<PAGE>

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

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

                                    FORM 10-K

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

                     For the fiscal year ended June 30, 1999

                         Commission file number 0-23271

                         RICHMOND COUNTY FINANCIAL CORP.
             (Exact name of registrant as specified in its charter)

                                    Delaware
                         (State or other jurisdiction of
                         incorporation or organization)

                                   06-1498455
                                (I.R.S. Employer
                               Identification No.)

              1214 Castleton Avenue, Staten Island, New York 10310
                    (Address of principal executive offices)

       Registrant's Telephone number, including area code: (718) 448-2800

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.01 per share
                                (Title of class)

Indicate by check mark 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.
Yes:   X      No:
     -----

Indicate by check mark if disclosure of delinquent filer pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

The aggregate market value of the shares of registrant's common stock held by
non-affiliates of the Registrant was $563,051,494 as of September 15, 1999.

There were issued and outstanding 31,039,812 common shares of the Registrant's
Common as of September 15, 1999.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Shareholders for the year ended June 30, 1999
are incorporated by reference into Part II of this Form 10-K. Portions of the
Proxy Statement for the 1999 Annual Meeting of Shareholders are incorporated by
reference into Part III of this Form 10-K.

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

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                  ----
<S>                                                                                             <C>
PART I

     Item 1    Business ........................................................................     1

     Item 2    Properties ......................................................................    35

     Item 3    Legal Proceedings ...............................................................    37

     Item 4    Submission of Matters to a Vote of Security Holders .............................    37

PART II

     Item 5    Market for Registrant's Common Stock and Related Stockholder Matters ............    38

     Item 6    Earnings Summary and Selected Financial Data and
               Condensed Quarterly Statements of Operations ....................................    38

     Item 7    Management's Discussion and Analysis of Financial Condition and Results of
               Operations ......................................................................    38

     Item 7a   Quantitative and Qualitative Disclosures About Market Risk.......................    39

     Item 8    Financial Statements.............................................................    39

     Item 9    Changes in and Disagreements with Accountants on Accounting and Financial
               Disclosure.......................................................................    39

PART III

     Item 10   Directors and Executive Officers of the Registrant ..............................    40

     Item 11   Executive Compensation...........................................................    40

     Item 12   Security Ownership of Certain Beneficial Owners and Management ..................    40

     Item 13   Certain Relationships and Related Transactions ..................................    40

PART IV

     Item 14   Exhibits, Financial Statement Schedules and Reports on Form 8-K .................    41


SIGNATURES......................................................................................    43
</TABLE>
<PAGE>

                                     PART I

Item 1. Business

General

Richmond County Financial Corp. (the "Company" or the "Registrant") was
incorporated under Delaware law in September 1997. On February 18, 1998, the
Company acquired Richmond County Savings Bank and subsidiaries (the "Bank"),
Staten Island, New York, as part of the Bank's conversion from the mutual to
stock form of organization (the "Conversion"). On February 18, 1998, the Company
issued an aggregate of 26,423,550 shares of its common stock, par value $0.01
per share, of which 24,466,250 shares were issued in a subscription offering and
1,957,300 shares were issued to the Richmond County Savings Foundation (the
"Foundation"), a charitable foundation established by the Bank. Prior to such
date, the Company had no assets, liabilities or operations. In connection with
the Conversion, the Company raised $234.9 million of net conversion proceeds, of
which $117.4 million was utilized for the acquisition of 100% of the outstanding
stock of the Bank. The Company is a savings and loan holding company and is
subject to regulation by the Office of Thrift Supervision (the "OTS") and the
Securities and Exchange Commission (the "SEC"). At June 30, 1999, the Company
had consolidated total assets of $2.8 billion, deposits of $1.6 billion and
stockholders' equity of $370.2 million. Currently, the Company's activities
consist solely of managing the Bank and investing the portion of net conversion
proceeds retained by the Company. The following discussions address the
operations of the Bank and its subsidiaries.

The Bank is a community-oriented savings bank, which was originally chartered in
the State of New York in 1886. The Bank's principal businesses consist of the
acceptance of retail deposits from the general public in the areas surrounding
its branch offices and the investment of those deposits, together with funds
generated from operations and borrowings, primarily in one- to four-family
residential and multifamily mortgage loans and, to a lesser extent, commercial
real estate, construction and development, commercial, home equity, consumer and
student loans and in mortgage-backed and mortgage-related securities and various
debt and equity securities. The Bank's revenues are derived principally from the
interest on its mortgage, commercial and consumer loans and securities. The
Bank's primary sources of funds are deposits, borrowings, principal and interest
payments on loans and securities, and proceeds from the sale of loans and
securities.

As a New York State chartered savings bank, the Bank's deposits are insured up
to the applicable limits by the Federal Deposit Insurance Corporation (the
"FDIC"). The Bank is regulated by the Superintendent of Banks of the State of
New York, (the "Superintendent") the New York Banking Board (the "NYBB") and the
New York State Banking Department (the "NYSBD").

The Company's executive offices are located at the administrative offices of the
Bank, 1214 Castleton Avenue, Staten Island, New York 10310. Its telephone number
is (718) 448-2800.

Acquisitions

Bayonne Bancshares, Inc.
At the close of business on March 22, 1999, the Company completed its
acquisition of Bayonne Bancshares, Inc. ("Bayonne"), the holding company of
First Savings Bank of New Jersey, SLA, a New Jersey State chartered savings and
loan association with four full service banking offices located in Bayonne, New
Jersey in a transaction which was accounted for as a purchase. The cost of the
acquisition was approximately $118.5 million for which the Company issued 1.05
shares of its common stock for each outstanding share of Bayonne common stock
for a total of 8,668,615 common shares, of which 3,938,731 shares were issued
from its treasury shares. Options to purchase 683,577 shares of Bayonne common
stock were also converted into options to purchase 717,755 shares of the
Company's common stock. The excess of cost over the fair value of net assets
acquired ("goodwill") in the transaction was $28.8 million, which is being
amortized on a straight line basis over 15 years.

Ironbound Bankcorp, NJ.
At the close of business on March 5, 1999, the Company completed its acquisition
of Ironbound Bankcorp, NJ ("Ironbound"), the holding company of Ironbound Bank,
a New Jersey chartered commercial bank with three full service commercial
banking offices located in the New Jersey counties of Union and Essex, in a
transaction which was accounted for as a purchase. The cost of the acquisition
was approximately $27.7 million. The Company issued 1.463 shares of its common
stock for each outstanding share of Ironbound common stock for a total of
1,458,842 common shares. The goodwill attributable to the transaction was $15.3
million, which is being amortized on a straight line basis over 15 years.

                                       1
<PAGE>

Market Area

The Bank is a community-oriented financial institution offering a variety of
financial services to meet the needs of the communities it serves. The Bank
currently operates 15 banking offices on Staten Island, one banking office in
Brooklyn, eight banking offices in the counties of Essex, Hudson and Union, New
Jersey, and operates a multifamily loan processing center in Jericho, Long
Island.

The Bank's primary deposit gathering area is currently concentrated around the
areas where its full service banking offices are located in the counties of
Essex, Hudson and Union, New Jersey and in the New York boroughs of Staten
Island and Brooklyn, which the Bank generally considers to be its primary market
area. The Bank's primary lending area has also historically been concentrated in
Staten Island and, to a lesser extent, in the area around its office in
Brooklyn. As of June 1998, based on a survey by a nationally-recognized bank
consulting firm, the Bank had 18.6% of total deposits in Staten Island.

The economy of the New York City metropolitan area has historically benefited
from having a large number of corporate headquarters and a diversity of
financial service entities. Additionally, Staten Island has historically
benefited from steady residential growth and an expanding base of service
businesses. During the late 1980s and early 1990s, however, due in part to the
effects of a prolonged period of weakness in the national economy, the decline
in the regional economy, layoffs in the financial services industry and
corporate relocations, the New York City metropolitan area experienced reduced
levels of employment. These conditions, in conjunction with a surplus of
available commercial and residential property, resulted in an overall decline in
the underlying values of properties located in the area during the late 1980s
and early 1990s. Staten Island, due to its location and its relatively large
population of government employees, was somewhat insulated from the economic
decline of the late 1980s and early 1990s. Since 1993, the prices and values of
real estate have stabilized and, in certain areas, the prices and values of real
estate have increased. In the past several years, the New York City metropolitan
area has benefited from the resurgence and growth in employment and
profitability experienced by national securities and investment banking firms,
many of which are domiciled in the Borough of Manhattan, as well as the growth
and profitability of other financial services companies, such as money center
banks. However, there can be no assurances that conditions in the local economy,
national economy or real estate market in general will not deteriorate in the
future.

Competition

The Bank faces significant competition, both in making loans and in attracting
deposits. The New York City metropolitan area has a high density of financial
institutions, many of which are branches of significantly larger institutions
that have greater financial resources than the Bank, and all of which are
competitors of the Bank to varying degrees. The Bank's competition for loans
comes principally from savings banks, commercial banks, savings and loan
associations, mortgage banking companies, credit unions, insurance companies and
other financial service companies. Its most direct competition for deposits has
historically come from savings and loan associations, savings banks, commercial
banks and credit unions. The Bank faces additional competition for deposits from
non-depository competitors, such as the mutual fund industry, securities and
brokerage firms and insurance companies. There are approximately 11 depository
institutions with operations in the Borough of Staten Island. Competition may
also increase as a result of the lifting of restrictions on the interstate
operations of financial institutions.

Lending Activities

Loan Portfolio Composition. The types of loans that the Bank may originate are
subject to federal and state law and regulations. Interest rates charged by the
Bank on loans are affected principally by the demand for such loans, the supply
of money available for lending purposes and the rates offered by its
competitors. These factors are, in turn, affected by general and economic
conditions, monetary policies of the federal government, including the Federal
Reserve Board (the "FRB"), legislative tax policies and governmental budgetary
matters.

