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



                                    FORM 10-Q
(Mark One)

  [ X ]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934

             For the quarterly period ended September 30, 1999
                                            ------------------

                                       OR

  [   ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
             EXCHANGE ACT OF 1934

             For the transition period from            to


                         Commission File Number 0-29770


                            WEST ESSEX BANCORP, INC.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


        UNITED STATES                                           22-3597632
--------------------------------------------------------------------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                            Identification Number)


417 Bloomfield Avenue, Caldwell, New Jersey                       07006
--------------------------------------------------------------------------------
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code             973-226-7911
                                                               -------------

      Indicate  by check X whether  the  registrant  (1) has  filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
                                (1) Yes  [ X  ]   No    [  ]
                                (2) Yes  [ X  ]   No    [  ]


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date:

    3,998,849  shares  of  common  stock,  par  value  $0.01  par  share,   were
outstanding as of October 31, 1999.
<PAGE>
                            WEST ESSEX BANCORP, INC.

                                    FORM 10-Q

                        Quarter Ended September 30, 1999

                                      INDEX

                                                                          Page
                                                                         Number
                                                                         ------
PART I      FINANCIAL INFORMATION

  Item 1.   Financial Statements                                            1

             Consolidated Statements of Financial Condition at
              September 30, 1999 and December 31, 1998 (Unaudited)          2

             Consolidated Statements of Income for the Three and Nine
              Months Ended September 30, 1999 and 1998 (Unaudited)          3

             Consolidated Statements of Comprehensive Income for the Three
              and Nine Months Ended September 30, 1999 and 1998 (Unaudited) 4

             Consolidated Statements of Cash Flows for the Nine
              Months Ended September 30, 1999 and 1998 (Unaudited)          5-6

             Notes to Consolidated Financial Statements                     7-8

  Item 2.   Management's Discussion and Analysis of
             Financial Condition and Results of Operations                  9-21

  Item 3.   Quantitative and Qualitative Disclosure About Market Risk        21


PART II     OTHER INFORMATION

Item 1.     Legal Proceedings                                                22
Item 2.     Changes in Securities and Use of Proceeds                        22
Item 3.     Defaults Upon Senior Securities                                  22
Item 4.     Submission of Matters to a Vote of Security Holders              22
Item 5.     Other Information                                                22
Item 6.     Exhibits and Reports on Form 8-K                                 22

SIGNATURES                                                                   23
<PAGE>
                            WEST ESSEX BANCORP, INC.
                          PART I. FINANCIAL INFORMATION
                               September 30, 1999
                  ---------------------------------------------


ITEM 1.  FINANCIAL STATEMENTS

Certain information and footnote  disclosures  required under generally accepted
accounting  principles  have  been  condensed  or  omitted  from  the  following
consolidated  financial  statements pursuant to the rules and regulations of the
Securities  and Exchange  Commission  ("SEC").  West Essex  Bancorp,  Inc.  (the
"Registrant"  or the  "Company")  believes  that the  disclosures  presented are
adequate to assure  that the  information  presented  is not  misleading  in any
material  respect.  It is suggested  that the following  consolidated  financial
statements  be read in  conjunction  with the  year-end  consolidated  financial
statements and notes thereto included in the Registrant's  Annual Report on Form
10-K for the year ended December 31, 1998.

The results of operations  for the three and nine month periods ended  September
30, 1999, are not  necessarily  indicative of the results to be expected for the
entire fiscal year.




                                       1
<PAGE>
<TABLE>
<CAPTION>
                                WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                             CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                               (unaudited)

                                                                       September 30,      December 31,
                                                                            1999               1998
                                                                       --------------    --------------
<S>                                                                    <C>               <C>
Assets

Cash and amounts due from depository institutions .................    $   1,781,006     $   1,547,464
Interest-bearing deposits in other banks ..........................        4,040,893        14,823,967
                                                                       -------------     -------------

       Total cash and cash equivalents ............................        5,821,899        16,371,431

Securities available for sale .....................................        2,972,500         8,282,450
Investment securities held to maturity ............................       44,118,555        36,873,165
Mortgage-backed securities held to maturity .......................      123,138,885       110,376,072
Loans receivable ..................................................      152,332,233       140,272,203
Real estate owned .................................................          774,201           582,138
Premises and equipment ............................................        2,786,770         2,947,374
Federal Home Loan Bank of New York stock ..........................        3,179,000         2,607,300
Accrued interest receivable .......................................        2,185,882         2,004,809
Excess of cost over assets acquired ...............................        4,791,540         5,236,116
Other assets ......................................................        2,994,172         3,055,825
                                                                       -------------     -------------

       Total assets ...............................................    $ 345,095,637     $ 328,608,883
                                                                       =============     =============

Liabilities and Stockholders' Equity
------------------------------------

Liabilities
-----------

Deposits ..........................................................    $ 233,939,349     $ 238,312,941
Borrowed money ....................................................       62,677,368        42,009,880
Advance payments by borrowers for taxes and insurance .............          936,773           921,958
Other liabilities .................................................          875,227           610,050
                                                                       -------------     -------------

       Total liabilities ..........................................      298,428,717       281,854,829
                                                                       -------------     -------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                    <C>               <C>
Stockholders' equity
--------------------

Preferred stock (par value $.01), 1,000,000 shares
  authorized; no shares issued or outstanding .....................             --                --
Common stock (par value $.01), 9,000,000 shares
  authorized; 4,197,233 shares issued; 4,013,849 and
  4,197,233 shares outstanding, respectively ......................           41,972            41,972
Additional paid-in capital ........................................       17,322,191        17,339,291
Retained earnings - substantially restricted ......................       32,380,659        30,507,475
Common stock acquired by Employee Stock Ownership
  Plan ("ESOP") ...................................................       (1,215,714)       (1,326,233)
Treasury stock, at cost; 183,384 shares ...........................       (1,845,684)             --
Accumulated other comprehensive (loss) income - Unrealized
  (loss) gain on securities available for sale, net of income taxes          (16,504)          191,549
                                                                       -------------     -------------

        Total stockholders' equity .................................      46,666,920        46,754,054
                                                                       -------------     -------------

       Total liabilities and stockholders' equity .................    $ 345,095,637     $ 328,608,883
                                                                       =============     =============
</TABLE>

                See notes to consolidated financial statements.

                                        2
<PAGE>
<TABLE>
<CAPTION>
                                              WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                                  CONSOLIDATED STATEMENTS OF INCOME

                                   --------------------------------------------------------------
                                                             (unaudited)

                                                                    Three Months Ended September 30, Nine Months Ended September 30,
                                                                      ---------------------------       ---------------------------
                                                                           1999           1998               1999           1998
                                                                      ------------   ------------       ------------   ------------
<S>                                                                   <C>            <C>                <C>            <C>
Interest income:
     Loans .......................................................... $  2,846,394   $  2,604,508       $  8,361,153   $  7,346,589
     Mortgage-backed securities .....................................    1,983,390      1,952,138          5,784,316      6,125,308
     Investment securities ..........................................      780,689        733,525          2,385,411      1,968,152
     OTHER INTEREST-EARNING ASSETS ..................................      135,089        169,307            484,675        477,116
                                                                      ------------   ------------       ------------   ------------

             TOTAL INTEREST INCOME ..................................    5,745,562      5,459,478         17,015,555     15,917,165
                                                                      ------------   ------------       ------------   ------------
Interest expense:
     Deposits .......................................................    2,141,585      2,489,732          6,465,838      7,356,809
     BORROWED MONEY .................................................      871,114        725,883          2,375,866      1,846,143
                                                                      ------------   ------------       ------------   ------------

             TOTAL INTEREST EXPENSE .................................    3,012,699      3,215,615          8,841,704      9,202,952
                                                                      ------------   ------------       ------------   ------------

Net interest income .................................................    2,732,863      2,243,863          8,173,851      6,714,213
PROVISION FOR (RECAPTURE OF) LOAN LOSSES ............................         --          (18,580)              --          (40,630)
                                                                      ------------   ------------       ------------   ------------

NET INTEREST INCOME AFTER PROVISION FOR (RECAPTURE OF) LOAN LOSSES ..    2,732,863      2,262,443          8,173,851      6,754,843
                                                                      ------------   ------------       ------------   ------------
Non-interest income:
     Fees and service charges .......................................       95,157         95,576            279,913        273,545
     Gain on sale of securities available for sale ..................         --             --               34,515           --
     OTHER ..........................................................       32,347         37,943            143,518        120,601
                                                                      ------------   ------------       ------------   ------------

