PORT FINANCIAL CORP, S-1/A, 2000-01-19

PORT FINANCIAL CORP
S-1/A, 2000-01-19
SAVINGS INSTITUTION, FEDERALLY CHARTERED

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<PAGE>

As filed with the Securities and Exchange Commission on January 19, 2000
Registration No. 333-91549
- --------------------------------------------------------------------------------

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 1
to
FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

PORT FINANCIAL CORP.
(exact name of registrant as specified in its charter)

Massachusetts 6035 Application Pending
(state or other jurisdiction of (Primary Standard) (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)

c/o Cambridgeport Bank
689 Massachusetts Avenue
Cambridge, Massachusetts 02139
(617) 661-4900
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

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

James B. Keegan
President and Chief Executive Officer
Cambridgeport Bank
689 Massachusetts Avenue
Cambridge, Massachusetts 02139
(617) 349-8010
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

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

Copies to:
Richard A. Schaberg, Esq.
Thacher Proffitt & Wood
1700 Pennsylvania Ave, N.W., Ste. 800
Washington, D.C. 20006
(202) 347-8400

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

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, check the following box / X /
---

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
==================================================================================================================================
Title of each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered(1) Offering Price Per Share(2) Aggregate Offering Price(2) Registration Fee
- --------------------------- ------------- --------------------------- --------------------------- ----------------
<S> <C> <C> <C> <C>
Common Stock 10,580,000 $10.00 $105,800,000 $33,088.95(3)
$.01 par Value
==================================================================================================================================
</TABLE>

(1) Includes the maximum number of shares that may be issued in connection with
this offering.
(2) Estimated solely for the purpose of calculating the registration fee.

(3) Previously Paid.

The Registrant hereby amends this Registration on such date or dates as may be
necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to Section 8(a), may determine.

Port Financial Corp.
<PAGE>

Cross Reference Sheet showing location in the Prospectus of information required
by Items of Form S-1:

<TABLE>
<CAPTION>
Registration Statement Item and Caption Location or Headings in Prospectus
- ------------------------------------------------ ----------------------------------------------------------------------
<S> <C>
1. Forepart of the Registration Statement and Outside Front Cover Page
Outside Front Cover Page of Prospectus

2. Inside Front and Outside Back Cover Inside Front and Outside Back Cover Pages
Pages of Prospectus

3. Summary Information and Risk Factors Summary; Risk Factors

4. Use of Proceeds Summary--How We Intend to Use the Proceeds We Raise from the
Offering; How We Intend to Use the Proceeds from the Offering

5. Determination of Offering Price Summary---How We Determined the Offering Range and the $10.00
Price Per Share; The Conversion and the Offering--How We
Determined the Offering Range and the $10.00 Price Per Share

6. Dilution Not Applicable

7. Selling Security Holders Not Applicable

8. Plan of Distribution Summary--Persons Who May Order Stock in the Offering; The
Conversion and the Offering--Subscription Offering and Subscription
Rights, Direct Community Offering and Syndicated Community
Offering

9. Description of Securities to be Registered Description of Capital Stock of Port Financial Corp.

10. Interests of Named Experts and Counsel Not Applicable

11. Information with Respect to the Registrant Outside Front Cover Page; Summary--The Companies; Summary--
Our Directors, Officers and Employees Will Have Additional
Compensation and Benefit Programs After the Conversion; Selected
Consolidated Financial and Other Data; Cambridgeport Bank; Port
Financial Corp.; Our Policy Regarding Dividends; Market for the
Common Stock; Regulatory Capital Compliance; Capitalization; Pro
Forma Data; Cambridgeport Mutual Holding Company Consolidated
Statements of Operations; Management's Discussion and Analysis of
Financial Condition and Results of Operations; Business of
Cambridgeport Bank; Business of Port Financial Corp.; Regulation
of Cambridgeport Bank and Port Financial Corp; Federal Banking
Regulation; Management; Executive Officers; The Conversion and
the Offering; Restrictions on Acquisition of Port Financial Corp. and
Cambridgeport Bank; Description of Capital Stock of Port Financial
Corp.; Financial Statements

12. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
</TABLE>
<PAGE>

PROSPECTUS
[LOGO]

PORT FINANCIAL CORP.
Proposed Holding Company for Cambridgeport Bank
Up to 10,580,000 Shares of Common Stock

Port Financial Corp. is a Massachusetts corporation that is offering shares of
its common stock in connection with the conversion of Cambridgeport Mutual
Holding Company to a stock holding company which will own all of the outstanding
stock of Cambridgeport Bank. We have applied to have the common stock of Port
Financial Corp. quoted on the Nasdaq National Market System under the symbol
"PORT."

____________________________________________________________

TERMS OF THE OFFERING

Price: $10.00 per share

<TABLE>
<CAPTION>
Minimum Maximum
----------- ------------
<S> <C> <C>
Number of shares........................................... 6,800,000 9,200,000
Underwriting commissions and expenses...................... $ 1,055,000 $ 1,055,000
Net proceeds to Port Financial Corp........................ $65,732,000 $ 89,732,000
Net proceeds per share to Port Financial Corp.............. $ 9.67 $ 9.75
</TABLE>

We may sell up to 10,580,000 shares because of regulatory considerations
or changes in market or economic conditions without the resolicitation of
subscribers.

____________________________________________________________

This investment involves a degree of risk,
including the possible loss of principal.
Please read the Risk Factors beginning on page [_].

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

None of the Securities and Exchange Commission, the Federal Deposit Insurance
Corporation, the Commissioner of Banks of the Commonwealth of Massachusetts nor
any state securities regulator has approved or disapproved these securities or
determined if this prospectus is accurate or complete. Any representation to the
contrary is a criminal offense.

We are offering the common stock on a best efforts basis, subject to certain
conditions. The minimum number of shares that you may purchase is 25 shares.
Funds received prior to the completion of the offering will be held in an
account at Cambridgeport Bank which will bear interest at our savings passbook
rate. This offering is expected to terminate on [_], 2000.

Ryan, Beck & Co.
[_], 2000
<PAGE>

[MAP OF CAMBRIDGEPORT BANK BRANCH OFFICES]
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary ........................................................................................
Risk Factors ...................................................................................
Selected Consolidated Financial and Other Data .................................................
Recent Developments.............................................................................
Cambridgeport Bank .............................................................................
Port Financial Corp. ...........................................................................
How We Intend to Use the Proceeds from the Offering ............................................
Our Policy Regarding Dividends .................................................................
Market for the Common Stock ....................................................................
Regulatory Capital Compliance ..................................................................
Capitalization .................................................................................
Pro Forma Data .................................................................................
Cambridgeport Mutual Holding Company Consolidated Statements of Operations .....................
Management's Discussion and Analysis of Financial Condition and Results of Operations ..........
Business of Cambridgeport Bank .................................................................
Business of Port Financial Corp. ...............................................................
Regulation of Cambridgeport Bank and Port Financial Corp. ......................................
Taxation .......................................................................................
Management .....................................................................................
The Conversion and the Offering ................................................................
Restrictions on Acquisition of Port Financial Corp. and Cambridgeport Bank .....................
Description of Capital Stock of Port Financial Corp. ...........................................
Legal and Tax Opinions .........................................................................
Experts ........................................................................................
Registration Requirements ......................................................................
Where You Can Find Additional Information ......................................................
Index to Financial Statements ..................................................................
</TABLE>
<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

SUMMARY

You should read this entire document carefully, including the consolidated
financial statements and the notes to the consolidated financial statements.

Our Conversion and Stock Offering

Cambridgeport Mutual Holding Company is converting to a stock holding
company, Port Financial Corp., which will own all of the stock of Cambridgeport
Bank after the conversion. As part of the conversion, Port Financial Corp. is
offering shares of its common stock in a subscription offering on a priority
basis to qualifying depositors, tax-qualified employee benefit plans such as an
employee stock ownership plan (ESOP), and employees, officers, directors,
trustees and corporators of Cambridgeport Bank or Cambridgeport Mutual Holding
Company (Management). Any remaining stock not subscribed for in the subscription
offering will be offered in a community offering with preference given to
natural persons residing in our local community which consists of the cities and
towns of Cambridge, Arlington, Bedford, Belmont, Boston, Braintree, Brookline,
Burlington, Canton, Dedham, Dover, Framingham, Lexington, Lincoln, Medford,
Milton, Natick, Needham, Newton, Norwood, Quincy, Randolph, Sherbourne,
Somerville, Stoneham, Walpole, Waltham, Watertown, Wayland, Wellesley, Weston,
Westwood, Weymouth, Winchester and Woburn, and possibly to the general public.

The Companies

Cambridgeport Bank

We are a Massachusetts-chartered stock savings bank that is currently a
wholly owned subsidiary of Cambridgeport Mutual Holding Company, a
Massachusetts-chartered mutual holding company. We were formed in 1853 and
reorganized into a mutual holding company structure without a stock offering
in 1994. Our mission in to be a profitable community-oriented provider of
banking products and services to individuals and businesses, including
residential and commercial mortgages, consumer loans, commercial loans, and a
variety of deposit instruments. We operate through ten full service banking
offices located in the cities and towns in and around Cambridge, Massachusetts.
Six of these banking offices are located in Middlesex County and four are
located in Norfolk County. In addition, we operate a Telebanking Center located
in Cambridge, Massachusetts to service loan and deposit customers, including
opening checking and deposit accounts and accepting loan applications.

1
<PAGE>

Cambridgeport Mutual Holding Company

Cambridgeport Mutual Holding Company is a Massachusetts-chartered mutual
holding company formed in 1994 in connection with Cambridgeport Bank's
reorganization. Cambridgeport Mutual Holding Company is governed by its Board of
Corporators and its Board of Trustees. On a consolidated basis at September 30,
1999, Cambridgeport Mutual Holding Company had unaudited total assets of
approximately $721.8 million and deposits and retained earnings of approximately
$596.1 million and $78.6 million, respectively. Under the conversion,
Cambridgeport Mutual Holding Company will convert to stock form and be renamed
Port Financial Corp.

Port Financial Corp.

Port Financial Corp. will be the stock holding company for Cambridgeport
Bank after the conversion. Port Financial Corp. has not engaged in any business
to date.

The following are highlights of Cambridgeport Bank's operating strategy:

. Community Banking and Customer Service

We are a service-oriented bank providing retail and business customers with
value driven products and services designed to create long term, profitable
relationships. Our focus is to develop core banking relationships by securing
checking accounts and then to provide customers appropriate loan and other
services from among a full array of banking products. In this regard, we offer
residential mortgage loans, commercial real estate loans and business banking
loans and services to customers throughout eastern Massachusetts.

. Residential Lending

Our strategy is to offer customers a broad range of mortgage products
including adjustable and fixed rate loans and "jumbo" loan products, which are
loans with balances that exceed Federal National Association (Fannie Mae)
guidelines. Our Telebanking Center is equipped with a special toll free number
for loan customers and handles information requests and accepts mortgage
applications over the telephone. We also offer home equity lines of credit to
complement our mortgage services.

2
<PAGE>

. Commercial Real Estate Lending

. Business Banking

. Business Diversification Strategies

. Expanded Delivery Systems

3
<PAGE>

services which provide our customers with continuous access to their accounts
through the use of a touch tone telephone. We plan to introduce home and
business internet banking products which will give our retail and business
customers access to their accounts and the ability to conduct account
transactions such as online bill payment and electronic funds transfers.

. Asset Quality

We have a commitment to conservative loan underwriting policies and
investing in high grade assets. As a result of such practices and a relatively
stable economy, at September 30, 1999, we had $507,000 in non-performing assets,
or loans with principal payments 90 days past due.

. Interest Rate Strategy

We seek to maintain an acceptable balance between maximizing potential
yield and limiting exposure to changing interest rates. To reduce the risk that
our earnings will be impacted if interest rates change, we:

. sell most of our fixed rate one- to four-family mortgage loans
rather than retain them in our loan portfolio;

. emphasize investments with adjustable rates and/or short and
intermediate-term maturities of less than ten years;

. structure most of our commercial real estate loans with
adjustable rates; and

. offer home equity credit lines with variable rates indexed to the
prime rate.

Reasons for the Conversion

The conversion is intended to provide an additional source of capital not
available to us as a mutual institution. Funds raised in the offering will allow
Cambridgeport Bank to serve better the needs of our local community through:

. increased lending
especially to support the growth of business banking;

. opportunistic branch expansion;

. diversifying the products that we offer;

. increasing delivery systems, including the introduction of internet
banking; and

. marketing to customers disenfranchised by recent consolidations in
the local banking market.

4
<PAGE>

The conversion is also intended to provide an additional source of capital
to Port Financial Corp. in order to allow it to:

. finance acquisitions of other financial institutions or other
businesses related to banking;

. pay dividends to stockholders; and

. repurchase shares of our common stock.

Additionally, after the conversion, Port Financial Corp. will have the
ability to issue additional shares of common stock to raise capital or to
support mergers or acquisitions, although no additional capital issuance and no
mergers or acquisitions are planned or contemplated at the present time. In
addition, stock ownership by officers and other employees, through stock-based
benefit plans, has proven to be an effective performance incentive and an
effective means of attracting and retaining qualified personnel. We also believe
that the conversion will provide local customers and other residents with an
opportunity to become equity owners of Port Financial Corp., and thereby
participate in possible stock price appreciation and cash dividends. This is
consistent with our objective of being a locally-owned financial institution. We
believe that, through expanded local stock ownership, current customers and non-
customers who purchase common stock will seek to enhance the financial success
of Cambridgeport Bank through consolidation of their banking business and
increased referrals to Cambridgeport Bank.

After considering the advantages and risks of the conversion, as well as
applicable fiduciary duties, the Board of Trustees of Cambridgeport Mutual
Holding Company and the Board of Directors of Cambridgeport Bank unanimously
approved the conversion as being in the best interests of Cambridgeport Bank and
Cambridgeport Mutual Holding Company, our depositors and the communities that we
serve.

Terms of the Offering

We are offering between 6,800,000 and 9,200,000 shares of common stock of
Port Financial Corp. to qualifying depositors, to tax-qualified employee plans,
to employees, officers, directors, trustees and corporators of Cambridgeport
Bank or Cambridgeport Mutual Holding Company, and possibly to the public. The
maximum number of shares that we sell in the offering may increase by 15% to
10,580,000 shares as a result of regulatory considerations or changes in
financial markets. Unless the number of shares to be issued is increased to more
than 10,580,000 or decreased below 6,800,000 you will not have the opportunity
to change or cancel your stock order. The offering price is $10.00 per share.
Ryan, Beck & Co., Inc., our financial and marketing advisor in connection with
the conversion, will use its best efforts to assist us in selling our stock.

5
<PAGE>

Persons Who May Order Stock in the Offering

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

(1) Depositors with accounts at Cambridgeport Bank with aggregate balances
of at least $50 on July 31, 1998;

(2) Depositors with accounts at Cambridgeport Bank with aggregate balances
of at least $50 on September 30, 1999;

(3) The tax-qualified employee plans of Cambridgeport Bank
(including the ESOP), which will provide retirement benefits to our
employees; and

(4) Employees, officers, directors, trustees and corporators of
Cambridgeport Bank or Cambridgeport Mutual Holding Company at the time
of the offering who do not already have subscription rights in the
above priorities.

The shares of common stock not purchased in the subscription offering will
be offered in what we call a "direct community offering," on a priority basis,
with preference to the natural persons residing within our Community
Reinvestment Act assessment area which consist of cities and towns of Cambridge,
Arlington, Bedford, Belmont, Boston, Braintree, Brookline, Burlington, Canton,
Dedham, Dover, Framingham, Lexington, Lincoln, Medford, Milton, Natick, Needham,
Newton, Norwood, Quincy, Randolph, Sherbourne, Somerville, Stoneham, Walpole,
Waltham, Watertown, Wayland, Wellesley, Weston, Westwood, Weymouth, Winchester
and Woburn. Shares may also be offered to the general public. We also may offer
shares of common stock not purchased in the subscription offering or the direct
community offering to the public in a "syndicated community offering." We have
the right to accept or reject orders received in the direct community offering
and the syndicated community offering at our sole discretion.

How We Determined the Offering Range and the $10.00 Price Per Share

The offering range is based on an independent appraisal of the common stock
to be offered. RP Financial, LC., an appraisal firm experienced in appraisals of
banks and financial institutions, has estimated as of January 7, 2000 that the
market value of the common stock to be between $68,000,000 and $92,000,000.
This results in an offering of between 6,800,000 and 9,200,000 shares of common
stock at an offering price of $10.00 per share. RP Financial's estimate of our
market value was based in part upon our financial condition and results of
operations and the effect of the additional capital raised in this offering. RP
Financial's independent appraisal will be updated before we complete our
conversion.

6
<PAGE>

The $10.00 price per share was selected primarily because $10.00 is the
price per share most commonly used in stock offerings involving conversions of
savings institutions. See "Pro Forma Data."

Limits on Your Purchase of the Common Stock

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

(1) the minimum order is 25 shares or $250;

(2) in the subscription offering, the maximum amount that an individual
may purchase is $[600,000];

(3) in the direct community offering and in the syndicated community
offering, the maximum amount that an individual may purchase is
$[600,000];

(4) in all categories of the offering combined, the total amount that an
individual may purchase, acting together with others, is $[1,200,000];
and

(5) if we receive orders for a greater number of shares than we are
offering, then we will allocate the available shares that we issue
based upon deposit balances. This may result in your receiving a
smaller number of shares than you ordered. See "The Conversion and The
Offering."

We may increase the $[600,000] and $[1,200,000] purchase limitations at anytime.
The ESOP is authorized to purchase up to 8% of the shares issued without regard
to these purchase limitations. For additional information on these purchase
limitations see "The Conversion and The Offering - Limitations on Common Stock
Purchases."

How You May Pay for Your Shares

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

(1) personal check, bank check or money order; or

(2) authorizing us to withdraw money from your non-check writing deposit
accounts maintained with Cambridgeport Bank.

7
<PAGE>

You May Not Sell or Transfer Your Subscription Rights

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

Deadline for Orders of Common Stock

If you wish to purchase shares, a properly completed stock order form,
together with payment for the shares, must be received by the Stock Information
Center or our main office no later than 10:00 a.m., Massachusetts time, on
[ ], 2000, unless we extend this deadline. You must submit your order forms
by mail, overnight courier or by dropping off your order at our stock
information center at our main office.

Termination of the Offering

The subscription offering will terminate at 10:00 a.m., Massachusetts time,
on [ ], 2000. We expect that the community offering will terminate at the
same time. We may extend this expiration date without notice to you, until
[ ], 2000, unless regulators approve a later date. If the subscription
offering and/or community offering is extended beyond [ ], 2000, we will be
required to resolicit subscriptions before proceeding with the offering. All
further extensions, in the aggregate, may not last beyond [ ].

Steps We May Take If We Do Not Receive Orders for the Minimum Number of Shares

If we do not receive orders for at least 6,800,000 shares of common stock,
we may take several steps in order to sell the minimum number of shares in the
offering range. Specifically, we may increase the $[600,000] and $[1,200,000]
purchase limitations to a maximum of $4,600,000, which is 5% of the maximum of
the offering range. In addition, we may seek regulatory approval to extend the
offering beyond the [ ], 2000 expiration date, provided that any such
extension will require us to resolicit subscriptions received in the offering.
See "The Conversion and The Offering - Limitations on Common Stock Purchases."

Market for the Common Stock

We have applied to have the common stock of Port Financial Corp. quoted on
the Nasdaq National Market System under the symbol "PORT". Ryan, Beck & Co.
intends to make a market in the common stock but it is under no obligation to do
so. See "Market for Common Stock."

8
<PAGE>

How We Intend to Use the Proceeds We Raise from the Offering

Assuming we sell 9,200,000 shares in the offering, we intend to distribute
the net proceeds from the offering as follows:

. $44,866,000 will be contributed to Cambridgeport Bank;

. $7,360,000 will be loaned to the ESOP to fund its purchase of common
stock; and

. $37,506,000 will be retained by Port Financial Corp.

Port Financial Corp. intends to use the net proceeds retained from the
offering to invest in securities, to finance the possible acquisition of other
financial institutions and other businesses that are related to banking, to pay
dividends, to repurchase common stock or for other general corporate purposes.
The Bank may use the proceeds it receives for the expansion of its lending
activities, especially to support the emphasis of business banking;
opportunistic branch expansion; expanding delivery systems, including the
introduction of internet banking; and capitalization on opportunities to serve
customers disenfranchised by recent consolidations in the local banking market.

Our Policy Regarding Dividends

Although no decision has been made yet regarding the payment of dividends,
we will consider a policy of paying quarterly cash dividends on the common stock
beginning in the first full quarter after we complete the conversion. We do not
guarantee that we will pay dividends, or that we will not reduce or eliminate
dividends in future periods.

Our Directors, Officers and Employees Will Have Additional
Compensation and Benefit Programs After the Conversion

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

. ESOP. This retirement plan will cover most of our employees. Port
Financial Corp. will lend the ESOP money to buy up to 8% of the shares
we sell in the offering. The ESOP will buy shares either in the
offering or in the open market after the offering and will allocate
the stock to employees over a thirty-year period as additional
compensation for their services.

. ESOP Restoration Plan. This plan will provide selected executive
officers additional benefits if the tax laws limit their benefits or
if they retire before the allocation of all stock under the ESOP.

. Long-Term Incentive Plan. This plan has been established to permit
eligible officers the opportunity to earn cash bonuses based on the
achievement of objectives, preestablished performance goals
appropriate for a publicly-held company that are set for periods
longer than one year.

9
<PAGE>

We currently have the following termination pay arrangements:

. Employment Agreements and Change of Control Agreements. We have
entered into employment agreements with Mr. James B. Keegan, our
President and Chief Executive Officer, and Ms. Jane L. Lundquist,
Executive Vice President. If we discharge one of them without cause,
if one of them resigns because we do not meet our obligations under
these agreements or following a change in control of Port Financial
Corp., we must make a termination payment. As of the conversion, we
will also enter into change in control agreements with other senior
officers that will provide for termination payments in the event of
termination of employment under certain circumstances following a
change of control.

. Directors' Emeritus Consultation Plan. Under this plan, directors
who retire from service on the board of Port Financial Corp. within
four years from the conversion may elect to provide consulting
services to Port Financial Corp. for a period of 12 to 36 months for a
monthly fee of $1,000. A director emeritus will provide the
consulting services agreed upon and may attend meetings of the board
of Port Financial Corp., but will have no power or right to vote at
such meetings.

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

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

. Management Recognition Plan. This plan will allow selected officers,
directors and employees to receive shares of our stock, without making
any payment, if they work for us until the end of a specified service
period.

Assuming we sell 9,200,000 shares, we expect to ask our stockholders for
approval to grant options to purchase 920,000 of our shares and make stock
grants under a management recognition plan of up to 368,000 shares under the
plans described above. We will not implement a stock option plan or management
recognition plan unless our stockholders approve them. We do not expect to ask
our stockholders to approve these plans until at least six months after we
complete the offering. We expect to obtain the shares we would need for these
plans through open market stock purchases or from authorized but unissued
shares.

10
<PAGE>

The following table presents the dollar value of the shares that we expect
to grant under the ESOP and the contemplated management recognition plan and
stock option plan, and the percentage of Port Financial Corp.'s outstanding
common stock that will be represented by these shares. The numbers in the table
are based on the issuance of 9,200,000 shares of common stock at $10.00 per
share.

Percentage of
Value of common stock sold
Benefit Plan shares granted in the offering
--------------------------------- -------------------- -------------------
(In thousands)
<S> <C> <C>
ESOP............................. $ 7,360 8%
Stock option plan................ - 10%
Management recognition plan...... $ 3,680 4%
</TABLE>

How You May Obtain Additional Information Regarding the Conversion and Offering

If you have any questions regarding the offering or the conversion, please
call the Stock Information Center at [ ], Monday through Friday between
9:00 a.m. and 4:00 p.m., Massachusetts time.

11
<PAGE>

RISK FACTORS

- --------------------------------------------------------------------------------
You should consider carefully the following risk factors before deciding
whether to invest in our common stock.
- --------------------------------------------------------------------------------

After the conversion our return on average equity will be low compared
to other companies. This could hurt the price of our common stock.

We will not be able to deploy the increased capital from this offering into
high-yielding earning assets immediately. Our ability to leverage our new
capital profitably will be significantly affected by industry competition for
loans and deposits. Initially, we intend to invest the net proceeds in short-
term investments and mortgage-backed securities, which generally have lower
yields than loans. This will reduce our return on average equity to a level
that will be lower than our historical ratios. For the nine months ended
September 30, 1999, our return on average equity was 6.45%. Until we can
leverage our increased capital and increase interest earning assets, we expect
our return on equity to be below the industry average, which may negatively
impact the value of our stock.

Because we intend to pursue conservative and locally-based business goals, our
earnings may not increase significantly, which could negatively affect the price
of your stock.

On a post-conversion basis, Cambridgeport Bank intends to continue to serve
the financial needs of the local community and to remain an independent,
locally-based institution pursuing safe operations and conservative lending and
investment strategies. We are going to continue to lend primarily in eastern
Massachusetts after our conversion. We also will not lower credit standards even
though our capital base will be larger. For these reasons, our future earnings
may not increase significantly. If your investment goals are to invest in
companies with high earnings growth, you may find that we may not suit your
investment objectives.

If recent stock market volatility continues, the price of your stock may be
negatively affected.

Publicly traded stocks, including stocks of financial institutions, have
recently experienced substantial market price volatility. These market
fluctuations may be unrelated to the operating performance of particular
companies whose shares are traded. In several cases, common stock issued by
recently converted financial institutions has traded at a price that is below
the price at which such shares were sold in the initial offerings of those
companies. The purchase price of our common stock in the offering is based on
the independent appraisal by RP Financial. After our shares begin trading, the
trading price of our common stock will be determined by the marketplace, and may
be influenced by many factors, including prevailing interest rates, investor
perceptions of Port Financial Corp. and general industry and economic
conditions. Due to possible continued market volatility, we cannot assure you
that, following the conversion, the trading price of our common stock will be at
or above the $10.00 per share initial offering price.

12
<PAGE>

Also, because Port Financial Corp. has never issued stock, there is no
current trading market for the common stock. Consequently, Port Financial Corp.
cannot assure or guarantee that an active trading market for the common stock
will develop or that, if developed, will continue. An active and orderly
trading market will depend on the existence and individual decisions of willing
buyers and sellers at any given time over which neither Port Financial Corp. nor
any market maker will have any control. If an active trading market does not
develop or is sporadic, this may hurt the market value of the common stock and
make it difficult to buy or sell shares on short notice.

Because transactions that you would like may be prevented by provisions in our
charter documents and other laws and regulations you may not be able to profit
from sale or merger of Port Financial Corp.

Provisions of our articles of organization and bylaws and applicable
provisions of Massachusetts and Federal law and regulations may delay, inhibit
or prevent an organization or person from gaining control of Port Financial
Corp. through a tender offer, business combination, proxy contest or some other
method even though some of our stockholders might believe a change in control is
desirable. See "Description of Capital Securities -" "-Special Charter and
Massachusetts Corporate Law Provisions" and "Regulation of Cambridgeport Bank
and Port Financial Corp."

A decrease in demand for mortgage, commercial and consumer loans may lower our
profitability.

Making loans is our primary business and primary source of profits. If
customer demand for loans decreases, our profits may decrease because our
alternative investments earn less revenue for us than real estate, commercial
and consumer loans. Customer demand for loans could be reduced by a weaker
economy, an increase in unemployment, a decrease in real estate values, an
increase in interest rates or increased competition from other institutions.

Because of our emphasis on commercial real estate lending, downturns in the real
estate market or economy will adversely impact our profits.

Loans secured by commercial real estate properties generally involve a
higher degree of risk than the residential mortgages. Because payments on loans
secured by commercial real estate properties are often dependent on the
successful operation or management of the properties, repayment of such loans
may be subject to a greater extent, to adverse conditions in the real estate
market or the economy. Commercial real estate loans may also involve relatively
large loan balances to single borrowers or groups of related borrowers. A
downturn in the real estate market or the economy could adversely impact the
value of properties secured by the loan as the future cash flow of the affected
properties. As of September 30, 1999, we had $200.4 million in commercial real
estate loans in our portfolio. Our emphasis on commercial real estate loans
could therefore adversely affect our profits.

13
<PAGE>

Our increased commercial business activities may adversely impact earnings and
asset quality.

Our future will depend on the success of our efforts to diversify our loan
portfolio through the expansion of commercial banking, the related development
of new products, and expansion of delivery systems. The success of our efforts
to increase commercial loan originations and successfully market commercial
products will depend on market conditions in our primary market area and will
require a significant investment in administrative infrastructure of our
business banking and personnel to staff the department. Commercial business
loans involve a higher degree of risk that loans will not be repaid than loans
secured by residential and commercial real estate because repayment is generally
dependent upon the successful operation of the borrower's business. As the
volume of commercial business loans in our loan portfolio increases, the
corresponding risks and potential for losses from these activities may also
increase.

Because our loans are concentrated in a small geographic area, downturns in the
economy or real estate market in our market area will adversely impact our
profits.

Our loan portfolio is secured primarily by real estate located in the
Massachusetts counties of Middlesex, Suffolk and Norfolk. Accordingly, the
asset quality of our loan portfolio depends upon the economy and unemployment
rate in this area. A downturn in the economy or the real estate market in our
primary lending area would likely adversely affect our operations and
profitability.

If we cannot successfully compete within our market area, we may lose customers,
which could reduce our profits.

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

Changing interest rates may adversely affect our profits.

To be profitable, we must earn more interest on loans and investments than
the interest we pay on deposits and borrowings. If interest rates rise, our net
interest income could be negatively affected if interest paid on interest-
bearing liabilities, such as deposits and borrowings, increases more quickly
than interest earned on interest-earning assets, such as loans and investment
securities. This would reduce our net income. In addition, rising interest
rates may hurt our income because they may reduce the demand for loans and the
value of our investment securities and make it more difficult for our borrowers
to repay their loans. If interest rates decline, however, our loans may be
refinanced at lower rates or paid and our investments may be prepaid earlier
than expected, which may also lower our income. Interest rates will continue to
fluctuate, and we cannot predict future Federal Reserve Board actions or other
factors that will cause rates to change.

14
<PAGE>

We have broad discretion in allocating the proceeds of the offering. Our
failure to effectively apply the proceeds of the offering could hurt our
profits.

We intend to contribute approximately $44.9 million of the $89.7 million
in net proceeds (assuming the sale of 9,200,000 shares in the offering) to
Cambridgeport Bank, which will use the proceeds to support increased lending,
opportunistic branch expansion, diversification of products, and the expansion
of delivery systems. In addition, Port Financial Corp. plans to use the
proceeds to invest in securities, to finance the possible acquisition of other
financial institutions or other businesses related to banking, to repurchase
common stock or to pay dividends and for other general corporate purposes. We
have not allocated specific amounts of proceeds for these purposes, and we will
have significant flexibility in determining the amounts of net proceeds we apply
to different uses and the timing of such applications. Our failure to apply
these funds effectively could hurt our profits.

The implementation of stock-based benefits will increase our future compensation
expense, reduce our earnings, and cause dilution.

We intend to adopt a stock option plan that will provide for granting to
our eligible officers, employees, and directors options to purchase common stock
of up to 10% of the common stock sold in the offering, to adopt a management
recognition plan that will provide for awards of common stock to eligible
employees, officers and directors of up to 4% of the common stock sold in the
offering, and an ESOP which intends to purchase in the offering up to 8% of the
stock sold, for allocation to employees as a retirement benefit. These plans
will increase our future costs of compensating our directors and employees,
thereby reducing our earnings. Additionally, stockholders will experience a
reduction in ownership interest in the event newly issued shares are used to
fund stock options and restricted stock awards.

Because banking reform legislation may increase competition, it may reduce our
earnings.

On November 12, 1999, President Clinton signed into law the Gramm-Leach-
Bliley Financial Services Modernization Act of 1999, federal legislation
intended to modernize the financial services industry by establishing a
comprehensive framework to permit affiliations among commercial banks, insurance
companies, securities firms and other financial service providers. As a result
of the legislation, bank holding companies will be permitted to engage in a
wider variety of financial activities than permitted under prior law,
particularly with respect to insurance and securities activities. In addition,
in a change from prior law, bank holding companies will be in a position to be
owned, controlled or acquired by any company engaged in financially-related
activities. However, to the extent that it permits banks, securities firms and
insurance companies to affiliate, the financial services industry may experience
further consolidation. Although we plan to diversify and expand the products
and services that we offer, this additional consolidation could result in a
growing number of larger financial institutions that offer a wider variety of
financial services than we are able to offer. This could adversely impact our
ability to retain and attract customers that prefer to obtain all of their
financial services from one provider. This would adversely impact our
profitability.

15
<PAGE>

Forward Looking Statements

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

16
<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

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

<TABLE>
<CAPTION>
At September 30, At December 31,
------------------ ---------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- --------- -------- --------- ---------
(unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Financial Data:
Total assets................................. $721,813 $686,460 $678,087 $619,368 $574,817 $508,558 $470,337
Loans, net(1)................................ 537,901 473,719 496,390 419,187 306,321 272,968 235,109
Investment securities available for sale(2).. 140,286 154,955 150,642 164,617 215,369 164,792 167,559
Investments securities held to maturity...... - - - - - - 22,517
Deposits..................................... 596,137 579,842 568,075 520,357 502,698 425,199 400,289
Federal Home Loan Bank advances.............. 41,431 24,824 27,066 21,604 720 11,720 7,045
Total retained earnings...................... 78,578 75,679 76,088 71,072 66,845 64,552 58,206
Allowance for possible loan losses........... 7,297 6,061 6,633 4,907 4,269 4,074 4,130
Non-performing assets........................ 507 850 963 789 903 1,471 1,763
</TABLE>

<TABLE>
<CAPTION>
For the Nine Months For the Years Ended
Ended September 30, December 31,
------------------- ---------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- --------- -------- ---------- -------- -------- ---------
(unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Operating Data:
Interest and dividend income.................. $37,097 $36,292 $48,656 $43,961 $37,741 $35,413 $27,249
Interest expense.............................. 18,944 19,358 25,880 23,554 21,038 18,733 12,562
------- ------- ------- ------- ------- ------- -------
Net interest income........................... 18,153 16,934 22,776 20,407 16,703 16,640 14,687
Provision for possible loan losses............ 562 1,183 1,760 600 450 100 -
------- ------- ------- ------- ------- ------- -------
Net interest and dividend income after
provision for loan losses.................... 17,591 15,751 21,016 19,807 16,253 16,540 14,687
Total non-interest income..................... 2,131 2,651 3,571 3,176 3,220 3,506 1,502
Total non-interest expenses................... 14,289 13,631 18,042 17,638 16,199 13,945 13,656
------- ------- ------- ------- ------- ------- -------
Income before provision for income
taxes........................................ 5,433 4,771 6,545 5,345 3,274 6,101 2,533
Provision for income taxes.................... 1,826 1,707 2,357 1,679 787 2,101 31
------- ------- ------- ------- ------- ------- -------
Net income.................................... $ 3,607 $ 3,064 $ 4,188 $ 3,666 $ 2,487 $ 4,000 $ 2,502
======= ======= ======= ======= ======= ======= =======
</TABLE>

___________

(1) Loans include loans held for sale and are shown net of deferred loan fees,
allowance for loan loss and unadvanced loan funds.
(2) Includes Federal Home Loan Bank of Boston stock and Savings Bank Life
Insurance stock.

17
<PAGE>

<TABLE>
<CAPTION>
At or for the
Nine Months Ended
September 30, At or for Years Ended December 31,
-------------------- ------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- -------- --------
(unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Financial Ratios and Other
Data(3)

Performance Ratios:
Return on average assets........... 0.69% 0.63% 0.63% 0.61% 0.46% 0.82% 0.59%
Return on average equity........... 6.45 5.85 5.93 5.50 3.89 6.62 4.31
Average equity to average assets... 10.65 10.73 10.71 11.14 11.81 12.32 13.11
Equity to total assets at end of
period............................ 10.89 11.02 11.22 11.47 11.63 12.69 12.38
Average interest rate spread....... 2.90 2.85 2.94 2.91 2.58 2.86 3.01
Net interest margin(4)............. 3.57 3.58 3.56 3.52 3.19 3.50 3.44
Average interest earning assets
to average interest bearing
liabilities....................... 115.18 115.26 115.32 115.04 115.03 111.24 112.26
Total noninterest expense to
average assets.................... 2.72 2.79 2.73 2.95 2.99 2.78 3.14
Efficiency ratio(5)................ 70.44 69.81 68.64 77.17 83.72 72.59 81.58

Regulatory Capital Ratios:
Regulatory tier 1 leverage capital. 10.76 10.65 10.66 11.04 11.38 12.42 12.86
Tier 1 risk-based capital.......... 18.37 18.36 18.74 19.24 21.32 20.93 21.26
Total risk-based capital........... 20.19 20.18 20.54 20.51 22.57 22.18 22.51

Asset Quality Ratios:
Non-performing loans as a percent
of total loans.................... 0.09 0.18 0.19 0.19 0.29 0.49 0.72
Non-performing assets as a percent
of total assets................... 0.07 0.03 0.14 0.13 0.16 0.29 0.37
Allowance for loan losses as a
percent of total loans............ 1.34 1.26 1.32 1.16 1.37 1.47 1.72
Allowance for loan losses as a
percent of non-performing
asssets........................... 1,439 713 689 622 473 277 234

Number of:
Full-service offices............... 10 10 10 9 8 6 5
Telebanking Center................. 1 1 1 1 - - -
Full-time equivalent employees..... 182 179 179 169 155 141 134
</TABLE>

________________

(3) Asset Quality Ratios and Regulatory Capital Ratios are end of period ratios.
Ratios for the period at or for the nine months ended September 30 are
annualized.
(4) Net interest margin represents net interest income as a percentage of
average interest earning assets.
(5) The efficiency ratio represents the ratio of operating expenses divided by
the sum of net interest income and non-interest income less gain on sales of
investments.

18
<PAGE>

RECENT DEVELOPMENTS

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

<TABLE>
<CAPTION>
At December 31, At December 31,
------------------ -----------------
1999 1998
------------------ -----------------
(In thousands)
<S> <C> <C>
Selected Financial Data:
Total assets ................................. $762,741 $678,087
Loans, net(1) ................................ 577,029 496,390
Investment securities available for sale(2) .. 138,032 150,642
Deposits ..................................... 621,319 568,075
Federal Home Loan Bank advances .............. 55,891 27,066
Total retained earnings ...................... 79,130 76,088
Allowance for possible loan losses ........... 7,081 6,633
Non-performing assets ........................ 128 963
</TABLE>

<TABLE>
<CAPTION>
For the Years Ended
December 31,
---------------------------------------
1999 1998
----------------- -------------------

Selected Operating Data:
<S> <C> <C>
Interest and dividend income ................. $49,971 $48,656
Interest expense ............................. 25,706 25,880
------- -------
Net interest income .......................... 24,265 22,776
Provision for possible loan losses ........... 740 1,760
------- -------
Net interest and dividend income after
provision for loan losses .................. 23,525 21,016
Total non-interest income .................... 3,059 3,571
Total non-interest expenses .................. 19,620 18,042
------- -------
Income before provision for income
taxes ...................................... 6,964 6,545
Provision for income taxes ................... 2,190 2,357
------- -------
Net income ................................... 4,774 4,188
======= =======
</TABLE>

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

19
<PAGE>

<TABLE>
<CAPTION>
At or for the Years Ended
December 31,
-------------------------------------------
1999 1998
--------------------- --------------------

Selected Financial Ratios and Other Data(3)
Performance Ratios:
<S> <C> <C>
Return on average assets ........................... 0.67% 0.63%
Return on average equity ........................... 6.34 5.93
Average equity to average assets ................... 10.56 10.71
Equity to total assets at end of period ............ 10.37 11.22
Average interest rate spread ....................... 2.98 2.94
Net interest margin(4) ............................. 3.53 3.56
Average interest earning assets to average
interest bearing liabilities ...................... 114.71 115.32
Total noninterest expense to average
assets ............................................ 2.76 2.73
Efficiency ratio(5) ................................ 71.81 68.64
Regulatory Capital Ratios:
Regulatory tier 1 leverage capital ................. 10.42 10.66
Tier 1 risk-based capital .......................... 17.51 18.74
Total risk-based capital ........................... 19.29 20.54
Asset Quality Ratios:
Non-performing loans as a percent
of total loans .................................... 0.02 0.19
Non-performing assets as a percent
of total assets ................................... 0.02 0.14
Allowance for loan losses as a percent
of total loans .................................... 1.21 1.32
Allowance for loan losses as a percent
of non-performing assets .......................... 5,532 689
Number of:
Full-service offices ............................... 10 20
Telebanking Center ................................. 1 1
Full-time equivalent employees ..................... 193 179
</TABLE>

________________

(3) Asset Quality Ratios and Regulatory Capital Ratios are end of period ratios.
Ratios for the period at or for the nine months ended December 31 are
annualized.
(4) Net interest margin represents net interest income as a percentage of
average interest earning assets.
(5) The efficiency ratio represents the ratio of operating expenses divided by
the sum of net interest income and non-interest income less gain on sales of
investments.

20
<PAGE>

COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1999 AND
DECEMBER 31, 1998

Our consolidated total assets increased $84.6 million, or 12.5%, to $762.7
million at December 31, 1999 from $678.1 million at December 31, 1998. This
increase was primarily the result of $81.0 million, or 16.2% growth, in loans.

Loan growth included $50.4 million in residential mortgage loans, $25.3
million in commercial real estate and construction loans, and $5.9 million in
home equity loans, offset by a $640,000 decline in consumer and other loans.
This loan activity reflects our strategy to build loan relationships with
property owners in our market area. It also reflects the strong local economic
conditions that prevailed in our region during 1999.

The growth in total assets during the period was primarily funded by:

. deposit growth;

. reduction in investment and mortgage-backed securities;

. additional Federal Home Loan Bank borrowings; and

. growth in retained earnings.

Total cash and investments decreased $4.0 million, 2.4%, to $162.6 million.
This reduction is part of our strategy to shift assets from securities into
higher yielding loan assets.

Deposits rose $53.2 million, or 9.4%, to $621.3 million at December 31,
1999 compared with $568.1 million at December 31, 1998. Money market accounts
and certificates of deposit represented $48.5 million, or 91.2%, of the growth
in total deposits and totaled $490.7 million at December 31, 1999. Certificates
of deposit increased $18.4 million, or 5.9%, to $328.4 million at December 31,
1999 from $310.0 million at December 31, 1998. Money market account balances
grew $30.1 million, 22.8%, to $162.3 million at December 31, 1999. The growth
in money market deposits reflects the continued success of our Treasury Index
Account.

Federal Home Loan Bank borrowings at December 31, 1999 were $28.8 million
above the level at December 31, 1998. In June 1999, we borrowed $14.5 million
from the Federal Home Loan Bank in order to fund the construction and
acquisition of a new building. See "Properties" below. The remaining growth in
Federal Home Loan Bank borrowings was to fund loan growth.

Total equity increased $3.0 million, or 3.9%, to $79.1 million at December
31, 1999 from $76.1 million at December 31, 1998. $4.8 million in net income
was partially offset by a decline of $1.7 million in the unrealized gain on
available for sale securities net of related taxes.

21
<PAGE>

COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1999 AND
DECEMBER 31, 1998

General

Net income was $4.8 million for year ended December 31, 1999, an increase
of $586,000, or 14.0%, compared with net income of $4.2 million for 1998. The
increase in net income was attributable to a $1.5 million increase in net
interest income and a $1.0 million decrease in the provision for loan losses.
These were partially offset by a $512,000 decline in total non-interest income,
an increase of $1.6 million in total non-interest expense and a $ 167,000
decrease in income tax expense.

Interest Income

Total interest and dividend income increased $1.3 million, or 2.7%, to
$50.0 million for 1999 compared with $48.7 million in 1998. Interest on loans
rose $3.0 million, or 8%, to $40.4 million in 1999, from $37.4 million in 1998.
This was primarily the result of the loan growth discussed above. Average loans
outstanding during 1999 were $533.7 million compared with average loans
outstanding of $462.6 million in 1998.

Interest and dividends on investment securities and deposits held at other
banks decreased $1.7 million to $9.6 million in 1999 from $11.3 million in 1998.
Interest bearing investment securities balances averaged $156.3 million in 1999
and $181.2 million in 1998, which is the primary reason for the decline in
interest income in this area.

Interest Expense

Total interest expense for 1999 was $25.7 million, $174,000, or .7%, below
1998, despite a higher average balance of interest-bearing liabilities in 1999
of $600.0 million compared with $554.9 the year before. This growth in
interest bearing liabilities was offset by a 38 basis point decrease in their
average cost, to 4.28% in 1999 from 4.66% for 1998. This decrease reflects the
lower interest rate environment that prevailed during 1999 compared to the 1998
period.

Interest expense on deposits declined by $898,000, or 3.7%, to $23.4
million in 1999 compared with $24.3 million for the year before. The average
balance of deposits rose to $589.1 million in 1999, from $555.7, but their
average cost declined from 4.38% in 1998 to 3.98% in 1999.

Interest expense on borrowed funds increased $724,000 as a result of an
$15.2 million rise in the average balance of borrowings used to fund the
building of new facilities and to fund loan growth.

22
<PAGE>

Provision for Possible Loan Losses

In 1999 we provided $740,000 for possible loan losses, compared to $1.8
million in 1998. The 1998 provision reflected not only the strong loan growth
during that period, but also the higher number of large balance commercial real
estate loans we booked during 1998 relative to prior periods. At the end of
1999 and 1998, the allowance for loan losses was $7.1 million and $6.6 million,
or 1.21% and 1.32% of total loans outstanding.

Future provisions for loan losses will continue to be based upon our
assessment of the overall loan portfolio and its underlying collateral, the mix
of loans within the portfolio, delinquency trends, economic conditions, current
and prospective trends in real estate values, and other relevant factors. As we
expand our commercial business lending, additional increases to the provision
for possible loan losses are likely.

Non-interest Income

Non-interest income includes service fees and charges for bank services,
gains or losses from asset sales, and other income resulting from miscellaneous
transactions. Total non-interest income $3.1 million for 1999 compared with
$3.6 million for the prior year. The 1998 figures includes gains on fixed-rate
loan sales of $1.1 million. In 1999, as mortgage interest rates increased,
fixed-rate loan applications declined, and loan sale gains declined to $599,000.
We expect that the new administrative center building, described above, will be
approximately 60% occupied by us, and 40% by companies that enter into long term
lease agreements with us. In future periods we expect to receive non-interest
income from these tenants.

Non-interest Expense

Total non-interest expense in 1999 increased $1.6 million, or 8.9%, to
$19.6 million compared with $18.0 million for the prior year. The 1999 figure
includes a one-time charge of $578,000, reflecting a curtailment loss on a
restructured executive non-qualified retirement plan. Salaries and employee
benefits increased 7.2%, or $682,000 compared with 1998. This was attributable
to: increased staffing levels in the areas of wealth management and business
banking, periodic salary adjustments for existing staff, and increased personnel
benefit costs.

Advertising expense increased $233,000, or 25.8%, over the 1998 level,
primarily related to promotions of our home equity loan products and our
Treasury Index money market account. Professional services expense was $695,000
in 1999, an increase of $155,000 over 1998. This included $125,000 of fees paid
in connection with leasing activity at our new building.

Other non-interest expense of $3.0 million in 1999 included $193,224 of
expenses related to the Y2K date change project. Y2K expenses in 1998 totaled
$50,767.

Income Taxes

Income tax expense was $2.2 million for 1999 compared to $2.4 million in
1998, resulting in effective tax rates of 31.5% and 36.0% for the respective
periods. The lower effective tax rate in 1999 is primarily the result of
increased utilization of qualified securities investment companies and non-
taxable increases in cash surrender values of life insurance policies.

23
<PAGE>

CAMBRIDGEPORT BANK

Cambridgeport Bank is a Massachusetts-chartered stock savings bank,
chartered in 1853. We are headquartered in Cambridge, Massachusetts, a suburb of
Boston. Our deposits are insured by the FDIC up to applicable legal limits and
by the Depositors Insurance Fund in excess of such amounts. We are examined and
regulated by the Division of Banks of the Commonwealth of Massachusetts and the
FDIC. Our executive offices are located at 689 Massachusetts Avenue, Cambridge,
Massachusetts 02139 and our telephone number is (617) 661-4900.

We are a community-oriented bank providing retail and business customers
with value driven products and services to meet customer needs. We provide a
wide variety of deposit products, residential mortgage loans, commercial real
estate loans, commercial loans and consumer loans to our customers in the cities
and towns around Cambridge, Massachusetts. Over the past five years, we have
more than doubled our branch network from four full service bank offices to ten
full service bank offices and one Telebanking Center. We have strategically
located our branch offices in cities and towns with a strong base for real
estate lending and deposit growth and where community bank competition has been
reduced by a consolidating banking industry. Our branch expansion has increased
our customer base and allowed us to increase our profitability by shifting our
mix of assets more towards higher yielding loans relative to investment
securities. As of September 30, 1999, approximately 75.6% of our total assets
were invested in loans. These loans are funded primarily by core deposits with
little reliance on borrowings. Our total deposits amounted to $596.1 million at
September 30, 1999 while borrowings totaled $41.4 million on that date.

Our branch expansion and broadened customer base has also enabled us to
diversify our loan portfolio without sacrificing asset quality or capital
strength. As of September 30, 1999, 36.7% of our loan portfolio consisted of
commercial real estate loans and 10.9% consisted of home equity lines of credit.
Non-performing assets were 0.07% of total assets while our tier 1 leverage
capital ratio was 10.76% on that date. For further information on our
operations and financial condition, see "Business of Cambridgeport Bank."

PORT FINANCIAL CORP.

Port Financial Corp. will be a Massachusetts-chartered stock holding
company. Port Financial Corp. has not engaged in any business to date and will
serve as a holding company of Cambridgeport Bank following the conversion. Port
Financial Corp. will be a registered bank holding company with the Federal
Reserve Board. Port Financial Corp.'s executive offices are located at 689
Massachusetts Avenue, Cambridge, Massachusetts and its telephone number is (617)
661-4900.

24
<PAGE>

HOW WE INTEND TO USE THE PROCEEDS FROM THE OFFERING

The net proceeds will depend on the total number of shares of common stock
sold in the offering, which in turn will depend on RP Financial's appraisal,
regulatory and market considerations, and the expenses incurred in connection
with the offering. Although we will not be able to determine the actual net
proceeds from the sale of the common stock until we complete the offering, we
estimate the net proceeds to be between $65.7 million and $89.7 million $103.5
million if the offering is increased 15%.

Port Financial Corp. intends to distribute the net proceeds from the
offering as follows:

<TABLE>
<CAPTION>
Number of Shares Sold
---------------------------------------
Minimum Maximum Super-Maximum
6,800,000 9,200,000 10,580,000
---------------------------------------
(In thousands)
<S> <C> <C> <C>
Offering proceeds.............................. $ 68,000 $ 92,000 $ 105,800
Less: offering expenses........................ 2,268 2,268 2,268
Net offering proceeds.......................... 65,732 89,732 103,532
Less:
Proceeds contributed to Cambridgeport Bank.. 32,866 44,866 51,766
Proceeds used for loan to ESOP.............. 5,440 7,360 8,464
Proceeds contributed to Port Financial Corp.... 27,426 37,506 43,302
</TABLE>

The net proceeds may vary because total expenses relating to the conversion
may be more or less than our estimates. For example, our expenses would
increase if a syndicated community offering is used to sell shares not purchased
in the subscription offering and community offering. The net proceeds will also
vary if the number of shares to be sold in the offering are adjusted to reflect
a change in the estimated pro forma market value of Port Financial Corp. and
Cambridgeport Bank or if our ESOP purchases shares in the open market at an
average cost that is higher or lower than $10 per share. Payments for shares
made through withdrawals from existing deposit accounts will not result in the
receipt of new funds for investment by Cambridgeport Bank but will result in a
reduction of Cambridgeport Bank's deposits and interest expense as funds are
transferred from interest bearing certificates of deposit or other deposit
accounts.

Port Financial Corp. may use the proceeds it retains from the offering:

. to finance possible acquisitions of financial institutions or other
businesses related to banking;

. to pay dividends to stockholders;

. to repurchase shares of common stock issued in the conversion;

. to invest in securities; and

. for general corporate purposes.

25
<PAGE>

Cambridgeport Bank may use the proceeds it receives from the offering:

. to fund new loans;

. to establish or acquire new branches;

. to diversify products that we offer;

. to increase delivery systems, including the introduction of internet
banking;

. to invest in securities; and

. for general corporate purposes.

Our ability to repurchase our common stock may be subject to regulatory
restrictions. See "Management-Future Stock Benefit Plans."

OUR POLICY REGARDING DIVIDENDS

Although no decision has been made yet regarding the payment of dividends,
we will consider a policy of paying quarterly cash dividends on the common stock
of Port Financial Corp., beginning in the first full fiscal quarter after
completion of the conversion. The payment of dividends will be subject to the
determination of our Board of Directors and will depend upon our debt and equity
structure, earnings and financial condition, need for capital in connection with
possible future acquisitions and other factors, including economic conditions,
regulatory restrictions and tax considerations. We cannot guarantee that we
will pay dividends to the amount and frequency of dividends, if declared.

The only funds available for the payment of dividends on the capital stock
of Port Financial Corp. will be cash and cash equivalents held by Port Financial
Corp., dividends paid by Cambridgeport Bank to Port Financial Corp., and
borrowings. Cambridgeport Bank will be prohibited from paying cash dividends to
Port Financial Corp. to the extent that any such payment would reduce
Cambridgeport Bank's capital below required capital levels or would impair the
liquidation account to be established for the benefit of the Cambridgeport
Bank's eligible account holders and supplemental eligible account holders at the
time of the conversion. See "The Conversion and The Offering - Effects of the
Conversion - Depositors' Rights If We Liquidate; Liquidation Account."

If Port Financial Corp. issues preferred stock, the holders of the
preferred stock may have dividend preferences over the holders of common stock.

FDIC regulations limit Cambridgeport Bank's ability to pay dividends under
certain circumstances. For example, Cambridgeport Bank could not pay dividends
if it was not in compliance with applicable regulatory capital requirements. In
addition, Massachusetts law provides that dividends may not be declared,
credited or paid by Cambridgeport Bank so long as there is any impairment of
capital stock. No dividend may be declared on Cambridgeport Bank's common stock
for any period other than for which dividends are declared upon preferred stock,
except as authorized by the Commissioner. The approval of the Commissioner is
also required for Cambridgeport Bank to declare a dividend, if the total of all
dividends declared by it in any calendar year shall exceed

26
<PAGE>

the total of its net profits for that year combined with its retained net
profits of the preceding two years, less any required transfer to surplus or a
fund for the retirement of any preferred stock.

MARKET FOR THE COMMON STOCK

We have not previously issued common stock, so there is currently no
established market for the common stock. We have applied to have our common
stock quoted on the Nasdaq National Market under the symbol "PORT" after
completion of the offering. Ryan, Beck & Co. has advised us that it intends to
make a market in the common stock following the conversion, but is under no
obligation to do so. We will encourage and assist additional market makers to
make a market in our common stock.

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

27
<PAGE>

REGULATORY CAPITAL COMPLIANCE

At September 30, 1999, we exceeded all regulatory capital requirements.
Set forth below is a summary of our capital computed under generally accepted
accounting principles ("GAAP") and our compliance with regulatory capital
standards at September 30, 1999, on a historical and pro forma basis. We have
assumed that the indicated number of shares were sold as of September 30, 1999
and that Cambridgeport Bank received 50% of the net proceeds from the offering.
For purposes of the table below, the amount expected to be loaned to the
employee stock ownership plan and the cost of the shares expected to be acquired
by the management recognition plan are deducted from pro forma regulatory
capital. For a discussion of the capital requirements applicable to
Cambridgeport Bank, see "Regulation of Cambridgeport Bank and Port Financial
Corp. - Federal Banking Regulation - Capital Requirements."

<TABLE>
<CAPTION>
Pro Forma at September 30, 1999 Based Upon the Sale at $10.00 Per Share
-------------------------------------------------------------------------------------------------
6,800,00 Shares 8,000,000 Shares 9,200,000 Shares
Historical at Minimum of Midpoint of (Maximum of
September 30, 1999 Range) Range) Range)
-------------------- -------------------- --------------------- -----------------------
Percent Percent Percent Percent
of of of of
Amount Assets(2) Amount Assets(2) Amount Assets(2) Amount Assets(2)
------ --------- ------- -------- ------ --------- ------ ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital and Retained Earnings
under Generally Accepted
Accounting Principles........ $78,578 10.89% $103,284 13.74% $107,844 14.24% $112,404 14.73%
======= ======== ======== ========= ======== ===== ======== =========

Tier 1 Leverage Capital(3).... 76,038 10.76 100,744 13.67 105,304 14.19 109,864 14.69
Requirement(4)................ 28,266 4.00 29,472 4.00 29,693 4.00 29,913 4.00
------- -------- ------- ----- -------- ----- -------- ---------
Excess........................ 47,772 6.76 71,272 9.67 75,611 10.19 79,951 10.69
======= ======== ======= ===== ======== ===== ======== =========

Tier 1 Risk-Based
Capital(3)(5)................ 76,038 18.37 100,744 23.99 105,304 25.01 109,864 26.03
Requirement................... 16,555 4.00 16,796 4.00 16,840 4.00 16,884 4.00
------- ------- ------- ----- -------- ----- -------- ---------
Excess........................ 59,483 14.37 83,948 19.99 88,464 21.01 92,980 22.03
======= ======= ======= ===== ======== ===== ======== =========

Total Risk-Based
Capital(3)(4)................ 83,547 20.19 108,253 25.78 112,813 26.80 117,373 27.81
Requirement(4)................ 33,110 8.00 33,592 8.00 33,680 8.00 33,769 8.00
------- ------- ------- ----- -------- ----- -------- ---------
Excess........................ $50,437 $ 12.19% 74,661 17.78% $ 79,133 18.80% $ 83,604 19.81%
======= ======= ======= ===== ======== ===== ======== =========

<CAPTION>
10,580,000 Shares
(15% Above Maximum
of Range) (1)
--------------------
Percent
of
Amount Assets(2)
-------- ---------
<S> <C> <C>
Capital and Retained Earnings
under Generally Accepted
Accounting Principles........ $117,648 15.29%
======== =====

Tier 1 Leverage Capital(3).... 115,108 15.26
Requirement(4)................ 30,167 4.00
-------- -----
Excess........................ 84,941 11.26
======== =====

Tier 1 Risk-Based............. 115,108 28.19
Capital(3)(5)
Requirement................... 16,935 4.00
-------- -----
Excess........................ 98,173 23.19
======== =====

Total Risk-Based
Capital(3)(4)................ 122,617 28.96
Requirement(4)................ 33,870 8.00
------- -----
Excess........................ $ 88,747 20.96%
======== =====
</TABLE>

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

(1) As adjusted to give effect to an increase in the number of share which
could occur due to an increase in the estimated price range of up to
15% as a result of changes in market conditions or general financial and
economic conditions following the commencement of the offering.
(2) Leverage capital levels are shown as a percentage of "total loss," and
risk-based capital levels are calculated on the basis of a percentage of
"risk-weighted assets," each as defined in the FDIC regulations.
(3) Pro forma capital levels assume receipt by Cambridgeport Bank of 50% of
the net proceeds from the shares of common stock sold at minimum midpoint
and maximum of the offerings range. These levels assume funding by Port
Financial Corp. of the management recognition plan equal to 4% of common
stock issued, including repayment of Port Financial Corp. loan to the
employee stock ownership plan to enable the plan to purchase 8% of the
common stock.
(4) The current leverage capital requirement for savings banks is 3% of total
adjusted assets for savings banks that receive the highest supervisory
ratings for safety and soundness and that are not experiencing or
anticipating significant growth. The current leverage capital ratio
applicable to all other savings banks is 4%.
(5) Assumes net proceeds are invested in assets that carry a 20%
risk-weighting.

28
<PAGE>

CAPITALIZATION

The following table presents the historical deposits and consolidated
capitalization of Cambridgeport Mutual Holding Company at September 30, 1999,
and the pro forma capitalization of Port Financial Corp. after giving effect to
the conversion, based upon the sale of the number of shares shown below and the
other assumptions set forth under "Pro Forma Data." A change in the number of
shares to be sold in the offering may affect materially the capitalization.

Pro Forma Based Upon Sale at $10.00 Per Share
----------------------------------------------------------------------------
10,580,000 Shares
Historical 6,800,000 Shares 8,000,000 Shares 9,200,000 Shares (15% Above
as of (Minimum (Midpoint (Maximum Maximum of
September 30, 1999 of Range) of Range) of Range) Range) (1)
------------------ ---------------- ---------------- --------------- -----------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits(2)....................... $596,137 $596,137 $596,137 $596,137 $596,137
Borrowings........................ 41,431 41,431 41,431 41,431 41,431
-------- -------- -------- -------- --------
Total deposits and borrowed
funds............................ 637,568 637,568 637,568 637,568 637,568
======== ======== ======== ======== ========
Stockholders' equity:
Common stock, $0.01 par
value, 30,000,000
shares authorized; shares to
be issued as reflected(3).... - 68 80 92 106
Preferred stock, $.01 par
value, 5,000,000
shares authorized; no shares
to be issued................. - - - - -
Additional paid-in capital)(3)... - 65,644 77,652 89,640 103,426
Retained earnings(4)............. 76,054 76,054 76,054 76,054 76,054
Accumulated other
comprehensive income (5)..... 2,524 2,524 2,524 2,524 2,524
Less:
Common stock acquired by
ESOP(6)...................... - (5,440) (6,400) (7,360) (8,464)
Common stock acquired by
management
recognition plan(7).......... - (2,720) (3,200) (3,680) (4,232)
-------- -------- -------- -------- --------
Total stockholders' equity........ $ 78,578 $136,150 $146,710 $157,270 $169,414
======== ======== ======== ======== ========

</TABLE>
___________________

(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the offering of up to 15% as a result of
regulatory considerations or changes in market or general financial and
economic conditions following the commencement of the offering.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
common stock in the offering. Such withdrawals would reduce pro forma
deposits by the amount of such withdrawals.
(3) Reflects the issuance of shares sold in the offering at a value of $10.00
per share. No effect has been given to the issuance of additional shares of
common stock pursuant to Port Financial Corp.'s proposed stock option plan
intended to be adopted by Port Financial Corp. and presented for approval of
stockholders at a meeting of the stockholders to be held at least six months
following completion of the offering.
(4) The retained earnings of Cambridgeport Bank will be substantially restricted
after the offering.
(5) Represents the unrealized gain on securities classified as available-for-
sale, net of related taxes.
(6) Assumes that 8% of the shares issued in connection with the offering will be
purchased by the employee stock ownership plan at an average cost of $10 per
share and that the funds used to acquire such shares will be borrowed from
Port Financial Corp. The common stock acquired by the employee stock
ownership plan is reflected as a reduction of stockholders' equity.
(7) Assumes that, subsequent to the offering, an amount equal to 4% of the
shares of common stock issued in the offering is purchased by a management
recognition plan through open market purchases. The proposed management
recognition plan is intended to be adopted by Port Financial Corp. and
presented for approval of stockholders at a meeting of stockholders to be
held at least six months following completion of the offering. The common
stock purchased by the management recognition plan is reflected as a
reduction of stockholders' equity.

29
<PAGE>

PRO FORMA DATA

We can not determine the actual net proceeds from the sale of the common
stock until the offering is completed. However, we estimate that net proceeds
will be between $65.7 million and $89.7 million, or $103.5 million if the
offering range is increased by 15%, based upon the following assumptions:

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

. we will pay Ryan, Beck & Co. fees and expenses of approximately
$1,055,000; and

. total expenses, excluding fees and expenses paid to Ryan, Beck & Co.
will be approximately $1,213,000.

We calculated the pro forma consolidated net income and stockholders'
equity of Port Financial Corp. for the nine months ended September 30, 1999 and
the year ended December 31, 1998, as if the common stock had been sold at the
beginning of the year and the net proceeds had been invested at 5.18% and 4.52%,
respectively. We chose these yields because they represent the yield on one-
year U.S. Government securities at the corresponding period. In light of
changes in interest rates in recent periods, we believe this rate more
accurately reflects pro forma reinvestment rates than the arithmetic average
method which assumes reinvestment of the net proceeds at a rate equal to the
average of yield on interest earning assets and cost of deposits for these
periods. We assumed a tax rate of 36.0% for both periods. This results in an
annualized after-tax yield of 3.32% for the nine months ended September 30, 1999
and 2.89% for the year ended December 31, 1998.

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

The following tables give effect to the restricted stock program or
"management recognition plan", which we expect to adopt following the conversion
and present to stockholders for approval at an annual or special meeting of
stockholders to be held at least six months following the completion of the
conversion. If the management recognition plan is approved by stockholders, the
management recognition plan will acquire an amount of common stock equal to 4%
of the shares of common stock sold in the offering, either through open market
purchases or from authorized but unissued shares of common stock. In preparing
the following tables we assumed that stockholder approval has been obtained and
that the shares acquired by the management recognition plan are purchased in the
open market $10.00 per share.

30
<PAGE>

The following tables do not give effect to:

. the shares to be reserved for issuance under the stock option plan,
which requires stockholder approval at a meeting following the
conversion;

. withdrawals from deposit accounts to purchase common stock in the
conversion;

. Port Financial Corp.'s results of operations after the conversion; or

. changes in the market price of the common stock after the conversion.

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

31
<PAGE>

At or for the Nine Months Ended September 30, 1999
-----------------------------------------------------
Maximum
Minimum Midpoint Maximum As Adjusted
6,800,000 8,000,000 9,200,000 10,580,000
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share(1)
--------- --------- ----------- ------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds..................................... $ 68,000 $ 80,000 $ 92,000 $ 105,800
Less expenses....................................... 2,268 2,268 2,268 2,268
Estimated net proceeds.............................. 65,732 77,732 89,732 103,532
Less: Common stock purchased by ESOP(2)............. (5,440) (6,400) (7,360) (8,464)
Less: Common stock purchased by MRP(3).............. (2,720) (3,200) (3,680) (4,232)
---------- ---------- ----------- -----------
Estimated net proceeds, as adjusted.............. $ 57,572 $ 68,132 $ 78,692 $ 90,836
========== ========== =========== ===========

For the 9 months ended September 30, 1999:
- -----------------------------------------
Consolidated net income:
Historical $ 3,607 $ 3,607 $ 3,607 $ 3,607
Pro forma income on net proceeds................... 1,431 1,694 1,957 2,259
Pro forma ESOP adjustment(2)....................... (87) (102) (118) (135)
Pro forma MRP adjustment(3)........................ (261) (307) (353) (406)
---------- ---------- ----------- -----------
Pro forma net income............................ $ 4,690 $ 4,892 $ 5,093 $ 5,325
========== ========== =========== ===========
Per share net income (reflects SOP 93-6):
Historical......................................... $ 0.60 $ 0.51 $ 0.44 $ 0.39
Pro forma income on net proceeds................... 0.24 0.24 0.24 0.24
Pro forma ESOP adjustment(2)(4).................... (0.01) (0.01) (0.01) (0.01)
Pro forma MRP adjustment(3)........................ (0.04) (0.04) (0.04) (0.04)
---------- ---------- ----------- -----------
Pro forma net income per share.................. $ 0.79 $ 0.70 $ 0.63 $ 0.58
========== ========== =========== ===========
Offering price as a ratio of pro forma net
annualized income per share........................ 9.49x 10.71x 11.90x 12.93x

At September 30, 1999
- ---------------------
Stockholders' equity:
Historical......................................... $ 78,578 $ 78,578 $ 78,578 $ 78,578
Estimated net proceeds............................. 65,732 77,732 89,732 103,532
Less: Common Stock acquired by ESOP(2)............. (54,440) (6,400) (7,360) (8,464)
Less: Common Stock acquired by MRP(3).............. (2,720) (3,200) (3,680) (4,232)
---------- ---------- ----------- -----------
Pro forma stockholders' equity $ 136,150 $ 146,710 $ 157,270 $ 169,414
========== ========== =========== ===========

Stockholders' equity per share(5):
Historical........................................ $ 11.56 $ 9.82 $ 8.54 $ 7.43
Estimated net proceeds............................ 9.67 9.76 9.75 9.82
Less: Common Stock acquired by ESOP(2)............ (0.80) (0.80) (0.80) (0.80)
Less: Common stock acquired by MRP(3)............. (0.40) (0.40) (0.40) (0.40)
---------- ---------- ----------- -----------
Pro forma stockholders' equity per share....... $ 20.03 $ 18.34 $ 17.09 $ 16.02
========== ========== =========== ===========
Offering price as a percentage of pro forma
stockholders' equity per share.................... 49.93% 54.53% 58.51% 62.42%
========== ========== =========== ===========
</TABLE>

32
<PAGE>

________________

(1) We reserve the right to issue up to a total of 10,580,000 shares at $10.00
per share, or 15% above the maximum of the offering range. Unless otherwise
required by the regulators, subscribers will not be given the right to
modify their subscriptions unless the aggregate purchase price of the common
stock is increased to exceed $105.8 million (i.e., 15% above the maximum of
the offering range.)

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

(3) Assumes a number of issued and outstanding shares of common stock equal to
4% of the common stock to be sold in the offering will be purchased by the
management recognition plan. Before the management recognition plan is
implemented, it must be approved by the stockholders. The dollar amount of
the common stock possibly to be purchased by the management recognition plan
is based on $10.00 per share and represents unearned compensation and is
reflected as a reduction of capital. Such amount does not reflect possible
increases or decreases in the price per share after the offering. As we
accrue compensation expenses to reflect the vesting of such shares over 5
years pursuant to the management recognition plan, the charge against
capital will be reduced accordingly. In the event the shares issued under
the management recognition plan consist of newly issued shares of common
stock at the price per share in the offering, the per share financial
condition and result of operations of Port Financial Corp. would be
proportionately reduced and to the extent the interest of existing
stockholders would be diluted by approximately 3.85%. For purposes of the
preceding table, it was assumed that the number of unvested management
recognition plan shares at September 30, 1999 was 272,000, 320,000, 368,000
and 423,200 for the minimum, midpoint, maximum, and 15% above the maximum of
the offering range, respectively.

(4) Cambridgeport Bank intends to record compensation expense related to the
employee stock option plan in accordance with SOP 93-6. As a result, to the
extent the value of the common stock appreciates over time, compensation
expense related to the employee stock ownership plan will increase. SOP 93-
6 also changes the earnings per share computations for leveraged employee
stock ownership plans to include as outstanding only shares that have been
committed to be released to participants. For purposes of the preceding
table, it was assumed that the number of employee stock ownership plan
shares were committed to be released at September 30, 1999 was 13,600,
16,000, 18,400 and 21,160 for the minimum, midpoint, maximum and 15% above
the maximum of the offering range, respectively.

(5) Stockholders' equity per share data is based upon 6,800,000, 8,000,000,
9,200,000 and 10,580,000 shares outstanding representing shares sold in the
offering, and shares purchased by the ESOP and management recognition plan.

33
<PAGE>

At or for the Year Ended December 31, 1998
-----------------------------------------------------
Maximum as
Minimum Midpoint Maximum Adjusted
6,800,000 8,000,000 9,200,000 10,580,000
Shares Shares Shares Shares
at $10.00 at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share Per Share(1)
------------ ---------- ---------- --------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross proceeds................................... $ 68,000 $ 80,000 $ 92,000 $ 105,800
Less expenses.................................... 2,268 2,268 2,268 2,268
Estimated net proceeds.......................... 65,732 77,732 89,732 103,532
Less: Common stock purchased by ESOP(2)......... (5,440) (6,400) (7,360) (8,464)
Less: Common stock purchased by MRP(3).......... (2,720) (3,200) (3,680) (4,232)
---------- ---------- ----------- -----------
Estimated net proceeds, as adjusted........... $ 57,572 $ 68,132 $ 78,692 $ 90,836
========== ========== =========== ===========

For the 12 months ended December 31, 1998
- -----------------------------------------
Historical...................................... $ 4,188 $ 4,188 $ 4,188 $ 4,188
Pro forma income on net proceeds................ 1,665 1,971 2,276 2,628
Pro forma ESOP adjustment(2).................... (116) (137) (157) (181)
Pro forma MRP adjustment(3)..................... (348) (410) (471) (542)
---------- ---------- ----------- -----------
Pro forma net income.......................... $ 5,389 $ 5,612 $ 5,836 $ 6,093
========== ========== =========== ===========
Per share net income (reflects SOP 93-6)
Historical...................................... $ 0.70 $ 0.59 $ 0.52 $ 0.45
Pro forma income on net proceeds................ 0.28 0.28 0.28 0.28
Pro forma ESOP adjustment(2)(4)................. (0.02) (0.02) (0.02) (0.02)
Pro forma MRP adjustment(3)..................... (0.06) (0.06) (0.06) (0.06)
---------- ---------- ----------- -----------
Pro forma net income per share................ $ 0.90 $ 0.79 $ 0.72 $ 0.65
========== ========== =========== ===========
Offering price as a ratio of pro forma net
income per share.............................. 11.11x 12.66x 13.89x 15.38x

At December 31, 1998
- --------------------
Stockholders' equity:
Historical...................................... $ 76,088 $ 76,088 $ 76,088 $ 76,088
Estimated net proceeds.......................... 65,732 77,732 89,732 103,532
Less: Common stock acquired by ESOP(2)........ (5,440) (6,400) (7,360) (8,464)
Less: Common stock acquired by MRP(3)......... (2,720) (3,200) (3,680) (4,232)
---------- ---------- ----------- -----------
Pro forma stockholders' equity................ $ 133,660 $ 144,220 $ 154,780 $ 166,924
========== ========== =========== ===========
Stockholders' equity per share (5):
Historical...................................... $ 11.19 $ 9.51 $ 8.27 $ 7.19
Estimated net proceeds........................... 9.67 9.76 9.75 9.82
Less: Common stock acquired by ESOP(2)........ (0.80) (0.80) (0.80) (0.80)
Less: Common stock acquired by MRP(3)......... (0.40) (0.40) (0.40) (0.40)
---------- ---------- ----------- -----------
Pro forma stockholders' equity per share...... $ 19.66 $ 18.03 $ 16.82 $ 15.78
========== ========== =========== ===========
Offering price as a percentage of pro forma...... 50.86% 55.46% 59.45% 63.37%
stockholders' equity per share.................. ========== ========== =========== ===========

</TABLE>

34
<PAGE>

__________________

(1) We reserve the right to issue up to a total of 10,580,500 shares at $10.00
per share, or 15% above the maximum of the Independent Valuation. Unless
otherwise required by the regulators, subscribers will not be given the
right to modify their subscriptions unless the aggregate purchase price of
the common stock is increased to exceed $105.8 million (15% above the
maximum of the Independent Valuation.)

