,976,671         5,958,205
                                                  ==========       ==========         ==========       ==========        ==========
Net income....................................... $3,244,336       $2,026,229         $1,059,940       $1,012,010        $  754,311
                                                  ==========       ==========         ==========       ==========        ==========
Net income per share............................. $     0.54       $     0.34         $     0.18       $     0.17        $     0.13
                                                  ==========       ==========         ==========       ==========        ==========
</TABLE> 
____________________


(1)  All common and common equivalent share amounts have been restated to
     reflect a 3.5-for-1 split approved by the Company on June 26, 1997 and 
     effected on August 7, 1997.

(2)  Includes common stock equivalents associated with any Company stock options
     issued one year prior to the expected public offering date of September
     1997. In accordance with Staff Accounting Bulletin Topic 4-D, for all
     periods presented, the effect of such equivalents was computed under the
     treasury stock method, assuming the repurchase of such options by the
     Company at an assumed offering price of $12.00 per share.





<PAGE>
 
                                                                    EXHIBIT 21.1

                        SUBSIDIARIES OF THE REGISTRANT

First National Bank of New England

* FNBNE SBA Holdings, Inc. (inactive)

_______________

*Subsidiary of First National Bank of New England



<PAGE>
 
                                                                    EXHIBIT 23.1

                      CONSENT OF INDEPENDENT ACCOUNTANTS
                      ----------------------------------


We consent to the inclusion in this Registration Statement on Form S-1 of our
report dated January 29, 1997, except for Note 1 (as it relates to "Earnings Per
Share" and "Common Stock Split") and Note 13 as to which the date is
June 26, 1997, on our audits of the consolidated financial statements of First
International Bancorp, Inc. and Subsidiary. We also consent to the references to
our Firm under the captions "Selected Consolidated Financial Information" and
"Experts."

/s/ COOPERS & LYBRAND L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.


Hartford, Connecticut
July 15, 1997

<TABLE> <S> <C>

<PAGE>
 
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   3-MOS                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1997             DEC-31-1996
<PERIOD-START>                             JAN-01-1997             JAN-01-1996
<PERIOD-END>                               MAR-31-1997             DEC-31-1996
<CASH>                                       8,268,388               5,643,026
<INT-BEARING-DEPOSITS>                          55,711                 223,627
<FED-FUNDS-SOLD>                             2,750,000              13,000,000
<TRADING-ASSETS>                                     0                       0
<INVESTMENTS-HELD-FOR-SALE>                 11,807,068              11,523,795
<INVESTMENTS-CARRYING>                       4,322,878               4,349,828
<INVESTMENTS-MARKET>                         4,288,513               4,343,347
<LOANS>                                    120,154,174             112,452,484
<ALLOWANCE>                                  2,750,000               3,000,000
<TOTAL-ASSETS>                             162,172,738             161,641,773
<DEPOSITS>                                 143,738,532             144,316,149
<SHORT-TERM>                                 1,134,464               1,061,449
<LIABILITIES-OTHER>                          2,232,681               2,048,600
<LONG-TERM>                                          0                       0
                                0                       0
                                          0                       0
<COMMON>                                       577,353                 576,635
<OTHER-SE>                                  14,489,708              13,638,940
<TOTAL-LIABILITIES-AND-EQUITY>             162,172,738             161,641,773
<INTEREST-LOAN>                              2,857,477              12,027,413
<INTEREST-INVEST>                              401,808               1,278,026
<INTEREST-OTHER>                                     0                       0
<INTEREST-TOTAL>                             3,259,285              13,305,439
<INTEREST-DEPOSIT>                           1,453,082               5,714,156
<INTEREST-EXPENSE>                               6,755                  27,229
<INTEREST-INCOME-NET>                        1,799,448               7,564,054
<LOAN-LOSSES>                                  367,700               3,486,974
<SECURITIES-GAINS>                                   0                       0
<EXPENSE-OTHER>                              2,495,983               8,425,221
<INCOME-PRETAX>                              1,774,856               5,597,117
<INCOME-PRE-EXTRAORDINARY>                   1,774,856               5,597,117
<EXTRAORDINARY>                                      0                       0
<CHANGES>                                            0                       0
<NET-INCOME>                                 1,012,010               3,244,336
<EPS-PRIMARY>                                     0.17                    0.54
<EPS-DILUTED>                                     0.17                    0.54
<YIELD-ACTUAL>                                    5.03                    5.48
<LOANS-NON>                                  2,378,974               2,251,710
<LOANS-PAST>                                         0                       0
<LOANS-TROUBLED>                                     0                       0
<LOANS-PROBLEM>                                      0                       0
<ALLOWANCE-OPEN>                             3,000,000               2,000,000
<CHARGE-OFFS>                                  629,067               2,526,801
<RECOVERIES>                                    11,367                  39,827
<ALLOWANCE-CLOSE>                            2,750,000               3,000,000
<ALLOWANCE-DOMESTIC>                         2,043,221               2,455,972
<ALLOWANCE-FOREIGN>                                  0                       0
<ALLOWANCE-UNALLOCATED>                        706,779                 544,028
        

</TABLE>


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