             TOTAL NON-INTEREST INCOME ..............................      127,504        133,519            457,946        394,146
                                                                      ------------   ------------       ------------   ------------
Non-interest expenses:
     Salaries and employee benefits .................................      791,576        743,405          2,381,871      2,260,107
     Net occupancy expense of premises ..............................       87,359         80,619            267,910        246,694
     Equipment ......................................................      160,821        164,036            488,844        492,014
     Loss on real estate owned ......................................       11,250         17,314             29,905         46,982
     Amortization of intangibles ....................................      148,192        148,192            444,576        444,576
     OTHER ..........................................................      452,399        478,248          1,491,859      1,384,260
                                                                      ------------   ------------       ------------   ------------

             TOTAL NON-INTEREST EXPENSES ............................    1,651,597      1,631,814          5,104,965      4,874,633
                                                                      ------------   ------------       ------------   ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                              WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                                  CONSOLIDATED STATEMENTS OF INCOME
                                                  ---------------------------------
                                                             (unaudited)


                                                                           Three Months Ended                Nine Months Ended
                                                                              September 30,                     September 30,
                                                                      ---------------------------       ---------------------------
                                                                           1999           1998               1999           1998
                                                                      ------------   ------------       ------------   ------------
<S>                                                                   <C>            <C>                <C>            <C>
Income before income taxes ..........................................    1,208,770        764,148          3,526,832      2,274,356
INCOME TAXES ........................................................      425,378        277,663          1,258,168        795,088
                                                                      ------------   ------------       ------------   ------------

NET INCOME .......................................................... $    783,392   $    486,485       $  2,268,664   $  1,479,268
                                                                      ------------   ------------       ------------   ------------
Net income per common share:
     Basic .......................................................... $       0.20         N/A(1)       $      0.56          N/A(1)
     DILUTED ........................................................         0.19         N/A(1)              0.56          N/A(1)
                                                                      ============   ============       ===========    ============
Weighted average number of common shares outstanding:
     Basic ..........................................................    4,009,842         N/A(1)         4,048,571          N/A(1)
     DILUTED ........................................................    4,017,888         N/A(1)         4,051,253          N/A(1)
                                                                      ============   ============       ===========    ============

</TABLE>
(1) West Essex Bank converted to stock form on October 2, 1998.

                See notes to consolidated financial statements.


                                       3
<PAGE>
<TABLE>
<CAPTION>
                                              WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                           -----------------------------------------------
                                                             (unaudited)


                                                                            Three Months Ended              Nine Months Ended
                                                                               September 30,                  September 30,
                                                                       ---------------------------    ----------------------------
                                                                            1999            1998          1999             1998
                                                                       ------------    -----------    ------------    ------------
<S>                                                                    <C>             <C>            <C>             <C>
NET INCOME ........................................................... $   783,392     $   486,485    $ 2,268,664     $ 1,479,268

Other comprehensive (loss) income -
  Unrealized holding (losses) gains on securities available for sale,
       net of income taxes of $10,232, $(126,933), $104,511, .........     (18,207)        225,852       (185,956)        261,905
       and $(147,195), respectively

  Reclassification adjustment for realized gains on securities
       available for sale, net of income taxes of $12,418 in 1999 ....          --              --        (22,097)             --
                                                                       -----------     -----------    -----------     -----------

Total other comprehensive (loss) income ..............................     (18,207)        225,852       (208,053)        261,905
                                                                       -----------     -----------    -----------     -----------

Comprehensive income ................................................. $   765,185     $   712,337    $ 2,060,611     $ 1,741,173
                                                                       ===========     ===========    ===========     ===========

</TABLE>
                See notes to consolidated financial statements.



                                       4
<PAGE>
<TABLE>
<CAPTION>
                                      WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        -------------------------------------
                                                     (unaudited)

                                                                                     Nine Months Ended September 30,
                                                                                     -------------------------------
                                                                                           1999             1998
                                                                                      ------------     ------------
<S>                                                                                   <C>              <C>
Cash flows from operating activities:
      Net income .................................................................    $  2,268,664     $  1,479,268
      Adjustments to reconcile net income
       to net cash provided by operating activities:
           Depreciation and amortization of premises and equipment ...............         177,193          214,299
           Net accretion of premiums, discounts and deferred loan fees ...........        (120,303)        (199,657)
           Amortization of intangibles ...........................................         444,576          444,576
           Recovery of loan losses ...............................................            --            (40,630)
           Provision for losses on real estate owned .............................            --             40,630
           (Gain) on sale of securities available for sale .......................         (34,515)            --
           (Gain) on sale of real estate owned ...................................            --             (5,386)
           (Increase) in accrued interest receivable .............................        (181,073)        (332,234)
           Decrease (increase) in other assets ...................................         178,582         (514,700)
           Increase in interest payable ..........................................          69,179              300
           Increase in other liabilities .........................................         198,712          508,707
           ESOP shares committed to be released ..................................         105,327             --
                                                                                      ------------     ------------

               Net cash provided by operating activities .........................       3,106,342        1,595,173
                                                                                      ------------     ------------

Cash flows from investing activities:
      Net increase in term deposits ..............................................            --         (3,000,000)
      Proceeds from sales of securities available for sale .......................       5,021,875             --
      Purchases of securities available for sale .................................            --         (1,000,000)
      Proceeds from maturities and calls of investment securities held to maturity      14,000,000        4,063,990
      Purchases of investment securities held to maturity ........................     (21,044,969)     (18,051,902)
      Principal repayments on mortgage-backed securities held to maturity ........      29,614,358       28,119,475
      Purchases of mortgage-backed securities held to maturity ...................     (42,457,596)     (17,137,719)
      Purchase of loans receivable ...............................................        (957,203)         (61,000)
      Net (increase) in loans receivable .........................................     (11,296,975)     (25,266,854)
      Proceeds from sales of real estate owned ...................................            --            503,458
      Proceeds from other payments received on real estate owned .................            --              4,000
      Additions to premises and equipment ........................................         (16,589)         (68,184)
      Purchase of federal home loan bank of New York stock .......................        (571,700)        (423,500)
                                                                                      ------------     ------------

               Net cash (used in) investing activities ...........................     (27,708,799)     (32,318,236)
                                                                                      ------------     ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                   <C>              <C>
Cash flows from financing activities:
      Net (decrease) increase in deposits ........................................      (4,376,306)         864,316
      Net increase (decrease) in short-term borrowed money .......................      11,000,000      (10,600,000)
      Proceeds of long-term borrowed money .......................................      15,000,000       36,800,000
      Repayment of long-term borrowed money ......................................      (5,332,512)      (4,972,129)
      Net increase in advance payments by borrowers for taxes and insurance ......          14,815           64,275
      Proceeds from common stock subscriptions ...................................            --         19,777,780
      Purchase of treasury stock .................................................      (1,845,684)            --
      Cash dividends paid ........................................................        (407,388)            --
                                                                                      ------------     ------------

               Net cash provided by financing activities .........................      14,052,925       41,934,242
                                                                                      ------------     ------------

Net (decrease) increase in cash and cash equivalents .............................     (10,549,532)      11,211,179
Cash and cash equivalents - beginning ............................................      16,371,431        8,696,118
                                                                                      ------------     ------------

Cash and cash equivalents - ending ...............................................    $  5,821,899     $ 19,907,297
                                                                                      ============     ============

</TABLE>
                                        5


<PAGE>
<TABLE>
<CAPTION>
                        WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                          -------------------------------------
                                       (unaudited)

                                                        Nine Months Ended September 30,
                                                        -------------------------------
                                                              1999             1998
                                                           -----------     -----------
<S>                                                        <C>             <C>
Supplemental disclosure of cash flow information:
  Cash paid during the year for:
      Income taxes ....................................    $   948,400     $   660,480
                                                           ===========     ===========

      Interest ........................................    $ 8,772,525     $ 9,128,751
                                                           ===========     ===========

Supplemental schedule of noncash investing activities:
      Unrealized (loss) gain on securities
            available or sale, net of income taxes ....    $  (208,053)    $   261,905
                                                           ===========     ===========

      Loans receivable transferred to real estate owned    $   192,063     $      --
                                                           ===========     ===========
</TABLE>

                See notes to consolidated financial statements.