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

(3) Assumes a number of issued and outstanding shares of common stock equal to
4% of the common stock to be sold in the offering will be purchased by the
management recognition plan. Before the management recognition plan is
implemented, it must be approved by the stockholders. The dollar amount of
the common stock possibly to be purchased by the management recognition plan
is based on $10.00 per share and represents unearned compensation and is
reflected as a reduction of capital. Such amount does not reflect possible
increases or decreases in the price per share after the offering. As we
accrue compensation expenses to reflect the vesting of such shares over 5
years pursuant to the management recognition plan, the charge against
capital will be reduced accordingly. In the event the shares issued under
the management recognition plan consist of newly issued shares of common
stock at the price per share in the offering, the per share financial
condition and result of operations of Port Financial Corp. would be
proportionately reduced and to the extent the interest of existing
stockholders would be diluted by approximately 3.85%. For purposes of the
preceding table, it was assumed that the number of unvested management
recognition plan shares at December 31, 1998 was 272,000, 320,000, 368,000
and 423,200 for the minimum, midpoint, maximum and 15% above the maximum of
the offering range, respectively.

(4) Cambridgeport Bank intends to record compensation expense related to the
employee stock ownership plan in accordance with SOP 93-6. As a result, to
the extent the value of the common stock appreciates over time, compensation
expense related to the employee stock ownership plan will increase. SOP 93-6
also changes the earnings per share computations for leveraged employee
stock ownership plans to include as outstanding only shares that have been
committed to be released to participants. For purposes of the preceding
table, it was assumed that the number of employee stock ownership plan
shares were committed to be released at December 31, 1998 was 18,133,
21,333, 24,533 and 28,213 for the minimum, midpoint, maximum and 15% above
the maximum of the offering range, respectively.

35
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS

The Consolidated Statements of Operations of Cambridgeport Mutual Holding
Company for the years ended December 31, 1998, 1997 and 1996 have been audited
by Arthur Andersen LLP, independent public accountants and are included in this
prospectus, along with their Auditors' Report on page F-2. The following
consolidated statements of operations have been extracted from the audited
consolidated statements of operations and should be read in conjunction with the
Consolidated Financial Statements and accompanying Notes to Consolidated
Financial Statements in this prospectus and "Management's Discussion and
Analysis of the Financial Condition and Results of Operations" beginning on page
32 of this prospectus. The consolidated statements of operations for the nine
month periods ended September 30, 1999 and 1998 are unaudited, but in the
opinion of management, reflect all adjustments necessary for a fair presentation
of the results for such periods. The results for the nine month period ended
September 30, 1999 are not necessarily indicative of the results of
Cambridgeport Mutual Holding Company for the entire year.

<TABLE>
<CAPTION>
For the Nine Months For the Year Ended
Ended September 30, December 31,
----------------------- -----------------------------------
1999 1998 1998 1997 1996
--------- ---------- ----------- ----------- --------
(unaudited) (In thousands)
<S> <C> <C> <C> <C> <C>
Interest and dividend income:
Interest on loans...................... $29,886 $27,671 $37,374 $30,304 $23,630
Interest and dividends on investment
securities........................... 6,323 7,691 10,023 12,282 10,450

Interest on other cash equivalents..... 593 564 787 574 2,744
Interest on certificates of deposit.... 295 366 472 801 917
-------- -------- --------- ------- --------
Total interest and dividend income... 37,097 36,292 48,656 43,961 37,741
-------- -------- --------- ------- --------

Interest expense:
Interest on deposits................... 17,361 18,197 24,318 22,732 20,184
Interest on borrowed funds............. 1,583 1,161 1,562 822 854
-------- -------- --------- ------- --------
Total interest expense............... 18,944 19,358 25,880 23,554 21,038
-------- -------- --------- ------- --------
Net interest income.................. 18,153 16,934 22,776 20,407 16,703

Provision for possible loan losses...... 562 1,183 1,760 600 450
-------- -------- --------- ------- --------
Net interest income after provision
for possible loan losses......... 17,591 15,751 21,016 19,807 16,253
-------- -------- --------- ------- --------

Noninterest income:
Customer service fees.................. 622 495 726 623 621
Net gain on sale of investment
securities, net...................... - 60 61 727 575
Gain on sale of loans, net............. 539 849 1,143 312 357
Loan servicing fee income.............. 309 518 656 995 1,173
Increase in cash surrender value 63 493 657 200 -
Other income........................... 598 236 328 319 494
-------- -------- --------- -------- --------
Total noninterest income............. 2,131 2,651 3,571 3,176 3,220
-------- -------- --------- -------- --------

Noninterest expenses:
Salaries and employee benefits......... 7,076 7,140 9,489 9,111 7,589
Occupancy and equipment expenses....... 2,526 2,615 3,507 3,590 3,215
Curtailment loss on nonqualified pension
plan................................. 578 - - - -
Data processing service fees........... 1,072 971 1,279 1,198 689
Advertising............................ 890 735 903 843 914
Other noninterest expenses............. 2,147 2,170 2,864 2,896 3,792
-------- -------- --------- -------- --------
Total noninterest expenses........... 14,289 13,631 18,042 17,638 16,199
-------- -------- --------- -------- --------
Income before provision for income taxes 5,433 4,771 6,545 5,345 3,274
Provision for income taxes.............. 1,826 1,707 2,357 1,679 787
-------- -------- --------- -------- --------
Net income $ 3,607 $ 3,064 $ 4,188 $ 3,666 $ 2,487
======== ======== ========= ======== ========
</TABLE>

36
<PAGE>

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

------------------------------------------------------------------------------
This discussion and analysis reflects Cambridgeport Mutual Holding's financial
statements and other relevant statistical data and is intended to enhance your
understanding of our financial condition and results of operations. You should
read the information in this section in conjunction with Cambridgeport Mutual
Holding's Consolidated Financial Statements and accompanying Notes to
Consolidated Financial Statements beginning on page F-1 of this prospectus,
and the other statistical data provided in this prospectus. Unless otherwise
indicated, the financial information presented in this section reflects the
financial condition and operations of Cambridgeport Mutual Holding Company on
a consolidated basis.
------------------------------------------------------------------------------

General

Cambridgeport Mutual Holding Company's results of operations is comprised
of earnings on investments and the net income recorded by its principal
operating subsidiary, Cambridgeport Bank. Cambridgeport Bank's results of
operations depend primarily on net interest income. Net interest income is the
difference between the interest income we earn on our interest-earning assets
and the interest we pay on interest-bearing liabilities. Our interest-earning
assets consist primarily of residential mortgage loans including home equity
loans, commercial mortgage loans, borrowings under home equity credit lines,
consumer loans, mortgage-backed securities and investment securities. Interest-
bearing liabilities consist primarily of certificates of deposit, savings and
money market and NOW account deposits, and borrowings from the Federal Home Loan
Bank of Boston. Our results of operations also depend on our provision for
possible loan losses, non-interest income, and our non-interest expense. Non-
interest expense includes salaries and employee benefits, occupancy expenses and
other general and administrative expenses. Non-interest income includes service
fees and charges.

Our results of operations may also be affected significantly by economic
and competitive conditions in our market area and elsewhere, including those
conditions that influence market interest rates, government policies and the
actions of regulatory authorities. Future changes in applicable laws,
regulations or government policies may materially impact us. Furthermore, our
lending activity is concentrated in loans secured by real estate located in the
Boston metropolitan area.

Management Strategy

Our primary management strategy has been to offer a variety of checking and
savings deposit products, as well as residential and commercial mortgage loan
products, in order to generate earnings and to expand our customer base in our
primary market area of Middlesex and Norfolk counties in Massachusetts. We seek
to provide high quality service to our customers while meeting their savings and
borrowing needs. We try to limit our exposure to changes in interest rates by
monitoring and managing our interest rate-sensitive assets and liabilities. To

37
<PAGE>

accomplish these strategies, we originate one- to four-family residential
mortgage loans, home equity and consumer loans and commercial real estate
mortgage loans, and we offer competitive rates to attract new deposits. We also
attempt to cross sell additional services to our existing customers as a way of
maintaining these deposit relationships. We train our employees not only in the
technical aspects of their jobs, but also in how to provide outstanding quality
service to customers. To facilitate our management of liquidity and interest
rate risk, we purchase investment and mortgage-backed securities. In recent
years, we have adopted a growth-oriented strategy that has focused on broadening
our product lines and services, expanding delivery systems for our customers and
extending our branch network. We believe that this business strategy is best
for our long term success and viability, and complements our existing commitment
to high quality customer service. In connection with our overall growth
strategy, we seek to:

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

. expand our commercial banking products and services for businesses,
as a means to increase the yield on our loan portfolio, to attract
lower cost transaction deposit accounts and increase non-interest
income;

. offer a variety of uninsured investment and insurance products and
services as a means to compete for an increased share of our
customers' financial service business; and

. increase the use of alternative delivery channels, such as internet
home banking and telebanking.

Following the conversion, we intend to utilize proceeds from the offering
to further the objectives of our growth-oriented strategy. We may also use the
offering proceeds to acquire branches from other banks or to make other
acquisitions. See "How We Intend to Use the Proceeds from the Offering."

Management of Interest Rate Risk

As a financial institution, we incur risk from interest rate volatility.
Fluctuations in interest rates will impact both our level of income and expense
on a large portion of our assets and liabilities. Fluctuations in interest
rates will also affect the market value of all interest earning assets.

The primary goal of our interest rate management strategy is to limit
fluctuations in net interest income as interest rates vary up or down. We seek
to coordinate asset and liability decisions so that, under changing interest
rate scenarios, our net interest income will remain within an acceptable range.

Our lending activities have emphasized one-to four-family and commercial
mortgage loans. Our primary source of funds has been deposits, consisting
primarily of certificates of deposit, which have shorter terms to maturity than
the loan portfolio, and transaction accounts. Occasionally, we have funded loan
growth with Federal Home Loan Bank advances.

38
<PAGE>

We have employed several strategies to manage the interest rate risk inherent in
the asset/liability mix, including but not limited to:

. Selling a majority of the 30 and 15 year fixed-rate mortgages we
originate to the secondary market;

. Maintaining the diversity of our existing loan portfolio through the
origination of commercial real estate and consumer loans which
typically have variable rates and shorter terms than residential
mortgages; and

. Emphasizing investments with short- and intermediate-term maturities
of less than ten years, with the majority of maturities or rate resets
currently under 5 years.

The actual amount of time before loans are repaid can be significantly
impacted by changes in market interest rates. Prepayment rates will also vary
due to a number of other factors, including the regional economy in the area
where the loans were originated, seasonal factors, demographic variables, the
assumability of the loans, related refinancing opportunities and competition.
We monitor interest rate sensitivity so that we can adjust our asset and
liability mix in a timely manner and minimize the negative effects of changing
rates.

Net Interest Income Simulation. We use a simulation model to monitor
interest rate risk. This model reports the net interest income at risk primarily
under two different interest rate environments. Specifically, an analysis is
performed of changes in net interest income assuming changes in interest rates,
both up and down 200 basis points from current rates over the one year time
period following the current financial statement. In addition, we periodically
simulate other scenarios by increasing the assumed changes in interest rates
both up and down 400 basis points, or extending the time period covered by the
analysis. Our policy objective is to limit any reduction in net interest income
over a one-year period to 10% from the current financial statement given a
change in interest rates of up or down 200 basis points.

The table below sets forth as of September 30, 2000 the estimated changes
in net interest income that would result from a 200 basis point change in
interest rates over the applicable twelve-month period.

For the Twelve Months Ended September 30, 2000
----------------------------------------------
(Dollars in thousands)

Changes in
Interest Rates Net Interest
(Basis Points) Income % Change
-------------- ------------ --------
200 $23,440 -1.74%
0 23,856 -
-200 23,866 0.04%

39
<PAGE>

Gap Analysis. In addition to net interest income simulation, we use gap
analysis to monitor interest rate risk. We analyze the repricing
characteristics of assets and liabilities by examining the extent to which such
assets and liabilities are "interest rate sensitive". An asset or liability is
deemed to be interest rate sensitive within a specific time period if it will
mature or reprice within that time period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest bearing-
liabilities maturing or repricing within that same time period.

A gap is considered positive when the amount of interest-earnings assets
maturing or repricing within a specific time period exceeds the amount of
interest-bearing liabilities maturing or repricing within that specific time
period. A gap is considered negative when the amount of interest-bearing
liabilities maturing or repricing within a specific time period exceeds the
amount of interest-earning assets maturing or repricing within the same period.
During a period of rising interest rates, a financial institution with a
negative gap position would be expected, absent the effects of other factors, to
experience a greater increase in the costs of its liabilities relative to the
yields of its assets. Thus, our net interest income would likely decrease. An
institution with a positive gap position would be expected, absent the effect of
other factors, to experience the opposite result. Conversely, during a period
of declining interest rates, a negative gap would tend to result in an increase
in net interest income. A positive gap would tend to reduce net interest
income.

At September 30, 1999, based on the assumptions below, our interest-bearing
liabilities maturing or repricing within one year exceeded our interest-earning
assets maturing or repricing within the same period by $130.2 million. This
represented a negative cumulative one-year interest rate sensitivity gap of
18.8% of total interest earning assets and a ratio of cumulative interest-
earning assets maturing or repricing within one year to cumulative interest-
bearing liabilities maturing or repricing within one year of 65.8%. Our
negative gap position could more adversely impact our net interest income in a
rising rate environment than if we had a positive gap position. Our policy sets
an objective of maintaining the one year cumulative gap between a negative 20%
of total earning assets to a positive 20% of total earning assets.

The following table presents the amounts of our interest-earning assets and
interest-bearing liabilities outstanding at September 30, 1999, which we
anticipate to reprice or mature in each of the future time periods shown.
Except as stated below, we determined the amounts of assets and liabilities
shown which reprice or mature during a particular period in accordance with the
earlier of the term to repricing or the contractual maturity of the asset or
liability. The information presented in the following table is also based on
the following assumptions:

. We assume that various mortgage related products will prepay principal
balances. Prepayment speeds will vary depending on the interest rate
environment, mortgage product type, outstanding principal balances,
average life to maturity and other factors. The residential mortgage
portfolio is segregated based on these factors and prepayment speeds
are calculated using analytical historical data from the Office of
Thrift Supervision.

. 10% of our commercial mortgages and home equity loans are assumed to
prepay annually.

40
<PAGE>

. Federal agency securities with call options that we believed would be
called were reported at the earlier of the next call date or
contractual maturity date.

. Higher earning savings accounts, money market accounts and the
Treasury index accounts are reported in the three month category.

The assumptions, as reflected in the last two items, are based on
regulatory guidance, as modified by our historical analysis of deposit levels
over during various changes in market rates. Deposit assumptions, prepayment
rates and anticipated call dates can have a significant impact on the estimated
interest sensitivity gap. While we believe that our assumptions are reasonable,
they may not be indicative of actual future deposit activity, mortgage and
mortgage-backed securities prepayments, and the actual timing of federal agency
calls.

41
<PAGE>

GAP Table
<TABLE>
<CAPTION>
Amounts Maturing or Repricing as of September 30, 1999
-----------------------------------------------------------------------------------------------------
less than 3 3 to 6 6 months to
months months 1 year 1 to 2 years 2 to 3 years 3 to 5 years * 5 yrs. Total
----------- --------- ----------- ------------ ------------ ------------ -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Earning Assets(1)
Short term investments..... $ 6,577 - - - - - - $ 6,577
Certificates of Deposit.... - $ 2,778 $ 2,284 - - - - 5,062
Investment securities(2)... 16,410 4,250 3,681 $ 9,895 $ 14,436 $ 43,639 $ 7,197 99,508
Mortgage and assets
backed securities(2)...... 1,982 3,700 15,484 7,015 2,055 3,556 3,184 36,976
Loans(3)................... 95,529 31,245 66,887 98,341 97,203 131,729 24,624 545,558
----------- --------- ---------- ------------ ------------ ----------- -------- --------
Total interest earning
assets.................. 120,498 41,973 88,336 115,251 113,694 178,924 35,005 693,681

Interest-Bearing Liabilities
NOW accounts(4)............ - - - - - - 42,880 42,880
Regular savings accounts... - - - - - - 54,006 54,006
Money market accounts(5)... 139,414 - - - - - 2,663 142,077
Certificate of deposit
accounts................. 55,573 44,664 118,293 94,519 9,165 2,569 - 324,783
Borrowed funds............. 6,055 10,209 6,823 891 954 1,969 14,717 41,618
----------- --------- ---------- ------------ ------------ -------- -------- --------
Total interest
bearing liabilities..... 201,042 54,873 125,116 95,410 10,119 4,538 114,266 605,364
Interest sensitivity gap...... (80,544) (12,900) (36,780) 19,841 103,575 174,386 (79,261)
Cumulative interest
sensitivity gap.............. (80,544) (93,444) (130,224) (110,383) (6,808) 167,578 88,317
Cumulative interest
sensitivity gap as a
percent of total assets...... -11.16% -12.95% -18.04% -15.29% -0.94% 23.22% 12.24%

Cumulative interest
sensitivity gap as a
percent of total interest
earning assets............... -11.61% -13.47% -18.77% -15.91% -0.98% 24.16% 12.73%

Cumulative interest-earning
assets as a percentage of
cumulative interest-
bearing liabilities.......... 59.94% 63.49% 65.82% 76.83% 98.60% 134.12% 114.59%
</TABLE>

_______________
(1) Interest earning assets are included in the period in which the balances
are expected to be redeployed and/or repriced as a result of anticipated
prepayments, scheduled rate adjustments and contractual maturities.
(2) Debt securities are presented at amortized cost.
(3) For the purposes of the gap analysis, allowances for loan losses and
deferred loan fees have been excluded.
(4) NOW accounts also include appreciation checking and are included in the
over five year column.
(5) Treasury Index and Real Savings accounts are included in 3 months or less.
Business investments accounts are in the over 5 year category.

* greater than

42
<PAGE>

Average Balance Sheet and Analysis of Net Interest Income

The following tables set forth information relating to our financial
condition and net interest income at and for the nine months ended September 30,
1999 and 1998 and for the years ended December 31, 1998, 1997 and 1996, and
reflect the average yield on assets and average cost of liabilities for the
periods indicated. We derived the yields and costs by dividing income or expense
by the average balance of interest-earning assets or interest-bearing
liabilities, respectively, for the periods shown. We derived average balances
from actual daily balances over the periods indicated. Interest income includes
fees we earned from making changes in loan rates or terms, and fees we earned
when commercial real estate loans were prepaid or refinanced.

<TABLE>
<CAPTION>
At September 30, For the Nine Months Ended September 30,
--------------------- ------------------------------------------------------------------------
1999 1999 1998
--------------------- --------------------------------------- -----------------------------
Average Average Average
Actual Yield/ Average Yield/ Average Yield/
Balance Cost Balance Interest Cost Balance Interest Cost
--------- ------- ------- -------- ------------- ------- -------- --------
Assets: (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Short term investments(1)... $ 6,577 5.42% $ 13,411 $ 593 5.83% $ 11,423 $ 564 6.51%
Certificates of deposit..... 5,062 7.30 5,525 295 7.14 7,050 366 6.94
Investment securities(2).... 140,286 6.12 140,208 6,323 6.04 164,407 7,691 6.32
Loans(3).................... 537,901 7.43 517,428 29,886 7.52 448,701 27,671 8.04
-------- -------- ------- -------- -------
Total interest earning
assets.................... 689,826 7.15 676,572 37,097 7.19 631,581 36,292 7.56
------- -------
Total non-interest
earning assets............ 31,987 25,629 21,262
-------- -------- --------
Total assets............... $721,813 $702,201 $652,843
======== ======== ========

Liabilities and Equity:
Interest bearing Liabilities:
NOW accounts................ 42,880 1.38 39,618 417 1.41 35,545 414 1.56
Savings accounts............ 54,006 2.03 54,025 845 2.09 53,332 895 2.24
Money market deposit
accounts................... 142,077 4.06 138,831 3,955 3.81 118,976 3,573 4.02
Certificate of deposit
accounts................... 324,783 4.92 321,610 12,144 5.05 315,980 13,315 5.63
-------- -------- ------- -------- -------
Total interest-bearing
deposits................... 563,746 4.16 554,084 17,361 4.19 523,833 18,197 4.64
Borrowed funds.............. 41,618 6.09 36,883 1,583 5.66 25,250 1,161 6.15
-------- -------- ------- -------- -------
Total interest-bearing
liabilities............... 605,364 4.29 590,967 18,944 4.29 549,083 19,358 4.71
------- -------
Noninterest-bearing
deposits................... 32,391 29,097 25,472
Other noninterest-bearing.... 5,480 5,883 5,684
liabilities................ -------- -------- --------

Total noninterest bearing
liabilities............... 37,871 34,980 31,156

Total liabilities........... 643,235 625,947 580,239
Total retained earnings..... 78,578 76,254 72,604
-------- -------- --------
Total liabilities and
retained earnings.......... $721,813 $702,201 $652,843
======== ======== ========
Net interest income.......... $18,153 $16,934
======= =======
Net interest rate spread(4).. 2.86% 2.90% 2.85%
Net interest margin(5)....... 3.57% 3.58%
Ratio of interest-earning
assets to average interest-
bearing liabilities......... 114.53x 115.18x 115.26x
(footnotes on following page)
</TABLE>
43
<PAGE>

<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------------------------------------------------------
1998 1997 1996
----------------------------- ------------------------------ -------------------------------
Average Average Average
Average Yield/ Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
------- -------- ------- ------- -------- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets: (Dollars in thousands)
Interest earning assets:
Short term investments(1).... $ 12,373 $ 787 6.36% $ 8,026 $ 574 7.15% $ 53,923 $ 2,744 5.09%
Certificates of deposit...... 6,736 472 7.01 12,480 801 6.42 14,265 917 6.43
Investment securities(2)..... 162,152 10,023 6.33 194,564 12,282 6.42 173,017 10,450 6.14
Loans(3)..................... 457,271 37,374 8.08 362,888 30,304 8.25 281,234 23,630 8.28
-------- ------- -------- ------- -------- --------
Total interest earning
assets..................... 638,532 48,656 7.60 577,958 43,961 7.59 522,439 37,741 7.20
------- ------- --------
Total non-interest
earning assets............. 21,658 20,103 19,125
-------- -------- --------
Total assets................ $660,190 $598,061 $541,564
======== ======== ========

Liabilities and Equity:
Interest bearing Liabilities:
NOW accounts................. 36,323 559 1.54 32,898 568 1.73 29,933 529 1.77
Savings accounts............. 53,283 1,194 2.24 56,688 1,298 2.29 59,748 1,368 2.29
Money market deposit
accounts.................... 123,020 4,825 3.92 85,968 3,063 3.56 71,107 2,493 3.51
Certificate of deposit
accounts.................... 316,937 17,740 5.60 314,360 17,803 5.66 279,771 15,794 5.65
-------- ------- -------- ------- -------- --------
Total interest-bearing
deposits................... 529,563 24,318 4.59 489,914 22,732 4.64 440,559 20,184 4.58
Borrowed funds............... 25,352 1,562 6.16 13,609 822 6.04 14,859 854 5.75
-------- ------- -------- ------- -------- --------
Total interest-bearing
liabilities................ 554,915 25,880 4.66 503,523 23,554 4.68 455,418 21,038 4.62

Noninterest-bearing
deposits.................... 26,134 20,330 16,008
Other noninterest-bearing
liabilities................. 5,923 5,403 4,367
-------- -------- --------
Total noninterest bearing
liabilities................ 32,057 25,733 20,375

Total liabilities............ 586,972 529,256 475,793
Total retained earnings...... 73,218 68,805 65,771
-------- -------- --------
Total liabilities and
retained earnings............ $660,190 $598,061 $541,564
======== ======== ========
Net interest income........... $22,776 $20,407 $ 16,703
======= ======= ========
Net interest rate spread(4)... 2.94% 2.91% 2.58%
Net interest margin(5)........ 3.56% 3.52% 3.19%
Ratio of interest earning
assets to interest bearing
liabilities.................. 115.32x 115.04x 115.03x
</TABLE>
_________________________

(1) Short term investments include federal funds sold.
(2) All investments securities are considered available for sale and carried at
market value.
(3) Loans are net of deferred loan origination costs (fees), allowance for loan
losses and unadvanced funds.
(4) Net interest rate spread represents the difference between the weighted
average yield on interest earning assets and the weighted average cost of
interest bearing liabilities.
(5) Net interest margin represents net interest income as a percentage of
average interest earning assets.

44
<PAGE>

Rate/Volume Analysis. The following table shows how changes in
interest rates and changes in the volume of interest-earning assets and
interest-bearing liabilities have affected our interest income and interest
expense during the periods indicated. Information is provided in each
category with respect to:

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

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

(3) the net change.

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

45
<PAGE>

<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1999 Compared to Year Ended December 31, 1998 Year Ended December 31, 1997
Nine Months Ended Compared to Year Ended Compared to Year Ended
September 30, 1998 December 31, 1997 December 31, 1996
Increase/(Decrease) Increase/(Decrease) Increase/(Decrease)
------------------------------- ------------------------------ -------------------------------

Due to Due to Due to
--------------------- -------------------- --------------------
Volume Rate Net Volume Rate Net Volume Rate Net
-------- -------- ------- -------- -------- -------- --------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Short term investments..... $ 71 $ (42) $ 29 $ 268 $ (55) $ 213 $(4,137) $1,967 $(2,170)
Certificates of deposit.... (82) 11 (71) (411) 82 (329) (115) (1) (116)
Investment securities...... (1,038) (330) (1,368) (2,088) (171) (2,259) 1,337 495 1,832
Loans...................... 3,820 (1,605) 2,215 7,682 (612) 7,070 6,759 (85) 6,674
------- ------- ------- ------- ----- ------- ------- ------ -------
Total interest-earning
assets................... $ 2,771 $(1,966) $ 805 $ 5,451 $(756) $ 4,695 $ 3,844 $2,376 $ 6,220
======= ======= ======= ======= ===== ======= ======= ====== =======
Interest bearing
liabilities:
NOW accounts............... $ 19 $ (16) $ 3 $ 164 $(173) $ (9) $ 51 $ (12) $ 39
Savings accounts........... 12 (62) (50) (76) (28) (104) (70) 0 (70)
Money market deposit
accounts.................. 556 (174) 382 1,427 335 1,762 534 36 570
Certificates of deposit.... 245 (1,416) (1,171) 215 (278) (63) 1,981 28 2,009
Borrowed funds............. 508 (86) 422 723 17 740 (80) 48 (32)
------- ------- ------- ------- ----- ------- ------- ------ -------
Total interest bearing
liabilities.............. $ 1,340 $(1,754) $ (414) $ 2,453 $(127) $ 2,326 $ 2,416 $ 100 $ 2,516
======= ======= ======= ======= ===== ======= ======= ====== =======

Change in net interest
income..................... $ 1,431 $ (212) $ 1,219 $ 2,998 $(629) $ 2,369 $ 1,428 $2,276 $ 3,704
======= ======= ======= ======= ===== ======= ======= ====== =======
</TABLE>

46
<PAGE>

Comparison of Financial Condition at September 30, 1999 And December 31, 1998

Our consolidated total assets increased $43.7 million, or 6.4%, to $721.8
million at September 30, 1999 from $678.1 million at December 31, 1998. This
increase was primarily the result of $42.1 million, or 8.4% growth, in loans.

The growth in total assets during the period was primarily funded by:

. deposit growth;
. reduction in investment and mortgage-backed securities;
. additional Federal Home Loan Bank borrowings; and
. growth in retained earnings.

Total investment securities available for sale decreased $8.6 million,
5.9%, to $136.5 million. This reduction is part of our strategy to shift assets
from securities into higher yielding loan assets.

Deposits increased $28.0 million, or 4.9%, to $596.1 million at September
30, 1999 compared with $568.1 million at December 31, 1998. Interest-bearing
deposits accounted for $26.5 million, or 94.3%, of the growth in total deposits
and were $563.8 million at September 30, 1999. Of our interest-bearing deposits,
certificates of deposit increased $14.8 million, or 4.8%, to $324.8 million at
September 30, 1999 from $310.0 million at December 31, 1998. Deposits other than
certificates of deposit grew $13.3 million, 5.1%, to $271.4 million at September
30, 1999. The growth in these deposit types reflects our strategy of emphasizing
transaction accounts as the basis for building stable long-term relationships
with our customers.

Federal Home Loan Bank borrowings at September 30, 1999 were $14.4 million
above the level at December 31, 1998. In June, 1999, we borrowed $14.5 million
from the Federal Home Loan Bank in order to fund the construction and
acquisition of a new building. See "Properties" below.

Total equity increased $2.5 million, or 3.3%, to $78.6 million at September
30, 1999 from $76.1 million at December 31, 1998. $3.6 million in net income was
partially offset by a decline of $1.1 million in the unrealized gain on
available for sale securities.

Comparison of Operating Results for the Nine Months Ended September 30, 1999 and
September, 30 1998

General

Net income was $3.6 million for nine months ended September 30, 1999, an
increase of $543,000, or 17.7%, compared with net income of $3.1 million for the
1998 period. The increase was attributable to a $1.2 million increase in net
interest income and a $621,000 decrease in the provision for loan losses. These
were partially offset by a $520,000 decline in total non-interest income, an
increase of $658,000 in total non-interest expense and a $119,000 increase in
income tax expense.

47
<PAGE>

Interest Income

Total interest and dividend income increased $805,000, or 2.2%, to $37.1
million for the 1999 period compared with $36.3 million in 1998. Interest on
loans rose $2.2 million, or 8.0%, to $29.9 million from $27.7 million in the
first nine months of 1998. Interest and dividends on investment securities
available for sale decreased $1.4 million, to $6.3 million from $7.7 million in
the 1998 period.

The growth in interest income on loans was due in part to a $68.7 million,
or 15.3%, increase in the average balance of total loans, which rose to $517.4
million for the 1999 period. This increase reflects our continued emphasis on
residential one- to four-family mortgage and commercial mortgage loan
originations, and favorable local economic conditions that contributed to active
loan demand. The average balance of investment securities fell $24.2 million,
or 14.7%, to $ 140.2 million for the 1999 period. This decrease reflects our
ongoing strategy of using portions of maturing investment securities to fund
growth in higher yielding residential and commercial real estate loans.

Total interest-earning assets averaged $676.6 million for the nine months-
ended September 30, 1999, up from $631.6 million in the comparable 1998 period,
a 7.1% increase. The effect on interest income from the higher average interest-
earning assets base was partially offset by a 37 basis point decline in the
average yield to 7.19% for 1999 from 7.56% for 1998. The average yield on loans,
net, fell 52 basis points to 7.52% for 1999 compared with 8.04% for the prior
year. The average yield on investment securities, including mortgage-backed
securities, declined 28 basis points to 6.04% for 1999 compared with 6.32% for
1998. The lower interest rate environment, particularly with respect to long-
term interest rates, curve that prevailed during 1999 and 1998 resulted in the
downward repricing of our interest rate-sensitive assets. In addition, the
average yield on our loans was adversely affected by refinancing activity as
borrowers sought lower rates.

Interest Expense

Total interest expense for the nine months ended September 30, 1999 was
$414,000, or 2.1%, below the 1998 period, despite a higher average balance of
total interest-bearing liabilities in 1999 of $590.1 million compared with
$549.1 million for the comparable 1998 period. The impact on interest expense
from the rise in interest-bearing liabilities was offset by a 42 basis point
decrease in their average cost, to 4.29% in 1999 from 4.71% for 1998. This
decrease reflects the lower interest rate environment that prevailed during 1999
compared to the 1998 period.

Interest expense on deposits declined $836,000, or 4.6%, to $17.4 million
for the first nine months of 1999 compared with $18.2 million for the 1998
period. The average balance of certificates of deposits increased $5.6 million
in 1999 but because of a 58 basis point decline in their average cost, interest
expense on certificates of deposits declined $1.2 million in the 1999 period
compared with 1998. Interest expense on money market balances increased
$382,000, reflecting the $19.9 million rise in average money market account
balances.

48
<PAGE>

Interest expense on borrowed funds increased $422,000, as a result of the
$11.6 million rise in the average balance of borrowed funds.

Net Interest Income

Net interest income for the nine months ended September 30, 1999 increased
$1.2 million, or 7.2%, to $18.1 million compared with $16.9 million for 1998.
The net interest rate spread-the difference between the average yield on
average total interest-earning assets and the average cost of average total
interest-bearing liabilities-increased 5 basis points to 2.90% for 1999 from
2.85% for the prior year. The net interest margin, which is net interest income
divided by average total interest-earning assets, decreased one basis point to
3.57% for 1999.

Provision for Possible Loan Losses

During the first nine months of 1999, we provided $562,000 for possible
loan losses, compared to $1.18 million for the 1998 period. The 1998 provision
reflected the significant growth in our commercial real estate and jumbo
residential loans, mortgage loans with balances that exceed Fannie Mae
guidelines portfolios. We also experienced an increase in the average size of
the commercial real estate loans we made in 1998. In 1999 we have seen continued
growth in both commercial real estate loans and jumbo residential mortgages,
however the average size of new commercial real estate loans has declined from
$1.25 million in 1998 to $925,000 in 1999.

At September 30, 1999, the allowance for loan losses as a percentage of
total loans was 1.34% compared with 1.26% at September 30, 1998.

Non-interest Income

Non-interest income includes service fees on deposit accounts, other
service charges and net gains on sales of securities. Total non-interest income
decreased $520,000, or 19.6%, to $2.1 million for 1999 compared with $2.6
million for the 1998 period. The 1998 figure includes gains on fixed rate loan
sales of $849,000. In 1999, as mortgage interest rates increased, fixed rate
loan applications declined, and sale gains decreased to $539,000 for the period.
We expect that the new administrative center building, described above, will be
approximately 60% occupied by us, and 40% by companies that enter into long term
lease agreements with us. In future periods we expect to receive non-interest
income from these tenants.

49
<PAGE>

Non-interest Expense

Total non-interest expense increased $658,000, or 4.8%, to $14.3 million
during 1999 compared with $13.6 million for the prior year. The 1999 figure
includes a one-time charge of $578,000, reflecting a curtailment loss on a
restructured executive non-qualified retirement plan. Salaries and employee
benefits, occupancy and equipment expense comprised 67.2% of total non-
interest expense for 1999. Salaries and employee benefits decreased $64,000, or
0.9%, to $7.1 million for 1999 compared with $7.2 million for 1998, reflecting
salary increases offset by a decrease in benefits expense.

Our efficiency ratio determined by dividing non-interest expense by the
sum of net interest income and non-interest income excluding gains on
securities transactions was 70.44% for 1999 compared with 69.81% for the 1998
period. The ratio of non-interest expense to average assets was 2.0% for 1999
and 2.1% for 1998. In future periods our occupancy expense may increase because
of the costs of our new administrative center. We expect that the increase in
occupancy expense will be partially offset by rental income mentioned above.
Annual operating expenses are expected to increase in the near term due to
future product and service expansion and the increased costs of operating as a
public company.

Income Taxes

Income tax expense increased $119,000, or 7.0%, to $1.8 million for 1999
compared with $1.7 million for 1998, resulting in an effective tax rate of 33.6%
for the nine months ended September 30, 1999 and 35.8% for the 1998 period. The
effective tax rate also reflects the utilization of qualified securities
investment companies to substantially reduce state income taxes.

Comparison of Financial Condition at December 31, 1998 and 1997

Our total assets increased $58.7 million, or 9.5%, to $678.1 million at
December 31, 1998 from $619.4 million at December 31, 1997. Loans increased
$79.1 million, or 18.6%, to $503.5 million. Growth in commercial real estate
loans totaled $45.0 million, and residential mortgage loan growth was $38.8
million. Partially offsetting loan growth was a decline in securities available
for sale which fell $15.2 million to $145.0 million, and a decline in
certificates of deposit that we held in other banks which totaled $12.1 million
at December 31, 1998 and $5.9 million at December 31, 1997.

Asset growth was funded primarily by an increase of $47.7 million in total
deposits, to $568.1 million at December 31, 1998 compared with $520.4 million at
December 31, 1997. We introduced a new "Treasury Index Account" in October,
1997. The Treasury Index Account is a money market savings account offering a
rate that is based on the three month U.S. Treasury bill. The Treasury Index
Account generated approximately $45.9 million in account balances during 1998.

50
<PAGE>

Our total equity increased $5.0 million, or 7.0%, to $76.1 million at
December 31, 1998. Net income accounted for $4.2 million of that increase and
the remainder was attributed to an $828,000 increase in unrealized gains on
securities.

Comparison of Operating Results for the Years Ended December 31, 1998 and 1997

General

Net income of $4.2 million for 1998 represents a $522,000, or 14.1%,
increase from 1997's earnings of $3.7 million. This increase was due primarily
to loan growth. At the same time, earnings on investment securities declined
primarily because of the reduction in investment securities balances discussed
above.

Interest Income

Total interest income increased $4.7 million to $48.7 million for 1998
compared to $44.0 million for 1997. The average balance of interest earning
assets increased $60.6 million, or 10.5%, and the yield on earning assets
increased from 7.60% in 1997 to 7.59% for 1998.

The previously mentioned growth in the loan portfolio, is the primary
reason for the rise in interest income. Interest and fees on loans increased
$7.1 million, or 23.4% to $37.4 million in 1998 from $30.3 million in 1997.
Partially offsetting the increase was a $2.4 million reduction in interest
income from securities and other investments caused primarily by a decline in
average investment portfolio balances.

We reduced the size of the investment portfolio as part of our strategy to
redeploy assets into higher yielding loan products.

Interest Expense

Interest expense increased $2.3 million, or 9.9%, to $25.9 million for 1998
compared with $23.6 million for 1997. The average balance of total interest-
bearing deposits grew $39.6 million in 1998 to $529.6 million, while the average
cost of our deposits fell 5 basis points to 4.59%. The combined effect of the
deposit growth and the decrease in cost of funds produced a $1.6 million
increase in interest expense for the year. The average balance of borrowed
funds rose in 1998, by $11.7 million, and the average cost of the borrowings
also rose by 12 basis points to 6.16% in 1998. These produced an increase in
interest expense of approximately $740,000 compared with 1997.

51
<PAGE>

Net Interest Income

Net interest income for 1998 was $22.8 million as compared with $20.4
million for 1997. Net interest rate spread-the difference between the yield on
average total interest-earning assets and the cost of average total interest-
bearing liabilities-rose to 2.94% for 1998 from 2.91% for the prior year. Net
interest margin--net interest income divided by average total interest-earning
assets-increased to 3.56% for 1998 compared with 3.52% for 1997. The
improvement in net interest income is primarily the result of the shift in our
mix of assets from investment securities to higher yielding loans.

Provision for Possible Loan Losses

During 1998, we provided $1.8 million for loan losses, compared to $600,000
in 1997. The higher provision in 1998 reflects the continued growth in our loan
portfolio, and in particular the growth in commercial real estate loans and in
"jumbo" residential mortgages. We consider these types of loans to contain more
inherent risk than conventional residential mortgages that conform to Fannie Mae
guidelines. The higher provision also reflects the fact that the average size
of the commercial real estate loans we originated in 1998 was significantly
higher than the average size of commercial real estate loans we originated in
prior years. The average size of the new commercial loans was $1.25 million in
1998, 53% larger than the average commercial real estate loan in our portfolio
at the end of 1997, which was $815,000.

The allowance for loan losses at the end of 1998 was 1.32% of total loans
compared with 1.16% at the end of the 1997. The increase in the coverage ratio
reflects the change in loan portfolio composition described above.

Non-Interest Income

Non-interest income increased to $3.6 million in 1998 compared with $3.2
million the year before. Loan fees declined from $995,000 in 1997 to $656,000
in 1998. The high level of residential mortgage refinancing reduced the
balance of loans we had been servicing and the fees we earned from that
servicing. Refinancing activity in 1998 also produced an increase in fixed rate
mortgage applications. Because we sell fixed rate residential mortgage loans,
primarily servicing released, the increased volume produced additional gains on
loan sales compared to 1997. The loan sale gains rose from $300,000 in 1997 to
$1.1 million in 1998.

Service charges on deposit accounts increased from $623,000 in 1997 to
$726,000 in 1998 primarily because we had more checking and NOW account
customers.

Securities gains were $61,000 in 1998, down from $727,000 in 1997.The
gains in 1997 reflect primarily the sale of most of our common stock holdings.

Total non-interest income in 1998 included a $457,000 increase in the cash
surrender value of certain life insurance policies compared with 1997.

52
<PAGE>

Non-Interest Expense

Total non-interest expense increased $404,000, or 2.3%, to $18.0 million in
1998 compared with $17.6 million for the prior year. Salaries and employee
benefits expense represented $378,000 of the increase. During 1998, we
increased our staffing levels in order to handle the higher loan and deposit
activity we were experiencing.

Income Taxes

Income taxes increased $678,000 or 40.4% to $2.4 million from $1.7 million
in 1997. The effective tax rate was 36.0% in 1998 and 31.4% in 1997. The 1997
tax rate was lower because we had held certain tax advantaged securities during
1997 which we no longer held in 1998. The effective tax rate also reflects the
utilization of qualified securities investment companies to substantially reduce
state income taxes.

Comparison of Financial Condition at December 31, 1997 and 1996

Our total assets increased $44.6 million, or 7.75%, to $619.4 million at
December 31, 1997 from $574.8 million at December 31, 1996.

During 1997 we focused our asset generation activities on loan growth,
using maturing short term investments, sales and maturities of investment
securities deposit growth and FHLB borrowings as funding sources.

At December 31, 1997, loans had increased $113.6 million to $424.4 million.
Commercial real estate loans grew $52.8 million, residential mortgages grew
$48.9 million and home equity credit line borrowings rose $14.1 million.

We reduced balances of investment securities available for sale to $160.3
million, $51.6 million below the balance at the end of 1996. We also reduced
short term investments by $11.8 million during 1997.

Our deposits grew by $17.7 million to $520.4 million at December 31, 1997
compared with $502.7 million at December 31, 1996. We introduced a new the
Treasury Index Account in October, 1997. The Treasury Index Account is a money
market savings account offering a rate that is based on the three month US
Treasury bill. The Treasury Index Account generated approximately $17.1 million
in account balances by the end of 1997.

We added $20.9 million in Federal Home Loan Bank borrowings during 1997.
These were primarily fixed rate borrowings used to fund certain fixed rate
loans.

Our total equity increased $4.3 million to $71.1 million at December 31,
1997, from $66.8 million at December 31, 1996, due to $3.7 million of net income
for 1997, and an increase of $561,000 in unrealized gains on securities
available for sale.

53
<PAGE>

Comparison of Operating Results for the Years Ended December 31, 1997 and 1996

General

Net income was $3.7 million for 1997, up 48.0%, from 1996 earnings of $2.5
million. As described above, we shifted our asset mix during 1997 away from
short term securities and investment securities into higher yielding loans,
primarily residential and commercial real estate loans. We added an additional
branch during the year, and completed preparations for our new Telebanking
Center. The increased loan activity and new offices required us to raise
staffing levels and other non-interest expenses.

Interest Income

Total interest income increased $6.3 million to $44 million for 1997
compared to $37.7 million 1996. The average balance of earning assets increased
$55.5 million and the average yield on earning assets increased from 7.20% for
1996 to 7.59% for 1997. This was primarily the result of the shift in our
asset mix from investments into loans. Interest and fees on loans increased
$6.7 million or 28.4% to $30.3 million in 1997 from $23.6 million in 1996.

Interest and dividends on securities increased $1.8 million, or 17.1%, to
$12.3 million for 1997 from $10.5 million for 1996. Despite the reduction in
the average size of the investment portfolio, we benefitted from having
purchased longer term securities in early 1997.

Interest Expense

Interest expense on deposits increased $2.5 million or 12.4%, to $22.7
million for 1997 compared with $20.2 million for 1996. Although the weighted
average cost of total deposits was 4.58% for 1996 and 4.64% for 1997. The
average balance of deposits rose approximately $53.7 million from 1996 to 1997.
Much of the deposit growth occurred in the latter half of 1996. The full effect
of 1996 deposit growth was reflected in 1997 annual interest expense.

Net Interest Income

Net interest income for 1997 was $20.4 million as compared with $16.7
million for 1996. The net interest rate spread increased 33 basis points to
2.91% for 1997 from 2.58% for the prior year. The net interest margin also
increased 33 basis points to 3.52% for 1997 compared with 3.19% for 1996. The
improvement in net interest income was largely the result of the shift into
loans from lower yielding investments.

54
<PAGE>

Provision for Possible Loan Losses

During 1997, we provided $600,000 for loan losses, compared to $450,000 in
1996. The higher provision reflected primarily the growth in commercial real
estate loans that occurred during the year. The allowance for loan losses at the
end of 1997 was 1.16% of total loans compared with 1.37% at the end of 1996.

Non-Interest Income

Total non-interest income decreased $44,000 to $3.18 million in 1997 from
$3.22 million in 1996. The change included reductions in loan servicing fees and
other income. Mortgage loan prepayments in 1997 reduced the volume of loans we
serviced, for which we collect fees. As a result, the balance of serviced loans
declined from $344.7 million in 1996 to $293.7 million in 1997, our loan
servicing fees declined by $178,000. Other income included a $200,000 increase
in the cash surrender value of life insurance policies in 1997. Security gains
increased $152,000 in 1997 compared to the prior year. These gains resulted from
the sale of common stock that we held in our investment portfolio.

Non-Interest Expense

Total non-interest expense increased $1.4 million or 8.6%, to $17.6 million
during 1997 compared with $16.2 million for the prior year. Salaries and
employee benefits increased by $1.5 million as a result of additional hires and
the introduction of a short term incentive program for officers. Other general
and administrative expenses decreased by $496,000. Building, occupancy, and
equipment expenses increased $375,000 or 11.7% to $3.6 million reflecting higher
equipment depreciation costs and other costs related to the purchase of computer
equipment, expansion of the branch network and the new Telebanking Center.

Income Taxes

Income taxes increased $892,000 or 113.3% to $1,679,000 resulting in
effective tax rates of 31.4% in 1997 and 24.0% in 1996, respectively. In 1996
we held auction rate preferred stock in our short term investment portfolio.
These investments provided tax exempt income. In late 1996, we redeemed most of
these investments and used the proceeds for loan growth.

Liquidity and Capital Resources

The term "liquidity" refers to our ability to generate adequate amounts of
cash to fund loan originations, loan purchases, deposit withdrawals and
operating expenses. Our primary sources of liquidity are deposits, scheduled
amortization and prepayments of loan principal and mortgage-backed securities,
maturities and calls of investment securities and funds provided by our
operations. We also can borrow funds from the Federal Home Loan Bank based on
eligible collateral of loans and securities. Our maximum borrowing capacity from
the Federal Home Loan Bank is approximately $300.0

55
<PAGE>

million, net of borrowings that are already outstanding. In addition, we may
enter into reverse repurchase agreements with approved broker-dealers. Reverse
repurchase agreements are agreements that allow us to borrow money using our
securities as collateral.

At September 30, 1999, outstanding borrowings from Federal Home Loan Bank
were $41.4 million, $14.4 million above the level at December 31, 1998. In June
1999, we borrowed $14.5 million from the Federal Home Loan Bank in order to fund
the construction and acquisition of a new building. The Federal Home Loan Bank
loan is to be repaid in equal monthly payments over 20 years. The rate is fixed
at 6.19%.

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

Our primary investing activities are the origination of one- to four-family
real estate, commercial real estate, commercial and consumer loans, and to the
purchase of investment securities. During the first nine months of 1999, we
originated loans of approximately $185.1 million, and the comparable period of
1998 we originated loans of approximately $239.4 million. Purchases of
investment securities totaled $28.9 million for the first nine months of 1999
and $70.9 million for 1998. At September 30, 1999, Cambridgeport had loan
commitments to borrowers of approximately $41.7 million, and available home
equity and unadvanced lines of credit of approximately $131.4 million.

Deposit flows are affected by the level of interest rates, by the interest
rates and products offered by competitors and by other factors. Total deposits
increased $28.1 million and $47.7 million during the first nine months of 1999
and 1998, respectively. Certificates of deposit accounts scheduled to mature
within one year were $218.5 million at September 30, 1999. Based on our deposit
retention experience and current pricing strategy, we anticipate that a
significant portion of these certificates of deposit will remain on deposit. We
monitor our liquidity position frequently and anticipate that we will have
sufficient funds to meet our current funding commitments.

At September 30, 1999, we exceeded each of the applicable regulatory
capital requirements. Our leverage tier 1 capital was $76.0 million, or 18.37%
of risk-weighed assets, and 10.76% of average assets. We had a risk-based total
capital of $83.5 million and a risk-based capital ratio of 20.19%.

Except for the construction of our new administrative center, for which we
have already secured funding, and other costs associated with the new building
such as furniture, we do not anticipate any other material capital expenditures
during calendar year 2000. We do not have any balloon or other payments due on
any long-term obligations or any off-balance sheet items other than the
commitments and unused lines of credit noted above.

56
<PAGE>

Financial Services Modernization Bill

. repeals the historical restrictions and eliminates many federal and
state law barriers to affiliations among banks, securities firms,
insurance companies and other financial service providers;

. provides a uniform framework for the functional regulation of the
activities of banks, savings institutions and their holding companies;

. broadens the activities that may be conducted by national banks,
banking subsidiaries of bank holding companies and their financial
subsidiaries;

. provides an enhanced framework for protecting the privacy of consumer
information;

. adopts a number of provisions related to the capitalization,
membership, corporate governance and other measures designed to
modernize the Federal Home Loan Bank system;

. modifies the laws governing the implementation of the Community
Reinvestment Act and

. addresses a variety of other legal and regulatory issues affecting
both day-to-day operations and long-term activities of financial
institutions.

Bank holding companies will be permitted to engage in a wider variety of
financial activities than permitted under prior law, particularly with respect
to insurance and securities activities. In addition, in a change from prior
law, bank holding companies will be in a position to be owned, controlled or
acquired by any company engaged in financially-related activities.

We do not believe that the Act will have a material adverse effect on our
operations in the near-term. However, to the extent that it permits banks,
securities firms and insurance companies to affiliate, the financial services
industry may experience further consolidation. This could result in a growing
number of larger financial institutions that offer a wider variety of financial
services than we currently offer and that can aggressively compete in the
markets we currently serve.

57
<PAGE>

Recent Accounting Pronouncements

In October 1995, the Financial Accounting Standards Board ("FASB") issued a
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." This Statement permits all entities to chose either
a fair value based method or the Accounting Principles Board (the "APB") Opinion
No. 25 intrinsic value based method of accounting for stock-based compensation
arrangements. Entities electing to remain with the accounting under APB Opinion
No. 25 must make pro forma disclosures of net income and earnings per share, as
if the fair value based method of accounting had been applied.

SFAS No. 123 was generally effective for transactions entered into in
fiscal years that begin after December 15, 1995. It is anticipated that we will
adopt APB Opinion No. 25 for the accounting of stock options and make pro forma
disclosures required by this Statement.

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

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

In February 1998, the FASB issued SFAS No. 132, "Employer's Disclosures
about Pensions and Other Postretirement Benefits," effective for fiscal years
beginning after December 15, 1997. The Statement revises employers' disclosures
about pension and other postretirement plans. It does not change the
measurement or recognition of those plans. The Statement standardizes the
disclosure requirements for pensions and other postretirement benefits to the
extent practical, requires additional information on changes in the benefits
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates disclosures that were previously required by
generally accepted accounting principles. We adopted these disclosure
requirements as of January 1, 1998.

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<PAGE>

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was amended by SFAS No. 137, is
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000. This Statement standardizes the accounting for derivative instruments,
including derivative instruments embedded in other contracts, by requiring that
an entity recognize those items as assets or liabilities in the balance sheet
and measure them at fair value. If certain conditions are met, an entity may
elect to designate a derivative as follows: a hedge of the exposure or changes
in the fair value of a recognized asset or liability, or of an unrecognized firm
commitment that are attributable to a particular risk. A hedge of the exposure
to variability in the cash flows of a recognized asset or liability, or of a
forecasted transaction, that is attributable to a particular risk. Or, a hedge
of the foreign currency exposure of an unrecognized firm commitment, an
available-for-sale security, a forecasted transaction, or a net investment in a
foreign operation. This Statement generally provides for matching the timing of
the recognition of the gain or loss of the hedging instrument with the
recognition of the changes in the fair value of the item being hedged. Depending
on the type of hedge, such recognition will be in either net income or other
comprehensive income. For a derivative not designated as a hedging instrument,
changes in fair value are recognized in net income in the period of change. We
will adopt SFAS No. 133 on January 1, 2001, and it is not expected to have a
material impact on us.

In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-
Backed Securities Retained After the Securitization of Mortgage Loans Held for
Sale by a Mortgage Banking Enterprise", which amends SFAS No. 65, "Accounting
for Certain Mortgage Banking Activities". This statement requires that after
the securitization of mortgage loans held for sale, an entity engaged in
mortgage banking activities classify the resulting mortgage-backed securities or
other retained interests based on its ability and intent to sell or hold those
investments. The Bank's adoption of this statement on January 1, 1999, did not
have a material impact on our financial position or results of operation.

Impact of Inflation and Changing Prices

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

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<PAGE>

BUSINESS OF CAMBRIDGEPORT BANK

General

We are a Massachusetts-chartered stock savings bank that is currently a
wholly owned subsidiary of Cambridgeport Mutual Holding Company, a
Massachusetts-chartered mutual holding company. We were formed in 1853 and
reorganized into a mutual holding company structure (without a stock offering)
in 1994. Our mission is to be a profitable community-oriented provider of
banking products and services to individuals and businesses, including
residential and commercial mortgages, consumer loans, commercial loans, and a
variety of deposit instruments. We operate through ten full service banking
offices located in the cities and towns in and around Cambridge, Massachusetts.
Six of these banking offices are located in Middlesex County and four are
located in Norfolk County. In addition, we operate a Telebanking Center located
in Cambridge, Massachusetts to service loan and deposit customers, including
opening checking and deposit accounts and accepting loan applications.

Our revenues are derived principally from interest on our loans and
mortgage-backed securities and interest and dividends on our investment
securities. Our primary sources of funds are deposits, scheduled amortization
and prepayments of loan principal and mortgage-backed securities, maturities and
calls of investment securities, funds provided by operations and borrowings. We
also use borrowings from the Federal Home Loan Bank as a source of funds for
loans, investments and other assets. See "-- Sources of Funds."

The largest component of our expenses is the interest that we pay on
deposits.

Business Strategy

The following are highlights of Cambridgeport Bank's operating strategy:

. Community Banking and Customer Service

Since 1853, we have met the banking needs of Cambridge and its surrounding
communities. We are a service-oriented bank providing retail and business
customers with value driven products and services designed to create long term,
profitable relationships. Our focus is to develop core banking relationships by
securing checking accounts and then to provide customers appropriate loan and
other services from among a full array of banking products. In this regard, we
offer residential mortgage loans, commercial real estate loans and business
banking loans and services to customers throughout eastern Massachusetts. With
the recent mergers and consolidations of banks in our market, we believe that
our community-oriented approach to banking may help us to increase our market
share of retail consumers and business customers.

. Residential Lending

Cambridgeport Bank emphasizes the origination of residential mortgage
loans. At September 30, 1999, we had $276.9 million of residential mortgage
loans, representing 50.8% of our total loan portfolio. Our strategy is to offer
customers a broad range of mortgage products including adjustable and fixed rate
loans and jumbo loan products. We utilize mortgage originators to call on real
estate brokers and other key referral sources. In addition, our branch staff is
trained to prequalify potential mortgage borrowers and actively refer new
lending relationships to the mortgage department. Our Telebanking Center is
equipped with a special toll free number for loan customers and handles
information requests and accepts mortgage applications over the telephone.

We also offer home equity lines of credit to complement our mortgage
services. At September 30, 1999, we had $59.5 million of outstanding borrowings
under home equity lines of credit representing 10.9% of our portfolio.

. Commercial Real Estate Lending

Beginning in 1994, we developed an expertise in commercial real estate
lending throughout the Boston metropolitan area as a means to increase the yield
on our loan portfolio and diversify our assets. Currently the commercial real
estate portfolio represents a significant portion of our lending activity. At
September 30, 1999, there were 225 loans in the commercial real estate portfolio
which totaled $200.4 million, or approximately 36.7% of our total loan
portfolio. The average size of commercial real estate loans in our portfolio
was approximately $891,000 Approximately 40% of our commercial real estate
portfolio was secured by properties located in the City of Boston. Properties in
Cambridge secured about 20% of the portfolio. The remainder was secured by
properties located elsewhere in our market area.

. Business Banking

We plan to increase our emphasis on business banking and to utilize our
existing branch franchise to provide expanded commercial deposit products and
services to business customers. Our service-oriented relationship banking
philosophy is targeted to capture business customers disenfranchised by recent
bank mergers. We have recently hired two senior commercial banking officers who
have extensive experience in establishing commercial banking centers and
generating and administering business banking for large Boston-based commercial
banks. These senior officers will work to enhance our operational
infrastructure and our loan production capabilities, so we can both expand
relationships with current business customers and attract new relationships. We
will also hire additional personnel to serve our business customers. We
currently offer traditional lending products such as lines of credit and term
loans and we will be expanding our services in 2000 by introducing cash
management services, sweep accounts and business banking using the internet,
which will benefit our customers and increase our non-interest income.

. Business Diversification Strategies

We plan to become a broader provider of financial services, enhancing our
ability to attract and retain both retail and commercial customers and
diversifying our income stream. We intend to increase both our customer base
and our share of customers' financial services business by offering a diverse
range of products and services that formerly were offered only by insurance
companies and securities brokerage firms. We will continue to offer various
uninsured investment and insurance products, including fixed-rate and variable
annuities and mutual funds, through a relationship with a third party broker-
dealer that serves both retail and business customer needs for investment
products. In addition, we intend to apply to the Commissioner of Banks for
permission to conduct expanded insurance activities.

. Expanded Delivery Systems

To serve our existing customers better and to complement our expanded
product line and presence in the business banking market, we will increase the
channels through which we deliver products and services. The increased use of
alternative delivery channels has simplified and reduced the costs of financial
transactions for consumers, businesses and financial institutions. In addition
to conducting financial transactions at branch offices, customers are
increasingly using ATMs and online banking. In response to these trends, we
offer 24 hour telebanking services which provide our customers with continuous
access to their accounts through the use of a touch tone telephone. We plan to
introduce an internet home banking product which will give our customers access
to their accounts and the ability to conduct account transactions such as online
bill payment and electronic funds transfers. Business banking customers will
also have access to an internet banking service tailored to their needs.

. Asset Quality

We have a commitment to conservative loan underwriting policies and
investing in high grade assets. As a result of such practices and a relatively
stable economy, at September 30, 1999, we had $507,000 in non-performing assets
and a ratio of allowance for possible loan losses to total loans of 1.34%.

. Interest Rate Strategy

. sell most of our fixed rate one- to four-family mortgage loans
rather than retain them in our loan portfolio;

. emphasize investments with adjustable rates and/or short and
intermediate-term maturities of less than ten years;

. structure most of our commercial real estate loans with
adjustable rates; and

. offer home equity credit lines with variable rates indexed to the
prime rate.

Market Area

Consistent with large metropolitan areas in general, the economy in our
market area is based on a mixture of service, manufacturing, wholesale/retail
trade, and state and local government. The market area suffered a downturn in
terms of economic activity and real estate values in the late 1980s and early
1990s-in lockstep with the national recession. However, more recently, the
Boston economy has flourished in line with the national economic expansion and a
resulting increase in demand for the products and services produced by the
Boston economy, particularly with respect to the technology and financial
services sectors. Maintaining operations in a large metropolitan area served as
a benefit to us in periods of economic growth, while at the same time fosters
significant competition for the financial services provided by us.

Our primary market area is representative of the Boston metropolitan area,
with employment primarily in services, wholesale/retail trade and manufacturing
sectors. Our market area also has a high concentration of white collar
professionals who work at the numerous colleges and universities, hospitals and
medical care companies, financial services firms, and high technology companies
located in the Boston metropolitan area. Service jobs represent the largest
employment sector in both of the primary market counties, with jobs in
wholesale/retail trade accounting for the second largest employment sector. The
manufacturing industry, once the backbone of local economy, remains a notable
employment sector in both Middlesex and Norfolk Counties. Manufacturing
employment has experienced a decline in our primary market during

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<PAGE>

the 1990s, reflecting the general trend of a shrinking manufacturing basis
throughout the northeast. However, the number of manufacturing jobs increased in
both Norfolk and Middlesex Counties during 1997. Population growth has
facilitated job growth in most sectors of the local economy, with services,
wholesale/retail trade, financial services and construction all reflecting
strong job growth in our primary market area.

We believe that the relative affluence of our market area and recent
population and job growth provide significant opportunities for profitable
household banking relationships. The median household and per capita income
levels in Middlesex and Norfolk Counties, the primary two counties of our market
area, were higher than the comparative medians for Massachusetts and the U.S.
However, in comparison to the U.S. and Massachusetts, growth in household income
was lower for Middlesex and Norfolk Counties from 1990 to 1999. Based on the
projections of CACI, household income for both Middlesex and Norfolk Counties
will increase over the next five years, but will continue to increase at a
slower pace than the projected growth rates for Massachusetts and the U.S.
Unemployment rates in Middlesex and Norfolk Counties are lower than comparative
measures for Massachusetts and the U.S.

Competition

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

Our competition for loans comes principally from commercial banks, savings
institutions, mortgage banking firms, credit unions, finance companies, mutual
funds, insurance companies and brokerage and investment banking firms. Our most
direct competition for deposits has historically come from commercial banks,
savings banks, savings and loan associations and credit unions. We face
additional competition for deposits from short-term money market funds and other
corporate and government securities funds and from brokerage firms and insurance
companies.

Lending Activities

Loan Portfolio Composition. Our loan portfolio consists of one- to four-
family residential first mortgage loans, commercial real estate loans, consumer
loans and commercial loans.

At September 30, 1999, we had total loans of $545.6 million, of which
$276.9 million were residential mortgage loans. Outstanding advances under home
equity credit lines totaled $59.5 million. Loans secured by mortgages on
commercial real estate totaled $200.4 million. The remaining portion of our loan
portfolio at September 30, 1999 consisted of consumer loans totaling $6.6
million and commercial loans of $1.2 million.

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<PAGE>

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

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<PAGE>

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

<TABLE>
<CAPTION>
For the Nine Months
Ended September 30, At December 31,
------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------ ------------------ ------------------ ------------------ ---------
Percent Percent Percent Percent
of of of of
Amount Total Amount Total Amount Total Amount Total Amount
-------- ------- -------- ------- -------- ------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
Residential(1)................ $276,921 50.76% $246,917 49.04% $208,124 49.04% $159,271 51.24% $156,031
Home equity lines of
credit....................... 59,471 10.90 56,502 11.22 60,875 14.34 46,745 15.04 39,386
Commercial.................... 200,379 36.73 189,275 37.59 144,292 34.00 91,528 29.45 69,732
Construction.................. 991 0.18 2,741 0.55 1,940 0.46 2,692 0.86 988
-------- ------ -------- ------ -------- ------ -------- ------ --------
Total real estate loans...... 537,762 98.57 495,435 98.40 415,231 97.84 300,236 96.59 266,137
-------- ------ -------- ------ -------- ------ -------- ------ --------

Other loans:
Commercial.................... 1,203 0.22 724 0.15 581 0.14 807 0.26 775
Consumer...................... 6,593 1.21 7,310 1.45 8,576 2.02 9,787 3.15 10,451
-------- ------ -------- ------ -------- ------ -------- ------ --------
Total other loans............ 7,796 1.43 8,034 1.60 9,157 2.16 10,594 3.41 11,226
-------- ------ -------- ------ -------- ------ -------- ------ --------

Total loans.................... 545,558 100.00 503,469 100.00 424,388 100.00 310,830 100.00 277,363

Less:
Net deferred loan fees........ 360 446 294 240 321
Allowance for loan losses..... 7,297 6,633 4,907 4,269 4,074
-------- -------- -------- -------- --------
Total loans, net............... $537,901 $496,390 $419,187 $306,321 $272,968
======== ======== ======== ======== ========

<CAPTION>
------- ----------------------
1994
------- ----------------------
Percent
of Percent of
Total Amount Total
------- -------- ----------
<S> <C> <C> <C>
Real estate loans:
Residential(1)................ 56.26% $134,463 56.13%
Home equity lines of.......... 14.20 37,696 15.73
credit
Commercial..................... 25.14 48,087 20.07
Construction................... 0.35 0 0.00
------ -------- ------
Total real estate loans...... 95.95 220,246 91.93
------ -------- ------

Other loans:
Commercial.................... 0.28 1,262 0.53
Consumer...................... 3.77 18,063 7.54
------ ---------- ------
Total other loans............ 4.05 19,325 8.07
------ ---------- ------

Total loans.................... 100.00 239,571 100.00

Less:
Net deferred loan fees........ 332
Allowance for loan losses..... 4,130
--------
Total loans, net............... $235,109
========
</TABLE>

_____________________

(1) Includes loans held for sale.

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<PAGE>

Loan Maturity and Repricing. The following table shows the repricing dates
or contractual maturity dates as of September 30, 1999. The table does not
reflect prepayments or scheduled principal amortization.

<TABLE>
<CAPTION>
At September 30, 1999
------------------------------------------------------------------------------------
Home
Equity
Residential Line of Commercial
Loans Credit Real Estate Construction Commercial Consumer Totals
------------ --------- ----------- ------------ ---------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Amounts due:
Within one year................ $ 24,719 $ 59,471 $ 5,574 $ 991 $ 399 $ 5,406 $ 96,560

After one year:
One to three years......... 52,451 - 85,659 - 221 1,050 139,381
Three to five years........ 120,825 - 83,769 - 583 137 205,314
Five to ten years.......... 65,669 - 24,911 - - - 90,580
Ten to twenty years........ 9,047 - 466 - - - 9,513
Over twenty years.......... 4,210 - - - - - 4,210
-------- -------- -------- ------- ------ ------- --------
Total due after one year....... 252,202 - 194,805 - 804 1,187 448,998
-------- -------- -------- ------- ------ ------- --------

Total amount due: $276,921 $ 59,471 $200,379 $ 991 $1,203 $ 6,593 $545,558
======== ======== ======== ======= ====== ======= ========

Less:
Net deferred loan origination 360
costs........................
Allowance for loan losses...... 7,297
--------

Loans, net................... $537,901
========
</TABLE>

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<PAGE>

The following table presents, as of September 30, 1999, the dollar amount
of all loans contractually due or scheduled to reprice after September 30, 2000
and whether such loans have fixed interest rates or adjustable interest rates.

Due After September 30, 2000
-------------------------------------
Fixed Adjustable Total
----- ---------- -----
(In thousands)
Real Estate Loans
Residential.................. $39,711 $ 212,491 $ 252,202
Home equity lines of credit.. - - -
Commercial real estate....... 24,357 170,448 194,805
Construction................. - - -
------- --------- ---------
Total real estate loans.... 64,068 382,939 447,007
------- --------- ---------

OTHER LOANS
Commercial................... 804 - 804
Consumer..................... 1,187 - 1,187
------- --------- ---------
Total other loans.......... 1,991 - 1,991
------- --------- ---------

Total loans................... $66,059 $ 382,939 $ 448,998
======= ========= =========

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<PAGE>

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

<TABLE>
<CAPTION>
For the Nine Months
Ended September 30, For the Years Ended December 31,
------------------- --------------------------------
1999 1998 1998 1997 1996
------ ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Loans(1):
Balance outstanding at beginning of period............. $ 503,023 $ 424,094 $ 424,094 $ 310,590 $277,042

Originations:
Mortgage loans:
Residential........................................... 111,675 133,729 201,371 109,593 65,408
Commercial............................................ 32,585 60,405 71,744 60,397 32,586
Home equity lines of credit........................... 35,620 38,901 49,089 49,873 29,908
--------- --------- --------- --------- --------
Total mortgage originations.......................... 179,880 233,035 322,204 219,863 127,902
Commercial loans....................................... 921 246 689 315 274
Consumer loans......................................... 4,343 6,135 7,644 5,865 4,873
--------- --------- --------- --------- --------
Total originations................................... 185,144 239,416 330,537 226,043 133,049

Less:
Principal repayments, unadvanced funds and other, (103,116) (116,141) (162,796) (84,086) (71,964)
net...................................................
Loan securitizations................................... - (1,584) (1,584) (696) (5,295)
Sale of residential mortgage loans, principal balance.. (39,765) (65,501) (86,499) (26,992) (21,333)
Sale of student loans.................................. (163) (304) (533) (695) (531)
Loan charge-offs....................................... (11) (36) (44) (16) (259)
Change in deferred fees................................ 86 (164) (152) (54) 81
Transfers to foreclosed real estate.................... - - - - (200)
--------- --------- --------- --------- --------
Total deductions..................................... (142,969) (183,730) (251,608) (112,539) (99,501)
Net loan activity...................................... 42,175 55,686 78,929 113,504 33,548
--------- --------- --------- --------- --------
Ending balance........................................ $ 545,198 $ 479,780 $ 503,023 $ 424,094 $310,590
========= ========= ========= ========= ========
</TABLE>

- ------------------
(1) Includes loans held for sale.

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<PAGE>

Residential Mortgage Loans and Originations. We emphasize the origination
of first and second mortgages secured by one- to four-family properties
primarily within eastern Massachusetts. As of September 30, 1999, loans on
residential properties accounted for 50.8% of our total loan portfolio.

Our mortgage origination strategy is to offer a broad array of products to
meet customer needs. These products include adjustable rate loans which are held
in our portfolio, fixed rate loans sold to investors with servicing released for
fee income, and fixed rate loans sold to the secondary market where we retain
the servicing rights. During 1998, we introduced a "mini-mortgage" product to
take advantage of the high volume of mortgage refinancings. Mini-mortgages are
loans with fixed terms of up to 15 years and loan amounts up to $250,000. Mini-
mortgages are first position mortgages with loan to value ratios under 70% and
which we hold in our portfolio.

Our originations of all types of residential first mortgages amounted to
$111.7 million in the first nine months of 1999, $201.4 million in 1998, $109.6
million in 1997, and $65.4 million in 1996. Due to the low interest rate
environment, a significant portion of loans originated in 1998 and 1999 were
refinances, including refinances of our existing portfolio loans and loans in
our servicing portfolio. The average size of our residential mortgage loans
originated in 1999 was $138,454.

We utilize a variety of strategies to originate new mortgage loans
including third party alliances with mortgage lenders, dedicated mortgage
originators, branch referrals, Telebanking mortgage specialists and targeted
advertising. Our mortgage originators develop referrals from real estate
brokers, attorneys, past customers and other key referral sources. Originators
are also assigned a branch in order to process mortgage referrals made by our
branch staff. In addition, we market our mortgage capabilities in appropriate
media highlighting our toll-free Telebanking number. Our Telebanking Center has
a specialized loan staff which handle mortgage inquiries and preapprovals, and
are equipped to take telephone applications for mortgages as well as home equity
products.

We have invested in automated mortgage origination software allowing us to
take applications via a personal computer at a customer's home or office. In
addition, our software interfaces with Fannie Mae's automated underwriting
software allowing us to make loan decisions quickly and often reducing the
documentation required from the borrower. We believe our investment in
automation makes the mortgage loan process efficient and fast, thereby improving
the quality of service to our customers.