                                       2
<PAGE>

The following table sets forth the composition of the Bank's loan portfolio,
including loans held for sale, in dollar amounts and in percentages of the
respective portfolios at the dates indicated:

<TABLE>
<CAPTION>
                                                                                  At June 30,
                                        --------------------------------------------------------------------------------------------
                                                 1999                    1998                      1997                 1996
                                        ----------------------   -----------------------   --------------------- -------------------
                                                      Percent                  Percent                 Percent              Percent
                                                        of                       of                      of                    of
                                         Amount        Total      Amount        Total       Amount      Total     Amount     Total
                                        --------    ----------   ---------   -----------   --------  ----------- --------  ---------
                                                                                 (Dollars in thousands)
<S>                                     <C>       <C>           <C>         <C>           <C>       <C>         <C>        <C>
Real estate loans:
   One- to four-family ...........     $  834,528       62.8%    $470,385        72.2%    $ 394,588      78.4%   $325,139     76.3%
   Multifamily ...................        290,066       21.8       50,491         7.8         2,705       0.5       1,238      0.3
   Commercial real estate ........        107,280        8.1       55,416         8.5        40,713       8.1      39,892      9.3
   Construction  and
      development ................         51,044        3.8       31,297         4.8        18,343       3.7      12,812      3.0
   Home equity ...................         18,575        1.5       15,379         2.4        16,729       3.3      18,054      4.2
   Commercial ....................         14,557        1.1        6,783         1.0         6,662       1.3       6,300      1.5
   Consumer and student ..........         11,817        0.9       21,770         3.3        23,589       4.7      22,932      5.4
                                       ----------   ---------    --------    ---------     --------   --------   --------  --------
                  Gross loans ....     $1,327,867      100.0%     651,521       100.0%      503,329     100.0%    426,367    100.0%
                                                    =========                =========                ========             ========

Less:
    Unamortized discounts, net ...            433                    (631)                     (788)                 (947)
    Deferred loan (costs) fees ...           (888)                    855                      (813)               (1,354)
    Allowance for loan losses ....        (13,885)                 (7,276)                   (5,470)               (4,796)
                                       ----------                --------                  --------              --------
                  Total loans, net      1,313,527                 644,469                   496,258               419,270
Less:
    Loans held for sale, net:
       One- to four-family .......             --                      --                        --                 1,155
                                       ----------                --------                  --------              --------
    Loans receivable held for
       investment, net ...........     $1,313,527                $644,469                  $496,258              $418,115
                                       ==========                ========                  ========              ========
<CAPTION>

                                              At June 30,
                                         --------------------
                                                 1995
                                         --------------------
                                                     Percent
                                                       of
                                          Amount      Total
                                         --------   ---------
<S>                                      <C>        <C>
Real estate loans:
   One- to four-family ...........        $303,734    76.2%
   Multifamily ...................             811     0.2
   Commercial real estate ........          40,037    10.1
   Construction  and
      development ................          10,487     2.6
   Home equity ...................          16,518     4.1
   Commercial ....................           5,039     1.3
   Consumer and student ..........          21,795     5.5
                                          --------  -------
                  Gross loans ....         398,421   100.0%
                                                    =======
Less:
    Unamortized discounts, net ...          (1,105)
    Deferred loan (costs) fees ...          (1,632)
    Allowance for loan losses ....          (3,275)
                                          --------
                  Total loans, net         392,409
Less:
    Loans held for sale, net:
       One- to four-family .......              --
                                          --------
    Loans receivable held for
       investment, net ...........        $392,409
                                          ========
</TABLE>

Loan Originations. The Bank originates both adjustable-rate and fixed-rate one-
to four-family mortgage loans, multifamily loans, commercial real estate loans,
construction and development loans, home equity loans, commercial loans,
consumer loans and student loans. The Bank's one- to four-family mortgage
lending activities are conducted primarily through the utilization of mortgage
brokers and by the Bank's loan personnel, generally operating in the Bank's loan
center. Although the Bank has authorized the use of approximately 64 mortgage
brokers in connection with one- to four-family loan originations, the Bank
primarily utilizes the services of 41 mortgage brokers operating primarily on
Staten Island and in Brooklyn. During the years ended June 30, 1999 and 1998,
the Bank originated $129.9 million and $74.3 million, respectively, of one- to
four-family loans through mortgage brokers and $120.3 million and $44.1 million,
respectively, of such loans through Bank personnel. Recently, the Bank began
offering, through brokers, its fully processed loan program, which is a zero
point loan that is originated and processed by the broker. The Bank pays
mortgage brokers a processing fee for a fully processed loan. All loans are
underwritten by the Bank pursuant to the Bank's loan underwriting policies and
procedures.

Recently, the Bank has placed increased emphasis on the origination of
commercial real estate, construction and development and commercial loans as
part of its efforts to broaden the services it provides to the Staten Island
business community. In this regard, the Bank has recently hired commercial
lending personnel with experience in the Bank's primary market area and may add
additional personnel as needed. In addition, the Bank has increased its
marketing efforts with respect to commercial real estate, construction and
development and commercial lending by making its existing business customers
aware of the expanded products and services available to businesses. The Bank's
ability to originate loans is dependent upon customer demand, demand for
fixed-rate or adjustable-rate loans and expected future levels of interest
rates.

In addition, the Bank has placed increased emphasis on the origination of
multifamily loans and, in April 1998, established a multifamily lending
department staffed by personnel experienced in the multifamily lending business.

Generally, all loans are originated for investment with certain exceptions for
longer-term fixed-rate one- to four-family mortgage loans. From time to time,
the Bank will retain fixed-rate mortgage loans with terms over 15 years,
depending on the asset quality and the interest rate risk position of the Bank.
The one- to four-family loan products currently originated for sale by the Bank
include a variety of mortgage loans that conform to underwriting standards
specified by Fannie Mae ("FNMA") and

                                       3
<PAGE>

the Federal Home Loan Mortgage Corporation ("FHLMC") ("conforming loans"). Loans
that do not conform to FNMA or FHLMC standards due to loan amounts ("jumbo
loans") are originated for the Bank's portfolio. With the exception of customary
provisions relating to breaches of representations and warranties, sales of
loans are made without recourse to the Bank in the event of default by the
borrower. The Bank generally retains the servicing rights on the mortgage loans
sold to FHLMC.

At June 30, 1999, the Bank was servicing its own portfolio of $1.3 billion of
loans receivable and $115.8 million of loans for others, primarily consisting of
conforming fixed-rate loans sold by the Bank. Loan servicing includes collecting
and remitting loan payments, accounting for principal and interest, contacting
delinquent mortgagors, supervising foreclosures and property dispositions in the
event of unremedied defaults, making certain insurance and tax payments on
behalf of the borrowers, and generally administering the loans.

During the years ended June 30, 1999 and June 30, 1998, the Bank originated
$250.2 million and $118.4 million of fixed-rate and adjustable-rate one- to
four-family loans, respectively, of which $250.2 million and $118.4 million,
respectively, were retained by the Bank. The fixed-rate loans retained by the
Bank consisted primarily of loans with terms of 15 to 30 years. At June 30,
1999, the Bank had no mortgage loans held for sale. The Bank has, in the past,
purchased participations in loans, primarily one- to four-family mortgage loans,
and had approximately $325,000 of participations in loans at June 30, 1999. The
Bank acquired $72.5 million in purchased whole loans as a result of the
acquisition of Bayonne Bancshares, Inc.

The following table sets forth the Bank's loan originations, purchases, sales
and principal repayments for the periods indicated.

<TABLE>
<CAPTION>
                                                                                     For the Year Ended June 30,
                                                                          ------------------------------------------------
                                                                             1999               1998                1997
                                                                          ----------         ----------         ----------
                                                                                           (In thousands)
<S>                                                                     <C>               <C>                 <C>
Gross loans:
Balance outstanding at beginning of period ......................         $  651,521         $  503,329         $  426,367
                                                                          ----------         ----------         ----------
     Loans originated:
            One- to four-family .................................            250,204            118,384            100,487
            Multifamily .........................................            235,213              9,393              1,616
            Commercial real estate ..............................             16,134             22,537              4,454
            Construction and development ........................             28,447             22,280             13,444
            Home equity .........................................              6,603              3,567              5,824
            Commercial ..........................................              9,848             10,083              3,636
            Consumer and student ................................              2,458              7,024              7,790
                                                                          ----------         ----------         ----------
                     Total loans originated .....................            548,907            193,268            137,251
                     Loans of acquired institutions, net ........            332,639                 --                 --
      Loans purchased ...........................................              1,500             38,616                910
                                                                          ----------         ----------         ----------
                     Total loans originated and purchased .......            883,046            231,884            138,161
                                                                          ----------         ----------         ----------
Less:
      Principal repayments ......................................            113,189             83,120             58,485
      Sales of loans ............................................             15,821                 --              2,004
      Mortgage securitization ...................................             77,159                 --                 --
      Transfers to real estate owned ............................                482                532                673
      Principal charged off .....................................                 49                 40                 37
                                                                          ----------         ----------         ----------
 Total loans receivable held for investment at end of period ....         $1,327,867         $  651,521         $  503,329
                                                                          ==========         ==========         ==========
</TABLE>


                                       4
<PAGE>

Loan Maturity. The following table shows the contractual maturity of the Bank's
loan portfolio at June 30, 1999. The table does not include prepayments or
scheduled principal amortization. Prepayments and scheduled principal
amortization on mortgage loans totaled $113.2 million, $83.1 million, and $58.5
million for the years ended June 30, 1999, 1998 and 1997, respectively.

<TABLE>
<CAPTION>
                                                                                At June 30, 1999
                                              -------------------------------------------------------------------------------------
                                                                       Real Estate Loans
                                              -----------------------------------------------------------------------
                                                One- to                                  Construction
                                                  Four-        Multi-     Commercial         and             Home
                                                 Family        Family     Real Estate     Development       Equity      Commercial
                                              -----------   -----------   -----------     -----------     -----------   -----------
                                                                                                 (In thousands)
<S>                                         <C>           <C>           <C>             <C>             <C>          <C>
Amounts due:
     Within one year ......................   $     2,461   $       711   $     2,262     $    34,459     $       337   $     5,587
                                              -----------   -----------   -----------     -----------     -----------   -----------
     After one year:
         More than one year to
                      three years .........        10,994         2,762        21,819          16,585             449         7,530
         More than three years to
                      five years ..........        10,642           579         7,507              --             425           949
         More than five years to 10
                      years ...............       143,209        14,039        33,767              --           5,803           491
         More than 10 years to 20
                      years ...............       248,846       271,975        39,248              --           9,457            --

         More than 20 years ...............       418,376            --         2,677              --           2,104            --
                                              -----------   -----------   -----------     -----------     -----------   -----------
         Total due after June 30,
                     2000 .................       832,067       289,355       105,018          16,585          18,238         8,970
                                              -----------   -----------   -----------     -----------     -----------   -----------
         Total amount due .................   $   834,528   $   290,066   $   107,280     $    51,044     $    18,575   $    14,557
                                              ===========   ===========   ===========     ===========     ===========   ===========
         Less:
         Unamortized discounts, net.............................................................................................
         Deferred loan costs, net...............................................................................................
         Allowance for possible loan losses.....................................................................................