                                       6
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

1.   PRINCIPLES OF CONSOLIDATION
--------------------------------

The consolidated  financial  statements include the accounts of the Company, the
Company's wholly owned  subsidiary,  West Essex Bank (the "Bank") and the Bank's
wholly  owned  subsidiary,  West Essex  Insurance  Agency,  Inc.  The  Company's
business is conducted principally through the Bank. All significant intercompany
accounts and transactions have been eliminated in consolidation.

2.   BASIS OF PRESENTATION
--------------------------

The accompanying  unaudited  consolidated  financial statements were prepared in
accordance  with  instructions  for  Form  10-Q and  regulations  S-X and do not
include  information  or  footnotes  necessary  for a complete  presentation  of
financial  condition,  results of operations,  and cash flows in conformity with
generally accepted accounting principles. However, in the opinion of management,
all adjustments  (consisting of normal  recurring  adjustments)  necessary for a
fair presentation of the consolidated  financial  statements have been included.
The results of operations for the three and nine months ended September 30, 1999
are not  necessarily  indicative  of the results  which may be expected  for the
entire fiscal year.

3.   REORGANIZATION TO MUTUAL HOLDING COMPANY FORM OF ORGANIZATION
------------------------------------------------------------------

The Company is a business  corporation formed at the direction of the Bank under
the laws of the United  States on October 2, 1998.  On October 2, 1998:  (i) the
Bank reorganized  from a federally  chartered mutual savings bank to a federally
chartered stock savings bank in the mutual holding company form of organization;
(ii) the Bank issued all of its  outstanding  capital stock to the Company;  and
(iii) the Company  consummated its initial public offering of common stock,  par
value $.01 per share (the "Common  Stock"),  by selling at a price of $10.00 per
share,  1,772,898 shares of common stock to certain eligible  accountholders  of
the Bank who had subscribed for such shares and by issuing  2,350,121  shares of
Common Stock to West Essex Bancorp,  M.H.C.,  a mutual holding company formed at
the direction of the Bank (collectively,  the "Reorganization and Offering") and
by contributing  74,214 shares of Common stock to West Essex Bancorp  Charitable
Foundation (the  "Foundation").  The Reorganizaiton and Offering resulted in net
proceeds of $16.7 million,  after expenses of $1.0 million. Net proceeds of $8.4
million  were  invested in the Bank to increase the Bank's  tangible  capital to
10.0% of the Bank's total  adjusted  assets.  The Company also  established  the
Foundation,  dedicated to the communities served by the Bank. In connection with
the Reorganization and Offering,  the Common Stock contributed by the Company to
the Foundation, at a value of $742,140, was charged to expense.
<PAGE>
In addition to the  9,000,000  authorized  shares of Common  Stock,  the Company
authorized  1,000,000  shares of  preferred  stock with a par value of $0.01 per
share (the "Preferred Stock"). The Board of Directors is authorized,  subject to
any  limitations  by law, to provide for the issuance of the shares of Preferred
Stock in  series,  to  establish  from  time to time the  number of shares to be
included in each such series, and to fix the designation,  powers,  preferences,
and rights of the shares of each such series and any qualifications, limitations
or  restriction  thereof.  As of  September  30,  1999,  there were no shares of
Preferred Stock issued.


                                       7
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

4.   CAPITAL TRANSACTIONS
-------------------------

On April 21, 1999, the Company's  shareholders  approved the West Essex Bancorp,
Inc. 1999 Stock-Based Incentive Plan (the "Plan").  Under the Plan, up to 73,884
shares of Company  common  stock may be  awarded,  and options to purchase up to
184,711  shares  of  Company  common  stock may be  granted,  to  employees  and
directors of the Company. Pursuant to the Plan, on April 30, 1999, 65,756 shares
of Company stock were awarded  (47,286  shares to employees and 18,470 shares to
directors) and options to purchase  176,048 shares (129,193 options to employees
and 46,855 options to directors)  were granted at an exercise price of $9.50 per
share (the market value of a share of Company common stock at the grant date).

On August  3,  1999,  the  Company  announced  that it had  received  regulatory
approval to repurchase  up to 15% or 277,067  shares of its  outstanding  common
stock, excluding common stock held by West Essex Bancorp,  M.H.C., the Company's
mutual holding company parent. On August 26, 1999, the Board of Directors of the
Company  authorized  management  to begin the  repurchase  process.  Through the
period ending September 30, 1999, the Company  repurchased 183,384 shares of its
common stock in the open market.

5.  NET INCOME PER COMMON SHARE
-------------------------------

Basic net income per common  share is  calculated  by dividing net income by the
weighted average number of shares of common stock outstanding,  adjusted for the
unallocated  portion of shares held by the ESOP in accordance  with the American
Institute of Certified Public  Accountants'  Statement of Position 93-6. Diluted
net income per share is calculated by adjusting the weighted  average  number of
shares of common stock  outstanding  to include the effect of  potential  common
shares, if dilutive, using the treasury stock method.





                                       8
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         -----------------------------------------------------------
         AND RESULTS OF OPERATIONS
         -------------------------

FORWARD-LOOKING STATEMENTS
--------------------------

         This report  contains  certain  forward-looking  statements  within the
meaning  of  Section  27A of  the  Securities  Act  of  1933,  as  amended  (the
"Securities  Act"),  and Section 21F of the Securities  Exchange Act of 1934, as
amended  (the  "Exchange  Act").   The  Company  intends  such   forward-looking
statements  to be  covered by the safe  harbor  provisions  for  forward-looking
statements  contained  in the  Private  Securities  Reform  Act of 1995,  and is
including  this  statement  for  purposes  of  these  safe  harbor   provisions.
Forward-looking statements,  which are based on certain assumptions and describe
future  plans,  strategies  and  expectations  of  the  Company,  are  generally
identified  by use of the words  "believe,"  "expect,"  "intend,"  "anticipate,"
"estimate," "project," or similar expressions.  The Company's ability to predict
results  or the  actual  effect  of future  plans or  strategies  is  inherently
uncertain.  Factors which could have a material adverse effect on the operations
of the Company and its subsidiaries  include, but are not limited to, changes in
interest rates,  general economic  conditions,  legislative/regulatory  changes,
monetary and fiscal polices of the U.S.  Government,  including  policies of the
U.S.  Treasury and the Federal Reserve Board,  the quality or composition of the
loan  or  investment  portfolios,  demand  for  loan  products,  deposit  flows,
competition,  demand for  financial  services in the  Company's  market area and
accounting  principles and guidelines.  These risks and uncertainties  should be
considered in evaluating  forward-looking  statements and undue reliance  should
not be placed on such statements. Further information concerning the Company and
its business,  including  additional  factors that could  materially  affect the
Company's financial results, is included in the Company's filings with the SEC.

         The  Company  does  not  undertake  - and  specifically  disclaims  any
obligation - to publicly  release the results of any revisions which may be made
to any  forward-looking  statements to reflect events or circumstances after the
date  of  such  statements  or to  reflect  the  occurrence  of  anticipated  or
unanticipated events.

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

GENERAL

         The Company became the federally  chartered  stock holding  company for
the Bank,  a federally  chartered  stock  savings  bank on October 2, 1998.  The
Company,  the Bank and West Essex Bancorp,  M.H.C., a mutual holding company and
majority owner of the Company, are regulated by the Office of Thrift Supervision
(the "OTS").  The Company's and the Bank's  results of operations  are dependent
primarily on net interest  income,  which is the  difference  between the income
earned on interest-earning assets, primarily the loan and investment portfolios,
and the cost of funds,  consisting of interest paid on deposits and  borrowings.
Results of  operations  are also  affected by the  provision for loan losses and
non-interest expense.  Non-interest expense principally consists of salaries and
employee  benefits,  office  occupancy and equipment  expense,  amortization  of
intangibles,  advertising,  federal deposit insurance premiums, expenses of real
estate owned and other  expenses.  Results of operations are also  significantly
affected by general economic and competitive conditions, particularly changes in
interest rates, government policies and actions of regulatory authorities.