We offer a variety of mortgage products to allow customers to select the
best product for their needs. A description of the products and underwriting
guidelines are highlighted below:

Adjustable Rate Mortgage Loans. We offer a variety of adjustable rate
mortgage (ARM) products that initially adjust after one, three, five, seven or
ten years. After the initial term, ARM loans generally adjust on an annual basis
at a fixed spread over the monthly average yield on United States Treasury
securities. The adjusted rates are based on a constant maturity of one year
(constant treasury maturity index). The interest rate adjustments are generally
subject to a maximum increase of 2% per adjustment period and the aggregate
adjustment is generally

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<PAGE>

subject to a maximum increase of 6% over the life of the loan. The initial
interest rates on our ARM loans are frequently below the interest rate that we
determine by a fixed spread above the monthly constant treasury maturity index.
We originated $66.4 million in one- to four-family ARM loans in the first nine
months of 1999. At September 30, 1999, 85.6% of our residential mortgage loans
in our portfolio were ARM loans.

Generally, we offer ARM loans in amounts up to $1.0 million depending on
the loan-to-value ratio and the type of property. The loan-to-value ratio is the
loan amount divided by the lower of (a) the appraised value of the property or
(b) the purchase price of the property. The loan-to-value ratio is commonly used
by financial institutions as one measure of potential exposure to risk.

Loans on owner occupied one- to four-family homes of up to $450,000 are
generally subject to a maximum loan to value ratio of 80%. However, we may make
loans with loan to value ratios above 80% if the borrower obtains private
mortgage insurance. All loans above $500,000 require two outside appraisals and
the lower value is used to determine the loan to value ratio. On loan amounts
between $450,000 and $650,000, our maximum loan to value ratio accepted is 75%.
For loans between $650,000 and $850,000, our maximum loan to value ratio
accepted is 70%. For loan amounts over $850,000, the maximum loan to value ratio
accepted is 60%. As of September 30, 1999, the average loan size of our one- to
four-family mortgage loans held in portfolio was $174,824.

All ARM loans are underwritten using specifications set by Fannie Mae.
Generally, our ARM loans with loan balances below the Fannie Mae maximum loan
standard ($240,000 for a single-family property) are conforming loans maintained
in our portfolio. Jumbo loans (amounts above the secondary market conforming
standards) are considered non-conforming but may be saleable to other investors.
As of September 30, 1999, we had approximately $120.4 million in ARM loans in
portfolio with balances above the Fannie Mae maximum loan amount standard of
$240,000.

Fixed Rate Mortgages Sold Servicing Released. We offer a variety of fixed-
rate products that we sell to investors on a servicing released basis. These
loans are underwritten to the investors' standards and are sold to the investor
after the loan closes. Gains on sales of residential loans amounted to $534,000
of our noninterest income for the first nine months of 1999.

Fixed Rate Mortgages Sold with Servicing Retained. We are an approved
seller/servicer for both Fannie Mae and the Federal Home Loan Mortgage Corp.
(Freddie Mac). Our fixed rate loans are underwritten to comply with
Fannie Mae/Freddie Mac standards for sale to these investors.

Mini-Mortgages. During 1998, we introduced a mini-mortgage product targeted
at borrowers whose loan balances are $250,000 or less and properties with loan
to value ratios under 70% in order to take advantage of the large volume of
mortgage refinancings. The property value is determined by use of a property tax
assessment or an appraisal. These loans use a simplified loan application
similar to fixed-rate home equity loans and have lower fees than a conventional
mortgage. Applications are reviewed as if they were fixed-rate home equity loans

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<PAGE>

where income and asset information is verified and credit reports are evaluated
to ensure credit quality. Borrowers are also evaluated based on debt to income
ratios as outlined in our underwriting policy similar to our mortgage
underwriting guidelines. Terms are fixed for 10 to 15 years fully amortizing.
The rates charged on mini-mortgages are generally higher than conventional fixed
rate mortgage loans. As of September 30, 1999 mini-mortgages in our portfolio
amounted to $27.1 million or 9.8% of total residential mortgage loans.

In addition to our standard mortgage products, we offer mortgage programs
designed to address the credit needs of low- to moderate-income home mortgage
applicants, first-time home buyers and low- to moderate-income home improvement
loan applicants. We define low- to moderate-income applicants as borrowers
residing in low- to moderate-income census tracts or households with income not
greater than 80% of the median income in the county where the subject property
is located. Among the features of the low- to moderate-income home mortgage and
first-time home buyer's programs are reduced rates, lower down payments, reduced
fees and closing costs, and generally less restrictive requirements for
qualification compared to our traditional one- to four-family mortgage loans.
For instance, some of these programs currently provide for loans with up to
95% loans-to-value ratios and rates which are 25 to 75 basis points lower than
our traditional mortgage loans. During the first nine months of 1999, we
originated $14.0 million in mortgage loans to home buyers under these programs.

Fixed Rate Home Equity Loans and Second Mortgages. We offer fixed rate home
equity loans and second mortgages in amounts up to $250,000 secured by owner
occupied one- to four-family residences. The maximum term offered is 10 years.
At September 30, 1999, these loans totaled $4.1 million or 1.5% of our
residential mortgage portfolio. Generally, fixed rate home equity loans have
higher rates of interest than conventional mortgages. The underwriting terms are
similar to those used to originate first mortgages.

Home Equity Credit Lines. We offer home equity lines of credit as a
complement to our one- to four-family lending activities. We believe that
offering home equity credit lines helps to expand and create stronger ties to
our existing customer base by increasing the number of customer relationships
and providing cross-marketing opportunities. Home equity credit lines provide
adjustable-rate loans secured by a first or second mortgage on owner-occupied
one- to four-family residences located primarily in eastern Massachusetts. As of
September 30, 1999, 82.3% of our home equity credit lines were secured by first
mortgages. Home equity credit lines enable customers to borrow at rates tied to
the prime rate as reported in The Wall Street Journal. Generally, the maximum
home equity credit line we offer is $250,000. The underwriting standards
applicable to home equity credit lines generally are the same as one-to four-
family first mortgage loans, except that the combined loan-to-value ratio,
including the balance of the first mortgage, cannot exceed 80% of the appraised
or tax assessed value of the property. Generally, our home equity credit lines
have a ten-year advance period and repayment period and are renewable in five-
year increments.

Commercial Real Estate Loans. We originate commercial real estate loans
secured by properties located primarily in the Boston metropolitan area. We
generally make loans on existing properties that have identifiable cash flows.
In underwriting commercial real estate loans, we consider not only the
property's historic cash flow, but also its current and projected occupancy,
location and physical condition. We generally lend up to a maximum loan-to-value

69
<PAGE>

ratio of 80% on commercial properties and require a minimum debt coverage ratio
of 1.25%. At September 30, 1999, we had 225 loans in our commercial real estate
portfolio. The average loan size was approximately $891,000. Approximately 40%
of our $200.4 million commercial real estate portfolio was secured by property
located in the City of Boston (Suffolk County) and 20% was secured by property
in Cambridge. The remainder was secured by property located elsewhere in our
market area. Our largest loan is a commercial real estate loan with an
outstanding balance of $5.5 million at September 30, 1999 which was secured by a
commercial property located in Belmont, Massachusetts.

As of September 30, 1999, our commercial real estate portfolio was
collateralized by a variety of property types with loan to value ratios at
origination, as shown below:

<TABLE>
<CAPTION>
Percentage of
Commercial Real Estate Weighted Average Loan
Loan Balance Portfolio to Value at Origination
------------ ---------------------- -----------------------
(Dollars in thousands)
<S> <C> <C> <C>
Multi-Unit Residential (5+ units) $ 85,924 42.9% 59.0%
Mixed Use - Office/Retail 42,510 21.2 60.0
Office Buildings 26,234 13.1 62.0
Retail 20,541 10.3 56.8
Mixed Use - Residential/Commercial 9,028 4.5 57.2
Other 16,142 8.0 53.3
-------- -----
Total $200,379 100.0% 58.8%
======== =====
</TABLE>

Commercial real estate lending involves additional risks compared with
one- to four-family residential lending. Payments on loans secured by commercial
real estate properties often depend on the successful management of the
properties, on the amount of rent from the properties, or on the level of
expenses needed to maintain the properties. Repayment of such loans may
therefore be adversely affected by conditions in the real estate market or the
general economy. Also, commercial real estate loans typically involve large loan
balances to single borrowers or groups of related borrowers. In order to
mitigate this risk, we monitor our loan concentration and our loan policies
generally limit the amount of loans to a single borrower or group of borrowers.
We also utilize the services of an outside consultant to conduct on-site credit
quality reviews of the commercial loan portfolio.

Because of increased risks associated with commercial real estate loans,
our commercial real estate loans generally have higher rates and shorter
maturities than residential mortgage loans. We usually offer commercial real
estate loans at adjustable rates tied to the prime rate or to yields on U.S.
Treasury securities. The terms of such loans generally do not exceed 25 years.

We closely monitor the performance of our commercial real estate portfolio.
We maintain an internal risk rating system that classifies each loan into one of
the following eight categories:

1. Nominal Risk for our best rated credits
2. Very Satisfactory
3. Satisfactory

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<PAGE>

4. Generally Satisfactory
5. Close Monitoring
6. Substandard
7. Doubtful
8. Loss

At September 30, 1999, all commercial real estate loans were rated Generally
Satisfactory or better. No commercial real estate loans had outstanding
delinquent payments as of that date.

Commercial Loans. We make loans to businesses in our market area. While the
number and amount of business loans is small in relation to our total portfolio,
we intend to significantly expand our business lending activities in the future.

Commercial loans generally are limited to terms of five years or less.
Substantially all have variable interest rates tied to the prime rate. Whenever
possible, we collateralize these loans with a lien on commercial real estate, or
alternatively, with a lien on business assets and equipment. We also generally
require the personal guarantee of the business owner. Interest rates on
commercial loans generally have higher yields than residential or commercial
real estate loans.

Commercial loans are generally considered to involve a higher degree of
risk than residential or commercial real estate loans because the collateral may
be in the form of intangible assets and/or inventory subject to market
obsolescence. Commercial loans may also involve relatively large loan balances
to single borrowers or groups of related borrowers, with the repayment of such
loans typically dependent on the successful operation and income stream of the
borrower. Such risks can be significantly affected by economic conditions. In
addition, business lending generally requires substantially greater oversight
efforts by our staff compared to residential or commercial real estate lending.
In this regard, we have recently hired two senior commercial banking officers
who have extensive experience in business banking at large Boston based
commercial banks who will work to enhance our operational infrastructure and our
loan production capabilities as well as introduce new underwriting techniques
for commercial loans which will enable us to approve such loans more quickly and
to assess more accurately the credit risk associated with such lending.

Consumer Loans. We offer a variety of consumer loans to retail customers in
the communities we serve in order to increase the yield on our loan portfolio.
Examples of our consumer loans include:

. education loans;
. new and used automobile loans;
. secured passbook loans;
. credit lines tied to deposit accounts to provide overdraft
protection; and
. unsecured personal loans.

At September 30, 1999, the consumer loan portfolio totaled $6.6 million or
1.21% of total loans.

71
<PAGE>

Consumer loans are generally originated at higher interest rates than
residential and commercial mortgage loans but they also generally tend to have a
higher credit risk than residential loans because they are usually unsecured or
secured by rapidly depreciable assets. Despite these risks, our level of
consumer loan delinquencies generally has been low. No assurance can be given,
however, that our delinquency rate on consumer loans will continue to remain low
in the future, or that we will not incur future losses on these activities.

Education loans currently represent the largest portion of our consumer
loan portfolio, $4.0 million, 60.7% of total consumer loans at September 30,
1999. There are two types of education loans in our portfolio. First, we have
$3.4 million, as of September 30, 1999, of loans guaranteed by The Education
Resources Institute, Inc. The Education Resources Institute is a tax exempt
corporation whose principal service is to function as a guarantor of student
loans disbursed by participating lending institutions. In its capacity as
guarantor, The Education Resources Institute is required to reimburse us for
unpaid principal and interest on qualifying defaulted loans. The Education
Resources Institute is subject to various regulatory requirements administered
by state banking agencies, including the Massachusetts Division of Banks. Until
1995, we made education loans with The Education Resources Institute guarantees.
In February, 1995, we discontinued this program. The $3.4 million represents the
remaining balance of the The Education Resources Institute-guaranteed loans that
had been made prior to that date. The balances of our The Education Resources
Institute-guaranteed portfolio at the end of 1998, 1997, and 1996 were $4.1
million, $5.1 million and $6.0 million respectively. The Education Resources
Institute-guaranteed education loans have also represented a significant portion
of our total loan delinquencies. At September 30, 1999, $475,000 of loans The
Education Resources Institute-guaranteed loans were more than 90 days
delinquent. See "Allowance for Loan Losses".

The other portion of our education loan portfolio consists of loans
guaranteed by Student Loan Marketing Association, Inc. (Sallie Mae). This
amounted to $600,000 at September 30, 1999. Under a program sponsored by Sallie
Mae, we originate and disburse funds to students for educational expenses while
they are in school. Prior to the loan entering full repayment, we sell the loans
to Sallie Mae. We originated total student loans of $200,000 during the first
nine months of 1999.

We make loans for automobiles, both new and used, directly to the
borrowers. The required repayment schedule of our automobile loans is generally
limited to five years. The other terms of these loans vary depending on the age
and condition of the collateral. We obtain a title lien on the vehicle and we
require collision insurance policies on all auto loans. At September 30, 1999,
our automobile loans totaled $600,000.

We make loans for up to 90.0% of the amount of a borrower's savings account
or certificate of deposit balance. These passbook loans totaled $1.5 million at
September 30, 1999.

Loan Approval Procedures and Authority. Our lending policies provide that
our residential mortgage and home equity underwriting departments may review and
approve one- to four-family mortgage loans and home equity loans and lines up to
prescribed limits as follows:

. Residential mortgage loans up to but not exceeding $500,000 that
meet underwriting standards set forth in our policies;

. Mini mortgage loans up to $250,000 that meet our underwriting
standards;

72
<PAGE>

. Home equity loans or lines for owner occupied one to four
properties up to $250,000 that conform to our underwriting
guidelines; and

. Home equity loans or lines up to $100,000 for vacation and non
owner occupied properties.

All loan applications that exceed the above mentioned amounts or have
exceptions to our policies require approval of either the Executive Committee of
the Board of Directors or approval of the Credit Committee.

The following generally describes our current lending procedures for
residential mortgages and home equity lines and loans. Upon receipt of a
completed loan application from a prospective borrower, we order a credit report
and verify other information. If necessary, we obtain additional financial or
credit related information. We require an appraisal for all mortgage loans,
except for home equity loans or lines and mini-mortgages where tax assessed
values may be used to determine the loan to value ratio. Appraisals are
performed by a licensed or certified third-party appraisal firms and are
reviewed by our lending department. We require title insurance on all mortgage
loans, except for home equity lines and loans and mini-mortgages that do not
exceed $250,000. For these loans, we require evidence of previous title
insurance.

We require borrowers to obtain hazard insurance and we may require
borrowers to obtain flood insurance prior to closing. For properties with a
private sewage disposal system, we also require evidence of compliance with
applicable law on residential mortgage loans, except mini-mortgages. Further, we
require borrowers to advance funds on a monthly basis together with each payment
of principal and interest to a mortgage escrow account from which we make
disbursements for items such as real estate taxes, flood insurance and private
mortgage insurance premiums, if required.

Commercial real estate loans are approved through the Bank's Credit
Committee process. The Credit Committee consists of the President, the Executive
Vice President, the Chief Financial Officer, certain other senior lending and
credit officers, as well as a non-management member of the Board of Directors.
The Credit Committee has authority to approve individual loans and modifications
up to $3.0 million, provided they are not part of a relationship that exceeds
$6.0 million. Any loan exceeding $3.0 million or any loan in a relationship
greater than $6.0 million requires approval by both the Credit Committee and the
Executive Committee of the Board of Directors.

On an exception basis, commercial real estate loans less than $250,000 may
be approved outside the Committee process with the dual signatures including the
President, Chief Financial Officer or Senior Vice-President, Commercial Lending,
and the Vice-President Loan Officer. These loans must also be ratified at the
next Executive Committee meeting.

The Credit Committee meeting minutes detail all approved loans and are
reviewed at least monthly by the Executive Committee and monthly by the Board of
Directors.

73
<PAGE>

Asset Quality

One of our key operating objectives has been and continues to be the
achievement of a high level of asset quality. We maintain a large proportion of
loans secured by residential one- to four-family properties and commercial
properties, we set sound credit standards for new loan originations and we
follow careful loan administration procedures. These practices and relatively
favorable economic and real estate market conditions have resulted in
historically low delinquency ratios and, in recent years, a low level of
non-performing assets. These factors have helped strengthen our financial
condition.

Delinquent Loans and Foreclosed Assets. Our policies require that
management continuously monitor the status of the loan portfolio and report to
the Board of Directors on a monthly basis. These reports include information on
delinquent loans and foreclosed real estate, as well as our actions and plans to
cure the delinquent status of the loans and to dispose of the foreclosed
property.

The following table presents information regarding non-accrual mortgage and
consumer and other loans, accruing loans delinquent 90 days or more, and
foreclosed real estate as of the dates indicated.

Cambridgeport Bank had non-performing assets of $507,000 and $963,000 at
September 30, 1999 and December 31, 1998, respectively.

74
<PAGE>

The following table presents information regarding non-accrual mortgage and
consumer and other loans, accruing loans delinquent 90 days or more, and
foreclosed real estate as of the dates indicated. At September 30, 1999 and
December 31, 1998, 1997, and 1996, we had $32,000, $290,000, $215,000, and
$212,000, respectively, of non-accrual loans. If all non-accrual loans had been
performing in accordance with their original terms and had been outstanding from
the earlier of the beginning of the period or origination, we would have
recorded interest income on these loans of approximately $20,000 for the nine
month period in 1998. In 1999, there would have been no impact.

<TABLE>
<CAPTION>
At September 30, At December 31,
---------------- ----------------------------------------
1999 1998 1997 1996 1995 1994
---------------- ---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-accrual real estate loans
Residential............................... $ 32 $ 290 $ 201 $ 212 $ 667 $ 916
Home equity lines of credit............... - - 14 - 51 -
Commercial real estate.................... - - - - 104 124
Construction and loans.................... - - - - - -
----- ------ ------ ------ ------ ------

Total non-accrual real estate loans........ 32 290 215 212 822 1,040
===== ====== ====== ====== ====== ======

Other loans:
Commercial................................ - - - - - -
Consumer.................................. - - - - - -
- - - - - -
----- ------ ------ ------ ------ ------
Total non-accrual consumer and other loans.. - - - - - -
===== ====== ====== ====== ====== ======

Accruing loans delinquent 90 days or more... 475 673 574 597 544 680
===== ====== ====== ====== ====== ======

Total non-performing loans.................. 507 963 789 809 1,366 1,720
===== ====== ====== ====== ====== ======

Foreclosed real estate, net................. - - - 94 105 43
===== ====== ====== ====== ====== ======

Total non-performing assets 507 963 789 903 1,471 1,763
===== ====== ====== ====== ====== ======

Non-performing loans to total loans......... 0.09% 0.19% 0.19% 0.29% 0.49% 0.72%
===== ====== ====== ====== ====== ======

Non-performing assets to total assets....... 0.07% 0.14% 0.13% 0.16% 0.29% 0.37%
===== ====== ====== ====== ====== ======
</TABLE>

Non-performing assets totaled $507,000 at September 30, 1999, including $475,000
of delinquent student loans. The non-performing asset totals at December 31,
1998 and 1997 were $963,000, and $789,000 respectively. Of these totals,
$672,000 and $564,000 respectively represented student loans.

Our non-accrual policy distinguishes between several different loan types.
For student loans guaranteed by The Education Resources Institute and first
mortgage loans insured or guaranteed by the FHA or VA, we continue to accrue
interest even if the principal and interest payments are more than 90 days past
due. For commercial, commercial real estate, construction, and land loans, we
stop accruing income when interest or principal payments are 90 days in arrears.
We may stop accruing income on such loans earlier than 90 days when we consider
the timely collectibility of interest or principal to be doubtful. For
residential mortgage loans, home equities, and consumer loans, we may continue
to accrue interest income beyond 90 days if the loan is well secured and we
determine that the ultimate collection of all principal and interest is not in
doubt.

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<PAGE>

When we designate nonaccrual loans, we reverse all outstanding interest
that we had previously credited. If we receive a payment on a non-accrual loan,
we may recognize that payment as interest income, if we determine that the
ultimate collectibility of principal is no longer in doubt. However, such loans
would remain on non-accrual status. We return a nonaccrual loan to accrual
status when the borrower has made all past due payments and we determine that
ultimate collection of principal is no longer in doubt.

We define impaired loans as all non-accrual commercial real estate and
commercial loans. Impaired loans are individually assessed to determine whether
the carrying value exceeds the fair value of the collateral or the present value
of the cash flow produced by the underlying collateral. Smaller balance
homogeneous loans, such as residential mortgage loans and consumer loans, are
collectively evaluated for impairment. We had no loans classified as impaired at
September 30, 1999. At December 31, 1998 and 1997, impaired loans totaled
$290,000 and $215,000, respectively. At the end of 1996, impaired loans total
was $993,000, consisting of about $426,000 in commercial real estate loans and
the remainder in residential mortgages. At September 30, 1999 and December 31,
1998, 1997, and 1996, we had no loans classified at troubled debt restructuring,
as defined in SFAS No. 15.

Foreclosed real estate consists of property we have acquired through
foreclosure or deed in lieu of foreclosure. Foreclosed real estate properties
are initially recorded at the lower of the recorded investment in the loan or
fair value. Thereafter, we carry foreclosed real estate at fair value less
estimated selling costs. As of September 30, 1999, we had no foreclosed real
estate.

76
<PAGE>

Allowance for Loan Losses. The following table presents the activity in our
allowance for loan losses and other ratios at or for the dates indicated.

<TABLE>
<CAPTION>
At or for Nine months
ended September 30, At or for Years Ended December 31,
--------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of period............... $ 6,633 $ 4,907 $ 4,907 $ 4,269 $ 4,074 $ 4,130 $ 4,170

Charge-offs:
Residential............................... - - - - (136) (160) (186)
Commercial real estate.................... - - - - (93) - -
Home equity lines of credit............... - - - - - - (29)
Commercial................................ - - - - - - -
Consumer.................................. (11) (36) (44) (16) (30) (3) (32)
-------- -------- -------- -------- -------- -------- --------
Total charge-offs..................... (11) (36) (44) (16) (259) (163) (247)
-------- -------- -------- -------- -------- -------- --------

Recoveries:
Residential............................... 5 2 2 27 - 3 41
Commercial real estate.................... 106 3 3 27 - - 148
Construction.............................. - - - - - 3 -
Commercial loans.......................... - - - - - - 7
Other consumer loans...................... 2 2 5 - 4 1 11
-------- -------- -------- -------- -------- -------- --------
Total recoveries...................... 113 7 10 54 4 7 207
-------- -------- -------- -------- -------- -------- --------

Net (charge-offs) recoveries................. 102 (29) (34) 38 (255) (156) (40)

Provision for possible loan losses........... 562 1,183 1,760 600 450 100 -
-------- -------- -------- -------- -------- -------- --------

Balance at end of period..................... $ 7,297 $ 6,061 $ 6,633 $ 4,907 $ 4,269 $ 4,074 $ 4,130
======== ======== ======== ======== ======== ======== ========

Total loans receivable(1).................... $543,465 $476,245 $498,194 $420,611 $306,388 $272,758 $235,498
======== ======== ======== ======== ======== ======== ========

Average loans outstanding.................... $523,761 $453,891 $462,528 $367,471 $285,406 $250,594 $217,704
======== ======== ======== ======== ======== ======== ========

Allowance for loan losses as a 1.34% 1.27% 1.33% 1.17% 1.39% 1.49% 1.75%
percent of total loans ======== ======== ======== ======== ======== ======== ========
receivable(1).........................

Net loans (charged off) recovered 0.02% (0.01)% (0.01)% 0.01% (0.09)% (0.06)% (0.02)%
as a percent of average loans ======== ======== ======== ======== ======== ======== ========
outstanding.......................
</TABLE>

_______________

(1) Does not include loans held for sale or passbook loans or deferred fees.

77
<PAGE>

Our evaluation of the loan portfolio includes the review of all loans on
which the collection of principal might be at risk. We consider the following
factors as part of this evaluation: our historical loan loss experience, known
and inherent risks in the loan portfolio, increases in categories with higher
loss potential such as commercial real estate loans and jumbo loans, the
estimated value of the underlying collateral and current economic and market
trends. There may be other factors that may warrant our consideration in
maintaining the allowance at a level sufficient to cover probable losses.
Although we believe that we have established and maintained the allowance for
loan losses at adequate levels, future additions may be necessary if economic,
real estate and other conditions differ substantially from the current operating
environment.

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

For the nine months ended September 30, 1999, we increased our allowance
for loan losses through a $562,000 provision for loan losses based on our
evaluation of the items discussed above. We believe that the current allowance
for loan losses accurately reflects the level of risk in the current loan
portfolio. To determine the adequacy of the allowance, we look at historical
trends in the growth and composition of our loan portfolio, among other factors.
The most significant trend over the last five years is the growth in our
commercial real estate loan portfolio, which has risen from $48.1 million at the
end of 1994 to $200.4 million at September 30, 1999.

We believe that, despite using prudent underwriting standards, commercial
real estate loans contain higher loss potential than one- to four-family
residential mortgages.

See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-for the Nine Months Ended September 30, 1999 and 1998 and
the Years Ended December 31, 1998, 1997 and 1996-Provision for Loan Losses."

78
<PAGE>

Allocation of Allowance for Loan Losses. The following tables set forth the
allowance for loan losses allocated by loan category, the total loan balances by
category, and the percent of loans in each category to total loans indicated.

<TABLE>
<CAPTION>
At September 30,
-------------------------------------------------------------------------------
1999 1998
-------------------------------------- ------------------------------------
Percent of Percent of
loans in loans in
Loan Each Loan Each
Balances Category to Balances Category to
by Total by Total
Loan Category Amount Category Loans Amount Category Loans
- ------------- ------- -------- ----------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Real estate - mortgage:
Residential(1)....................... $2,191 $334,856 61.62% $1,917 $280,385 58.87%
Commercial........................... 2,833 202,380 37.24 2,647 189,043 39.69
Commercial loans...................... 18 1,204 0.22 7 488 0.11
Consumer loans(2)..................... 55 5,025 0.92 70 6,329 1.33
Unallocated........................... 2,200 - - 1,420 - -
------ -------- ------ ------ -------- -------
Total allowance for loan losses...... $7,297 $543,465 100.00% $6,061 $476,245 100.00%
====== ======== ====== ====== ======== =======

<CAPTION>
At December 31,
-------------------------------------------------------------------------------
1998 1997
-------------------------------------- ------------------------------------
Percent of Percent of
loans in loans in
Loan Each Loan Each
Balances Category to Balances Category to
by Total by Total
Loan Category Amount Category Loans Amount Category Loans
- ------------- ------ -------- ----------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Real estate - mortgage:
Residential(1)....................... $2,014 $298,485 59.91% $1,780 $266,075 63.26%
Commercial........................... 2,703 193,046 38.75 1,908 146,806 34.90
Commercial loans...................... 11 724 0.15 9 581 0.14
Consumer loans(2)..................... 65 5,939 1.19 79 7,149 1.70
Unallocated........................... 1,840 - - 1,131 - -
------ -------- ------ ------ -------- ------
Total allowance for loan losses...... $6,633 $498,194 100.00% $4,907 $420,611 100.00%
====== ======== ====== ====== ======== ======
</TABLE>

<TABLE>
<CAPTION>
At December 31,
----------------------------------------------------------------------------------------------------
1996 1995 1994
---------------------------------- -------------------------------- -----------------------------
Percent of Percent of Percent of
loans in loans in loans in
Loan Each Loan Each Loan Each
Balances Category to Balances Category to Balances Category to
by Total by Total by Total
Loan Category Amount Category Loans Amount Category Loans Amount Category Loans
- ------------- ------ -------- ----------- ------ -------- ----------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate - mortgage:
Residential(1)............. $1,515 $203,053 66.27% $1,488 $191,254 70.12% $1,332 $168,917 71.73%
Commercial................. 1,225 94,220 30.75 943 70,720 25.93 693 48,656 20.66
Commercial loans............ 12 807 0.27 12 775 0.28 19 1,262 0.53
Consumer loans(2)........... 90 8,308 2.71 116 10,009 3.67 171 16,663 7.08
Unallocated................. 1,427 - - 1,515 - - 1,915 - -
------ -------- ------ ------ -------- ------ ------ -------- ------
Total allowance for loan
losses.................... $4,269 $306,388 100.00% $4,074 $272,758 100.00% $4,130 $235,498 100.00%
====== ======== ====== ====== ======== ====== ====== ======== ======
</TABLE>

_________________________
(1) Includes home equity lines of credit, excludes loans held for sale.
(2) Excluded passbook loans.

79
<PAGE>

Investment Activities

The Board of Directors reviews and approves our investment policy on an
annual basis. The President, Chief Financial Officer and Investment Officer, as
authorized by the Board, implement this policy based on the established
guidelines within the written policy, and other established guidelines,
including those set periodically by the Asset Liability Management Committee.

Our investment policy is designed primarily to manage the interest rate
sensitivity of our assets and liabilities, to generate a favorable return
without incurring undue interest rate and credit risk, to complement our lending
activities and to provide and maintain liquidity within the range established by
policy. In determining our investment strategies, we consider our interest rate
sensitivity or "gap" position, yield, credit risk factors, maturity and
amortization schedules, and other characteristics of the securities to be held.

Massachusetts chartered savings banks have authority to invest in various
types of assets, including U.S. Treasury obligations, securities of various
federal agencies, mortgage-backed securities, certain certificates of deposit of
insured financial institutions, repurchase agreements, overnight and short term
loans to other banks, corporate debt instruments, and equity securities.

Liquidity

We calculate liquidity by taking the total of:

. our cash;
. cash we have in other banks;
. our money market investments;
. U.S. Government Securities;
. Mortgage backed securities guaranteed by the U.S. Government or
Agencies;
. Securities with remaining maturities of less than thirty days;

and subtracting a percentage of maturing CDs and other short term liabilities.

Our policies provide that we shall attempt to maintain liquidity at 7% to
20% of total assets. At September 30, 1999 our liquidity ratio was 9.1% of total
assets.

Investment Portfolio

Securities can be classified as trading, held to maturity, or available for
sale at the date of purchase. All of our securities are currently classified as
"available for sale." The weighted average annualized yield of the portfolio is
6.12% as of September 30, 1999. We believe the credit quality of the portfolio
is high, with 75% of the portfolio invested in U.S. Government, U.S. Agency, or
U.S. Agency guaranteed mortgage backed securities. Our mortgage backed security
portfolio is comprised predominately of adjustable rate securities in addition
to 5-year and 7-year balloon securities. Balloon securities are so named because
the entire principal balance is due prior to completing the normal 30 year
amortization of the underlying mortgages. The remainder of

80
<PAGE>

our portfolio, approximately 25%, is invested in corporate bonds with maturities
of less than five years. Corporate Bonds must be rated investment grade
according to policy guidelines. The amortized cost of the securities that will
mature or reprice within five years is $96.8 million or 75.1%. For information -
Carrying Values, Yields and Maturities."

Finally, we own stock of the Federal Home Loan Bank, common stock of a
local financial institution and other equity securities also classified as
available for sale.

81
<PAGE>

Investment Portfolio. The following table sets forth the composition of
our investment securities portfolio at the dates indicated.

<TABLE>
<CAPTION>
At September 30, At December 31,
--------------------- ---------------------------------------------------------------------
1999 1998 1997 1996
--------------------- -------------------- --------------------- ---------------------
Amortized Market Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value Cost Value
--------- --------- --------- -------- --------- -------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment securities:
U.S. Government securities....... $ 2,974 $ 2,973 $ - $ - $ 2,004 $ 2,008 $ 70,596 $ 70,527
Federal agency securities....... 56,970 55,845 55,516 55,734 53,060 53,262 28,633 28,645
Other debt securities........... 31,918 31,892 34,156 34,419 43,037 43,218 57,176 57,222
--------- --------- --------- --------- --------- --------- --------- ---------
Total investment
securities................. 91,862 90,710 89,672 90,153 98,101 98,488 156,405 156,394
--------- --------- --------- --------- --------- --------- --------- ---------

Mortgage-backed and
mortgage-related securities:
Ginnie Mae...................... 14,235 14,118 18,890 18,836 16,762 16,796 11,764 11,697
Fannie Mae...................... 11,394 11,342 16,516 16,755 17,298 17,391 16,626 16,771
Freddie Mac..................... 11,347 11,339 12,773 13,004 19,289 19,388 16,934 16,871
Other........................... - - 116 117 766 768 1,323 1,326
--------- --------- --------- --------- --------- --------- --------- ---------
Total mortgage-backed and
mortgage-related
securities.................. 36,976 36,799 48,295 48,712 54,115 54,343 46,647 46,665
--------- --------- --------- --------- --------- --------- --------- ---------

Asset-backed securities.......... - - - - - - 778 781

Marketable equity
securities.................... 1,260 6,391 1,262 5,964 3,069 6,790 3,048 6,533

SBLI stock....................... 1,934 1,934 1,934 1,934 1,934 1,934 1,934 1,934

Federal Home Loan Bank
stock......................... 4,452 4,452 3,879 3,879 3,062 3,062 3,062 3,062
--------- --------- --------- --------- --------- --------- --------- ---------
Total investment
securities.................. $136,484 $140,286 $145,042 $150,642 $160,281 $164,617 $211,874 $215,369
========= ========= ========= ========= ========= ========= ========= =========

<CAPTION>
At December 31,
----------------------------------------------
1995 1994
----------------------- --------------------
Amortized Market Amortized Market
Cost Value Cost Value
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Investment securities:
U.S. Government securities....... $ - $ - $ 57,386 $ 56,694
Federal agency securities....... 43,059 43,609 23,650 23,679
Other debt securities........... 26,598 26,796 73,022 71,954
-------- -------- -------- --------
Total investment
securities.................. 69,657 70,405 154,058 152,327
-------- -------- -------- --------
Mortgage-backed and
mortgage-related securities:
Ginnie Mae...................... 2,310 2,307 2,003 1,803
Fannie Mae...................... 27,089 27,414 4,869 4,776
Freddie Mac..................... 41,649 41,622 15,645 15,332
Other........................... 989 1,002 1,311 1,252
-------- -------- -------- --------
Total mortgage-backed and
mortgage-related
securities................... 72,037 72,345 23,828 23,163
-------- -------- -------- --------

Asset-backed securities.......... 1,092 1,111 - -

Marketable equity
securities.................... 14,008 16,685 7,760 9,734

SBLI stock....................... 1,934 1,934 1,934 1,934

Federal Home Loan Bank
stock......................... 2,312 2,312 2,312 2,312
-------- -------- -------- --------
Total investment
securities.................. $161,040 $164,792 $189,892 $189,470
======== ======== ======== ========
</TABLE>

82
<PAGE>

Mortgage-Backed Securities and Mortgage-Related Securities. The following
table sets for the amortized cost and fair value of our mortgage-backed and
mortgage-related securities, which are classified as available for sale or held
to maturity as of the dates indicated. Since 1994, all mortgage-backed and
mortgage-related securities have been classified as available for sale.

<TABLE>
<CAPTION>
At September 30, At December 31,
---------------------------------------------------------------------------------------------------
1999 1998 1997
-------------------------------- ------------------------------- -------------------------------
Percent Percent Percent
Amortized of Market Amortized of Market Amortized of Market
Cost Total(1) Value Cost Total(1) Value Cost Total(1) Value
--------- -------- --------- --------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-backed and
mortgage-related securities
available for sale........
Ginnie Mae................. $14,235 38.50% $14,118 $18,890 39.11% $18,836 $16,762 30.97% $16,796
Fannie Mae................ 11,394 30.81 11,342 16,516 34.20 16,755 17,298 31.97 17,391
Freddie Mac............... 11,347 30.69 11,339 12,773 26.45 13,004 19,289 35.64 19,388
Other..................... - 0.00 - 116 0.24 117 766 1.42 768
------- ------- ------- ------- ------- ------- ------- ------- -------
Total mortgage-backed
and mortgage related
securities............ $36,976 100.00% $36,799 $48,295 100.00% $48,712 $54,115 100.00% $54,343
======= ======= ======= ======= ======= ======= ======= ======= =======

<CAPTION>
At December 31,
---------------------------------------------------------------------------------------------------
1996 1995 1994
------------------------------- ------------------------------- -------------------------------
Percent Percent Percent
Amortized of Market Amortized of Market Amortized of Market
Cost Total(1) Value Cost Total(1) Value Cost Total(1) Value
--------- ------- -------- --------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-backed and
mortgage-related securities
available for sale........
Ginnie Mae................... $11,764 25.22% $11,697 $ 2,310 3.21% $ 2,307 - 0.00% $ -
Fannie Mae.................. 16,626 35.64 16,771 27,089 37.60 27,414 - 0.00 -
Freddie Mac................. 16,934 36.30 16,871 41,649 57.82 41,622 - 0.00 -
Other....................... 1,323 2.84 1,326 989 1.37 1,002 1,311 100.00 1,252
------- ------- ------- ------- ------- ------- ----- ------- -------
Total mortgage-backed
and mortgage- related
securities.............. $46,647 100.00% $46,665 $72,037 100.00% $72,345 1,311 100.00% $ 1,252
======== ======= ======= ======= ======= ======= ===== ======= =======
</TABLE>

<TABLE>
<CAPTION>
At December 31,
---------------------------------
1994
---------------------------------
Percent
Amortized of Market
Cost Total(1) Value
--------- -------- ------
<S> <C> <C> <C>
Mortgage-backed and mortgage-
related securities held to maturity..
Ginnie Mae............................ 2,003 8.90% 1,803
Fannie Mae............................ 4,869 21.62% 4,776
Freddie Mac........................... 15,645 69.48% 15,332
Other................................. - 0.00% -
------ ------- ------
Total mortgage-backed and
mortgage related securities...... 22,517 100.00% 21,911
====== ======= ======
</TABLE>

83
<PAGE>

Investment Portfolio Maturities. The composition and maturities of the
Investment securities portfolio (debt securities) and the mortgage-backed
securities portfolio at September 30, 1999 are summarized in the following
table. Maturities are based on the final contractual payment dates, and do not
reflect the impact of prepayments or redemptions that may occur.

<TABLE>
<CAPTION>
More than One Year More than Five Years
One year or Less through Five Years through Ten Years More than Ten Years
--------------------- --------------------- --------------------- ---------------------
Weighted Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield Cost Yield
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment securities available
for sale:
U.S. Government securities...... $ 2,974 4.51% $ - 0.00% $ - 0.00% $ - 0.00%
Federal agency securities....... 2,984 4.83 48,974 5.95 5,012 7.08 - 0.00
Other debt securities........... 9,962 6.10 21,956 6.24 - 0.00 - 0.00
------- ------- ------ -------
Total investment securities.. 15,920 5.56 70,930 6.04 5,012 7.08 - 0.00
------- ------- ------ -------

Mortgage-backed securities
available for sale:
Ginnie Mae.................... - 0.00 - 0.00 - 0.00 14,235 5.84
Fannie Mae.................... 301 6.51 7,257 6.41 801 7.34 3,035 6.31
Freddie Mae................... 61 7.00 2,325 6.03 1,206 7.09 7,755 6.76
------- ------- ------ -------
Total mortgage-back securities.. 362 6.59 9,582 6.32 2,007 7.19 25,025 6.19
------- ------- ------ -------

Total.......................... $16,282 5.59 $80,512 6.07 $7,019 7.11 $25,025 6.19
======= ======= ====== =======

<CAPTION>
Total Securities
--------------------------------
Weighted
Amortized Market Average
Cost Value Yield
---------- ---------- ----------
<S> <C> <C> <C>
Investment securities available
for sale:
U.S. Government securities......
Federal agency securities....... $ 2,974 $ 2,973 4.51%
Other debt securities...........
56,970 55,845 5.99
Total investment securities..
31,918 31,892 6.20
-------- --------
Mortgage-backed securities 91,862 90,710 6.01
available for sale: -------- --------
Ginnie Mae....................
Fannie Mae....................
Freddie Mae...................

Total mortgage-back securities.. 14,235 14,118 5.84
11,394 11,342 6.45
11,347 11,339 6.65
Total.......................... -------- --------
Total mortgage-back 36,976 36,799 6.28
securities..................... -------- --------

Total.......................... $128,838 $127,509 6.09
======== ========
</TABLE>

84
<PAGE>

Sources of Funds

Deposits, scheduled amortization and prepayments of loan principal and
mortgage-backed securities, maturities and calls of investments securities and
funds provided by operations are our primary sources of funds for use in
lending, investing and for other general purposes. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

Deposits. We offer a variety of deposit products to meet the needs of
retail and business customers. We currently offer non-interest bearing demand
accounts, interest bearing demand accounts (NOWs), savings passbook and
statement accounts, money market accounts and certificates of deposits.

Deposit products are developed to meet the needs of our market. For
instance, we introduced the Treasury Index Account in October, 1987 to capture
investment dollars of consumers and businesses. The Treasury Index Account is a
savings account where the rate offered on monthly average balances over $25,000
is based on the three month U.S. Treasury bill rate. Currently, the Treasury
Index Account can only be opened by customers who maintain a personal interest
bearing checking account or business demand deposit account. We also offer a
Kids Bank Club savings passbook account targeted at children under 13 years of
age in an effort to teach children the value of saving money at an early age.

We offer other specially packaged deposit products to encourage broad
relationships. Our Appreciation Now account requires a minimum of $10,000 in
various deposit accounts to waive monthly maintenance charges and offers
customers premium rates on selected certificate of deposit accounts. We waive
monthly maintenance fees on our Real Checking Account (an interest bearing
checking account) if mortgage or home equity loan payments are automatically
deducted from the Real account. These and other products have enabled us to
develop multiple account relationships with customers.

Our deposit flows are influenced by a number of factors including: general
and local economic conditions, the perceived strength of the stock and stock
mutual fund market, prevailing interest rates and competition. Our deposits are
primarily obtained from areas surrounding our offices. To attract and retain
deposits, we utilize a strategy that incorporates competitive pricing with high
quality service and the development of long term relationships. We determine
our deposit rates by evaluating our competition's pricing, the cost of Federal
Home Loan Bank borrowings, rates on U.S. Treasury securities and other related
funds.

As of September 30, 1999, demand deposits, NOW deposits, savings, and money
market accounts represented 45.5% of total deposits. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Analysis of Net Interest Income" for information relating to the average
balances and costs of our deposit accounts for the years ended December 31,
1998, 1997, and 1996.

85
<PAGE>

Deposit Distribution Weighted Average. The following table sets for the
distribution of our deposit accounts, by account type, at the dates indicated.

At December 31,
-------------------------------------------------------------
For the Nine Months Ended
September 30, 1999 1998 1997
---------------------------- ------------------------------- -----------------------------
Weighed Weighed Weighed
Average Average Average
Amount Percent Rates Amount Percent Rates Amount Percent Rates
---------- ------- --------- ----------- ------- --------- ----------- ------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand deposits (1)................... $ 32,294 5.42% 0.00% $ 30,742 5.42% 0.00% $ 23,600 4.53% 0.00%
NOW deposits.......................... 42,977 7.21 1.38 41,546 7.31 1.50 35,061 6.74 1.69
Savings deposits...................... 54,006 9.06 2.03 53,560 9.43 2.18 54,281 10.43 2.28
Money market deposits................. 142,077 23.83 3.94 132,219 23.27 3.71 93,712 18.01 3.79
-------- ------- -------- ------- -------- ------
Total non-certificated accounts.. 271,354 45.52 2.69 258,067 45.43 2.60 206,654 39.71 2.60

Certificate of deposit
Due within 1 year................ 218,530 36.66 4.78 252,594 44.46 5.33 203,194 39.05 5.58
Over 1 year through 3 years...... 103,684 17.39 5.20 54,615 9.61 5.43 105,126 20.20 5.94
Over 3 years..................... 2,569 0.43 5.36 2,799 0.50 5.38 5,383 1.04 5.84
-------- ------- -------- ------- -------- ------
Total certificate accounts.. 324,783 54.48 4.92 310,008 54.57 5.35 313,703 60.29 5.70
-------- ------- -------- ------- -------- ------

Total................................. $596,137 100.00% 3.90% $568,075 100.00% 4.10% $520,357 100.00% 4.46%
======== ======= ======== ======= ======== ======

<CAPTION> At December 31,
-----------------------------

1996
-----------------------------
Weighed
Average
Amount Percent Rates
----------- ------- ---------
<S> <C> <C> <C>
Demand deposits(1).................... $ 20,020 3.99% 0.00%
NOW deposits.......................... 32,918 6.55 1.79
Savings deposits...................... 57,823 11.50 2.28
Money market deposits................. 79,738 15.86 3.59
-------- ------
Total non-certificated accounts.. 190,499 37.90 2.52

Certificate of deposit
Due within 1 year................ 227,757 45.31 5.53
Over 1 year through 3 years...... 78,515 15.62 5.93
Over 3 years..................... 5,927 1.17 6.00
-------- ------
Total certificate accounts.. 312,199 62.10 5.64
-------- ------
Total................................. $502,698 100.00% 4.47%
======== ======
</TABLE>

___________________
(1) Includes mortgagor's escrow payments.

86
<PAGE>

Deposit Flow. The following table summarizes the deposit activity of the
Bank for the periods indicated.

<TABLE>
<CAPTION>
Nine Months Ended
September 30, At December 31,
-------------------- --------------------------------
1999 1998 1998 1997 1996
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period........... $568,075 $520,357 $520,357 $502,698 $425,199
Net increase (decrease) before interest
credited (1)............................ 10,701 41,288 23,376 (5,081) 57,315
Interest credited........................ 17,361 18,197 24,342 22,740 20,184
-------- -------- -------- -------- --------
Balance at end of period................. $596,137 $579,842 $568,075 $520,357 $502,698
======== ======== ======== ======== ========
Total increase in deposit accounts.... $ 28,062 $ 59,485 $ 47,718 $ 17,659 $ 77,499
======== ======== ======== ======== ========
Percentage increase...................... 4.94% 11.43% 9.17% 3.51% 18.23%
</TABLE>

_______________
(1) Includes mortgage escrow payments

C.D. Maturities. At September 30, 1999, we had $59.8 million in
certificates of deposits with balances of $100,000 and over maturing as follow:

<TABLE>
<CAPTION>
Weighted
Average
Maturity Period Amount Rate
- -------------------------------------- ----------------- -----------------
(In thousands)
<S> <C> <C>
Three months or less.................. $11,859 4.58%
Over three months through six months.. 10,196 4.50%
Over six months through 12 months..... 18,984 5.02%
Over 12 months........................ 18,797 5.24%
-------
Total............................. $59,836 4.91%
=======
</TABLE>

C.D. Balances by Rates. The following table sets forth, by interest rate
ranges, information concerning our certificates of deposit at the dates
indicates.

<TABLE>
<CAPTION>
At September 30, 1999
-----------------------------------------------------------------------------
Period to Maturity
-----------------------------------------------------------------------------
Less than One to Two Two to More than Percent of
One Year Years Three Years Three Years Total Total
---------- ------------ ------------- ------------- --------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
4.00% and below $ 2,930 $ 1 $ $ - $ 2,931 0.90%
4.01% to 5.00% 170,269 20,680 847 820 192,616 59.31%
5.01% to 6.00% 37,656 72,620 6,788 1,502 118,566 36.51%
6.01% to 7.00% 7,675 1,218 1,530 247 10,670 3.28%
7.01% and above - - - - - 0.00%
-------- --------- ---------- --------- --------- ------
Total $218,530 $ 94,519 $ 9,165 $ 2,569 $ 324,783 100.00%
======== ========= ========== ========= ========= ======
</TABLE>

87
<PAGE>

Borrowings. In addition to deposits, borrowings from the Federal Home Loan
Bank provide an additional source of funds to finance our lending and investing
activities.

The following table sets forth information concerning balances and interest
rates on the Bank's Federal Home Loan Bank advances at the dates and for the
periods indicated.

<TABLE>
<CAPTION>
At or for The Nine
Months Ended At or For The Year Ended
September 30, December 31,
------------------ --------------------------
1999 1998 1998 1997 1996
----- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Federal Home Loan Bank advances:
Average balance outstanding............... $36,674 $24,988 $25,097 $13,550 $14,859
Maximum amount outstanding at any
month-end during the period.............. 44,525 31,902 31,902 35,810 22,252
Balance outstanding at end of the period.. 41,431 24,824 27,066 21,604 720
Weighted average interest rate during
the period............................... 5.64% 6.03% 6.13% 6.01% 5.75%
Weighted average interest rate at
end of period............................ 6.08% 6.11% 6.04% 6.52% 6.80%
</TABLE>

88
<PAGE>

Properties

We currently conduct our business through our executive and administrative
offices, our ten full service banking offices and our Telebanking Center. We
are in the process of building a new facility located at 1380 Soldiers Field
Road, Brighton, MA. Occupancy of the building should occur by the end of the
second quarter 2000. This facility will house certain administrative
departments and all lending operations. The estimated cost is approximately
$16.0 million of which approximately $14.0 million was borrowed from the Federal
Home Loan Bank. As of September 30, 1999, the properties and leasehold
improvements owned by us had an aggregate net book value of $6.9 million.

<TABLE>
<CAPTION>
Year of Lease
or License Deposits as of
Location Ownership Year Opened Expiration(1) September 30, 1999
-------- --------- ----------- ------------- ------------------
(In thousands)
<S> <C> <C> <C> <C>
Administrative/Main Office:
689 Massachusetts Avenue Owned N/A - $139,348
Cambridge, MA 02139

Branch Offices:
1751 Massachusetts Avenue Leased 1978 2007 $139,641
Lexington, MA 02420

522 Main Street Leased 1980 2004 $ 74,709
Winchester, MA 01890

Harvard Square Office Leased 1985 2003 $ 44,973
1290 Massachusetts Avenue
Cambridge, MA 02139

177 Linden Street Leased 1994 2003 $ 49,822
Wellesley, MA 02482

1243 Centre Street Leased 1995 2010 $ 50,539
Newton, MA 02459

133 Chapel Street Leased 1995 2015 $ 42,050
Needham, MA 02492

Supermarket Offices:
101 Falls Boulevard Licensed 1996 2011 $ 12,533
Quincy, MA 02169

150 W. Central Street Licensed 1997 2012 $ 9,631
Natick, MA 01760

338 Washington Street Licensed 1997 2012 $ 4,706
Westwood, MA 02090
</TABLE>

89
<PAGE>

<TABLE>
<CAPTION>
Year of Lease
or License Deposits as of
Location Ownership Year Opened Expiration(1) September 30, 1999
-------- --------- ----------- ------------- ------------------
(In thousands)
<S> <C> <C> <C> <C>
Residential Mortgage Center Leased 1998 2003 N/A
2150 Washington Street
Newton, MA 02462

Telebanking Center Leased 1997 2000 $ 28,185
100 Cambridge Park Drive
Cambridge, MA 02140
</TABLE>
______________________________
(1) Lease expiration dates assume all options to extend lease terms are
exercised.

Legal Proceedings

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

Personnel

As of September 30, 1999, we had 168 full-time employees and 34 part-time
employees. The employees are not represented by a collective bargaining unit,
and we consider our relationship with our employees to be excellent.

Subsidiary Activities

Cambridgeport Bank and Brighton Investment Corp. are the subsidiaries of
Cambridgeport Mutual Holding Company. Brighton Investment Corp. is a
Massachusetts securities corporation formed in December 1999 to take advantage
of the favorable Massachusetts tax treatment of securities corporations. After
the conversion, Cambridgeport Bank and Brighton Investment Corp. will become
subsidiaries of Port Financial Corp.

Cambridgeport Bank currently has two principle subsidiaries: The Port
Corporation and Temple Investment Corporation. The Port Corporation is currently
inactive. Temple Investment Corporation, a Massachusetts securities corporation,
engages in the investment of securities and was formed to take advantage of
favorable state tax treatment of interest income from certain investment
securities. Temple Investment Corporation owns the subsidiary Temple Realty
Corp., and Temple Realty Corp. owns the subsidiary Temple Realty, LLC. Temple
Realty, LLC. was formed to hold the land and the building of Cambridgeport
Bank's new administrative center and will lease the real estate from the
developer. After construction of the building is complete, Temple Realty, LLC.
will purchase the real estate and will lease the improved property to Temple
Realty Corp.

90
<PAGE>

BUSINESS OF PORT FINANCIAL CORP.

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

Immediately after consummation of the conversion, it is expected that the
only business activities of Port Financial Corp. will be to hold all of the
outstanding common stock of Cambridgeport Bank, to fund a loan to the ESOP from
the proceeds of capital raised in the offering, and to contribute 50% of the net
proceeds from the offering to Cambridgeport Bank as additional capital. Port
Financial Corp. may use the net proceeds retained by it to pay dividends to
stockholders and to repurchase shares of its common stock. In the future,
however, Port Financial Corp., as the holding company of Cambridgeport Bank,
will be authorized to pursue other business activities permitted by applicable
laws and regulations for such holding companies, which may include the issuance
of additional shares of common stock to raise capital or to support mergers
or acquisitions and borrowing funds for reinvestment in Cambridgeport Bank.
There are no plans for any additional capital issuance, merger or acquisition,
or other diversification of the activities of Port Financial Corp. at the
present time.

Our cash flow will depend upon earnings from the investment of the portion
of net proceeds we retain and any dividends Port Financial Corp. receives from
Cambridgeport Bank. Initially, Port Financial Corp. will neither own nor lease
any property, but will instead use the premises, equipment and furniture of
Cambridgeport Bank. At the present time, we intend to employ only persons who
are officers of Cambridgeport Bank to serve as officers of Port Financial Corp.
However, we will use the support staff of Cambridgeport Bank from time to time.
These persons will not be separately compensated by Port Financial Corp. Port
Financial Corp. will hire additional employees, as appropriate, to the extent it
expands its business in the future. See "How We Intend to Use the Proceeds from
the Offering."

91
<PAGE>

REGULATION OF CAMBRIDGEPORT BANK AND
PORT FINANCIAL CORP.

General

Port Financial Corp., as the bank holding company controlling Cambridgeport
Bank, will be subject to the Bank Holding Company Act of 1956, as amended, and
the rules and regulations of the Federal Reserve Board under the Bank Holding
Company Act. Port Financial Corp. will also be subject to the provisions of the
Massachusetts General Laws applicable to savings banks and other depository
institutions and their holding companies (the Massachusetts banking laws) and
the regulations of the Massachusetts Division of Banks under the Massachusetts
banking laws applicable to bank holding companies. Port Financial Corp. will be
required to file reports with, and otherwise comply with the rules and
regulations of the Federal Reserve Board and the Division. Port Financial Corp.
will be required to file reports with, and otherwise comply with, the rules and
regulations of the Securities and Exchange Commission under the federal
securities laws.

Any change in such laws and regulations, whether by the Division, the FDIC,
or the Federal Reserve Board, or through legislation, could have a material
adverse impact on Port Financial Corp. and Cambridgeport Bank and their
operations and stockholders.

Massachusetts Banking Regulation

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

. real estate mortgages;

. consumer and commercial loans;

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

. certain types of corporate equity securities; and

. certain other assets.

92
<PAGE>

A savings bank may also:

. invest pursuant to a "leeway" power that permits
investments not otherwise permitted by the Massachusetts banking
laws. "Leeway" investments must comply with a number of limitations
on the individual and aggregate amounts of "leeway" investments;

. exercise trust powers upon approval of the Division; and

. exercise any power and engage in any activity permissible for
national banks in accordance with regulations adopted by the
Division with respect to such power or activity.

The exercise of these lending, investment and activity powers are limited by
federal law and the related regulations. See "-- Federal Banking Regulation --
Activity Restrictions on State-Chartered Banks" below.

Community Reinvestment Act. Cambridgeport Bank is also subject to
provisions of the Massachusetts banking laws that, like the provisions of the
federal Community Reinvestment Act, impose continuing and affirmative
obligations upon a banking institution organized in Massachusetts to serve the
credit needs of its local communities. The obligations of the Massachusetts
Community Reinvestment Act are similar to those imposed by the federal Community
Reinvestment Act with the exception of the assigned exam ratings. Massachusetts
banking law provides for an additional exam rating of "high satisfactory" in
addition to the federal Community Reinvestment Act ratings of "outstanding,"
"satisfactory," "needs to improve" and "substantial noncompliance." The Division
has adopted regulations to implement the Massachusetts Community Reinvestment
Act that are based on the federal Community Reinvestment Act. See "Federal
Banking Regulation --Community Reinvestment Act." The Division is required to
consider a bank's Massachusetts Community Reinvestment Act rating when reviewing
the bank's application to engage in certain transactions, including mergers,
asset purchases and the establishment of branch offices or automated teller
machines, and provides that such assessment may serve as a basis for the denial
of any such application. The Massachusetts Community Reinvestment Act requires
the Division to assess a bank's compliance with the Massachusetts Community
Reinvestment Act and to make such assessment available to the public.
Cambridgeport Bank's latest Massachusetts Community Reinvestment Act rating,
received by letter, dated July 8, 1999, from the Division was a rating of
"satisfactory."

Loans-to-One-Borrower Limitations. With specified exceptions, the total
obligations of a single borrower to a Massachusetts chartered savings bank may
not exceed 20% of the savings bank's retained earnings account. A savings bank
may lend additional amounts up to 100% of the bank's retained earnings account
if secured by collateral meeting the requirements of the Massachusetts banking
laws. Cambridgeport Bank currently complies with applicable loans-to-one-
borrower limitations.

Loans to a Bank's Insiders. Provisions of the Massachusetts banking laws
prohibit a savings bank from making a loan or otherwise extending credit to any
of its officers and directors or trustees. The Massachusetts banking laws also
prohibit any such officer, director or trustee from borrowing, otherwise
becoming indebted, or becoming liable for a loan or other extension of credit by
such bank to any other person except for any of the following loans or
extensions of credit:

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

93
<PAGE>

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

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

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

The loans listed above require approval of the majority of the members of
the bank's executive committee, excluding any member involved in the loan or
extension of credit. No such loan or extension of credit may be granted with an
interest rate or other terms that are preferential in comparison to loans
granted to persons not affiliated with the savings bank.

Dividends. Under the Massachusetts banking laws, a stock savings bank may,
subject to several limitations, declare and pay a dividend on its capital stock
out of the bank's net profits. A dividend may not be declared, credited or paid
by a stock savings bank so long as there is any impairment of capital stock. No
dividend may be declared on the bank's common stock for any period other than
for which dividends are declared upon preferred stock, except as authorized by
the Commissioner. The approval of the Commissioner is also required for a stock
savings bank to declare a dividend, if the total of all dividends declared by
the savings bank in any calendar year shall exceed the total of its net profits
for that year combined with its retained net profits of the preceding two years,
less any required transfer to surplus or a fund for the retirement of any
preferred stock.

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

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

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Federal Banking Regulation

Capital Requirements. FDIC regulations require banks whose deposits are
insured by the Bank Insurance Fund, such as Cambridgeport Bank, to maintain
minimum levels of capital. The FDIC regulations define two tiers, or classes, of
capital.

Tier 1 capital is comprised of the sum of:

. common stockholders' equity, excluding the unrealized appreciation or
depreciation, net of tax, from available-for-sale securities;

. non-cumulative perpetual preferred stock, including any related
retained earnings; and

. minority interests in consolidated subsidiaries

minus all intangible assets (other than qualifying servicing rights), and any
net unrealized loss on marketable equity securities.

The components of Tier 2 capital currently include:

. cumulative perpetual preferred stock;

. certain perpetual preferred stock for which the dividend rate
may be reset periodically;

. mandatory convertible securities;

. subordinated debt;

. intermediate preferred stock; and

. allowance for possible loan losses.

Allowance for possible loan losses includible in Tier 2 capital is limited to a
maximum of 1.25% of risk-weighted assets. Overall, the amount of Tier 2 capital
that may be included in total capital can not exceed 100% of Tier 1 capital.

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

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

The federal banking agencies, including the FDIC, have also adopted
regulations to require an assessment of an institution's exposure to declines in
the economic value of a bank's capital due to changes in interest rates when
assessing the bank's capital adequacy. Under such a risk assessment, examiners
will evaluate a bank's capital for interest rate risk on a case-by-case basis,
with consideration of both quantitative and qualitative factors. According to
the agencies, applicable considerations include:

. the quality of the bank's interest rate risk management process;

. the overall financial condition of the bank; and

. the level of other risks at the bank for which capital is needed.

Institutions with significant interest rate risk may be required to hold
additional capital. The agencies also issued a joint policy statement providing
guidance on interest rate risk management, including a discussion of the
critical factors affecting the agencies' evaluation of interest rate risk in
connection with capital adequacy.

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The following table shows Cambridgeport Bank's leverage ratio, its Tier 1
risk-based capital ratio, and its total risk-based capital ratio, at September
30, 1999:

<TABLE>
<CAPTION>
As of September 30, 1999
-----------------------------------------------------------------------
Percent Pro Pro Forma
Historical of Forma Percent of Capital Percent of
Capital Assets/2/ Capital/1/ Assets/2/ Requirements Assets/2/
-------- ---------- --------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
(In thousands)
Regulatory Tier 1 leverage capital.. $ 76,038 10.76 $ 105,304 14.19 $ 29,693 4.00
Tier 1 risk-based capital........... 76,038 18.37 105,304 25.01 16,840 4.00
Total risk-based capital............ 83,547 20.19 112,813 26.80 33,680 8.00
</TABLE>

__________________

(1) Assumes the sale of 8,000,000 share of common stock in the offering.

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

As the table shows, Cambridgeport Bank exceeded the minimum capital
adequacy requirements at the date indicated.

Activity Restrictions on State-Chartered Banks. Section 24 of the Federal
Deposit Insurance Act, as amended, which was added by the Federal Deposit
Insurance Corporation Improvement Act of 1991 FDIC Improvement Act, generally
limits the activities and investments of state-chartered FDIC insured banks and
their subsidiaries to those permissible for federally chartered national banks
and their subsidiaries, unless such activities and investments are specifically
exempted by Section 24 or consented to by the FDIC.

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

. the bank held such types of investments during the 14-month period
from December 31, 1990 through November 26, 1991;

. the state in which the bank is chartered permitted such investments
as of December 31, 1991; and

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

Cambridgeport Bank received approval from the FDIC to retain and acquire such
equity investments subject to a maximum permissible investment equal to the
lesser of 100% of Cambridgeport Bank's Tier 1 capital or the maximum permissible
amount specified by the Massachusetts banking laws. Section 24 also provides an
exception for majority owned subsidiaries of a bank, but Section 24 limits the
activities of such subsidiaries are limited to those

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permissible for a national bank, permissible under Section 24 of the Federal
Deposit Insurance Act and the related FDIC regulations, or as approved by the
FDIC.

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

Enforcement. The FDIC has extensive enforcement authority over insured
savings banks, including Cambridgeport Bank. This enforcement authority
includes, among other things, the ability to assess civil money penalties, to
issue cease and desist orders and to remove directors and officers. In general,
these enforcement actions may be initiated in response to violations of laws and
regulations and to unsafe or unsound practices.

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

. insolvency, or when the assets of the bank are less than its
liabilities to depositors and others;

. substantial dissipation of assets or earnings through violations of
law or unsafe or unsound practices;

. existence of an unsafe or unsound condition to transact business;

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

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

Deposit Insurance. Pursuant to FDIC Improvement Act, the FDIC established a
system for setting deposit insurance premiums based upon the risks a particular
bank or savings association posed to its deposit insurance funds. Under the
risk-based deposit insurance assessment system, the FDIC assigns an institution
to one of three capital categories based on the institution's financial
information, as of the reporting period ending six months before the assessment
period. The three capital categories are (1) well capitalized, (2) adequately
capitalized and (3) undercapitalized. The FDIC also assigns an institution to
one of three supervisory subcategories within each capital group. With respect
to the capital ratios, institutions are

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classified as well capitalized, adequately capitalized or undercapitalized
using ratios that are substantially similar to the prompt corrective action
capital ratios discussed below. The FDIC also assigns an institution to
supervisory subgroup based on a supervisory evaluation provided to the FDIC by
the institution's primary federal regulator and information that the FDIC
determines to be relevant to the institution's financial condition and the risk
posed to the deposit insurance funds, which may include information provided by
the institution's state supervisor.

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

Under the Deposit Insurance Funds Act of 1996, the assessment base for the
payments on the bonds issued in the late 1980's by the Financing Corporation to
recapitalize the now defunct Federal Savings and Loan Insurance Corporation was
expanded to include, beginning January 1, 1997, the deposits of institutions
insured by the Bank Insurance Fund, such as Cambridgeport Bank. Until December
31, 1999, or such earlier date on which the last savings association ceases to
exist, the rate of assessment for Bank Insurance Fund-assessable deposits will
be one-fifth of the rate imposed on deposits insured by the Savings Association
Insurance Fund. The annual rate of assessments for the payments on the Financing
Corporation bonds for the quarterly period beginning on January 1, 1999 was
0.0122% for Bank Insurance Fund-assessable deposits and 0.0610% for SAIF-
assessable deposits.

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

Transactions with Affiliates of Cambridgeport Bank. Transactions between
an insured bank, such as Cambridgeport Bank, and any of its affiliates is
governed by Sections 23A and 23B of the Federal Reserve Act. An affiliate of a
bank is any company or entity that controls, is controlled by or is under common
control with the bank. Currently, a subsidiary of a bank that is not also a
depository institution is not treated as an affiliate of the bank for purposes
of Sections 23A and 23B, but the Federal Reserve Board has proposed treating any
subsidiary of a bank that is engaged in activities not permissible for bank
holding companies under the Bank Holding Company Act of 1956, as amended, as an
affiliate for purposes of Sections 23A and 23B. Sections 23A and 23B:

. limit the extent to which the bank or its subsidiaries may
engage in "covered transactions" with any one affiliate to an
amount equal to 10% of such bank's capital

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stock and retained earnings, and limit on all such transactions with
all affiliates to an amount equal to 20% of such capital stock and
retained earnings; and

. require that all such transactions be on terms that are consistent
with safe and sound banking practices.

The term "covered transaction" includes the making of loans, purchase of
assets, issuance of guarantees and other similar types of transactions. Further,
most loans by a bank to any of its affiliates must be secured by collateral in
amounts ranging from 100 to 130 percent of the loan amounts. In addition, any
covered transaction by a bank with an affiliate and any purchase of assets or
services by a bank from an affiliate must be on terms that are substantially the
same, or at least as favorable, to the bank as those that would be provided to a
non-affiliate.

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

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

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

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

. for land development loans or loans for the purpose of improving
unimproved property prior to the erection of structures, the
supervisory limit is 75%;

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

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

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

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

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

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

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

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

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

The Community Reinvestment Act requires the FDIC to provide a written
evaluation of an institution's Community Reinvestment Act performance utilizing
a four-tiered descriptive rating system and requires public disclosure of an
institution's Community Reinvestment Act rating. Cambridgeport Bank received a
"satisfactory" rating in its Community Reinvestment Act examination conducted by
the FDIC on October 27, 1997.

Safety and Soundness Standards. Pursuant to the requirements of FDIC
Improvement Act, as amended by the Riegle Community Development and Regulatory
Improvement Act of 1994, each federal banking agency, including the FDIC, has
adopted guidelines establishing general

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standards relating to internal controls, information and internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth,
asset quality, earnings, and compensation, fees and benefits. In general, the
guidelines require, among other things, appropriate systems and practices to
identify and manage the risks and exposures specified in the guidelines. The
guidelines prohibit excessive compensation as an unsafe and unsound practice and
describe compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director, or principal stockholder.

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

Prompt Corrective Action. FDIC Improvement Act also established a system of
prompt corrective action to resolve the problems of undercapitalized
institutions. The FDIC, as well as the other federal banking regulators, adopted
regulations governing the supervisory actions that may be taken against
undercapitalized institutions. The regulations establish five categories,
consisting of "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized." The FDIC's
regulations defines the five capital categories as follows:

An institution will be treated as "well capitalized" if:

. its ratio of total capital to risk-weighted assets is at least 10%;

. its ratio of Tier 1 capital to risk-weighted assets is at least 6%; and

. its ratio of Tier 1 capital to total assets is at least 5%, and it is
not subject to any order or directive by the FDIC to meet a specific
capital level.

An institution will be treated as "adequately capitalized" if:

. its ratio of total capital to risk-weighted assets is at least 8%;

. its ratio of Tier 1 capital to risk-weighted assets is at least 4%; and

. its ratio of Tier 1 capital to total assets is at least 4% (3% if the
bank receives the highest rating under the Uniform Financial
Institutions Rating System) and it is not a well-capitalized
institution.

An institution will be treated as "undercapitalized" if:

. its total risk-based capital is less than 8%;

. its Tier 1 risk-based-capital is less than 4%; or

. its leverage ratio is less than 4% (or less than 3% if the institution
is rated a composite "1" under the Uniform Financial Institutions
Rating System).

An institution will be treated as "significantly undercapitalized" if:

. its that has total risk-based capital is less than 6%;

. Tier 1 capital of less than 3%; or

. a leverage ratio that is less than 3%.

An institution that has a tangible capital to assets ratio equal to or
less than 2% would be deemed to be "critically undercapitalized."

The severity of the action authorized or required to be taken under the
prompt corrective action regulations increases as a bank's capital decreases
within the three undercapitalized categories. All banks are prohibited from
paying dividends or other capital distributions or paying management fees to any
controlling person if, following such distribution, the bank would be
undercapitalized. The FDIC is required to monitor closely the condition of an

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undercapitalized bank and to restrict the growth of its assets. An
undercapitalized bank is required to file a capital restoration plan within 45
days of the date the bank receives notice that it is within any of the three
undercapitalized categories, and the plan must be guaranteed by any parent
holding company. The aggregate liability of a parent holding company is limited
to the lesser of:

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

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

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

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

Loans to a Bank's Insiders. A bank's loans to its executive officers,
directors, any owner of 10% or more of its stock (each, an "insider") and any
entities affiliated with an insider are subject to the conditions and
limitations imposed by Section 22(h) of the Federal Reserve Act and the Federal
Reserve Board's Regulation O. Under these restrictions, the aggregate amount of
the loans to any insider and any entities affiliated with such insider may not
exceed the loans-to-one-borrower limit applicable to national banks, which is
comparable to the loans-to-one-borrower limit applicable to Cambridgeport Bank's
loans. See "Massachusetts Banking Regulation-- Loans-to-One Borrower
Limitations." All loans by a bank to all insiders and their affiliates in the
aggregate may not exceed the bank's unimpaired capital and unimpaired retained
earnings. With some exceptions, loans to an executive officer, other than loans
for the education of the officer's children and certain loans secured by the
officer's residence, may not exceed the lesser of (1) $100,000 or (2) the
greater of $25,000 or 2.5% of the bank's capital and unimpaired retained
earnings. Regulation O also requires that any proposed loan to an insider or the
insider's affiliates be approved in advance by a majority of the Board of
Directors of the bank, with any interested director not participating in the
voting, if such loan, when aggregated with any existing loans to that insider

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and that insider's affiliates, would exceed either (1) $500,000 or (2) the
greater of $25,000 or 5% of the bank's unimpaired capital and retained earnings.
Generally, such loans must be made on substantially the same terms as, and
follow credit underwriting procedures that are not less stringent than, those
that are prevailing at the time for comparable transactions with other persons.
An exception is made for extensions of credit made pursuant to a benefit or
compensation plan of a bank that is widely available to employees of the bank
and that does not give any preference to insiders of the bank over other
employees of the bank.

In addition, provisions of the Bank Holding Company Act prohibit extensions
of credit to a bank's insiders and their affiliates by any other institution
that has a correspondent banking relationship with the bank, unless such
extension of credit is on substantially the same terms as those prevailing at
the time for comparable transactions with other persons and does not involve
more than the normal risk of repayment or present other unfavorable features.

Federal Reserve System

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

Holding Company Regulation

Federal Regulation. After the conversion, Port Financial Corp. will be
regulated as a bank holding company. Bank holding companies are subject to
examination, regulation and periodic reporting under the Bank Holding Company
Act, as administered by the Federal Reserve Board. The Federal Reserve Board has
adopted capital adequacy guidelines for bank holding companies on a consolidated
basis substantially similar to those of the FDIC for Cambridgeport Bank. As of
December 31, 1998, Port Financial Corp.'s total capital and Tier 1 capital
ratios for Port Financial Corp. would, on a pro forma basis, exceed these
minimum capital requirements. See "Regulatory Capital Compliance."