Loans receivable held for investment, net


<CAPTION>
                                                  Consumer      Total
                                                    and         Loans
                                                  Student     Receivable
                                                -----------   -----------
<S>                                           <C>           <C>
Amounts due:
     Within one year ......................     $       876   $    46,693
                                                -----------   -----------
     After one year:
         More than one year to
                      three years .........           9,375        69,514
         More than three years to
                      five years ..........             291        20,393
         More than five years to 10
                      years ...............           1,156       198,465
         More than 10 years to 20
                      years ...............             115       569,641
         More than 20 years ...............               4       423,161
                                                -----------   -----------
         Total due after June 30,
                     2000 .................          10,941     1,281,174
                                                -----------   -----------
         Total amount due .................     $    11,817     1,327,867
                                                ===========   -----------
         Less:
         Unamortized discounts, net.......................            433
         Deferred loan costs, net.........................           (888)
         Allowance for possible loan losses...............        (13,885)
                                                              -----------
Loans receivable held for investment, net                     $ 1,313,527
                                                              ===========
</TABLE>

The following table sets forth at June 30, 1999, the dollar amount of gross
loans receivable contractually due after June 30, 2000, and whether such loans
have fixed interest rates or adjustable interest rates.

<TABLE>
<CAPTION>
                                                                                          Due After June 30, 2000
                                                                        ------------------------------------------------------------
                                                                           Fixed                 Adjustable                 Total
                                                                        ----------               ----------               ----------
                                                                                               (In thousands)
<S>                                                                   <C>                     <C>                       <C>
Real estate loans:
   One- to four-family ..................................               $  517,386               $  314,681               $  832,067
   Multifamily ..........................................                   23,887                  265,468                  289,355
   Commercial real estate ...............................                   31,038                   73,980                  105,018
   Construction and development .........................                       --                   16,585                   16,585
   Home equity ..........................................                    7,220                   11,018                   18,238
                                                                        ----------               ----------               ----------
      Total real estate loans ...........................                  579,531                  681,732                1,261,263
Commercial loans ........................................                    1,412                    7,558                    8,970
Consumer and student loans ..............................                    3,339                    7,602                   10,941
                                                                        ----------               ----------               ----------
      Total loans receivable ............................               $  584,282               $  696,892               $1,281,174
                                                                        ==========               ==========               ==========
</TABLE>

One- to four-family Loans. The Bank currently offers both fixed-rate and
adjustable-rate mortgage loans secured by one- to four-family residences located
in the Bank's primary market area, primarily with maturities of up to 30 years.
One- to four-family mortgage loan originations are obtained through the use of
mortgage brokers, the Bank's loan center, existing or past customers,
advertising, and referrals from real estate brokers and attorneys.

At June 30, 1999, the Bank's one- to four-family loans totaled $834.5 million,
or 62.8%, of gross loans. Of the one- to four-family loans outstanding at that
date, 63.1% were fixed-rate mortgage loans and 36.9% were adjustable-rate
mortgage

                                       5
<PAGE>

loans. The Bank generally offers fixed-rate mortgage loans with terms of 15 and
30 years. The Bank, from time to time may sell fixed-rate residential mortgage
loans it originates with terms in excess of 15 years, except for non-conforming
loans, to FHLMC, and retains the servicing on all loans sold, although the Bank
may retain fixed-rate mortgage loans with terms exceeding 15 years, depending on
the asset quality and the interest rate risk position of the Bank. The Bank
generally retains for its portfolio shorter-term, fixed-rate loans with
maturities of 15 years or less and all adjustable-rate one- to four-family
loans.

The Bank currently offers a number of adjustable-rate mortgage loans with terms
of up to 30 years and interest rates which adjust annually from the outset of
the loan or which adjust annually after a one, three, five or seven year initial
fixed period. Forty-year terms are available on certain adjustable-rate loans.
The interest rates for the Bank's adjustable-rate mortgage loans are indexed to
the one or three year U.S. Treasury Securities Index. Interest rate adjustments
on loans are limited to a 2% periodic adjustment cap (2.5% on five-year
adjustable-rate loans) and a maximum adjustment of 6% over the life of the loan.
Certain of the Bank's adjustable-rate mortgage loans can be converted to a
fixed-rate loan with interest rates based upon the then-current market rates
plus a varying margin.

The volume and type of adjustable-rate mortgage loans originated by the Bank
have been affected by such market factors as the level of interest rates,
competition, consumer preferences and the availability of funds. The origination
of adjustable-rate residential mortgage loans, as opposed to fixed-rate
residential mortgage loans, are intended, in part, to reduce the Bank's exposure
to increases in interest rates. However, adjustable-rate loans generally pose
credit risks not inherent in fixed-rate loans, primarily because as interest
rates rise, the underlying payments of the borrower rise, thereby increasing the
potential for default. Periodic and lifetime caps on interest rate increases are
expected to reduce the risks associated with adjustable-rate loans but also may
limit the interest rate sensitivity thereof.

One- to four-family residential mortgage loans are generally underwritten
according to FNMA or FHLMC guidelines. The Bank currently originates one- to
four-family residential mortgage loans in amounts up to 80% of the lower of the
appraised value or the selling price of the property securing the loan and up to
97% of the appraised value or selling price if private mortgage insurance is
obtained. Mortgage loans originated by the Bank include due-on-sale clauses
which provide the Bank with the contractual right to deem the loan immediately
due and payable in the event the borrower transfers ownership of the property
without the Bank's consent. Due-on-sale clauses are an important means of
adjusting the yields on the Bank's fixed-rate mortgage loan portfolio and the
Bank has generally exercised its rights under these clauses.

In an effort to provide financing for low and moderate-income homebuyers, the
Bank participates in residential mortgage programs and products sponsored by the
State of New York Mortgage Association ("SONYMA"). The SONYMA mortgage programs
provide low and moderate-income households with fixed-rate loans, which have
market rates generally below prevailing fixed-rate mortgages and which allow
below market down payments. At June 30, 1999, $10.2 million, or 0.8% of total
loans, were sponsored by SONYMA.

Multifamily Lending. During fiscal 1998, the Bank increased its origination of
multifamily loans through the establishment of a separate department staffed by
personnel experienced in the multifamily lending business. During fiscal 1999,
the Bank originated $235.2 million, of multifamily loans as compared to
originations of $9.4 million and $1.6 million in fiscal years 1998 and 1997,
respectively. As a result, the Bank had approximately $290.1 million, or 21.8%
of the total loan portfolio invested in multifamily loans. The largest
multifamily loan in the Bank's portfolio at June 30, 1999 was a $13.2 million
loan secured by six individual multifamily apartment dwellings in the Borough of
The Bronx.

Multifamily loans generally involve large principal amounts and a greater degree
of risk than one- to four-family residential mortgage loans. Because payments on
loans secured by multifamily properties are often dependent on the successful
operation or management of the properties, repayment of such loans may be
subject to a greater extent to adverse conditions in the real estate market or
the economy. The Bank seeks to minimize these risks by originating such loans
within market areas where it has knowledge and experience.

In reaching its decision on whether to make a multifamily loan, the Bank
considers the qualifications and financial condition of the borrower, including
credit history, profitability and expertise, as well as the value and condition
of the underlying property. Multifamily loans originated by the Bank require a
debt service coverage ratio of at least 120% and a loan to value ratio of no
more than 75% of the lower of the appraised value or sales price of the
underlying property. Generally, these loans are five year adjustable-rate loans
with a term of 15 years and an amortization schedule not

                                       6
<PAGE>

exceeding 30 years. The Bank's multifamily loans are originated with rates that
are generally fixed for the first five years with a single adjustment on the
fifth anniversary of the loan based upon the average monthly yield on the U.S.
Treasury obligations, adjusted to a constant maturity of five years, plus a
margin of 1.75% to 2.50%.

Commercial Real Estate Lending. The Bank originates commercial real estate loans
that are generally secured by properties used for business purposes or a
combination of residential and retail purposes and that are generally located in
the Bank's primary market area. All mixed-use properties are classified as
commercial real estate. At June 30, 1999, the Bank's commercial real estate loan
portfolio totaled approximately $107.3 million, or 8.1%, of total loans. The
Bank's underwriting procedures provide that commercial real estate loans
generally may be made in amounts up to 75% of the lower of the appraised value
or sales price of the property, subject to the Bank's current regulatory
loans-to-one-borrower limit. These loans generally may be made with terms up to
20 years and are generally offered at interest rates that adjust every one,
three or five years, utilizing the corresponding U.S. Treasury Securities Index
as a base. The Bank also offers fixed-rate commercial real estate loans with 10
year terms. In reaching its decision on whether to make a commercial real estate
loan, the Bank considers the net operating income of the property and the
borrower's expertise, credit history and profitability. In addition, the Bank
considers the business activities and present and past uses of the properties in
evaluating potential environmental issues and, where such consideration
indicates a need, a more detailed investigation by a qualified environmental
expert is conducted. The Bank has generally required that the properties
securing commercial real estate loans have a debt service coverage ratio (the
ratio of earnings before debt service to debt service) of at least 120%.
Exceptions to this ratio are considered on an individual basis and must be
approved by the appropriate lending authority. Generally, all commercial real
estate loans made to corporations, partnerships and other business entities
require personal guarantees by the principals. The largest commercial real
estate loan in the Bank's portfolio at June 30, 1999 was a $4.8 million loan
secured by four ground leases owned by the Bayonne School District.

Loans secured by commercial real estate properties generally involve larger
principal amounts and a greater degree of risk than one- to four-family
residential mortgage loans. Because payments on loans secured by commercial real
estate properties are often dependent on successful operation or management of
the properties, or business operated on such properties, repayment of such loans
may be affected by adverse conditions in the real estate market or the economy.
The Bank seeks to minimize these risks through its underwriting standards, which
require such loans to be qualified on the basis of the property's income and
debt service coverage ratio. As part of the operating strategy, the Bank intends
to continue to emphasize its commercial real estate lending activities in its
primary market area depending on the demand for such loans and commercial real
estate market conditions.

Construction and Development Lending. The Bank originates construction and
development loans for the development of commercial and residential property
located in its primary market area, and may originate construction and
development loans outside its primary market area to existing customers. At June
30, 1999, the Bank had $51.0 million of construction loans, most of which
related to the construction of one- to four-family properties, of which $19.1
million of these loans were outstanding at that date. The Bank originates loans
for the acquisition of commercial and residential property located in its
primary market area usually if such acquisition loan is part of an overall
development loan. Construction loans are offered primarily to experienced local
developers operating in the Bank's primary market area and, to a lesser extent,
to individuals for the construction of their residences. The majority of the
Bank's construction loans are originated primarily to finance the construction
of one- to four-family, owner-occupied residential real estate, and commercial
real estate properties located in the Bank's primary market area. Construction
loans are generally offered with terms of up to two years. Construction loans
may be made in amounts up to 75% of the estimated cost of construction, or up to
80% in the case of loans to individuals for the construction of their
residences. With respect to commercial construction loans, the Bank generally
requires borrowers, with whom the Bank does not have experience, to secure
permanent-financing commitments from generally recognized lenders for an amount
equal to or greater than the amount of the loan. In some cases, the Bank may
itself provide permanent financing. Loan proceeds are disbursed periodically in
increments as construction progresses and as inspections by the Bank's lending
officers warrant.