                                       9
<PAGE>
MANAGEMENT STRATEGY

         The Company's current  strategic plan is to maintain  profitability and
its  well-capitalized  position to take advantage of future  expansion or growth
opportunities,  while managing growth,  maintaining  asset quality,  controlling
expenses and  reducing  exposure to credit and  interest  rate risk.  Management
seeks to accomplish  these goals by: (1) emphasizing its retail banking services
through  its  network of branch  offices,  which  includes  the  origination  of
one-to-four  family  mortgage  loans,  as well as commercial  real estate,  home
equity,  multi-family,  construction  and development and consumer loans, in the
communities it serves as market conditions  permit;  (2) enhancing  earnings and
offsetting the effects of the extreme  competition  for real estate loans in the
Bank's   market  area   primarily   through  the  purchase  of   adjustable-rate
mortgage-backed securities, which provide a source of liquidity, low credit risk
and low administrative cost as well as helping to manage interest rate risk; and
(3) continuing to monitor interest rate risk. Management has aggressively sought
to increase loan  originations  in recent years and was successful in increasing
loans  receivable,  net,  from $82.1  million  at  December  31,  1996 to $112.7
million,  $140.3 million and $152.3  million at December 31, 1997,  December 31,
1998  and  September  30,  1999,  respectively.  Management  was  successful  in
increasing  its  loan  originations   primarily  by  increasing  the  amount  of
advertising  the Bank does in its primary  market area,  paying fees to mortgage
brokers who send loan applicants to the Bank to whom the Bank  originates  loans
and providing cash incentives to its mortgage origination staff to increase loan
originations.  Competition,  however,  has remained intense in the Bank's market
area,   which  has  resulted  in  the  Company's  total   securities   portfolio
representing  a greater  percentage  of total assets than its loan  portfolio in
each of the last five years. Management believes that continuing to seek lending
opportunities,  as well as investing in mortgage-backed securities, the majority
of which are  adjustable-rate,  enables the Company to  effectively  control its
interest  rate risk while at the same time  enabling it to maintain a balance of
high  quality,  diversified  investments,   provide  collateral  for  short  and
long-term borrowings and lessen exposure to credit risk.

MANAGEMENT OF INTEREST RATE RISK AND MARKET RISK ANALYSIS

         The  principal  objectives  of  interest  rate risk  management  are to
evaluate the interest  rate risk  included in certain  balance  sheet  accounts;
determine the level of risk appropriate given the Company's  business  strategy,
operating  environment,  capital  and  liquidity  requirements  and  performance
objectives; and manage the risk consistent with the Board of Directors' approved
guidelines.   Through  such   management,   the  Company  seeks  to  reduce  the
vulnerability  of its  operations  to changes in  interest  rates.  The Board of
Directors has established an Asset/Liability Committee, which is responsible for
reviewing   asset/liability  policies  and  interest  rate  risk  position.  The
Asset/Liability  Committee meets at least on a quarterly  basis,  reports trends
and interest  rate risk  position to the Board of Directors and reviews with the
Board of Directors its activities and strategies, the effect of those strategies
on net interest  margin,  the market value of the portfolio,  and the effect the
changes in interest  rates will have on the portfolio and exposure  limits.  The
extent of the  movement of interest  rates is an  uncertainty  that could have a
negative impact on the earnings of the Company.

         In recent years the Company has used the following strategies to manage
interest rate risk: (i) emphasizing the origination of long-term mortgage loans,
and  (ii)  offsetting  the  effects  of  holding  fixed-rate  mortgage  loans by
purchasing adjustable-rate mortgage-backed securities.

                                       10
<PAGE>
         The Bank continues to seek opportunities to originate for its portfolio
one-to-four  family  residential  mortgage loans, as well as other loans, in its
primary market area of Essex, Morris and Bergen Counties, New Jersey. Due to the
relatively low interest rate  environment  that has existed in recent years, the
Bank has originated primarily fixed-rate  one-to-four family mortgage loans. The
purchase of adjustable-rate  mortgage-backed securities, as well as various debt
obligations of federal, state and local governments,  has enabled the Company to
effectively  manage its interest rate risk.  At September 30, 1999,  the Company
had  $123.1  million  or 35.7% of total  assets  in  mortgage-backed  securities
classified  as  held-to-maturity,  and $47.1 million or 13.6% of total assets in
investment  securities,  of which  $3.0  million  or 0.9% of total  assets  were
classified  as  available-for-sale.  At the same date,  loans  receivable,  net,
totalled $152.3 million or 44.1% of total assets.

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

         Total  assets were $345.1  million at September  30, 1999,  compared to
$328.6 million at December 31, 1998, an increase of $16.5 million,  or 5.0%. The
increase in assets was funded by an  increase  in Federal  Home Loan Bank of New
York ("FHLB") borrowings of $20.7 million.

         Cash and cash equivalents, primarily interest-bearing deposits with the
FHLB,  decreased  $10.6 million to $5.8 million at September 30, 1999 from $16.4
million at December 31, 1998. The decrease in cash and cash equivalents was used
to fund additional investments in securities.

         In the aggregate, mortgage-backed securities and investment securities,
including  available-for-sale  and  held to  maturity  issues,  totalled  $170.2
million at  September  30, 1999,  an increase of $14.7  million,  or 9.5%,  from
$155.5  million  at  December  31,  1998.   Such  increase  was  funded  by  the
aforementioned $10.6 million decrease in cash and cash equivalents and the $20.7
million increase in borrowed money. Mortgage-backed securities, all of which are
held to maturity, increased $12.8 million due to purchases exceeding repayments.
Investment securities held to maturity increased $7.2 million,  primarily due to
purchases exceeding maturities.  Securities available for sale decreased by $5.3
million primarily due to a $5.0 million sale.

         Loans  receivable  increased  by $12.0  million  to $152.3  million  at
September  30, 1999 from $140.3  million at December  31, 1998 due  primarily to
originations  exceeding  repayments.  The  increase  in loans was  funded by the
aforementioned increase in FHLB borrowings.

         Deposits  totalled  $233.9 million at September 30, 1999, a decrease of
$4.4 million or 1.8%, from the $238.3 million balance at December 31, 1998.

         Borrowed  money  increased  $20.7 million to $62.7 million at September
30, 1999, as compared to $42.0 million at December 31, 1998.  Based on the lower
cost of wholesale  funds as compared to  comparable  maturity  retail  deposits,
management  chose to fund the asset growth  discussed above with additional FHLB
borrowings.  During the nine months ended  September 30, 1999,  $15.0 million in
long-term  borrowings with five to ten year  maturities and an average  interest
rate of 5.54 % were incurred.



                                       11
<PAGE>
         Stockholders'  equity decreased $87,000, or 0.2%, to $46.7 million, due
to the Company's  repurchase of 183,384 shares of its  outstanding  common stock
for an aggregate price of $1.8 million, the payment of $408,000 in cash dividend
to stockholders,  and the $105,000 cost of ESOP shares committed to be released,
the aggregate effect of which was largely offset by net income of $2.3 million.

         On  August  3,  1999,  the  Company  announced  that  it  had  received
regulatory  approval to repurchase  up to 15% or 277,067  shares of its publicly
traded common stock, excluding common stock held by West Essex Bancorp, MHC, the
Company's  mutual  holding  company  parent.  On August 26,  1999,  the Board of
Directors of the Company authorized  management to begin the repurchase process.
Through the period ending  September 30, 1999, the Company  repurchased  183,384
shares of its common stock in the open market.

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999
AND 1998

         NET INCOME.  Net income increased $297,000 or 61.1% to $783,000 for the
three months ended  September  30, 1999 compared with $486,000 for the same 1998
period.  The increase in net income  during the 1999 period  resulted  primarily
from a $489,000  increase in net interest income,  which was partially offset by
increases in  non-interest  expenses  and income taxes of $20,000 and  $148,000,
respectively.

         INTEREST INCOME.  Total interest income  increased  $286,000 or 5.3% to
$5.75  million for the three months ended  September 30, 1999 from $5.46 million
for the same 1998 period.  The increase  was the result of a $16.9  million,  or
5.4%,  increase in average  interest-earning  assets between the periods.  Yield
remained constant at 6.93% for both periods. The increase in the average balance
was the result of loan  originations  and securities  purchased  during the past
twelve months funded by the net proceeds of the Company's  initial  public stock
offering and increased borrowed money.

         Interest  income on loans increased by $242,000 or 9.3% to $2.8 million
during the three months ended September 30, 1999 when compared with $2.6 million
for the same 1998 period.  The increase  during the 1999 period resulted from an
increase  of  $17.0  million,   or  12.4%,  in  the  average  balance  of  loans
outstanding,  which was  sufficient to offset a 22 basis point decrease to 7.39%
in the yield earned on the loan portfolio. The increased average balance was the
result of strong  lending  volume.  The  decreased  yield is the result of lower
rates obtained on originations as well as downward  interest rate adjustments on
the Bank's adjustable-rate mortgage loans.