Regulations of the Federal Reserve Board provide that a bank holding
company must serve as a source of strength to any of its subsidiary banks and
must not conduct its activities in an unsafe or unsound manner. Under the prompt
corrective action provisions of FDIC Improvement Act, a bank holding company
parent of an undercapitalized subsidiary bank would be directed to guarantee,
within limitations,

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the capital restoration plan that is required of such an undercapitalized bank.
See "--Federal Banking Regulation -- Prompt Corrective Action" above. If the
undercapitalized bank fails to file an acceptable capital restoration plan or
fails to implement an accepted plan, the Federal Reserve Board may prohibit the
bank holding company parent of the undercapitalized bank from paying any
dividend or making any other form of capital distribution without the prior
approval of the Federal Reserve Board.

As a bank holding company, Port Financial Corp. will be required to obtain
the prior approval of the Federal Reserve Board to acquire all, or substantially
all, of the assets of any bank or bank holding company. Prior Federal Reserve
Board approval will be required for Port Financial Corp. to acquire direct or
indirect ownership or control of any voting securities of any bank or bank
holding company if, after giving effect to such acquisition, it would, directly
or indirectly, own or control more than 5% of any class of voting shares of such
bank or bank holding company.

A bank holding company is required to give the Federal Reserve Board prior
written notice of any purchase or redemption of its outstanding equity
securities if the gross consideration for the purchase or redemption, when
combined with the net consideration paid for all such purchases or redemptions
during the preceding 12 months, will be equal to 10% or more of the company's
consolidated net worth. The Federal Reserve Board may disapprove such a purchase
or redemption if it determines that the proposal would constitute an unsafe and
unsound practice, or would violate any law, regulation, Federal Reserve Board
order or directive, or any condition imposed by, or written agreement with, the
Federal Reserve Board. Such notice and approval is not required for a bank
holding company that would be treated as "well capitalized" under applicable
regulations of the Federal Reserve Board, that has received a composite "1" or
"2" rating at its most recent bank holding company inspection by the Federal
Reserve Board, and that is not the subject of any unresolved supervisory issues.

In addition, a bank holding company, which does not qualify as a financial
holding company under the Gramm-Leach-Bliley Financial Services Modernization
Act, is generally prohibited from engaging in, or acquiring direct or indirect
control of any company engaged in non-banking activities. One of the principal
exceptions to this prohibition is for activities found by the Federal Reserve
Board to be so closely related to banking or managing or controlling banks as to
be permissible. Some of the principal activities that the Federal Reserve Board
has determined by regulation to be so closely related to banking as to be
permissible are:

. making or servicing loans;

. performing certain data processing services;

. providing discount brokerage services;

. acting as fiduciary, investment or financial advisor;

. leasing personal or real property;

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. making investments in corporations or projects designed primarily to
promote community welfare; and

. acquiring a savings and loan association.

Bank holding companies that do qualify as a financial holding company may engage
in activities that are financial in nature or incidental to activities which are
financial in nature. Bank holding companies may qualify to become a financial
holding company if:

. each of its depository institution subsidiaries is "well capitalized,"

. each of its depository institution subsidiaries is "well-managed";

. each of its depository institution subsidiaries has at least a
"satisfactory" Community Reinvestment Act rating at its most recent
examination;

. and the bank holding company has filed a certification with the
Federal Reserve Board that it elects to become a financial holding
company.

Under the Federal Deposit Insurance Act, depository institutions are liable
to the FDIC for losses suffered or anticipated by the FDIC in connection with
the default of a commonly controlled depository institution or any assistance
provided by the FDIC to such an institution in danger of default. This law would
potentially be applicable to Port Financial Corp. if it ever acquired as a
separate subsidiary a depository institution in addition to Cambridgeport Bank.

Massachusetts Regulation.

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

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

. register, and file reports, with the Division and is
subject to examination by the Division.

Port Financial Corp. will become a Massachusetts bank holding company if it
acquires a second banking institution and holds and operates it separately from
Cambridgeport Bank.

Acquisition of Port Financial Corp.

Under federal law, no person may acquire control of Port Financial Corp. or
Cambridgeport Bank without first obtaining, as summarized below, approval of
such acquisition of control by the Federal Reserve Board.

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

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

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

TAXATION

Federal

General. For federal income tax purposes, we report income on the basis of
a taxable year ending December 31, using the accrual method of accounting, and
we are generally subject to federal income taxation in the same manner as other
corporations. Following the conversion, Cambridgeport Bank and Port Financial
Corp. will constitute an affiliated group of corporations and, therefore, will
be eligible to report their income on a consolidated basis. Cambridgeport Bank
and Cambridgeport Mutual Holding Company are not currently under audit by the
IRS.

Distributions. To the extent that we (Cambridgeport Bank) make "non-
dividend distributions" to stockholders, such distributions will be considered
to result in distributions from our unrecaptured tax bad debt reserve as of
December 31, 1987 (our "base year reserve"), to the extent thereof and then from
our supplemental reserve for losses on loans, and an amount based on the amount
distributed will be included in our income. Non-dividend distributions include
distributions in excess of our current and accumulated earnings and profits,

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distributions in redemption of stock and distributions in partial or complete
liquidation. Dividends paid out of our current or accumulated earnings and
profits will not be included in our income.

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

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

Elimination of Dividends. Port Financial Corp. may exclude from its income
100% of dividends received from Cambridgeport Bank as a member of the same
affiliated group of corporations.

State

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

Port Financial Corp. will be required to file a Massachusetts income tax
return and will generally be subject to a state income tax rate that is the same
tax rate as the tax rate for financial institutions in Massachusetts. However,
the use of Brighton Investments Corp., a Massachusetts Security Corporation and
a wholly owned subsidiary of Port Financial Corp., Port Financial Corp. will be
taxed at a rate that is currently lower than income tax rates for savings
institutions in Massachusetts.

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MANAGEMENT

Shared Management Structure

Port Financial Corp.'s directors and executive officers will be the same as
Cambridgeport Bank's. Although it has no current plans to do so, Cambridgeport
Bank may choose to appoint additional directors in the future. We expect that
Port Financial Corp. and Cambridgeport Bank will continue to have common
executive officers until there is a business reason to establish separate
management structures.

To date, Cambridgeport Bank has compensated its directors and executive
officers for their services to the bank. Port Financial Corp. has not paid any
additional compensation to these people for their additional services to the
holding company. We expect to continue this practice in the case of executive
officers after the conversion until we have a business reason to establish
separate compensation programs. Until then, we expect Port Financial Corp. to
reimburse Cambridgeport Bank for a part of the compensation paid to each
executive officer that is proportionate to the amount of time which he or she
devotes to performing services for Port Financial Corp.

Directors

Composition of our Boards. We have nine directors. Each belongs to one of
three classes with staggered three-year terms of office. Classes One, Two and
Three have directors whose terms expire in 2001, 2002 and 2003. At each of the
annual shareholder meetings of Port Financial Corp., the shareholders elect
directors to fill the seats of the directors whose terms are expiring in that
year and any vacant seats. Directors of Cambridgeport Bank are elected by Port
Financial Corp. as its sole stockholder.

Who Our Directors Are. The following table states our directors' names,
their ages as of their birthdays in 1999, the years when they began serving as
directors and the years when their current terms of office as directors will
expire:

Bank Company
Director Director Term
Name Age Since Since Expires
---- --- ----- ----- -------
Paul R. Corcoran, Jr. 67 1972 2000 2002
Daniel C. Crane, Esq. 49 1986 2000 2003
Samuel C. Fleming 59 1993 2000 2001
William Goldberg, Esq. 70 1977 2000 2002
Robert D. Happ 59 1997 2000 2001
James B. Keegan 58 1985 2000 2003
Jane L. Lundquist 46 1999 2000 2001
Joseph F. O'Connor 70 1979 2000 2002
Rudolph R. Russo 72 1974 2000 2003

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Our Directors' Backgrounds. The business experience for the past five
years of each of our directors is as follows:

Paul R. Corcoran, Jr. is the owner and President of The Harvard Shop, Inc.,
a retail specialty store which sells college insignia merchandise. He has held
the office of Clerk of Cambridgeport Bank since 1990.

Daniel C. Crane, Esq. has served as Chief Bar Counsel for the Board of Bar
Overseers of the Supreme Judicial Court of Massachusetts since September, 1999.
Prior to this position, he was an attorney in private practice for over twenty
years. He has served on the boards of directors of a number of charitable and
professional organizations, including service as president of the Massachusetts
Bar Association. He currently serves as Chair of the Audit Committee of the
Bank, a position he has held for the last five years.

Samuel C. Fleming has been the Board Chairman and Chief Executive Officer
of Decision Resources, Inc., an international health care research and
consulting company since 1990. From 1967 to 1990, Mr. Fleming held various
positions at Arthur D. Little, Inc., most recently as Senior Vice President,
Member of the Corporate Management Committee and Chairman of Arthur D. Little
Decision Resources, which he founded in the mid-1970s. Mr. Fleming received a
B.Ch.B. from Cornell University and an M.B.A. from Harvard Business School. In
addition to Cambridgeport Bank, he serves as a Director of CareGroup, Inc. and
as a Trustee of Cornell University and the Standish Ayer & Wood Investment
Trust.

William Goldberg, Esq. has been an attorney with the Goldberg Law Office in
Cambridge, Massachusetts since 1954.

Robert D. Happ is a director for Net Optix. He retired in June, 1994 from
his position as Regional Managing Partner of KPMG Peat Marwick.

James B. Keegan has served as the President and Chief Executive Officer of
Cambridgeport Bank since 1984. Prior to this position, he was the Executive
Vice President of the Bank for one year. Before joining Cambridgeport Bank, Mr.
Keegan held positions in various financial institutions, including Rochester
Savings Bank, First Pennsylvania Bank and New England Merchants National Bank.
Mr. Keegan earned his undergraduate degree from Harvard College and his MBA from
the Harvard Business School.

Jane L. Lundquist has been the Executive Vice President of Cambridgeport
Bank since 1996. Prior to this position, she served as the Senior Vice President
from 1987 to 1996. As Executive Vice President, she is currently the Senior
Officer of Cambridgeport Bank for the Consumer Banking Department, which
includes mortgage lending, consumer lending, branch banking and telebanking. She
also manages several administrative areas such as Human Resources, Marketing,
Community Relations and Auditing (administrative reporting only). Prior to
Cambridgeport Bank, Ms. Lundquist worked at Braxton Associates, a strategic
management consulting firm, and at Arthur Andersen. Ms. Lundquist holds a
business degree from the University of North Carolina and an MBA from the
University of Virginia.

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Joseph F. O'Connor is Consultant to the Charles Stark Draper Laboratory,
Inc., a nonprofit research company and Secretary of that corporation. He
retired as Vice-President of Administration in 1994. He also serves as a
director of the Delta Dental Corporation of Massachusetts, Inc., a nonprofit
dental insurance company. He is also Chairman of the Board of Denta Quest
Investment Corp., a wholly owned subsidiary of Delta Dental.

Rudolph R. Russo has 50 years of experience in all phases of real estate
including brokering, appraising, investing, developing and consulting. He also
served as Chairman of the Board of Assessors for the City of Cambridge from 1969
to 1982. He has been involved with Cambridgeport Bank since 1977 and has been a
director since 1994.

Meetings of the Board of Directors and Its Committees

Our Boards of Directors meet on a monthly basis and may hold additional
special meetings. During 1999, the Board of Directors of Cambridgeport Bank
held 12 regular meetings and three special meetings. The Board of Directors of
Port Financial Corp. did not meet in 1999.

The Boards of Directors of Cambridgeport Bank and Port Financial Corp.
maintain Executive, Audit, Compensation, Credit and Nominating Committees with
identical compositions.

The Executive Committees consist of Messrs. Keegan, Corcoran, Fleming,
Goldberg, Lundquist and Russo, with Mr. Keegan serving as Chair. The Executive
Committees meet as needed with the full power of the Board of Directors. The
Executive Committee of Cambridgeport Bank met 22 times during 1999.

The Audit Committees consist of Messrs. Crane, Happ and O'Connor, with Mr.
Crane serving as Chair. These Committees review the annual audit prepared by
the independent accountants, recommend the appointment of accountants and review
the work of the internal auditors. The Audit Committee of Cambridgeport Bank
met four times during 1999.

The Compensation Committees consist of Messrs. Corcoran, Fleming, Happ,
Keegan, O'Connor, and Ms. Lundquist with Mr. Corcoran serving as Chair. These
Committees provide advice and recommendations to the Board in the areas of
employee salaries and benefit programs. The Compensation Committee of
Cambridgeport Bank met one time during 1999.

The Credit Committees consist of Messrs. Russo and Keegan and Ms. Lundquist
and certain officers of Cambridgeport Bank, with Mr. Keegan as the Chair. The
Credit Committee of Cambridgeport Bank met 22 times during 1999.

The Nominating Committees consist of Messrs. Crane, Fleming and Keegan,
with Mr. Crane as the Chair. These Committees nominate individuals for election
to the Board of Directors. The Nominating Committee of Cambridgeport Bank met
one time during 1999.

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Director Compensation

Meeting Fees. Cambridgeport Bank's practice has been to pay a fee of $500
to each of its non-employee directors for attendance at each board meeting and
each committee meeting and to pay each non-employee director an annual retainer
of $10,000. Cambridgeport Bank paid fees totaling $[ ] to its non-
employee directors for the year ended December 31, 1999.

Effective as of the conversion, non-employee directors of Cambridgeport
Bank will receive an annual retainer of $5,000 and non-employee directors of
Port Financial Corp. will receive an annual retainer of $5,000. Directors of
Cambridgeport Bank will receive a $500 fee for any board or committee meeting
attended and, similarly, directors of Port Financial Corp. will receive a $500
fee for any board or committee meeting attended. However, only one board or
committee meeting fee will be paid to a director for any joint meeting of the
boards of Cambridgeport Bank and Port Financial Corp. or any joint meeting of
any committees of the boards.

Mr. Corcoran receives an additional annual retainer of $10,000 for his
service as Clerk of Cambridgeport Bank. In addition, Cambridgeport Bank pays
Mr. Russo $70 per hour for special assignments.

Directors' Emeritus Consultation Plan. Directors of Port Financial Corp.
who retire from service on the board of Port Financial Corp. within four years
from the conversion may elect to participate in the Directors' Emeritus
Consultation Plan by agreeing to provide consulting services to Port Financial
Corp. for a period of 12 to 36 months. A retiring director who elects to
provide consulting services will receive a fee of $1,000 per month and will be
designated as a director emeritus. A director emeritus will provide the
consulting services agreed upon and may attend meetings of the board of Port
Financial Corp., but will have no power or right to vote at such meetings.

EXECUTIVE OFFICERS

Executive Officers Who are Not Directors

Charles Jeffrey serves as Senior Vice President and Chief Financial Officer of
Cambridgeport Bank, a position he has held since July of 1998. From 1994 to
1997, he served as President of the Massachusetts Division of Albank, FSB
located in Ludlow, Massachusetts. His background also includes 15 years at Bank
of America where he held positions in commercial lending, operations, and
finance.

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Executive Officer Compensation

Summary Compensation Table. The following table provides information about
the compensation paid for 1999 to the Bank's Chief Executive Officer and to the
other most highly compensated executive officers whose annual salary and bonus
for 1999 was at least $100,000.

<TABLE>
<CAPTION>
Annual Compensation
---------------------------------------------
Name and Other Annual All Other
Principal Position Year Salary ($) Bonus ($) Compensation ($)/(a)/ Compensation/(b)/
------------------ ---- ---------- -------- --------------------- -----------------
<S> <C> <C> <C> <C> <C>
James B. Keegan,
President and Chief 1999 331,602 120,000 --
Executive Officer
Jane L. Lundquist, 1999 216,009 90,000 --
Executive Vice-President
Charles Jeffrey, 1999 139,669 40,000
Senior Vice President and
Chief Financial Officer
</TABLE>

_______________________

(a) Cambridgeport Bank provides its executive officers with non-cash
benefits and perquisites, such as the use of employer-owned or leased
automobiles. Management of the Bank believes that the aggregate value of
these benefits for 1998 did not, in the case of any executive officer,
exceed $50,000 or 10% of the aggregate salary and annual bonus reported
for him or her in the Summary Compensation Table.

(b) Includes the following components: (1) employer matching contributions to
the Cambridgeport Bank 401(k) Plan: Mr. Keegan, $3,754; Ms. Lundquist,
$4,452; and Mr. Jeffrey $882; (2) the premium cost for group life
insurance coverage provided by Cambridgeport Bank: Mr. Keegan, $2,124;
Ms. Lundquist, $792; and Mr. Jeffrey, $1,248; and (3) the dollar value of
the benefit of the premiums paid by Cambridgeport Bank under the
executive's split-dollar life insurance arrangement: Mr. Keegan $[ ]; and
Ms. Lundquist $[ ]. The full amount of the premiums paid by Cambridgeport
Bank under the split-dollar life insurance arrangements will be refunded
to it from the proceeds of the split-dollar life insurance policies.

Employment Agreements

Port Financial Corp. and Cambridgeport Bank have jointly entered into
employment agreements with Mr. Keegan to secure his services as President and
Chief Executive Officer, and Ms. Lundquist to secure her services as Executive
Vice President. For purposes of Port Financial Corp.'s obligations, the
employment agreements have rolling three-year terms beginning November 1, 1999
which by decision of the executive or joint decision of Port Financial Corp. and
Cambridgeport Bank may be converted to a fixed three-year term. For purposes of
Cambridgeport Bank's obligations the employment agreements have fixed terms of
three years beginning November 1, 1999 and may be renewed annually after a
review of the executive's performance. These agreements provide for minimum
annual salaries of $375,000 and $220,000, respectively, discretionary cash
bonuses, and participation on generally applicable terms and conditions in other
compensation and fringe benefit plans. They also guarantee customary corporate
indemnification and errors and omissions insurance coverage throughout the
employment term and for six years after termination.

Port Financial Corp. and Cambridgeport Bank may terminate each executive's
employment, and each executive may resign, at any time with or without cause.
However, in the event of termination during the term without cause, they will
owe the executive severance

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benefits generally equal to the value of the cash compensation and fringe
benefits that the executive would have received if he had continued working for
an additional three years. The same severance benefits would be payable if the
executive resigns during the term following: a loss of title, office or
membership on the board of directors; material reduction in duties, functions or
responsibilities; involuntary relocation of the executive's principal place of
employment to a location over 25 miles in distance from Cambridgeport Bank's
principal office in Cambridge, Massachusetts and over 25 miles from the
executive's principal residence; or other material breach of contract by Port
Financial Corp. or Cambridgeport Bank which is not cured within 30 days. For 60
days after a change in control, each executive may resign for any reason and
collect severance benefits as if he or she had been discharged without cause.
The employment agreements also provide uninsured death and disability
benefits.

If Port Financial Corp. or Cambridgeport Bank experiences a change in
ownership, a change in effective ownership or control or a change in the
ownership of a substantial portion of their assets as contemplated by section
280G of the Internal Revenue Code, a portion of any severance payments under the
employment agreements might constitute an "excess parachute payment" under
current federal tax laws. Federal tax laws impose a 20% excise tax, payable by
the executive, on excess parachute payments. Under the employment agreements,
Cambridgeport Bank and Port Financial Corp. would reimburse the executive for
the amount of this excise tax and would make an additional gross-up payment so
that, after payment of the excise tax and all income and excise taxes imposed on
the reimbursement and gross-up payments, the executive will retain approximately
the same net-after tax amounts under the employment agreement that he or she
would have retained if there were no 20% excise tax. The effect of this
provision is that Cambridgeport Bank and Port Financial Corp., rather than the
executive, bears the financial cost of the excise tax. Assuming a change in
control occurred as of December 31, 1999 and payments become payable under the
employment agreements on that date, approximately $2.9 million and $1.5 million
would become payable to Mr. Keegan and Ms. Lundquist, respectively. Neither Port
Financial Corp. nor Cambridgeport Bank could claim a federal income tax
deduction for an excess parachute payment, excise tax reimbursement payment or
gross-up payment.

Change of Control Agreements

Cambridgeport Bank and Port Financial Corp. will jointly enter into two-
year change of control agreements with Mr. Jeffrey and two non-executive
officers. The term of these agreements is perpetual until Cambridgeport Bank
gives notice of non-extension, at which time the term is fixed for two years.

Generally, Cambridgeport Bank may terminate the employment of any officer
covered by these agreements, with or without cause, at any time prior to a
change of control without obligation for severance benefits. However, if
Cambridgeport Bank or Port Financial Corp. signs a merger or other business
combination agreement, or if a third party makes a tender offer or initiates a
proxy contest, it could not terminate an officer's employment without cause
without liability for severance benefits. The severance benefits would
generally be equal to the value of the cash compensation and fringe benefits
that the officer would have received if he or she had continued working for an
additional two years. Cambridgeport Bank would pay the same severance benefits
if the officer resigns after a change of control following a loss of title,
office

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or membership on the Board of Directors, material reduction in duties, functions
or responsibilities, involuntary relocation of his or her principal place of
employment to a location over 25 miles from Cambridgeport Bank's principal
office on the day before the change of control and over 25 miles from the
officer's principal residence or other material breach of contract which is not
cured within 30 days. These agreements also provide uninsured death and
disability benefits.

If Cambridgeport Bank or Port Financial Corp. experiences a change in
ownership, a change in effective ownership or control or a change in the
ownership of a substantial portion of their assets as contemplated by section
280G of the Internal Revenue Code, a portion of any severance payments under the
change of control agreements might constitute an "excess parachute payment"
under current federal tax laws. Any excess parachute payment would be subject
to a federal excise tax payable by the officer and would be non-deductible by
Cambridgeport Bank and Port Financial Corp. for federal income tax purposes.
The change of control agreements do not provide a tax indemnity.

Similar change of control agreements providing severance benefits equal to
one year's compensation and benefits will be entered into with for 21 non-
executive officers of Cambridgeport Bank.

Benefit Plans

Severance Pay Plan. This plan provides severance benefits to salaried
employees with one year of service who are not parties to individual employment
or change of control agreements and are discharged without cause due to a change
of control. Severance benefits include two weeks' base salary for each year of
service for officers and one week's base salary for each year of service for
non-officer employees. The minimum severance benefit is twelve weeks' base
salary for officers and two weeks' base salary for non-officers. The maximum
severance benefit payable under the plan is 52 weeks' base salary. Employees
entitled to severance also receive continued employer-paid life and health
insurance coverage for up to one year after termination of employment as well as
professional outplacement and job assistance services. These same benefits are
available to an employee who resigns after a change of control following a
material adverse change in title, position or responsibilities, involuntary
relocation to a worksite requiring that the officer move his place of residence
to avoid an unreasonable commute, a reduction in base salary of more than 20%,
or assignment to duties, offices or working space involving unreasonable
personal embarrassment.

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Pension Plans. Cambridgeport Bank has adopted the SBERA Pension Plan for
its employees. The SBERA Pension Plan is a tax-qualified plan that covers
substantially all employees who are age 21 and completed at least one year of
service. The following table shows the estimated aggregate benefits payable
under the SBERA Pension Plan upon retirement at age 65 with various years of
service and average compensation combinations.

<TABLE>
<CAPTION>
Years of Service
------------------------------------------------------
Average Compensation/(a)/ 15 20 25 30(b) 35(b)
- ------------------------- -- -- -- ----- ----
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 17,274 $ 23,032 $ 28,790 $ 28,790 $ 28,790
$ 120,000 21,324 28,432 35,540 35,540 35,540
$ 140,000 25,374 33,832 42,290 42,290 42,290
$ 160,000 29,424 39,232 49,040 49,040 49,040
$ 200,000 29,424 39,232 49,040 49,040 49,040
$ 400,000 29,424 39,232 49,040 49,040 49,040
$ 600,000 29,424 39,232 49,040 49,040 49,040
</TABLE>

_______________________

(a) Average compensation is average base salary plus bonus, as reported in
the "Salary" and "Bonus" columns of the Summary Compensation Table, for
the highest three consecutive years during the participant's employment
period. Tax laws impose a limit ($160,000 for individuals retiring in
1999) on the average compensation that may be counted in computing
benefits under the SBERA Pension Plan.
(b) The SBERA Pension Plan does not count service in excess of 25 years in
the benefit formula.

The benefits shown in the preceding table are annual benefits payable in the
form of a single life annuity at age 65 and are not subject to any deduction for
Social Security or other offset amounts. An additional benefit equal to 0.6% of
Average Compensation is provided for each year of service credited prior to
April 1, 2000. Mr. Keegan, Ms. Lundquist and Mr. Jeffrey have 17, 14 and 2 years
of such prior service credit, respectively. At December 31, 1999, the estimated
average compensation and years of service of the executive officers named in the
Summary Compensation Table were: Mr. Keegan: $[ ], 17 years of service; Ms.
Lundquist: $[ ], 14 years of service; and Mr. Jeffrey [ ] years of service.

Mr. Keegan and Ms. Lundquist also are entitled to retirement benefits under
the Cambridgeport Bank 1999 Nonqualified Pension Plan. Under this plan, each
executive is entitled to a monthly retirement benefit equal to the greater of
25% of his or her highest monthly salary or 75% of his or her highest monthly
salary, reduced by his or her monthly retirement benefit under the SBERA Pension
Plan and his or her monthly Social Security benefit. Under the plan, the
executive's highest monthly salary is equal to the executive's average annual
base salary for the three calendar years out of the five calendar years prior to
retirement in which the executive's base salary is the highest, divided by
twelve.

401 (k) Plan. Cambridgeport Bank has adopted the SBERA 401(k) Plan, a
tax-qualified defined contribution plan, for substantially all employees of
Cambridgeport Bank who have attained age 21 and completed at least one year of
service. Eligible employees may contribute from 1% to 15% of annual
compensation to the plan on a pre-tax basis each year, subject to limitations of
the Internal Revenue Code (for 1999 the limit was $10,000). Cambridgeport Bank
makes a matching contribution to the plan equal to 50% of the first three

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percent of annual compensation contributed to the plan on a pre-tax basis by a
participant. Effective January 1, 2000, the matching contribution made by
Cambridgeport Bank will increase to 100% of the first three percent of a
participant's annual compensation contributed to the plan on a pre-tax basis.

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

Officers' Deferred Compensation Plan. Cambridgeport Bank also maintains the
Cambridgeport Bank Officers' Deferred Compensation Plan, a non-qualified plan,
in order to provide restorative payments to certain executives whose employer
matching contributions under the 401(k) Plan are limited by legal limitations
applicable to tax-qualified plans. The Officers' Deferred Compensation Plan also
offers eligible executives the opportunity to defer the receipt of a portion of
their income in a manner that defers the taxation of such income.

Employee Stock Ownership Plan. This plan is a tax-qualified plan that
covers substantially all employees who have at least one year of service and
have attained age 21 and will take effect at the completion of the conversion.

Port Financial Corp. intends to lend this plan enough money to purchase 8%
of the shares issued to investors. The plan may purchase all or part of these
shares from Port Financial Corp. to the extent that shares are available after
filling the subscriptions of eligible account holders. Alternatively, the plan
may purchase all or part of these shares in private transactions or on the open
market after completion of the conversion to the extent that shares are
available for purchase on reasonable terms. We have not determined whether such
funds would be available to the plan or that such purchase would be made
directly from Port Financial Corp. in the offering, or after completion of the
conversion. We expect to make such determination immediately prior to the
expiration date for submitting orders in the offering. This determination would
be made based on prevailing market conditions. For this reason, we cannot assure
you that the employee stock ownership plan will purchase shares in the offering
after the conversion, or that such purchases will occur during any particular
time period or at any particular price.

Although contributions to this plan will be discretionary, Cambridgeport
Bank intends to contribute enough money each year to make the required principal
and interest payments on the loan from Port Financial Corp. It is expected that
this loan will be for a term of 30 years and will call for level annual payments
of principal and interest. The plan will initially pledge the shares it
purchases as collateral for the loan and hold them in a suspense account.

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The plan will not distribute the pledged shares right away. Instead, it
will release a portion of the pledged shares annually. Assuming the plan repays
its loan as scheduled over a 30-year term, we expect that 1/30th of the shares
will be released annually in years 2000 through 2030. The plan will allocate the
shares released each year among the accounts of participants in proportion to
their compensation for the year. For example, if a participant's compensation
for a year represents 1% of the total compensation of all participants for the
year, the plan would allocate to that participant 1% of the shares released for
the year. Participants direct the voting of shares allocated to their accounts.
Shares in the suspense account will usually be voted in a way that mirrors the
votes which participants cast for shares in their individual accounts.

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

ESOP Restoration Plan. Port Financial Corp. has also established the ESOP
Restoration Plan of Port Financial Corp. in order to provide restorative
payments to executives who are prevented from receiving the full benefits
contemplated by the ESOP's benefit formula. The restorative payments consist of
payments in lieu of shares that cannot be allocated to participants under the
ESOP due to the legal limitations imposed on tax-qualified plans and, in the
case of participants who retire before the repayment in full of the ESOP's loan,
payments in lieu of the shares that would have been allocated if employment had
continued through the full term of the loan.

Long-Term Incentive Plan. In connection with this offering, this plan
was established to permit executives selected by the Compensation Committee to
earn cash bonuses based on the achievement of objective, preestablished
performance goals appropriate for a publicly-held company that are set for
periods longer than one year. This plan is effective as of January 1, 2000.
Under the plan the Compensation Committee grants participation units to
selected employees each year. Each unit represents a dollar amount that will
be paid at the end of a three-year performance period if specified performance
targets are met. The Compensation Committee may establish lower unit values for
performance that exceeds a minimum threshold but is below the target and higher
unit values for performance that exceeds the target. Participation units
granted in any plan year may be canceled and substituted with awards of
restricted stock or stock options granted to the participant.

Payments for participation units will be made as soon as practicable
following the end of the relevant performance period. In general, a participant
whose employment terminates prior to the payment for units for a performance
period will forfeit his or her units. There is an exception, and payment will be
made in the event death, disability, retirement or a change in control occurs
after the end of a performance period but prior to the payment for units related
to the performance period.

Future Stock Benefit Plans

Stock Option Plan. We intend to implement a stock option plan for our
directors and officers after the conversion. Applicable regulations prohibit us
from implementing this plan until 6 months after the conversion. If we implement
this plan within one year after the conversion, applicable regulations require
that we first obtain the approval of the holders of a majority of the
outstanding shares of Port Financial Corp. We have not decided whether we will
implement this plan before or after the one-year anniversary of the conversion.

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

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

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

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

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

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

We may obtain the shares needed for this plan by issuing additional shares
or through stock repurchases.

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

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

When a non-qualified stock option is exercised, Port Financial Corp. and
Cambridgeport Bank may be allowed a federal income tax deduction for the same
amount that the option holder includes in his or her ordinary income. When an
incentive stock option is exercised, there is no

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tax deduction unless the shares acquired are resold sooner than two years after
the option was granted or one year after the option was exercised.

Management Recognition Plan. We intend to implement a management
recognition plan for our directors and officers after the conversion. Applicable
regulations prohibit us from implementing this plan until 6 months after the
conversion. If we implement this plan within one year after the conversion, the
regulations require that we first obtain the approval of the holders of a
majority of the outstanding shares of Port Financial Corp. We have not decided
whether we will implement this plan before or after the one-year anniversary of
the conversion.

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

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

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

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

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

After the first anniversary of the conversion, we may amend the plan to change
or remove these restrictions. If we adopt a management recognition plan within
one year after the conversion, we expect to amend the plan later to remove these
restrictions and to provide for accelerated vesting in cases of retirement and
change of control. We expect that any other amendment to this plan (whether
adopted before or after the first anniversary of the plan's initial effective
date) will be subject to stockholder approval if it would change the class of
people eligible to receive benefits, change the price they must pay for stock
which they acquire under the plan, or increase the number of shares available
under the plan or increase the maximum amount of stock that may be acquired by
any one person under the plan.

We may obtain the shares needed for this plan by issuing additional shares
or through stock repurchases.

Restricted stock awards under this plan may feature employment restrictions
that require continued employment for a period of time for the award to be
vested. They may feature

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

Limitations on Federal Tax Deductions for Executive Officer Compensation

As a private entity, Cambridgeport Bank has been subject to federal tax
rules which permit it to claim a federal income tax deduction for a reasonable
allowance for salaries or other compensation for personal services actually
rendered. Following the conversion, federal tax laws may limit this deduction
to $1 million each tax year for each executive officer named in the summary
compensation table in Port Financial Corp.'s proxy statement for that year.
This limit will not apply to non-taxable compensation under various broad-based
retirement and fringe benefit plans, to compensation that is paid in "qualified
performance-based compensation" under applicable law or to compensation that is
paid in satisfaction of commitments that arose before the conversion. Port
Financial Corp. and Cambridgeport Bank expect that the Compensation Committee
will take this deduction limitation into account with other relevant factors in
establishing the compensation levels of their executive officers and in setting
the terms of compensation programs. Currently, none of our executives officers
receive annual compensation expected to exceed this limit. However, there is no
assurance that all compensation paid to our executive officers will be
deductible for federal income tax purposes. To the extent that compensation paid
to any executive officer is not deductible, the net after-tax cost of providing
the compensation will be higher and the net after-tax earnings of Port Financial
Corp. and Cambridgeport Bank will be reduced.

Certain Transactions with Directors/Trustees and Executive Officers

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

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Proposed Purchases of Common Stock by Management

The following table presents, for each of our directors and executive
officers, the amount of stock they wish to purchase in the offering. We have
assumed that a sufficient number of shares will be available to satisfy their
subscriptions. The amounts include shares that may be purchased through
individual retirement accounts and by associates of the directors and executive
officers. Collectively our directors and executive officers expect to purchase a
total of 112,000 shares, or approximately 1.22% of shares we sell in the
offering (assuming the sale of 9,200,000 shares of common stock). These shares
do not include shares expected to be issued under any stock benefit plans of
Port Financial Corp. If all shares issuable under such stock benefit plans were
issued to directors and executive officers of Port Financial Corp., directors
and executive officers of Port Financial Corp. would own 2,136,000 shares, or
23.20% of the shares sold in the offering (assuming the sale of 9,200,000 shares
of the common stock).

<TABLE>
<CAPTION>
Number Percent of
Name Amount of shares Shares Sold
- -------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Directors and Executive Officers:
Paul R. Corcoran, Jr. $ 10,000 1,000 0.01%
Daniel C. Crane, Esq. 100,000 10,000 0.11
Samuel C. Fleming 50,000 5,000 0.05
William Goldberg, Esq. 100,000 10,000 0.11
Robert D. Happ 100,000 10,000 0.11
Charles Jeffrey 100,000 10,000 0.11
James B. Keegan 250,000 25,000 0.27
Jane L. Lundquist 110,000 11,000 0.12
Joseph F. O'Connor 100,000 10,000 0.11
Rudolph R. Russo 200,000 20,000 0.22
----------- ---------
Total to be purchased by directors and $ 1,120,000 112,000 1.22%
executive officers =========== =========
</TABLE>

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THE CONVERSION AND THE OFFERING

- --------------------------------------------------------------------------------
The Board of Directors of Cambridgeport Bank and the Board of Trustees of
Cambridgeport Mutual Holding Company have adopted and the Commissioner of the
Division of Banks of the Commonwealth of Massachusetts and the Corporators of
Cambridgeport Mutual Holding Company have approved the plan of conversion,
subject to the satisfaction of certain conditions.

Approval by the Commissioner does not constitute an endorsement of the
conversion by the Commissioner.
- --------------------------------------------------------------------------------

General

On October 19, 1999, Cambridgeport Mutual Holding Company's Board of
Trustees unanimously adopted the plan of conversion pursuant to which
Cambridgeport Mutual Holding Company will convert to Port Financial Corp., a
stock holding company. This conversion from mutual to stock form includes the
offering by Port Financial Corp. of 100% of its shares to qualifying depositors
of Cambridgeport Bank, tax qualified employee plans of Cambridgeport Bank and
Management in a subscription offering and to certain other persons in a direct
community offering and/or syndicated community offering. Under the terms of the
plan of conversion, Port Financial Corp. will own all of the stock of
Cambridgeport Bank. The conversion will be effected as described under "-Tax
Aspects" or in any other manner that is permitted by the Division and the
Federal Reserve Board and is consistent with the intent of the plan of
conversion.

Cambridgeport Mutual Holding Company has requested approval from the
Federal Reserve Bank of Boston to become bank holding company and to acquire
Cambridgeport Bank. The plan of conversion was approved by the Division, subject
to, among other things, approval of the plan of conversion by the corporators of
Cambridgeport Mutual Holding Company. Corporators are individuals that
constitute a governing body for Massachusetts-chartered mutual savings banks and
mutual holding companies. Under Massachusetts law, each mutual savings bank must
have at least 25 corporators who generally are residents of the communities in
which the savings bank conducts its business. Corporators serve for a term of
ten years and, by law, are required to approve certain transactions of the
mutual holding company, including any proposed conversion. Depositors do not
have voting rights with respect to Massachusetts-chartered mutual savings banks.

Cambridgeport Mutual Holding Company held a special meeting of corporators
for this purpose on February 2, 2000. At such meeting, the plan of conversion
was approved by an affirmative vote of a majority of Cambridgeport Mutual
Holding Company's corporators and a majority of Cambridgeport Mutual Holding
Company's independent corporators. An independent corporator is a person who is
not an employee, officer, trustee or significant borrower of Cambridgeport
Mutual Holding Company or Cambridgeport Bank.

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The aggregate price of the shares of common stock to be issued in the
conversion will be within the offering range, subject to a 15% increase. The
offering range has been established by the Board of Trustees to be between
$68.0 million and $92.0 million and is based upon an independent appraisal of
the estimated pro forma market value of the common stock of Port Financial Corp.
The appraisal was prepared by RP Financial, a consulting firm experienced in the
valuation and appraisal of banks and other financial institutions. All shares of
common stock to be issued and sold pursuant to the conversion will be sold at
the same price ($10.00) per share. The independent appraisal will be affirmed
or, if necessary, updated at the termination of the offering. See "- How We
Determined the Offering Range and the $10.00 Price Per Share" for additional
information as to the determination of the estimated pro forma market value of
the common stock.

- --------------------------------------------------------------------------------
The following is a brief summary of pertinent aspects of the conversion. A copy
of the plan is available from Cambridgeport Bank upon request and is available
for inspection at the offices of Cambridgeport Bank and at the Division of
Banks. The plan is also filed as an exhibit to the Registration Statement of
which this prospectus is a part, copies of which may be obtained from the SEC.
See "Where You Can Find Additional Information."
- --------------------------------------------------------------------------------

Reasons for the Conversion

The conversion is intended to provide an additional source of capital not
available to us as a mutual institution. Funds raised in the offering will
allow Cambridgeport Bank to serve better the needs of our local community
through:

. increased lending (especially to support the growth of business
banking);

. opportunistic branch expansion;

. diversifying the products that we offer;

. increasing delivery systems, including the introduction of internet
banking; and

. marketing to customers disenfranchised by recent consolidations in
the local banking market.

The conversion is also intended to provide an additional source of capital
to Port Financial Corp. in order to allow it to:

. finance acquisitions of other financial institutions or other
businesses related to banking;

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<PAGE>

. pay dividends to stockholders; and

. repurchase shares of our common stock.

Additionally, after the conversion, Port Financial Corp. will have the
ability to issue additional shares of common stock to raise capital or to
support mergers or acquisitions, although no additional capital issuance and no
mergers or acquisitions are planned or contemplated at the present time. In
addition, stock ownership by officers and other employees, through stock-based
benefit, has proven to be an effective performance incentive and an effective
means of attracting and retaining qualified personnel. We also believe that the
conversion will provide local customers and other residents with an opportunity
to become equity owners of Port Financial Corp., and thereby participate in
possible stock price appreciation and cash dividends. This is consistent with
our objective of being a locally-owned financial institution. We believe that,
through expanded local stock ownership, current customers and non-customers who
purchase common stock will seek to enhance the financial success of
Cambridgeport Bank through consolidation of their banking business and increased
referrals to Cambridgeport Bank.

The proceeds from the sale of common stock of Port Financial Corp. will be
invested and used for leveraging in order to enhance our profitability and
facilitate growth. Additionally, our stronger capital position after the
offering will enhance operating flexibility, support desired expansion and
provide a cushion for absorbing unanticipated losses. Cambridgeport Bank will
receive approximately 50% of the net proceeds of the conversion as equity
capital, to be used initially to invest in short-term investments and adjustable
rate mortgage-backed securities, then later for making loans within our market
area. Port Financial Corp. will also use a portion of the cash proceeds from
the conversion to extend a loan to the ESOP, for use in purchasing shares of
common stock issued pursuant to the conversion. The remainder of the proceeds
will be retained by Port Financial Corp. to repurchase common stock, pay
dividends to stockholders or for other general purposes. See "How We Intend to
Use the Proceeds from the Offering" for a description of our intended use of
proceeds.

After considering the advantages and risks of the conversion, as well as
applicable fiduciary duties, the Board of Trustees of Cambridgeport Mutual
Holding Company unanimously approved the conversion as being in the best
interests of Cambridgeport Mutual Holding Company, Cambridgeport Bank, our
depositors and the communities that we serve. The plan of conversion was
subsequently approved by the corporators of Cambridgeport Mutual Holding Company
on February 2, 2000.

Effects of the Conversion

General. Each depositor of Cambridgeport Bank has both a deposit account in
Cambridgeport Bank and a pro rata ownership interest in the equity of
Cambridgeport Mutual Holding Company based upon the balance in the depositor's
account. This interest may only be realized in the event of a liquidation of
Cambridgeport Mutual Holding Company. However, this ownership interest is tied
to the depositor's account and has no tangible market value separate

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from the deposit account. Any depositor who opens a deposit account obtains a
pro rata ownership interest in the equity of Cambridgeport Mutual Holding
Company without any additional payment beyond the amount of the deposit. A
depositor who reduces or closes his or her account receives the balance in the
account but receives nothing for his or her ownership interest in the equity of
Cambridgeport Mutual Holding Company, which is lost to the extent that the
balance in the account is reduced. Consequently, depositors of Cambridgeport
Bank have no way to realize the value of their ownership interest in
Cambridgeport Mutual Holding Company, except in the unlikely event that
Cambridgeport Mutual Holding Company is liquidated. If Cambridgeport Mutual
Holding Company was liquidated, the depositors of record at that time would
share pro rata in any residual retained earnings and reserves after other
claims, including claims of depositors to the amounts of their deposits, are
paid.

When a mutual institution converts to stock form, permanent non-
withdrawable capital stock is created to represent the ownership of the
institution's equity and the former pro rata ownership of depositors is
thereafter represented exclusively by their liquidation rights. This capital
stock is separate and apart from deposit accounts and cannot be and is not
insured by the FDIC or any other governmental agency. Certificates are issued
to evidence ownership of the capital stock. The stock certificates are
transferable, and, therefore, the stock may be sold or traded with no effect on
any deposit account the seller may hold in the institution.

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

The Board of Directors of Cambridgeport Bank currently consists of nine
members, who also serve as trustees of Cambridgeport Mutual Holding Company.
After the conversion, these nine directors will continue to serve on the Board
of Directors of Cambridgeport Bank and will become the new Board of Directors of
Port Financial Corp.

There will be no change in our offices or staff as part of the conversion.
The officers of Port Financial Corp. will be the current executive officers of
Cambridgeport Bank. See "Management."

Deposit Accounts and Loans. The conversion will not affect any deposit
accounts or borrower relationships with Cambridgeport Bank. All deposit
accounts in Cambridgeport Bank will continue to be insured up to the legal
maximum by the Federal Deposit Insurance Corporation and the Depositors
Insurance Fund of the Mutual Savings Central Fund, Inc. in the same manner as
such deposit accounts were insured immediately before the conversion. The
conversion will not change the interest rate or the maturity of deposits at
Cambridgeport Bank.

Furthermore, all loans of Cambridgeport Bank will retain the same status
that they had prior to the conversion. The amount, interest rate, maturity and
security for each loan will remain as they were contractually fixed prior to the
conversion.

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Voting Rights of Depositors. After the conversion, direction of
Cambridgeport Bank will continue to be under the control of the Board of
Directors of Cambridgeport Bank. Port Financial Corp., as the holder of all of
the outstanding common stock of Cambridgeport Bank, will have exclusive voting
rights with respect to any matters concerning Cambridgeport Bank requiring
stockholder approval, including the election of directors of Cambridgeport Bank.

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

Depositors' Rights if We Liquidate. In the unlikely event of a complete
liquidation of Cambridgeport Mutual Holding Company prior to the completion of
the conversion, each depositor would receive a pro rata share of any assets of
Cambridgeport Bank remaining after payment of expenses and satisfaction of
claims of all creditors. Each depositor's pro rata share of such liquidating
distribution would be in the same proportion as the value of such depositor's
deposit account was to the total value of all deposit accounts in Cambridgeport
Bank at the time of liquidation.

Upon a complete liquidation of Port Financial Corp. after the conversion,
all persons who had liquidation rights with respect to Cambridgeport Mutual
Holding Company will continue to have such rights solely with respect to Port
Financial Corp. However, except as described below, a depositor's claim would
be solely for the amount of the balance in such depositor's deposit account plus
accrued interest. Such depositor would not have an interest in the value or the
assets of Port Financial Corp. above that amount. Instead, the holders of Port
Financial Corp.'s common stock would be entitled to any assets remaining upon a
liquidation of Port Financial Corp.

Liquidation Rights. At the completion of the conversion, Port Financial
Corp. will establish a liquidation account for the benefit of eligible account
holders and supplemental eligible account holders who continue to maintain
deposit accounts with Cambridgeport Bank following the conversion. The amount
of the liquidation account will be equal to the net worth of Cambridgeport
Mutual Holding Company as set forth in the most recent consolidated statement of
financial condition contained in this prospectus. In the unlikely event of a
complete liquidation of Port Financial Corp., and only in such event, each such
account holder will be entitled to receive a liquidating distribution from the
liquidation account in the amount of the then-adjusted account balances for such
person's deposit accounts then held following all liquidation payments to
creditors.

The initial account balance for each eligible account holder and
supplemental eligible account holder will be determined by multiplying the
opening balance in the liquidation account by a fraction, the number of which is
the amount of qualifying deposits held by such eligible

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<PAGE>

account holder or supplemental eligible account holder on the July 31, 1998 or
the September 30, 1999 qualifying date, respectively, and the denominator of
which is the aggregate amount of all qualifying deposits on such dates.

If, however, on the last day of any fiscal year of Port Financial Corp.
commencing after July 31, 1998 or September 30, 1999, as the case may be,
the deposit balance in any deposit account of an eligible account holder or
supplemental eligible account holder is less than either (i) the amount of
qualifying deposits of such account holder on July 31, 1998 or September 30,
1999, as the case may be, or (ii) the deposit balance in such deposit account at
the close of business on the last day of any previous fiscal year of Port
Financial Corp. commencing after the July 31, 1998 or the September 30, 1999,
then such eligible account holder's or supplemental eligible account holder's
account balance would be reduced in an amount equal to the reduction in such
liquidation deposit balance, and such account balance will cease to exist if
such deposit account is closed. In addition, no interest in the liquidation
account would ever be increased despite any subsequent increase in the deposit
balances of any eligible account holder or supplemental eligible account holder.

Port Financial Corp. will not be required to set aside funds for the
purpose of establishing the liquidation account, and the creation and
maintenance of the account will not operate to restrict the use or application
of any of the equity accounts of Port Financial Corp., except that Port
Financial Corp. shall not declare or pay a cash dividend on, or repurchase any
of, its capital stock if the effect of such a transaction would be to cause its
equity to be reduced below the amount required for the liquidation account.

Any assets remaining after the above liquidation rights of eligible account
holders and supplemental eligible account holders are satisfied would be
distributed to the stockholders of Port Financial Corp. who would be entitled to
receive a pro rata share of Port Financial Corp.'s assets.

Tax Aspects. Although the conversion may be effected in any manner
approved by the Division that is consistent with the purposes of the plan of
conversion and applicable law, regulations and policies, it is intended that the
conversion will be effected by changing the charter of Cambridgeport Mutual
Holding Company to that of a stock holding company under the name of Port
Financial Corp. The Conversion is intended to be a reorganization under Code
section 368(a)(1)(F). After the conversion, Port Financial Corp. will own 100%
of the issued and outstanding stock of Cambridgeport Bank. There will be no
change in the structure of Cambridgeport Bank, which will retain all of its
historical tax attributes.

Under the plan of conversion, consummation of the conversion is conditioned
upon, among other things, the prior receipt by Cambridgeport Bank and
Cambridgeport Mutual Holding Company of either a private letter ruling from the
IRS and from the Massachusetts taxing authorities or an opinion of Thacher
Proffitt & Wood as to the federal income tax consequences and from Arthur
Andersen LLP as to the Massachusetts income tax consequences

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<PAGE>

of the conversion to Cambridgeport Bank, Cambridgeport Mutual Holding Company,
Port Financial Corp., eligible account holders and supplemental eligible account
holders. In Revenue Procedure 99-3, 1999-1 I.R.B. 103, the IRS announced that it
will not rule on whether a transaction qualifies as a reorganization under Code
section 368(a)(1)(F), but that it will rule on significant sub-issues that must
be resolved to determine whether the transaction qualifies under either of that
Code section.

Based in part upon representations of Cambridgeport Bank and Cambridgeport
Mutual Holding Company, Thacher Proffitt & Wood has issued its opinion regarding
certain federal income tax consequences of the conversion. With regard to the
conversion, Thacher Proffitt & Wood has opined that:

(1) the conversion will constitute a reorganization under Code section
368(a)(1)(F);

(2) none of Cambridgeport Bank, Cambridgeport Mutual Holding Company or
Port Financial Corp. will recognize gain or loss as a result of the
conversion; and

(3) eligible account holders and supplemental eligible account holders
will not recognize gain or loss upon their receipt of nontransferable
subscription rights to purchase shares of Port Financial Corp.,
provided the amount to be paid for such shares is equal to fair
market value of such shares.

Unlike private rulings of the IRS, an opinion of counsel is not binding on
the IRS and the IRS could disagree with conclusions reached in the opinion. If
there is a disagreement, we can not guarantee that the IRS would not prevail in
a judicial or administrative proceeding.

Arthur Andersen LLP has opined, subject to the limitations and
qualifications in its opinion, that, for purposes of the Massachusetts corporate
income tax, the conversion will not become a taxable transaction to
Cambridgeport Bank, Cambridgeport Mutual Holding Company, Port Financial Corp.,
the stockholders of Port Financial Corp. or the depositors of Cambridgeport
Bank.

Accounting Consequences. The conversion will be accounted for in a manner
similar to a pooling-of-interests under generally accepted accounting
principles. Accordingly, the carrying value of our assets, liabilities, and
capital will be unaffected by the conversion and will be reflected in the Port
Financial Corp.'s and Cambridgeport Bank's consolidated financial statements
based on their historical amounts.

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How We Determined the Offering Range and the $10.00 Price Per Share

The plan of conversion requires that the purchase price of the common stock
must be based on the appraised pro forma market value of the common stock, as
determined on the basis of an independent valuation. Cambridgeport Mutual
Holding Company has retained RP Financial to make the independent valuation. RP
Financial's fees for its services in making such appraisal are estimated to be
$65,000. Neither Cambridgeport nor Cambridgeport Mutual Holding Company have had
any prior business dealings with RP Financial. Port Financial Corp. will
indemnify RP Financial and its employees and affiliates against losses
(including any losses in connection with claims under the federal securities
laws) arising out of its services as appraiser, except where RP Financial's
liability results from its negligence or bad faith.

An appraisal has been made by RP Financial in reliance upon the information
contained in this prospectus, including the financial statements. RP Financial
also considered the following factors, among others:

. the present and projected operating results and financial condition
of Cambridgeport Mutual Holding Company, and the economic and
demographic conditions in Cambridgeport Bank's existing market area;

. historical, financial and other information relating to Cambridgeport
Bank;

. a comparative evaluation of the operating and financial statistics of
Cambridgeport Mutual Holding Company with those of other similarly
situated savings associations and savings institutions located in New
England;

. the impact of the conversion on Cambridgeport Mutual Holding
Company's equity and earnings potential;

. dividends that may be paid by Port Financial Corp.; and

. the trading market for securities of comparable institutions and
general conditions in the market for such securities.

On the basis of the foregoing, RP Financial has advised Cambridgeport
Mutual Holding Company that, in its opinion, dated January 7, 2000, the
estimated pro forma market value of the common stock of Port Financial Corp.
ranged from a minimum of $68.0 million to a maximum of $92.0 million with a
midpoint of $80.0 million (the estimated valuation range).

The Board of Trustees of Cambridgeport Mutual Holding Company held a
meeting to review and discuss the appraisal report prepared by RP Financial.
Representatives of RP Financial participated in the meeting to explain the
contents of the appraisal report. The Board of Trustees reviewed the methods
that RP Financial used to determine the pro forma market

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value of the common stock and the appropriateness of the assumptions that RP
Financial used in determining this value. The Board of Trustees determined that
the common stock will be sold at $10.00 per share, which is the price most
commonly used in stock offerings involving converting savings institutions.

The Board of Trustees has approved the independent appraisal of RP
Financial, LC. which established an estimated valuation range of $68.0 million
to $92.0 million, with a midpoint of $80.0 million. Port Financial Corp.
expects to issue between 6,800,000 and 9,200,000 shares of common stock. The
estimated valuation range and the offering range may be amended with the
approval of the Division and the Federal Reserve Board (if required), due to
subsequent developments in the financial condition of Cambridgeport Mutual
Holding Company or Cambridgeport Bank or market conditions generally.

- --------------------------------------------------------------------------------
The valuation prepared by RP Financial is not intended, and must not be
construed, as a recommendation of any kind as to the advisability of purchasing
such shares. RP Financial did not independently verify the financial statements
and other information provided by Cambridgeport Mutual Holding Company, nor did
RP Financial value independently the assets or liabilities of Cambridgeport
Mutual Holding Company. The valuation considers Cambridgeport Mutual Holding
Company as a going concern and should not be considered as an indication of the
liquidation value of Cambridgeport Mutual Holding Company. Moreover, because
such valuation is necessarily based upon estimates and projections, all of
which are subject to change from time to time, no assurance can be given that
persons purchasing such shares in the conversion will thereafter be able to
sell such shares at prices at or above the purchase price.
- --------------------------------------------------------------------------------

The maximum of the estimated valuation range may be increased up to 15% and
the number of shares of common stock to be issued in the conversion may be
increased to 10,580,000 shares due to regulatory considerations, changes in the
market and general financial and economic conditions without the resolicitation
of subscribers. See "-- Limitations on Common Stock Purchases" as to the method
of distribution and allocation of additional shares that may be issued in the
event of an increase in the estimated valuation range.

We may not sell any shares of common stock unless RP Financial confirms to
Cambridgeport Bank, Port Financial Corp., the Division and the Federal Reserve
Board that, to the best of its knowledge, nothing of a material nature has
occurred which, taking into account all relevant factors, would cause RP
Financial to conclude that the appraisal report is incompatible with its
estimate of the pro forma market value of the common stock upon the conclusion
of the offering.

If RP Financial concludes that the pro forma market value of the common
stock is either more than 15% above the maximum of the estimated valuation range
or less than the minimum of the estimated valuation range, Cambridgeport Bank
and Port Financial Corp., after consulting with the Division and the Federal
Reserve Board, may:

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(1) terminate the plan of conversion and return all subscription funds
promptly, paying interest at Cambridgeport Bank's passbook savings
rate of interest and cancel all account withdrawal authorizations;

(2) establish a new estimated valuation range and either:

(a) hold new subscription and community offerings; or

(b) provide subscribers the opportunity to change or cancel their
orders (a "resolicitation"); or

(3) take such other actions as permitted by the Division and the Federal
Reserve Board in order to complete the conversion.

If a resolicitation is commenced, unless an affirmative response is received
from a subscriber within a designated period of time, all funds will be promptly
returned to the subscriber and account withdrawal authorizations canceled as
described above.

A copy of the appraisal report of RP Financial, including any amendments
made to it, and the detailed memorandum of the appraiser setting forth the
method and assumptions for such appraisal are available for inspection at the
main office of Cambridgeport Bank.

Subscription Offering and Subscription Rights

In accordance with the plan of conversion, rights to subscribe for the
purchase of common stock have been granted to the following persons in the
following order of priority:

(1) Eligible accounts holders. Depositors with deposits in Cambridgeport
Bank with balances aggregating $50 or more ("qualifying deposit") as
of July 31, 1998.

(2) Supplemental eligible account holders. Depositors with qualifying
deposits in Cambridgeport Bank on September 30, 1999, other than those
depositors who would otherwise qualify as eligible account holders and
except for officers, directors, trustees, corporators and their
associates; and

(3) Tax-qualified employee stock benefit plans of Cambridgeport Bank,
including the ESOP.

(4) Employees, officers, directors, trustees and corporators of
Cambridgeport Bank or Cambridgeport Mutual Holding Company at the time
of the offering, who do not qualify in the preceding categories.

All subscriptions received will be subject to the availability of common stock
after satisfaction of all subscriptions of all subscribers having prior rights
in the subscription offering and to the

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maximum and minimum purchase limitations set forth in the plan of conversion and
as described below under "- Limitations on Common Stock Purchases."

Priority 1: Eligible Account Holders. Each eligible account holder will
receive, as first priority and without payment, non-transferable rights to
subscribe for common stock in an amount of up to $[600,000]. See "--Limitations
on Common Stock Purchases."

If there are not sufficient shares available to satisfy all subscriptions
by eligible account holders, shares first will be allocated so as to permit each
subscribing eligible account holder to purchase a number of shares sufficient to
make such eligible account holder's total allocation equal to the lesser of 100
shares or the number of shares subscribed for. Thereafter, unallocated shares
will be allocated among the remaining eligible account holders whose
subscriptions remain unfilled in the proportion that the amount of their
respective qualifying deposit bears to the total amount of qualifying deposits
of all eligible account holders whose subscriptions remain unfilled. However, no
fractional shares shall be issued.

To ensure a proper allocation of stock, each eligible account holder must
list on his or her stock order form all deposit accounts in which such eligible
account holder had an ownership interest at July 31, 1998. Failure to list an
account or providing incorrect information could result in the loss of all or
part of an allocation than if all accounts had been disclosed. The subscription
rights of eligible account holders who are also directors, trustees, corporators
or officers of Cambridgeport Bank or Cambridgeport Mutual Holding Company or
their associates will be subordinated to the subscription rights of other
eligible account holders to the extent attributable to increased deposits in the
one-year period preceding July 31, 1998.

Priority 2: Supplemental Eligible Account Holders. To the extent that
there are shares remaining after satisfaction of the subscriptions by eligible
account holders, each supplemental eligible account holder will receive, as a
second priority and without payment, non-transferable rights to subscribe for
common stock in an amount of up to $[600,000]. See "- Limitations on Common
Stock Purchases."

If there are not sufficient shares available to satisfy all subscriptions
by supplemental eligible account holders, available shares first will be
allocated among subscribing supplemental eligible account holders so as to
permit each supplemental eligible account holder to purchase a number of shares
sufficient to make such supplemental eligible account holder's total allocation
equal to the lesser of 100 shares or the number of shares subscribed for.
Thereafter, unallocated shares will be allocated among the remaining
supplemental eligible account holders whose subscriptions remain unfilled in the
proportion that the amount of their respective qualifying deposit bears to the
total amount of qualifying deposits of all supplemental eligible account holders
whose subscriptions remain unfilled. However, no fractional shares shall be
issued.

To ensure proper allocation of stock, each supplemental eligible account
holder must list on his or her stock order form all deposit accounts in which
such supplemental eligible account holder had an ownership interest at September
30, 1999. Failure to list an account or providing incorrect information could
result in the loss of all or part of an allocation.

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Priority 3: The Tax-Qualified Employee Benefit Plans. On a third priority
basis, the tax-qualified employee benefit plans, including the ESOP, will
receive, as a third priority and without payment therefor, non-transferable
subscription rights to purchase up to 8% of the common stock to be issued in the
offering. As a tax-qualified employee benefit plan, the ESOP expects to
purchase 8% of the shares to be issued in the offering, or 544,000 shares, based
on the issuance of 6,800,000 shares at the minimum of the offering range or
828,000 shares based on the issuance of 9,200,000 at the maximum of the
offering range. Subscriptions by the ESOP will not be aggregated with shares of
common stock purchased directly by or which are otherwise attributable to any
other participants in the subscription and community offerings, including
subscriptions of any of Cambridgeport Bank's directors, officers or employees.
In the event that the total number of shares offered is increased to more than
10,350,000 shares, the ESOP will have a first priority right to purchase any
such shares up to an aggregate of 8% of the shares issued in the offering. It
has not been determined whether the ESOP will subscribe for shares in the
offering or purchase shares in private transactions or on the open market after
completion of the offering.

Priority 4: Employees, Officers, Directors, Trustees and Corporators of
Cambridgeport Bank or Cambridgeport Mutual Holding Company. On a fourth priority
basis, each employee, officer, director, trustee and corporator of Cambridgeport
Bank or the Cambridgeport Mutual Holding Company at the time of the offering who
is not eligible in the preceding priority categories shall receive non-
transferable subscription rights to subscribe for common stock in an amount up
to [$600,000]. See "-- Limitations on Common Stock Purchases."

Expiration Date for the Subscription Offering. The subscription offering
will expire at 10:00 a.m., Massachusetts time, on [ ], 2000, unless we extend
this period for up to 45 days. We may further extend this period for additional
60 day periods with the approval of the Division and, if necessary, the Federal
Reserve Board. Subscription rights which have not been exercised prior to the
expiration date, as extended, will become void.

If all shares have not been subscribed for by the expiration date, as
extended, all funds delivered to Port Financial Corp. will be returned promptly
with interest at our passbook savings rate and all withdrawal authorizations
will be canceled. If an extension beyond [ ], 2000 is granted, Port Financial
Corp. will notify subscribers of the extension of time and of their rights to
change or cancel their orders. Each extension may not exceed 60 days, and all
extensions, in the aggregate, may not last beyond [ ].

Persons in Non-qualified States or Foreign Countries. We will make
reasonable efforts to comply with the securities laws of all states in the
United States in which persons entitled to subscribe for stock pursuant to the
plan of conversion reside. However, we are not required to offer stock in the
subscription offering to any person who resides in a foreign country.

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Direct Community Offering and Syndicated Community Offering

Direct Community Offering. To the extent that shares remain available for
purchase after satisfaction of all subscriptions received in the subscription
offering, Port Financial Corp. may offer shares for sale pursuant to the plan of
conversion in a direct community offering to the public with preference given to
natural persons residing in the cities and towns of Cambridge, Arlington,
Bedford, Belmont, Boston, Braintree, Brookline, Burlington, Canton, Dedham,
Dover, Framingham, Lexington, Lincoln, Medford, Milton, Natick, Needham, Newton,
Norwood, Quincy, Randolph, Sherbourne, Somerville, Stoneham, Walpole, Waltham,
Watertown, Wayland, Wellesley, Weston, Westwood, Weymouth, Winchester and
Woburn, and possibly to the general public. The term "residents" includes
persons who occupy a dwelling within these cities and towns and establish an
ongoing physical presence within it, together with an indication that such
presence is not merely transitory in nature. To the extent the person is a
corporation or other business entity, the principal place of business or
headquarters shall be in these cities and towns. We may utilize depositor or
loan records or such other evidence provided to it to make a determination as to
whether a person is a resident. In all cases, the determination of resident
status will be made by us in our sole discretion. Stock sold in the direct
community offering will be offered and sold in a manner to achieve the widest
distribution of the stock. No person may purchase more than $[600,000] of common
stock in the direct community offering. Allocation of shares if an
oversubscription occurs will give preference to natural persons residing in the
cities and towns listed above. Orders accepted will each be filled to a maximum
percentage to be determined by us and not to exceed 2% of the total offering or
the purchase limitations in the plan. Thereafter remaining shares will be
allocated on an equal number of shares per order basis until all orders have
been filled.

The direct community offering, if any, may commence concurrently with or
subsequent to the commencement of the subscription offering and shall terminate
no later than 45 days after the expiration of the subscription offering unless
extended by Port Financial Corp., with the approval of the Division and the
Federal Reserve Board, if necessary. We may terminate the direct community
offering or the syndicated community offering as soon as we have received orders
for at least the minimum number of shares available for purchase in the
offering.

Syndicated Community Offering. If any stock remains unsold in the
subscription and direct community offerings, we may use the services of broker-
dealers to sell such shares on a best efforts basis in a syndicated community
offering to be managed by Ryan, Beck & Co. No person may purchase more than
$[600,000] of common stock in the syndicated community offering.

Ryan, Beck & Co. has not selected any particular broker-dealers to
participate in a syndicated community offering. Neither Ryan, Beck & Co. nor any
registered broker-dealer shall have any obligation to take or purchase any
shares of the common stock in the syndicated community offering. However, Ryan,
Beck & Co. has agreed to use its best efforts in the sale of shares in any
syndicated community offering.

The syndicated community offering, if any, may commence during the direct
community offering or after the direct community offering is terminated. The
syndicated community offering will

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terminate no more than 45 days following the expiration of the subscription
offering unless extended by Port Financial Corp. with the approval of the
Division and Federal Reserve Board. Such extensions may not be beyond [ ].

------------------------------------------------------------------------------
The opportunity to subscribe for shares of common stock in the direct
community offering or syndicated community offering is subject to our right,
in our sole discretion, to accept or reject any order in whole or in part
either at the time of receipt of an order or as soon as practicable following
the expiration date. If we reject a subscription in part, the subscriber will
not have the right to cancel the remainder of the subscription.
------------------------------------------------------------------------------

If for any reason a syndicated community offering of unsubscribed shares
cannot be effected or is not deemed advisable, we will seek to make other
arrangements, subject to the approval of the Division and the FRB and to
compliance with applicable state and federal securities laws.

Marketing Arrangements

Ryan, Beck & Co. Inc. We have engaged Ryan, Beck & Co. as financial and
marketing agent in connection with the offering of the common stock. Ryan, Beck
& Co. has agreed to use its best efforts to assist us with the solicitation of
subscriptions for shares of common stock in the offering.

Ryan, Beck & Co. will receive fees for services provided in connection with
the offering equal to $1,000,000. If there is a syndicated community offering,
we will also pay Ryan, Beck & Co. a management fee equal to 1.0% of the
aggregate purchase price of common stock sold in the syndicated community
offering which fee, along with fees payable by us to any broker-dealers
including Ryan, Beck & Co., for the shares they sell, will not exceed 6.0% of
the aggregate purchase price of the common stock sold in the syndicated
community offering. Ryan, Beck & Co. will also be reimbursed for its reasonable
out-of-pocket expenses, including legal fees of up to $55,000.

Directors, Officers and Employees. Directors and executive officers of
Port Financial Corp. and Cambridgeport Bank may participate in the solicitation
of offers to purchase common stock. Other employees of Cambridgeport Bank may
participate in the offering in ministerial capacities or provide clerical work
in effecting a sales transaction. Such other employees have been instructed not
to solicit offers to purchase common stock or provide advice regarding the
purchase of common stock. Port Financial Corp. will rely on Rule 3a4-1 under
the Exchange Act, and sales of common stock will be conducted within the
requirements of Rule 3a4-1, so as to permit directors, officers and employees to
participate in the sale of common stock. No director, officer or employee of
Port Financial Corp. or Cambridgeport Bank will be compensated in connection
with his or her participation by the payment of commissions or other
remuneration based either directly or indirectly on transactions in common
stock.

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Procedure for Purchasing Shares in Subscription and Direct Community Offerings

Use of Order Forms. To purchase shares in the subscription offering and the
direct community offering, an executed order form with the required payment for
each share subscribed for, or with appropriate authorization for withdrawal from
a subscriber's deposit accounts at Cambridgeport Bank (which must be given by
completing the appropriate blanks on the stock order form), must be received by
Cambridgeport Bank by 10:00 a.m., Massachusetts time, on the indicated
expiration date unless extended. You may submit your order form by mail using
the return envelope provided or by overnight courier to the indicated address,
or by bringing your order forms to our stock information center in our main
office. Stock order forms which are not received by such time or are executed
defectively or are received without full payment (or correct withdrawal
instructions) are not required to be accepted. In addition, we are not obligated
to accept orders submitted on photocopied or facsimiled order forms. We have the
power to waive or permit the correction of incomplete or improperly executed
forms, but do not represent that we will do so. Once received, an executed order
form may not be modified, amended or rescinded without our consent unless the
conversion has not been completed within 45 days of the end of the subscription
offering or we conduct a resolicitation of subscribers for some other reason. If
resolicitation is commenced, subscribers will have an opportunity to change or
cancel their orders. Unless an affirmative response is received from a
subscriber within a designated timeframe, all funds will be promptly returned to
the subscriber with interest at Cambridgeport Bank's passbook-savings rate and
all account withdrawal authorizations will be canceled.

In order to ensure that eligible account holders and supplemental eligible
account holders are properly identified as to their stock purchase eligibility,
depositors must list on the stock order form all deposit accounts as of the
applicable eligibility record date giving all names on each account and the
account numbers.

To ensure that each purchaser receives a prospectus at least 48 hours prior
to the expiration date for the offering, in accordance with Rule 15c2-8 of the
Exchange Act, no prospectus will be mailed later than five days prior to such
date or hand delivered any later than two days prior to such date. Execution of
the stock order form will confirm receipt or delivery in accordance with Rule
15c2-8. Order forms will only be distributed when preceded or accompanied by a
prospectus.

Payment for Shares. Payment for subscriptions may be made by personal
check, bank check, money order or by authorization of withdrawal from your
current deposit accounts which do not have check-writing privileges maintained
at Cambridgeport Bank. Interest will be paid on payments made by check, bank
check or money order at our passbook savings rate of interest from the date
payment is received until the completion or termination of the conversion. If
payment is made by authorization of withdrawal from deposit accounts, the funds
authorized to be withdrawn will remain in the account and continue to accrue
interest at the contractual rates until completion or termination of the
conversion, but a hold immediately will be placed on such funds, thereby making
them unavailable to the depositor.

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Cambridgeport Bank will waive any applicable penalties for early withdrawal
from certificates of deposit. If the remaining balance in a certificate account
is reduced below the applicable minimum balance requirement at the time that the
funds are transferred under the authorization, the certificate will be canceled
at the time of the withdrawal, without penalty, and the remaining balance will
be converted into a statement savings account and will earn interest at the
passbook savings rate.

The ESOP will not be required to pay for the shares subscribed for at the
time it subscribes. Rather, the ESOP may pay for such shares of common stock
subscribed for at the purchase price upon completion of the offering; provided,
that there is in force from the time of its subscription until such time, a loan
commitment acceptable to Port Financial Corp. from an unrelated financial
institution or from Port Financial Corp. to lend to the ESOP the aggregate
purchase price of the shares for which it subscribed. Port Financial Corp.
intends to provide such a loan to the ESOP.

Owners of self-directed IRAs may use the assets of such IRAs to purchase
shares of common stock in the subscription and community offerings, provided
that such IRAs are not maintained at Cambridgeport Bank. Persons with IRAs
maintained at Cambridgeport Bank must have their accounts transferred to an
unaffiliated institution or broker to purchase shares of common stock in the
subscription and community offerings. In addition, the provisions of ERISA and
IRS regulations require that officers, trustees and ten percent stockholders who
use self-directed IRA funds to purchase shares of common stock in the
subscription and community offerings make such purchases for the exclusive
benefit of the IRAs. Assistance on how to transfer IRAs maintained at
Cambridgeport Bank can be obtained from the Stock Information Center.
Depositors interested in using funds in an IRA to purchase common stock should
contact the Stock Information Center as soon as possible.

Certificates representing shares of common stock purchased will be mailed
to purchasers to the addresses specified in properly completed order forms, as
soon as practicable following completion of the offering. Any certificates
returned as undeliverable will be disposed of in accordance with applicable law.

Stock Information Center

If you have any questions regarding the offering or the conversion, please
call the Stock Information Center at [ ], from 9:00 a.m. to 4:00 p.m.,
Massachusetts time, Monday through Friday.

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Restrictions on Transfer of Subscription Rights and Shares of Common Stock

Regulations prohibit any person with subscription rights from transferring
or entering into any agreement or understanding to transfer the legal or
beneficial ownership of the subscription rights issued under the plan of
conversion or the shares of common stock to be issued upon their exercise. Such
rights may be exercised only by the person to whom they are granted and only for
such person's account. Each person exercising such subscription rights will be
required to certify that such person is purchasing shares solely for such
person's own account and that such person has no agreement or understanding
regarding the sale or transfer of such shares. The regulations also prohibit
any person from offering or making an announcement of an offer or an intent to
make an offer to purchase such subscription rights or shares of common stock
prior to the completion of the conversion.

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We will pursue any and all legal and equitable remedies (including forfeiture)
in the event we become aware of the transfer of subscription rights and will
not honor orders known by us to involve the transfer of such rights.
------------------------------------------------------------------------------

Limitations on Common Stock Purchases

The plan of conversion includes the following limitations on the number of
shares of common stock which may be purchased during the conversion:

(1) No subscription for fewer than 25 shares will be accepted;

(2) No fractional shares will be allocated or issued;

(3) Eligible account holders and supplemental eligible account holders,
may subscribe for and purchase common stock in the subscription
offering in an amount up to $600,000.