The Bank originates land loans to local developers for the purpose of holding or
developing the land for sale. At June 30, 1999, the Bank had $19.2 million of
land loans. Such loans are secured by a lien on the property, and limited to 65%
of the appraised value of the secured property on raw land or up to 75% on
developed building lots, and have terms of up to two years, with floating
interest rates based on the prime rate (which is the prime rate as published in
The Wall Street Journal). The principal of the loan is reduced as lots are sold
and released. The Bank's land loans are generally secured by property in its
primary market area; however, the Bank may originate land loans outside its
primary market area to

                                       7
<PAGE>

existing customers. In addition, the Bank generally originates such loans to
developers with whom it has established relationships and obtains personal
guarantees.

Construction and development financing is generally considered to involve a
higher degree of credit risk than long-term financing on improved,
owner-occupied real estate. Risk of loss on a construction loan is dependent
largely upon the accuracy of the initial estimate of the property's value at
completion of construction or development compared to the estimated cost
(including interest) of construction and other assumptions, including the
estimated time to sell residential properties. If the estimate of value proves
to be inaccurate, the Bank may be confronted with a project, when completed,
having a value which is insufficient to assure full repayment. The largest
construction loan in the Bank's portfolio at June 30, 1999, was a $7.3 million
loan for the construction of four story office complex located in the Borough of
Staten Island.

Home Equity Lending. The Bank offers fixed-rate, fixed-term home equity loans
and lines of credit and adjustable-rate home equity loans in its primary market
area. At June 30, 1999, the Bank's home equity loans and lines of credit totaled
$18.6 million, or 1.4%, of the Bank's gross loans. Fixed-rate, fixed-term home
equity loans and lines of credit are offered in amounts up to 80% of the
appraised value of the property (including the first mortgage). Fixed-rate,
fixed-term home equity loans and lines of credit are offered with terms of up to
10 years, with interest-only payments during the first five years and repayment
of principal and interest during the final five years. Adjustable-rate home
equity loans are offered in amounts up to 80% of the appraised value of the
property (including the first mortgage) with terms of up to 20 years.
Adjustable-rate loans are indexed to the prime rate (which is the prime rate as
published in The Wall Street Journal).

Commercial Lending. The Bank also originates commercial loans to small and
medium sized businesses operating in the Bank's primary market area. At June 30,
1999, the Bank had $14.6 million of commercial loans, which amounted to 1.1% of
the Bank's total loans receivable. Although such loans are sometimes secured by
equipment, leases, inventory and accounts receivable, in the case of the Bank,
the majority of its commercial loans are secured by real estate. Term loans are
generally offered with adjustable rates of interest and terms of up to five
years. Secured commercial loans will be made based upon the value of the
collateral provided to secure the loan. All term loans fully amortize during the
term of such loan. Business lines of credit have terms of up to seven years, if
secured, and up to one year, if unsecured. Secured lines of credit will
generally be made based upon the collateral provided in securing the line.
Interest rates on business lines of credit adjust on a daily basis and are
indexed to the prime rate.

The Bank also issues both secured and unsecured letters of credit to business
customers of the Bank. Secured letters of credit will be issued in amounts up to
100% of the value of the collateral securing the letter of credit. Acceptable
collateral includes an assigned deposit account with the Bank, real estate or
marketable securities. Letters of credit have a maximum term of two years. At
June 30, 1999, there was $445,400 letters of credit outstanding.

In making commercial loans, the Bank considers primarily the financial resources
of the borrower, the borrower's ability to repay the loan out of net operating
income, the Bank's lending history with the borrower and the value of any
collateral. Generally, if the borrower is a corporation, partnership or other
business entity, personal guarantees by the principals are required. However,
personal guarantees may not be required on such loans, depending on the
creditworthiness of the borrower and other mitigating circumstances. The Bank's
largest commercial loan at June 30, 1999, was approximately $700,000. At such
date, the Bank had $11.4 million of unadvanced commercial lines of credit.

Unlike mortgage loans, which generally are made on the basis of the borrower's
ability to make repayment from his or her employment or other income and secured
by real property whose value tends to be more easily ascertainable, commercial
loans are of higher risk and typically are made on the basis of the borrower's
ability to make repayment from the cash flow of the borrower's business. As a
result, the availability of funds for the repayment of commercial loans may be
substantially dependent upon the success of the business itself. Further, any
collateral securing such loans may depreciate over time, may be difficult to
appraise or may fluctuate in value based on the success of the business.

Consumer and Student Lending. The Bank's portfolio of consumer and student loans
consists primarily of student loans, unsecured personal loans and overdraft
lines of credit. As of June 30, 1999, consumer and student loans amounted to
$11.8 million, or 0.9% of the Bank's total loan portfolio, of which $1.4 million
were student loans.

Consumer loans may entail a greater degree of credit risk than do residential
mortgage loans, particularly in the case of consumer loans that are unsecured.
Consumer loan collections are dependent upon the borrower's continuing financial
stability and are more likely to be adversely affected by job loss, divorce,
illness or personal bankruptcy. Finally, the

                                       8
<PAGE>

application of various federal and state laws, including federal and state
bankruptcy and insolvency laws, may limit the amount which can be recovered on
such loans in the event of a default.

Loan Approval Procedures and Authority. The Board of Directors establishes the
lending policies and loan approval limits of the Bank. The Board of Directors
has established an Officer Loan Committee, which is comprised of members of
senior management, including the Chairman and Chief Executive Officer and the
President and Chief Operating Officer of the Bank, whom are also Directors of
the Bank. The Officer Loan Committee has the authority to approve all loans
greater than $100,000, but less than $500,000, with the exception of multifamily
loans. The Officer Loan Committee approves all multifamily loans greater than
$1.5 million but less than $2.0 million. The Board has also established a
Director Loan Committee, comprised of five members of the Board of Directors,
whom are not employees of the Bank, to review and approve all loans in amounts
greater than the Officer Loan Committee approval limits up to the Bank's lending
limit. The Directors Loan Committee discusses and approves all loans and lines
of credit in amounts greater than management has authority to approve, within
the Committee's designated authority as established from time to time by the
Board of Directors. Individual loans over $3 million are to be approved or
denied by the Board of Directors and all aggregate lending relationships with a
single borrower that exceeds $3 million must be reported to the Board of
Directors. In addition, the Board has established lending authority for
individual officers as to its various types of loan products.

The Board of Directors has authorized the following persons to approve loans up
to the amounts indicated: multifamily loans can be approved by two members of
the Multifamily Lending Division, requiring the Multifamily Division Head and
one Vice President of the Multifamily Division for up to $1.5 million;
residential mortgage loans of up to $250,000 and home equity loans of up to
$250,000 can be approved by the Senior Real Estate Officer, construction loans
of up to $250,000 can be approved by the Senior Construction Loan Officer;
commercial mortgages of up to $250,000, secured commercial loans up to $250,000
and unsecured commercial loans and lines of credit up to $100,000 can be
approved by the Senior Commercial Loan Officer. Additionally, individual loans
to one borrower may not exceed $3.0 million and aggregate loans to one borrower
may not exceed $3.0 million for all loans, with the exception of multifamily
loans in which the aggregate loan limit is $12 million, without Board
involvement. Total aggregate loans are also subject to the Bank's regulatory
loans-to-one-borrower limit, which at June 30, 1999, was 15% of total capital.

With respect to all loans originated by the Bank, upon receipt of a completed
loan application from a prospective borrower, a credit report is ordered and
certain other information is verified by an independent credit agency. If
necessary, additional financial information may be required. An appraisal of
real estate intended to secure a proposed loan generally is required to be
performed by appraisers approved by the Bank. For proposed mortgage loans, the
Board annually approves independent appraisers used by the Bank and approves the
Bank's appraisal policy. The Bank's policy is to obtain title and hazard
insurance on all mortgage loans and the Bank may require borrowers to make
payments to a mortgage escrow account for the payment of property taxes.

Delinquent Loans, Real Estate Owned and Classified Assets

Management and the Board of Directors perform a monthly review of all delinquent
loans. The Bank's procedures with respect to delinquencies vary, depending upon
the nature of the loan and period of delinquency. The Bank generally requires
that delinquent mortgage loans be reviewed, that a delinquency notice be mailed
no later than the thirtieth day of delinquency and that a late charge be
assessed after 15 days. The Bank's policies provide that telephone contact will
be attempted to ascertain the reasons for delinquency and the prospects of
repayment. When contact is made with the borrower at any time prior to
foreclosure, the Bank will attempt to obtain full payment or work out a
repayment schedule with the borrower to avoid foreclosure. Mortgage loans, which
are more than 45 days delinquent, are referred to the Bank's attorneys for
collection. If the loan becomes 75 days delinquent, the Bank's attorneys are
instructed to commence foreclosure proceedings.

It was the Bank's policy to discontinue accruing interest on all commercial real
estate, construction and commercial loans which were past due 90 days, on all
consumer loans which were past due 120 days, and on all one- to four-family
residential mortgage loans which were past due 180 days, or, when in the opinion
of management, such suspension was warranted. Effective July 1, 1997, the Bank
revised this policy such that it does not accrue interest on any loans,
including one- to four-family loans secured by real estate, which are more than
90 days delinquent unless, in the opinion of management, collection is probable.
Property acquired by the Bank as a result of foreclosure on a mortgage loan is
classified as "real estate owned" ("REO") and is recorded at the lower of the
unpaid principal balance or fair value, less costs to sell at the date of
acquisition and thereafter. For loans in excess of $25,000, fair value must be
substantiated by an appraisal of

                                       9
<PAGE>

the property and, thereafter, appraisal of the property on an as-needed basis.
At June 30, 1999, the Bank had $6.9 million of nonperforming assets (defined as
non-accruing loans and REO).

At June 30, 1999, the Bank's REO net, consisting of foreclosed assets, totaled
$997,000, which was comprised of five one- to four-family properties and four
mixed use commercial property. Bank personnel generally conduct periodic
external inspections on all properties securing loans in foreclosure and
generally conduct external appraisals on all properties prior to taking
ownership of the property. Based upon such inspections and appraisals, the Bank
will charge off any loan principal it deems appropriate at such time. Bank
personnel conduct monthly reviews of foreclosed real estate and periodically
adjust valuation allowance for possible declines in the value of real estate
owned. The Bank is currently offering for sale all REO as a result of
foreclosure through brokers and through its own personnel. The Bank's policies
generally permit the financing of the sale of its foreclosed real estate on
substantially the same terms applicable to its other real estate mortgage loans.