         Interest   on   mortgage-backed    securities,   all   of   which   are
held-to-maturity,  increased  $31,000 or 1.5%, to $1.98 million during the three
months ended  September  30, 1999 when  compared with $1.95 million for the same
1998 period. The increase during the 1999 period resulted from an increase of 10
basis  points to  6.56%,  in  yield.  The  average  balance  of  mortgage-backed
securities was substantially unchanged between the periods.

         Interest    earned   on   investment    securities,    including   both
available-for-sale and held-to-maturity  issues,  increased by $47,000, or 6.4%,
to $781,000  during the three months ended  September 30, 1999, when compared to
$734,000  during the same 1998  period,  primarily  due to an  increase  of $3.3
million, or 7.7%, in the average balance of such assets,  which more than offset
an 8 basis point decrease to 6.72% in the yield earned.  The increase in average
balance was the result of purchases of securities exceeding calls and maturities
thereof.  The  decrease in yield was the result of the lower rates  available on
securities purchased and calls of higher yielding issues.


                                       12
<PAGE>
         Interest on other interest-earning  assets decreased $34,000, or 20.1%,
to $135,000  during the three  months  ended  September  30, 1999 as compared to
$169,000  for the same 1998  period.  The decrease was due to a decrease of $3.4
million, or 24.3%, in the average balance of such assets,  partially offset by a
27 basis point increase in yield. The reduced usage of lower yielding short-term
deposits in other banks was responsible for both the reduced average balance and
increased yield.

         Interest Expense.  Interest expense on deposits decreased $348,000,  or
14.0%,  to $2.1 million  during the three months ended  September  30, 1999 when
compared  to $2.5  million  during  the same  1998  period.  Such  decrease  was
primarily  attributable to a decrease of 35 basis points,  to 3.90%, in the cost
of interest-bearing  deposits,  along with a $14.3 million, or 6.1%, decrease in
the average balance thereof. The decrease in cost is due to lower interest rates
paid on deposits.  The average cost of certificates of deposit was 5.01% for the
three  months  ended  September  30, 1999 as compared to 5.41% for the same 1998
period. The average cost of non-certificate deposits decreased to 1.89 % for the
three  months ended  September  30, 1999 as compared to 2.43% for the same prior
year period.

         Interest expense on borrowed money increased by $145,000,  or 20.0%, to
$871,000  during the three months ended  September  30, 1999 when  compared with
$726,000  during the same 1998  period,  primarily  due to an  increase  of $9.4
million,  or 18.6%,  in the average balance of borrowings  outstanding  from the
FHLB,  along  with a 7 basis  point  increase  to 5.79% in the cost of  borrowed
money.  During the three months ended  September 30, 1999,  the Bank repaid $6.3
million in borrowings ($6.0 million of which were short-term  borrowings) having
an average  interest  rate of 5.28% and  obtained  $8.0  million  in  short-term
borrowings with an average interest rate of 5.86%.

         Net Interest Income.  Net interest income  increased  $489,000 or 21.8%
during the three months ended  September  30, 1999,  when compared with the same
1998 period.  Such increase was due to an increase in total  interest  income of
$286,000,  along with a decrease in total interest expense of $203,000.  The net
interest rate spread increased to 2.63% in 1999 from 2.42% in 1998. The increase
in the interest rate spread resulted entirely from a decrease of 21 basis points
in the cost of interest-bearing liabilities, as there was no change in the yield
on interest-earning  assets.  Additionally,  net interest income improved due to
the  additional  income  generated  by  a  $16.9  million  increase  in  average
interest-earning assets and the reduced cost incurred by a $4.9 million decrease
in average interest-bearing liabilities.

         Provision for Loan Losses.  During the three months ended September 30,
1999,  the Bank did not  record a  provision  for loan  losses  as the  existing
balance of the allowance  for loan losses was  considered  adequate.  During the
three months ended  September  30,  1998,  the Bank  recorded a recapture of the
provision  for loan  losses of  $19,000.  The  recapture  was the  result of the
adjustment  of  the  balance  of the  allowance  for  loan  losses,  based  upon
management's  quarterly  analysis,  to $1.84  million at September 30, 1998 from
$1.86  million at June 30, 1998.  There were no loan  charge-offs  or recoveries
during the three months ended  September  30, 1999 and 1998.  The  allowance for
loan losses is based on management's evaluation of the risk inherent in its loan
portfolio  and  gives  due  consideration  to  the  changes  in  general  market
conditions  and in the nature and volume of the Bank's loan  activity.  The Bank
intends to continue to provide for loan losses based on its  periodic  review of

<PAGE>

the loan  portfolio  and general  market  conditions.  At September 30, 1999 and
1998, loans delinquent  ninety days or more totalled  $883,000 and $2.0 million,
respectively,  representing  0.57% and 1.42%,  respectively,  of total loans. At
September  30,  1999,  the  allowance  for loan  losses  stood at $1.4  million,
representing  0.91% of total loans and 158.6% of loans delinquent ninety days or
more.  At December  31,  1998,  the  allowance  for loan  losses  stood at $1.72
million,  representing 1.20% of total loans and 82.4% of loans delinquent ninety
days or more.  At September  30, 1998,  the  allowance  for loan losses stood at
$1.84 million,  representing  1.31% of total loans and 91.7% of loans delinquent
ninety days or more. The Bank monitors its loan portfolio on a continuing  basis
and intends to continue to provide for loan losses  based on its ongoing  review
of the loan portfolio and general market conditions.


                                       13
<PAGE>
         The Bank has established a standardized  process to assess the adequacy
of the allowance for loan losses and to identify the risks  inherent in the loan
portfolio.  The process  incorporates  credit reviews and gives consideration to
areas of exposure such as concentrations of credit,  local economic  conditions,
trends in delinquencies,  collateral coverage, the composition of the performing
and  non-performing  loan  portfolios,  and  other  risks  inherent  in the loan
portfolio.

         Specific allocations of the allowance for loan losses are identified by
individual loan based upon a detailed  credit review of each such loan.  General
loan loss  allowances  are allocated to pools of loans  categorized  by type and
assigned allowance  percentages which take into effect past charge-off  history,
industry averages and current trends and risks.  Finally, an unallocated portion
of the allowance is  maintained to account for the general  inherent risk in the
loan  portfolio,  known  circumstances  which are not addressed in the allocated
portion of the allowance (such as the increased  dependence on outside  mortgage
brokers for originations), and the necessary imprecision in the determination of
the allocation portion of the allowance.

         Management believes that, based on information currently available, the
allowance  for loan losses is  sufficient  to cover losses  inherent in the loan
portfolio at this time. However, no assurance can be given that the level of the
allowance  for loan losses will be  sufficient  to cover  future  possible  loan
losses or that future  adjustments  to the allowance for loan losses will not be
necessary  if  economic  and  other  conditions  differ  substantially  from the
economic and other conditions  considered by management to determine the current
level of the allowance for loan losses.  Management  may in the future  increase
the level of the  allowance  for loan losses as a percentage  of total loans and
non-performing  loans in the event it  increases  the level of  commercial  real
estate,  multifamily,  or  consumer  lending as a  percentage  of the total loan
portfolio.  In addition,  various  regulatory  agencies,  as an integral part of
their examination  process,  periodically  review the allowance for loan losses.
Such agencies may require the Bank to provide  additions to the allowance  based
upon judgments different from those of management.

         The  allowance  for  loan  losses   includes   specific,   general  and
unallocated  allowances  of $115,000,  $872,000 and $413,000,  respectively,  at
September   30,  1999,   as  compared  to  $492,000,   $817,000  and   $408,000,
respectively,  at December  31,  1998.  The  $377,000  decrease in the  specific
allowance  from  December  31,  1998,  is  primarily  the  result  of the  final
resolution of $694,000 impaired construction loan, which was assigned a specific
allowance of $347,000 at December 31, 1998.

         Non-Interest Income.  Non-interest income decreased $6,000, or 4.5%, to
$128,000  during the three months ended  September 30, 1999 from $134,000 during
the same 1998 period.