(4) The tax-qualified employee benefit plans are permitted to purchase up
to 8% of the shares of common stock issued in the offering and, as a
tax-qualified employee benefit plan, the ESOP intends to purchase 8%
of the shares of common stock issued in the offering;

(5) The officers, directors, trustees and corporators of Cambridgeport
Bank or Cambridgeport Mutual Holding Company and their associates in
the aggregate, excluding purchases by the tax-qualified employee
benefit plans, may purchase up to 30% of the shares of stock issued in
the offering. Each employee, officer, director, trustee or corporator
who does not qualify as an eligible account holder or supplemental
eligible account holder will be subject to the same purchase
limitations as eligible account holders and supplemental eligible
account holders; and

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(6) Persons purchasing shares of common stock in the direct community
offering or the syndicated community offering, may purchase common
stock in an amount up to $[600,000] subject to increase as described
below.

(7) Except for the tax-qualified employee benefit plans, the maximum
amount of shares of common stock purchased in all categories of the
offering by any person, together with associates of, and groups of
person acting in concert with, such person, shall not exceed
$[1,200,000] subject to increase as described below.

Subject to any required regulatory approval and the requirements of
applicable laws and regulations, the $[600,000] and $[1,200,000] maximum amounts
may be altered by Cambridgeport Mutual Holding Company, in its sole discretion
and without further notice to or solicitation of subscribers or other
prospective purchasers, to the following amounts: (i) increased to a maximum of
5% of the shares offered in the offering, exclusive of an increase in the total
number of shares issued due to an increase in the offering range of up to 15%
up to 460,000 shares, or (ii) decreased to not less than one-tenth of a
percent (.10%) of the number of shares of stock offered in the conversion. If
the purchase limitations are increased, subscribers for the maximum amount
in the subscription offering will be given the opportunity to increase their
subscriptions up to the then applicable limit. Requests to purchase additional
shares of common stock under this provision will be determined by and in the
sole discretion of the Board of Directors of Cambridgeport Bank and the Board of
Trustees of Cambridgeport Mutual Holding Company and, if necessary, allocated on
a pro rata basis giving priority in accordance with the priorities set forth in
the plan of conversion and described in this prospectus.

If we sell more than 9,200,000 shares, the additional shares will be
allocated in accordance with the priorities and procedures described in "-
Subscription Offering and Subscription Rights" and "-Direct Community Offering
and Syndicated Community Offering."

The term "associate" of a person is defined to mean:

(1) any corporation or organization (other than Port Financial Corp.,
Cambridgeport Mutual Holding Company, Cambridgeport Bank or a
majority-owned subsidiary of Cambridgeport Bank) of which such person
is a director, officer or partner or is directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities;

(2) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in
a similar fiduciary capacity; and

(3) any relative or spouse of such person, or any relative of such spouse,
who has the same home as such person or who is a director or officer
of Port Financial Corp., Cambridgeport Mutual Holding Company,
Cambridgeport Bank or any subsidiary of Cambridgeport Bank or Port
Financial Corp. or any affiliate thereof; and

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(4) any person "acting in concert" with any of the persons or entities
specified in clauses (1) through (3) above; provided, however, that
any tax-qualified or non-tax-qualified employee plan will not be
deemed to be an associate of any director, trustee or officer of
Cambridgeport Bank, Cambridgeport Mutual Holding Company or Port
Financial Corp., for purposes of aggregating total shares that may be
acquired or held by directors, trustees and officers and their
associates

We have the sole discretion to determine whether prospective purchasers are
"associates" or "acting in concert." Trustees, directors and officers are not
treated as associates of each other solely by virtue of holding such positions.

We have the right in our sole discretion to reject any order submitted by a
person whose representations we believe to be false or who we otherwise believe,
either alone or acting in concert with others, is violating or circumventing, or
intends to violate or circumvent, the terms and conditions of the plan of
conversion.

Restrictions on Purchase or Transfer of Shares After the Conversion

All shares of common stock purchased in connection with the conversion by
an officer, director, trustee or corporator of Cambridgeport Bank, Cambridgeport
Mutual Holding Company or Port Financial Corp. will be subject to a restriction
that the shares not be sold for a period of one year following the date of
purchase, except in the event of the death or the Commissioner's declaration of
incompetence of such officer, director, trustee or corporator. Each certificate
for restricted shares will bear a legend giving notice of this restriction on
transfer, and instructions will be issued to the effect that the transfer agent
for Port Financial Corp. is to disregard any such attempted transfer. The
directors and executive officers of Port Financial Corp. and Cambridgeport Bank
will also be subject to the federal insider trading rules and any other
applicable requirements of the federal securities laws.

Purchases of outstanding shares of common stock of Port Financial Corp. by
directors, trustees, corporators or officers of Port Financial Corp. or
Cambridgeport Bank (and any person who was a director, corporator or officer of
Cambridgeport Bank; a trustee, corporator or officer of Cambridgeport Mutual
Holding Company or a director or officer of Port Financial Corp. at any time
after the date on which the Board of Directors of Cambridgeport Bank and the
Board of Directors of Cambridgeport Mutual Holding Company adopted the plan of
conversion), and their associates during the three-year period following
conversion may be made only through a broker or dealer registered with the SEC,
except with the prior written approval of the Division. This restriction does
not apply, however, to negotiated transactions involving more than 1% of the
outstanding common stock, or purchases of common stock made and held by any tax-
qualified or non-tax-qualified employee plan of Cambridgeport Bank. In
addition, for a period of three years following the conversion, no officer,
director, trustee or corporator of Cambridgeport Bank, Cambridgeport Mutual
Holding Company, Port Financial Corp. or any of their associates may, without
prior written approval from the Commissioner, purchase capital stock of Port
Financial Corp.

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Interpretation, Amendment and Termination

All interpretations of the plan of conversion by the Board of Trustees of
Cambridgeport Mutual Holding Company will be final, subject to the authority of
the Division and Federal Reserve Board. The plan of conversion provides that, if
deemed necessary or desirable by the Board of Trustees of Cambridgeport Mutual
Holding Company, the plan of conversion may be substantively amended by a
majority vote of the Board of Trustees as a result of comments from regulatory
authorities or otherwise, at any time prior to the date material is sent to the
corporators for approval of the plan. Amendment of the plan of conversion
thereafter requires a majority vote of the Board of Trustees and the approval of
the Commissioner. The plan of conversion shall be terminated if the conversion
is not completed within 24 months from the date on which the Board of Trustees
of Cambridgeport Mutual Holding Company approves the plan. The plan of
conversion may be terminated by a majority vote of the Board of Trustees of
Cambridgeport Mutual Holding Company at any time prior to the date of the
special meeting of corporators called to consider this plan, and thereafter by
such a vote with the approval of the Commissioner.

RESTRICTIONS ON ACQUISITION OF PORT FINANCIAL CORP.
AND CAMBRIDGEPORT BANK

General

The plan of conversion provides for Cambridgeport Mutual Holding Company to
convert from mutual form to Port Financial Corp., a stock holding company which
will own 100% of the stock of Cambridgeport Bank. See "The Conversion and The
Offering -- General." Provisions in Port Financial Corp.'s Articles of
Organization and Bylaws and in its benefit plans and agreements entered into in
connection with the conversion, together with provisions of the Massachusetts
General Laws ("MGL") and governing regulatory restrictions, may have anti-
takeover effects.

Port Financial Corp.'s Articles of Organization and Bylaws

Port Financial Corp.'s Articles of Organization and Bylaws contain a number
of provisions, relating to corporate governance and rights of stockholders, that
might discourage future takeover attempts. As a result, stockholders who might
desire to participate in such transactions may not have an opportunity to do so.
In addition, these provisions will also render the removal of the Board of
Directors or management of Port Financial Corp. more difficult.

------------------------------------------------------------------------------
The following description is a summary of the provisions of the Articles of
Organization and Bylaws. See "Where You Can Find Additional Information" as to
how to review a copy of these documents.
------------------------------------------------------------------------------
141
<PAGE>

Directors. Certain provisions of Port Financial Corp.'s Articles of
Organization and Bylaws will impede changes in control of the Board of
Directors. Port Financial Corp.'s Articles of Organization provide that the
Board of Directors will be divided into three classes, with directors in each
class elected for three-year staggered terms except for the initial directors.
Thus, it would take two annual elections to replace a majority of Port Financial
Corp.'s Board. Port Financial Corp.'s Articles of Organization provide that the
size of the Board of Directors may be increased or decreased only by a majority
vote of the Board. The Articles of Organization also provide that any vacancy
occurring in the Board of Directors, including a vacancy created by an increase
in the number of directors, shall be filled for the remainder of the unexpired
term by a majority vote of the directors then in office. Finally, the Articles
of Organization and Bylaws impose notice and information requirements in
connection with the nomination by stockholders of candidates for election to the
Board of Directors or the proposal by stockholders of business to be acted upon
at an annual meeting of stockholders.

The Articles of Organization provide that a director may only be removed
for cause by the affirmative vote of either two-thirds of the authorized Board
of Directors of Port Financial Corp., or 80% of the shares eligible to vote. In
the absence of these provisions, the vote of the holders of a majority of the
shares of Port Financial Corp. could remove the entire Board, with or without
cause, and replace it with persons of such holders' choice.

Restrictions on Call of Special Meetings. The Articles of Organization
provide that a special meeting of stockholders may be called by a majority of
the authorized Board of Directors of Port Financial Corp. or the affirmative
vote of a majority of the disinterested directors then in office, or, upon
written application, by stockholders holding at least 80% of the capital stock
entitled to vote at the meeting.

Votes of Stockholders. The Articles of Organization prohibit cumulative
voting for the election of directors. No cumulative voting means that the
directors, officers and employees of Cambridgeport Bank and the former trustees,
officers and employees of Cambridgeport Mutual Holding Company may have the
power to elect all directors of Port Financial Corp. to be elected at that
meeting. This could prevent public stockholder representation on Port Financial
Corp.'s Board of Directors. In addition, the Articles of Organization also
provides that any action required or permitted to be taken by the stockholders
of Port Financial Corp. may be taken only at an annual or special meeting and
prohibits stockholder action by written consent in lieu of a meeting.

Authorization of Preferred Stock. The Articles of Organization authorize
one million shares of serial preferred stock, par value $0.01 per share. Port
Financial Corp. is authorized to issue preferred stock from time to time in one
or more series subject to applicable provisions of law, and the Board of
Directors is authorized to fix the designations, and relative preferences,
limitations, voting rights, if any, including without limitation, offering
rights of such shares (which could be multiple or as a separate class). In the
event of a proposed merger, tender offer or other attempt to gain control of
Port Financial Corp. that the Board of Directors does not

142
<PAGE>

approve, it might be possible for the Board of Directors to authorize the
issuance of a series of preferred stock with rights and preferences that would
impede that completion of the transaction. An effect of the possible issuance of
preferred stock, therefore may be to deter a future attempt to gain control of
Port Financial Corp. The Board of Directors has no present plan or understanding
to issue any preferred stock.

Stockholder Vote Required to Approve Business Combinations with Principal
Stockholders. The Articles of Organization requires the approval of the holders
of at least 80% of Port Financial Corp.'s outstanding shares of voting stock to
approve certain "Business Combinations" and related transactions.

The vote of at least 80% of the stockholders is required in connection with
any transaction involving an Interested Stockholder except in cases where the
proposed transaction has been approved in advance by a majority of those members
of Port Financial Corp.'s Board of Directors who are unaffiliated with the
Interested Stockholder and were directors prior to the time when the Interested
Stockholder became an Interested Stockholder. However, if the proposed
transaction meets conditions set forth in the Articles of Organization designed
to afford the stockholders a fair price in consideration for their shares,
approval of only two-thirds of the outstanding shares of voting stock would be
sufficient.

The term "Interested Stockholder" is defined to include, among others, any
individual, corporation, partnership or other entity (other than Cambridgeport
Bank, Port Financial Corp. or its subsidiary or any employee benefit plan
maintained by Port Financial Corp. or its subsidiary) which owns beneficially or
controls, directly or indirectly, more than 5% of the outstanding shares of
voting stock of Port Financial Corp.

A "Business Combination" means:

(1) any merger or consolidation of Port Financial Corp. or any of its
subsidiaries with or into any Interested Stockholder or its affiliate;

(2) any sale, lease, exchange, mortgage, pledge, transfer, or other
disposition to or with any Interested Stockholder or its affiliate of
25% or more of the assets of Port Financial Corp. or combined assets
of Port Financial Corp. and its subsidiary;

(3) the issuance or transfer to any Interested Stockholder or its
affiliate by Port Financial Corp. (or any subsidiary) of any
securities of Port Financial Corp. in exchange for cash, securities or
other property having an aggregate fair market value equaling or
exceeding 25% of the combined fair market value of the outstanding
common stock of Port Financial Corp. and its subsidiaries, except for
any issuance or transfer pursuant to an employee benefit plan of Port
Financial Corp. or any subsidiary;

(4) the adoption of any plan for the liquidation or dissolution of Port
Financial Corp. proposed by or on behalf of any Interested Stockholder
or its affiliate; and

143
<PAGE>

(5) any reclassification of securities, recapitalization, merger or
consolidation of Port Financial Corp. which has the effect of
increasing the proportionate share of common stock or any class of
equity or convertible securities of Port Financial Corp. owned
directly or indirectly by an Interested Stockholder or its affiliate.

Evaluation of Offers. The Articles of Organization further provides that
the Board of Directors of Port Financial Corp. shall when evaluating any offer
to Port Financial Corp. from another party to:

. make a tender offer or exchange offer for any outstanding equity
security of Port Financial Corp.;

. merge or consolidate Port Financial Corp. with another corporation or
entity; or

. purchase or otherwise acquire all or substantially all of the
properties and assets of Port Financial Corp.;

in connection with the exercise of its judgment in determining what is in the
best interest of Port Financial Corp. and its stockholders, give due
consideration to the extent permitted by law to all relevant factors, including,
without limitation, Port Financial Corp.'s employees, suppliers, creditors and
customers; the economy of the state, region and nation; community and societal
considerations; and the long- and short-term interests of Port Financial Corp.
and its stockholders, including the possibility that these interests will be
best served by the continued independence of Port Financial Corp.

By having these standards in the Articles of Organization of Port Financial
Corp., the Board of Directors may be in a stronger position to oppose such a
transaction if the Board concludes that the transaction would not be in the best
interests of Port Financial Corp., even if the price offered is significantly
greater than the then market price of any equity security of Port Financial
Corp.

Amendment to Articles of Organization and Bylaws. The Articles of
Organization may be amended by the affirmative vote of 80% of the total votes
eligible to be cast by stockholders, voting together as a single class;
provided, however, that if at least two-thirds of the Directors recommend
approval of the amendment, then such amendment shall require the affirmative
vote of a majority of the total votes eligible to cast by stockholder, voting
together as a single class.

The Bylaws may be amended by the affirmative vote of two-thirds of the
Board of Directors of Port Financial Corp. or the affirmative vote of at least
80% of the total votes eligible to be cast by stockholders, voting together as a
single class. These provisions could have the effect of discouraging a tender
offer or other takeover attempt where the ability to make fundamental changes
through Bylaw amendments is an important element of the takeover strategy of the
acquiror.

144
<PAGE>

Anti-Takeover Effects of Port Financial Corp.'s Articles of Organization, Bylaws
and Benefit Plans Adopted in the Conversion

The provisions described above are intended to reduce Port Financial
Corp.'s vulnerability to takeover attempts and other transactions which
have not been negotiated with and approved by members of its Board of Directors.
The provisions of the employment agreements, the management recognition plan and
the stock option plan to be established may also discourage takeover attempts by
increasing the costs to be incurred by Cambridgeport Bank and Port Financial
Corp. in the event of a takeover. See "Management -- Employment Agreements," and
"-- Benefits."

Port Financial Corp.'s Board of Directors believes that the provisions of
the Articles of Organization, Bylaws and benefit plans to be established are in
the best interests of Port Financial Corp. and its stockholders. An unsolicited
non-negotiated proposal can seriously disrupt the business and management of a
corporation and cause it great expense. Accordingly, the Board of Directors
believes it is in the best interests of Port Financial Corp. and its
stockholders to encourage potential acquirors to negotiate directly with
management and that these provisions will encourage such negotiations and
discourage non-negotiated takeover attempts. It is also the Board of Directors'
view that these provisions should not discourage persons from proposing a merger
or other transaction at a price that reflects the true value of Port Financial
Corp. and that otherwise is in the best interests of all stockholders.

Regulatory Restrictions

Federal Change in Bank Control Act. Federal law provides that no person,
acting directly or indirectly or through or in concert with one or more other
persons, may acquire control of a bank unless the FDIC has been given 60 days
prior written notice. For this purpose, the term "control" means the acquisition
of the ownership, control or holding of the power to vote 25% or more of any
class of a bank holding company's voting stock, and the term "company" includes
an individual, corporation, partnership, and various other entities, acting
individually or in concert. In addition, an acquiring person is presumed to
acquire control if the person acquires the ownership, control or holding of the
power to vote of 10% or more of any class of the holding company's voting stock
if (a) Port Financial Corp.'s shares are registered under Section 12 of the
Exchange Act or (b) no other person will own, control or hold the power to vote
a greater percentage of that class of voting securities. The Federal Reserve
Board is authorized by the change in bank control act and its own regulations to
disapprove a proposed transaction on certain specified grounds. Accordingly, the
prior approval of the Federal Reserve Bank would be required before any person
could acquire 10% or more of the Common Stock of Port Financial Corp.

145
<PAGE>

Federal Bank Holding Company Act. Federal law provides that no company may
acquire control of a bank holding company without the prior approval of the
Federal Reserve. Any company that acquires control becomes a "bank holding
company" subject to registration, examination and regulation by the Federal
Reserve. Under federal regulations, the term "company" is defined to include
banks, corporations, partnerships, associations, and certain trusts and other
entities, and the term "control" is deemed to exist if a company has voting
control of at least 25% of any class of a bank's voting stock, and may be found
to exist if a company controls in any manner the election of a majority of the
directors of the bank or has the power to exercise a controlling influence over
the management or policies of the bank. In addition, a bank holding company must
obtain Federal Reserve Board approval prior to acquiring voting control of more
than 5% of any class of voting stock of a bank or another bank holding company.
The foregoing restrictions do not apply to the acquisition of stock by one or
more tax-qualified employee stock benefit plans, provided that the plan or plans
do not have beneficial ownership in the aggregate of more than 25 percent of any
class of our equity security.

An acquisition of control of a bank that requires the prior approval of the
Federal Reserve Board under the Bank Holding Company Act is not subject to the
notice requirements of the Change in Bank Control Act. Accordingly, the prior
approval of the Federal Reserve Board under the Bank Holding Company Act would
be required (a) before any bank holding company could acquire 5% or more of the
common stock of Port Financial Corp. and (b) before any other company could
acquire 25% or more of the common stock of Port Financial Corp.

The Federal Reserve may prohibit an acquisition of control if:

(1) it would result in a monopoly or substantially lessen competition;

(2) the financial condition of the acquiring person might jeopardize the
financial stability of the institution; or

(3) the competence, experience or integrity of the acquiring person
indicates that it would not be in the interest of the depositors or of
the public to permit the acquisition of control by such person.

Massachusetts Banking Law. Massachusetts banking law also prohibits any
"company," defined to include banking institutions as well as corporations, from
directly or indirectly controlling the voting power of 25% or more of the voting
stock of two or more banking institutions without the prior approval of the
Board of Bank Incorporation. Additionally, an out-of-state company which already
directly or indirectly controls voting power of 25% or more of the voting stock
of two or more banking institutions may not also acquire direct or indirect
ownership or control of more than 5% of the voting stock of a Massachusetts
banking institution without the prior approval of the Board of Bank
Incorporation. Finally, for a period of three years following completion of a
conversion to stock form, no person may directly or indirectly offer to acquire
or acquire beneficial ownership of more than 10% of any class of equity security
of a converting mutual holding company without prior written approval of the
Board of Bank Incorporation.

146
<PAGE>

DESCRIPTION OF CAPITAL STOCK OF
PORT FINANCIAL CORP.

General

Port Financial Corp. is authorized to issue thirty million (30,000,000)
shares of common stock having a par value of $.01 per share and five million
(5,000,000) shares of preferred stock having a par value of $.01 per share. Port
Financial Corp. currently expects to sell 9,200,000 shares of common stock (or
10,580,000 shares of common stock in the event of an increase of 15% in the
Estimated Valuation Range) to purchasers of common stock in the offering. Port
Financial Corp. will not issue any shares of preferred stock in the offering.
Except as discussed above in "Restrictions on Acquisition of Port Financial
Corp. and Cambridgeport Bank," each share of Port Financial Corp.'s common stock
will have the same relative rights as, and will be identical in all respects
with, every other share of common stock. Upon payment of the purchase price for
the common stock in accordance with the plan of conversion, all such stock will
be duly authorized, fully paid and non-assessable.

The shares of common stock:

. are not deposit accounts and are subject to investment risk;

. are not insured or guaranteed by the FDIC, or any other government
agency; and

. are not guaranteed by Port Financial Corp. or Cambridgeport Bank.

Common Stock

Dividends. Port Financial Corp. can pay dividends from net profits if, as
and when declared by its Board of Directors. The payment of dividends by Port
Financial Corp. is subject to limitations which are imposed by law. See "Our
Policy Regarding Dividends" and "Regulation of Cambridgeport Bank and Port
Financial Corp." The owners of common stock of Port Financial Corp. will be
entitled to receive and share equally in such dividends as may be declared by
the Board of Directors out of funds legally available therefor. If Port
Financial Corp. issues preferred stock, the holders of the preferred stock may
have a priority over the holders of the common stock with respect to dividends.

Voting Rights. Upon the effective date of the conversion, the holders of
common stock of Port Financial Corp. will possess exclusive voting rights in
Port Financial Corp. They will elect Port Financial Corp.'s Board of Directors
and act on such other matters as are required to be presented to them under law
or Port Financial Corp.'s Articles of Organization or as are otherwise presented
to them by the Board of Directors. Each holder of common stock will be entitled
to one vote per share and will not have any right to cumulate votes in the
election of directors. Under some circumstances, shares in excess of 10% of Port
Financial Corp.'s

147
<PAGE>

common stock may be considered "Excess Shares" and may therefore not be entitled
to vote. See "Restrictions on Acquisition of Port Financial Corp. and
Cambridgeport Bank." If Port Financial Corp. issues preferred stock, holders of
the preferred stock may also possess voting rights. Certain matters, including
the removal of directors, the approval of business combinations and amending the
Articles of Organization or Bylaws, generally requires an 80% stockholder vote.
See "Restrictions on Acquisition of Port Financial Corp. and Cambridgeport
Bank."

Liquidation. In the event of any liquidation, dissolution or winding up of
Cambridgeport Bank, Port Financial Corp., as owner of Cambridgeport Bank's
capital stock, would be entitled to receive, after payment or provision for
payment of all debts and liabilities of Cambridgeport Bank (including all
deposit accounts and accrued interest thereon) and after distribution of the
balance in the special liquidation account to eligible account holders and the
supplemental eligible account holders (see "The Conversion and The Offering --
Effects of the Conversion -- Liquidation Rights"), all assets of Cambridgeport
Bank available for distribution. In the event of liquidation, dissolution or
winding up of Port Financial Corp., the holders of its common stock would be
entitled to receive, after payment or provision for payment of all its debts and
liabilities, all of the assets of Port Financial Corp. available for
distribution. If preferred stock is issued, the holders thereof may have a
priority over the holders of the common stock in the event of the liquidation or
dissolution.

Preemptive Rights; Redemption. Holders of the common stock of Port
Financial Corp. will not be entitled to preemptive rights with respect to any
shares which may be issued. The common stock is not subject to redemption.

Preferred Stock

Port Financial Corp. will not issue any shares of its authorized preferred
stock in the conversion. We may issue with such preferences and designations as
the Board of Directors may from time to time determine. The Board of Directors
can, without stockholder approval, issue preferred stock with voting, dividend,
liquidation and conversion rights which could dilute the voting strength of the
holders of the common stock and may assist management in impeding an unfriendly
takeover or attempted change in control.

LEGAL AND TAX OPINIONS

Thacher Proffitt & Wood, Washington, D.C. will issue its opinion to us of
the legality of the issuance of the common stock being offered and certain
matters relating to the conversion and federal taxation. Certain matters
relating to state taxation will be passed upon for us by Arthur Andersen LLP.,
Boston, Massachusetts. Certain legal matters will be passed upon for Ryan, Beck,
Inc. by Nixon Peabody, LLP., Washington, D.C.

148
<PAGE>

EXPERTS

The consolidated financial statements of Cambridgeport Mutual Holding
Company as of December 31, 1998 and 1997 and for each of the years in the three-
year period ended December 31, 1998, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included in this prospectus in reliance upon the authority of
said Firm as experts in giving said reports.

RP Financial has consented to the publication in this document of a summary
of its letter to Cambridgeport Mutual Holding Company setting forth its opinion
as to the estimated pro forma market value of Cambridgeport Bank after the
conversion and its opinion setting forth the value of subscription rights and to
the use of its name and statements with respect to it appearing in this
document.

REGISTRATION REQUIREMENTS

Our common stock is registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the Exchange Act). We will be subject to the
information, proxy solicitation, insider trading restrictions, tender offer
rules, periodic reporting and other requirements of the SEC under the Exchange
Act. We may not deregister the common stock under the Exchange Act for a period
of at least three years following the conversion.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We are subject to the informational requirements of the Exchange Act and
must file reports and other information with the SEC.

We have filed with the SEC a registration statement on Form S-1 under the
Securities Act of 1933, as amended, with respect to the common stock offered in
this document. As permitted by the rules and regulations of the SEC, this
document does not contain all the information set forth in the registration
statement. You may examine this information without charge at the public
reference facilities of the SEC located at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain copies of this material from the SEC at prescribed
rates. You may obtain information on the operations of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web-site that
contains reports, proxy and information statements and other information
regarding registrants, including Port Financial Corp., that file electronically
with the SEC. The address for this web site is "http://www.sec.gov."

This document contains a description of the material features of certain
exhibits to the Form S-1. The statements as to the contents of such exhibits,
however, are, of necessity, brief descriptions and are not necessarily complete;
each such statement is qualified by reference to such contract or document.

149
<PAGE>

A copy of Port Financial Corp.'s Articles of Organization and Bylaws, as
well as a copy of the Amended Charter and Amended Bylaws of Cambridgeport Bank,
are available for review at any of our offices. A copy of the plan of conversion
is available from offices of Cambridgeport Bank without charge. You may also
call the stock information center Monday through Friday, 9 a.m. to 4 p.m. to
request of a copy of the plan. A copy of the appraisal report of RP Financial,
including any amendments made to it, and the detailed memorandum of the
appraiser setting forth the method and assumptions for such appraisal are
available for inspection at the main office of Cambridgeport Bank.

Cambridgeport Mutual Holding Company has filed an application for the
establishment of a stock holding company and associated stock issuance with the
Division of Banks of the Commonwealth of Massachusetts. Port Financial Corp. has
filed an application with the Federal Reserve Bank of Boston to become a bank
holding company. This prospectus omits some information contained in those
applications.

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<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2

CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1999 (UNAUDITED) AND
DECEMBER 31, 1998 AND 1997 F-3

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) AND FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997 AND 1996 32

CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) AND THE
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 F-4

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (UNAUDITED) AND THE YEARS ENDED
DECEMBER 31, 1998, 1997 AND 1996 F-5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7

All schedules are omitted because they are not required or applicable, or the
required information is shown in the financial statements or notes thereto.

F-1
<PAGE>

Report of Independent Public Accountants

To the Audit Committee of
Cambridgeport Mutual Holding Company:

We have audited the accompanying consolidated balance sheets of Cambridgeport
Mutual Holding Company and subsidiary (collectively, the Bank) as of December
31, 1998 and 1997, and the related consolidated statements of operations,
changes in retained earnings and cash flows for each of the three years in the
period ended December 31, 1998. These consolidated financial statements are the
responsibility of the Bank's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Cambridgeport Mutual Holding Company and subsidiary as of December 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.

/s/ Arthur Andersen LLP

Boston, Massachusetts
March 2, 1999 (except with respect to
matters discussed in Note 16, as to
which the date is November 15, 1999)

F-2
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Consolidated Balance Sheets

(In thousands)

<TABLE>
<CAPTION>
September 30, December 31,
------------------ ------------------------------------
1999 1998 1997
------------------ ----------------- -----------------
<S> <C> <C> <C>
(Unaudited)
ASSETS

CASH AND DUE FROM BANKS $ 13,731 $ 6,988 $ 6,968

OTHER CASH EQUIVALENTS 6,542 3,059 2,226
-------- -------- --------

Total cash and cash equivalents 20,273 10,047 9,194

Certificates of Deposit 5,062 5,900 12,101

Investment Securities Available-for-Sale, at
fair value (Note 2) 133,900 144,829 159,621

Loans Held-for-Sale 386 3,842 1,829

Loans, net (Notes 1 and 3) 537,515 492,548 417,358

Federal Home Loan Bank Stock, at cost (Note 7) 4,452 3,879 3,062

Savings Bank Life Insurance Stock, at cost 1,934 1,934 1,934

Banking Premises and Equipment, net (Note 4) 8,079 5,616 5,786

Accrued Interest Receivable 4,711 4,032 4,474

Other Assets (Notes 5, 8 and 11) 5,501 5,460 4,009
-------- -------- --------

Total assets $721,813 $678,087 $619,368
======== ======== ========

LIABILITIES AND RETAINED EARNINGS

Deposits (Note 6) $592,864 $565,418 $517,798

Federal Home Loan Bank Advances (Note 7) 41,431 27,066 21,604

Mortgagors' Escrow Payments 3,273 2,657 2,559

Accrued Expenses and Other Liabilities (Notes 8 and 11) 5,667 6,858 6,335
-------- -------- --------

Total liabilities 643,235 601,999 548,296
-------- -------- --------

Commitments and Contingencies (Notes 8, 9 and 12)

Retained Earnings (Note 10) 76,054 72,447 68,259

Accumulated Other Comprehensive Income 2,524 3,641 2,813
-------- -------- --------

Total retained earnings 78,578 76,088 71,072
-------- -------- --------

Total liabilities and retained earnings $721,813 $678,087 $619,368
======== ======== ========
</TABLE>

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

F-3
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Consolidated Statements of Operations

(In thousands)

<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
---------------------- ----------------------------------
1999 1998 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:

Interest on loans $29,886 $27,671 $37,374 $30,304 $23,630
Interest and dividends on investment securities 6,323 7,691 10,023 12,282 10,450
Interest on other cash equivalents 593 564 787 574 2,744
Interest on certificates of deposit 295 366 472 801 917
------- ------- ------- ------- -------

Total interest and dividend income 37,097 36,292 48,656 43,961 37,741
------- ------- ------- ------- -------

INTEREST EXPENSE:
Interest on deposits 17,361 18,197 24,318 22,732 20,184
Interest on borrowed funds 1,583 1,161 1,562 822 854
------- ------- ------- ------- -------

Total interest expense 18,944 19,358 25,880 23,554 21,038
------- ------- ------- ------- -------

Net interest income 18,153 16,934 22,776 20,407 16,703

PROVISION FOR POSSIBLE LOAN LOSSES (NOTE 3) 562 1,183 1,760 600 450
------- ------- ------- ------- -------

Net interest income after provision for 17,591 15,751 21,016 19,807 16,253
possible loan losses ------- ------- ------- ------- -------

NONINTEREST INCOME:
Customer service fees 622 495 726 623 621
Gain on sales of investment securities, net - 60 61 727 575
(Note 2)
Gain on sales of loans, net 539 849 1,143 312 357
Loan servicing fee income 309 518 656 995 1,173
Increase in cash surrender value 63 493 657 200 -
Other income 598 236 328 319 494
------- ------- ------- ------- -------

Total noninterest income 2,131 2,651 3,571 3,176 3,220
------- ------- ------- ------- -------

NONINTEREST EXPENSES:
Salaries and employee benefits (Note 11) 7,076 7,140 9,489 9,111 7,589
Occupancy and equipment expenses (Note 4 and 2,526 2,615 3,507 3,590 3,215
Note 9)
Curtailment loss on nonqualified pension 578 - - - -
plan (Note 11)
Data processing service fees 1,072 971 1,279 1,198 689
Advertising 890 735 903 843 914
Other noninterest expenses 2,147 2,170 2,864 2,896 3,792
------- ------- ------- ------- -------

Total noninterest expenses 14,289 13,631 18,042 17,638 16,199
------- ------- ------- ------- -------

Income before provision for income taxes 5,433 4,771 6,545 5,345 3,274

PROVISION FOR INCOME TAXES (NOTE 8) 1,826 1,707 2,357 1,679 787
------- ------- ------- ------- -------

Net income $ 3,607 $ 3,064 $ 4,188 $ 3,666 $ 2,487
======= ======= ======= ======= =======
</TABLE>

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

F-4
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Consolidated Statements of Changes in Retained Earnings
for the Nine Months Ended September 30, 1999 (Unaudited) and
for the Years Ended December 31, 1998, 1997 and 1996

(In thousands)

<TABLE>
<CAPTION>
Accumulated Other
Comprehensive Retained Comprehensive Total Retained
Income Earnings Income Earnings
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 $62,106 $ 2,446 $64,552

Net income $ 2,487 2,487 - 2,487

Unrealized securities gains, net of $75 tax
expense 243

Less--Reclassification of securities gains
included in net income, net of $138 tax
expense 437
------- ------- ------- -------
Total other comprehensive income (194) - (194) (194)
------- ------- ------- -------

Total comprehensive income $ 2,293
=======

BALANCE, DECEMBER 31, 1996 64,593 2,252 66,845

Net income $ 3,666 3,666 - 3,666

Unrealized securities gains, net of $508 tax
expense 1,060

Less--Reclassification of securities gains
included in net income, net of $228 tax
expense 499
-------

Total other comprehensive income 561 - 561 561
------- ------- ------- -------

Total comprehensive income $ 4,227
=======

BALANCE, DECEMBER 31, 1997 68,259 2,813 71,072

Net income $ 4,188 4,188 - 4,188

Unrealized securities gains, net of $458 tax
expense 867

Less--Reclassification of securities gains
included in net income, net of $22 tax expense 39
-------

Total other comprehensive income 828 - 828 828
------- ------- ------- -------

Total comprehensive income $ 5,016
=======

BALANCE, DECEMBER 31, 1998 72,447 3,641 76,088

Net income $ 3,607 3,607 - 3,607

Unrealized securities losses, net of $681 tax
benefit (1,117)
-------

Total other comprehensive income (1,117) - (1,117) (1,117)
------- ------- ------- -------

Total comprehensive income $ 2,490
=======

BALANCE, SEPTEMBER 30, 1999 (UNAUDITED) $76,054 $ 2,524 $78,578
======= ======= =======
</TABLE>

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

F-5
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Consolidated Statements of Cash Flows

(In thousands)

<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31
-------------------- ---------------------------------
1999 1998 1998 1997 1996
--------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,607 $ 3,064 $ 4,188 $ 3,666 $ 2,487
Adjustments to reconcile net income to
net cash provided by operating
activities-
Provision for possible loan losses 562 1,183 1,760 600 450
Depreciation and amortization 947 1,002 1,353 1,285 1,150
Net gain from sales of investment
securities - (60) (61) (727) (575)
Amortization of premiums on investment
securities, net 115 246 353 800 1,302
Gain on loan sales, net (539) (849) (1,143) (312) (357)
Gain on sales of other real estate
owned, net - - - (25) (31)
Increase in cash surrender value (63) (493) (657) (200) -
Proceeds from sale of loans 40,467 66,654 88,175 27,999 22,221
Loans originated for sale (36,472) (67,790) (90,629) (27,454) (26,822)
(Increase) decrease in other assets 196 54 (523) 387 (496)
(Increase) decrease in accrued interest
receivable (679) (147) 442 452 (1,386)
(Decrease) increase in deferred loan
fees (86) 164 152 (54) (90)
(Decrease) increase in accrued expenses
and other liabilities (1,191) (220) 523 1,782 (2,533)
Provision for prepaid taxes (174) (121) (907) (328) (27)
-------- -------- -------- --------- ---------

Net cash provided by (used in)
operating activities 6,690 2,687 3,026 7,871 (4,707)
-------- -------- -------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales, maturities and
principal repayment of securities
available-for-sale 37,418 67,760 85,825 159,472 224,960
Purchase of securities available-for-sale (28,402) (54,300) (68,484) (107,948) (275,772)
Proceeds from maturities of certificates
of deposit 1,106 6,603 6,603 4,282 -
Purchase of certificates of deposit (268) (304) (402) (1,499) (3,461)
Net decrease in short-term investments - - - 2,000 34,901
Purchase of FHLB stock (573) (817) (817) - (750)
Proceeds from sales of other real estate
owned - - - 119 242
Purchase of premises and equipment (3,410) (880) (1,252) (1,129) (1,810)
Loan originations, net (44,875) (55,525) (76,836) (113,699) (28,866)
Recoveries of loans previously
charged-off 113 7 10 54 4
Decrease in due from brokers - - - - 165
-------- -------- -------- --------- ---------

Net cash used in investing
activities (38,891) (37,456) (55,353) (58,348) (50,387)
-------- -------- -------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in certificates of
deposit 14,775 13,277 (3,695) 1,504 57,723
Increase in demand deposits, NOW
accounts and savings accounts 12,671 45,592 51,315 16,150 20,238
Increase (decrease) in mortgagors'
escrow payments 616 616 98 5 (462)
Additions to borrowings 14,365 3,220 5,462 20,884 -
Repayment of borrowings - - - - (11,000)
-------- -------- -------- --------- ---------

Net cash provided by financing
activities 42,427 62,705 53,180 38,543 66,499
-------- -------- -------- --------- ---------

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (NOTE 1) 10,226 27,936 853 (11,934) 11,405

CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR 10,047 9,194 9,194 21,128 9,723
-------- -------- -------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 20,273 $ 37,130 $ 10,047 $ 9,194 $ 21,128
======== ======== ======== ========= =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 18,873 $ 19,306 $ 25,890 $ 23,569 $ 20,879
======== ======== ======== ========= =========
Cash paid for income taxes $ 2,117 1,563 $ 2,143 $ 1,739 $ 721
======== ======== ======== ========= =========

SUPPLEMENTAL NONCASH INVESTING ACTIVITIES:
Loans securitized into mortgage-backed
investments $ - $ 1,584 $ 1,584 $ 696 $ 5,295
======== ======== ======== ========= =========
Property acquired in settlement of loans $ - - $ - $ - $ 200
======== ======== ======== ========= =========
</TABLE>

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

F-6
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Cambridgeport Savings Bank was reorganized into a mutual bank holding company
operating under the name Cambridgeport Mutual Holding Company (the Company)
on August 23, 1994 under the provisions of Massachusetts General Law. A new
Massachusetts savings bank in stock form, known as Cambridgeport Bank, was
chartered as a wholly owned subsidiary of the Company. All deposits of the
Bank are insured by the Federal Deposit Insurance Corporation (FDIC) and the
Depositors Insurance Fund (DIF). The reorganization had no effect on
previously reported consolidated results of operations.

The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Cambridgeport Bank
(collectively, the Bank). Cambridgeport Bank has two wholly owned
subsidiaries, Temple Investment Corporation and Port Corporation. Temple
Investment Corporation engages in the investment of securities and Port
Corporation is currently inactive. All significant intercompany balances and
transactions have been eliminated in the accompanying consolidated financial
statements.

Certain reclassifications have been made to the 1997 and 1996 consolidated
financial statements to conform with the 1998 presentation. Such
reclassifications have no effect on previously reported consolidated net
income.

In the opinion of management, the unaudited consolidated financial statements
presented herein reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation. Interim results are not
necessarily indicative of the results to be expected for the entire year.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of the date of the financial statements
and the reported amounts of income and expenses during the reporting periods.
Actual results could differ from those estimates.

Statements of Cash Flows

For purposes of the consolidated statements of cash flows, cash and cash
equivalents include cash and due from banks, federal funds sold and overnight
deposits with maturities of one day and investments in the highly liquid Bank
Investment fund.

F-7
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

Investment Securities

Debt securities that the Bank has the positive intent and ability to hold to
maturity are classified as held-to-maturity and are reported at cost,
adjusted for amortization of premiums and accretion of discounts, using the
effective-yield method. Debt and equity securities that are bought and held
principally for the purpose of selling in the near term are classified as
trading and reported at fair value, with unrealized gains and losses included
in earnings. The Bank has no securities classified as trading or held-to-
maturity. Debt and equity securities not classified as either held-to-
maturity or trading are classified as available-for-sale and reported at fair
value, with unrealized gains and losses excluded from earnings and reported
as a separate component of other comprehensive income, which is included in
retained earnings, net of the related taxes. The Bank classifies its
securities based on the Bank's intention at the time of purchase.

Unrealized losses that are determined to be other than temporary declines in
value are charged to operations. When securities are sold, the adjusted cost
of the specific security sold is used to compute gains or losses on the sale.

Loans Held-for-Sale

Loans held-for-sale are carried at the lower of the recorded loan balance or
market value based on prevailing market conditions and commitments from
institutional investors to purchase such loans. The amount by which cost
exceeds market value is reflected in a valuation allowance, with subsequent
increases or decreases in market value charged or credited to the valuation
allowance and reflected in operations in the period in which they occur.
There were no adjustments required for unrealized losses at September 30,
1999, December 31, 1998 and 1997.

Loans, Deferred Fees and the Allowance for Possible Loan Losses

Loans are stated at the amount of unpaid principal, reduced by amounts due to
borrowers on unadvanced loans, net deferred loan fees and the allowance for
possible loan losses.

It is the policy of the Bank to discontinue the accrual of interest on loans
when, in the judgment of management, the ultimate collectibility of principal
or interest becomes doubtful. It is generally the policy of the Bank to
discontinue the accrual of interest on loans delinquent in excess of 90 days.
When a loan is placed on nonaccrual status, all interest previously accrued
is reversed against current-period interest income. Interest received on
nonaccrual loans is either applied against principal or reported as income on
the cash basis based on management's judgment as to the collectibility of
principal.

Deferred loan origination fees and certain deferred loan origination costs
are amortized over the contractual life of the related loan using the
interest method or taken into income at the time the loans

F-8
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

are sold. At September 30, 1999, December 31, 1998 and 1997, the Bank had net
deferred loan fees of approximately $360,000, $446,000 and $294,000,
respectively.

The allowance for possible loan losses is maintained at a level considered
adequate to provide for potential loan losses. The allowance is increased by
provisions charged to operations, and realized losses, net of recoveries, are
charged directly to the allowance. The provision and the level of the
allowance are based on management's periodic review of the composition of the
loan portfolio in light of historical experience and prevailing economic
conditions. The allowance is an estimate, and ultimate losses may vary from
current estimates. As adjustments become necessary, they are reported in the
results of operations in the period in which they become known.

Loans are considered impaired when it is probable that the Bank will not be
able to collect principal, interest and fees according to the contractual
terms of the loan agreement. Management considers the paying status, net
worth and earnings potential of a borrower, and the value and cash flow to
the collateral as factors to determine whether a loan will be paid in
accordance with its contractual terms. The amount judged to be impaired is
the difference between the present value of the expected cash flows using as
a discount rate the original contractual effective interest rate and the
recorded investment of the loan. If foreclosure on a collateralized loan is
probable, impairment is measured based on the fair value of the collateral
compared to the carrying value. If appropriate, a valuation reserve is
established to recognize the difference between the carrying value and the
fair value. Impaired loans are charged off when management believes that the
collectibility of the loan's principal is doubtful. The Bank considers
nonaccrual loans, except for smaller balance homogenous residential and
consumer loans, to be impaired. All impaired loans are classified as
nonaccrual.

Loan Servicing

The Bank recognizes a servicing asset or a servicing liability upon the
purchase or origination of mortgages loans and the sale or securitization of
those loans with servicing retained, unless it securitizes the loans, retains
all of the securities and classifies them as debt securities held-to-
maturity. The amount capitalized is based on the allocation of the total
cost of the mortgage loans to the mortgage servicing rights and the loans
without the mortgage servicing rights based on their relative fair values.
The cost of mortgage servicing rights is amortized in proportion to, and over
the period of, estimated net servicing revenues. Impairment of mortgage
servicing rights is assessed based on the fair value of those rights. Fair
values are estimated using discounted cash flows based on a current market
interest rate. For purposes of measuring impairment, the rights are
stratified based on predominant risk characteristics including loan type,
maturity date and interest rate. The amount of impairment recognized is the
amount by which the capitalized mortgage servicing rights for a stratum
exceed their fair value.

F-9
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

Banking Premises and Equipment

Land is stated at cost. Banking premises, leasehold improvements and
furniture, fixtures and equipment are stated at cost, less accumulated
depreciation and amortization. Construction-in-Progress represents
expenditures at cost and capitalized interest which is calculated using the
average construction costs for the period and the Bank's average borrowing
rate. Depreciation and amortization are primarily computed by use of the
straight-line method over the estimated useful lives of the respective assets
or the terms of the respective leases, if shorter. The cost of maintenance
and repairs is charged to expense as incurred; major expenditures for
betterments are capitalized and depreciated.

Income Taxes

Deferred tax assets and liabilities are computed based on the difference
between the financial statement and income tax bases of assets and
liabilities using currently enacted tax rates. As changes in tax laws or
rates are enacted, deferred tax assets and liabilities are adjusted through
the provision for income taxes.

Recent Accounting Developments

Effective January 1, 1998, the Bank adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive
Income. SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of financial
statements. Under SFAS No. 130, comprehensive income is divided into net
income and other comprehensive income. Other comprehensive income includes
items previously recorded directly to equity, such as unrealized gains and
losses on securities available for sale, minimum pension liability
adjustments and foreign currency items.

Comprehensive income is presented in the statements of changes in retained
earnings. SFAS No. 130 requires only additional disclosures and does not
affect the Bank's financial position or results of operations. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS No. 130.

Effective January 1, 1998, the Bank adopted the provisions of SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information. Public
entities are required to report financial and descriptive information about
their reportable operating segments. An operating segment is a component of
an entity for which financial information is developed and evaluated by the
entity's chief operating decision maker to assess performance and to make
decisions about resource allocation. Disclosures about operating segments
should generally be based on the information used internally.

F-10
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

Effective January 1, 1998, the Bank adopted the provisions of SFAS No. 132,
Employers' Disclosure About Pensions and Other Postretirement Benefits. SFAS
No. 132 revises disclosures only and does not affect the Bank's financial
position or results of operations. Prior year financial statement
disclosures have been revised to conform to the requirement of SFAS No. 132.

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. This
statement establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded on the balance sheet as either an asset or
liability measured at its fair value. The statement requires that changes in
the derivative's fair value be recognized currently in income unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the
hedged item in the statement of income and requires that a company must
formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. SFAS No. 133, as amended by SFAS No. 137,
Deferral of the Effective Date of FASB Statement No. 133, is effective for
fiscal years beginning after June 15, 2000. The Bank does not expect that
the adoption of this statement will have a material impact on its financial
position or results of operations.

In October 1998, the FASB issued SFAS No. 134, Accounting for Mortgage-Backed
Securities Retained After the Securitization of Mortgage Loans Held for Sale
by a Mortgage Banking Enterprise. This statement requires that after the
securitization of mortgage loans held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-backed securities or other
retained interests based on its ability and intent to sell or hold those
investments. The Bank's adoption of this statement on January 1, 1999 did
not have a material impact on the Bank's financial position or results of
operations.

In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. SOP 98-1 requires that
computer software costs associated with internal-use software be expensed as
incurred until certain capitalization criteria are met. The Bank's adoption
of SOP 98-1 on January 1, 1999 did not have a material impact on its
financial position or results of operations.

In April 1998, the AICPA issued SOP 98-5, Reporting on the Costs of Start-up
Activities. SOP 98-5 requires all costs associated with pre-opening, pre-
operating and organization activities to be expensed as incurred. The Bank's
adoption of SOP 98-5 on January 1, 1999, did not have a material impact on
its financial position or results of operations.

F-11
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

(2) INVESTMENT SECURITIES

The amortized cost and fair value of securities classified as available-for-
sale at September 30, 1999 and December 31, 1998 and 1997 are as follows (in
thousands):

<TABLE>
<CAPTION>
September 30, 1999
Amortized Gross Unrealized
Cost Gains Losses Fair Value
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
(Unaudited)

U.S. Treasury and agency obligations $ 59,944 $ - $(1,126) $ 58,818
Other bonds and notes 31,918 67 (93) 31,892
Mortgage-backed securities 36,976 72 (249) 36,799
-------- ------ ------- --------

Total debt securities 128,838 139 (1,468) 127,509

Marketable equity securities and mutual 1,260 5,131 - 6,391
funds -------- ------ ------- --------

Total securities available-for-sale $130,098 $5,270 $(1,468) $133,900
======== ====== ======= ========
<CAPTION>
December 31, 1998
Amortized Gross Unrealized
Cost Gains Losses Fair Value
------------ ------------ ------------- ------------

<S> <C> <C> <C> <C>
U.S. Treasury and agency obligations $ 55,516 $ 398 $(180) $ 55,734
Other bonds and notes 34,156 277 (14) 34,419
Mortgage-backed securities 48,295 517 (100) 48,712
-------- ------ ----- --------

Total debt securities 137,967 1,192 (294) 138,865

Marketable equity securities and mutual 1,262 4,702 - 5,964
funds -------- ------ ----- --------

Total securities available-for-sale $139,229 $5,894 $(294) $144,829
======== ====== ===== ========

December 31, 1997
Amortized Gross Unrealized
Cost Gains Losses Fair Value
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury and agency obligations $ 55,064 $ 215 $ (9) $ 55,270
Other bonds and notes 43,037 201 (20) 43,218
Mortgage-backed securities 54,115 404 (176) 54,343
-------- ------ ----- --------

Total debt securities 152,216 820 (205) 152,831

Marketable equity securities and mutual 3,069 3,721 - 6,790
funds -------- ------ ----- --------

Total securities available-for-sale $155,285 $4,541 $(205) $159,621
======== ====== ===== ========
</TABLE>

F-12
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

A schedule of the maturity distribution of debt securities available-for-sale
at December 31, 1998 is as follows (dollars in thousands):

<TABLE>
<CAPTION>
Amortized Percent of
Cost Total Fair Value
--------- ---------- --------------
<S> <C> <C> <C>
One year or less $ 14,006 10.2% $ 14,058
Over 1 year to 5 years 82,181 59.6 82,573
Over 5 years to 10 years 10,801 7.8 11,029
Over 10 years 30,979 22.4 31,205
-------- ----- --------

Total $137,967 100% $138,865
======== ===== ========
</TABLE>

Actual maturities of mortgage-backed securities may differ from contractual
maturities presented because borrowers have the right to prepay obligations
without incurring prepayment penalties.

Proceeds from the sales and maturities of investment securities and related
gross gains and gross losses for the nine months ended September 30, 1999 and
1998 and for years ended December 31, 1998, 1997 and 1996 were as follows (in
thousands):

<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
------------------------------ ----------------------------------------------
1999 1998 1998 1997 1996
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
(Unaudited)
Proceeds from $ - $9,280 $9,280 $61,786 $205,860
sales

Gross gains - 95 95 762 783

Gross losses - 35 34 35 208
</TABLE>

(3) LOANS

The Bank's lending activities are conducted principally in Massachusetts.
The Bank grants single-family and multifamily residential loans, commercial
real estate loans, commercial loans and a variety of consumer loans. In
addition, the Bank grants loans for the construction of residential homes,
multifamily properties and commercial real estate properties. Most loans
granted by the Bank are collateralized by real estate. The ability and
willingness of the single-family residential and consumer borrowers to honor
their repayment commitments is generally dependent on the level of overall
economic activity within the borrowers' geographic areas and real estate
values. The ability and willingness of the commercial real estate,
commercial and construction loan borrowers to honor their repayment
commitments is generally dependent on the health of the real estate economic
sector in the borrowers' geographic areas and the general economy.

F-13
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

The Bank's loan portfolio consisted of the following (in thousands):

December 31,
September 30, ------------------------------
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
(Unaudited)
Real estate loans-
Residential $276,865 $243,363 $206,574
Home equity lines of credit 59,471 56,502 60,875
Commercial 199,689 188,541 143,719
Construction 991 2,741 1,940
-------- -------- --------
Total real estate loans 537,016 491,147 413,108

Commercial 1,203 724 581

Consumer 6,593 7,310 8,576
-------- -------- --------
Total loans 544,812 499,181 422,265

Less-
Allowance for possible loan losses 7,297 6,633 4,907
-------- -------- --------
Total loans, net $537,515 $492,548 $417,358
======== ======== ========
</TABLE>

An analysis of the allowance for possible loan losses is as follows (in
thousands):

<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
---------------------------- -------------------------------------------
1999 1998 1998 1997 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(Unaudited)

Balance, beginning of year $6,633 $4,907 $4,907 $4,269 $4,074
------ ------ ------ ------ ------

Provision for possible loan 562 1,183 1,760 600 450
losses ------ ------ ------ ------ ------

Charge-offs-
Real estate - - - - (229)
Consumer (11) (36) (44) (16) (30)
------ ------ ------ ------ ------

(11) (36) (44) (16) (259)
------ ------ ------ ------ ------

Recoveries-
Real estate 111 5 5 54 -
Consumer 2 2 5 - 4
------ ------ ------ ------ ------

113 7 10 54 4
------ ------ ------ ------ ------

Net (charge-offs)
recoveries 102 (29) (34) 38 (255)
------ ------ ------ ------ ------

Balance, end of period $7,297 $6,061 $6,633 $4,907 $4,269
====== ====== ====== ====== ======
</TABLE>

F-14
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

F-15
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

Nonaccrual loans consisted of the following (in thousands):

<TABLE>
<CAPTION>
September 30, December 31,
---------------- ----------------------------
1999 1998 1997
---------------- -------------- ------------
<S> <C> <C> <C>
(Unaudited)

Residential real estate $32 $ 289 $ 201
Home equity lines of credit - - 14
--- ----- -----

$32 $ 289 $ 215
=== ===== =====
</TABLE>

If these loans had been paying in accordance with their original contractual
terms, approximately $8,000, $17,000 and $17,000 of additional interest
income would have been recorded in 1998, 1997 and 1996, respectively. There
are no commitments to extend additional credit on these loans.

During 1998 and 1997, the average recorded investment in impaired loans was
$252,000 and $201,000, respectively, and no income was recognized related to
the impaired loans. At December 31, 1998 and 1997, the Bank classified
approximately $289,000 and $215,000 loans, respectively, as impaired. These
impaired loans did not, in the opinion of the Bank's management, require a
related valuation reserve.

In the ordinary course of business, the Bank has granted loans to trustees
and officers at substantially the same terms and conditions as those
prevailing at the time of origination for comparable transactions with other
borrowers. In the opinion of management, these loans do not involve more
than normal risk of collectibility. The aggregate amount of these loans was
approximately $818,000 and $268,000 at December 31, 1998 and 1997,
respectively. None of these loans were on nonaccrual status in 1998 and
1997.

F-16
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

(4) BANKING PREMISES AND EQUIPMENT

A summary of the cost and accumulated depreciation and amortization of
banking premises and equipment and their estimated useful lives is as follows
(in thousands):

<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------------------------ Estimated
1999 1998 1997 Useful Life
------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
(Unaudited)
Land $ 47 $ 47 $ 47
Banking premises and leasehold
improvements 5,808 5,783 5,664 30 years or lease term
Furniture, fixtures and equipment 3,895 3,661 3,544 3-10 years
Construction-in-Progress 3,151 - -
------- ------ ------
12,901 9,491 9,255

Less--Accumulated depreciation and
amortization 4,822 3,875 3,469
------- ------ ------
$ 8,079 $5,616 $5,786
======= ====== ======
</TABLE>

Depreciation and amortization expense of banking premises and equipment for
the nine months ended September 30, 1999 and 1998 amounted to approximately
$947,000 and $1,002,000, respectively, and for the years ended December 31,
1998, 1997 and 1996 amounted to approximately $1,353,000, $1,285,000 and
$1,150,000, respectively, and is included in occupancy and equipment expenses
in the accompanying consolidated statements of operations.

For the nine months ended September 30, 1999, the Bank capitalized
approximately $44,000 in interest expense associated with the construction
costs.

(5) LOAN SERVICING

Loans serviced for other investors amounted to approximately $228,778,000 and
$293,717,000 at December 31, 1998 and 1997, respectively. There were no
formal recourse provisions related to these loans.

During 1998, 1997 and 1996, mortgage servicing rights of approximately
$115,000, $79,000 and $152,000, respectively, were capitalized. Amortization
of mortgage servicing rights for the years ended December 31, 1998, 1997 and
1996 were approximately $203,000, $91,000 and $73,000, respectively. No
adjustment was required in 1998, 1997 and 1996 to write down the assets to
fair value.

F-17
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

(6) DEPOSITS

A summary of deposit balances, by type, is as follows (in thousands):

<TABLE>
<CAPTION>
December 31,
September 30, ------------------------------
1999 1998 1997
--------------- -------------- --------------
<S> <C> <C> <C>
(Unaudited)

Regular savings accounts $ 54,006 $ 53,560 $ 54,281
NOW accounts 42,977 41,546 35,061
Demand deposit accounts 29,021 28,085 21,041
Money market accounts 142,077 132,219 93,712
--------------- -------------- --------------

Total noncertificate accounts 268,081 255,410 204,095
--------------- -------------- --------------

Term certificates-
Term certificates less than $100,000 264,947 256,097 264,764
Term certificates of $100,000 and over 59,836 53,911 48,939
--------------- -------------- --------------

Total term certificate accounts 324,783 310,008 313,703
--------------- -------------- --------------

Total deposits $592,864 $565,418 $517,798
=============== ============== ==============
</TABLE>

A schedule of the maturity distribution of term certificates with weighted
average interest rates is as follows (dollars in thousands):

<TABLE>
<CAPTION>
December 31,
September 30, 1999 1998 1997
--------------------------- --------------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Amount Interest Rate Amount Interest Rate Amount Interest Rate
------------ ------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
(Unaudited)

Within 1 year $218,530 4.79% $252,594 5.33% $203,196 5.58%
Over 1 to 2 years 94,519 5.20% 46,621 5.41% 89,333 5.93%
Over 2 to 3 years 9,165 5.37% 7,994 5.54% 15,793 5.95%
Over 3 to 5 years 2,569 5.20% 2,799 5.38% 5,381 5.84%
------------ ------------- ------------ ------------- ------------ -------------

$324,783 4.92% $310,008 5.35% $313,703 5.70%
============ ============= ============ ============= ============ =============
</TABLE>

F-18
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

(7) FEDERAL HOME LOAN BANK ADVANCES

Federal Home Loan Bank (FHLB) advances are collateralized by a blanket-type
pledge agreement on the Bank's FHLB stock, certain qualified investment
securities, deposits at the FHLB and first mortgages on residential
property. As a member of the FHLB, the Bank is required to invest in stock
of the FHLB at an amount equal to 1% of its outstanding first mortgage
residential loans, .3% of total assets or 5% of its outstanding advances
from the FHLB, whichever is higher. As and when such stock is redeemed, the
Bank will receive from the FHLB an amount equal to the par value of the
stock. The Bank also has access to a preapproved daily line of credit of
$11,003,000. Under this line of credit, the bank advanced $5,849,000 (6%
per annum) at September 30, 1999, $2,423,000 (5.4% per annum) at December
31, 1998 and $1,224,000 (7.05% per annum) at December 31, 1997.

A schedule of the maturity distribution of FHLB advances with weighted
average interest rates is as follows (dollars in thousands):

Within 1 year $22,249 5.85% $ 2,423 5.40% $16,224 5.86%
Over 1 to 5 years - - 6,400 5.75% - -
Over 5 to 10 years 4,740 6.79% 18,243 6.23% 5,380 6.80%
10 years and over 14,442 6.19% - - - -
------- ---- ------- ---- ------- ----

$41,431 6.08% $27,066 6.04% $21,604 6.10%
======= ==== ======= ==== ======= ====
</TABLE>

The Bank may be subject to a substantial penalty upon prepayment of FHLB
advances.

F-19
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

(8) INCOME TAXES

The components of the provision for income taxes for the years ended
December 31 are as follows (in thousands):

<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Current-
Federal $2,843 $1,723 $ 779
State 421 284 35
------ ------ -----
Total current 3,264 2,007 814
------ ------ -----
Prepaid-
Federal (679) (252) (27)
State (228) (76) -
------ ------ -----
Total prepaid (907) (328) (27)
------ ------ -----
Total $2,357 $1,679 $ 787
====== ====== =====
</TABLE>

The difference between the income tax rate computed by applying the
statutory federal income tax rate of 34% to income before income taxes and
the actual effective income tax rate is summarized as follows:

<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Statutory rate 34.0% 34.0% 34.0%
Increase (decrease) resulting from-
State taxes, net of federal benefit 2.7 2.5 0.7
Dividends-received deduction (1.0) (1.3) (9.5)
Tax credits (1.6) (1.9) -
Other, net 1.9 (1.9) (1.2)
---- ---- ----
36.0% 31.4% 24.0%
==== ==== ====
</TABLE>

The Bank does not separately determine its current and deferred tax
provision on an interim basis. The primary items giving rise to the
temporary differences included in the Bank's net deferred tax asset between
year ends are the allowance for possible loan losses, certain unfunded
employee benefit accruals, unrealized gains and losses on available-for-
sale securities, deferred loan origination fees and depreciation. A
valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The Bank's
provision for income taxes for nine months ended September 30, 1999 and
1998 and the related effective tax rates were $1,826,000 (33.6%) and
$1,707,000 (35.8%), respectively.

F-20
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

At December 31, the Bank's net deferred tax asset consisted of the following
components (in thousands):

<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Deferred Tax Assets:
Allowance for possible loan losses $2,733 $2,035
Supplemental Pension 698 575
Pension 660 680
Depreciation 395 60
Other 357 480
------ ------
4,843 3,830
------ ------

Deferred Tax Liabilities:
Net unrealized gain on securities
available for sale 1,959 1,521
Limited partnership 2,058 1,925
Other 76 103
------ ------
4,093 3,549
------ ------
Net deferred tax assets $ 750 $ 281
====== ======
</TABLE>

In August 1996, Congress passed the Small Business Job Protection Act of
1996. Included in this bill was the repeal of Internal Revenue Code Section
593, which allowed thrift institutions special provisions in calculating bad
debt deductions for income tax purposes. Thrift institutions are viewed as
commercial banks for income tax purposes. The repeal is effective for tax
years beginning after December 31, 1995.

One effect of this legislative change is to suspend the Bank's bad debt
reserve for income tax purposes as of its base year (December 31, 1987). Any
bad debt reserve in excess of the base year amount is subject to recapture
over a six-year time period. The suspended (i.e., base year) amount is
subject to recapture upon the occurrence of certain events, such as a
complete or partial redemption of the Bank's stock or if the Bank ceases to
qualify as a bank for income tax purposes.

At December 31, 1998, the Bank's retained earnings includes approximately
$4,420,000 of bad debt reserves, representing the base year amount, for which
income taxes have not been provided. Since the Bank does not intend to use
the suspended bad debt reserve for purposes other than to absorb the losses
for which it was established, deferred taxes in the amount of $1,800,000 have
not been recorded with respect to such reserve.

F-21
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

(9) COMMITMENTS AND CONTINGENCIES

In the normal course of business, there are outstanding commitments and
contingencies that are not reflected in the consolidated financial
statements. On December 30, 1998, the Bank entered into a Master Commitment
to deliver or sell $5,000,000 in residential mortgage loans to a federal
agency on or before December 31, 1999. At September 30, 1999, the
unfulfilled portion that remained to be delivered under this commitment was
approximately $1,029,000.

The Bank acquired a portion of its furniture, fixtures and equipment under
various capital leases that expire through 2002. As of December 31, 1998,
capital lease obligations amounted to approximately $228,000 and are
included in accrued expenses and other liabilities.

The Bank operates branch offices and certain other operations under leases
that are classified as operating leases. The leases contain renewal options
that guarantee the Bank the right to extend the leases for additional
periods and also provide that the Bank shall pay, as additional rent, a
proportionate share of any increase in real estate taxes. At December 31,
1998, future minimum lease payments are as follows:

<TABLE>
<S> <C> <C>
Years ending December 31,
1999 $1,000,000
2000 949,000
2001 834,000
2002 601,000
2003 554,000
Thereafter 2,347,000
----------

Total minimum lease payments $6,285,000
==========
</TABLE>

The operating leases contain renewal options for periods ranging from one
to 15 years, the cost of which is not included above. Rental expense
amounted to approximately $1,061,000, $964,000 and $879,000 for the years
ended December 31, 1998, 1997 and 1996, respectively, and is included in
occupancy and equipment expenses in the accompanying consolidated
statements of operations.

Aggregate reserves (in the form of deposits with the Federal Reserve Bank
and vault cash) of $2,564,000 and $2,976,000 were maintained to satisfy
regulatory requirements at December 31, 1998 and 1997, respectively.

In the ordinary course of business, the Bank is involved in litigation.
Based on its review of current litigation and discussion with legal
counsel, management does not expect that the resolution of such matters
will have a material adverse effect upon the Bank's consolidated financial
condition or results of operations.

F-22
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

(10) REGULATORY MATTERS

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

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and Tier 1 capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1998, that the
Company and the Bank met all capital adequacy requirements to which they are
subject.

As of December 31, 1998, the most recent notification from the Federal
Reserve Bank of Boston relating to the Holding Company classified the Holding
Company's capital as satisfactory, and the most recent notification from the
FDIC relating to the Bank categorized the Bank as well-capitalized under the
regulatory framework for prompt corrective action. To be categorized as
well-capitalized, an insured depository institution must maintain minimum
total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth
in the table. There are no conditions or events since that notification that
management believes have changed the Bank's category.

F-23
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

The Company's and the Bank's actual capital amounts and ratios as of
December 31, 1998 are also presented in the table.

<TABLE>
<CAPTION>
To Be Well-Capitalized
For Capital Adequacy Under Prompt Corrective
Actual Purposes Action Provisions
------------------------ --------------------------------------- -------------------------
Amount Ratio Amount Ratio Amount Ratio
----------- ----------- -------------------- ----------------- ------------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1998:
Company (consolidated)-
Total capital (to greater than greater than
risk-weighted assets) $79,389 20.54% or equal to $30,752 or equal to 8.0% N/A N/A
Tier 1 capital (to greater than greater than
risk-weighted assets) $72,420 18.74% or equal to $15,376 or equal to 4.0% N/A N/A
Tier 1 capital (to greater than greater than
average assets) $72,420 10.66% or equal to $27,183 or equal to 4.0% N/A N/A
Bank-
Total capital (to greater than greater than greater than greater than
risk-weighted assets) $53,059 14.13% or equal to $30,039 or equal to 8.0% or equal to $37,547 or equal to 10.0%
Tier 1 capital (to greater than greater than greater than greater than
risk-weighted assets) $48,350 12.88% or equal to $15,020 or equal to 4.0% or equal to $22,530 or equal to 6.0%
Tier 1 capital (to greater than greater than greater than greater than
average assets) $48,350 7.37% or equal to $26,234 or equal to 4.0% or equal to $32,793 or equal to 5.0%
</TABLE>

F-24

<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

For Capital Adequacy
Actual Purposes
------------------------ --------------------------------------
Amount Ratio Amount Ratio
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
(Dollars in Thousands)

As of December 31, 1997:
Company (consolidated)-
Total capital (to Less than or Less than or
risk-weighted assets) $72,695 20.51% Equal to $28,361 Equal to 8.0%
Tier 1 capital (to Less than or Less than or
risk-weighted assets) $68,222 19.24% Equal to $14,180 Equal to 4.0%
Tier 1 capital (to Less than or Less than or
average assets) $68,222 11.04% Equal to $18,541 Equal to 3.0%
Bank-
Total capital (to Less than or Less than or
risk-weighted assets) $49,496 14.32% Equal to $27,644 Equal to 8.0%
Tier 1 capital (to Less than or Less than or
risk-weighted assets) $45,169 13.07% Equal to $13,822 Equal to 4.0%
Tier 1 capital (to Less than or Less than or
average assets) $45,169 7.62% Equal to $17,781 Equal to 3.0%

<CAPTION>
To Be Well-Capitalized
Under Prompt
Corrective Action
Provisions
-------------------------
Amount Ratio
------------ -----------
<S> <C> <C>
(Dollars in Thousands)

As of December 31, 1997:
Company (consolidated)-
Total capital (to
risk-weighted assets) N/A N/A
Tier 1 capital (to
risk-weighted assets) N/A N/A
Tier 1 capital (to
average assets) N/A N/A
Bank-
Total capital (to Less than or Less than or
risk-weighted assets) Equal to $34,555 Equal to 10.0%
Tier 1 capital (to Less than or Less than or
risk-weighted assets) Equal to $20,733 Equal to 6.0%
Tier 1 capital (to Less than or Less than or
average assets) Equal to $29,635 Equal to 5.0%

</TABLE>

(11) EMPLOYEE BENEFITS

The Bank provides pension benefits for eligible employees through the Savings
Banks Employees' Retirement Association's (SBERA) Pension Plan (the Plan).
Each employee reaching the age of 21 and having completed one year of service
becomes a participant. All participants are fully vested after three years
of service.

F-25
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

According to the Plan's actuary and in accordance with SFAS No. 132,
Employers' Disclosures About Pensions and Other Postretirement Benefits, the
following summary sets forth the Plan's funded status and amounts included in
the Bank's consolidated balance sheets as of October 31, 1998 and 1997
(latest available data):

<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
(In thousands)

<S> <C> <C>
Benefit obligation at beginning
of year $ 3,851 $ 3,586
Service cost 366 318
Interest cost 279 269
Actuarial gain (35) (5)
Benefits paid (169) (317)
------- -------
Benefit obligation at end of year $ 4,292 $ 3,851
======= =======

Fair value of assets at beginning
of year $ 3,781 $ 3,341
Actual return on plan assets 309 585
Contributions by employer 311 172
Benefits paid (169) (317)
------- -------
Fair value of assets at end of
year $ 4,232 $ 3,781
======= =======

Fair value of assets at end of
year $ 4,232 $ 3,781
Benefit obligation at end of year 4,292 3,851
------- -------
Funded status (60) (70)
Unrecognized net gain (1,253) (1,257)
Unrecognized net asset (266) (288)
------- -------
Net accrued benefit cost $(1,579) $(1,615)
======= =======
</TABLE>

The accumulated benefit obligation (substantially all vested) at October 31,
1998 and 1997 amounts to approximately $2,678,000 and $2,446,000,
respectively, which was less than the fair value of plan assets at that date.
Plan assets are primarily invested in fixed-income and equity securities.

Actuarial assumptions used in determining plan obligations and net pension
expense are as follows:

<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------

<S> <C> <C> <C>
Discount rate used to calculate projected
benefit obligation 7.3% 7.5% 7.5%
Expected long-term rate of return on plan
assets 8.0 8.0 8.0%
Annual salary increase 5.0 5.0 5.0
</TABLE>

F-26
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

The net pension cost for years ended 1998, 1997 and 1996 included the
following components (in thousands):

<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Service cost benefit earned during the
period $ 366 $ 318 $ 315
Interest cost on projected benefit
obligation 279 269 263
Expected return on plan assets (302) (267) (237)
Amortization of transition asset (22) (22) (22)
Amortization of net gain (47) (36) (9)
----- ----- -----

Net pension cost $ 274 $ 262 $ 310
===== ===== =====
</TABLE>

Effective December 1, 1987, the Bank adopted a nonqualified supplemental
pension plan (the Nonqualified Plan). Certain officers as of December 1,
1987 were eligible for enrollment. In addition, certain officers elected
after December 1, 1987 are eligible for enrollment after five years of
service. The present value of the future payments is presently accrued over
the estimated remaining terms of employment. The Nonqualified Plan is being
funded through a life insurance program, with policy benefits accruing to the
Bank. The cash surrender value of the policies is approximately $3,709,000
at September 30, 1999 and $3,646,000 and $2,277,000 at December 31, 1998 and
1997, respectively, and is included in other assets in the accompanying
consolidated balance sheets. The accrued liability associated with this
Nonqualified Plan is approximately $1,508,000 and $1,369,000 at December 31,
1998 and 1997, respectively, and is included in other liabilities in the
accompanying consolidated balance sheets. Net expense for these supplemental
retirement benefits for the years ended December 31, 1998, 1997 and 1996 was
approximately $126,000, $455,000 and $235,000, respectively, and is included
in salaries and employee benefits in the accompanying consolidated statements
of operations.

Effective May 4, 1999, the Bank terminated the Nonqualified Plan and paid out
the majority of participants. Included in noninterest expense for the nine
months ended September 30, 1999 is a $578,000 curtailment loss associated
with this Nonqualified Plan termination. Effective May 4, 1999, the Bank
adopted a 1999 Nonqualified Pension Plan (the 1999 Nonqualified Plan) for
certain executive officers. The accrued liability associated with this 1999
Nonqualified Plan is approximately $1,624,000 at September 30, 1999 and the
net expense associated with the 1999 Nonqualified Plan for the nine months
ended September 30, 1999 was approximately $76,000 and is included in
salaries and employee benefits in the accompanying consolidated statements of
operations.

