Depositors Insurance Fund

“The Depositors Insurance Fund (DIF) has contracted with Longfellow Investment Management, Inc. to manage the investment of approximately $285 million of the DIF's assets. Longfellow's investment activities are governed by specific Investment Policies adopted annually by the DIF's Board of Directors, and by Investment Guidelines adopted annually by the Investment Committee of the Board. The Investment Committee meets quarterly, reviews the investment activity of Longfellow, and reports to the Board on the Investment Committee meeting. Following the Investment Committee review, the Board reviews the purchases and sales of investments for the previous quarter at its quarterly Board meeting.”

“The Commissioner of Banks of the Commonwealth of Massachusetts has approval authority for a number of actions of the Board of Directors, most notably payment of dividends, changes to bylaws, setting the level of premiums and assessment, provision of most forms of financial assistance, payment of depositors in the event of a bank failure, and liquidation of the company. In addition, bylaw amendments approved by the Board require approval of a majority of the members, as well as approval of the Commissioner of Banks.”

“The Form 990 is prepared by the DIF's auditing firm using information from the audit and additional information supplied by the DIF's Treasurer. The auditing firm provides a draft of the Form 990 to the Treasurer prior to filing, and the Treasurer reviews the Form 990 and provides comments and questions to the auditing firm. If any changes are necessary based on the review by the Treasurer, the auditing firm makes the changes. The final copy is prepared by the auditing firm and provided to the Treasurer for a final review. When the Treasurer is satisfied with the final Form 990, he executes Form 8879-EO authorizing the auditing firm to file the return electronically.”

“Officers, directors, and key employees are required to disclose any potential conflict of interest prior to participating in any decision about transacting business with any person or organization with whom he/she has a potential conflict. Officers and employees are required to disclose any loans they have from member banks. Each officer, director, and key employee is responsible for determining for themselves whether a conflict or potential conflict requiring disclosure exists. In addition, (1) members of the Watch Bank Committee are required to file an annual form disclosing any securities of problem banks held by the Committee member, his/her family, or his/her bank; and (2) members of the Board of Directors are required to file an annual form disclosing securities of First Tier problem banks held by the Committee member, his/her family, or his/her bank, but only when there are banks on the First Tier of the Watch List. The DIF enforces compliance with the Watch Bank Committee and Board's annual filing requirements applicable to problem banks. Each year, a disclosure form is given to Watch Bank Committee members and, when there are banks on the First Tier of the Watch List, Board members, and management follows up with the directors to ensure that the disclosure forms are turned in. Members of the Board of Directors are told only the names of the banks on the first tier.”

“Compensation of the CEO and other officers is addressed in December of each year by the compensation Committee and the Board. In preparation for the compensation Committee meeting, the Compensation Committee secures information from personnel consultants about merit and cost of living increases and salary structure adjustments in the banking industry and in other organizations viewed as broadly comparable to the DIF. This information, along with the CEO's recommendations for compensation for other officers and employees, is presented to the compensation Committee. The compensation Committee then agrees on a recommendation for officers' compensation, including the CEO's compensation, and presents the recommendations to the full Board. The Board considers the Committee's recommendations and establishes the compensation for the CEO and other officers in Executive Session with no officers present, and reports the compensation changes to the CEO.”

“The DIF's charter is codified in Chapter 44 of the Massachusetts Acts of 1932, as amended, and Chapter 43 of the Massachusetts Acts of 1934, as amended. As such, the DIF's charter is available to the public. The DIF publishes its audited financial statements annually in its annual report, which appears on the DIF's website and is also available upon request. The DIF's Conflicts of Interest Policy is available upon request. The Federal Form 990 is available upon request.”

“Several Members of the board of directors are also board members of other organizations, some of which do business with the Depositors Insurance Fund. At no time does any director benefit from these transactions and cannot in anyway influence transactions between those organizations and the Depositors Insurance Fund. These relationships are as follows: Donna L. Boulanger, Steven E. Lowell, Patrick J. Murray, Jr. Gilda Nogueira and Charles P. O'Brien are also directors of the Massachusetts Bankers Association. Donna L. Boulanger is also a director of THE FEDERAL HOME LOAN BANK OF BOSTON. Robert S. Karam and John F. Heaps, Jr. are also directors of the Savings Bank Life Insurance Company of Massachusetts. David Elliot, Norman S. Seppala, William J. Wagner and Mark R. O'Connell are also directors of the Savings Bank Employees Retirement Association. The Savings Bank Employee Retirement Association provides pension and other retirement services to the Depositors Insurance Fund and its employees. At no time do these directors, officers or key emplopyees benefit from that relationship.”

“FAS 158 Change in pension liability (603,266) Assessments from members 2,443,434 ----------- Total 1,840,168 ===========”