         Non-Interest  Expenses.  Non-interest expenses increased by $20,000, or
1.2%,  to $1.65  million  during the three months ended  September 30, 1999 when
compared with $1.63 million  during the same 1998 period.  Salaries and employee
benefits, the largest component of non-interest expenses,  increased $49,000, or
6.6%, to $792,000 during the three months ended September 30, 1999 from $743,000
during  the prior year  quarter.  All other  elements  of  non-interest  expense
remained  little changed at $860,000 and $888,000  during the three months ended
September 30, 1999 and 1998, respectively.

         Income Taxes. Income tax expense totalled $425,000,  or 35.2% of income
before  income  taxes,  during the three  months  ended  September  30,  1999 as
compared  to  $278,000,  or 36.3% of income  before  income  taxes,  during  the
comparable 1998 period.

                                       14
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
AND 1998

         Net Income.  Net income increased $790,000 or 53.4% to $2.3 million for
the nine months ended September 30, 1999 compared with $1.5 million for the same
1998  period.  The  increase  in net  income  during  the 1999  period  resulted
primarily  from a $1.5  million  increase  in net  interest  income,  which  was
partially  offset by  increases  in  non-interest  expenses  and income taxes of
$230,000 and $463,000, respectively.

         Interest Income. Total interest income increased $1.1 million, or 6.9%,
to $17.0 million for the nine months ended September 30, 1999 from $15.9 million
for the same 1998 period.  The increase  was the result of a $27.9  million,  or
9.3%,  increase in average  interest-earning  assets between the periods,  which
more than offset a 15 basis point decline in yield.  The increase in the average
balance was the result of loan originations and securities  purchased during the
past twelve months funded by the net proceeds of the  Company's  initial  public
stock  offering  and  increased  borrowed  money.  The decrease in yield was the
result of lower rates  obtained on loans  originated  and  securities  purchased
since September 30, 1998.

         Interest income on loans increased by $1.0 million,  or 13.8%, to $8.36
million during the nine months ended September 30, 1999 when compared with $7.35
million for the same 1998 period.  The increase  during the 1999 period resulted
from an increase of $22.5  million,  or 17.9%,  in the average  balance of loans
outstanding,  which was  sufficient to offset a 27 basis point decrease to 7.54%
in the yield earned on the loan portfolio. The increased average balance was the
result of strong  lending  volume.  The  decreased  yield is the result of lower
rates obtained on originations as well as downward  interest rate adjustments on
the Bank's adjustable-rate mortgage loans.

Interest  on  mortgage-backed  securities,  all of which  are  held-to-maturity,
decreased  $251,000  or 4.1%,  to $5.8  million  during  the nine  months  ended
September 30, 1999 when compared with $6.1 million for the same 1998 period. The
decrease  during the 1999 period  resulted from  decreases of $4.1  million,  or
3.3%, in the average balance of mortgage-backed  securities and 15 basis points,
to 6.47%, in yield. The decreased average balance is the result of repayments of
mortgage-backed  securities  exceeding  purchases.  The decrease in yield is the
result of repayments on higher yielding  securities and the lower interest rates
obtained on securities  purchased  since  September 30, 1998, many of which were
adjustable rate issues with customarily low initial interest rates.

         Interest    earned   on   investment    securities,    including   both
available-for-sale and held-to-maturity issues, increased by $417,000, or 21.2%,
to $2.4 million during the nine months ended  September 30, 1999,  when compared
to $2.0  million  during the same 1998 period,  primarily  due to an increase of
$9.7 million,  or 25.3%, in the average balance of such assets,  which more than
offset a 22 basis point  decrease to 6.66% in the yield earned.  The increase in
average  balance was the result of purchases of securities  exceeding  calls and
maturities  thereof.  The  decrease  in yield was the result of the lower  rates
available on securities purchased and calls of higher yielding issues.

         Interest on other  interest-earning  assets increased $8,000 or 1.7% to
$485,000 during the nine months ended September 30, 1999 as compared to $477,000
for the same 1998 period. The increase was due to an increase of 13 basis points
in the  yield  of  other  interest-earning  assets,  which  more  than  offset a
$125,000, or 1.0%, decline in the average balance of such assets.


                                       15
<PAGE>
         Interest Expense.  Interest expense on deposits  decreased  $891,000 or
12.1% to $6.4  million  during the nine  months  ended  September  30, 1999 when
compared  to $7.4  million  during  the same  1998  period.  Such  decrease  was
primarily  attributable to a decrease of 38 basis points,  to 3.89%, in the cost
of  interest-bearing  deposits,  along with a $7.9 million, or 3.5%, decrease in
the average balance thereof. The decrease in cost is due to lower interest rates
paid on deposits.  The average cost of certificates of deposit was 5.01% for the
nine  months  ended  September  30,  1999 as compared to 5.46% for the same 1998
period. The average cost of non-certificate deposits decreased to 1.90 % for the
nine  months  ended  September  30, 1999 as compared to 2.36% for the same prior
year period.

         Interest expense on borrowed money increased by $530,000,  or 34.3%, to
$2.38 million during the nine months ended September 30, 1999 when compared with
$1.85 million during the same 1998 period, primarily due to an increase of $13.5
million,  or 32.0%,  in the average balance of borrowings  outstanding  from the
FHLB,  which was  sufficient to offset a 14 basis point decrease to 5.67% in the
cost of borrowed  money.  During the nine months ended  September 30, 1999,  the
Bank repaid $5.3 million in long-term borrowings having an average interest rate
of  6.40%  and  obtained  $15.0  million  in  borrowings  with  five to ten year
maturities  with an  average  interest  rate  of  5.54%  and  $11.0  million  in
short-term borrowings with an average rate of 5.71%.

         Net Interest  Income.  Net interest income  increased $1.5 million,  or
21.7%,  during the nine months ended  September 30, 1999, when compared with the
same 1998 period.  Such increase was due to an increase in total interest income
of $1.1 million,  along with a decrease in total  interest  expense of $361,000.
The net interest rate spread  increased to 2.68% in 1999 from 2.57% in 1998. The
increase in the interest rate spread resulted from a decrease of 26 basis points
in the cost of  interest-bearing  liabilities  which more than offset a 15 basis
point  decrease  in the  yield on  interest-earning  assets.  Additionally,  net
interest  income  improved  due to the  additional  income  generated by a $27.9
million increase in average  interest-earning assets, which more than offset the
additional cost incurred by a $5.6 million increase in average  interest-bearing
liabilities.

         Provision for Loan Losses.  During the nine months ended  September 30,
1999,  the Bank did not  record a  provision  for loan  losses  as the  existing
balance of the allowance  for loan losses was  considered  adequate.  During the
nine months  ended  September  30,  1998,  the Bank  recorded a recapture of the
provision  for loan  losses of  $41,000.  The  recapture  was the  result of the
adjustment  of  the  balance  of the  allowance  for  loan  losses,  based  upon
management's  quarterly  analysis,  to $1.84  million at September 30, 1998 from
$1.89 million at December 31, 1997.  During the nine months ended  September 30,
1999,  there was a  $316,000  charge-off  related to the final  resolution  of a
$694,000  construction  loan  and  no  loan  recoveries.   There  were  no  loan
charge-offs or recoveries  during the nine months ended  September 30, 1998. The
allowance  for  loan  losses  is based on  management's  evaluation  of the risk
inherent in its loan  portfolio  and gives due  consideration  to the changes in
general  market  conditions  and in the nature  and  volume of the  Bank's  loan
activity.  The Bank  intends to continue to provide for loan losses based on its
periodic  review  of the  loan  portfolio  and  general  market  conditions.  At
September  30, 1999 and 1998,  loans  delinquent  ninety  days or more  totalled
$883,000  and  $2.0  million,   respectively,   representing  0.57%  and  1.42%,
respectively,  of total loans.  At September  30, 1999,  the  allowance for loan
losses stood at $1.4  million,  representing  0.91% of total loans and 158.6% of
loans  delinquent  ninety days or more. At December 31, 1998,  the allowance for
loan losses stood at $1.72 million,  representing 1.20% of total loans and 82.4%
of loans  delinquent  ninety days or more. At September 30, 1998,  the allowance
for loan losses stood at $1.84  million,  representing  1.31% of total loans and
91.7% of  loans  delinquent  ninety  days or more.  The Bank  monitors  its loan
portfolio  on a  continuing  basis and  intends to  continue to provide for loan
losses  based on its ongoing  review of the loan  portfolio  and general  market
conditions.