The Bank offers an SBERA 401(k) Plan (the 401(k) Plan) for employees. Each
employee reaching the age of 21 and having completed one year of service with
the Bank becomes a participant. Participants are 100% vested in their
accounts. Participating employees are able to contribute up to 15% of their
salary, and the Bank matches 50% of a participant's deferral contribution of
the first 3% of the deferral amount subject to the maximum allowable under
federal regulations. The Bank's matching contribution expense was
approximately $77,000 and $50,000 for the years ended December 31, 1998

F-27
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

and 1997, respectively, and is included in salaries and employee benefits in
the accompanying consolidated statements of operations. The Bank did not make
any matching contributions in 1996.

(12) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK AND CONCENTRATION OF
CREDIT RISK

The Bank is party to financial instruments with off-balance-sheet risk in the
normal course of business to meet the financing needs of its customers and to
reduce interest rate risk. These financial instruments primarily include
commitments to extend credit.

These instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amounts recognized in the accompanying
consolidated balance sheets.

The contract amounts of those instruments reflect the extent of involvement
the Bank has in particular classes of financial instruments. The Bank's
exposure to credit loss in the event of nonperformance by the other party to
the financial instrument for commitments to extend credit is represented by
the contractual amount of those instruments. The Bank uses the same credit
policies in making commitments as it does for on-balance-sheet financial
instruments.

Off-balance-sheet financial instruments whose contract amounts present credit
risk include the following (in thousands):

<TABLE>
<CAPTION>
December 31,
September 30, ------------------------------
1999 1998 1997
--------------- -------------- --------------
(Unaudited)
<S> <C> <C> <C>
Commitments to originate loans-
Variable $ 35,760 $ 32,366 $ 22,422
Fixed 5,968 9,198 3,840
Unadvanced home equity lines of credit 119,492 106,393 121,832
Unadvanced lines of credit 11,995 5,988 10,706
</TABLE>

Commitments to originate loans and unadvanced lines of credit are agreements
to lend to a customer provided there is no violation of any condition
established in the contract. Commitments generally have fixed expiration
dates or other termination clauses and may require payment of a fee. Since
many of the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's creditworthiness on a case-
by-case basis. The amount of collateral obtained, if deemed necessary by the
Bank upon extension of credit, is based on management's credit evaluation of
the borrower. The collateral supporting these commitments varies and may
include real property, accounts receivable or inventory. The bank originates
primarily residential and commercial real estate loans and, to a lesser
extent, installment loans to customers primarily located in eastern
Massachusetts.

F-28
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

(13) FAIR VALUES OF FINANCIAL INSTRUMENTS

The reported fair values of financial instruments are based on a variety of
valuation techniques. In some cases, fair values represent quoted market
prices for identical or comparable instruments. In other cases, fair values
have been estimated based on assumptions concerning the amount and timing of
estimated future cash flows, assumed discount rates reflecting varying
degrees of risk and future expected-loss assumptions.

Fair value estimates are made at a specific point in time based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Bank's entire holdings of a particular
financial instrument. Because a market may not readily exist for a
significant portion of the Bank's financial instruments, fair value estimates
are based on judgments regarding future expected loss experience, current
economic conditions, risk characteristics of various financial instruments,
and other factors.

These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions could significantly affect these
estimates.

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. In addition, the tax implications of
unrealized gains and losses can also have a significant effect on the fair
value of the financial instruments that could have been realized as of
December 31, 1998 and 1997 or that will be realized in the future.

The following methods and assumptions were used by the Bank in estimating
fair values of the Bank's financial instruments.

Cash and Cash Equivalents

The balance sheet carrying amounts for cash and cash equivalents approximate
fair value due to the short maturities of those instruments.

Certificates of Deposit and Investment Securities

Fair value for investment securities and certificates of deposit are based on
published market prices, if available. If published market prices are not
available, fair values are based on quotations received from securities
dealers for comparable securities.

F-29
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

Loans Held-for-Sale

For loans held-for-sale, fair value is based on prevailing market conditions
and commitments from institutional investors to purchase such loans.

Loans

The fair values of loans are estimated for loan portfolios of similar
characteristics. Loans are segregated by type, by fixed- and adjustable-rate
interest terms, and by performing and nonperforming status.

For variable-rate loans tied to the Bank's prime rate, which reprice
frequently and entail no significant change in credit risk, fair values are
based on the carrying values. The estimated fair values of all other loans
are estimated based on discounted cash flow analyses using interest rates
currently offered for loans with similar terms to borrowers of similar credit
quality. The carrying amount of accrued interest approximates its fair
value.

FHLB and Savings Bank Life Insurance Stock

The carrying amount reported in the accompanying consolidated balance sheets
approximates fair value. If redeemed, the Company will receive an amount
equal to the par value of the stock.

Mortgage Servicing Rights

The fair value is estimated by discounting the future cash flows through the
estimated maturity of the underlying mortgage loans.

Deposit Liabilities

The fair value of deposits does not include the value of the Bank's long-term
relationships with its depositors, nor do they reflect the value associated
with possessing this relatively inexpensive source of funds, which may be
available for a considerable length of time. The fair value of
noncertificate deposits is equal to the amount payable on demand at the
reporting date. The fair values of certificates of deposit are estimated by
discounting the contractual future cash flows at rates currently offered for
certificates of deposit with similar remaining maturities. No consideration
has been given to determine the deposit premium associated with a core
deposit intangible.

Borrowings

The fair value of the Bank's borrowings are estimated using discounted cash
flow analyses based on the Bank's current incremental borrowing rates for
similar types of borrowing arrangements.

F-30
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

Off-Balance-Sheet Instruments

The fair values of commitments are estimated using the fees charged to enter
into similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. The
Bank's commitments for unused lines of credit are at floating rates, which
approximate current market rates. The fair value of the commitments to
extend credit and for unused lines of credit at December 31, 1998 and 1997
were deemed immaterial to the SFAS No. 107 disclosure and have been excluded.

Certain assets are excluded from disclosure requirements, including banking
premises and equipment, the intangible value of the Bank's portfolio of loans
serviced for others and the intangible value inherent in the Bank's deposit
relationships among others. Accordingly, the aggregate fair value amounts
presented below do not represent the underlying value of the Bank.

The estimated fair values of the Bank's financial instruments at December 31,
1998 and 1997 are as follows:

<TABLE>
<CAPTION>
1998 1997
------------------------ ------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
(In thousands)
<S> <C> <C> <C> <C>
Financial assets-
Cash and cash equivalents $ 10,047 $ 10,047 $ 9,194 $ 9,194
Certificates of deposit 5,900 6,054 12,101 12,246
Investment securities 144,829 144,829 159,621 159,621
Loans held-for-sale 3,842 3,842 1,829 1,864
Loans, net 492,548 502,029 417,358 424,212
Federal Home Loan Bank stock 3,879 3,879 3,062 3,062
Savings Bank Life Insurance stock 1,934 1,934 1,934 1,934
Mortgage servicing rights 284 284 372 372

Financial liabilities-
Noncertificate deposits 255,410 255,410 204,095 204,095
Certificate deposits 310,008 310,584 313,703 314,155
FHLB Advances 27,066 27,567 21,604 21,763
</TABLE>

F-31
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

(14) CONDENSED PARENT COMPANY FINANCIAL STATEMENTS

The Balance Sheets of the Company are as follows (in thousands):

<TABLE>
<CAPTION>
December 31,
September 30, --------------------------------
1999 1998 1997
------------------ --------------- ---------------
(Unaudited)
<S> <C> <C> <C>
ASSETS:
Cash and due from banks $ 5,285 $ 2,626 $ 1,486
Investment securities available-for-sale, 24,041 25,955 24,978
at fair value
Investment in subsidiary 50,499 48,867 45,590
Other assets 481 320 324
------- ------- -------

Total assets $80,306 $77,768 $72,378
======= ======= =======

LIABILITIES AND RETAINED EARNINGS:
Accrued expenses and other liabilities $ 1,728 $ 1,680 $ 1,306
Retained earnings 78,578 76,088 71,072
------- ------- -------

Total liabilities and retained earnings $80,306 $77,768 $72,378
======= ======= =======

</TABLE>

F-32
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

The Statements of Operations of the Company are as follows (in thousands):

<TABLE>
<CAPTION>
Nine Months Ended
September 30, Years Ended December 31,
----------------- -------------------------
1999 1998 1998 1997 1996
-------- ------- ------- ------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
INTEREST AND DIVIDEND INCOME:
Interest and dividends on investment
securities $1,166 $1,166 $1,557 $1,445 $1,205
------ ------ ------ ------ ------
NONINTEREST INCOME:
Net gain on sales of investment securities - - - - 7
------ ------ ------ ------ ------
NONINTEREST EXPENSE:
Other operating expenses 34 34 46 57 74
------ ------ ------ ------ ------

Total noninterest expense 34 34 46 57 74
------ ------ ------ ------ ------

Income before provision for income taxes
and equity in undistributed net income of
subsidiary 1,132 1,132 1,511 1,388 1,138
------ ------ ------ ------ ------
PROVISION FOR INCOME TAXES 368 370 495 451 348
------ ------ ------ ------ ------

Income before equity in undistributed net
income of subsidiary 764 762 1,016 937 790

EQUITY IN UNDISTRIBUTED NET INCOME OF
SUBSIDIARY 2,843 2,302 3,172 2,729 1,697
------ ------ ------ ------ ------

Net income $3,607 $3,064 $4,188 $3,666 $2,487
====== ====== ====== ====== ======
</TABLE>

F-33
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

The Statements of Cash Flows of the Company are as follows (in thousands):

Nine Months Ended
September 30, Years Ended December 31,
------------------- ------------------------------
1999 1998 1998 1997 1996
--------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,607 $ 3,064 $ 4,188 $ 3,666 $ 2,487

ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net gain from sales of investment securities - - - - (7)
Net amortization of premiums on investment 17 9 12 23 101
securities
Equity in undistributed earnings of (2,843) (2,302) (3,172) (2,729) (1,697)
subsidiary
Net increase (decrease) on other liabilities 2 76 (3) 11 (397)
Net (decrease) increase in other assets (161) (91) 4 59 (190)
------- ------- ------- -------- --------

Net cash provided by operating activities 622 756 1,029 1,030 297
------- ------- ------- -------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales, maturities and 6,000 6,500 8,500 28,168 50,176
principal repayments of securities
available-for-sale
Purchase of securities available-for-sale (3,963) (6,389) (8,389) (28,389) (51,105)
------- ------- ------- -------- --------

Net cash provided by (used in) investing 2,037 111 111 (221) (929)
activities ------- ------- ------- -------- --------

NET INCREASE (DECREASE) IN CASH AND CASH 2,659 867 1,140 809 (632)
EQUIVALENTS

CASH AND CASH EQUIVALENTS, 2,626 1,486 1,486 677 1,309
BEGINNING OF YEAR ------- ------- ------- -------- --------

CASH AND CASH EQUIVALENTS, $ 5,285 $ 2,353 $ 2,626 $ 1,486 $ 677
END OF PERIOD ======= ======= ======= ======== ========

</TABLE>

(15) BUSINESS SEGMENTS

SFAS No. 131, Disclosures About Segments of an Enterprise and Related
Information, establishes standards for reporting segments of a business
enterprise. Operating segments are components of an enterprise which are
evaluated regularly by the chief operating decision maker in deciding how to

F-34
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

allocate resources and in assessing performance. The Company's chief
operating decision maker is the President and Chief Executive Officer. The
adoption of SFAS No. 131 did not have a material effect on the Company's
primary financial statements, but did result in the disclosure of segment
information contained herein. The Company has identified its reportable
operating business segment as community banking based on products and
services provided to the customer. The Company's community banking business
segments consist of commercial banking and retail banking. The community
banking business segment derives its revenues from a wide range of banking
services, including lending activities, acceptance of demand, saving and time
deposits, mortgage lending and sales, as well as servicing income from
investors. Non-reportable operating segments of the Company's operations
which do not have similar characteristics to the community banking operations
and do not meet the quantitative thresholds requiring disclosure are included
in the Other category in the disclosure of business segments below. These
non-reportable segments include Parent Company financial information.
Consolidation adjustments are included in the consolidation adjustments
category. The consolidated adjustments reflect certain eliminations of cash
and Parent Company investments in subsidiaries.

The accounting policies used in the disclosure of business segments are the
same as those described in the summary of significant accounting policies.

<TABLE>
<CAPTION>
Community Other Consolidation Consolidated
Banking Adjustments
(Dollars in Thousands)
December 31, 1998:
- -----------------
<S> <C> <C> <C> <C>
Investment securities $118,874 $25,955 $ - $144,829
available-for-sale, at fair value
Loans, net 492,548 - - 492,548
Total assets 650,658 77,768 (50,339) 678,087
Total deposits 568,075 - - 568,075
Total liabilities 601,792 1,680 (1,473) 601,999
Total retained earnings 48,866 76,088 (48,866) 76,088
Total interest and dividend income 47,099 1,557 - 48,656
Total interest expense 25,880 - - 25,880
Net interest income 21,219 1,557 - 22,776
Provision for possible loan losses 1,760 - - 1,760
Total noninterest income 3,571 - - 3,571
Total noninterest expense 17,996 46 - 18,042
Net income 3,172 1,016 - 4,188
</TABLE>

F-35
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

<TABLE>
<CAPTION>
Community Other Consolidation Consolidated
Banking Adjustments
(Dollars in Thousands)
December 31, 1997:
- -----------------
<S> <C> <C> <C> <C>
Investment securities $134,643 $24,978 $ - $159,621
available-for-sale, at fair value
Loans, net 417,358 - - 417,358
Total assets 593,800 72,378 (46,810) 619,368
Total deposits 520,357 - - 520,357
Total liabilities 548,210 1,306 (1,220) 548,296
Total retained earnings 45,590 71,072 (45,590) 71,072
Total interest and dividend income 42,516 1,445 - 43,961
Total interest expense 23,554 - - 23,554
Net interest income 18,962 1,445 - 20,407
Provision for possible loan losses 600 - - 600
Total noninterest income 3,176 - - 3,176
Total noninterest expense 17,581 57 - 17,638
Net income 2,729 937 - 3,666
</TABLE>

(16) SUBSEQUENT EVENT (UNAUDITED)

In February 1999, the Bank entered into an agreement with a developer for the
construction of a new administrative center. The Bank expects to incur
approximately $16 million in the construction of the building and the
purchase of land. Temple Realty LLC was established in February 1999 as a
wholly owned subsidiary of the Bank for the purpose of holding the new
administrative center. At the completion of the project, which is estimated
to be in 2000, certain administrative and operating departments are expected
to be located in this building. The Bank expects to occupy 60% of the new
building and lease out the remaining portion. The current building serving
as the main office will continue to include administrative offices and a
retail branch with the remaining space subleased to other tenants. Based on
the current estimate of fair value for the existing corporate headquarters
and the benefits associated with continued utilization by the Bank and other
tenants, no impairment write-down of the carrying amount of the building is
anticipated.

F-36
<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

Notes to Consolidated Financial Statements
September 30, 1999 and 1998 (Unaudited) and
December 31, 1998, 1997 and 1996

(Continued)

Stock Conversion

On October 19, 1999, the Board of Trustees of the Company adopted a Plan of
Conversion (the Conversion) pursuant to which the Company will convert to a
stock form of ownership and offer for sale 100% of its common stock in a
subscription offering initially to bank depositors, employee benefit plans of
the Company and certain other eligible subscribers. Any shares of stock not
sold in the subscription offering are expected to be sold to the public by
underwriters.

As part of the Conversion, the Bank will establish a liquidation account in
an amount equal to the net worth of the Bank as of the date of the latest
consolidated balance sheet appearing in the final prospectus. The
liquidation account will be maintained for the benefit of eligible account
holders and supplemental eligible account holders who maintain their accounts
at the Bank after the Conversion. The liquidation account will be reduced
annually to the extent that such account holders have reduced their
qualifying deposits as of each anniversary date. Subsequent increases will
not restore an account holder's interest in the liquidation account. In the
event of a complete liquidation, each eligible account holder will be
entitled to receive balances for accounts then held.

Subsequent to the Conversion, the Company may not declare or pay dividends on
and may not repurchase any of its common stock if the effect thereof would
cause its capital to be reduced below applicable regulatory capital
maintenance requirements or if such declaration, payment or repurchase would
otherwise violate regulatory requirements.

F-37
<PAGE>

You should rely only on the information contained in this document or that to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document does not constitute an offer to
sell, or the solicitation of an offer to buy, any of the securities offered
hereby to any person in any jurisdiction in which such offer or solicitation
would be unlawful. The affairs of Cambridgeport Bank or Port Financial Corp. may
change after the date of this prospectus. Delivery of this document and the
sales of shares made hereunder does not mean otherwise.

Port Financial Corp.

(Proposed Stock Holding Company for Cambridgeport Bank)

Up to 10,580,000 Shares of Common Stock

______

Prospectus

______

Ryan, Beck & Co.

[ ], 2000

Until the later of _____, 2000 or 25 days after commencement of the offering,
all dealers effecting transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.(1)

Massachusetts Commissioner of Banks registration fee(2)............. 5,000
SEC registration fee(2)............................................. 33,100
NASD filing fee(2).................................................. 12,403
NASDAQ National Market Listing Fee(2)............................... 76,625
Printing, postage and mailing....................................... 500,000
Legal fees and expenses............................................. 300,000
Accounting fees and expenses........................................ 175,000
Appraiser's fees and expenses (including business plan)............. 65,000
Marketing fees, selling commissions, and
underwriter's expenses (including counsel fees).................... 1,055,000
Conversion agent fees and expenses.................................. 5,000
Certificate printing................................................ 10,000
Blue Sky fees and expenses (including fees of counsel).............. 5,000
Miscellaneous....................................................... 25,872
TOTAL............................................................... 2,268,000

- ---------------
(1) All expenses are estimated except where otherwise indicated.

(2) Based upon the issuance of 10,580,000 shares at $10.00 per share.

Item 14. Indemnification of Directors and Officers.

Section 67 of the Massachusetts Business Corporation Law ("MBCL") sets
forth certain circumstances under which directors, officers, employees and
agents may be indemnified against liability which they may incur in their
capacity as such. Section 67 of the MBCL provides as follows:

"Indemnification of Directors, Officers, Employees, etc."--Indemnification
of directors, officers, employees and other agents of a corporation and
persons who serve at its request as directors, officers, employees or other
agents of another organization or who serve at its request in any capacity
with respect to any employee benefit plan, may be provided by it to
whatever extent shall be specified in or authorized by (i) the articles of
organization or (ii) a by-law adopted by the stockholders or (iii) a vote
adopted by the

II-1
<PAGE>

holders of a majority of the shares of stock entitled to vote on the
election of directors. Except as the articles of organization or by-laws
otherwise require, indemnification of any persons referred to in the
preceding sentence who are not directors of the corporation may be provided
by it to the extent authorized by the directors. Such indemnification may
include payment by the corporation of expenses incurred in defending a
civil or criminal action or proceeding in advance of the final disposition
of such action or proceeding, upon receipt of an undertaking by the person
indemnified to repay such payment if he shall be adjudicated to be not
entitled to indemnification under this section which undertaking may be
accepted without reference to the financial ability of such person to make
repayment. Any such indemnification may be provided although the person to
be indemnified is no longer an officer, director, employee or agent of the
corporation or of such other organization or no longer serves with respect
to any such employee benefit plan.

No indemnification shall be provided for any person with respect to any
matter as to which he shall have been adjudicated in any proceeding not to
have acted in good faith in the reasonable belief that his action was in
the best interest of the corporation or to the extent that such matter
relates to service with respect to an employee benefit plan, in the best
interests of the participants or beneficiaries of such employee benefit
plan.

The absence of any express provision for indemnification shall not limit
any right of indemnification existing independently of this section. A
corporation shall have power to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or other agent of
the corporation, or is or was serving at the request of the corporation as
a director, officer, employee or other agent of another organization or
with respect to any employee benefit plan against any liability 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.

The Company's Articles of Organization provide for the indemnification of
directors, officers, employees and other agents of the Company. Under Article
VI "Other Lawful Provisions," Section 6.7 entitled "Indemnification" states the
following policies and procedures of the Company on indemnification:

The Company will indemnify and hold harmless, to the fullest extent
authorized by the Massachusetts Business Corporation Law, anyone involved
or threatened to be made a party in an action, suit or proceeding by reason
of his or her service for the Company or at the request of the Company as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan; against all expense, liability
and loss, including attorneys' fees, judgments, fines, ERISA excise taxes
or penalties and amounts paid in settlement, reasonably incurred or
suffered by him or her in connection with such action, suit or proceeding;
provided, however that such action, suit or proceeding was authorized by
the Board of Directors of the Company (except for proceedings to enforce
rights to indemnification).

The right to indemnification includes the advancement of expenses incurred
in defending any such action, suit or proceeding, for any director or
officer at the level of Vice President or above, and in the discretion of
the Board of Directors for any other officer or employee.

The Company may, to the extent authorized by the Board of Directors, grant
rights to indemnification and the advancement of expenses to any employee
of agent of the Company; the Company may also enter into specific
agreements, commitments or arrangements for indemnification on any terms
not prohibited by law which it deems to be appropriate.

The rights to indemnification and to the advancement of expenses shall not
be exclusive of any other right which any person may have or hereafter
acquire under any statute, the Company's Articles, Bylaws, agreement, vote
of stockholders or disinterested directors or otherwise.

II-2
<PAGE>

Item 15. Recent Sales of Unregistered Securities.

Not Applicable.

Item 16. Exhibits and Financial Statement Schedules.

The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:

(a) List of Exhibits. (Filed herewith unless otherwise noted)

1.1 Engagement Letter dated May 19, 1999, between Cambridgeport Bank and
Ryan, Beck & Co., Inc.*
1.2 Form of Agency Agreement, between Cambridgeport Bank and Ryan, Beck &
Co., Inc.*
2.1 Plan of Conversion and Stock Issuance Plan of Cambridgeport Mutual
Holding Company
3.1 Articles of Organization of Port Financial Corp.
3.2 Bylaws of Port Financial Corp.*
3.3 Amended and Restated Charter of Cambridgeport Bank*
3.4 Amended and Restated Bylaws of Cambridgeport Bank*
4.1 Articles of Organization of Port Financial Corp. (See Exhibit 3.1)
4.2 Bylaws of Port Financial Corp. (See Exhibit 3.2)
4.3 Form of Stock Certificate of Port Financial Corp.*
5.1 Form of Opinion of Thacher Proffitt & Wood regarding legality of
securities to be registered*
8.1 Form of Opinion of Thacher Proffitt & Wood regarding federal tax
matters*
8.2 Form of Opinion of Arthur Andersen LLP regarding state and local tax
matters
8.3 Letter from RP Financial, LC. regarding subscription rights*
10.1 Form of Employee Stock Ownership Plan of Port Financial Corp.*
10.2 Form of ESOP Restoration Plan of Port Financial Corp.*
10.3 Form of Employment Agreement, between James Keegan and Port
Financial Corp.*
10.4 Form of Employment Agreement, between Jane Lundquist and Port
Financial Corp.*
10.5 Form of Trust Agreement under the Cambridgeport Bank Nonqualified
Pension Plans and Supplemental Executive Retirement Plan*
10.6 Form of 1999 Nonqualified Pension Plan of Cambridgeport Bank and
Amendment thereto*
10.7 Form of Directors' Emeritus Consultation Plan of Port Financial
Corp.*
10.8 Form of Officers' Deferred Compensation Plan of Cambridgeport Bank*
10.9 Long-Term Incentive Plan of Port Financial Corp.
21.1 Subsidiaries of the Registrant*
23.1 Consent of Thacher Proffitt & Wood (included in Exhibits 5.1 and 8.1
to this Registration Statement)
23.2 Consent of Arthur Andersen LLP
23.3 Consent of RP Financial, LC.
24.1 Powers of Attorney*
27.1 Financial Data Schedule (only filed in electronic format)
99.1 Appraisal Report of RP Financial, LC. (filed in paper format only)*
99.2 Updated Appraisal Report of RP Financial, LC. (filed in paper format
only)
99.3 Form of marketing materials to be used in connection with the
offering
- -------------------------
*Previously filed.

(b) Financial Statement Schedules.

All schedules have been omitted as not applicable or not required under the
rules of Regulation S-X.

II-3
<PAGE>

Item 17. Undertakings.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:

(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.

The undersigned Registrant hereby undertakes to furnish stock certificates
to or in accordance with the instructions of the respective purchasers of the
Common Stock, so as to make delivery to each purchaser promptly following the
closing under the Plan of Conversion.

Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, 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 Securities 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
Securities Act and will be governed by the final adjudication of such issue.

II-4
<PAGE>

The undersigned Registrant hereby undertakes that:

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

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

II-5
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cambridge, Commonwealth
of Massachusetts on January 11, 2000.

Port Financial Corp.

/s/ James B. Keegan
--------------------------------------
By: James B. Keegan
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, and
any rules and regulations promulgated thereunder, this Registration Statement,
has been signed by the following persons in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
Name Title Date
- ------------------------------ ------------------------------ -----------------
<S> <C> <C>
* President, Chief Executive January 11, 2000
- ------------------------------ Officer and Director
James B. Keegan

* Chief Accounting Officer, January 11, 2000
- ------------------------------ Vice President and
Charles Jeffrey Treasurer

* Director and Clerk January 11, 2000
- ------------------------------
Paul R. Corcoran, Jr.

* Director January 11, 2000
- ------------------------------
Daniel C. Crane, Esq.

* Director January 11, 2000
- ------------------------------
Samuel C. Fleming

* Director January 11, 2000
- ------------------------------
William Goldberg, Esq.
</TABLE>

II-6
<PAGE>

<TABLE>
<S> <C> <C>
* Director January 11, 2000
- ------------------------------
Robert D. Happ

* Executive Vice President and January 11, 2000
- ------------------------------ Director
Jane L. Lundquist

* Director January 11, 2000
- ------------------------------
Joseph F. O'Connor

* Director January 11, 2000
- ------------------------------
Rudolph R. Russo
</TABLE>

* /s/ James B. Keegan as attorney-in-fact by power of attorney dated
November 16, 1999, as filed on November 23, 1999.

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Exhibit 2.1

CAMBRIDGEPORT MUTUAL HOLDING COMPANY

PLAN OF CONVERSION

FROM

MUTUAL HOLDING COMPANY

STOCK HOLDING COMPANY

AND

STOCK ISSUANCE

Adopted by the Board of Trustees
on October 19, 1999
<PAGE>

TABLE OF CONTENTS

1. Introduction - Business Purpose........................................ 1

2. Definitions............................................................ 2

3. General Procedure for Conversion....................................... 7
3.1 Procedures for Conversion......................................... 7
3.2 Preconditions to Conversion....................................... 9

4. Number of Shares and Purchase Price of Conversion Stock................ 9
4.1 Independent Appraisal............................................. 9
4.2 Price Per Share................................................... 9
4.3 Number of Shares.................................................. 10
4.4 Confirmation of Valuation......................................... 10

5. Subscription Rights of Eligible Account Holders, Supplemental Eligible
Account Holders, Tax-Qualified Employee Stock Benefit Plans and
Management............................................................. 10
5.1 Subscription Priorities........................................... 10
5.2 Minimum Purchase; No Fractional Shares............................ 13
5.3 Purchase Limitations.............................................. 13
5.4 Certain Determinations............................................ 13

6. Direct Community Offering and Syndicated Community Offering............ 13
6.1 Direct Community Offering......................................... 13
6.2 Syndicated Community Offering..................................... 14
6.3 Other Arrangements................................................ 14

7. Limitations on Purchases............................................... 14
7.1 Maximum Purchase Limit............................................ 14
7.2 Purchases by Management........................................... 15
7.3 Illegal Purchases................................................. 15
7.4 Rejection of Orders............................................... 15

8. Manner of Exercising Rights; Order Forms............................... 15

9. Payment for Conversion Stock........................................... 17
9.1 Deadline for Receipt of Payment................................... 17
9.2 Changes in Aggregate Purchase Price............................... 17
9.3 Method of Payment................................................. 17

10. Expiration of Purchase Rights; Undelivered, Defective or Late Order Forms;
Insufficient Payment................................................... 18
10.1 Expiration of Subscription Rights................................. 18
10.2 Undelivered, Defective or Late Order Forms; Insufficient Payment.. 18

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10.3 Waiver of Irregularities or Defects.............................. 19

11. Persons in Nonqualified States or in Foreign Countries................. 19

12. Voting Rights after Conversion......................................... 19

13. Establishment of a Liquidation Account................................. 19
13.1 Establishment of Liquidation Account............................. 19
13.2 Interest in Liquidation Account.................................. 19
13.3 Amount of Subaccount Balances.................................... 19
13.4 Distributions.................................................... 20

14. Restriction on Transfer of Conversion Stock of Management.............. 20
14.1 Restrictions on Resale........................................... 20
14.2 Certificates and Stop Orders..................................... 20
14.3 Stock Dividends and Stock Splits................................. 21

15. Restriction on Stock Purchases by Management........................... 21

16. Amendment and Termination of the Plan.................................. 21

17. Time Period for Completion of Conversion............................... 21

18. Expenses of Conversion................................................. 21

19. Registration Under Securities Exchange Act of 1934..................... 21

20. Market................................................................. 22

21. Conversion Stock Not Insured........................................... 22

22. No Loans to Purchase Capital Stock..................................... 22

23. Restrictions on Acquisition of Bank.................................... 22

24. Stock Charter and Bylaws............................................... 22
24.1 Stock Holding Company Articles of Organization And Bylaws........ 22
24.2 Bank Charter And Bylaws.......................................... 23

25. Post Offering Matters.................................................. 23
25.1 Stock Benefit Plans.............................................. 23
25.2 Payment of Dividends............................................. 23
25.3 Repurchase of Stock.............................................. 23

26. Miscellaneous.......................................................... 24
26.1 Interpretation of Plan........................................... 24

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26.2 Enforcement of Terms and Conditions.............................. 24

Exhibits
--------

Exhibit A - Proposed Articles of Organization of the Stock Holding Company
Exhibit B - Proposed Bylaws of the Stock Holding Company
Exhibit C - Amended and Restated Charter of Cambridgeport Bank
Exhibit D - Amended and Restated Bylaws of Cambridgeport Bank
Exhibit E - Initial Directors of the Stock Holding Company

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<PAGE>

CAMBRIDGEPORT MUTUAL HOLDING COMPANY
PLAN OF CONVERSION FROM MUTUAL HOLDING COMPANY
TO STOCK HOLDING COMPANY AND STOCK ISSUANCE

1. Introduction - Business Purpose

The Board of Trustees of Cambridgeport Mutual Holding Company, a
Massachusetts-chartered mutual holding company (the "MHC"), has determined that
it is in the best interests of the MHC, of Cambridgeport Bank, a Massachusetts-
chartered stock savings bank and wholly owned subsidiary of the MHC (the
"Bank"), of the depositors and customers of the Bank, and of the communities
served by the Bank and the MHC for the MHC to convert from a mutual institution
to a stock-form institution (the "Conversion"). Capitalized terms used but not
defined in this Section 1 shall have the meaning set forth in Section 2 hereof.

In order to carry out the Conversion, the Board of Trustees of the MHC has
adopted this Plan of Conversion (the "Plan") to be carried out under the laws of
the Commonwealth of Massachusetts and the regulations of the Massachusetts
Division of Banks and the FRB, and other applicable laws and regulations.
Pursuant to the Plan, the MHC will convert to a stock form corporation (the
"Stock Holding Company") and offer Conversion Stock on a priority basis to (i)
qualifying depositors, (ii) Tax-Qualified Employee Plans of the Bank and the MHC
and (iii) Management, with any remaining shares to be offered to the Local
Community in a Direct Community Offering and possibly to the public in a
Syndicated Community Offering.

The Conversion is intended to provide an additional source of capital not
now available in order to allow the Bank and the MHC to better serve the needs
of the Local Community through: increased lending (especially to support the
introduction of small business banking); opportunistic branch expansion;
diversification of products; expanding delivery systems, including the
introduction of Internet banking and capitalization on opportunities to serve
customers disenfranchised by recent consolidations in the banking industry. The
Conversion is also intended to provide an additional source capital to the Stock
Holding Company in order to allow it to: finance acquisitions of other
financial institutions or other businesses related to banking; pay dividends to
stockholders; and repurchase shares of Conversion Stock. In addition, after the
Conversion, the Stock Holding Company would have the ability to issue additional
shares of Holding Company Common Stock to raise additional capital or in
connection with additional mergers or acquisitions, although no additional
capital issuance and no merger or acquisition are planned or contemplated at the
present time. In addition, stock ownership by Officers and other Employees of
the Stock Holding Company and the Bank has proven to be an effective performance
incentive and an effective means of attracting and retaining qualified
personnel. The Board of Directors, Board of Trustees and senior management
believe that the Conversion will be beneficial to the population within the
primary market area. The Conversion will provide local customers and other
residents with an opportunity to become equity owners of the Bank, and thereby
participate in the possible stock price appreciation and cash dividends, which
is consistent with the objective of being a locally-owned financial institution
servicing local financial needs. The Board and management believe that,

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through expanded local stock ownership, current customers and non-customers who
purchase Conversion Stock will seek to enhance the financial success of the Bank
through consolidation of their banking business and increased referrals to the
Bank.

The Plan is subject to the approval of various regulatory agencies, and
must also be approved by the affirmative vote of at least a majority of the
MHC's Corporators (and a majority of the MHC's Independent Corporators (who must
constitute not less than 60% of all Corporators)) at an annual meeting or a
special meeting called for such purpose. By approving the Plan, the Corporators
will also be approving the Articles of Organization and bylaws of the Stock
Holding Company and the Charter and bylaws of the Bank and all other steps
necessary or incidental to the Conversion.

The Bank became a stock-form subsidiary of the MHC when the Bank
reorganized into mutual holding company form in 1994. Accordingly, the
Conversion will not affect the corporate existence of the Bank. Although the
Plan does provide that certain amendments will be made to the Bank's corporate
charter and bylaws, the Bank's business and operations will not be affected or
interrupted by the Conversion, and the Bank will continue as the same legal
entity after the Conversion. The deposit accounts and loan accounts of the
Bank's customers will not be affected by the Conversion. Upon Conversion, each
deposit account holder of the Bank will continue to hold exactly the same
deposit account as the holder held immediately before the Conversion. All
deposit accounts in the Bank following the Conversion will continue to be
insured up to the legal maximum by the Federal Deposit Insurance Corporation and
the Depositors Insurance Fund in the same manner as such deposit accounts were
insured immediately before the Conversion. There will be no change in the
Bank's loans. The Conversion will not result in any reduction of the Bank's
reserves or net worth.

2. Definitions

As used in the Plan, the terms set forth below have the following meanings:

Acting in Concert: The term "Acting in Concert" means (a) knowing
participation in a joint activity or conscious parallel action towards a common
goal, whether or not pursuant to an express agreement; or (b) Persons seeking to
combine or pool their voting or other interests (such as subscription rights) in
the securities of an issuer for a common purpose, pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether written or
otherwise. When Persons act together for such purpose, their group is deemed to
have acquired their stock. The determination of whether a group is Acting in
Concert shall be made solely by the Board of Trustees of the MHC or Officers
delegated by such Board and may be based on any evidence upon which the Board or
such delegatee chooses to rely, including, without limitation, joint account
relationships or the fact that such Persons have filed joint Schedules 13D with
the SEC with respect to other companies. Trustees of the MHC and directors of
the Stock Holding Company and the Bank shall not be deemed to be Acting in
Concert solely as a result of their membership on any such board or boards.

2
<PAGE>

Affiliate: An "Affiliate" of, or a Person "Affiliated" with, a specified
Person, is a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with the
Person specified.

Aggregate Purchase Price: The term "Aggregate Purchase Price" means the
total sum paid for all shares of Conversion Stock.

Application: The application, including a copy of the Plan, submitted by
the MHC to the Commissioner for approval of the Conversion.

Associate: The term "Associate," when used to indicate a relationship with
any Person, means: (i) any corporation or organization (other than the Bank,
the Stock Holding Company, the MHC or a majority-owned subsidiary of any
thereof) of which such Person is a director, Officer or partner or is, directly
or indirectly, the beneficial owner of 10% or more of any class of equity
securities; (ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as trustee or
in a similar fiduciary capacity; (iii) any relative or spouse of such Person, or
any relative of such spouse, who has the same home as such Person; and (iv) any
Person Acting in Concert with any of the Persons or entities specified in
clauses (i) through (iii) above; provided, however, that any Tax-Qualified or
Non-Tax-Qualified Employee Plan shall not be deemed to be an Associate of any
director, trustee or Officer of the MHC, the Stock Holding Company or the Bank,
to the extent provided in the Plan. When used to refer to a Person other than
an Officer or director of the Bank, the MHC or the Stock Holding Company, the
MHC in its sole discretion may determine the Persons that are Associates of
other Persons. Trustees of the MHC and directors of the Stock Holding Company
and the Bank shall not be deemed to be Associates solely as a result of their
membership on such Board.

Bank: Cambridgeport Bank.

BHCA: The Bank Holding Company Act of 1956, as amended.

Broker-Dealer: The term "Broker-Dealer" means any person who engages
either for all or part of such person's time, directly or indirectly, as agent,
broker or principal, in the business of offering, buying, selling or otherwise
dealing or trading in securities issued by another person.

Commissioner: The Office of the Commissioner of Banks of The Commonwealth
of Massachusetts.

Community Offering: A Direct Community Offering and/or a Syndicated
Community Offering.

Conversion: (1) the conversion of the MHC into the Stock Holding Company
by amendment of the MHC's charter and bylaws to authorize the issuance of
capital stock or by such other means as the Commissioner shall approve under
applicable Massachusetts law and regulations, (2) the offering of Conversion
Stock in a Subscription Offering and, to the extent shares remain available, in
a Direct Community Offering and possibly in a Syndicated Community Offering; (3)
the issuance

3
<PAGE>

of the Conversion Stock, (4) the amendment of the Bank's charter and bylaws as
contemplated in the Plan; and (5) the consummation of the related transactions
provided for in the Plan.

Conversion Stock: The Holding Company Common Stock to be issued in the
Conversion.

Corporator: A member of the MHC's Board of Corporators.

Deposit Account: Any withdrawable deposit account offered by the Bank,
including, without limitation, savings accounts, NOW account deposits,
certificates of deposit, demand deposits, Keogh Plan, SEPs and IRA accounts for
which the Bank acts as custodian or trustee, and such other types of deposit
accounts as may then have been authorized by Massachusetts or federal law and
regulations, but not including repurchase agreements, savings bank life
insurance policies or certain escrow accounts.

Direct Community Offering: The offering to the Local Community with
preference given to natural persons residing in the Local Community, and then to
the general public of any unsubscribed shares in the Subscription Offering which
may be effected pursuant to the Plan. The Direct Community Offering may be
conducted simultaneously with the Subscription Offering.

Division: The Division of Banks of The Commonwealth of Massachusetts.

Eligible Account Holder: Any Person holding a Qualifying Deposit on the
Eligibility Record Date.

Eligibility Record Date: July 31, 1998, the date for determining who
qualifies as an Eligible Account Holder.

Employee: The term "Employee" does not include a trustee, director or
Officer.

Employee Plan: Any Tax-Qualified Employee Plan or Non-Tax-Qualified
Employee Benefit Plan.

ESOP: The employee stock ownership plan to be established by the Bank.

Estimated Valuation Range: The dollar range of the proposed Offering, as
determined by the Independent Appraiser before the Offering and as it may be
amended from time to time thereafter. The Estimated Valuation Range may vary
within 15% above or 15% below the midpoint of such range, with a possible
adjustment by up to 15% above the maximum ("Range Maximum") of such range.

Exchange Act: The Securities Exchange Act of 1934, as amended.

FDIC: The Federal Deposit Insurance Corporation.

FRB: The Board of Governors of the Federal Reserve System.

4
<PAGE>

Holding Company Common Stock: The common stock authorized to be issued
from time to time by the Stock Holding Company.

Independent Appraiser: The appraiser retained by the MHC to prepare an
appraisal of the pro forma market value of the Conversion Stock.

Independent Corporator: A Corporator who is not an Employee, Officer, or
trustee of the MHC or an Employee, Officer, director, or "significant borrower"
of the Bank.

Independent Valuation: The estimated pro forma market value of the
Conversion Stock as determined by the Independent Appraiser.

Information Statement. The information statement required to be sent to
the Corporators in connection with the Special Meeting.

Liquidation Account: The liquidation account established pursuant to
Section 13.1 of the Plan.

Local Community: Those cities and towns designated by the MHC with the
approval of the Commissioner before the commencement of the Offering.

Management: Employees, Officers, directors, trustees and Corporators of
the Bank or the MHC at the time of the Offering.

Marketing Agent: The broker-dealer responsible for organizing and managing
the Conversion and sale of the Conversion Stock.

Market Maker: A dealer (i.e., any Person who engages directly or
indirectly as agent, broker, or principal in the business of offering, buying,
selling or otherwise dealing or trading in securities issued by another Person)
who, with respect to a particular security, (i) regularly publishes bona fide
competitive bid and offer quotations on request, and (ii) is ready, willing and
able to effect transactions in reasonable quantities at the dealer's quoted
prices with other brokers or dealers.

Maximum Purchase Limit: The limitation on the purchase of shares of
Conversion Stock established by Section 7.1, as such limit may be increased
pursuant to said Section 7.1.

MHC: Cambridgeport Mutual Holding Company, the Massachusetts-chartered
holding company for the Bank as it exists in mutual form prior to the
Conversion.

Non-Tax-Qualified Employee Benefit Plan: Any defined benefit plan or
defined contribution plan which is not qualified under Section 401 of the
Internal Revenue Code.

Offering: The Subscription Offering, the Direct Community Offering and the
Syndicated Community Offering.

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<PAGE>

Officer: The Chairman of the Board, the President, any officer of the
level of vice president or above, the Clerk and the Treasurer of the Bank, the
MHC or the Stock Holding Company, as the case may be.

Person: An individual, corporation, partnership, association, joint-stock
company, trust (including Individual Retirement Accounts, SEP's and Keogh
Accounts), unincorporated organization, government entity or political
subdivision thereof or any other entity.

Plan: This Plan of Conversion as adopted by the Board of Directors of the
Bank and the Board of Trustees of the MHC and approved by the Commissioner.

Prospectus: The term "Prospectus" means the prospectus by which the
Conversion Stock is being offered.

Purchase Price: The term "Purchase Price" means the price of the
Conversion Stock, as offered in the Conversion.

Qualifying Deposit: The term "Qualifying Deposit" means deposit accounts
of all types offered by the Bank including, but not limited to, NOW account
deposits, certificates of deposit, demand deposits, money market deposits and
deposits made pursuant to IRA/Keogh Plans. It does not include repurchase
agreements, savings bank life insurance policies or certain escrow accounts.
Aggregate deposits of less than $50 will not constitute Qualifying Deposits.

Range Maximum: The valuation which is 15% above the midpoint of the
Estimated Valuation Range, as defined in Section 4.1.

Regulations: The regulations of the Division and the FRB regarding mutual
to stock conversions.

SEC: The Securities and Exchange Commission.

Special Meeting: The Special Meeting of Corporators called for the purpose
of voting on the Plan.

Stock Holding Company: The stock-form holding company that will result
from the conversion of the MHC as provided in the Plan, issue Conversion Stock
in the Conversion, and continue to own 100% of the common stock of the Bank.

Stock Holding Company Application: The holding company application to be
submitted by the MHC to the FRB to have the MHC convert to stock form and issue
Conversion Stock.

Subscription Offering: The term "Subscription Offering" means the offering
of Conversion Stock, through nontransferable Subscription Rights issued to
Eligible Account Holders, Supplemental Eligible Account Holders, the Tax
Qualified Employee Stock Benefit Plans of the Bank and Management.

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<PAGE>

Supplemental Eligibility Record Date: The term "Supplemental Eligibility
Record Date" means September 30, 1999, the record date set by the Bank for
determining Supplemental Eligible Account Holders.

Supplemental Eligible Account Holder: The term "Supplemental Eligible
Account Holder" means any person (other than an Eligible Account Holder) holding
a Qualifying Deposit in the Bank as of the Supplemental Eligibility Record Date,
except Officers, directors, trustees, corporators and their associates.

Syndicated Offering: The term "Syndicated Offering" means the offering of
Conversion Stock not subscribed for in the Subscription Offering or the Direct
Community Offering, if any, to certain members of the general public and/or
through a syndicate of registered broker-dealers:

Tax-Qualified Employee Stock Benefit Plan: The term "Tax-Qualified
Employee Stock Benefit Plan" means any defined benefit plan or defined
contribution plan of the Bank, such as an employee stock ownership plan, or
other plan, which, with its related trust, meets the requirements to be
"qualified" under section 401 of the Internal Revenue Code of 1986, as amended:

3. General Procedure for Conversion

3.1 Procedures for Conversion. After adoption of the Plan by the Board of
Directors of the Bank and at least two-thirds of the Board of Trustees of the
MHC, the Plan will be submitted, together with all other requisite material in
the Application, to the Commissioner for his approval and to the FRB to
determine whether it has objections, based on safety and soundness
considerations, to the Conversion. References herein to approval of the
Commissioner shall also refer to the approval from the FRB. The Bank must also
receive either private letter rulings from the Internal Revenue Service and the
Massachusetts Department of Revenue or opinions of its counsel as to the federal
income tax consequences of the Conversion and of its tax accountants as to the
Massachusetts income tax consequences of the Conversion, in either case
substantially to the effect that the Conversion will not result in any adverse
federal or Massachusetts income tax consequence to the Bank, the MHC, the Stock
Holding Company, Eligible Account Holders or Supplemental Eligible Account
Holders.

Upon a determination by the Commissioner that the Application is complete,
the MHC will publish and post public announcements and notices of the
Application as required by the Commissioner and the Regulations. Following
approval of the Plan by the Commissioner, the Special Meeting shall be scheduled
in accordance with the MHC's Bylaws, and the Plan (as revised in response to
comments received from the Commissioner), proposed revisions and amendments to
the charters and bylaws of the Bank and the Articles of Organization and bylaws
of the Stock Holding Company, and any information required pursuant to the
Regulations, will be submitted to the Corporators for their consideration and
approval at the Special Meeting. The MHC will mail to each Corporator a copy of
the Information Statement not less than seven (7) days before the Special
Meeting. Following approval of the Plan by the Corporators, the MHC intends to
take such steps

7
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as may be appropriate pursuant to applicable laws and regulations to convert the
MHC to a Massachusetts-chartered stock form holding company.

If the Corporators approve the Plan, and upon receipt of all required
regulatory approvals, the Bank will sell the Conversion Stock in a Subscription
Offering as provided herein. Upon such approval, the Conversion Stock to be
issued pursuant to this Plan will be offered to Eligible Account Holders,
Supplemental Eligible Account Holders, the Tax-Qualified Employee Stock Benefit
Plans and Management and as set forth in Section 5 of this Plan. The
Subscription Offering period will run for no less than twenty (20) but no more
than forty-five (45) days from the date of distribution of the Subscription
Offering materials, unless extended by the MHC with the approval of the
Commissioner.

If feasible, any Conversion Stock remaining will then be sold to the
general public through a Direct Community Offering as provided in Section 6 of
this Plan. The sale of all Conversion Stock ordered in the Subscription
Offering may be consummated simultaneously, during or subsequent to the date the
Direct Community Offering is completed, or, if there is no Direct Community
Offering, as soon as practicable following expiration of the Subscription Rights
provided for in this Plan.

If feasible, any shares of Conversion Stock remaining unsold after
completion of the Subscription Offering and a Direct Community Offering will be
sold in a Syndicated Community Offering (which may commence following or
contemporaneously with the Direct Community Offering). If for any reason a
Syndicated Community Offering of all unsubscribed Conversion Stock cannot be
effected, the MHC will use its best efforts to obtain other purchasers, subject
to the approval of the Commissioner. Completion of the sale of all Conversion
Stock not sold in the Subscription Offering is required within forty-five (45)
days after termination of the Subscription Offering, subject to the extension of
such forty-five (45) day period by the MHC with the approval of the
Commissioner. The MHC may seek one or more extensions of such forty-five (45)
day period if necessary to complete the sale of all shares of Conversion Stock.
If all available shares of Conversion Stock are sold in the Subscription
Offering and any Direct Community Offering, there will be no Syndicated
Community Offering and the Conversion will be consummated upon completion of the
Subscription Offering or the Direct Community Offering, as the case may be.

Upon the consummation of the Conversion, the MHC will be converted into the
Stock Holding Company. The Stock Holding Company will be chartered as a
Massachusetts corporation and will be authorized to exercise any and all powers,
rights and privileges, and will be subject to all limitations applicable to bank
holding companies under applicable laws and regulations. The initial members of
the Board of Directors of the Stock Holding Company will be those Persons whose
names are set forth on Exhibit E to the Plan, each to hold office until the
---------
Annual Meeting (or Special Meeting in lieu thereof) in the year set forth
opposite their respective names on such Exhibit E, and until their successors
are elected and have been qualified, and otherwise in accordance with the
Articles of Organization and By-Laws of the Stock Holding Company. The Officers
of the Bank immediately prior to the Conversion shall be the initial Officers of
the Stock Holding Company, in each case until their respective successors are
duly elected or appointed and qualified. The Stock Holding Company, as
successor in interest to the MHC, will continue to own 100% of the common

8
<PAGE>

stock of the Bank. The Stock Holding Company expects to contribute at least 50%
of the net proceeds of the Conversion to the Bank as additional capital.

The Bank believes that the Conversion proceeds will greatly enhance the
Bank's ability, among other things, (i) to expand its franchise through
increased lending, (ii) to diversify products offered to customers and (iii) to
establish new branch locations.

3.2 Preconditions to Conversion. The Conversion is expressly conditioned
upon prior occurrence of the following:

(1) Approval of the Plan by the affirmative vote of a majority of the
Corporators at a regular or special meeting of such Corporators (and,
if required by regulatory authorities, by the affirmative vote of a
majority of Independent Corporators (who shall constitute not less
than 60% of all Corporators)).

(2) Approval by the Commissioner of the Application, including the Plan
and the Articles of Organization and Bylaws of the Stock Holding
Company and of the Bank.

(3) Approval by the FRB for the MHC to convert to stock form and issue
Conversion Stock.

4. Number of Shares and Purchase Price of Conversion Stock.

4.1 Independent Appraisal. An Independent Appraiser shall be employed by
the MHC to provide it with an Independent Valuation as required by regulations
of the Commissioner. The Trustees of the MHC shall thoroughly review and
analyze the methodology and fairness of the Independent Valuation. The
Independent Valuation will be made by a written report to the MHC, contain the
factors upon which the Independent Valuation was made and conform to procedures
adopted by the Commissioner. The Independent Valuation shall contain an
Estimated Valuation Range of aggregate prices for the Conversion Stock, which
range shall reflect the anticipated pro forma market value of the Conversion
Stock. The Aggregate Purchase Price shall be no more than 15 percent above the
Estimated Valuation Range, and the minimum price shall be no more than 15
percent below the Estimated Valuation Range. All shares to be sold in the
Conversion shall be sold at a uniform price per share.

The Independent Appraiser shall evaluate the pro forma market value of the
Conversion Stock, which value shall be included in the Prospectus (as described
in Section 8 of this Plan) filed with the Commissioner. The Independent
Appraiser shall also present to the MHC at the close of the Subscription
Offering a valuation of the pro forma market value of the Conversion Stock. The
Aggregate Purchase Price of the Conversion Stock shall be adjusted to reflect
any required changes in the Independent Valuation. If, as a result of such
adjustment, the Aggregate Purchase Price is not within the Estimated Valuation
Range, the MHC shall obtain an amendment to the Commissioner's approval. If
appropriate, the Commissioner will condition his approval by requiring a
resolicitation of depositors and/or order forms.

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<PAGE>

4.2 Price Per Share. The price per share for each share of Conversion
Stock when multiplied by the number of shares of Conversion Stock, shall be
equivalent to the pro forma market value of the Conversion Stock in accordance
with the Independent Valuation furnished to the MHC by the Independent
Appraiser.

4.3 Number of Shares. The total number of shares of Conversion Stock
which will be issued in connection with the Conversion will be determined by the
Board of Trustees of the MHC and the Board of Directors of the Bank immediately
prior to the commencement of the Subscription Offering; provided, that the Board
of Trustees of the MHC may elect to increase or decrease the number of shares of
Conversion Stock to be offered in the Offering depending upon market and
financial conditions or in the event the initial Independent Valuation is
materially increased or is decreased by the Independent Appraiser.

4.4 Confirmation of Valuation. Notwithstanding the foregoing, no sale of
Conversion Stock may be consummated unless, before such consummation, the
Independent Appraiser confirms to the Trustees of the MHC and to the FRB and the
Commissioner that, to the best knowledge of the Independent Appraiser, nothing
of a material nature has occurred which, taking into account all relevant
factors, would cause the Independent Appraiser to conclude that the aggregate
value of the Conversion Stock at the Aggregate Purchase Price for all shares of
Conversion Stock is incompatible with its estimate of the aggregate consolidated
pro forma market value of the Conversion Stock. An increase in the aggregate
value of the Conversion Stock by up to 15% above the estimated pro forma market
value of the MHC would not be deemed to be material. If such confirmation is
not received, the MHC may cancel the Conversion, resolicit and extend the
Conversion and establish a new Purchase Price and/or Estimated Valuation Range,
or hold a new Conversion or take such other action as the FRB and the
Commissioner may permit. The estimated pro forma market value of the
Conversion Stock shall be determined for such purpose by an Independent
Appraiser on the basis of such appropriate factors as are not inconsistent with
the Regulations and will be confirmed upon completion of the Conversion. In any
case, the total number of shares of Conversion Stock to be issued and sold will
be determined by the MHC as follows: (a) the estimated aggregate pro forma
market value of the Conversion Stock, immediately after Conversion as
determined by the Independent Appraiser, expressed in terms of a specific
aggregate dollar amount rather than as a range, shall be divided by (b) the
Purchase Price.

5. Subscription Rights of Eligible Account Holders, Supplemental Eligible
Account Holders, Tax-Qualified Employee Stock Benefit Plans and Management

5.1 Subscription Priorities. In descending order of priority, the
opportunity to purchase Conversion Stock shall be given in the Subscription
Offering to: (A) Eligible Account Holders; (B) Supplemental Eligible Account
Holders; (C) Tax-Qualified Employee Plans; and (D) Management. Any shares of
Conversion Stock that are not subscribed for in the Subscription Offering at the
discretion of the MHC may be offered for sale in a Direct Community Offering
and/or, if necessary, a Syndicated Community Offering on terms and conditions
and procedures satisfactory to the MHC.

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(A) Category No. 1: Eligible Account Holders

(1) Each Eligible Account Holder shall receive, as first priority and
without payment, non-transferable Subscription Rights to purchase
shares of Conversion Stock in the amount up to $1,000,000. The MHC
may, in its sole discretion and without further notice to or
solicitation of subscribers or other prospective purchasers, (x)
increase such $1,000,000 purchase limit to up to 5% of the number of
shares of Conversion Stock offered in the Offering, exclusive of an
increase in the total number of shares issued due to an increase in
the offering range of up to 15%, or (y) decrease such $1,000,000
purchase limit to no less than one-tenth of one percent (.10%) of the
number of shares of Conversion Stock offered in the Offering. If the
MHC increases the $1,000,000 purchase limit, subscribers for the
previously-effective maximum amount in the subscription offering will
be, and certain other large subscribers in the sole discretion of the
MHC may be, given the opportunity to increase their subscriptions up
to the then applicable limit. Requests to purchase additional shares
of Conversion Stock under this provision will be determined by the
MHC, in its sole discretion. Such subscription is subject to the
Maximum Purchase Limit specified in Section 7.1 and the minimum
purchase limit in Section 7.1 and exclusive of an increase in the
total number of shares issued due to an increase in the Estimated
Valuation Range of up to 15%.

(2) In the event that subscriptions for Conversion Stock are received from
Eligible Account Holders upon exercise of Subscription Rights pursuant
to paragraph (a) in excess of the number of Shares available for
subscription, the Conversion Stock available for purchase will be
allocated among the subscribing Eligible Account Holders so as to
permit each subscribing Eligible Account Holder, to the extent
possible, to purchase a number of Shares sufficient to make his total
allocation of Conversion Stock equal to the lesser of 100 Shares or
the number of Shares subscribed for by such Eligible Account Holder.
Any Shares remaining after such allocation will be allocated among the
subscribing Eligible Account Holders whose subscriptions remain
unsatisfied in the proportion which the amount of each Eligible
Account Holder's Qualifying Deposit bears to the total amount of the
Qualifying Deposits of all Eligible Account Holders whose
subscriptions remain unsatisfied. If the amount so allocated exceeds
the amount subscribed for by any one or more Eligible Account Holders,
the excess shall be reallocated on the same principle (one or more
times as necessary) among those Eligible Account Holders whose
subscriptions are still not fully satisfied until all available Shares
have been allocated.

(3) Subscription Rights held by Eligible Account Holders who are also
Officers, directors, trustees or Corporators of the Bank or the MHC or
their Associates, will be subordinated to those of other Eligible
Account Holders to the extent they are attributable to increased
deposits during the one-year period preceding the Eligibility Record
Date.

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(B) Category No. 2: Supplemental Eligible Account Holders

(1) Each Supplemental Eligible Account Holder shall receive, as second
priority and without payment, nontransferable subscription rights to
subscribe for shares of Conversion Stock equal to an amount up to
$1,000,000. The MHC may, in its sole discretion and without further
notice to or solicitation of subscribers or other prospective
purchasers, (x) increase such $1,000,000 purchase limit to up to 5% of
the number of shares of Conversion Stock offered in the Offering,
exclusive of an increase in the total number of shares issued due to
an increase in the offering range of up to 15%, or (y) decrease such
$1,000,000 purchase limit to no less than one-tenth of one percent
(.10%) of the number of shares of Conversion Stock offered in the
Offering. If the MHC increases the $1,000,000 purchase limit,
subscribers for the previously-effective maximum amount in the
subscription offering will be, and certain other large subscribers in
the sole discretion of the MHC may be, given the opportunity to
increase their subscriptions up to the then applicable limit. Requests
to purchase additional shares of Conversion Stock under this provision
will be determined by the MHC, in its sole discretion. Such
subscription is subject to the Maximum Purchase Limit specified in
Section 7.1 and the minimum purchase limit in Section 7.1 and
exclusive of an increase in the total number of shares issued due to
an increase in the Estimated Valuation Range of up to 15%.

(2) In the event that subscriptions for Conversion Stock are received from
Supplemental Eligible Account Holders upon exercise of Subscription
Rights pursuant to paragraph (a) in excess of the number of Shares
available for subscription, the Conversion Stock available for
purchase will be allocated among the subscribing Supplemental Eligible
Account Holders so as to permit each subscribing Supplemental Eligible
Account Holder, to the extent possible, to purchase a number of Shares
sufficient to make his total allocation of Conversion Stock equal to
the lesser of 100 Shares or the number of Shares subscribed for by
such Supplemental Eligible Account Holder. Any Shares remaining after
such allocation will be allocated among the subscribing Supplemental
Eligible Account Holders whose subscriptions remain unsatisfied in the
proposition which the amount of each Supplemental Eligible Account
Holder's Qualified Deposit bears to the total of the Qualifying
Deposits of all Supplemental Eligible Account Holders whose
subscriptions remain unsatisfied. If the amount so allocated exceeds
the amount subscribed for by any one or more Supplemental Eligible
Account Holders, the excess shall be reallocated (one or more times as
necessary) among those Supplemental Eligible Account Holders whose
subscriptions are still not fully satisfied on the same principle
until all available shares have been allocated.

The Tax-Qualified Employee Stock Benefit Plans of the Bank shall
receive, without payment, as a third priority after the filling of the
subscriptions of Eligible Account

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<PAGE>

Holders, non-transferable Subscription Rights to purchase up to 8% of
the shares of Conversion Stock issued in the Conversion. In the event
that the total number of shares of Conversion Stock offered in the
Conversion is increased to an amount greater than the Range Maximum,
the Tax-Qualified Employee Stock Benefit Plans shall have a priority
right to purchase any such shares exceeding the Range Maximum (up to
the aggregate of 8% of Conversion Stock sold. If all the shares of
Common Stock offered in the Subscription Offering are purchased by
Eligible Account Holders and Supplemental Eligible Account Holders or
if the Tax-Qualified Employee Stock Benefit Plans choose not to fill
their orders in the Offering, then the Tax-Qualified Employee Stock
Benefit Plans will purchase shares in the open market following
consummation of the Conversion. A Tax-Qualified Employee Stock Benefit
Plan shall not be deemed to be an Associate or Affiliate of, or a
Person Acting in Concert with, any Director or Officer of the Holding
Company or the Bank. Notwithstanding any provision contained herein to
the contrary, the Bank may make scheduled discretionary contributions
to a Tax-Qualified Employee Stock Benefit Plan; provided, that such
contributions do not cause the Bank to fail to meet its regulatory
capital requirements.

(D) Category No. 4: Management.

To the extent there are shares remaining after satisfaction of
subscriptions by Eligible Account Holders, Supplemental Eligible
Account Holders, and any Tax-Qualified Employee Plan, each Management
member who does not already qualify in a preceding category shall
receive non-transferable subscription rights to subscribe for shares
of Conversion Stock offered in the Conversion in an amount up to
$1,000,000. The MHC may, in its sole discretion and without further
notice to or solicitation of subscribers or other prospective
purchasers, (x) increase such $1,000,000 purchase limit to up to 5% of
the number of shares of Conversion Stock offered in the Offering,
exclusive of an increase in the total number of shares issued due to
an increase in the offering range of up to 15%, or (y) decrease such
$1,000,000 purchase limit to no less than one-tenth of one percent
(.10%) of the number of shares of Conversion Stock offered in the
Offering. If the MHC increases the $1,000,000 purchase limit,
subscribers for the previously-effective maximum amount in the
subscription offering will be, and certain other large subscribers in
the sole discretion of the MHC may be, given the opportunity to
increase their subscriptions up to the then applicable limit.
Requests to purchase additional shares of Conversion Stock under this
provision will be determined by the MHC, in its sole discretion. Such
subscription is subject to (i) the Maximum Purchase Limit specified in
Section 7.1 and the minimum purchase limitation in Section 7.1 and
exclusive of an increase in the total number of shares issued due to
an increase in the Estimated Valuation Range of up to 15% and (ii) the
limitation on purchases by Management specified in Section 7.2. In
the event that Management subscribes under this Section 5.1(D) for
more shares of Conversion Stock than are available for purchase by
them, the shares of Conversion Stock available for purchase will be
allocated by the MHC among such

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<PAGE>

subscribing persons on an equitable basis, such as by giving weight to
the period of service, compensation and position of the individual
subscriber.

5.2 Minimum Purchase; No Fractional Shares. The minimum purchase by any
Person shall be 25 shares (to the extent that shares of Conversion Stock are
available for purchase), provided, however, that the aggregate purchase price
for any minimum share purchase shall not exceed $250. No fractional shares will
be allocated or issued.

5.3 Purchase Limitations and Adjustments. All purchase priorities
established by this Section 5 shall be subject to the purchase limitations set
forth in, and shall be subject to adjustment as provided in, Section 7.1 and
Section 7.2 of this Plan. In addition to the priorities set forth in this
Section 5, the MHC may establish other priorities for the purchase of Conversion
Stock, subject to the approval of the Commissioner and the FRB.

5.4 Certain Determinations. All interpretations or determinations of
whether prospective purchasers are "residents," "Associates," or "Acting in
Concert", and any other interpretations of any and all other provisions of the
Plan shall be made by and at the sole discretion of the MHC, and may be based on
whatever evidence the MHC may choose to use in making any such determination.

6. Direct Community Offering and Syndicated Community Offering.

6.1 Direct Community Offering. If feasible, Conversion Stock which
remains unsubscribed after the exercise of Subscription Rights pursuant to the
Subscription Offering (Section 5) shall be offered for sale first to the Local
Community and then to the general public through a Direct Community Offering.
The Direct Community Offering, if any, may commence simultaneously with the
Subscription Offering or may commence during or after the commencement of the
Subscription Offering, as the Board so determines. The right to subscribe for
Conversion Stock in the Direct Community Offering is subject to the right of the
Bank to accept or reject such subscriptions in whole or in part. Conversion
Stock being sold in the Direct Community Offering will be offered and sold in a
manner that will achieve the widest distribution of the Conversion Stock. In
making the Direct Community Offering, the MHC will give preference to natural
persons residing in the Local Community. Orders accepted in the Direct
Community Offering shall each be filled up to a maximum amount to be determined
by the MHC but not in excess of 2% of the Aggregate Purchase Price per order and
thereafter remaining shares shall be allocated on an equal number of shares
basis per order until all available shares have been allocated. No Person may
purchase more than $1,000,000 of Conversion Stock in the Direct Community
Offering.

The Direct Community Offering, if any, shall be for a period of not more
than 45 days unless extended by the MHC, and shall commence concurrently with,
during or promptly after the Subscription Offering. The MHC may use the
Marketing Agent on a best efforts basis to sell the unsubscribed shares in the
Subscription Offering and Direct Community Offering. The MHC may pay a
commission or other fee to the Marketing Agent as to the shares sold by the
Marketing Agent in the Subscription Offering and Direct Community Offering and
may also reimburse the Marketing Agent for expenses incurred in connection with
the sale.

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<PAGE>

6.2 Syndicated Community Offering. If any Conversion Stock remains unsold
in the Subscription Offering and Direct Community Offering, the MHC may use the
services of Broker-Dealers to sell such unsold shares in a Syndicated Community
Offering, subject to terms, conditions and procedures as may be determined by
the MHC in a manner that is intended to achieve the widest distribution of the
Conversion Stock subject to the rights of the MHC to accept or reject in whole
or in part all orders in the Syndicated Community Offering. No Person may
purchase in the Syndicated Community Offering more than $1,000,000 of
Conversion Stock. The Syndicated Community Offering will commence during or as
soon as practicable after termination of the Direct Community Offering, if any.
The Syndicated Community Offering shall be completed within 45 days after the
termination of the Subscription Offering, unless such period is extended as
provided herein. The commission in the Syndicated Community Offering shall be
determined by a marketing agreement between the MHC and the Marketing Agent.
Such agreement shall be filed with the FRB, the Division and the SEC.

6.3 Other Arrangements. If for any reason a Syndicated Community Offering
of unsubscribed shares of Conversion Stock cannot be effected or is not deemed
to be advisable, and any shares remain unsold after the Subscription Offering
and the Direct Community Offering, if any, the MHC will seek to make other
arrangements for the sale of the remaining shares, including an underwritten
public offering. Such other arrangements will be subject to the approval of the
Commissioner and the FRB and to compliance with applicable state and federal
securities laws. The MHC may terminate the Direct Community Offering or the
Syndicated Community Offering as soon as it has received orders for at least the
minimum number of shares available for purchase in the Offering.

7. Limitations on Purchases.

7.1 Maximum Purchase Limit. With the exception of the Tax-Qualified
Employee Stock Benefit Plans, which are expected to subscribe for 8% of the
shares of Conversion Stock, the Plan of Conversion provides for the following
purchase limitations: no Person, either alone or together with Associates of or
Persons Acting In Concert with such Person, may purchase more than $2,000,000 of
Conversion Stock except that: (i) the MHC may, in its sole discretion and
without further notice to or solicitation of subscribers or other prospective
purchasers, (x) increase such Maximum Purchase Limit to up to 5% of the number
of shares of Conversion Stock offered in the Offering or (y) decrease such
Maximum Purchase Limit to no less than one-tenth of one percent (.10%) of the
number of shares of Conversion Stock offered in the Offering. If the MHC
increases the Maximum Purchase Limit, subscribers for the previously-effective
maximum amount will be, and certain other large subscribers in the sole
discretion of the MHC may be, given the opportunity to increase their
subscriptions up to the then applicable limit. Requests to purchase additional
shares of Conversion Stock under this provision will be determined by the MHC,
in its sole discretion. A minimum of 25 shares of Conversion Stock must be
purchased by each person purchasing Conversion Stock to the extent shares are
available, provided, however, that such minimum number of shares will be reduced
if the price per share times such minimum number of shares exceeds $500.

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<PAGE>

7.2 Purchases by Management. The maximum number of Shares which may be
purchased in the Offering by Officers, directors, trustees and corporators and
their Associates, in the aggregate shall not exceed 30 percent (30%) of the
Conversion Stock sold in the Offering. Each Management person will be subject
to the same purchase limitations as other Eligible Account Holders and
Supplemental Eligible Account Holders.

7.3 Illegal Purchases. Notwithstanding any other provision of the Plan,
no Person shall be entitled to purchase any Conversion Stock to the extent such
purchase would be illegal under any federal law or state law or regulation or
would violate regulations or policies of the National Association of Securities
Dealers, Inc., particularly those regarding free riding and withholding. The
MHC and/or its agents may ask for an acceptable legal opinion from any purchaser
as to the legality of such purchase and may refuse to honor any purchase order
if such opinion is not timely furnished.

7.4 Rejection of Orders. The Bank and the MHC have the right in their
sole discretion to reject any order submitted by a Person whose representations
the Bank and the MHC believe to be false or who they otherwise believe, either
alone or Acting in Concert with others, is violating, circumventing, or intends
to violate, evade or circumvent the terms and conditions of the Plan.

8. Manner of Exercising Rights; Order Forms.

Upon authorization of the sale of Conversion Stock by the Commissioner:

(1) Promptly after the Commissioner has approved the Prospectus referred
to in paragraph (2) of this Section 8, order forms approved by the
Commissioner for the exercise of the Subscription Rights provided for
in this Plan will be sent to all persons with Subscription Rights at
their last known address appearing in the records of the Bank.

(2) Each order form will be preceded or accompanied by a Prospectus which
must be approved by the Commissioner. Such Prospectus shall describe
the Bank and the Conversion Stock being offered and will contain all
the information required by the Commissioner and all applicable laws
and regulations as necessary to enable the recipients of the order
forms to make informed investment decisions regarding the purchase of
Conversion Stock. The Bank may, in lieu of mailing a Prospectus to
each Eligible Account Holder and Supplemental Eligible Account Holder,
mail a Notice and Information Statement to each such person with a
request form to be returned to the Bank by a reasonable date certain
to request subscription materials.

(3) The order forms will contain or will be accompanied by, among other
things, the following:

(a) An explanation of the rights and privileges granted under this
Plan to each class of persons granted Subscription Rights
pursuant to Section 5 of this Plan with respect to the purchase
of Conversion Stock ;

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<PAGE>

(b) A specified time by which order forms must be received by the
Bank for purposes of exercising the Subscription Rights under
this Plan, as provided in Section 10 of this Plan;

(c) A statement that the Aggregate Purchase Price at which the
Conversion Stock will ultimately be purchased in the Conversion
has not been determined as of the date of mailing of the order
form, but that such price will be within the range of prices
which will be stated in the Prospectus;

(d) The amount which must be returned with the order form to
subscribe for Conversion Stock. Such amount will be equal to the
Purchase Price multiplied by the number of Shares subscribed for
in accordance with the terms of this Plan;

(e) Instructions concerning how to indicate on such order form the
extent to which the recipient elects to exercise Subscription
Rights under this Plan, the name or names in which the Shares
subscribed for are to be registered, the address to which
certificates representing such Shares are to be sent and the
alternative methods of payment for Conversion Stock which will be
permitted;

(f) Specifically designated blank spaces for dating and signing the
order form;

(g) An acknowledgment that the recipient of the order form has
received, prior to signing the order form, the Prospectus
referred to in paragraph (b) of this Section 8;

(h) A statement that the Subscription Rights provided for in this
Plan are nontransferable, will be void after the specified time
referred to in paragraph (3)(6) above and can be exercised only
by delivery of the order form, properly completed and executed,
to the Bank, together with the full required payment (in the
manner specified in Section 9 of this Plan) for the number of
shares of Conversion Stock subscribed for prior to such specified
time; and

(i) Provision for certification to be executed by the recipient of
the order form to the effect that, as to any shares of Conversion
Stock which the recipient elects to purchase, such recipient is
purchasing such shares of Conversion Stock for his own account
only and has no present agreement or understanding regarding any
subsequent sale or transfer of such shares of Conversion Stock.