Federal regulations and the Bank's Classification of Assets Policy require that
the Bank utilize an internal asset classification system as a means of reporting
problem and potential problem assets. The Bank currently classifies problem and
potential problem assets as "Substandard," "Doubtful" or "Loss" assets. An asset
is considered Substandard if it is inadequately protected by the current net
worth and paying capacity of the obligor or of the collateral pledged, if any.
Substandard assets include those characterized by the distinct possibility that
the insured institution will sustain some loss if the deficiencies are not
corrected. Assets classified as Doubtful have all of the weaknesses inherent in
those classified Substandard with the added characteristic that the weaknesses
present make collection or liquidation in full, on the basis of currently
existing facts, conditions and values, highly questionable and improbable.
Assets classified as Loss are those considered uncollectible and of such little
value that their continuance as assets, without the establishment of a specific
loss reserve, is not warranted. Assets which do not currently expose the insured
institution to a sufficient degree of risk to warrant classification in one of
the aforementioned categories, but possess weaknesses, are required to be
designated "Special Mention."

When an insured institution classifies one or more assets, or portions thereof,
as Substandard or Doubtful, it is required to establish a general valuation
allowance for possible loan losses in an amount deemed prudent by management,
unless the loss of principal appears to be remote. General valuation allowances
represent loss allowances, which have been established to recognize the inherent
risk associated with lending activities, but which, unlike specific allowances,
have not been allocated to particular problem assets. When an insured
institution classifies one or more assets or portions thereof, as Loss, it is
required either to establish a specific allowance for losses equal to 100% of
the amount of the assets so classified or to charge off such amount.

A savings institution's determination as to the classification of its assets and
the amount of its valuation allowances is subject to review by the FDIC and
NYSBD, which can order the establishment of additional general or specific loss
allowances. The FDIC, in conjunction with the other federal banking agencies,
recently adopted an interagency policy statement on the allowance for loan and
lease losses. The policy statement provides guidance for financial institutions
on both the responsibilities of management for the assessment and establishment
of adequate allowances and guidance for banking agency examiners to use in
determining the adequacy of general valuation guidelines. Generally, the policy
statement recommends that institutions have effective systems and controls to
identify, monitor and address asset quality problems; that management has
analyzed all significant factors that affect the collectibility of the portfolio
in a reasonable manner; and that management has established acceptable allowance
evaluation processes that meet the objectives set forth in the policy statement.
While the Bank believes that it has established an adequate allowance for
possible loan losses, there can be no assurance that regulators, in reviewing
the Bank's loan portfolio, will not request the Bank to materially increase at
that time, its allowance for possible loan losses, thereby negatively affecting
the Bank's financial condition and earnings at that time. Although management
believes that adequate specific and general loan loss allowances have been
established, actual losses are dependent upon future events and, as such,
further additions to the level of specific and general loan loss allowances may
become necessary.

All residential real estate loans with loan balances in excess of $500,000 are
reviewed annually. Commercial real estate and construction loans with a balance
in excess of $500,000 are also reviewed annually. Additionally, loans with
balances of $1.0 million or more will be reviewed semi-annually, if conditions
warrant. Loan reviews are performed by the loan reviewer, a person not directly
involved in the lending or loan administration process. The loan reviewer's
findings are submitted to the Directors Loan Committee, composed of five members
of the Board of Directors. Meetings are held on a quarterly or on an as-needed
basis. Upon review, the Committee will classify the loan and comment as to any
corrective

                                       10
<PAGE>

action needed. The findings of the Director's Loan Committee will be reported to
the Board of Directors on an ongoing basis.

At June 30, 1999, the Bank had $2.0 million of assets designated as Substandard,
consisting of 12 loans; there were no loans classified as Doubtful; and $18,000,
consisting of 11 consumer loans classified as Loss. At June 30, 1999, the Bank
had $3.8 million of assets designated as Special Mention, consisting of 65 loans
which were designated Special Mention, due to past loan delinquencies.

The following tables set forth delinquencies in the Bank's loan portfolio as of
the dates indicated:

<TABLE>
<CAPTION>
                                                                At June 30, 1999
                                                 -----------------------------------------------
                                                       60-89 Days             90 Days or More
                                                 -----------------------   ---------------------
                                                   Number    Principal      Number    Principal
                                                 ---------  ------------   --------  -----------
                                                              (Dollars in thousands)
<S>                                                  <C>      <C>             <C>      <C>
One- to four-family .......................          14       $1,201           58      $3,816
Multifamily ...............................          --           --           --          --
Commercial real estate ....................           1          639            5       1,461
Construction and development ..............          --           --            1          90
Home equity ...............................           3           96            5         143
Commercial loans ..........................           8          610            8         329
Consumer and student loans ................          10           40           11          18
                                                 -------      -------      -------     -------
         Total ............................          36       $2,586           88      $5,857
                                                 =======      =======      =======     =======
Delinquent loans to total loans(1) ........                     0.19%                    0.45%
                                                              =======                  =======

<CAPTION>
                                                                At June 30, 1998
                                                 -----------------------------------------------
                                                       60-89 Days             90 Days or More
                                                 -----------------------   ---------------------
                                                   Number    Principal      Number    Principal
                                                 ---------  ------------   --------  -----------
                                                              (Dollars in thousands)
<S>                                                 <C>       <C>              <C>     <C>
One- to four-family .......................           4       $  481           24      $3,162
Multifamily ...............................          --           --           --          --
Commercial real estate ....................          --           --            5       1,619
Construction and development ..............           4          612            2         606
Home equity ...............................           1           33            1         144
Commercial loans ..........................           3          134           --          --
Consumer and student loans ................          88          273            1           3
                                                 -------      -------      -------     -------
         Total ............................         100       $1,533           33      $5,534
                                                 =======      =======      =======     =======
Delinquent loans to total loans(1) ........                     0.24%                    0.85%
                                                              =======                  =======
<CAPTION>
                                                                At June 30, 1997
                                                 -----------------------------------------------
                                                       60-89 Days             90 Days or More
                                                 -----------------------   ---------------------
                                                   Number    Principal      Number    Principal
                                                 ---------  ------------   --------  -----------
                                                              (Dollars in thousands)
<S>                                                  <C>      <C>            <C>       <C>
One- to four-family .......................           3       $  338           20      $2,306
Multifamily ...............................          --           --           --          --
Commercial real estate ....................           1        1,102            6         876
Construction and development ..............           1          100            3         341
Home equity ...............................          --           --            1          30
Commercial loans ..........................           1           18           --          --
Consumer and student loans ................          67          213           89         324
                                                 -------      -------      -------     -------
         Total ............................          73       $1,771          119      $3,877
                                                 =======      =======      =======     =======
Delinquent loans to total loans(1) ........                     0.35%                    0.77%
                                                              =======                  =======
</TABLE>

(1)  Total loans include loans receivable held-for-investment, plus deferred
     loan costs, deferred mortgage interest and unamortized discounts, net.

                                       11
<PAGE>

Non-Performing Assets. The following table sets forth information regarding the
Bank's non-performing assets.

<TABLE>
<CAPTION>
                                                                                               At June 30,
                                                                    ----------------------------------------------------------------
                                                                      1999          1998          1997          1996          1995
                                                                    --------      --------      --------      --------      --------
                                                                                          (Dollars in thousands)
<S>                                                                  <C>           <C>           <C>           <C>           <C>
Non-accrual loans:
            One- to four-family ..............................       $3,959        $3,306        $1,676        $1,695        $1,590
            Multifamily ......................................           --            --            --            --            --
            Commercial real estate ...........................        1,461         1,619           876           939           593
            Construction and development .....................           90           606           120           120           108
            Commercial .......................................          329            --            --            --            --
            Consumer and student .............................           18             3            --            --            --
                                                                     ------        ------        ------        ------        ------
                     Total non-accrual loans .................        5,857         5,534         2,672         2,754         2,291
Loans contractually past due 90 days or more and
    still accruing interest(1) ...............................           --            --         1,205         1,066           704
                                                                     ------        ------        ------        ------        ------
                   Total non-performing loans ................        5,857         5,534         3,877         3,820         2,995
Real estate owned ............................................          997           322           662           612           335
                                                                     ------        ------        ------        ------        ------
                   Total non-performing assets ...............       $6,854        $5,856        $4,539        $4,432        $3,330
                                                                     ======        ======        ======        ======        ======
Allowance for possible loan losses
     as a percent of loans(2) ................................         1.05%         1.12%         1.10%         1.14%         0.83%

Allowance for possible loan losses as a percent of
     total non-performing loans(3) ...........................       237.07        131.50        141.09        125.55        109.35
Non-performing loans as a percent of loans(2)(3) .............         0.45          0.85          0.78          0.91          0.76
Non-performing assets as a percent of total
    assets(3) ................................................         0.25          0.37          0.46          0.48          0.39
</TABLE>

(1) Includes consumer and student loans.

(2) Loans include loans receivable held for investment, net, excluding the
    allowance for possible loan losses.

(3) It was the Bank's policy to generally cease accruing interest on all
    commercial real estate, construction and commercial loans 90 days or more
    past due, on all consumer loans which were 120 days or more past due, and on
    all one- to four-family residential mortgage loans which were 180 days or
    more past due. Effective July 1, 1997, the Bank revised this policy such
    that it does not accrue interest on any loans, including one- to four-
    family loans secured by real estate, which are more than 90 days
    delinquent as to principal and interest unless, in the opinion of
    management, collection is probable.

Non-accrual loans totaled $5.9 million as of June 30, 1999, which included 63
one- to four-family loans, with an aggregate balance of $4.0 million and six
commercial real estate loans and construction loans with an aggregate balance of
$1.6 million, of which one loan is a $1.1 million commercial mortgage on a
mixed-use property in Staten Island, New York. Non-accrual loans do not include
student loans delinquent 90 days or more, as the Bank does not classify such
loans as non-accrual because delinquent principal and interest on student loans
is guaranteed by the U.S. government.

Allowance for Loan Losses

The allowance for possible loan losses is maintained through provisions for
possible loan losses based on management's on-going evaluation of the risks
inherent in its loan portfolio in consideration of the trends in its loan
portfolio, the national and regional economies and the real estate market in the
Bank's primary lending area. The allowance for possible loan losses is
maintained at an amount management considers adequate to cover estimated losses
in its loan portfolio that are deemed probable and estimable, based on
information currently known to management. The Bank's loan loss allowance
determinations also incorporate factors and analyses which consider the
potential principal loss associated with the loan, costs of acquiring the
property securing the loan through foreclosure or deed in lieu thereof, the
periods of time involved with the acquisition and sale of such property, costs
and expenses associated with maintaining and holding the property until sale,
and the costs associated with the Bank's inability to utilize funds for other
income producing activities during the estimated holding period of the property.