                                       16
<PAGE>
         The Bank has established a standardized  process to assess the adequacy
of the allowance for loan losses and to identify the risks  inherent in the loan
portfolio.  The process  incorporates  credit reviews and gives consideration to
areas of exposure such as concentrations of credit,  local economic  conditions,
trends in delinquencies,  collateral coverage, the composition of the performing
and  non-performing  loan  portfolios,  and  other  risks  inherent  in the loan
portfolio.

         Specific allocations of the allowance for loan losses are identified by
individual loan based upon a detailed  credit review of each such loan.  General
loan loss  allowances  are allocated to pools of loans  categorized  by type and
assigned allowance  percentages which take into effect past charge-off  history,
industry averages and current trends and risks.  Finally, an unallocated portion
of the allowance is  maintained to account for the general  inherent risk in the
loan  portfolio,  known  circumstances  which are not addressed in the allocated
portion of the allowance (such as the increased  dependence on outside  mortgage
brokers for originations), and the necessary imprecision in the determination of
the allocation portion of the allowance.

         Management believes that, based on information currently available, the
allowance  for loan losses is  sufficient  to cover losses  inherent in the loan
portfolio at this time. However, no assurance can be given that the level of the
allowance  for loan losses will be  sufficient  to cover  future  possible  loan
losses or that future  adjustments  to the allowance for loan losses will not be
necessary  if  economic  and  other  conditions  differ  substantially  from the
economic and other conditions  considered by management to determine the current
level of the allowance for loan losses.  Management  may in the future  increase
the level of the  allowance  for loan losses as a percentage  of total loans and
non-performing  loans in the event it  increases  the level of  commercial  real
estate,  multifamily,  or  consumer  lending as a  percentage  of the total loan
portfolio.  In addition,  various  regulatory  agencies,  as an integral part of
their examination  process,  periodically  review the allowance for loan losses.
Such agencies may require the Bank to provide  additions to the allowance  based
upon judgments different from those of management.

         The  allowance  for  loan  losses   includes   specific,   general  and
unallocated  allowances  of $115,000,  $872,000 and $413,000,  respectively,  at
September   30,  1999,   as  compared  to  $492,000,   $817,000  and   $408,000,
respectively,  at December  31,  1998.  The  $377,000  decrease in the  specific
allowance  from  December  31,  1998,  is  primarily  the  result  of the  final
resolution of the aforementioned  $694,000 impaired construction loan, which was
assigned a specific allowance of $347,000 at December 31, 1998.

         Non-Interest Income.  Non-interest income increased $64,000 or 16.2% to
$458,000  during the nine months ended  September 30, 1999 from $394,000  during
the same 1998 period.  The 1999 amount  includes a $35,000 gain on the sale of a
security available for sale.

         Non-Interest Expenses.  Non-interest expenses increased by $230,000, or
4.7%,  to $5.1  million  during the nine months  ended  September  30, 1999 when
compared  with $4.9 million  during the same 1998 period.  Salaries and employee
benefits, the largest component of non-interest expenses, increased $122,000, or
5.4%, to $2.4 million during the nine months ended  September 30, 1999 from $2.3
million during the prior year period.  Other  expenses  increased  $108,000,  or
7.8%, to $1.5 million during the nine months ended September 30, 1999, from $1.4
million during the comparable prior year period, primarily due to the additional
costs  incurred as the result of being a public  company.  All other elements of
non-interest expense remained little changed at $1.23 million during each of the
nine months ended September 30, 1999 and 1998, respectively.

         Income Taxes.  Income tax expense  totalled $1.26 million,  or 35.7% of
income before income taxes,  during the nine months ended  September 30, 1999 as
compared  to  $795,000,  or 35.0% of income  before  income  taxes,  during  the
comparable 1998 period.

                                       17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

         The  Company's and Bank's  primary  sources of funds on a long-term and
short-term  basis  are  deposits,  principal  and  interest  payments  on loans,
mortgage-backed and investment securities and FHLB borrowings. The Bank uses the
funds generated to support its lending and investment  activities as well as any
other demands for  liquidity  such as deposit  outflows.  While  maturities  and
scheduled amortization of loans are predictable sources of funds, deposit flows,
mortgage  prepayments  and the exercise of call features on debt  securities are
greatly   influenced  by  general  interest  rates,   economic   conditions  and
competition.  The Bank has  continued to maintain the required  levels of liquid
assets as defined by OTS regulations.  This requirement of the OTS, which may be
varied at the  direction  of the OTS  depending  upon  economic  conditions  and
deposit flows, is based upon a percentage of deposits and short-term borrowings.
The Bank's  currently  required  liquidity ratio is 4.0%. At September 30, 1999,
the Bank's regulatory liquidity ratio was 24.98%.

         At September 30, 1999, the Bank exceeded all of its regulatory  capital
requirements  with a tangible capital level of $35.7 million,  or 10.5% of total
adjusted  assets,  which is above the required  level of $5.1 million,  or 1.5%;
core capital of $35.7 million, or 10.5% of total adjusted assets, which is above
the required  level of $13.6 million,  or 4.0%; and risk-based  capital of $37.1
million, or 27.7% of risk-weighted  assets, which is above the required level of
$10.7 million, or 8.0%.

         The  Company's  most liquid  assets are cash and cash  equivalents  and
securities  available  for sale.  The levels of these  assets are  dependent  on
operating,  financing, lending and investing activities during any given period.
At September 30, 1999, cash and cash  equivalents  and securities  available for
sale totalled $8.8 million, or 2.5% of total assets.

         The Bank has other sources of liquidity if a need for additional  funds
arises,  including  FHLB  borrowings.  At September 30, 1999, the Bank had $62.7
million in borrowings outstanding from the FHLB. Depending on market conditions,
the pricing of deposit  products and FHLB  borrowings,  the Bank may continue to
rely on FHLB borrowings to fund asset growth.

         On  August  3,  1999,  the  Company  announced  that  it  had  received
regulatory  approval  to  repurchase  up  to  277,067  shares,  or  15%  of  its
outstanding common stock from shareholders other than West Essex Bancorp, M.H.C.
As of September 30, 1999,  183,384  shares have been  repurchased in open market
transactions at a cost of $1.8 million.

         At  September  30, 1999,  the Bank had  commitments  to  originate  and
purchase  loans and fund  unused  outstanding  lines of credit  and  undisbursed
proceeds of construction  mortgages totalling $8.8 million. The Bank anticipates
that it will have sufficient  funds  available to meet its current  commitments.
Certificate accounts,  including Individual  Retirement Account accounts,  which
are scheduled to mature in less than one year from September 30, 1999,  totalled
$115.9  million.  The  Bank  expects  that  substantially  all of  the  maturing
certificate accounts will be retained by the Bank.

         The initial impact of the  Reorganization and Offering on the liquidity
and capital  resources of the Company was to  substantially  increase the liquid
assets  of the  Company  and the  capital  base on which the  Company  operates.
Subsequently,  a substantial  majority of the Offering  proceeds was invested in
readily marketable investment grade securities. The additional capital resulting
from the Offering  increased  the capital  bases of the Company and the Bank. At
September  30, 1999,  the Company and the Bank had total  equity,  determined in
accordance with generally accepted accounting  principles,  of $46.7 million and
$40.5 million,  respectively, or 13.5% and 11.8%, respectively, of total assets.
The Bank's

                                       18
<PAGE>
regulatory  tangible capital at that date, which excludes  intangible  assets of
$4.8 million and unrealized  securities losses, net of deferred income taxes, of
$17,000,  was $35.7 million,  or 10.5% of adjusted total assets.  An institution
with a ratio of tangible  capital to adjusted  total  assets of greater  than or
equal  to  5.0%  is  considered  to  be   "well-capitalized"   pursuant  to  OTS
regulations.

Year 2000 Compliance

         As the year 2000  approaches,  an important  business issue has emerged
regarding how existing  application  software programs and operating systems can
accommodate this date value.  Many existing  application  software  products use
two-digit  date fields to designate a year.  As the century date change  occurs,
date  sensitive  systems may recognize the Year 2000 as 1900 or not at all. This
inability  to  recognize  or  properly  treat the Year 2000 may cause  erroneous
results, ranging from system malfunctions to incorrect or incomplete processing.

         The Company has been  identifying  and remediating  potential  problems
which are  associated  with the "Year 2000" issues since early 1998. The Company
has fully  remedied its in house  accounting  system,  loan tracking  system and
other software  programs  identified as mission critical by the Company.  All of
the  hardware  associated  with these  systems  has been  checked by the Company
internally,  as well as by an independent computer company, and found to be Year
2000 compliant.