9. Payment for Conversion Stock.

9.1 Deadline for Receipt of Payment. Full payment for Conversion Stock
subscribed for must be received by the Bank, together with properly completed
and executed order forms therefor,

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<PAGE>

prior to the expiration time, which will be specified on the order forms, unless
such date is extended by the Bank; provided, however, that if any Employee Plan
subscribes for shares during the Subscription Offering, such plans will not be
required to pay for the shares at the time they subscribe but rather may pay for
such shares of Conversion Stock subscribed for by such plans at the Purchase
Price upon consummation of the Conversion; provided, however, that, in the case
of the ESOP there is in force from the time of its subscription until the
consummation of the Conversion, a loan commitment to lend to the ESOP, at such
time, the aggregated Purchase Price of the shares for which it subscribed. The
Stock Holding Company or the Bank may make scheduled discretionary contributions
to an Employee Plan provided such contributions from the Bank, if any, do not
cause the Bank to fail to meet its regulatory capital requirement. Payment for
Conversion Stock may also be made by a participant in an Employee Plan
(including the Bank's tax-qualified deferred compensation plan for Bank
Employees) causing funds held for such participant's benefit by an Employee Plan
to be paid over for such purchase to the extent that such plan allows
participants or any related trust established for the benefit of such
participants to direct that some or all of their individual accounts or sub-
accounts be invested in Holding Company Conversion Stock.

9.2 Changes in Aggregate Purchase Price. If it is determined that the
Aggregate Purchase Price should be greater than 15% above the Range Maximum,
upon compliance with such requirements as may be imposed by the Commissioner
(which may include resolicitation of votes for approval of this Plan by
Corporators of the MHC) each person who subscribed for Conversion Stock will be
permitted to withdraw his subscription and have his payment for Conversion Stock
returned to him in whole or in part, with interest, or to make payment to the
Bank of the additional amount necessary to pay for the Conversion Stock
subscribed for by him at the Purchase Price in the manner and within the time
prescribed by the Bank. If the Aggregate Purchase Price is outside the range of
prices established by the Independent Appraiser referred to in Section 4 of this
Plan and set forth in the Prospectus referred to in Section 8 of this Plan, the
MHC will apply for an amendment to the Commissioner's approval of this Plan and
comply with such requirements as the Commissioner may then establish.

9.3 Method of Payment. Payment for Conversion Stock will be permitted to
be made in any of the following manners:

(1) By check, bank draft or money order, provided that checks will only be
accepted subject to collection. Interest will be paid by the Bank at
not less than the rate per annum being paid by the Bank on its
passbook accounts at the time the Subscription Offering commences, on
payments for Conversion Stock received in the Subscription Offering by
check, bank draft or money order from the date payment is received
until consummation or termination of the Conversion. The Bank shall be
entitled to invest all amounts paid for subscriptions in the
Subscription Offering for its own account until completion or
termination of the Conversion.

(2) By appropriate authorization of withdrawal from designated types of
deposit accounts in the Bank. The order forms will contain appropriate
means by which authorization of such withdrawals may be made. For
purposes of determining the withdrawable

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<PAGE>

balance of such accounts, such withdrawals will be deemed to have been
made upon receipt of appropriate authorization therefor, but interest
at the rates applicable to the accounts from which the withdrawals
have been deemed to have been made will be paid by the Bank on the
amounts deemed to have been withdrawn until the date on which the
Conversion is consummated, at which date the authorized withdrawal
will actually be made. Such withdrawals may be made upon receipt of
order forms authorizing such withdrawals, but interest will be paid by
the Bank on the amounts withdrawn as if such amounts had remained in
the accounts from which they were withdrawn until the date upon which
the sales of Conversion Stock pursuant to exercise of Subscription
Rights are actually consummated.

(3) Wire transfers as payment for shares ordered for purchase may be
permitted or accepted as proper payment.

(4) Payments for the purchase of Conversion Stock in the Subscription
Offering will be permitted through authorization of withdrawals from
certificate accounts at the Bank without early withdrawal penalties.
If the remaining balances of the certificate accounts after such
withdrawals are less than the minimum qualifying balances under
applicable regulations, the certificates evidencing the accounts will
be canceled upon consummation of the Conversion, and the remaining
balances will thereafter earn interest at the passbook rate.

10. Expiration of Purchase Rights; Undelivered, Defective or Late Order
Forms; Insufficient Payment.

10.1 Expiration of Subscription Rights. All Subscription Rights provided
for in this Plan, including, without limitation the Subscription Rights of all
persons whose order forms are returned by the United States Post Office as
undeliverable, will expire at [ ] p.m. Massachusetts Time, on a specified
date which shall be not less than the twentieth day following the date on which
order forms are first sent to Eligible Account Holders, provided that the Bank
shall have the power to extend such expiration time in its discretion.

10.2 Undelivered, Defective or Late Order Forms; Insufficient Payment. In
those cases in which the Bank is unable to locate particular persons granted
Subscription Rights under this Plan, and cases in which order forms (1) are
returned as undeliverable by the United States Post Office, (2) are not received
back by the Bank or are received by the Bank after the expiration date specified
thereon, (3) are defectively filled out or executed or (4) are not accompanied
by the full required payment for the Conversion Stock subscribed for (including
cases in which deposit accounts from which withdrawals are authorized are
insufficient to cover the amount of the required payment), the Subscription
Rights of the person to whom such rights have been granted will lapse as though
such person failed to return the completed order form within the time period
specified thereon.

10.3 Waiver of Irregularities or Defects. The Bank may, but will not be
obligated to, waive any irregularity on any order forms or require the
submission of corrected order forms or the

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<PAGE>

remittance of full payment for Shares subscribed for by such date as it may
specify, and all interpretations by the Bank of terms and conditions of this
Plan and of the order forms will be final.

11. Persons in Nonqualified States or in Foreign Countries.

Subject to the following sentence, the Stock Holding Company will make
reasonable efforts to comply with the securities laws of all states of the
United States in which Eligible Account Holders and Supplemental Eligible
Account Holders entitled to subscribe for Conversion Stock pursuant to this Plan
reside. However, no such person will be offered any Subscription Rights or sold
any Conversion Stock under this Plan who resides in a foreign country or who
resides in a state of the United States with respect to which the Bank
determines that compliance with the securities laws of such state would be
impracticable for reasons of cost or otherwise. No payments will be made in
lieu of the granting of Subscription Rights to such persons.

12. Voting Rights after Conversion.

Following Conversion, voting rights with respect to the Stock Holding
Company will be held and exercised exclusively by the holders of the capital
stock of the Stock Holding Company; the Stock Holding Company shall own all of
the issued and outstanding stock of the Bank.

13. Establishment of a Liquidation Account.

13.1 Establishment of Liquidation Account. For purposes of granting a
priority claim to the assets of the Bank in the event of a complete liquidation
thereof to Eligible Account Holders and Supplemental Eligible Account Holders
who continue to maintain deposit accounts at the Bank, the Stock Holding Company
will, at the time of Conversion, establish a "Liquidation Account" in an amount
equal to the net worth of the MHC set forth in its latest statement of financial
condition contained in its final Prospectus. The function of the Liquidation
Account is to establish a priority on liquidation and, except as provided for in
this Section 13, shall not operate to restrict the use or application of any of
the net worth accounts of the Stock Holding Company.

13.2 Interest in Liquidation Account. Each Eligible Account Holder and
Supplemental Eligible Account Holder will have a separate inchoate interest in
the Liquidation Account for each deposit account making up a Qualifying Deposit.
Such inchoate interests are referred to herein as "Subaccount Balances." For
deposit accounts in existence on the Eligibility Record Date and the
Supplemental Eligibility Record Date, separate Subaccount Balances shall be
determined on the basis of the Qualifying Deposits in such deposit accounts on
each such date.

13.3 Amount of Subaccount Balances. Each initial Subaccount Balance in the
Liquidation Account shall be an amount determined by multiplying the opening
balance in the Liquidation Account by a fraction the numerator of which is the
closing balance in the Eligible Account Holder's and Supplemental Eligible
Account Holder's account and the denominator of which is the total amount of all
Qualifying Deposits of Eligible Account Holders and Supplemental Account Holders
on the corresponding record date. Each initial Subaccount Balance in the
Liquidation Account shall never be increased, but will be subject to downward
adjustment as follows. If the balance in the

20
<PAGE>

deposit account to which a Subaccount Balance relates, at the close of business
on any annual closing date of the Bank subsequent to the corresponding record
date, is less than the lesser of the deposit balance in such account at the
close of business on any other annual closing date subsequent to the Eligibility
Record Date or Supplemental Eligibility Record Date, or the amount of the
Qualifying Deposit as of the Eligibility Record Date or Supplemental Eligible
Record Date, the Subaccount Balance for such deposit account shall be adjusted
by reducing such Subaccount Balance in an amount proportionate to the reduction
in such account balance. If any account is closed, its related Subaccount
Balance shall be reduced to zero upon such closing.

13.4 Distributions. In event of a complete liquidation of the Stock
Holding Company (and only in such event), each Eligible Account Holder and
Supplemental Eligible Account Holder shall receive from the Liquidation Account
a liquidation distribution equal to the current amount in each of his Subaccount
Balances, before any liquidation distribution may be made to any holders of the
conversion stock of the converted Bank. No merger, consolidation, purchase of
bulk assets with assumption of accounts and other liabilities, or similar
transaction, in which the Stock Holding Company is not the surviving
institution, will be deemed to be a complete liquidation for this purpose, and,
in any such transaction, the Liquidation Account shall be assumed by the
surviving institution.

14. Restriction on Transfer of Conversion Stock of Management.

14.1 Restrictions on Resale. All capital stock purchased by Officers,
directors, trustees and Corporators of the Bank or the MHC on original issue
pursuant to this Plan (by subscription or otherwise) will be subject to the
restriction that no such shares shall be sold for a period of one year following
the date of purchase of such shares, except in the event of the death or
substantial disability (as determined by the Commissioner) of the Management
person to whom such Conversion Stock was initially sold under the terms of this
Plan or upon the written approval of the Commissioner.

14.2 Certificates and Stop Orders. With respect to all Conversion Stock
subject to restriction on subsequent disposition pursuant to the above
paragraph, each of the following provisions shall apply:

(1) Each certificate representing such Conversion Stock shall bear the
following legend prominently stamped on its face giving notice of such
restriction on transfer:

The shares represented by this certificate may not be sold by the
registered holder hereof for a period of not less than one year from
the date of issuance hereof, except in the event of the death of the
registered holder or substantial disability (as determined by the
Commissioner) of the officer, director, trustee or corporator to whom
such shares were initially sold under the terms of this Plan or upon
the written approval of the Commissioner.

21
<PAGE>

(2) Instructions will be given to the transfer agent for the Stock Holding
Company not to recognize or effect any transfer of any certificates
representing such Shares, or any change of record ownership thereof in
violation of such restriction on transfer.

14.3 Stock Dividends and Stock Splits. Any capital stock of the Stock
Holding Company issued in respect of a stock dividend, stock split or otherwise
in respect of ownership of outstanding Shares subject to restrictions on
transfer hereunder will be subject to the same restrictions as are applicable to
the Conversion Stock in respect of which such Conversion Stock is issued.

15. Restriction on Stock Purchases by Management.

For a period of three years following the Conversion, no Officer, director,
trustee or Corporator of the Bank the MHC or the Stock Holding Company or any of
their Associates shall, without the prior written approval of the Commissioner,
purchase capital stock of the Stock Holding Company from the Bank, the MHC or
the Stock Holding Company.

16. Amendment and Termination of the Plan.

This Plan may be substantively amended by the Board of Trustees of the MHC
in its sole discretion as a result of comments from regulatory authorities or
otherwise, at any time prior to the date material is sent to the Corporators in
connection with the Special Meeting to consider this Plan, and at any time
thereafter with the concurrence of the Commissioner. This Conversion may be
terminated by the Trustees of the MHC at any time prior to the Special Meeting
of the Corporators called to consider this Plan and at any time thereafter with
the concurrence of the Commissioner.

17. Time Period for Completion of Conversion.

The Conversion of the MHC shall be completed within 24 months from the date
this Plan is approved by the Board of Trustees of the MHC.

18. Expenses of Conversion.

The Bank and the MHC shall use their best efforts to assure that the
expenses incurred in connection with the Conversion shall be reasonable.

19. Registration Under Securities Exchange Act of 1934.

The Stock Holding Company shall register its Conversion Stock under the
Massachusetts General Laws and Section 12(g) of the Securities Exchange Act of
1934, as amended, concurrently with or promptly following the Conversion,
provided that either or both such registrations are required under applicable
law.

20. Market.

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<PAGE>

The Stock Holding Company shall use its best efforts to encourage and
assist two or more market makers to establish and maintain a market for its
Conversion Stock promptly following Conversion. The Stock Holding Company shall
also use its best efforts to cause its Conversion Stock to be quoted on the
Nasdaq Stock Market or such other national exchange.

21. Conversion Stock Not Insured.

The Conversion Stock will not be covered by deposit insurance.

22. No Loans to Purchase Capital Stock.

The Bank shall not loan funds or otherwise extend credit to any person to
purchase the capital stock of the Holding Company in connection with the
Conversion. The Stock Holding Company will not offer or sell any of the Holding
Company Common Stock proposed to be issued to any Person whose purchase would be
financed by funds loaned to the Person by the Stock Holding Company, Bank or any
of their Affiliates.

23. Restrictions on Acquisition of Bank.

Present Massachusetts regulations provide that for a period of three years
following completion of the Conversion, no Person, or group of Persons Acting In
Concert shall directly, or indirectly, offer to purchase or actually acquire the
beneficial ownership of more than 10% of any class of equity security of the
Bank without the prior approval of the Commissioner. However, approval is not
required for purchases directly from the Bank or the underwriters or selling
group acting on its behalf with a view towards public resale, or for purchases
not exceeding one percent per annum of the shares outstanding, or for the
acquisition of securities by one or more Tax-Qualified Employee Stock Benefit
Plans of the Bank, provided that the plan or plans do not have beneficial
ownership in the aggregate of more than 25% of any class of equity security of
the Bank. Civil penalties may be imposed by the Commissioner for willful
violation or assistance of any violation. Where any person directly or
indirectly, acquires beneficial ownership of more than ten percent of any class
of equity security of the Bank within such three-year period without the prior
approval of the Commissioner, stock of the Bank beneficially owned by such
person in excess of 10% shall not be counted as shares entitled to vote and
shall not be voted by any person or counted as voting shares in connection with
any matter submitted to the stockholders for a vote.

24. Stock Charter and Bylaws.

24.1 Stock Holding Company Articles of Organization And Bylaws. Copies of
the proposed Articles of Organization and Bylaws of the Stock Holding Company
are attached hereto as Exhibit A and Exhibit B, respectively, and are made a
--------- ---------
part of the Plan. By their approval of the Plan, the Corporators shall have
approved and adopted the Articles of Organization and Bylaws of the Stock
Holding Company.

24.2 Bank Charter And Bylaws. Copies of the proposed amended and restated
Charter and Bylaws of the Bank are attached hereto as Exhibit C and Exhibit D,
--------- ---------
respectively, and are made a part

23
<PAGE>

of the Plan. By their approval of the Plan, the Trustees, as the governing body
of the sole stockholder of the Bank, have approved and adopted the amended and
restated Charter and Bylaws of the Bank.

25. Post Offering Matters.

25.1 Stock Benefit Plans. The Board of Directors of the Bank and/or the
Stock Holding Company are permitted under the Regulations, and may decide, to
adopt one or more stock benefit plans for the benefit of the Employees, Officers
and directors of the Bank and Stock Holding Company, including an ESOP, stock
award plans and stock option plans, which will be authorized to purchase Common
Stock and grant options for Common Stock. However, only the Tax-Qualified
Employee Plans will be permitted to purchase Conversion Stock in the Conversion
subject to the purchase priorities set forth in the Plan. Pursuant to the
Regulations, the Stock Holding Company may authorize the ESOP and any other Tax-
Qualified Employee Plans to purchase in the aggregate up to 8% of the Conversion
Stock to be issued. The Bank or the Stock Holding Company may make scheduled
discretionary contributions to one or more Tax-Qualified Employee Plans to
purchase Common Stock or to purchase issued and outstanding shares of Common
Stock or authorized but unissued shares of Common Stock subsequent to the
completion of the Conversion, provided, however, that such contributions do not
cause the Bank to fail to meet any of its regulatory capital requirements. The
Plan specifically authorizes the grant and issuance by the Stock Holding Company
of (i) awards of Common Stock after the Conversion pursuant to one or more stock
recognition and award plans (the "Recognition Plans") in an amount equal to up
to 4% of the number of shares of Conversion Stock issued in the Conversion, (ii)
options to purchase a number of shares of the Stock Holding Company's Conversion
Stock in an amount equal to up to 10% of the number of shares of Conversion
Stock issued in the Conversion and shares of Conversion Stock issuable upon
exercise of such options, and (iii) Common Stock to one or more Tax Qualified
Employee Plans, including the ESOP, at the closing of the Conversion or at any
time thereafter, in an amount equal to up to 8% of the number of shares of
Conversion Stock issued in the Conversion (including shares of Conversion Stock
to be issued to the ESOP). Shares awarded to the Tax Qualified Employee Plans
or pursuant to the Recognition Plans, and shares issued upon exercise of options
may be authorized but unissued shares of the Stock Holding Company's Common
Stock, or shares of Common Stock purchased by the Stock Holding Company or such
plans in the open market. The Recognition Plans and the stock option plans will
be subject to shareholder approval.

25.2 Payment of Dividends. The Stock Holding Company may not declare or
pay a cash dividend on the Holding Company Common Stock if the effect thereof
would cause its regulatory capital to be reduced below the amount required to
maintain the Liquidation Account and under FRB rules and regulations.
Otherwise, the Stock Holding Company may declare dividends in accordance with
applicable laws and regulations.

25.3 Repurchase of Stock. Based upon facts and circumstances following the
Conversion and subject to applicable regulatory and accounting requirements, the
Board of Directors of the Stock Holding Company may determine to repurchase
stock in the future. Such facts and circumstances may include but not be limited
to: (i) market and economic factors such as the price at which the Holding
Company Common Stock is trading in the market, the volume of trading, the

24
<PAGE>

attractiveness of other investment alternatives in terms of the rate of return
and risk involved in the investment, the ability to increase the book value
and/or earnings per share of the remaining outstanding shares, and the
opportunity to improve the Stock Holding Company's return on equity; (ii) the
avoidance of dilution to stockholders by not having to issue additional shares
to cover the exercise of stock options or the purchase of shares by the ESOP in
the event the ESOP is unable to acquire shares in the Subscription Offering, or
to fund the Stock Plans; and (iii) any other circumstances in which repurchases
would be in the best interests of the Stock Holding Company and its
shareholders.

26. Miscellaneous.

26.1 Interpretation of Plan. All interpretations of the Plan and
application of its provisions to particular circumstances by the MHC shall be
final, subject to the authority of the Commissioner. When a reference is made in
this Agreement to Sections or Exhibits, such reference shall be to a Section of
or Exhibit to the Plan unless otherwise indicated. The recitals hereto
constitute an integral part of the Plan. References to Sections include
subsections, which are part of the related Section (e.g., a section numbered
"Section 5.5.1" would be part of "Section 5.5" and references to "Section 5.5"
would also refer to material contained in the subsection described as "Section
5.5.1"). The table of contents and headings contained in the Plan are for
reference purposes only and shall not affect in any way the meaning or
interpretation of the Plan. Whenever the words "include", "includes" or
"including" are used in the Plan, they shall be deemed to be followed by the
words "without limitation".

26.2 Enforcement of Terms and Conditions. The MHC shall have the right to
take all such action as it, in its sole discretion, may deem necessary,
appropriate or advisable in order to monitor and enforce the terms, conditions,
limitations and restrictions contained in the Plan and the terms, conditions and
representations contained in the Order Forms, including, but not limited to, the
right to require any subscriber or purchaser to provide evidence, in a form
satisfactory to the MHC, of such Person's eligibility to subscribe for or
purchase shares of the Conversion Stock under the terms of the Plan and the
absolute right (subject only to any necessary regulatory approvals or
concurrence) to reject, limit or revoke acceptance of any subscription or order
and to delay, terminate or refuse to consummate any sale of Conversion Stock
that it believes might violate, or is designed to, or is any part of a plan to,
evade or circumvent such terms, conditions, limitations, restrictions and
representations. Any such action shall be final, conclusive and binding on all
Persons, and the MHC, the Bank and their Board of Trustees, Board of Directors,
Officers, Employees and agents shall be free from any liability to any Person on
account of any such action.

<PAGE>

EXHIBIT 3.1

ARTICLES OF ORGANIZATION

Port Financial Corp.

ARTICLE I

NAME

The exact name of the corporation is "Port Financial Corp." (the
"Corporation").

ARTICLE II

PURPOSE

The purpose of the Corporation is to engage in the following business
activities: to buy, sell, deal in, or hold securities of every kind and
description; to operate as a holding company and to carry on any business
permitted to holding companies under applicable laws and regulations; and in
general to carry on any business permitted to corporations organized under
Chapter 156B of the Massachusetts General Laws as now in force or hereafter
amended.

ARTICLE III

AUTHORIZED CAPITAL STOCK

The total number of shares and par value of each class of stock that the
Corporation is authorized to issue is as follows:

Common: 30,000,000 shares, $.01 par value
Preferred: 5,000,000 shares, $.01 par value

ARTICLE IV

CAPITAL STOCK

A description of the different classes and series of the Corporation's
capital stock and a statement of the designations, and the relative rights,
preferences and limitations of the shares of each class and series of capital
stock are as follows:

A. COMMON STOCK. Except as provided by law or in this Article IV (or
in any certificate of establishment of series of preferred stock), holders of
the Common Stock shall exclusively possess all voting power. Each holder of
shares of Common Stock shall be entitled to one vote on all matters for each
share held by such holder. Stockholders shall not be permitted to cumulate their
votes for election of directors.
<PAGE>

Whenever there shall have been paid, or declared and set aside for payment,
to the holders of the outstanding shares of any class of stock having preference
over the Common Stock as to the payment of dividends, the full amount of
dividends and of sinking fund, retirement fund or other retirement payments, if
any, to which such holders are respectively entitled in preference to the Common
Stock, then dividends may be paid on the Common Stock and on any class or series
of stock entitled to participate therewith as to dividends, out of any assets
legally available for the payment of dividends; but only when and as declared by
the Board of Directors.

In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid to or set aside for the holders of
any class having preferences over the Common Stock in the event of liquidation,
dissolution or winding up of the full preferential amounts of which they are
respectively entitled, the holders of the Common Stock, and of any class or
series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets, shall be entitled, after payment or provision for
payment of all debts and liabilities of the Corporation, to receive the
remaining assets of the Corporation available for distribution, in cash or in
kind, in proportion to their holdings.

Each share of Common Stock shall have the same relative rights as, and be
identical in all respects with, all the other shares of Common Stock.

B. PREFERRED STOCK. Subject to any limitations prescribed by law,
the Board of Directors of the Corporation is authorized, by vote or votes from
time to time adopted, to provide for the issuance of one or more classes of
preferred stock, which shall be separately identified. The Board of Directors
shall have the authority to divide any authorized class of preferred stock of
the Corporation into one or more series, to establish or change from time to
time the number of shares to be included in each such series, and to fix and
state the voting powers, designations, preferences and relative, participating,
optional or other special rights of the shares of any series so established and
the qualifications, limitations and restrictions thereof. Each series shall be
separately designated so as to distinguish the shares thereof from the shares of
all other series and classes. The authority of the Board of Directors with
respect to each series shall include, but not be limited to, determination of
one or more of the following:

1. The distinctive serial designation and the number of shares
constituting such series;

2. The dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so,
from which date or dates, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends;

3. The voting powers, full or limited, if any, of shares of such
series;

4. Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such
shares may be redeemed;

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<PAGE>

5. The amount or amounts payable upon the shares of such series in
the event of voluntary or involuntary liquidation, dissolution or winding
up of the Corporation;

6. Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and if so entitled, the amount of such fund and
the manner of its application, including the price or prices at which such
shares may be redeemed or purchased through the application of such fund;

7. Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the
Corporation, and if so convertible or exchangeable, the conversion price or
prices or the rate or rates of exchange, and the adjustments thereof, if
any, at which such conversion or exchange may be made, and any other terms
and conditions of such conversion or exchange;

8. The price or other consideration for which the shares of such
series shall be issued;

9. Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of preferred stock
and whether such shares may be reissued as shares of the same or any other
series of stock; and

10. Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as are permitted by law and as the
Board of Directors of the Corporation may deem advisable.

Any such vote shall become effective when the Corporation files with the
Secretary of State of The Commonwealth of Massachusetts a certificate of
establishment of one or more series of preferred stock signed by the President
or any Vice President and by the Clerk, Assistant Clerk, Secretary or Assistant
Secretary of the Corporation, setting forth a copy of the vote of the Board of
Directors establishing and designating the series and fixing and determining the
relative rights and preferences thereof, the date of adoption of such vote and a
certification that such vote was duly adopted by the Board of Directors.

Each share of each series of preferred stock shall have the same relative
rights as and be identical in all respects with all the other shares of the same
series.

Subject to the authority of the Board of Directors as set forth in
Paragraph 9 above, any shares of Preferred Stock shall, upon reacquisition
thereof by the Corporation, be restored to the status of authorized but unissued
Preferred Stock under this Section B.

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<PAGE>

Except as specifically provided in these Articles, the holders of Preferred
Stock or Common Stock shall not be entitled to any vote and shall not have any
voting rights concerning the designation or issuance of any shares of Preferred
Stock authorized by and complying with the conditions of these Articles, and
subject to the authority of the Board of Directors or any authorized committee
thereof as set forth above, the right to any such vote is expressly waived by
all present and future holders of the capital stock of the Corporation.

ARTICLE V

LIMITATION ON BENEFICIAL OWNERSHIP OF STOCK

Section 1. Applicability of Article. The provisions of this Article
V shall become effective upon (i) the consummation of the Conversion and (ii)
the concurrent acquisition by the Corporation of all of the outstanding capital
stock of the Bank (the "Effective Date"). All terms used in this Article V and
not otherwise defined herein shall have the meanings ascribed to such terms in
Article VI below.

Section 2. Prohibitions Relating to Beneficial Ownership of Voting
Stock. No Person (other than the Corporation, any Subsidiary or any pension,
profit-sharing, stock bonus or other compensation plan maintained by the
Corporation or by a member of a controlled group of corporations or trades or
businesses of which the Corporation is a member for the benefit of the employees
of the Corporation or any Subsidiary, or any trust or custodial arrangement
established in connection with any such plan) shall directly or indirectly
acquire or hold the beneficial ownership of more than ten percent (10%) of the
issued and outstanding shares of Voting Stock of the Corporation. Any Person so
prohibited who directly or indirectly acquires or holds the beneficial ownership
of more than ten percent (10%) of the issued and outstanding shares of Voting
Stock in violation of this Section 2 shall be subject to the provisions of
Sections 3 and 4 of this Article V, below. The Corporation is authorized to
refuse to recognize a transfer or attempted transfer of any shares of Voting
Stock to any Person who beneficially owns, or who the Corporation believes would
become by virtue of such transfer the beneficial owner of, more than ten percent
(10%) of shares of the Voting Stock.

Section 3. Excess Shares. If, notwithstanding the foregoing
prohibition, a Person subject to the foregoing prohibition shall voluntarily or
involuntarily become or attempt to become the purported beneficial owner (the
"Purported Owner") of shares of Voting Stock in excess of ten percent (10%) of
the issued and outstanding shares of Voting Stock, (i) during the period of
three years following the date of the completion of the Conversion (the "Initial
Period"), the number of shares in excess of ten percent (10%) shall be deemed to
be "Excess Shares," and shall not be counted as shares entitled to vote, shall
not be voted by any person or counted as voting shares in connection with any
matter submitted to the stockholders for a vote, and shall not be counted as
outstanding for purposes of determining the affirmative vote necessary to
approve any matter submitted to the stockholders for a vote; or (ii) following
the Initial Period, the holder of any Excess

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<PAGE>

Shares shall be entitled to cast only one one-hundredth (1/100) of one vote per
share for each Excess Share.

The restrictions set forth in this Article V shall be noted
conspicuously on all certificates evidencing ownership of shares of Voting
Stock.

Section 4. Powers of the Board of Directors.

(a) The Board of Directors may, to the extent permitted by law, from
time to time establish, modify, amend or rescind, by Bylaw or otherwise,
regulations and procedures not inconsistent with the express provisions of this
Article V for the orderly application, administration and implementation of the
provisions of this Article V. Such procedures and regulations shall be kept on
file with the Corporate Secretary of the Corporation and with the Transfer
Agent, shall be made available for inspection by the public and, upon request,
shall be mailed to any holder of shares of Voting Stock of the Corporation.

(b) When it appears that a particular Person has become a Purported
Owner of Excess Shares in violation of Section 2 of this Article V, or of the
regulations or procedures of the Board of Directors with respect to this Article
V, and that the provisions of this Article V require application, interpretation
or construction, then a majority of the directors of the Corporation shall have
the power and duty to interpret all of the terms and provisions of this Article
V and to determine on the basis of information known to them after reasonable
inquiry all facts necessary to ascertain compliance with this Article V,
including, without limitation, (i) the number of shares of Voting Stock
beneficially owned by any Person or Purported Owner, (ii) whether a Person or
Purported Owner is an Affiliate or Associate of, or is acting in concert with,
any other Person or Purported Owner, (iii) whether a Person or Purported Owner
has an agreement, arrangement or understanding with any other Person or
Purported Owner as to the voting or disposition of any shares of the Voting
Stock, (iv) the application of any other definition or operative provision of
this Article V to the given facts or (v) any other matter relating to the
applicability or effect of this Article V.

The Board of Directors shall have the right to demand that any Person
who is reasonably believed to be a Purported Owner of Excess Shares (or who
holds of record shares of Voting Stock beneficially owned by any Person
reasonably believed to be a Purported Owner in excess of such limit) supply the
Corporation with complete information as to (i) the record owner(s) of all
shares of Voting Stock beneficially owned by such Person or Purported Owner and
(ii) any other factual matter relating to the applicability or effect of this
Article V as may reasonably be requested of such Person or Purported Owner.

Any applications, interpretations, constructions or any other
determinations made by the Board of Directors pursuant to this Article V, in
good faith and on the basis of such information and assistance as was then
reasonably available for such purpose, shall be conclusive and binding upon the
Corporation and its shareholders, and neither the Corporation nor any of its
shareholders shall have the right to challenge any such application,
interpretation, construction or determination.

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<PAGE>

Section 5. Severability. In the event any provision (or portion
thereof) of this Article V shall be found to be invalid, prohibited or
unenforceable for any reason, the remaining provisions (or portions thereof) of
this Article V shall remain in full force and effect, and shall be construed as
if such invalid, prohibited or unenforceable provision had been stricken
herefrom or otherwise rendered inapplicable, it being the intent of this
Corporation and its shareholders that each such remaining provision (or portion
thereof) of this Article V remain, to the fullest extent permitted by law,
applicable and enforceable as to all shareholders, including Purported Owners,
if any, notwithstanding any such finding.

Section 6. Exclusions. This Article V shall not apply to (a) any
offer or sale with a view towards public resale made exclusively by the
Corporation to any underwriter or underwriters acting on behalf of the
Corporation, or to the selling group acting on such underwriter's or
underwriters' behalf, in connection with a public offering of the Common Stock;
or (b) any reclassification of securities (including any reverse stock split),
or recapitalization of the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other transaction or
reorganization that does not have the effect, directly or indirectly, of
changing the beneficial ownership interests of the Corporation's shareholders,
other than pursuant to the exercise of any dissenters' appraisal rights, except
as a result of immaterial changes due to fractional share adjustments, which
changes do not exceed, in the aggregate, one percent (1%) of the issued and
outstanding shares of such class of equity or convertible securities.

ARTICLE VI

OTHER LAWFUL PROVISIONS

6.1 CORPORATE GOVERNANCE

The following provisions are inserted for the management of the business
and the conduct of the affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and of its Directors
and stockholders:

A. The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors. In addition to the powers and
authority expressly conferred upon them by statute or by these Articles or the
Bylaws of the Corporation, the Directors are hereby empowered to exercise all
such powers and do all such acts and things as may be exercised or done by the
Corporation.

B. Any action to be taken by the stockholders of the Corporation
must be effected at a duly called annual or special meeting of stockholders of
the Corporation and may not be effected by the unanimous consent in writing by
such stockholders.

C. Special meetings of stockholders of the Corporation may be called
only by the Board of Directors pursuant to a resolution adopted by a majority of
the total number of authorized directorships (whether or not there exist any
vacancies in previously authorized directorships at the time any such resolution
is presented to the Board for adoption) (the "Whole

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<PAGE>

Board"), (provided, however, that if there is an Interested Stockholder (as
defined in Section C of Section 6.4), any such call by the Board of Directors
shall also require the affirmative vote of a majority of the Disinterested
Directors (as defined in Section C of Section 6.4) then in office). Special
meetings shall be called by the Clerk, or in the case of the death, absence,
incapacity or refusal of the Clerk, by any other officer, upon written
application of one or more stockholders who hold at least 80% in interest of the
capital stock entitled to vote at such meeting. Application to a court pursuant
to Section 34(b) of Chapter 156B (the "Massachusetts Business Corporation Law")
of The General Laws of The Commonwealth of Massachusetts (or successor
provisions) requesting the call of a special meeting of stockholders because
none of the officers is able and willing to call such a meeting may be made only
by stockholders who hold at least 80% in interest of the capital stock entitled
to vote at such meeting. At a special meeting of stockholders, only such
business shall be conducted, and only such proposals shall be acted upon, as
shall have been stated in the written notice of the special meeting, unless
otherwise provided by law.

6.2 DIRECTORS

A. The number of Directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board. The Directors shall be divided into three classes,
with the term of office of the first class to expire at the first annual meeting
of stockholders, the term of office of the second class to expire at the annual
meeting of stockholders one year thereafter and the term of office of the third
class to expire at the annual meeting of stockholders two years thereafter. At
each annual meeting of stockholders following such initial classification and
election, Directors elected to succeed those Directors whose terms expire shall
be elected for a term of office to expire at the third succeeding annual meeting
of stockholders after their election. No person shall be eligible for election,
reelection, appointment or reappointment to the Board if such person reached
seventy (70) years of age or older on January 1 of the year in which such person
seeks election, reelection, appointment or reappointment to the Board.

B. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, newly created directorships resulting from any increase
in the authorized number of Directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the Directors
then in office, though less than a quorum, (provided, however, that if there is
an Interested Stockholder, any such action by the Board of Directors shall also
require the affirmative vote of a majority of the Disinterested Directors then
in office) and Directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been chosen expires. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any incumbent
Director.

C. Advance notice of stockholder nominations for the election of
Directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.

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<PAGE>

D. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, any Director may be removed from office at any time, but
only for cause and only by the affirmative vote of either (i) two-thirds of the
Whole Board or (ii) the holders of at least 80% of the voting power of all of
the then-outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of Directors, voting together as a single class. At
least 30 days prior to such meeting of the Board of Directors or stockholders,
written notice shall be sent to the Director whose removal will be considered at
the meeting and, if the removal is for cause, the Director will be provided an
opportunity to be heard before the Board of Directors or stockholders, as
applicable.

6.3 AMENDMENT TO BYLAWS. The Board of Directors is expressly empowered to
adopt, amend or repeal the Bylaws of the Corporation. Any adoption, amendment or
repeal of the Bylaws of the Corporation by the Board of Directors shall require
the approval of a majority of the Whole Board (unless at the time of such action
there shall be an Interested Stockholder, in which case such action shall
require the affirmative vote of a majority of the Disinterested Directors then
in office). The stockholders shall also have power to adopt, amend or repeal the
Bylaws of the Corporation; provided, however, that, in addition to any vote of
the holders of any class or series of stock of the Corporation required by law
or by these Articles, the affirmative vote of the holders of at least 80% of the
voting power of all of the then-outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of Directors, voting
together as a single class, shall be required to adopt, amend or repeal any
provisions of the Bylaws of the Corporation.

6.4 CERTAIN BUSINESS COMBINATIONS

A. In addition to any affirmative vote required by law or these
Articles, and except as otherwise expressly provided in this Section 6.4:

1. any merger or consolidation of the Corporation or any Subsidiary
(as defined in Section C of this Section 6.4) with (i) any Interested
Stockholder (as defined in Section C of this Section 6.4), or (ii) any
other corporation (whether or not itself an Interested Stockholder) which
is, or after such merger or consolidation would be, an Affiliate (as
defined in Section C of this Section 6.4) of an Interested Stockholder; or

2. any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder, or any Affiliate of any Interested Stockholder, of
any assets of the Corporation or any Subsidiary having an aggregate Fair
Market Value (as herein defined in Section C of this Section 6.4) equaling
or exceeding 25% or more of the combined assets of the Corporation and its
Subsidiaries; or

3. the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for cash, securities or
other property (or a combination thereof) having an aggregate Fair Market
Value (as defined in Section C of this Section 6.4) equaling or exceeding
25% of the combined Fair Market Value of the outstanding Common Stock of
the Corporation and its

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<PAGE>

Subsidiaries, except for any issuance or transfer pursuant to an employee
benefit plan of the Corporation or any Subsidiary thereof (established with
the approval of a majority of the Disinterested Directors then in office);
or

4. the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate of any Interested Stockholder; or

5. any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested Stockholder or any
Affiliate of any Interested Stockholder;

shall require the affirmative vote of the holders of at least 80% of the voting
power of the then-outstanding shares of stock of the Corporation entitled to
vote in the election of Directors (the "Voting Stock"), voting together as a
single class. Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be specified, by
law or by any other provisions of these Articles or any Certificate of
Establishment or in any agreement with any national securities exchange or
otherwise.

The term "Business Combination" as used in this Section 6.4 shall mean any
transaction which is referred to in any one or more of paragraphs 1 through 5 of
Section A of this Section 6.4.

B. The provisions of Section A of this Section 6.4 shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only the affirmative vote of two-thirds of the outstanding shares
of capital stock entitled to vote, if, in the case of any Business Combination
that does not involve any cash or other consideration being received by the
stockholders of the Corporation solely in their capacity as stockholders of the
Corporation, the condition specified in the following paragraph 1 is met or, in
the case of any other Business Combination, all of the conditions specified in
either of the following paragraphs 1 or 2 are met:

1. The Business Combination shall have been approved by a majority of
the Disinterested Directors (as defined in Section C of this Section 6.4)
then in office.

2. All of the following conditions shall have been met:

(a) The aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by the holders
of Common Stock in such Business Combination shall at least be equal
to the higher of the following:

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<PAGE>

(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage commissions,
transfer taxes and soliciting dealers' fees, paid by the
Interested Stockholder or any of its Affiliates for any shares of
Common Stock acquired by it (i) within the two-year period
immediately prior to the first public announcement of the
proposal of the Business Combination (the "Announcement Date"),
or (ii) in the transaction in which it became an Interested
Stockholder, whichever is higher.

(2) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such latter date is
referred to in this Section 6.4 as the "Determination Date"),
whichever is higher.

(b) The aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
shares of any class of outstanding Voting Stock other than Common
Stock shall be at least equal to the highest of the following (it
being intended that the requirements of this subparagraph (b) shall be
required to be met with respect to every such class of outstanding
Voting Stock, whether or not the Interested Stockholder has previously
acquired any shares of a particular class of Voting Stock):

(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage commissions,
transfer taxes and soliciting dealers' fees, paid by the
Interested Stockholder for any shares of such class of Voting
Stock acquired by it (i) within the two-year period immediately
prior to the Announcement Date, or (ii) in the transaction in
which it became an Interested Stockholder, whichever is higher;

(2) (if applicable) the highest preferential amount per
share to which the holders of shares of such class of Voting
Stock are entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; and

(3) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date,
whichever is higher.

(c) The consideration to be received by holders of a particular
class of outstanding Voting Stock (including Common Stock) shall be in
cash or in the same form as the Interested Stockholder has previously
paid for shares of such class of Voting Stock. If the Interested
Stockholder has paid for shares of any class of Voting Stock with
varying forms of consideration, the form of consideration to be
received per share by holders of shares of such class of Voting Stock
shall be either cash or the form used to acquire the largest number of
shares of such class of Voting Stock

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<PAGE>

previously acquired by the Interested Stockholder. The price
determined in accordance with subparagraph B.2 of this Section 6.4
shall be subject to appropriate adjustment in the event of any stock
dividend, stock split, combination of shares or similar event.

(d) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business
Combination: (1) except as approved by a majority of the Disinterested
Directors (as defined in Section C of this Section 6.4) then in
office, there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not
cumulative) on any outstanding stock having preference over the Common
Stock as to dividends or liquidation; (2) there shall have been (i) no
reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of the Common Stock),
except as approved by a majority of the Disinterested Directors then
in office, and (ii) an increase in such annual rate of dividends as
necessary to reflect any reclassification (including any reverse stock
split), recapitalization, reorganization or any similar transaction
which has the effect of reducing the number of outstanding shares of
the Common Stock, unless the failure to so increase such annual rate
is approved by a majority of the Disinterested Directors then in
office, and (3) neither such Interested Stockholder or any of its
Affiliates shall have become the beneficial owner of any additional
shares of Voting Stock except as part of the transaction which results
in such Interested Stockholder becoming an Interested Stockholder.

(e) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages
provided, directly or indirectly, by the Corporation, whether in
anticipation of or in connection with such Business Combination or
otherwise.

(f) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (or any subsequent provisions replacing such
Act, and the rules or regulations thereunder) shall be mailed to
stockholders of the Corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such proxy
or information statement is required to be mailed pursuant to such Act
or subsequent provisions).

C. For the purposes of Section 6.1 and this Section 6.4:

1. A "Person" shall include an individual, a group acting in
concert, a corporation, a partnership, an association, a joint venture, a
pool, a joint stock company, a trust, an unincorporated organization or
similar company, a syndicate or any other group formed for the purpose of
acquiring, holding or disposing of securities or any other entity.

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<PAGE>

2. "Interested Stockholder" shall mean any person (other than the
Corporation or any Holding Company or Subsidiary thereof) who or which:

(a) is the beneficial owner, directly or indirectly, of more
than 5% of the outstanding Voting Stock; or

(b) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question was the
beneficial owner, directly or indirectly, of 5% or more of the voting
power of the then outstanding Voting Stock; or

(c) is an assignee of or has otherwise succeeded to any shares
of Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
Interested Stockholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act
of 1933, as amended.

3. "Beneficial ownership" shall be determined pursuant to Rule 13d-3
of the General Rules and Regulations under the Securities Exchange Act of
1934 (or any successor rule or statutory provision), or, if said Rule 13d-3
shall be rescinded and there shall be no successor rule or statutory
provision thereto, pursuant to said Rule 13d-3 as in effect on the date of
filing of these Articles; provided, however, that a person shall, in any
event, also be deemed the "beneficial owner" of any Common Stock:

(a) which such person or any of its affiliates beneficially
owns, directly or indirectly; or

(b) which such person or any of its affiliates has (i) the right
to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding (but shall not be deemed to be the beneficial owner of
any voting shares solely by reason of an agreement, contract, or other
arrangement with this Corporation to effect any transaction which is
described in any one or more clauses of Section A of Section 6.4) or
upon the exercise of conversion rights, exchange rights, warrants, or
options or otherwise, or (ii) sole or shared voting or investment
power with respect thereto pursuant to any agreement, arrangement,
understanding, relationship or otherwise (but shall not be deemed to
be the beneficial owner of any voting shares solely by reason of a
revocable proxy granted for a particular meeting of stockholders,
pursuant to a public solicitation of proxies for such meeting, with
respect to shares of which neither such person nor any such affiliate
is otherwise deemed the beneficial owner); or

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<PAGE>

(c) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
affiliates acts as a partnership, limited partnership, syndicate or
other group pursuant to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any
shares of capital stock of this Corporation;

and provided further, however, that (1) no Director or Officer of this
Corporation (or any affiliate of any such Director or Officer) shall,
solely by reason of any or all of such Directors or Officers acting in
their capacities as such, be deemed, for any purposes hereof, to
beneficially own any Common Stock beneficially owned by another such
Director or Officer (or any affiliate thereof, and (2) neither any employee
stock ownership plan or similar plan of this Corporation or any subsidiary
of this Corporation, nor any trustee with respect thereto or any affiliate
of such trustee (solely by reason of such capacity of such trustee), shall
be deemed, for any purposes hereof, to beneficially own any Common Stock
held under any such plan. For purposes of computing the percentage
beneficial ownership of Common Stock of a person, the outstanding Common
Stock shall include shares deemed owned by such person through application
of this subsection but shall not include any other Common Stock which may
be issuable by this Corporation pursuant to any agreement, or upon exercise
of conversion rights, warrants or options, or otherwise. For all other
purposes, the outstanding Common Stock shall include only Common Stock then
outstanding and shall not include any Common Stock which may be issuable by
this Corporation pursuant to any agreement, or upon the exercise of
conversion rights, warrants or options, or otherwise.

4. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended, as in effect on the
date of filing of these Articles.

5. "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph 2 of this Section C, the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.

6. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Stockholder and was a
member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any Director who is
thereafter chosen to fill any vacancy of the Board of Directors or who is
elected and who, in either event, is unaffiliated with the Interested
Stockholder and in connection with his or her initial assumption of office
is recommended for appointment or election by a majority of Disinterested
Directors then in office.

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<PAGE>

7. "Fair Market Value" means:

(a) in the case of stock, the highest closing sales price of the
stock during the 30-day period immediately preceding the date in
question of a share of such stock on the National Association of
Securities Dealers Automated Quotation System or any system then in
use, or, if such stock is admitted to trading on a principal United
States securities exchange registered under the Securities Exchange
Act of 1934, as amended, Fair Market Value shall be the highest sale
price reported during the 30-day period preceding the date in
question, or, if no such quotations are available, the Fair Market
Value on the date in question of a share of such stock as determined
by the Board of Directors in good faith, in each case with respect to
any class of stock, appropriately adjusted for any dividend or
distribution in shares of such stock or any stock split or
reclassification of outstanding shares of such stock into a greater
number of shares of such stock or any combination or reclassification
of outstanding shares of such stock into a smaller number of shares of
such stock, and

(b) in the case of property other than cash or stock, the Fair
Market Value of such property on the date in question as determined by
the Board of Directors in good faith.

8. Reference to "Highest Per Share Price" shall in each case with
respect to any class of stock reflect an appropriate adjustment for any
dividend or distribution in shares of such stock or any stock split or
reclassification of outstanding shares of such stock into a greater number
of shares of such stock or any combination or reclassification of
outstanding shares of such stock into a smaller number of shares of such
stock.

9. In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used
in Subparagraphs (a) and (b) of Paragraph 2 of Section B of this Section
6.4 shall include the shares of Common Stock and/or the shares of any other
class of outstanding Voting Stock retained by the holders of such shares.

D. A majority of the Directors of the Corporation then in office
(provided, however, that if there is an Interested Stockholder, any such
determination shall also require the affirmative vote of a majority of the
Disinterested Directors then in office) shall have the power and duty to
determine for the purposes of this Section 6.4, on the basis of information
known to them after reasonable inquiry: (a) whether a person is an Interested
Stockholder; (b) the number of shares of Voting Stock beneficially owned by any
person; (c) whether a person is an Affiliate or Associate of another; and (d)
whether the assets which are the subject of any Business Combination have, or
the consideration to be received for the issuance or transfer of securities by
the Corporation or any Subsidiary in any Business Combination has, an aggregate
Fair Market Value equaling or exceeding 25% of the combined Fair Market Value of
the Common Stock of the Corporation and its Subsidiaries. A majority of the
Disinterested Directors then in office shall have the further power to interpret
all of the terms and provisions of this Section 6.4.

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<PAGE>

E. Nothing contained in this Section 6.4 shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.

F. Notwithstanding any other provisions of these Articles or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, these Articles or any Certificate of
Establishment, the affirmative vote of the holders of at least 80% of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal this Section 6.4.

6.5 STANDARDS FOR BOARD OF DIRECTORS' EVALUATION OF OFFERS.

The Board of Directors of the Corporation, in determining whether the
interests of the Corporation and its stockholders will be served by any offer of
another Person (as defined in Section 6.4) to (i) make a tender or exchange
offer for any equity security of the Corporation, (ii) merge or consolidate the
Corporation with or into another institution, or (iii) purchase or otherwise
acquire all or substantially all of the properties and assets of the
Corporation, may consider the interests of the Corporation's employees,
suppliers, creditors and customers, the economy of the state, region and nation,
community and societal considerations, and the long-term and short-term
interests of the Corporation and its stockholders, including the possibility
that these interests may be best served by the continued independence of the
Corporation.

6.6 PRE-EMPTIVE RIGHTS

Holders of the capital stock of the Corporation shall not be entitled to
preemptive rights with respect to any shares of the capital stock of the
Corporation which may be issued.

6.7 INDEMNIFICATION

A. Each person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a Director or an
Officer of the Corporation or is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
Director, Officer, employee or agent or in any other capacity while serving as a
Director, Officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Massachusetts Business
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith; provided, however, that,
except as provided in Section C hereof with respect to proceedings to enforce
rights to indemnification, the Corporation

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<PAGE>

shall indemnify any such indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if such proceeding (or part thereof)
was authorized by the Board of Directors of the Corporation.

B. The right to indemnification conferred in Section A of this
Section 6.7 shall include, in the case of a Director or officer at the level of
Vice President or above, and in the case of any other Officer or any employee
may include (in the discretion of the Board of Directors), the right to be paid
by the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition (hereinafter an "advancement of expenses").
Notwithstanding the foregoing, expenses incurred by an indemnitee in advance of
the final disposition of a proceeding may be paid only upon the Corporation's
receipt of an undertaking by the indemnitee to repay such payment if he or she
shall be adjudicated or determined to be not entitled to indemnification under
applicable law. The Corporation may accept such undertaking without reference to
the financial ability of the Indemnitee to make such repayment. The rights to
indemnification and to the advancement of expenses conferred in Sections A and B
of this Section 6.7 shall be contract rights and such rights shall continue as
to an indemnitee who has ceased to be a Director, Officer, employee or agent and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators.

C. If a claim under Section A or B of this Section 6.7 is not paid
in full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee also shall be
entitled to be paid the expense of prosecuting or defending such suit. In (i)
any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, he or she shall not have acted in good faith in the
reasonable belief that his or her action was in the best interests of the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Massachusetts Business
Corporation Law, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the indemnitee, be a defense to such
suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to be
indemnified, or to such advancement of expenses, under this Section 6.7 or
otherwise, shall be on the Corporation.

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<PAGE>

D. The rights to indemnification and to the advancement of expenses
conferred in this Section 6.7 shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Articles, Bylaws, agreement, vote of stockholders or disinterested Directors or
otherwise.

E. The Corporation may maintain insurance, at its expense, to
protect itself and any Director, Officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Massachusetts Business Corporation Law.

F. The Corporation may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Section 6.7 with respect to the
indemnification and advancement of expenses of Directors and Officers of the
Corporation. Without limiting the generality of the foregoing, the Corporation
may enter into specific agreements, commitments or arrangements for
indemnification on any terms not prohibited by law which it deems to be
appropriate.

G. If the Corporation is merged into or consolidated with another
corporation and the Corporation is not the surviving corporation, the surviving
Corporation shall assume the obligations of the Corporation under this Section
6.7 with respect to any action, suit, proceeding or investigation arising out of
or relating to any actions, transactions or facts occurring at or prior to the
date of such merger or consolidation.

6.8 LIMITATION OF LIABILITY OF DIRECTORS

A. No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director notwithstanding any provision of law imposing such liability;
provided, however, that this Section 6.8 shall not eliminate or limit any
liability of a Director (i) for any 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 a knowing violation of law,
(iii) under Sections 61 or 62 of Chapter 156B of the General Laws of the
Commonwealth of Massachusetts, or (iv) with respect to any transaction from
which the Director derived an improper personal benefit.

B. No amendment or repeal of this Section 6.8 shall adversely affect
the rights and protection afforded to a Director of this Corporation under this
Section 6.8 for acts or omissions occurring prior to such amendment or repeal.
If the Massachusetts Business Corporation Law is hereafter amended to further
eliminate or limit the personal liability of Directors or to authorize corporate
action to further eliminate or limit such liability, then the liability of the
Directors of this Corporation shall be eliminated or limited to the fullest
extent permitted by the Massachusetts Business Corporation Law as so amended.

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<PAGE>

6.9 TRANSACTIONS WITH INTERESTED PERSONS

A. Unless entered into in bad faith, no contract or transaction by
the Corporation shall be void, voidable or in any way affected by reason of the
fact that it is with an Interested Person.

B. For the purposes of this Section 6.9, "Interested Person" means
any person or organization in any way interested in the Corporation whether as a
director, officer, stockholder, employee or otherwise, and any other entity in
which any such person or organization of the Corporation is in any way
interested.

C. Unless such contract or transaction was entered into in bad
faith, no Interested Person, because of such interest, shall be liable to the
Corporation or to any other person or organization for any loss or expense
incurred by reason of such contract or transaction or shall be accountable for
any gain or profit realized from such contract or transaction.

D. The provisions of this Section 6.9 shall be operative
notwithstanding the fact that the presence of an Interested Person was necessary
to constitute a quorum at a meeting of Directors or stockholders of the
Corporation at which such contract or transaction was authorized or that the
vote of an Interested Person was necessary for the authorization of such
contract or transaction.

6.10 ACTING AS A PARTNER

The Corporation may be a partner in any business enterprise which it would
have power to conduct by itself.

6.11 STOCKHOLDERS' MEETINGS

Meetings of stockholders may be held at such place in The Commonwealth of
Massachusetts or, if permitted by applicable law, elsewhere in the United States
as the Board of Directors may determine.

6.12 AMENDMENT TO ARTICLES OF ORGANIZATION

These Articles may be amended at a duly constituted meeting of stockholders
called expressly for such purpose, by the affirmative vote of at least 80% of
the total votes eligible to be cast by stockholders on such amendment, voting
together as a single class; provided, however, that if the Board of Directors
recommends, by the affirmative vote of at least two-thirds of the Directors then
in office at a duly constituted meeting of the Board of Directors (unless at any
time within the 60 day period immediately preceding the meeting at which the
stockholder vote is to be taken, there shall be an Interested Stockholder, in
which case such action shall also require the affirmative vote of a majority of
the Disinterested Directors then in office), that stockholders approve such
amendment at such meeting of stockholders, such amendment shall only require the
affirmative vote of a majority of the total votes eligible to be cast by
stockholders on such amendment, voting together as a single class.

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ARTICLE VII

EFFECTIVE DATE

The effective date of organization of the Corporation shall be the date
approved and filed by the Secretary of the Commonwealth.

ARTICLE VIII

DIRECTORS AND OFFICERS

The information contained in Article VIII is not a permanent part of the
Articles of Organization.

a. The street address of the principal office of the Corporation in
Massachusetts is: 689 Massachusetts Avenue, Cambridge, Massachusetts,
02139.

b. The name, residential address and post office address of each Director
and Officer of the Corporation is as follows:

<TABLE>
<CAPTION>
Title Name Residential Address and Post Office Address
- -------------- --------------------- ---------------------------------------------
<S> <C> <C>
President: James B. Keegan 60 Columbine Avenue, Milton, MA 02186
Executive Vice
President: Jane L. Lundquist 21 Appleton Lane, Boxford, MA 01921
Treasurer: Charles Jeffrey 6 Canal Park, #403, Cambridge, MA 02141
Clerk: Paul R. Corcoran, Jr. 40 Sewall Street, West Newton, MA 02465
Director: Paul R. Corcoran, Jr. 40 Sewall Street, West Newton, MA 02465
Director: Daniel C. Crane, Esq. 594 Huron Avenue, Cambridge, MA 02138
Director: Samuel C. Fleming 61 Meadowbrook Road, Weston, MA 02493
Director: William Goldberg, Esq. 256 Atlantic Avenue, Swampscott, MA 01907
Director: Robert D. Happ 3474 So. Ocean Blvd., #15, Palm Beach, FL 33480
Director: Jane L. Lundquist 21 Appleton Lane, Boxford, MA 01921
Director: James B. Keegan 60 Columbine Avenue, Milton, MA 02186
Director: Joseph F. O'Connor 42 Forest Gate, Yarmouth Port, MA 02675
Director: Rudolph R. Russo 2 Blanchard Road, Cambridge, MA 02138-1009
</TABLE>

c. The fiscal year (i.e., tax year) of the Corporation shall end on the
last day of the month of December.

d. The name and business address of the resident agent, if any, of the
Corporation is: _______________.

-19-
<PAGE>

ARTICLE IX

BYLAWS

Bylaws of the Corporation have been duly adopted and the President,
Treasurer, Clerk and Directors whose names are set forth above, have been duly
elected.

IN WITNESS WHEREOF AND UNDER THE PAINS AND PENALTIES OF PERJURY, I, whose
signature appears below as incorporator and whose name and residential address
is clearly printed beneath my signature, do hereby associate with the intention
of forming this Corporation under the provisions of General Laws, Chapter 156B
and do hereby sign these Articles of Organization as incorporator this ____ day
of __________, 1999.

_________________________________
___________________, Incorporator
[Address]

<PAGE>

Exhibit 8.2

(Arthur Andersen LLP Letterhead)
Form of State Income Tax Opinion
1/18/00

[DATE], 2000

Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
689 Massachusetts Avenue
Cambridge, MA 02139

Dear Board Members:

You have requested from Arthur Andersen LLP an opinion regarding the
Massachusetts Financial Institutions Excise Tax consequences to Cambridgeport
Mutual Holding Company ("MHC")/1/, Cambridgeport Bank ("Bank"), Port Financial
Corp., ("SHC"); and the Massachusetts Personal Income Tax Consequences which
apply to the "Eligible Account Holders" and "Supplemental Eligible Account
Holders" of Bank resulting from the proposed conversion and reorganization of
the existing mutual holding company structure to a stock holding company
structure.

In rendering our opinion, we have relied upon certain facts and information
presented in the Plan of Conversion from Mutual Holding Company to Stock Holding
Company and Stock Issuance dated October 19, 1999 ("Plan of Conversion") as well
as the facts and representations shown below, under "Statement of Facts" and
"Representations". We have also relied on the facts and representations made to
Thacher Proffitt & Wood, Bank's legal counsel, and their "Federal Income Tax
Opinion," dated January ____, 2000, summarized below. We have assumed that
these facts and representations are complete and accurate and have not
independently audited or otherwise verified any of these facts or
representations. If any fact or representation contained herein or represented
to or obtained from Bank's legal counsel that we have relied upon is not true,
correct, and complete in all material respects, our opinion could change.

The discussions and conclusions set forth herein are based upon existing state
tax law under the Massachusetts General Laws, related Income Tax Regulations,
Judicial Decisions, Rulings, and Administrative Interpretations thereunder as of
the date of this letter all of which are subject to change. Changes to these
authorities may be prospective or retroactive and could significantly affect our
opinions. Furthermore, any change in applicable federal income tax law that
affects

___________________
/1/Capitalized terms used herein are defined in the Plan of Conversion, unless
otherwise defined.
<PAGE>

Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 2
_______2000

the opinion expressed by Thacher Proffitt & Wood could change our
opinion. As a result, the opinions expressed herein would necessarily have to
be re-evaluated in light of any such changes. However, we have no
responsibility to update this opinion for any such changes occurring after the
date of this opinion letter.

The opinions expressed herein are based solely upon our interpretation of the
above authorities, are not binding on the Massachusetts Department of Revenue
and there can be no assurance that the Massachusetts Department of Revenue will
not take a position contrary to any of the opinions expressed herein. The
opinions expressed herein reflect our assessment of the probable outcome of
litigation and other adversarial proceedings based solely on an analysis of the
existing tax authorities as of the date of this letter.

The opinion expressed herein is rendered only with respect to the opinion
requested above and no opinion is expressed with respect to any other legal,
federal, state or local tax or non-tax aspect of the Plan of Conversion. Our
opinion is expressed under the heading "STATE INCOME TAX OPINION". This opinion
is as of the date of this letter and we have no responsibility to update this
opinion for events, transactions, circumstances or changes in any of the facts
or representations occurring after this date.

We are rendering our opinion pursuant to Section 3.1, General Procedure for
Conversion, of the Plan of Conversion. Our opinions are solely for the benefit
of MHC, Bank, SHC, Eligible Account Holders and Supplemental Eligible Account
Holders and are not intended to be relied upon by anyone other than the
aforementioned. Furthermore, without the prior written consent of Arthur
Andersen LLP, this letter may not be quoted in whole or in part or otherwise
referred to in any documents or delivered to any other person or entity.

Statement of Facts

Conversion

Bank, headquartered in Cambridge, Massachusetts is a Massachusetts-chartered
stock savings bank, which operates as a wholly owned subsidiary of MHC, a
Massachusetts-chartered mutual holding company. In 1994, Bank reorganized into
the mutual holding company form of organization and as a result became a wholly
owned subsidiary of MHC.

Subsequently, on October 19, 1999, the Boards of Trustees of MHC and the Board
of Directors of Bank adopted a Plan of Conversion providing for the conversion
of MHC into the capital stock form of organization ("Conversion").
<PAGE>

DRAFT
Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 3
_______2000

The Conversion will be effected so that SHC, as successor in interest to MHC,
will continue to own 100% of the common stock of Bank. SHC will issue
prioritized non-transferable subscription rights ("Subscription Rights") to
certain persons, without payment, to purchase SHC common stock ("Holding Company
Common Stock"). SHC may also offer Holding Company Common Stock shares not
subscribed for, if any, for sale to the general public. SHC expects to
contribute at least 50% of the net proceeds of the Conversion to Bank as
additional capital.

Liquidation Account

For purposes of granting a priority claim to the assets of Bank in the event of
a complete liquidation of Bank to Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain deposit accounts at Bank, SHC
will, at the time of Conversion, establish a Liquidation Account in an amount
equal to the net worth of MHC. Each Eligible Account Holder and Supplemental
Eligible Account Holder will have a separate inchoate interest in the
Liquidation Account balance (referred to as a Subaccount Balance). In the sole
event of a complete liquidation, each Eligible Account Holder and Supplemental
Eligible Account Holder will be entitled to receive a liquidation distribution
from the Liquidation Account in the amount of their then current interest before
any liquidation distribution may be made with respect to the stock of SHC.

Deposit Accounts

Upon Conversion, each deposit account holder of Bank will continue to hold
exactly the same deposit account as the holder held immediately before the
Conversion.

Capitalization

SHC will authorize 30 million shares of Holding Company Common Stock with a par
value of $0.01 per share and 5 million shares of preferred stock with a par
value of $0.01 per share. It is estimated that SHC will initially issue between
6,800,000 and 9,200,000 of its authorized shares of Holding Company Common Stock
and no shares of its authorized preferred stock will be issued for sale in the
Conversion.
<PAGE>

DRAFT
Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 4
_______2000

Priority of Subscription Rights and Offerings

The Plan of Conversion provides for the issuance of Subscription Rights, without
payment, to purchase Holding Company Common Stock of SHC to the following in
descending order of priority:

1. Eligible Account Holders: As first priority, each Eligible Account Holder
------------------------
(depositors whose aggregate Deposit Accounts in Bank total $50 or more as
of the close of business on July 31, 1998) will receive Subscription Rights
to purchase shares of Holding Company Common Stock in the amount up to
$1,000,000;

2. Supplemental Eligible Account Holders: As second priority, each
-------------------------------------
Supplemental Eligible Account Holder (depositors whose aggregate Deposit
Accounts in Bank total $50 or more as of the close of business on September
30, 1999) will receive Subscription Rights to subscribe for Holding Company
Common Stock in the amount up to $1,000,000;

3. Tax-Qualified Employee Stock Benefit Plans: As third priority, Tax-
------------------------------------------
Qualified Employee Stock Benefit Plans will receive Subscription Rights to
purchase up to eight percent of the shares of Holding Company Common Stock
issued in the Conversion;

4. Management: As fourth priority, directors, officers, employees, trustees
----------
and Corporators of MHC or Bank, will receive Subscription Rights to
subscribe for shares of Holding Company Common Stock in an amount up to
$1,000,000;

5. Public: SHC may offer its shares of Holding Company Common Stock
-------
unsubscribed in the above Subscription Offering (Categories 1-4) for sale
to the general public through a Direct Community Offering (with preference
given to natural persons residing in the Bank's Local Community), a
Syndicated Community Offering and/or Public Offering.

Independent Appraisals of Subscription Rights and Conversion Stock

An independent appraisal of the Subscription Rights by RP Financial, LC., opines
that the Subscription Rights have no value. RP Financial, LC., as an
independent appraiser, has provided an independent valuation of the estimated
pro-forma market value of Holding Company Common Stock to be issued in the
Conversion which will be used as the basis for determining the Holding Company
Common Stock price.
<PAGE>

DRAFT
Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 5
_______2000

Representations

In the preparation of this opinion, Arthur Andersen LLP has relied on the
following representations, which were derived, in part, from representations
made to Thacher Proffitt & Wood for purposes of rendering their federal income
tax opinion. Arthur Andersen LLP has not verified the accuracy of the following
representations.

1. MHC is a Massachusetts-chartered mutual holding company; Bank is a
Massachusetts-chartered stock savings bank; SHC is a stock holding company,
charted as a Massachusetts corporation and will be authorized to exercise
any and all powers, rights and privileges and will be subject to all
limitations applicable to bank holding companies under applicable laws and
regulations. SHC is registered under the Federal Bank Holding Company Act.

2. MHC, at the time of Conversion, will qualify as a financial institution
under Massachusetts General Laws (MGL) Chapter 63, Sec. 1. MHC will file a
notice of withdrawal of its Massachusetts security corporation
classification, as defined in MGL Chapter 63, Sec. 38B, in accordance with
Massachusetts Department of Revenue Directive 86-36, Security Corporations:
Election for Voluntary Withdrawal. MHC's withdrawal of its security
corporation classification will be made retroactive to MHC's taxable year
beginning January 1, 2000. SHC, at the time of Conversion, will also
qualify as a financial institution under MGL Chapter 63, Sec. 1.

3. MHC has no outstanding stock; mutual ownership interests in MHC are the
only ownership interests in MHC.

4. The principal amount, interest rate, and maturity of each deposit account
in the Bank, and the fair market value of each such deposit account, will
not change by reason of the Conversion.

5. The fair market value of the interest in the SHC Liquidation Account
received by a Bank depositor in the Conversion will approximately equal the
fair market value of such depositor's interest in the liquidation proceeds
of the Bank surrendered in exchange therefor.

6. The aggregate fair market value of the Qualifying Deposits held by Eligible
Account Holders or Supplemental Eligible Account Holders at the close of
the Eligibility Record
<PAGE>

DRAFT
Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 6
_______2000

Date or the Supplemental Eligibility Record Date, respectively, will equal
or exceed 99% of the aggregate fair market value of all deposit accounts in
the Bank (including deposits of less than $50) as of the close of the
Eligibility Date.

7. Immediately following the Conversion, depositors of the Bank will own all
of the outstanding interests in the Liquidation Account and will own such
interests solely by reason of their ownership of deposits in the Bank
(including their right to liquidation proceeds) immediately before the
Conversion.

8. Immediately following the Conversion, SHC will possess the same assets
(except for assets used to pay expenses incurred in connection with the
Conversion) and liabilities as those possessed by MHC immediately before
the Conversion, plus the proceeds from the Offering.

9. Assets of MHC used to pay expenses of the Conversion (without reference to
expenses related to the Offering), and any distributions by MHC will, in
the aggregate, constitute less than 1% of the net assets of MHC

10. At the time of the Conversion, MHC will not have outstanding any warrants,
options, convertible securities or any other type of right pursuant to
which any person could acquire stock in SHC, other than the nontransferable
Subscription Rights.

11. SHC has no plan or intention to sell or otherwise dispose of any of the
assets of MHC acquired in the Conversion, except for dispositions made in
the ordinary course of business.

12. The liabilities of MHC assumed or succeeded to by SHC plus the liabilities,
if any, to which the assets of MHC are subject, were incurred by MHC in the
ordinary course of its business and are associated with such assets.

13. Following the Conversion, SHC will continue to engage in the same business
in substantially the same manner as engaged in by MHC before the
Conversion.

14. MHC is not under the jurisdiction of a court in a Title 11 or similar case
within the meaning of section 368(a)(3)(A) of the Internal Revenue Code of
1986 (the "Code").

15. No account holder in the Bank who is eligible to receive an interest in the
Liquidation Account will be excluded from participating in the Liquidation
Account.
<PAGE>

DRAFT
Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 7
_______2000

16. SHC and each account holder of the Bank will pay its, his or her own
expense, if any, of the Conversion.

17. SHC has no plan or intention to redeem or otherwise reacquire any of the
stock issued in the Offering.

18. The stock of SHC issued in the Offering will not be callable or subject to
mandatory redemption or to a put option.

19. At the time of the Conversion, the fair market value of the assets of MHC
will equal or exceed the sum of MHC's liabilities and the amount of
liabilities to which such assets are subject, and immediately before the
Conversion, MHC will have a positive net worth.

20. None of the compensation received by an MHC employee who is also an
Eligible Account Holder, Supplemental Eligible Account Holder or a member
of Management will be separate consideration for, or allocable to, his or
her status as an Eligible Account Holder, Supplemental Eligible Account
Holder or a member of Management; none of the shares of SHC stock or
interests in the Liquidation Account received by any employee pursuant to
the Conversion will be separate consideration for, or allocable to, any
employment agreement or arrangement; and the compensation paid the employee
will be for services actually rendered and will be commensurate with the
compensation that would be paid to third parties bargaining at arm's length
for similar services.

21. There is no plan or intention for SHC or the Bank to be liquidated or
merged with or acquired by another corporation following the Conversion.

22. There is no intercorporate indebtedness between MHC and the Bank that was
issued, acquired, or that will be settled, at a discount.

23. No cash or other property will be given to Eligible Account Holders,
Supplemental Eligible Account Holders or a members of Management in lieu of
Subscription Rights or an interest in the Liquidation Account.

24. MHC is not an "investment company" within the meaning of section
368(a)(2)(F) of the Code.
<PAGE>

DRAFT
Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 8
_______2000

25. No mutual ownership interests in MHC have been sold or otherwise
transferred in connection with the Conversion, and prior to the
consummation of the Conversion no such mutual ownership interest will be
sold or otherwise transferred in connection with the Conversion. For
purposes of this representation, "mutual ownership interests" means any
liquidation or voting right in MHC.

26. No stock of SHC will be sold or otherwise transferred to SHC or to an SHC
related party in connection with the Conversion. For purposes of this
representation, an "SHC related party" means the Bank or any other
corporation that, prior to or after the Conversion, either (i) is a member
of the same affiliated group of corporations of which SHC is a member (or
that will become a member by reason of the Conversion or by reason of any
transaction related to the Conversion) within the meaning of Section 1504
of the Code (determined without application of Section 1504(b) of the
Code), or (ii) owns (or that will own by reason of the Conversion or by
reason of any transaction related to the Conversion) stock of SHC
possessing at least 50% of the combined voting power of all classes of SHC
stock entitled to vote or 50% or more of the total value of all SHC stock.
In determining the existence of an SHC Related Party, a partner in a
partnership (or a member of a limited liability company or of any other
entity that is treated as a partnership for federal income tax purposes)
shall be treated as owning or acquiring any stock owned or acquired by the
partnership in accordance with that partner's interest in the partnership.

27. As determined by an independent appraisal, Subscription Rights to purchase
shares of common stock in SHC have no value.

28. The exercise price of the Subscription Rights received by Bank's Eligible
Account Holders and Supplemental Eligible Account Holders to purchase
Holding Company Common Stock will be equal to the fair market value of the
stock of SHC at the time of the completion of the Conversion as determined
by an independent appraisal.

29. Bank's legal counsel, Thacher Proffitt & Wood, opines that for federal
income tax purposes Bank, MHC, SHC each will not recognize gain or loss as
a result of the Conversion.
<PAGE>

DRAFT
Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 9
_______2000

30. Bank's legal counsel, Thacher Profitt & Wood, opines that for federal
income tax purposes Eligible Account Holders and Supplemental Eligible
Account Holders will not recognize gain or loss upon their receipt of
Subscription Rights to purchase shares of SHC, provided the amount to be
paid for such shares is equal to the fair market value of such shares. In
rendering this opinion, bank's legal counsel relies on the opinion of RP
Financial, LC. that the Subscription Rights have no value.

Federal Income Tax Opinion

In preparation of this opinion, Arthur Andersen LLP has relied on the federal
income tax opinion issued by, Thacher Proffitt & Wood with respect to the
recognition of gain or loss to the parties of the Conversion. Thacher Proffitt &
Wood has issued the following opinions, dated _____, 2000 , with respect to the
federal income taxability:

1. The Conversion will constitute a reorganization under Section 368(a)(1)(F)
of the Internal Revenue Code;

2. None of the Bank, MHC, or SHC will recognize gain or loss as a result of
the Conversion; and

3. Eligible Account Holders and Supplemental Eligible Account Holders will not
recognize gain or loss upon their receipt of Subscription Rights (provided
the Subscription Rights have no value as opinioned on by RP Financial, LC.)
to purchase shares of SHC, provided the amount to be paid for such shares
is equal to fair market value of such shares.