                                       12
<PAGE>

As of June 30, 1999, the Bank's allowance for possible loan losses was $13.9
million, or 1.1% of total loans, and 237.1% of non-performing loans as compared
to $5.5 million, or 1.1% of total loans, and 131.5% of non-performing loans, as
of June 30, 1998. The Bank had total non-performing loans of $5.9 million and
$5.5 million at June 30, 1999 and June 30, 1998, respectively, and
non-performing loans to total loans of 0.4% and 0.9%, respectively. The Bank
will continue to monitor and modify its allowance for possible loan losses as
conditions dictate. The Board of Directors reviews the adequacy of the allowance
for possible loan losses quarterly. While management believes that, based on
information currently available, the Bank's allowance for possible loan losses
is sufficient to cover losses inherent in its loan portfolio at this time, no
assurances can be given that the Bank's level of allowance for loan losses will
be sufficient to cover future loan losses incurred by the Bank 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
used by management to determine the current level of the allowance for loan
losses. Management may, in the future, increase its level of loan loss allowance
as a percentage of total loans and non-performing loans in the event it
increases the level of multifamily, commercial real estate, construction and
development or other lending as a percentage of its total loan portfolio. In
addition, the FDIC and NYSBD, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses. Such agencies may
require the Bank to make additional provisions for estimated loan losses based
upon judgments different from those of management.

The following table sets forth activity in the Bank's allowance for loan losses
for the periods set forth in the table.

<TABLE>
<CAPTION>
                                                                                 Years Ended June 30,
                                                       ------------------------------------------------------------------------
                                                         1999            1998            1997           1996             1995
                                                       --------        --------        --------       --------         --------
                                                                                   (In thousands)
<S>                                                    <C>             <C>             <C>             <C>             <C>
Balance at beginning of period ...............         $ 7,276         $ 5,470         $ 4,796         $ 3,275         $ 3,106
                                                       -------         -------         -------         -------         -------
Allowance of acquired institutions ...........           4,357              --              --              --              --
Provision for loan losses ....................           2,550           2,200           1,080           1,600             600
Charge-offs:
       Real estate loans .....................              60             110             174             166             384
       Commercial real estate ................              50             142              15              --               6
       Consumer and student loans ............             235             281             286             186             150
                                                       -------         -------         -------         -------         -------
                     Total charge-offs .......             345             533             475             352             540
Recoveries:
       Real estate loans .....................              --              --              45              97              48
       Commercial real estate ................              --              88              --             122              --
       Consumer and student loans ............              47              51              24              54              61
                                                       -------         -------         -------         -------         -------
                     Total recoveries ........              47             139              69             273             109
Net charge-offs ..............................             298             394             406              79             431
                                                       -------         -------         -------         -------         -------
Balance at end of period .....................         $13,885         $ 7,276         $ 5,470         $ 4,796         $ 3,275
                                                       =======         =======         =======         =======         =======

</TABLE>

                                       13
<PAGE>

The following tables set forth the Bank's percent of allowance for loan losses
to total allowance and the percent of loans to total loans in each of the
categories listed at the dates indicated.

<TABLE>
<CAPTION>
                                                                  At June 30,
                              --------------------------------------------------------------------------------------------------
                                             1999                                           1998
                              ------------------------------------------------  ------------------------------------------------
                                                                  Percent of                                       Percent of
                                                  Percent of       Loans in                        Percent of       Loans in
                                                  Allowance          Each                          Allowance          Each
                                                   to Total       Category to                       to Total       Category to
                                 Amount           Allowance       Total Loans      Amount          Allowance       Total Loans
                              -------------      -----------     -------------  ------------      ------------    --------------
                                                                 (Dollars in thousands)
<S>                           <C>                <C>             <C>            <C>               <C>             <C>
Real estate(1) .........         $ 6,966              50%              98%         $ 3,581              49%              96%

Commercial .............             230               2                1              156               2                1
Consumer and
     student ...........             195               1                1              325               5                3

Unallocated ............           6,494              47               --            3,214              44               --
                                 -------         -------          -------          -------         -------          -------
Total allowance
     for possible
     loan losses .......         $13,885             100%             100%         $ 7,276             100%             100%
                                 =======         =======          =======          =======         =======          =======

<CAPTION>

                                                                     At June 30,
                       -----------------------------------------------------------------------------------------------------------
                                     1997                               1996                                1995
                       -----------------------------------  ----------------------------------  ----------------------------------
                                               Percent of                          Percent of                          Percent of
                                  Percent of   Loans in               Percent of   Loans in               Percent of    Loans in
                                  Allowance      Each                 Allowance      Each                 Allowance       Each
                                  to Total    Category to             to Total    Category to             to Total     Category to
                         Amount   Allowance   Total Loans    Amount   Allowance   Total Loans    Amount   Allowance    Total Loans
                       --------- ----------- -------------  -------- -----------  ------------  -------- -----------  ------------
                                                                           (Dollars in thousands)
<S>                    <C>       <C>         <C>            <C>      <C>          <C>           <C>      <C>          <C>
Real estate(1) .......   $2,619       48%         94%        $2,173       45%         93%        $2,084       64%           93%

Commercial ...........      355        6           1            380        8           3            472       14             1
Consumer and
     Student .........      321        6           5            315        7           4            295        9             6

Unallocated ..........    2,175       40          --          1,928       40          --            424       13            --
                         ------   ------      ------         ------   ------      ------         ------   ------        ------
Total allowance
     for possible
     loan losses .....   $5,470      100%        100%        $4,796      100%        100%        $3,275      100%          100%
                         ======   ======      ======         ======   ======      ======         ======   ======        ======
</TABLE>

(1) Real estate includes one- to four-family, multifamily, commercial real
estate, construction and development, and home equity loans.

                                       14
<PAGE>

Securities Investment Activities

The investment policy of the Company and the Bank, which is approved by the
Board of Directors, is designed primarily to manage the interest rate
sensitivity of its overall assets and liabilities, to generate a favorable
return without incurring undue interest rate and credit risk, to complement the
Bank's lending activities and to provide and maintain liquidity. In establishing
its investment strategies, the company considers its business and growth
position, the economic environment, its interest rate sensitivity position, the
types of securities to be held and other factors.

While the Board of Directors has final authority and responsibility for the
securities investment portfolio, the Bank has established a Management
Investment Committee comprised of six senior officers, including the Investment
Officer, to supervise the Bank's securities investment program. The Management
Investment Committee meets at least quarterly and evaluates all investment
activities for safety and soundness, adherence to the Bank's investment policy
and assurance that authority levels are maintained. The Bank's policies provide
that all investment transactions must be authorized by two senior executive
officers and reported to the Board of Directors on a monthly basis and reviewed
by the Asset/Liability Committee on an ongoing basis.

The Company's current securities investment policy permits investments in
various types of liquid assets, including obligations of the U.S. Treasury and
federal agencies, investment and non-investment grade corporate obligations,
various types of mortgage-backed and mortgage-related securities, including
collateralized mortgage obligations ("CMOs"), corporate equities, commercial
paper and insured certificates of deposit.

The Company currently does not participate in hedging programs, interest rate
swaps, or other activities involving use of off-balance sheet derivative
financial instruments. Similarly, the Company does not invest in
mortgage-related securities, deemed to be "high risk" by the federal banking
regulators.

In November 1995, the Financial Accounting Standards Board ("FASB") issued a
special report, "A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities," which allowed institutions
to affect a one-time reclassification of its securities from held to maturity to
available for sale without requiring that all securities held to maturity be
reclassified. As a result, in November 1995, the Bank reclassified $26.0 million
of securities from held to maturity to available for sale. In February 1998, the
Company transferred its entire securities held to maturity portfolio to its
securities available for sale portfolio as part of a balance sheet restructuring
initiative implemented at that time, primarily in connection with a reassessment
by the Company of its asset/liability management strategy. As a result, the
Company did not maintain a portfolio of securities held to maturity, nor a
trading portfolio of securities at June 30, 1998. In connection with the balance
sheet restructuring initiative, approximately $54.7 million of securities
available for sale were sold and a net loss of $144,000 was realized. Management
believes that the flexibility of the available for sale portfolio will assist
the Company in evaluating market opportunities while managing the Bank's
exposure to interest rate risk and asset sensitivity.

As of June 30, 1999, the Company's securities portfolio totaled $1.2 billion, or
42.2% of total assets, with a weighted average life of 8.1 years and was
classified as available for sale.

Mortgage-Backed and Mortgage-Related Securities. The Bank purchases
mortgage-backed and mortgage-related securities in order to: (1) generate
positive interest rate spreads with minimal administrative expense; (2) lower
its credit risk as a result of the guarantees provided by GNMA, FHLMC and FNMA;
(3) utilize these securities as collateral for borrowings; and (4) maintain
sufficient liquidity levels for the Bank. The Bank has primarily invested in
mortgage-backed and mortgage-related securities issued or sponsored by GNMA,
FHLMC and FNMA and private issuers.

The Bank also invests in CMOs issued or sponsored by FNMA and FHLMC, as well as
private issuers. At June 30, 1999, mortgage-backed and mortgage-related
securities totaled $866.8 million, or 31.4% of total assets, with a weighted
average yield of 6.44%. The increase in such securities reflects management's
recent revisions to its investment strategy, placing greater emphasis on
mortgage-backed and mortgage-related securities, the investment of conversion
proceeds and leverage strategy conducted. At June 30, 1999, the Company's CMO
portfolio totaled $359.3 million, or 13.0% of total assets, consisting of $304.4
million of CMOs issued by private issuers and $54.9 million issued by the
government sponsored agencies. The Company policy limits its privately issued
CMOs to non-high risk securities rated "AAA" by two rating agencies, with an
average life of seven years or less and limits the amount of such investment to
40% of total assets. For government sponsored CMOs, the policy limits such
investments to non-high risk securities

                                       15
<PAGE>

that have an average life of 10 years or less. The credit rating of the specific
CMOs owned are monitored on a regular basis. The current investment policy
prohibits the purchase of higher risk CMOs, which are defined as those
securities exhibiting significantly greater volatility of estimated average life
and price relative to interest rates than do standard 30-year fixed-rate
securities. At such date, the Company's CMO portfolio had an estimated average
life of 2.1 years and a weighted average yield of 6.51%.

Debt Securities. The Company's investment in debt securities consists primarily
of investments in debt securities issued by government sponsored agencies such
as FNMA, Federal Home Bank Loan ("FHLB") and FHLMC and creditworthy financial
companies. Like the prior year, the Company either sold or allowed to mature its
U. S. government obligations, government sponsored agency debt, corporate and
public utility bonds in conjunction with its asset/liability management
strategy.

U.S. Agency Obligations. At June 30, 1999, the Company's U.S. government agency
securities portfolio totaled $39.3 million, with a weighted average yield of
6.50%. It consists of $11.0 million of callable agency zero-coupon medium term
notes and $28.3 million of primarily short-term callable notes.