         The Company also realizes that its ability to be Year 2000 compliant is
dependent  upon  the  cooperation  of its  vendors.  The  Company  has  received
representations from its primary third party vendors that they have resolved all
mission  critical Year 2000 problems in their software and hardware  areas.  The
Company  has  completed  its end to end  testing  with its  primary  third party
service bureau. The testing was completed on two consecutive Sundays in March of
this year. All offices and departments of the Company were present to test their
respective  areas.  All of the  testing  was  completed  by each office and area
without  a  problem.  The  Company  will  do  final  testing  of its  Year  2000
contingency  plan in each of its  offices  during  the month of  November.  This
testing will primarily deal with how operations  will continue in the event of a
loss of power or loss of  communications  with its primary  third party  service
bureau. The Company has also received certification from its primary third party
service  bureau that it has passed end to end testing.  In addition,  all of the
ATM machines owned by the Company have had their  software  upgraded and are now
also Year 2000 compliant.

Year 2000 Plan Costs

         The Company  believes that its costs  related to Year 2000  remediation
will be  approximately  $185,000.  To date, the Company has spent  approximately
$140,000  of this  amount on various  hardware  and  software  upgrades  and has
completely remediated its mission critical systems.  There can be no assurances,
however,  that the Company's  internal actions or the performance by third party
vendors will be effective to remedy all  potential  problems.  To the extent the
Company's systems are affected by third party vendors, there can be no assurance
that potential  systems  interruptions  or the cost necessary to update software
would not have a material  adverse effect on the Company's  business,  financial
condition, results of operations and business prospects.  Further, any Year 2000
failure on the part of the  Company's  customers  or third party  vendors  could
result in additional expense or loss to the Company.
<PAGE>

Year 2000 Risks and Contingency Plan

         Because the Company depends  substantially  on its computer systems and
those of third  parties,  the failure of these systems to be Year 2000 compliant
could cause  substantial  disruption of the Company's  business and could have a
material adverse  financial impact on the Company.  Failure to resolve Year 2000
issues presents the following risks to the Company,  which it believes  reflects
its most reasonably likely worst-case scenario: the Company could lose customers
to other financial institutions,

                                       19
<PAGE>
resulting in a loss of revenue,  if the Company's  third-party service bureau is
unable to properly process customer transactions; governmental agencies, such as
the Federal Home Loan Bank of New York,  and  correspondent  institutions  could
fail to  provide  funds  to the  Company,  which  could  materially  impair  the
Company's  liquidity and affect the Company's  ability to fund loans and deposit
withdrawals;  concern  on the part of  depositors  that Year 2000  issues  could
impair  access to their  deposit  account  balances  could result in the Company
experiencing  deposit  outflows  before December 31, 1999; and the Company could
incur  increased  personnel  costs if  additional  staff is  required to perform
functions that inoperative systems would have otherwise performed.

         Management  believes  that it is  impossible  to estimate the potential
lost  revenue due to the Year 2000  issue,  as the extent and  longevity  of any
potential  problem  cannot  be  predicted.  Because  substantially  all  of  the
Company's loan portfolio consists of loans to individuals rather than commercial
enterprises,   management  believes  that  Year  2000  issues  will  not  impair
materially the ability of the Company's borrowers to repay their debt.

         There  can be no  assurances  that the  Company's  Year  2000 plan will
effectively  address the Year 2000 issue,  that the  Company's  estimates of the
timing and costs of completing the plan will  ultimately be accurate or that the
impact of any  failure of the  Company or its  third-party  vendors  and service
providers to be Year 2000 compliant  will not have a material  adverse effect on
the Company's business, financial condition or results of operations.

         The Company has a business  resumption  contingency  plan for Year 2000
compliance  that  calls  for the  Company  to resort  to  manual  processing  of
transactions  until the  computer  systems  resume  operation.  Internally,  the
Company will continue to make changes to its contingency  plan as  circumstances
may warrant.

Year 2000 Liquidity Concerns

         The Company  will make every  effort to  maintain  an ample  reserve of
currency  to  accommodate  the  needs of its  customers  at  year-end.  This may
necessitate the utilization of short-term  investments which will mature late in
the fourth quarter of the year. Excess funds may also be placed in various types
of overnight  investments which will allow the Company immediate access to these
funds. The utilization of short-term investments including overnight investments
during  the late  third and fourth  quarters  may have an adverse  effect on the
financial operations of the Company.

Year 2000 Legal Concerns

         The  Company  may  also  face a legal  risk in the  form of  contingent
liability in conjunction  with Year 2000 issues.  The likelihood and severity of
this risk is  materially  dependent on both the Company's own efforts and on the
actions  of other  parties  over  which the  Company  has  little or no  control
including the  telecommunication  and electric power industries.  The likelihood
and severity of the Company's contingent Year 2000 liability are also materially
dependent  on the extent  and  success of the  timely  remediation  and  testing
efforts of a large number of third parties. Whether the Company may incur a Year
2000 liability is at this time an unknown.

Pending Legislation

         Pending  legislation  designed  to  modernize  the  regulation  of  the
financial  services  industry  expands the ability of bank holding  companies to
affiliate  with other types of financial  services  companies  such as insurance
companies and investment banking companies.  However,  the legislation  provides
that companies that acquire control of a single savings association after May 4,
1999 (or that filed an  application  for that  purpose  after than date) are not
entitled to the unrestricted activities formerly allowed

                                       20
<PAGE>
for a unitary  savings and loan holding  company.  Rather,  these companies will
have  authority  to engage in the  activities  permitted  "a  financial  holding
company" under the new legislation,  including insurance and  securities-related
activities, and the activities currently permitted for multiple savings and loan
holding companies, but generally not in commercial activities. The authority for
unrestricted  activities is  grandfathered  for unitary savings and loan holding
companies,  such as the Company, that existed prior to May 4, 1999. However, the
authority  for  unrestricted  activities  would  not apply to any  company  that
acquired the Company.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         ----------------------------------------------------------

         There  have  been  no  material   changes  in   information   regarding
quantitative and qualitative  disclosures about market risk from the information
presented as of December 31, 1998, in the Company's  Annual Report on Form 10-K,
to September 30, 1999.


                                       21
<PAGE>
                            WEST ESSEX BANCORP, INC.
                           PART II . OTHER INFORMATION

                               September 30, 1999

ITEM 1. LEGAL PROCEEDINGS
        -----------------

         The Company and the Bank are parties to various litigation which arises
         primarily  in the  ordinary  course  of  business.  A case  before  the
         Superior Court of New Jersey related to condominium  construction loans
         has been settled.  The  disposition  of this  litigation did not have a
         material effect on the consolidated financial position or operations of
         the Company.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
        -----------------------------------------

         None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
        -------------------------------

         None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
        ---------------------------------------------------

         None.

ITEM 5. OTHER INFORMATION
        -----------------

         None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
        --------------------------------

(a)      Exhibits:

         3.1       Charter of West Essex Bancorp, Inc.  *
         3.2       Bylaws of West Essex Bancorp, Inc.  *
         4.0       Form  of  Common  Stock   Certificate  *
        11.0       Statement regarding computation of per share earnings.
        27.0       Financial Data Schedule

         *  Incorporated  herein  by  reference  into  this  document  from  the
            Exhibits  to Form  S-1  Registration  Statement  and any  amendments
            thereto, Registration No. 333-56729.

(b)      Reports on Form 8-K:

                  On August 4, 1999,  the Company  filed a Form 8-K in regard to
                  its August 3, 1999 press release  announcing  that the Company
                  had received  regulatory  clearance to repurchase up to 15% of
                  its outstanding  common shares held by shareholders other than
                  West Essex Bancorp, M.H.C.

                                       22
<PAGE>


                                   SIGNATURES
                                   ----------

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                    WEST ESSEX BANCORP, INC.

DATE:  November 12, 1999            BY    /s/Leopold W. Montanaro
                                          -----------------------
                                          Leopold W. Montanaro
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)

DATE:  November 12, 1999            BY:   /s/Dennis A. Petrello
                                          ---------------------
                                          Dennis A. Petrello
                                          Executive Vice President and
                                          and Chief Financial Officer
                                          (Principal Financial and
                                          Accounting Officer)