STATE INCOME TAX OPINION

Massachusetts Financial Institutions Excise Tax:
- ------------------------------------------------

Based solely on the Statement of Facts, Representations, and State Tax
Discussion (re: Massachusetts Excise Tax) as set forth in this opinion letter
and the federal income tax opinion of Thacher Proffitt & Wood that for federal
income tax purposes no gain or loss will be recognized in the proposed
Conversion by Bank, MHC or SHC, it is the opinion of Arthur Andersen LLP that:

. Bank, MHC, and SHC each will not recognize gain or loss for Massachusetts
Financial Institutions Excise Tax purposes as a result of the Conversion.
<PAGE>

DRAFT
Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 10
_______2000

Massachusetts Personal Income Tax:
- ----------------------------------

Based solely on the Statement of Facts, Representations, and State Tax
Discussion (re: Massachusetts Personal Income Tax) set forth in this opinion
letter and the federal income tax opinion of Thacher Proffitt & Wood, it is the
opinion of Arthur Andersen LLP that for Massachusetts Personal Income Tax
purposes:

. Eligible Account Holders and Supplemental Eligible Account Holders will not
recognize gain or loss upon their receipt of Subscription Rights (provided
the Subscription Rights have no value as opined on by RP Financial, LC.) to
purchase Holding Company Common Stock, provided the amount to be paid for
such shares is equal to fair market value of such shares.

State Tax Discussion

Massachusetts Financial Institutions Excise Tax:
- ------------------------------------------------

"Financial institutions" are subject to Massachusetts Financial Institutions
Excise Tax under Massachusetts General Laws (MGL) Chapter 63, Sections 1, 2, 2A
and 7.

"Financial institutions" are defined in MGL Ch. 63, Sec. 1, in pertinent parts,
as "(a) any bank, banking association, trust company, federal or state savings
and loans association ..., whether of issue or not, existing by authority of the
United States, or any state or a foreign country, or any law of the
commonwealth; (b) any other institution ...., the deposits or accounts of which
are insured under the Federal Deposit Insurance Act or by the Federal Deposit
Insurance Corporation...(c) any corporation ....registered under the Federal
Bank Holding Company Act of 1956, or registered as a savings and loan holding
company under the Federal National Housing Act, as amended, including any
subsidiary which participates in the filing of a consolidated return of income
to the federal government; (d) any corporation subject to supervision by the
division of banks... or (e) any other corporation organized under the laws of
the United States, the commonwealth or any other state or foreign country which,
in substantial competition with financial institutions as defined in any or all
of clauses (a) to (d), inclusive, derives more than fifty percent of its gross
income... from loan origination, from lending activities,..."

Bank, a Massachusetts-chartered stock savings bank, MHC, a Massachusetts-charted
mutual holding company, and SHC, a Massachusetts chartered stock bank holding
company, registered
<PAGE>

DRAFT
Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 11
_______2000

under the Federal Bank Holding Company Act, are considered "financial
institutions" as that term is defined in MGL Ch. 63, Sec. 1. MGL Ch. 63, Sec. 2
provides that "Every financial institution engaged in business in the
commonwealth shall pay, on account of each taxable year, an excise measured by
its net income determined to be taxable ... as defined in section two A ...." As
financial institutions, Bank, MHC, and SHC will pay an excise tax measured by
their respective taxable "net incomes."

"Net income" is defined in MGL Ch. 63, Sec 1 as "gross income, other than
ninety-five percent of dividends received in any taxable year beginning on or
after January 1, 1999 from or on account of the ownership of any class of stock
if the financial institution owns fifteen percent or more of the voting stock of
the institution paying the dividend, less the deductions, but not the credits
allowable under the provisions of the Internal Revenue Code, as amended and in
effect for the taxably year. For taxable years beginning on or after January 1,
1999, the provisions of section 291 of said Code shall not apply, and the
provisions of section 171(a)(2) and 265 of said Code shall apply to the extent
that the income to which the deductions relate is excludable from gross income.
Deductions with respect to the following items, however, shall not be allowed
except as otherwise provided: (a) dividends received, except as otherwise
provided; (b) losses sustained in other taxable years; or (c) taxes on or
measured by income, franchise taxes measured by net income, franchise taxes for
the privilege of doing business and capital stock taxes imposed by any state."

Under MGL Ch. 63, Sec. 1, taxable "net income" begins with "gross income."
"Gross income" is defined in MGL Ch. 63, Sec.1 as "gross income as defined under
the provisions of the Internal Revenue Code, as amended and in effect for the
taxable year, plus interest from bonds, notes and evidences of indebtedness of
any state, including this commonwealth."

The Massachusetts Department of Revenue has issued Letter Rulings addressing the
taxability of financial institutions converting from a mutual form to a stock
form of operation. In Letter Ruling 1983-53 the Massachusetts Department of
Revenue held that the conversion of a state-chartered mutual savings bank
("bank") to a state-charted stock savings bank ("converted bank") results in no
gross income, gain or loss being realized for Massachusetts bank excise tax
purposes by either the bank or converted bank as a result of the conversion
provided that the conversion qualifies as a tax-free reorganization within the
meaning of Section 368(a)(1)(F) of the Internal Revenue Code and provided no
gain or loss will be recognized pursuant to Section 1032 of the Internal Revenue
Code. (See also, Letter Ruling 1982-5 (conversion of a federal mutual savings
and loan association to a federal stock savings and loan association),
Letter Ruling 1983-61 (conversion of state-charted co-operative bank in mutual
form to a state-charted
<PAGE>

DRAFT
Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 12
_______2000

co-operative bank in stock form); and Letter Ruling 1984-11 (conversion of a
federal mutual savings bank to a federal stock savings bank) which similarly
held).

In establishing a starting point for the calculation of Massachusetts taxable
net income for financial institutions, Massachusetts begins with federal taxable
income and makes no provisions for adjustments with respect to the proposed
Conversion. Therefore, since no federal gross income or federal taxable income
will be recognized as a result of the Conversion, no Massachusetts gross income
or Massachusetts taxable income will be recognized.

Massachusetts Personal Income Tax:
- ---------------------------------

Individuals are subject to personal income taxation under MGL Ch. 62, Sec. 2 on
their Massachusetts "gross income" less certain deductions and exemptions. The
starting point for determining income subject to Massachusetts's personal income
tax is Massachusetts "gross income." Massachusetts gross income is divided into
Part A, Part B, and Part C income. MGL Ch. 62, Sec. 2(b). Part A gross income
consists of non-Massachusetts bank taxable interest, dividends, and capital gain
income from the sale or exchange of capital assets held for one year or less.
Part B gross income consists of income which is not Part A gross income or Part
C gross income. Part C gross income consists of capital gain income comprised
of gains from the sale or exchange of capital assets held for more than one
year. MGL Ch. 62, Sec. 2(b).

The above Massachusetts classes of gross income are defined by reference to
"federal gross income" adjusted for differences between federal and
Massachusetts basis in property, and certain modifications. MGL Ch. 62, Sec.
2(a). "Federal gross income" is defined as "gross income as defined under the
Code". MGL Ch. 62, Sec. 1(d). The "Code" refers to the Internal Revenue Code,
as amended on January 1, 1998, and in effect for the taxable year. MGL Ch. 62,
Sec. 1(c).

Modifications that increase Massachusetts gross income relative to federal gross
income include:

. Interest on state and municipal obligation exclusive of obligations issued
by Massachusetts or its subdivisions, to the extent not includable in
federal gross income. MGL Ch. 62, Sec. 2(a)(1)(A).
. Foreign source earned income excluded under Code Section 911.
MGL Ch. 62, Sec. 2(a)(1)(C).
. For a Federal S corporation treated as a Massachusetts corporate trust, any
amounts excluded under Subchapter S of the Code.
MGL Ch. 62, Sec. 2(a)(1)(E).
<PAGE>

DRAFT
Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 13
_______2000

. Amounts determined to be Massachusetts gross income under any other
provision of chapter 62 of the General Laws. MGL Ch. 62, Sec. 2(a)(1)(F).
. Any amount excluded under Code Section 128. MGL Ch. 62, Section 2(a)(1)(G).
. Certain amounts contributed on behalf of the taxpayer and not included in
federal gross income. MGL Ch. 62, Sec. 2(a)(1)(I).

Modifications that decrease Massachusetts gross income relative to federal gross
income include:

. Income with respect to which taxation by any state is prohibited by federal
law such as interest of United States government obligations and dividends
attributable to interest on obligations of the United States paid by a
regulated investment company. MGL Ch. 62, Section 2(a)(2)(A).
. For a federal S corporation treated a Massachusetts corporate trust, any
amount included under Subchapter S of the Code.
MGL Ch. 62, Sec. 2(a)(2)(B).
. Income taxable to a trustee or other fiduciary received from the trustee
or fiduciary. MGL. Ch. 62, Sec. 2(a)(2)(C).
. Dividends from a corporate trust, if the dividends are tax-exempt under
MGL Ch. 62, Sec. 8. MGL Ch. 62, Sec. 2(a)(2)(D).
. Income from contributory annuity, pension, endowment or retirement fund of
the U.S. government or the commonwealth or any political subdivision
thereof. MGL Ch. 62, Sec. 2(a)(2)(E).
. Income from plans or contracts described in Code sections 403(b), 404,
408 or 409, subject to certain limitations. MGL Ch. 62, Sec. 2(a)(2)(F).
. Income received from the sale, lease or other transfer of a certain energy
conservation and alternative energy development patents.
MGL Ch. 62, Sec. 2(a)(2)(G).
. Social security benefits included in federal gross income.
MGL Ch. 62, Sec. 2(a)(2)(H).
. Exempt interest dividends and capital gain dividends from a regulated
investment company attributable to interest or capital gain from
obligations issued by the commonwealth or political subdivisions.
MGL Ch. 62, Sec. 2(a)(2)(I) and (J).

As a general rule, Massachusetts does not adopt federal tax law changes
incorporated into the Internal Revenue Code after January 1, 1998. Chapter 319
of the Acts of 1998 incorporated into Massachusetts personal income tax law the
Internal Revenue Code as amended on January 1, 1998, and in effect for the
taxable year. As a result of the Chapter 319 Internal Revenue Code update, all
amounts which are allowed to be excluded from federal gross income under the
Internal Revenue Code as amended and in effect on January 1, 1998 are excluded
from
<PAGE>

DRAFT
Boards of Trustees
Board of Directors
Cambridgeport Mutual Holding Company
Cambridgeport Bank
Port Financial Corp.
Page 14
_______2000

Massachusetts gross income, unless a specific Massachusetts statutory
modification adds the amount back into Massachusetts gross income (See MGL Ch.
62 Sec. 2(a), TIR 98-8 and TIR 98-15).

The Massachusetts Department of Revenue has issued Letter Rulings addressing the
taxability of eligible account holders of financial institutions converting from
a mutual form to a stock form of operation. The Massachusetts Department of
Revenue issued Letter Ruling 1983-53 holding that eligible account holders of a
bank which changes its form of ownership from a state-chartered mutual savings
bank to a state-chartered stock savings bank do not recognize any gain or loss
by reason of either the conversion or the distribution of nontransferable
subscription rights to purchase common stock provided that no gain or loss will
be recognized for federal income tax purposes. (See also, Letter Ruling 1982-5
(conversion of federal mutual savings and loan association to federal stock
savings and loan association), Letter Ruling 1983-61 (conversion of state-
charted co-operative bank in mutual form to a state-charted co-operative bank in
stock form); and Letter Ruling 1984-11 (conversion of a federal mutual savings
bank to a federal stock savings bank) which similarly held).

In establishing a starting point for the calculation of Massachusetts gross
income, Massachusetts begins with federal gross income as determined under the
Internal Revenue Code as amended to January 1, 1998 and makes no provisions for
modifications with respect to the proposed Conversion. Therefore, since no
federal gross income would be recognized under the Internal Revenue Code as
amended to January 1, 1998 as a result of the Conversion, no Massachusetts gross
income or taxable income will be recognized.

*****

We hereby consent to the filing of the opinion as an exhibit to the Application
for Conversion filed with the Division of Banks of the Commonwealth of
Massachusetts, as a supporting document to the Application to the Board of
Governors of the Federal Reserve System on Form FRY-3 and as an exhibit to the
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission.

Very truly yours,

Arthur Andersen LLP

<PAGE>

Exhibit 10.9

LONG-TERM INCENTIVE PLAN

PORT FINANCIAL CORP.

Adopted on _______________, 2000
Effective as of January 1, 2000
<PAGE>

TABLE OF CONTENTS
-----------------

Page
----

1. General Purpose of Plan...................................................1
-----------------------

2. Definitions...............................................................1
-----------
<TABLE>
<S> <C> <C>
(a) "Affiliate" .......................................................1
(b) "Bank".............................................................1
(c) "Board"............................................................1
(d) "Change in Control"................................................1
(e) "Code".............................................................3
(f) "Committee"........................................................3
(g) "Company"..........................................................3
(h) "Disability" ......................................................3
(i) "Disinterested Board Member" ......................................3
(j) "Effective Date"...................................................3
(k) "Eligible Employee"................................................3
(l) "Employer" ........................................................3
(m) "ERISA"............................................................3
(n) "GAAP" ............................................................3
(o) "Performance Award" ...............................................3
(p) "Performance Goal" ................................................3
(q) "Performance Period" ..............................................3
(r) "Performance Unit".................................................3
(s) "Plan" ............................................................3
(t) "Plan Year" .......................................................4
(r) "Retirement" ......................................................4
(s) "Share" ...........................................................4
</TABLE>
3. Eligibility...............................................................4
-----------
<TABLE>
<S> <C> <C>
(a) In General.........................................................4
(b) Performance Periods Ending After December 31, 2001.................4
(c) Performance Periods Ending On or Before December 31, 2001..........4
</TABLE>
4. Administration............................................................4
--------------
<TABLE>
<S> <C> <C>
(a) Committee..........................................................4
(b) Committee Action...................................................4
(c) Committee Responsibilities.........................................4
</TABLE>
5. Performance Goals.........................................................5
-----------------
<TABLE>
<S> <C> <C>
(a)(i) Performance Periods Ending After December 31, 2001.................5
(ii)Performance Periods Ending On or Before December 31, 2001..........5
(b) Criteria for Performance Goals.....................................5
(c) Adjustment of Performance Goals....................................6
</TABLE>
6. Performance Awards; Performance Units.....................................6
-------------------------------------
<TABLE>
<S> <C> <C>
(a) Performance Awards.................................................6

<PAGE>

(b) Performance Units..................................................6

7. Payment of Performance Awards.............................................6
-----------------------------
(a) Payment of Awards..................................................6
(b) Termination of Service.............................................6
(c) Substitution of Shares for Units...................................6
</TABLE>
8. Amendment and Termination.................................................7
-------------------------
<TABLE>
<S> <C> <C>
(a) Termination........................................................7
(b) Amendment..........................................................7
</TABLE>
9. Miscellaneous.............................................................7
-------------
<TABLE>
<S> <C> <C>
(a) Status as an Employee Benefit Plan.................................7
(b) No Right to Continued Employment...................................7
(c) Construction of Language...........................................7
(d) Governing Law......................................................8
(e) Headings...........................................................8
(f) Non-Alienation of Benefits.........................................8
(g) Taxes..............................................................8
(h) Notices............................................................8
</TABLE>
(i) Required Regulatory Provision................................8
-----------------------------
<PAGE>

LONG-TERM INCENTIVE PLAN
------------------------

OF
--

PORT FINANCIAL CORP.
---------------------

1. General Purpose of Plan.
-----------------------

The purpose of the Long-Term Incentive Plan of Port Financial Corp. (the
"Plan") is to promote the growth and profitability of the Company, to provide
certain key officers of the Company and its Affiliates with an incentive to
achieve business objectives, to attract and retain individuals of outstanding
competence and to provide a means of compensating such individuals for their
contributions to the Company in a manner which permits such compensation to be
deductible by the Company for federal income tax purposes.

2. Definitions.
-----------

The following definitions shall apply for the purposes of this Plan, unless
a different meaning is plainly indicated by the context:

(a) "Affiliate" means (i) a member of a controlled group of corporations
of which the Company is a member determined in accordance with section 1563(a)
of the Code determined without regard to Sections 1563(a)(4) and (e)(3)(C) or
(ii) an unincorporated trade or business which is under common control with the
Company as determined in accordance with section 414(c) of the Code and the
regulations issued thereunder.

(b) "Bank" means Cambridgeport Bank and any successor thereto.

(d) "Change in Control" means any of the following events:

(i) the consummation of a reorganization, merger or consolidation of
the Company with one or more other persons, other than a transaction following
which:

(A) at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended ("Exchange Act")) in substantially the same relative
proportions by persons who, immediately prior to such transaction,
beneficially owned (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) at least 51% of the outstanding equity ownership
interests in the Company; and

(B) at least 51% of the securities entitled to vote generally in
the election of directors of the entity resulting from such
transaction are beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) in substantially the same relative
proportions by persons who,
<PAGE>

immediately prior to such transaction, beneficially owned (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) at least 51%
of the securities entitled to vote generally in the election of
directors of the Company;

(ii) the acquisition of all or substantially all of the assets of
the Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding
securities of the Company entitled to vote generally in the election of
directors by any person or by any persons acting in concert;

(iii) a complete liquidation or dissolution of the Company;

(iv) the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board of Directors of the Company
do not belong to any of the following groups:

(A) individuals who were members of the Board of Directors of
the Company on the date of this Agreement; or

(B) individuals who first became members of the Board of
Directors of the Company after the date of this Agreement either:

(1) upon election to serve as a member of the Board of
Directors of the Company by affirmative vote of three-quarters of
the members of such board, or of a nominating committee thereof,
in office at the time of such first election; or

(2) upon election by the shareholders of the Board of
Directors of the Company to serve as a member of such board, but
only if nominated for election by affirmative vote of three-
quarters of the members of the Board of Directors of the Company,
or of a nominating committee thereof, in office at the time of
such first nomination;

provided, however, that such individual's election or nomination did
not result from an actual or threatened election contest (within the
meaning of Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents (within the meaning of Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) other than by or on behalf of the
Board of Directors of the Company; or

(v) any event which would be described in section 2(d)(i), (ii),
(iii) or (iv) if the term "Bank" were substituted for the term "Company"
therein.

In no event, however, shall a Change of Control be deemed to have occurred as a
result of any acquisition of securities or assets of the Company, the Bank, or a
subsidiary of either of them, by the Company, the Bank, or any subsidiary of
either of them, or by any employee benefit plan maintained

-2-
<PAGE>

by any of them. For purposes of this section 2(d), the term "person" shall have
the meaning assigned to it under sections 13(d)(3) or 14(d)(2) of the Exchange
Act.

(e) "Code" means the Internal Revenue Code of 1986, as amended.

(f) "Committee" means the Committee described in Section 4.

(g) "Company" means Port Financial Corp. and any successor thereto.

(h) "Disability" means a condition of total incapacity, mental or
physical, preventing further performance of duty with the Company and the Bank
which the Committee shall have deter mined, on the basis of competent medical
evidence, is likely to be permanent.

(i) "Disinterested Board Member" means a member of the Board who
(i) is not a current employee of the Company or a subsidiary thereof, (ii) is
not a former employee of the Company who receives compensation for prior
services (other than benefits under a tax-qualified retirement plan) during the
taxable year, (iii) is not currently and has not been an officer of the Company
or a subsidiary thereof, (iv) does not receive consideration or remuneration
from the Company or any subsidiary thereof, either directly or indirectly, in
any capacity other than as a director and (v) does not possess an interest in
any other transaction, and is not engaged in a business relationship, for which
disclosure would be required pursuant to Item 404(a) or (b) of the proxy
solicitation rules of the Securities and Exchange Commission. A Disinterested
Board Member shall be an "outside director" as such term is defined under
section 162(m) of the Code.

(j) "Effective Date" means January 1, 2000.

(k) "Eligible Employee" means an employee of the Company, the Bank
or any Affiliates thereof whom the Committee selects to be eligible to receive a
Performance Award pursuant to the Plan.

(l) "Employer" means the Company, the Bank, any Affiliates, and,
with the prior approval of the Board and subject to such terms and conditions as
may be imposed by the Board, any other corporation or other business
organization or institution.

(m) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.

(n) "GAAP" means Generally Accepted Accounting Principals.

(o) "Performance Award" means an award of Performance Units.

(p) "Performance Goal" means the preestablished, objective
performance goal or goals determined in accordance with section 5(a).

(q) "Performance Period" means a period of three (3) consecutive
Plan Years or such other period as the Committee, in its discretion, may
determine.

-3-
<PAGE>

(r) "Performance Unit" means a unit of measure which is used to
compute the amount of a Performance Award, the value of which is preestablished
by the Committee and may be variable depending on the extent of achievement of
relevant Performance Goals.

(s) "Plan" means the Long-Term Incentive Plan of Port Financial
Corp., as amended from time to time, and may be referred to as the "Long-Term
Incentive Plan of Port Financial Corp."

(t) "Plan Year" means the calendar year.

(r) "Retirement" means retirement at or after the normal or early
retirement date set forth in any tax-qualified retirement plan of the Bank.

(s) "Share" means a share of common stock, par value $.01 per
share, of Port Financial, Corp. or any successor thereto.

3. Eligibility.
-----------

(a) In General. An individual who is a key employee of the
Employer or any of its subsidiaries shall be eligible to be considered for a
Performance Award under this Plan. An individual who is an Eligible Employee in
one Plan Year may be excluded from participation in a subsequent year at the
discretion of the Committee.

(b) Performance Periods Ending After December 31, 2001. Except as
provided in section 3(c), no later than 90 days (or such other period prescribed
under Section 162(m) of the Code and the regulations thereunder) after the
beginning of each Plan Year, the Committee shall determine which individuals
shall be Eligible Employees for the Performance Period that begins in such Plan
Year.

(c) Performance Periods Ending On or Before December 31, 2001. Not
later than March 31, 2000, the Committee shall determine which individuals shall
be Eligible Employees for the Performance Periods ending December 31, 2000 and
December 31, 2001.

4. Administration.
--------------

(a) Committee. The Plan shall be administered by a Committee
consisting of the members of the Compensation Committee of the Company who are
Disinterested Board Members. If the Committee consists of fewer than two
Disinterested Board Members, the Board shall appoint to the Committee such
additional Disinterested Board Members as shall be necessary to provide for a
Committee consisting of at least two Disinterested Board Members.

(b) Committee Action. The Committee shall hold such meetings, and
may make such administrative rules and regulations, as it may deem proper. A
majority of the members of the Committee shall constitute a quorum, and the
action of a majority of the members of the Committee present at a meeting at
which a quorum is present, as well as actions taken pursuant to the unanimous
written consent of all of the members of the Committee without holding a
meeting, shall be deemed to be actions of the Committee. All actions of the
Committee shall be final and conclusive and shall be binding upon the Employer
and all other interested parties. Any person dealing with the Committee shall be
fully protected in relying upon any written notice, instruction, direction or
other

-4-
<PAGE>

communication signed by two members of the Committee or by a representative of
the Committee authorized to sign the same in its behalf.

(c) Committee Responsibilities. Subject to the terms and
conditions of the Plan and such limitations as may be imposed from time to time
by the Board, the Committee shall be re sponsible for the overall management and
administration of the Plan and shall have such authority as shall be necessary
or appropriate in order to carry out its responsibilities, including, without
limitation, the authority:

(i) to interpret and construe the Plan, and to determine all
questions that may arise under the Plan as to eligibility for participation
in the Plan;

(ii) to adopt rules and regulations and to prescribe forms for
the operation and administration of the Plan; and

(iii) to take any other action not inconsistent with the
provisions of the Plan that it may deem necessary or appropriate.

5. Performance Goals.
-----------------

(a)(i) Performance Periods Ending After December 31, 2001. Except as
provided in section 5(a)(i), the Committee shall establish, during the first 90
days of each Plan Year (or such other period specified in section 162(m) of the
Code and any regulations thereunder), a Performance Goal or Performance Goals
for each Eligible Employee based on one or more of the criteria set forth in
section 5(b).

(ii) Performance Periods Ending On or Before December 31, 2001.
Prior to March 31, 2000, the Committee shall establish the Performance Goal or
Performance Goals for each Eligible Employee for the Performance Periods ending
December 31, 2000 and December 31, 2001.

(b) Criteria for Performance Goals. The Performance Goals for a
Plan Year shall be based on one or more of the following criteria:

(1) Basic earnings per common share,
(2) Basic cash earnings per common share,
(3) Diluted earnings per common share,
(4) Diluted cash earnings per common share,
(5) Net income,
(6) Cash earnings,
(7) Net interest income,
(8) Non-interest income,
(9) General and administrative expense to average assets
ratio
(10) Cash general and administrative expense to average
assets ratio,
(11) Efficiency ratio,
(12) Cash efficiency ratio,
(13) Return on average assets,
(14) Return on average stockholders' equity,
(15) Cash return on average stockholders' equity,
(16) Return on average tangible stockholders' equity,

-5-
<PAGE>

(17) Cash return on average tangible stockholders' equity.

The Performance Goals may be based on the performance of the Company and the
Bank in the absolute or in relation to peer institutions designated by the
Committee. Those Performance Goals which have meanings ascribed to them by
GAAP, shall have the meanings assigned to them under GAAP as in effect and
applied to the Company and the Bank on the date on which the Performance Goals
are established, without giving effect to any subsequent changes in GAAP, unless
the Committee specifically provides otherwise when it establishes the
Performance Goals. Performance Goals based upon cash earnings or cash returns
shall refer to or be calculated based upon net income plus non-cash charges for
goodwill amortization and amortization relating to employee stock ownership
plans and restricted stock plans and related tax benefits. Performance Goals
based upon cash general and administrative expenses shall refer to general and
administrative expenses, calculated in accordance with GAAP, adjusted to
eliminate non-cash amortization expenses related to employee stock ownership
plans and restricted stock plans.

(c) Adjustment of Performance Goals. Once established, the
Performance Goals for a particular Plan Year shall not be changed or adjusted
during such Plan Year, unless the Committee determines that such Performance
Goal shall be adjusted to decrease or eliminate the amount of an Eligible
Employee's Performance Award due to external changes or other unanticipated
business conditions; provided, however, that any such change or adjustment shall
-------- -------
comply with the requirements of Section 162(m) of the Code and any regulations
thereunder.

6. Performance Awards; Performance Units.
-------------------------------------

(a) Performance Awards. An Eligible Employee shall be entitled to
receive a Performance Award pursuant to this Plan to the extent that the
preestablished Performance Goal determined by the Committee is satisfied. No
Performance Award to an Eligible Employee may exceed $600,000.

(b) Performance Units. A Performance Award shall consist of one or
more Performance Units. Each Performance Unit shall represent the right to
receive a payment in the amount of $1,000 upon the achievement of the
Performance Goal(s) established for the relevant Performance Period. If
determined by the Committee in its discretion, a Performance Unit may also
represent the right to receive an amount that is less than or more than $1,000
upon achievement that falls short of or exceeds the established Performance
Goal(s) for a Performance Period by prescribed tolerances.

7. Payment of Performance Awards.
-----------------------------

(a) Payment of Awards. As soon as practicable following the last
day of each Plan Year, the Committee shall determine the extent of achievement
of the Performance Goal(s) established for the Performance Period ended in such
Plan Year, the value (if any) of each Performance Unit awarded for such
Performance Period and the value of each Performance Award and shall certify all
such determinations in writing. Each such Performance Award shall be paid in the
form and manner determined by the Committee, as soon as practicable after the
Committee determines the amount of such Performance Award.

(b) Termination of Service. An Eligible Employee who terminates
employment with the Employer during any Plan Year or following the end of any
Plan Year, but prior to the payment of a Performance Award earned for such Plan
Year, shall forfeit any right to receive such

-6-
<PAGE>

Performance Award; provided, however, that if such termination occurs after the
-------- -------
end of the Plan Year to which the Performance Award relates and such termination
is due to death, Disability, Retirement or a Change in Control, then, in such
case and only in such case, such Performance Award shall not be forfeited and
shall be paid as if no termination of service had occurred. In the event of a
termination of employment with the Employer due to a Change in Control, such
Performance Award shall be paid on the date of the Change in Control.

(c) Substitution of Shares for Units. Notwithstanding anything in
this Plan to the contrary, the Committee shall have the right, in its sole and
absolute discretion, to substitute options to purchase Shares and awards of
restricted Shares for Performance Units hereunder, subject to the following
terms and conditions:

(i) any such substitution shall be effected by written notice to
the Eligible Employee given on or before the date on which a
cash payment in settlement of the Performance Units would
otherwise be paid;

(ii) an option to purchase a Share shall be valued at $2.60 and an
award of a Restricted Share shall be valued at $7.00, such
that an award of 142.86 restricted Shares or options to
purchase 384.62 Shares shall provide full substitution for
each Performance Unit;

(iii) options to purchase Shares and/or awards of restricted Shares
granted in substitution for Performance Units shall vest
within five (5) years after the first day of the Performance
Period for which the substitution is to be effected;

(iv) the exercise price per Share of any options granted in
substitution for Performance Units shall be no greater that
the Fair Market Value of a Share on the date the substitution
is effected, and the acquisition price per Share of Shares
subject to any restricted stock award shall not exceed the par
value of a Share.

The substitution of options or restricted stock awards shall result in the
cancellation of an appropriate number of Performance Units without payment
therefor.

8. Amendment and Termination.
-------------------------

(a) Termination. The Board may suspend or terminate the Plan in
whole or in part at any time by giving written notice of such suspension or
termination to the Committee.

(b) Amendment. The Board may amend or revise the Plan in whole
or in part at any time; provided, however, that, to the extent required to
-------- -------
comply with Section 162(m) of the Code and any regulations thereunder, no such
amendment or revision shall be effective if it amends a material term of the
Plan unless approved by the affirmative vote of a majority of the votes cast by
the shareholders of the Company at a meeting duly called and held for such
purpose.

9. Miscellaneous.
-------------

-7-
<PAGE>

(a) Status as an Employee Benefit Plan. This Plan is not intended
to satisfy the requirements for qualification under section 401(a) of the Code
or to satisfy the definitional require ments for an "employee benefit plan"
under section 3(3) of ERISA. It is intended to be a non-qualified incentive
compensation program that is exempt from the regulatory requirements of ERISA.
The Plan shall be construed and administered so as to effectuate this intent.

(b) No Right to Continued Employment. Neither the establishment
of the Plan nor any provisions of the Plan nor any action of the Board or the
Committee with respect to the Plan shall be held or construed to confer upon any
Eligible Employee any right to a continuation of his or her position as an
employee of the Employer. The Employer reserves the right to dismiss any
Eligible Employee or otherwise deal with any Eligible Employee to the same
extent as though the Plan had not been adopted.

(c) Construction of Language. Whenever appropriate in the Plan,
words used in the singular may be read in the plural, words used in the plural
may be read in the singular, and words importing the masculine gender may be
read as referring equally to the feminine or the neuter. Any reference to a
section number shall refer to a section of this Plan unless otherwise indicated.

(d) Governing Law. The Plan shall be construed, administered and
enforced according to the laws of the Commonwealth of Massachusetts without
giving effect to the conflict of laws principles thereof, except to the extent
that such laws are preempted by federal law.

(e) Headings. The headings of sections are included solely for
convenience of reference. If there is any conflict between such headings and the
text of the Plan, the text shall control.

(f) Non-Alienation of Benefits. The right to receive a benefit
under the Plan shall not be subject in any manner to anticipation, alienation or
assignment, nor shall such right be liable for or subject to debts, contracts,
liabilities, engagements or torts.

(g) Taxes. The Employer shall have the right to deduct from all
amounts paid by the Employer as a Performance Award under the Plan any taxes
required by law to be withheld with respect to such award.

(h) Notices. Any communication required or permitted to be given
under the Plan, including any notice, direction, designation, comment,
instruction, objection or waiver, shall be in writing and shall be deemed to
have been given at such time as it is delivered personally or five days after
mailing if mailed, postage prepaid, by registered or certified mail, return
receipt requested, addressed to such party at the address listed below, or at
such other address as one such party may by written notice specify to the other
party:

(i) If to the Committee:

Port Financial Corp.
c/o Cambridgeport Bank
689 Massachusetts Avenue
Cambridge, Massachusetts 02139
Attention: Corporate Secretary
-------------------

-8-
<PAGE>

(ii) If to an Eligible Employee, to the Eligible Employee's
address as shown in the Employer's records.

(i) Required Regulatory Provision. Notwithstanding anything herein
-----------------------------
contained to the contrary, any payments pursuant to this Plan, are subject to
and conditioned upon their compliance with section 18(k) of the Federal Deposit
Insurance Act and any regulations promulgated thereunder.

-9-

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use our reports (and
to all references to our Firm) included in or made a part of this registration
statement.

ARTHUR ANDERSEN
Independent Public Accountant

Boston, Massachusetts
January 14, 2000

<PAGE>

EXHIBIT 23.3

January 19, 2000

Board of Trustees
Cambridgeport Mutual Holding Company
Board of Directors
Cambridgeport Bank
689 Massachusetts Avenue
Cambridge, Massachusetts 02139

Members of the Board of Trustees and Board of Directors:

We hereby consent to the use of our firm's name in Amendment No. 1 to the
Form S-1 Registration Statement for Port Financial Corp. We also hereby consent
to the inclusion of, summary of and references to our Appraisal and our
statement concerning subscription rights in such filings including the
prospectus of Port Financial Corp.

Sincerely,

RP FINANCIAL, LC.

/s/ Gregory E. Dunn
-----------------------
Gregory E. Dunn
Senior Vice President

<PAGE>

MARKETING MATERIALS

FOR

PORT FINANCIAL CORP.

Draft #3, dated January 19, 2000
<PAGE>

PORT FINANCIAL CORP.
STOCK OFFERING MARKETING MATERIALS

TABLE OF CONTENTS
-----------------

CORRESPONDENCE
- --------------

Letter to Depositors (Eligibility Record Date and Supplemental Eligibility Date)
Potential Investor Letter (Non-Customers, Call-Ins)
Ryan, Beck "Broker Dealer" Letter

ADVERTISEMENTS
- --------------

Tombstone Newspaper Advertisement (optional)
Branch Lobby Poster - Offering (optional)

BROCHURES
- ---------

Q&A Brochure
Community Meeting Mailing Invitation and Branch Lobby Poster (optional)

FORMS
- -----

Stock Order Form

- -------------------------------------------------------------------------------
Note: Draft slide show presentation will be prepared later, if community
meetings are expected.
<PAGE>

[LETTER TO ELIGIBLE AND SUPPLEMENTAL ELIGIBLE DEPOSITORS]

Dear Customer:

I am pleased to inform you of an investment opportunity. You have been
granted a priority right to purchase common stock of Port Financial Corp., the
parent company of Cambridgeport Bank.

Cambridgeport Mutual Holding Company's Board of Trustees and Corporators
recently approved a change in our form of organization from a mutual holding
company structure to a stock holding company structure. Currently, our mutual
holding company owns all of the common stock of the Bank, and there are no
outside stockholders. After the conversion to stock form, all of the common
stock of Port Financial Corp. will be owned by stockholders, and Port Financial
Corp. will own all of the Bank's common stock. As part of the conversion, Port
Financial Corp. is conducting an initial public offering of up to 10,580,000
shares of common stock at $10 per share. We believe that the change in
corporate structure and the proceeds received from the stock offering will
enable Cambridgeport Bank to continue providing high quality service to
customers while increasing our lending and product capabilities.

Cambridgeport Bank depositors who had accounts as of July 31, 1998 or as of
September 30, 1999, have a priority right, but no obligation, to buy common
stock before it is offered to the general public.

It is important to note that:

. THERE WILL BE NO CHANGE IN THE ACCOUNT NUMBERS, INTEREST RATES OR OTHER
TERMS OF YOUR CAMBRIDGEPORT BANK DEPOSITS OR LOANS.

. THE NAME OF OUR BANK WILL NOT CHANGE, AND YOU WILL CONTINUE TO ENJOY THE
SAME SERVICES IN THE SAME OFFICES, WITH THE SAME STAFF.

. OUR CORPORATE CHANGE DOES NOT INVOLVE AN OUTSIDE COMPANY. WE INTEND TO
REMAIN INDEPENDENT AND COMMUNITY-ORIENTED.

. YOUR DEPOSIT ACCOUNTS AT THE BANK WILL CONTINUE TO BE INSURED IN FULL BY A
COMBINATION OF THE FEDERAL DEPOSIT INSURANCE CORPORATION AND THE DEPOSITORS
INSURANCE FUND.

. PORT FINANCIAL CORP. STOCK, LIKE ALL COMMON STOCK, CANNOT BE INSURED BY THE
FDIC OR ANY GOVERNMENT AGENCY.

Before making an investment decision, please review the information
contained in the enclosed Prospectus, including details about the stock
offering. If you are interested in purchasing shares of Port Financial Corp.
common stock, complete the enclosed Stock Order Form and return it, with full
payment or deposit account withdrawal instructions, in the return envelope
provided. Stock Order Forms must be received prior to 10:00 a.m., Massachusetts
time, on ________, 2000.

We expect that, after the offering is completed, Port Financial Corp.
common stock will be quoted on the Nasdaq National Market under the symbol
"PORT."

If you have questions regarding the offering, please refer to the enclosed
Questions & Answers Brochure, or you may call our Stock Information Center at
(800) 835-9094, Monday through Friday, from 9:00 a.m. to 4:00 p.m.

Sincerely,

James B. Keegan
President and Chief Executive Officer

This letter is neither an offer to sell nor a solicitation of an offer to buy
common stock. The offer is made only by the Prospectus. The shares of common
stock are not savings accounts or deposits and are not insured by the Federal
Deposit Insurance Corporation, the Depositors Insurance Fund or any other
government agency.
<PAGE>

[POTENTIAL INVESTOR LETTER]

Dear Friend:

I am pleased to inform you of an investment opportunity. Port Financial Corp.,
parent company of Cambridgeport Bank, is conducting its initial public offering
of up to 10,580,000 shares of common stock at $10 per share.

Enclosed please find a Prospectus and Questions & Answers Brochure. If you are
interested in purchasing shares of Port Financial Corp. common stock, complete
the enclosed Stock Order Form and return it, with full payment, in the return
envelope provided. Stock Order Forms must be received prior to 10:00 a.m.,
Massachusetts time, on _________, 2000.

We expect that, after the offering is completed, Port Financial Corp. common
stock will be quoted on the Nasdaq National Market under the symbol "PORT."

If you have questions regarding the offering, refer to the Questions & Answers
Brochure, or you may call our Stock Information Center at (800) 835-9094, Monday
through Friday, from 9:00 a.m. to 4:00 p.m.

Thank you for your interest in our stock offering.

Sincerely,

James B. Keegan
President and Chief Executive Officer

[RYAN, BECK "BROKER DEALER" LETTER -- Ryan, Beck Letterhead]

Dear Sir/Madam:

At the request of Port Financial Corp., we are enclosing materials regarding
the offering of Port Financial Corp. common stock. We have included in the
package a Prospectus and Questions & Answers Brochure describing the stock
offering. Ryan, Beck & Co., Inc. has been retained by Port Financial Corp. as
selling agent in connection with the stock offering.

We have been asked to forward these materials to you in view of certain
regulatory requirements and the securities laws of your state.

Sincerely,

Ryan, Beck & Co.

_____________________________
NOTE: To accompany, not replace, one of the preceding letters for prospects in
states where the offer must be made by a broker-dealer.
<PAGE>

[TOMBSTONE NEWSPAPER ADVERTISEMENT - Optional]

PORT FINANCIAL CORP. [LOGO]
Holding Company for Cambridgeport Bank

UP TO 10,580,000 SHARES
COMMON STOCK

$10 Per Share
Purchase Price

Port Financial Corp., newly organized to become the holding company for
Cambridgeport Bank, is conducting an initial offering of common stock.

THIS OFFERING EXPIRES AT 10:00 A.M., MASSACHUSETTS TIME, ON _________, 2000

To receive a Prospectus, please call the Stock Information Center at (800) 835-
9094, Monday through Friday, from 9:00 a.m. to 4:00 p.m.

CAMBRIDGEPORT BANK [LOGO]

This advertisement is neither an offer to sell nor a solicitation of an offer to
buy common stock. The offer is made only by the Prospectus. The shares of
common stock are not savings accounts or deposits and are not insured by the
Federal Deposit Insurance Corporation, the Depositors Insurance Fund or any
other government agency.
<PAGE>

[STOCK OFFERING -- BRANCH LOBBY POSTER - Optional]

PORT FINANCIAL CORP. [LOGO]
Holding Company for Cambridgeport Bank

UP TO 10,580,000 SHARES
COMMON STOCK

$10 Per Share
Purchase Price

We are conducting an offering of common stock.

THIS OFFERING EXPIRES AT 10:00 A.M. ON _________, 2000

If you have questions, please call our Stock Information Center at (800) 835-
9094, Monday through Friday, from 9:00 a.m. to 4:00 p.m. The Stock Information
Center is located at our main office, in Cambridge.

CAMBRIDGEPORT BANK [LOGO]

This notice is neither an offer to sell nor a solicitation of an offer to buy
common stock. The offer is made only by the Prospectus. The shares of common
stock are not savings accounts or deposits and are not insured by the Federal
Deposit Insurance Corporation, the Depositors Insurance Fund or any other
government agency.
<PAGE>

[COMMUNITY MEETING MAILING INVITATION AND LOBBY POSTER - Optional]

You Are Cordially Invited. . .

To a Community Investor Meeting and Reception

to learn about the business focus of

Port Financial Corp.

and its common stock offering

[Put location here]

___________, 2000

and

___________, 2000

7:00 p.m.

Light Refreshments Served

SEATING IS LIMITED
Please call to make your reservation.

(800) 835-9094

PORT FINANCIAL CORP. [LOGO]

This invitation is neither an offer to sell nor a solicitation of an offer to
buy common stock. The offer is made only by the Prospectus. The shares of
common stock are not savings accounts or deposits and are not insured by the
Federal Deposit Insurance Corporation, the Depositors Insurance Fund or any
other government agency.
<PAGE>

BROCHURE
Front Cover
:
Port Financial Corp. [LOGO]

Questions
&
Answers

Cambridgeport Bank [LOGO]
Inside Cover:

An Opportunity.....

This brochure will answer questions about (1) the conversion of Cambridgeport
Mutual Holding Company from a mutual holding company to a stock holding company,
Port Financial Corp. (the "Conversion") and (2) the sale of common stock by Port
Financial Corp. (the "Offering"). If you have further questions, please call
our Stock Information Center at (800) 835-9094, Monday through Friday, from 9:00
a.m. to 4:00 p.m.

Investment in common stock involves certain risks. Before making an investment
decision, please read the enclosed Prospectus carefully, including the section
titled "Risk Factors".

BACKGROUND

In 1994, Cambridgeport Bank ("Cambridgeport" or the "Bank") organized a mutual
holding company, Cambridgeport Mutual Holding Company. The operations of
Cambridgeport Mutual Holding Company have been limited to owning the stock of
Cambridgeport Bank and holding certain investments. As a "mutual" entity,
Cambridgeport Mutual Holding Company has no stockholders.

Recently, the Board of Trustees of Cambridgeport Mutual Holding Company and the
Board of Directors of Cambridgeport Bank adopted a plan of conversion, whereby
Cambridgeport Mutual Holding Company will become Port Financial Corp., a stock
holding company. As part of the Conversion, Port Financial Corp. (the
"Company") will sell shares of common stock to investors in the Offering. As a
result, Port Financial Corp. will become a fully stockholder-owned company and
will be the parent company of the Bank.

1
<PAGE>

IT WILL BE BUSINESS AS USUAL

The Conversion will change our corporate form of organization, but not our
business relationships. We are not affiliating with another company. Our
organization will remain independent. The Bank's name is not changing. Our
employees will continue to serve our customers in the same offices.
Cambridgeport's Board of Directors will continue to serve the Bank, and will
serve as the initial directors of the Company.

THE CONVERSION

Q. What is the purpose of the Conversion?

A. The stock holding company corporate structure will give our organization
greater operating flexibility to meet goals and take advantage of business
opportunities. The proceeds from the sale of common stock in the Offering
will allow Cambridgeport Bank to better serve the needs of our local
community through increased lending and investing, diversifying our
products and offering additional ways to serve our customers, such as
internet banking. Proceeds may also be used to pay dividends to
stockholders and may be used to acquire other financial institutions and
related businesses.

Q. Will the Conversion have any effect on my Cambridgeport deposits or loan
accounts?

A. No. The Conversion will not affect the amount, interest rate, account
number or other terms of your deposit accounts at the Bank. Deposit
accounts will continue to be insured by the FDIC and the Depositors
Insurance Fund to the legal maximum. Likewise, the terms of loan accounts
and the rights of borrowers will not be affected by the Conversion.

PURCHASING STOCK IN THE OFFERING

The Offering includes a Subscription Offering to eligible Cambridgeport
depositors. Shares unsold in the Subscription Offering may be offered to the
public in a Community Offering.

Q. How many shares are being offered for sale, and what is the price per
share?

A. The Offering range is between 6,800,000 and 9,200,000 shares of common
stock, which may be increased to 10,580,500 shares. All shares will be
sold at $10 per share. No commission or brokerage fee will be charged for
the purchase of shares in the Offering.

Q. Who is eligible to purchase stock in the Subscription Offering?

A. No one is obligated to buy stock. However, pursuant to regulations, certain
Cambridgeport Bank depositors have "subscription rights" allowing them to
purchase shares in the Subscription Offering. Customers as of July 31,
1998, with deposits aggregating at least $50, have first priority to
purchase shares. Customers who were not depositors on July 31, 1998, but
who had deposits aggregating at least $50 on September 30, 1999, have
second

2
<PAGE>

priority. We have mailed Offering materials to depositors eligible in the
Subscription Offering. Our tax qualified employee benefit plans plan also
have a right to purchase stock in the Subscription Offering.

Q. Who may purchase stock in the Community Offering?

A. Shares not sold in the Subscription Offering may be made available in a
Community Offering, with first preference given to residents of
Cambridgeport Bank's local community, as described on p. ___ of the
Prospectus.

Q. I am eligible to purchase stock in the Subscription Offering, but am
not interested in investing. May I allow someone else to use my Stock
Order Form to take advantage of my priority as an eligible depositor?

A. No. Applicable law does not allow you to do so. Any attempt to transfer
subscription rights to any other person is illegal and subject to civil or
criminal fines. If anyone offers to give you money to buy stock in your
name, in exchange for later transferring the stock, or if someone requests
to share in proceeds upon your future sale of Port Financial Corp. stock,
please inform our Stock Information Center at (800) 835-9094.

Q. How do I place an order for shares, and how do I pay for them?

A. To order shares, you must complete the Stock Order Form that was enclosed
in your Offering materials package. Submit the original Stock Order Form,
with full payment, so that it is received (not postmarked) by 10:00 a.m.,
Massachusetts time, on ______, 2000.

Full payment for shares must be included with the Stock Order Form. You
----
may pay for the shares by (1) submitting a personal check, money order or
bank check and/or (2) authorizing withdrawal of funds from your current
Cambridgeport Bank savings, Treasury index, money market (without check-
writing privileges) or certificate of deposit accounts. Penalties for
early withdrawal from certificate accounts will be waived for the purchase
of shares in the Offering. You may not authorize a withdrawal from a
checking account or other account with check-writing privileges or from a
Cambridgeport IRA account. (If you wish to use IRA funds, see the
discussion below). Withdrawals will not be made until the completion of
the Offering, but the designated funds will not be available to you in the
interim.

As explained in detail on the back of the Stock Order Form, if you order
shares in the Subscription Offering, you must register the stock only in
the name(s) of persons/entities who are eligible at the same date that you
are eligible. Adding the name(s) of persons without accounts or the names
of persons with a later eligibility date than yours, may result in a loss
of your eligibility.

3
<PAGE>

Q. How do I deliver my Stock Order Form to Cambridgeport Bank?

A. Stock Order Forms may be submitted by (1) mailing the Stock Order Form in
the self-addressed return envelope enclosed with your Offering materials,
(2) overnight delivery to the address provided on the back of the Stock
Order Form, or (3) hand-delivery to our Stock Information Center, which is
located at our main office, 689 Massachusetts Avenue, Cambridge.

Q. Will I receive interest on funds I submit?

A. Yes. Funds received in the form of personal check, bank check or money
order will be cashed immediately and placed in a segregated account at
Cambridgeport Bank, and interest will accrue at the Bank's passbook savings
rate. When we complete the Conversion, interest earned will be paid by
check. With respect to authorized account withdrawals, interest will
continue to accrue at the account's contractual rate until we complete the
Conversion, and will remain in the account.

Q. May I purchase the common stock with funds in my Cambridgeport IRA account?

A. Yes. However, stock shares must be held in a self-directed retirement
account. By regulation, Cambridgeport Bank IRA's are not self-directed. If
you do not have a self-directed account, you will need to establish one at
a brokerage firm or other independent trustee. The funds that you choose to
invest in Port Financial Corp. stock will need to be transferred to the
self-directed account before your stock order is placed.

Because individual situations vary, and IRA processing takes additional
time, we recommend that you call our Stock Information Center by no later
than _______, 2000, for assistance with purchases using your Cambridgeport
IRA funds or another retirement account that you have.

Q. How many shares may I order?

A. The minimum number of shares that anyone may order is 25, or $250. The
maximum number of shares that an eligible depositor may order in the
Subscription Offering is 60,000, or $600,000. The same purchase limitation
applies to the Community Offering. Further, no person, together with
associates and persons acting in concert, may purchase an aggregate of more
than 120,000 shares, or $1.2 million, in all categories of the Offering,
combined.

Q. What is the deadline for placing an order in the Subscription Offering?

A. The deadline for receipt of completed Stock Order Forms is 10:00 a.m.,
Massachusetts time, on ______, 2000. If we offer stock for sale in a
Community Offering, the deadline may be the same or later than that
established for the Subscription Offering.

4
<PAGE>

Q. Can my local Cambridgeport branch assist me with purchasing shares or
completing my Stock Order Form?

A. No. Cambridgeport Bank branch personnel may not, by law, assist with
investment-related questions about the Offering. We have established a
Stock Information Center that is staffed by registered representatives able
to assist you with questions about the Conversion and the Offering. The
Stock Information can be reached at (800) 835-9094, Monday through Friday,
from 9:00 a.m. to 4:00 p.m.

Q. May I obtain a loan from Cambridgeport Bank or use a Cambridgeport Bank
line of credit to pay for stock?

A. No. Regulations do not allow Cambridgeport Bank to make loans for this
purpose, nor may you use a Cambridgeport line of credit to pay for shares.
However, you are not precluded from obtaining financing from another
financial institution.

Q. Is the common stock insured by the Federal Deposit Insurance Corporation or
the Depositors Insurance Fund?

A. No. Common stock is not a deposit and cannot be insured by the FDIC, the
Depositors Insurance Fund or any other government agency. Common stock is
subject to investment risk, including loss of principal invested.

Q. Is Cambridgeport Bank's management purchasing shares in the Offering?

A. Yes. As shown on p. ___ of the Prospectus, the Board of Directors,
executive officers and their associates intend to purchase an aggregate of
112,500 shares, or $1,125,000.

Q. Does placing an order guarantee that I will receive all, or a portion,
of the shares I ordered?

A. No. It is possible that orders received during the Offering will exceed the
number of shares offered for sale. In this case, referred to as an
"oversubscription," regulations require that orders be filled using a pre-
determined allocation procedure. Please refer to the sections of the
Prospectus titled "Subscription Offering and Subscription Rights" and
"Direct Community Offering and Syndicated Community Offering" for a
detailed description of allocation procedures.

If we are not able to fill an order (either wholly or in part), excess
funds will be refunded by check, including interest earned at the Bank's
passbook savings rate. If payment was to be made by withdrawal from a
Cambridgeport Bank deposit account, excess funds will remain in that
account.

AFTER THE OFFERING

Q. When will the stock trade, and when will certificates be mailed?

5
<PAGE>

A. Although the deadline for receipt of stock orders is 10:00 a.m.,
Massachusetts time, on _______, 2000, it may take several weeks to process
orders and to receive final regulatory approval to complete the Conversion.
The shares cannot trade, and certificates cannot be issued, until
regulatory approval is received. The stock will begin trading, and
certificates will be mailed to investors, as soon as practicable after
receipt of the approvals. Please be aware that you may not be able to sell
the shares that you purchased until you have received a stock certificate.
You may call the Stock Information Center after the Offering deadline to
inquire when the certificates are likely to be mailed.

Q. Will I be paid dividends on Port Financial stock?

A. No decision has been made whether to pay dividends. Port Financial Corp.'s
Board of Directors will consider a policy of paying quarterly cash
dividends. We do not guarantee that dividends will be paid or, if paid,
what the dollar amount of dividends will be.

Q. How can I purchase or sell Port Financial Corp. stock shares in the future?

A. After the Conversion is completed, you may purchase or sell shares through
a brokerage or discount brokerage firm. We expect the common stock to be
quoted on the Nasdaq National Market, under the symbol "PORT." You may
obtain price quotes by calling a stockbroker. Ryan, Beck & Co., Inc.
intends to make a market in the stock, and we will encourage other firms to
do so.

We cannot assure you that an active and liquid market for the common stock
will develop or that you will be able to sell your shares at or above the
$10 per share purchase price paid in the Offering.

__________________________________________________
ADDITIONAL QUESTIONS?

PLEASE CALL OUR STOCK INFORMATION CENTER

(800) 835-9094

FROM 9:00 A.M. TO 4:00 P.M., MONDAY THROUGH FRIDAY

This brochure is neither an offer to sell nor a solicitation of an offer to buy
common stock. The offer is made only by the Prospectus. The shares of common
stock are not savings accounts or deposits and are not insured by the Federal
Deposit Insurance Corporation, the Depositors Insurance Fund or any other
government agency.

6
<PAGE>

STOCK ORDER FORM INSTRUCTIONS
-----------------------------

(1) SHARES REQUESTED -- Indicate the number of shares that you wish to purchase,
----------------
and indicate the total amount due. The minimum purchase is 25 shares. Maximum
purchase limitations apply to aggregate orders. In the Subscription Offering,
the maximum purchase by each Eligible Account Holder or Supplemental Eligible
Account Holder is $1,000,000 (100,000 shares). In the Community Offering, the
maximum purchase by any person is $600,000 (60,000 shares). However, no person,
together with associates and persons acting in concert with such person, may
purchase, in all categories of the stock offering combined, an aggregate of more
than $1,200,000 (120,000 shares). See the "Limitations on Common Stock
Purchases" section of the Prospectus, page ___ for a definition of "associates"
and of "acting in concert". By signing this Stock Order Form, you are deemed to
confirm that your order does not conflict with these purchase limitations.

(2) METHOD OF PAYMENT - CHECKS OR MONEY ORDERS: Make personal checks, bank
-----------------
checks or money orders payable to Cambridgeport Bank. These funds will be
cashed immediately against available funds. You will earn interest at
Cambridgeport Bank's passbook savings rate from the time funds are received
until the offering is consummated. ACCOUNT WITHDRAWALS: List the savings,
Treasury index, money market (without check-writing privileges) or certificate
of deposit account(s), and designate the amount to be withdrawn from each. A
hold will immediately be placed on the amount(s) designated by you and the funds
held will be unavailable for withdrawal for other purposes. You will continue
to earn interest at the contractual rate of the account(s), and early withdrawal
penalties will be waived. FUNDS AUTHORIZED FOR WITHDRAWAL MUST BE AVAILABLE AT
THE TIME THIS FORM IS SUBMITTED. Note: Retirement accounts (such as IRAs and
Qualified Plans) cannot be designated for direct withdrawal in this section;
------
please contact the Stock Information Center as soon as possible, but we
recommend no later than _____, 2000, if you want to use your Cambridgeport Bank
retirement accounts (or other retirement funds). Your ability to use such funds
for the purchase of shares cannot be guaranteed and depends on various factors,
possibly including at what institution those funds are held. YOU MAY NOT USE
CASH OR WIRE TRANSFERS TO PAY FOR STOCK.

(3) PURCHASER INFORMATION - Purchase priorities are based on eligibility dates.
---------------------
There are two dates. Please check the one box that reflects the earliest date
---- ---------
at which you had a deposit account. List the name(s) on the account(s) and the
account number(s) at the applicable eligibility date. For example, if ordering
in just your name, list all the accounts you had at the applicable date. This
--------------
may include accounts on which you were a joint owner, your individual deposit
accounts and your IRA account. If ordering jointly, list the accounts in which
-------
either person had beneficial ownership at the applicable date. If purchasing
shares for a minor, list only the minor's account(s). If purchasing shares for
a corporate entity, list only that entity's corporate accounts. If additional
space is needed, attach a separate page. Failure to complete this section,
completing it incorrectly or omitting information, can result in the loss of all
or part of your stock allocation. See the sections of the Prospectus entitled
"Subscription Offering and Subscription Rights" and "Direct Community Offering
and Syndicated Community Offering", beginning on page __, ", for explanation of
purchase priorities in the Subscription Offering and the Community Offering, and
a detailed explanation of how shares will be allocated in the event of an
oversubscription.

(4) CAMBRIDGEPORT BANK MANAGEMENT, EMPLOYEES AND THEIR ASSOCIATES - If
-------------------------------------------------------------
applicable, check the appropriate box. Immediate family members are spouse,
parents, siblings and children who live in the same household as the director,
trustee, officer or employee of Cambridgeport Bank.

(5) STOCK REGISTRATION - Clearly print the name(s) and address in which you want
------------------
the stock certificate registered and mailed. If you are ordering stock in the
Subscription Offering as a Cambridgeport Bank (i) Eligible Account Holder as of
7/31/98 or (ii) Supplemental Eligible Account Holder as of 9/30/99, you must
----
register the stock only in the name(s) of the person(s)/entity(ies) with
qualifying accounts at the same date. Adding the name(s) of persons who were
not deposit account holders, or were account holders only at a later eligibility
date than checked in Section 3 of this Form, will be a violation of your
subscription rights and may result in a loss of your purchase priority in the
Subscription Offering. Enter the Social Security Number or Tax ID Number of the
registered owner(s). The first number listed will be identified with the stock
certificate for tax purposes. Listing a phone number is important. NOTE: ONE
STOCK CERTIFICATE WILL BE GENERATED PER ORDER FORM. IF VARIOUS REGISTRATIONS
AND SHARE AMOUNTS ARE DESIRED, A SEPARATE STOCK ORDER FORM MUST BE COMPLETED FOR
EACH CERTIFICATE DESIRED. CONTACT THE STOCK INFORMATION CENTER IF YOU NEED
ADDITIONAL FORMS. Note: Purchase limitations apply to aggregate orders - See
Section 1, above.

(6) FORM OF STOCK OWNERSHIP -- For reasons of clarity and standardization, the
-----------------------
stock transfer industry has developed uniform stockholder registrations that we
will utilize in the issuance of Port Financial Corp. stock certificates. If you
have any questions, please consult your legal advisor. When registering stock,
avoid the use of two initials. Use first name, middle initial and last name.
Check the one that applies.
---

BUYING STOCK INDIVIDUALLY: Indicate the name, mailing address and Social
Security Number of the individual owner. Include the first name, middle initial
and last name of the individual. Avoid using two initials. Omit words that do
not affect ownership, such as "Mrs.", "Dr.", "special account", etc. You may
not indicate a beneficiary. Upon the individual's death, the stock will be
owned by the individual's estate and distributed as indicated by the will or
otherwise in accordance with law. If ordering in the Subscription Offering, the
individual listed must have had qualifying deposits on either 7/31/98 or 9/30/99
or be eligible in the Subscription Offering category applicable to Cambridgeport
Bank Management.

BUYING STOCK JOINTLY: Note that if registering stock in more than one person's
name for an order placed in the Subscription Offering, only persons with
qualifying accounts at the same date (either 7/31/98 or 9/30/99) may be listed.
Two alternatives exist when registering stock in more than one name:

JOINT TENANTS -- Joint Tenancy (with Right of Survivorship) may be specified to
identify two or more owners where ownership is intended to pass automatically
to the surviving tenant(s). All owners must agree to the transfer or sale of
shares held in this form.

TENANTS IN COMMON-- Tenants in Common may also be specified to identify two
or more owners. When stock is held as Tenants in Common, upon the death of one
co-tenant, ownership of the stock will be held by the surviving co-tenant(s)
and by the heirs of the deceased co-tenant. All parties must agree to the
transfer or sale of shares held in this form.

BUYING STOCK FOR A MINOR: A minor may acquire stock under the Uniform Transfer
to Minors Act if the minor is the actual owner of the stock, with an adult
custodian listed on the registration who is responsible for the investment until
the minor reaches legal age (18 or 21 years or age, depending on the state).
Only one minor and one custodian may be listed. Please note that if ordering in
the Subscription Offering, the minor must have had qualifying deposits at
Cambridgeport on either 7/31/98 or 9/30/99.

How to complete Section 5 (Stock Registration) when buying stock for a minor:
On the first line, print the first name, middle initial and last name of the
custodian; after the name write the initials "CUST. On the second line, print
the first name, middle initial and last name of the minor. To the right of the
minor's name, indicate his or her Social Security Number only; do not list the
custodian's Social Security Number. Standard postal service state abbreviations
should be used. For example, stock held by John P. Doe as custodian for Susan
A. Doe under the Massachusetts Uniform Transfer to Minors Act will be
abbreviated John P. Doe, CUST Susan A. Doe UTMA-MA.

BUYING STOCK FOR A CORPORATION/PARTNERSHIP: On the first name line, write the
name of the corporation or partnership and list that entity's Tax ID Number.
Note that, if ordering in the Subscription Offering, the corporation or
partnership must have had qualifying deposits at Cambridgeport Bank at either
7/31/98 or 9/30/99.

BUYING STOCK THROUGH AN IRA: Stock may be purchased using self-directed
Individual Retirement Accounts which have the ability to hold the securities,
such as at a brokerage firm. The purchase of shares using such funds can only
be made through a self-directed retirement account, not through a Cambridgeport
Bank IRA. Please contact the Stock Information Center by _______, 2000, for
assistance with IRA-related questions. If ordering in the Subscription
Offering, the beneficial owner of the IRA must have had qualifying deposits at
Cambridgeport Bank on either 7/31/98 or 9/30/99 or be eligible in the
Subscription Offering category applicable to Cambridgeport Bank Management.

FOR BROKER/TRUSTEE USE ONLY -- How to complete Section 5 (Stock Registration)
when buying stock using a self-directed retirement account: Registration should
be completed to reflect your firm's registration requirements for any subsequent
mailings, including stock certificates. For example, on the first line you
would indicate the name of the firm followed by "TRUSTEE" or "CUSTODIAN". On
the second line, indicate the name of the beneficial owner, for example: "FBO
JOHN SMITH IRA". You may also indicate the owner's account number or other
identifying information. Indicate the address and name of the department at
your firm to which mailings should be directed. Also indicate the Tax ID Number
under which your firm's IRAs are reported.

BUYING STOCK IN A TRUST/FIDUCIARY CAPACITY: Information provided with respect
to stock to be held in a fiduciary capacity must include:

. The name(s) of the fiduciary. If an individual, list the first name, middle
initial and last name. If a corporation, list the full corporate title
(name). If an individual and a corporation, list the corporation's title
before the individual.

. The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, etc.

. A description of the document governing the fiduciary relationship, such as
a trust agreement or court order. Documentation may be required to register
your stock in a fiduciary capacity.

. The date of the document governing the relationship, except that the date
of a trust created by a will need not be included.

. The name of the maker, donor or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John
P. Doe, Trustee Under Agreement Dated 10-1-87 for Susan A. Doe.

(7) NASD AFFILIATION - If applicable, check the box.
----------------

(8) ACKNOWLEDGMENT AND SIGNATURE - Please review this Form before signing.
----------------------------
Stock Order Forms submitted without a signature will not be accepted. Only one
signature is required, unless Section 2 (Method of Payment) includes
authorization to withdraw from a Cambridgeport Bank deposit account requiring
more than one signature. If signing as a custodian, trustee, corporate officer,
etc., please include your title. If exercising a Power of Attorney ("POA"), you
must submit a copy of the POA agreement with this Stock Order Form.

Address Overnight Deliveries to:
Cambridgeport Bank, 689 Massachusetts Avenue, Cambridge, MA 02139
Attn: Stock Information Center
QUESTIONS? Call the Stock Information Center at (800) 835-9094, Monday through
Friday, from 9:00 a.m. to 4:00 p.m.
<PAGE>

<TABLE>
<CAPTION>
<S> <C>
Pre-printed Record Codes PORT FINANCIAL CORP.

Pre-printed Name & Address STOCK ORDER FORM (Instructions on Reverse Side)

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

FOR INTERAL USE
---------------------

Date Rec'd
---------------------

Batch No. / Order No.

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

DEADLINE AND DELIVERY
- --------------------------------------------------------------------------------
Expiration Date: 10:00 a.m., Massachusetts time, on ______, 2000, unless extended. This original Stock Order Form, properly
executed and with full payment, must be received (not postmarked) by this deadline or it will be void. Delivery will be
accepted by the return envelope provided, or by overnight delivery to the address on the reverse side of this Form. Stock Order
Forms may ONLY be hand-delivered to our Stock Information Center located at our Cambridge main office, 689 Massachusetts Avenue.
Copies and facsimiles of Stock Order Forms will not be accepted.
- --------------------------------------------------------------------------------
YOU MUST PRINT CLEARLY AND COMPLETE ALL APPLICABLE SHADED AREAS.
- --------------------------------------------------------------------------------

(1) SHARES REQUESTED
- --------------------------------------------------------------------------------
Number of Shares Price per Amount Due
Share

X $10.00 = $
(25 share minimum. See reverse side for maximum purchase limitations.)
- --------------------------------------------------------------------------------

(2) METHOD OF PAYMENT (Cash and wires will not be accepted)

- --------------------------------------------------------------------------------
[_] CHECK OR MONEY ORDER PAYMENT
----------------------------
Enclosed is/are personal check(s), bank check(s) or money order(s)
payable to Cambridgeport Bank totaling: $
----------------

[_] PAYMENT BY ACCOUNT WITHDRAWAL
-----------------------------
The undersigned authorizes withdrawal from the Cambridgeport Bank
savings, Treasury index, money market (without check-writing privileges)
or CD account(s) listed below. Retirement accounts (i.e., IRA) and
checking or other check-writing accounts may not be designated
for withdrawal below. There will be no early withdrawal penalty
applicable for accounts authorized below.

For Internal
Use Only Account Number Amount
- ------------------- ---------------- ----------
1. ___________________ $
2. ___________________ $
3. ___________________ $
4. ___________________ $
5. ___________________ $
Total Withdrawal(s): $

Funds enclosed or authorized for withdrawal must be available when this
Form is submitted.
- --------------------------------------------------------------------------------

(3) PURCHASER INFORMATION (Check the one box which applies)
- --------------------------------------------------------------------------------
[_] Eligible Account Holder --You were a Cambridgeport Bank depositor with an
aggregate of at least $50 on deposit on July 31, 1998. In the spaces below,
list all accounts you had at that eligibility date.

[_] Supplemental Eligible Account Holder --You are not an Eligible Account
Holder, but you were a Cambridgeport Bank depositor with an aggregate of at
least $50 on deposit on September 30, 1999. In the spaces below, list all
accounts you had at that eligibility date.

[_] I do not qualify in the Subscription Offering as any of the above -- You
were not a Cambridgeport Bank depositor with an aggregate of at least $50 at
either of the above dates.

Account
Title/Name(s) on Eligibility Date Account Number
- ---------------------------------- --------------

If additional space is needed, attach a separate page. Failure to complete this
section, or completing it incorrectly, may result in a loss of part or all of
your stock allocation.
- -------------------------------------------------------------------------------
(4) CAMBRIDGEPORT BANK MANAGEMENT, EMPLOYEES, ASSOCIATES

[_] Check here if you are a Cambridgeport Bank director, trustee, officer or
employee.

[_] Check here if you are member of the immediate family of a Cambridgeport Bank
director, trustee, officer or employee. (See definition on reverse side of
this Form.)

[_] Check here if you are a Cambridgeport Mutual Holding Company corporator.
- --------------------------------------------------------------------------------

(5) STOCK REGISTRATION (PRINT clearly and provide all information, which will be
used for stock certificate delivery and future mailings).
- ------------------------------------------------------------------------------------------------------------------
(First Name, Middle Initial, Last Name) (Social Security No./Tax ID No. (certificate will show only this number)

- ------------------------------------------------------------------------------------------------------------------
(First Name, Middle Initial, Last Name) (Social Security No./Tax ID No.)

- ------------------------------------------------------------------------------------------------------------------
(Street Address) (Daytime Phone Number)

- ------------------------------------------------------------------------------------------------------------------
(City, State, Zip Code) (Evening Phone Number)

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

(6) FORM OF STOCK OWNERSHIP (Check one --See ownership definitions on reverse side).
- ------------------------------------------------------------------------------------------------------------------
[_] Individual [_] Joint Tenants [_] Tenants in Common [_] Trust (Under Agreement Dated ________)
[_] Corporation [_] Partnership [_] Uniform Transfer to Minors [_] Other
- ------------------------------------------------------------------------------------------------------------------
FOR BROKER USE ONLY: [_] IRA Social Security # of Beneficial Owner: _______-____-__________
- ------------------------------------------------------------------------------------------------------------------

(7) NATIONAL ASSOCIATION OF SECURITIES DEALERS ("NASD") AFFILIATION (Check only if applicable)
- -----------------------------------------------------------------------------------------------------------------------------------

Check here if you are a member of the NASD or a person affiliated with an NASD member or a member of the immediate family of any
such person to whose support such person contributes directly or indirectly, or if you have an account in which an NASD member, or
person associated with an NASD member, has a beneficial interest. I agree 1) not to sell, transfer or hypothecate the stock for
period of three months following issuance; and 2) to report this subscription in writing to the applicable NASD member within one
day of payment for the stock.
- ----------------------------------------------------------------------------------------------------------------------------------

(8) ACKNOWLEDGEMENT AND SIGNATURE
- ----------------------------------------------------------------------------------------------------------------------------------

I acknowledge receipt of the Prospectus dated ____, 2000 and that I have read the conditions described therein, including the
section titled "Risk Factors". The undersigned agrees that after receipt by Port Financial Corp., this Stock Order Form may not be
modified or withdrawn without Port Financial Corp.'s consent, and if withdrawal from Cambridgeport Bank accounts has been
authorized, the amount shall not otherwise be available for withdrawal. Under penalty of perjury, I certify that (1) the Social
Security or Tax ID information and all other information provided hereon are true, correct and complete, (2) I am purchasing solely
for my own account, and there is no agreement or understanding regarding the sale or transfer of the shares, and (3) I am not
subject to backup withholding tax. [Cross out (3) if you have been notified by the IRS that you are subject to backup withholding].
The undersigned acknowledges that the shares of common stock are not savings accounts or deposits, are not guaranteed or insured by
the Federal Deposit Insurance Corporation, the Depositors Insurance Fund or any other government agency.

Subscription rights pertain to those eligible to subscribe in the Subscription Offering. The Plan of Conversion and applicable law
and regulations prohibit any person from transferring, or entering into any agreement, directly or indirectly, to transfer, the
legal or beneficial ownership of subscription rights or the underlying stock to the account of another. Port Financial Corp. will
pursue any and all legal and equitable remedies in the event management becomes aware of the transfer of subscription rights, and
they will not honor orders known by them to involve such transfer.

ONE SIGNATURE REQUIRED, UNLESS PART 2 OF THIS FORM INCLUDES ACCOUNTS REQUIRING MORE THAN ONE SIGNATURE TO AUTHORIZE WITHDRAWAL. IF
SIGNING AS A CUSTODIAN, CORPORATE OFFICER, ETC., PLEASE INCLUDE YOUR FULL TITLE.

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

Signature Date Signature Date
- ----------------------------------------------------------------------------------------------------------------------------------

ORDER NOT VALID UNLESS SIGNED
-----------------------------
QUESTIONS? See instructions on reverse side of this Form, or call the Stock Information Center at (800) 835-9094,
Mon. - Fri., 9:00 a.m. to 4:00 p.m.
</TABLE>

<PAGE>

<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from consolidated
balance sheet and statement of operations and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 13,731
<INT-BEARING-DEPOSITS> 5,062
<FED-FUNDS-SOLD> 6,542
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 133,900
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 544,812
<ALLOWANCE> 7,297
<TOTAL-ASSETS> 721,813
<DEPOSITS> 592,864
<SHORT-TERM> 41,431
<LIABILITIES-OTHER> 8,940
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 78,578
<TOTAL-LIABILITIES-AND-EQUITY> 721,813
<INTEREST-LOAN> 29,886
<INTEREST-INVEST> 6,323
<INTEREST-OTHER> 8,888
<INTEREST-TOTAL> 37,097
<INTEREST-DEPOSIT> 17,361
<INTEREST-EXPENSE> 1,583
<INTEREST-INCOME-NET> 18,153
<LOAN-LOSSES> 17,591
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 14,289
<INCOME-PRETAX> 5,433
<INCOME-PRE-EXTRAORDINARY> 3,607
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,607
<EPS-BASIC> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 2.63
<LOANS-NON> 32
<LOANS-PAST> 475
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 6,633
<CHARGE-OFFS> 11
<RECOVERIES> 113
<ALLOWANCE-CLOSE> 7,297
<ALLOWANCE-DOMESTIC> 7,297
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,201

</TABLE>