Financial Bonds. At June 30, 1999, the financial bond portfolio totaled $198.2
million with a weighted average yield of 7.30%, consisting of $111.7 million
fixed-rate and $86.5 million floating-rate issues. The majority of the issues
are long term and generally issued by investment grade U. S. banks and savings
and loan holding companies. All of the Company's financial bonds are callable by
the respective issuers pursuant to the terms of the bonds, generally after an
initial 10 year holding period. The floating-rate bonds have a weighted average
coupon of 5.83% and reset quarterly, based on the Three Month LIBOR (London
Interbank Offer Rate) Index plus margins ranging from 0.50% to 1.80%. The
current policy of the Company limits the purchases of financial bonds to a
maturity of 30 years or less, a total investment of 10% of total assets, with a
1% limitation for any single issuer.

Equity Securities. At June 30, 1999, the Company's equity securities portfolio
totaled $46.5 million, all of which was classified as available for sale. Such
portfolio consisted of investments of $30.1 million of investments in preferred
stock and $16.4 million of investments in common stock primarily of financial
institutions. The Company's policy limit for its common and preferred stock
investments is 5% and 7.5% respectively, of its total assets. Current policy
permits the purchase of preferred stock rated investment grade. The substantial
majority of the preferred stock holdings are redeemable by issuers after five
years.

                                       16
<PAGE>

The following table sets forth the composition of the Company's debt and equity
and mortgage-backed and mortgage-related securities portfolios in dollar amounts
and percentages at the dates indicated:

<TABLE>
<CAPTION>
                                                                                    At June 30,
                                                   --------------------------------------------------------------------------------
                                                            1999                       1998                        1997
                                                   ------------------------   -------------------------  --------------------------
                                                                   Percent                     Percent                     Percent
                                                     Amount        of Total     Amount         of Total    Amount          of Total
                                                   -----------    ---------   ---------       ---------  ----------       ---------
                                                                              (Dollars in thousands)
<S>                                                <C>            <C>         <C>             <C>        <C>              <C>
Debt securities:
         Corporate bonds .......................   $       --            --%  $    5,213          0.62%  $   68,483         15.66%
         U.S. Government obligations ...........          300          0.03        8,989          1.07       52,757         12.06
         Agency securities .....................       39,312          3.37       24,675          2.93       39,457          9.02
         Public utilities ......................           --            --       14,385          1.70       36,489          8.34
         Municipal bonds .......................        1,572          0.14        1,182          0.14        1,149          0.26
         Other debt obligations (1) ............        1,763          0.15        2,249          0.27        6,866          1.57
         Asset backed notes ....................        9,963          0.86        9,988          1.18           --            --
         Financial bonds .......................      198,246         17.02      115,863         13.74           --            --
                                                   ----------        ------   ----------        ------   ----------        ------
            Total debt securities ..............      251,156         21.57      182,544         21.65      205,201         46.91
                                                   ----------        ------   ----------        ------   ----------        ------

Equity securities:
         Preferred stock .......................       30,097          2.59       28,448          3.37       14,158          3.24
         Common stock ..........................       16,358          1.40       27,056          3.21        3,814          0.87
         Mutual funds ..........................           --            --          842          0.10        1,734          0.40
                                                   ----------        ------   ----------        ------   ----------        ------
            Total equity securities ............       46,455          3.99       56,346          6.68       19,706          4.51
                                                   ----------        ------   ----------        ------   ----------        ------

Mortgage-backed and mortgage-related securities:
         FHLMC pass-through ....................      161,472         13.86       97,362         11.55       82,237         18.80
         GNMA pass-through .....................      159,247         13.68      185,023         21.94       11,824          2.70
         FNMA pass-through .....................       97,055          8.33       76,451          9.07           --            --
         Private issuer pass-through ...........       89,734          7.71       18,208          2.16        3,276          0.75
         Agency CMOs ...........................       54,922          4.72       39,125          4.64       36,934          8.44
         Private issuer CMOs ...................      304,414         26.14      188,135         22.31       78,249         17.89
                                                   ----------        ------   ----------        ------   ----------        ------
            Total mortgage-backed and mortgage-
                 related securities ............      866,844         74.44      604,304         71.67      212,520         48.58
                                                   ----------        ------   ----------        ------   ----------        ------
            Total securities ...................   $1,164,455        100.00%  $  843,194        100.00%  $  437,427        100.00%
                                                   ==========        ======   ==========        ======   ==========        ======

Debt and equity securities available for sale ..   $  297,611         25.56%  $  238,890         28.33%  $   19,706          4.51%
Debt and equity securities held to maturity ....           --            --           --            --      205,201         46.91
                                                   ----------        ------   ----------        ------   ----------        ------
            Total debt and equity securities ...      297,611         25.56      238,890         28.33      224,907         51.42
                                                   ----------        ------   ----------        ------   ----------        ------
Mortgage-backed and mortgage-related
      securities available for sale ............      866,844         74.44      604,304         71.67       27,398          6.26
Mortgage-backed and mortgage-related
      securities held to maturity ..............           --            --           --            --      185,122         42.32
                                                   ----------        ------   ----------        ------   ----------        ------
            Total mortgage-backed and mortgage-
                 related securities ............      866,844         74.44      604,304         71.67      212,520         48.58
                                                   ----------        ------   ----------        ------   ----------        ------
            Total securities ...................   $1,164,455        100.00%  $  843,194        100.00%  $  437,427        100.00%
                                                   ==========        ======   ==========        ======   ==========        ======
</TABLE>

(1)  Consists of Railroad, Foreign and Other Bonds.

                                       17
<PAGE>

<TABLE>
<CAPTION>

The following table sets forth the Company's securities activities for the periods indicated:

                                                                                               For the Year
                                                                                              Ended June 30,
                                                                          -----------------------------------------------------
                                                                              1999                 1998                1997
                                                                          -----------          -----------          -----------
                                                                                              (In thousands)
<S>                                                                       <C>                  <C>                  <C>
Beginning balance ...............................................         $   843,194          $   437,427          $   411,037
                                                                          -----------          -----------          -----------

Add:
Debt and equity securities purchased held to maturity ...........                  --                   --               17,611
Debt and equity securities purchased available for sale .........              96,028              173,260               17,678
Mortgage-backed and mortgage-related securities
            purchased held to maturity ..........................                  --                   --              133,668
Mortgage-backed and mortgage-related securities
            purchased available for sale ........................             384,631              608,059               26,478
Securitization ..................................................              77,159                   --                   --
Investments of acquired institutions, net .......................             233,150                   --                   --
Change in net unrealized gain on
            available for sale securities .......................             (34,671)               6,179                  450

Less:
Maturities and redemptions debt and equity securities
            held to maturity ....................................                  --               55,972              127,005
Sales and redemptions of debt and equity securities
            available for sale ..................................             107,141              108,936               11,938
Maturities and redemptions of mortgage-backed and
            mortgage-related securities held to maturity ........                  --               29,237                3,609
Principal repayments on mortgage-backed and
            mortgage-related securities held to maturity ........                  --               31,987               25,315
Sales and redemptions of mortgage-backed and
            mortgage-related securities available for sale ......              63,931               69,074                   --
Principal repayments on mortgage-backed and
            mortgage-related securities available for sale ......             264,460               86,073                  479
Realized (gains) losses on sales of mortgage-backed and
            mortgage-related securities .........................                (272)                 287                   --
Realized (gains) losses on debt and equity securities ...........              (2,800)                (317)                 110
Amortization of investment premiums, net accretion
            of discount .........................................               2,576                  482                1,039
                                                                          -----------          -----------          -----------

Ending balance ..................................................         $ 1,164,455          $   843,194          $   437,427
                                                                          ===========          ===========          ===========
</TABLE>

                                       18
<PAGE>

The following table sets forth certain information regarding the amortized cost
and market values of the Company's debt and equity and mortgage-backed and
mortgage-related securities, at the dates indicated:

<TABLE>
<CAPTION>
                                                                                         At June 30,
                                                        ----------------------------------------------------------------------------
                                                                 1999                        1998                        1997
                                                        ------------------------   ------------------------    ---------------------
                                                          Amortized    Market        Amortized   Market          Amortized  Market
                                                            Cost        Value          Cost       Value            Cost      Value
                                                        -----------   ----------   -----------  -----------    -----------  --------
                                                                                         (In thousands)
<S>                                                     <C>                         <C>                         <C>
Debt securities held to maturity:
   U.S. Government obligations ....................     $       --    $      --     $      --   $       --     $   52,757   $ 52,815
   Agency securities ..............................             --           --            --           --         39,457     39,522
   Municipal bonds ................................             --           --            --           --          1,149      1,198
   Corporate bonds ................................             --           --            --           --        104,972    104,930
   Other debt obligations..........................             --           --            --           --          6,866      6,897
                                                        ----------   ----------    ----------    ---------    -----------   --------
          Total debt securities held to maturity ..             --           --            --           --        205,201    205,362
                                                        ----------   ----------    ----------   ----------    -----------   --------
Debt securities available for sale:
   U.S. Government obligations ....................            300           300        8,960        8,989           --           --
   Agency securities ..............................         41,564        39,312       24,484       24,675           --           --
   Municipal bonds ................................          1,575         1,572        1,119        1,182           --           --
   Corporate bonds ................................             --            --       19,425       19,598           --           --
   Other debt obligations (1) .....................          1,762         1,763        2,218        2,249           --           --
   Asset backed notes .............................          9,981         9,963        9,954        9,988           --           --
   Financial bonds ................................        204,447       198,246      114,153      115,863           --           --
                                                        ----------   -----------   ----------   ----------    ---------     --------
        Total debt securities available for sale ..        259,629       251,156      180,313      182,544           --           --
                                                        ----------   -----------   ----------   ----------    ---------     --------
Equity securities available for sale:
   Mutual funds ...................................             --            --          605          842        1,629        1,734
   Preferred stock ................................         29,687        30,097       27,146       28,448       14,027       14,158
   Common stock ...................................         16,218        16,358       24,786       27,056        3,578        3,814
                                                        ----------    ----------   ----------   ----------   ----------     --------
         Total equity securities available for sale         45,905        46,455       52,537       56,346       19,234       19,706
                                                        ----------    ----------   ----------   ----------   ----------     --------
Mortgage-backed and mortgage-related securities:
Held to maturity:
   FHLMC pass-through .............................             --            --           --           --       82,237       83,584
   Private issuer pass-through ....................             --            --           --           --        3,276        3,281
   Agency CMOs ....................................             --            --           --           --       32,248       32,336
   Private issuer CMOs ............................             --            --           --           --       67,361       67,392
                                                        ----------    ----------   ----------   ----------   ----------     --------
         Total mortgage-backed and mortgage-related
            securities held to maturity ...........             --            --           --           --      185,122      186,593
                                                        ----------    ----------   ----------   ----------   ----------     --------
Available for sale:
   FHLMC pass-through .............................        166,129       161,472       96,970       97,362       11,710       11,824
   GNMA pass-through ..............................        162,446       159,247      185,098      185,023           --           --
   FNMA pass-through ..............................         98,465        97,055       76,616       76,451           --           --
   Private issuer pass-through ....................         92,664        89,734       18,143       18,208           --           --
   Agency CMOs ....................................         55,849        54,922       39,165       39,125        4,693        4,686
   Private issuer CMOs ............................        311,274       304,414      187,587      188,135       10,881       10,888
                                                        ----------    ----------   ----------   ----------   ----------     --------
         Total mortgage-backed and mortgage-related
            securities available for sale .........        886,827       866,844      603,579      604,304       27,284       27,398
Net unrealized (loss) gain on
   available for sale securities ..................        (27,906)           --        6,765           --          586           --
                                                        ----------    ----------   ----------   ----------   ----------     --------
Total securities ..................................     $1,164,455    $1,164,455   $  843,194   $  843,194   $  437,427   $  439,059
                                                        ==========    ==========   ==========   ==========   ==========   ==========
</TABLE>

(1) Consists of Railroad, Foreign and Other Bonds.

                                       19
<PAGE>

The table below sets forth certain information regarding the carrying value,
weighted average yields and contractual maturities of the Company's securities
portfolio as of June 30, 1999.

<TABLE>
<CAPTION>
                                                                        At June 30, 1999
                                       --------------------------------------------------------------------------------------
                                                               More than One          More than Five
                                        One Year or Less     Year to Five Years     Years to Ten Years   More than Ten Years
                                       -----------------     ------------------     ------------------   --------------------
                                                 Weighted               Weighted              Weighted               Weighted
                                       Carrying   Average   Carrying     Average   Carrying    Average  Carrying      Average
                                         Value     Yield      Value       Yield      Value      Yield     Value        Yield
                                       -------    -------   --------   ----------  ---------   --------  --------    ---------
                                                                  (Dollars in thousands)
<S>                                   <C>         <C>       <C>        <C>         <C>          <C>      <C>        <C>
Available for sale:
  Debt securities:
     Municipal bonds ...............  $      277    3.17%  $      957      3.32%  $      338     4.08%  $       --       --%
     U.S. Government obligations ...         300    4.78           --        --           --       --           --       --
     Agency securities .............         500    5.49       16,696      6.05        9,600     6.63       12,516     7.02
     Other debt obligations ........          --      --        1,763      6.84           --       --           --       --
     Asset backed notes ............          --      --           --        --        9,963     7.00           --       --
     Financial bonds ...............          --      --        1,403      6.41        6,652     8.82      190,191     7.25
                                      ----------           ----------             ----------            ----------
Total debt securities
  available for sale ...............       1,077    4.70       20,819      6.02       26,553     7.28      202,707     7.24
                                      ----------           ----------             ----------            ----------
   Mortgage-backed and
        mortgage-related securities:
     FHLMC pass-through ............          --      --        5,701      6.94           --       --      155,771     6.18
     GNMA pass-through .............          --      --           --        --           --       --      159,247     6.73
     FNMA pass-through .............          --      --        5,518      5.40       27,410     6.15       64,127     6.34
     Private issuer pass-through ...          --      --           --        --        2,301     7.27       87,433     6.26
     Agency CMOs ...................          --      --           --        --           --       --       54,922     6.54
     Private issuer CMOs ...........          --      --           --        --           --       --      304,414     6.50
                                      ----------           ----------             ----------            ----------
Total mortgage-backed and
  mortgage-related securities
  available for sale ...............          --      --       11,219      6.18       29,711     6.24      825,914     6.45
                                      ----------           ----------             ----------            ----------
  Equity securities:
      Preferred stock ..............          --      --        4,500      5.09       12,451     6.20       13,146     6.19
      Common stock .................          --      --           --        --           --       --       16,358     2.85
                                      ----------           ----------             ----------            ----------
Total equity securities ............          --      --        4,500      5.09       12,451     6.20       29,504     4.34
                                      ----------           ----------             ----------            ----------
Total securities
  available for sale ...............  $    1,077    4.70   $   36,538      5.95   $   68,715     6.63   $1,058,125     6.54
                                      ==========           ==========             ==========            ==========
</TABLE>

                                            At June 30, 1999
                                       ------------------------------
                                                  Total
                                        -----------------------------
                                                      Weighted
                                         Carrying      Average
                                           Value        Yield
                                        ----------    ---------------

Available for sale:
  Debt securities:
     Municipal bonds ...............     $    1,572        3.46%
     U.S. Government obligations ...            300        4.78
     Agency securities .............         39,312        6.49
     Other debt obligations ........          1,763        6.84
     Asset backed notes ............          9,963        7.00
     Financial bonds ...............        198,246        7.30
                                         ----------
Total debt securities
  available for sale ...............        251,156        7.13
                                         ----------
   Mortgage-backed and
        mortgage-related securities:
     FHLMC pass-through ............        161,472        6.21
     GNMA pass-through .............        159,247        6.73
     FNMA pass-through .............         97,055        6.23
     Private issuer pass-through ...         89,734        6.28
     Agency CMOs ...................         54,922        6.54
     Private issuer CMOs ...........        304,414        6.50
                                         ----------

Total mortgage-backed and
  mortgage-related securities
  available for sale ...............        866,844        6.44
                                         ----------

  Equity securities:
      Preferred stock ..............         30,097        6.03
      Common stock .................         16,358        2.85
                                         ----------
Total equity securities ............         46,455        4.91
                                         ----------
Total securities
  available for sale ...............     $1,164,455        6.53
                                         ==========

Sources of Funds

General. Deposits, repayments and prepayments of loans and securities, proceeds
from sales of loans and securities, proceeds from maturing securities and cash
flows from operations are the primary sources of the Bank's funds for use in
lending, investing and for other general purposes. The Bank also utilizes
borrowed funds, primarily FHLB advances and reverse-repurchase agreements, to
fund its operations.

Deposits. The Bank offers a variety of deposit accounts with a range of interest
rates and terms. The Bank's deposit accounts consist of savings, retail
checking/NOW accounts, commercial checking accounts, money market accounts, club
accounts and certificates of deposit accounts. The Bank offers jumbo certificate
of deposit accounts and Individual Retirement Accounts ("IRAs") and other
qualified plan accounts. While jumbo certificate accounts are accepted by the
Bank and may be subject to preferential rates, the Bank does not actively
solicit such deposits, as such deposits are more difficult to retain than core
deposits.

At June 30, 1999, the Bank's deposits totaled $1.6 billion, of which 89.6% were
interest-bearing deposits. For year ended June 30, 1999, the average balance of
core deposits totaled $722.2 million, or 63.7% of total average deposits. At
June 30, 1999, the Bank had a total of $598.5 million in certificates of
deposit, of which $453.0 million had maturities of less than one year. For the
year ended June 30, 1998, the average balance of core deposits represented
approximately 66.0% of total deposits and certificate accounts represented
34.0%, as compared to core deposits representing 63.7% of total deposits and
certificate accounts representing 36.3% of deposits for year ended June 30,
1999. Although the Bank has a significant portion of its deposits in savings
accounts, management monitors activity on the Bank's savings accounts and, based
on historical experience and the Bank's current pricing strategy, believes it
will continue to retain a large portion of such accounts. The Bank is not
limited with respect to the rates it may offer on deposit products.

                                       20
<PAGE>

The flow of deposits is influenced significantly by general economic conditions,
changes inmoney market rates, prevailing interest rates and competition. The
Bank's deposits are obtained predominantly from the areas in which its branch
offices are located. The Bank relies primarily on customer service and long-
standing relationships with customers to attract and retain these deposits;
however, market interest rates and rates offered by competing financial
institutions affect the Bank's ability to attract and retain deposits. The Bank
uses traditional means of advertising its deposit products, including television
and print media, and generally does not solicit deposits from outside its market
area. While the Bank has historically not accepted brokered deposits, the Bank
is currently in the process of establishing relationships with deposit brokers
and may, in the future, utilize brokered deposits as a funding source, depending
on market conditions.

The following table presents the deposit activity of the Bank for the periods
indicated:

<TABLE>
<CAPTION>
                                                                                           For the Year Ended June 30,
                                                                            --------------------------------------------------------
                                                                                1999                  1998                  1997
                                                                            -----------            -----------          ------------
                                                                                                  (In thousands)
<S>                                                                         <C>                    <C>                  <C>
Net deposits ..................................................               $108,989               $ 34,168               $ 38,896
Deposits of acquired institutions, net ........................                523,742                     --                     --
Interest credited on deposit accounts .........................                 35,931                 30,822                 27,707
                                                                              --------               --------               --------
Total increase in deposit accounts ............................               $668,662               $ 64,990               $ 66,603
                                                                              ========               ========               ========
</TABLE>

At June 30, 1999, the Bank had outstanding $80.3 million in certificate of
deposit accounts in amounts of $100,000 or more, maturing as follows:

                                                         Weighted
         Maturity Period               Amount          Average Rate
----------------------------------   ----------        ------------
                                        (Dollars in thousands)
Three months or less .............    $23,926             5.25%
Over three through six months ....     18,463             4.87
Over six through 12 months .......     17,971             5.13
Over 12 months ...................     19,942             5.62
                                      -------
Total ............................    $80,302             5.23
                                      =======

                                       21
<PAGE>

 The following table sets forth the distribution of the Bank's average deposit
accounts for the periods indicated and the weighted average interest rates on
each category of deposits presented. Averages for the periods ended June 30,
1998 and 1997 presented utilize average month-end balances. The period ended
June 30, 1999, utilized daily average balances.

<TABLE>
<CAPTION>

                                                                  For the Year Ended June 30,
                                     --------------------------------------------------------------------------------
                                                       1999                                    1998
                                     ---------------------------------------  ---------------------------------------
                                                       Percent                                 Percent
                                                       of Total    Weighted                    of Total    Weighted
                                       Average         Average     Average      Average        Average     Average
                                       Balance         Deposits      Rate       Balance        Deposits      Rate
                                     ----------        ---------   ---------  -----------     ----------  -----------
<S>                                 <C>                <C>          <C>       <C>             <C>         <C>
                                                                       (Dollars in thousands)
   Money market accounts ......      $   42,973           3.79%      3.22%     $ 39,075           4.23%      3.46%
   Savings accounts ...........         510,476          45.00       2.48       445,057          48.19       2.73
   NOW accounts ...............          35,004           3.08       1.70        19,089           2.07       2.34
   Non-interest-bearing
      accounts ................         133,707          11.79         --       106,189          11.50         --
                                     ----------         ------                 --------         ------
         Total ................         722,160          63.66       2.03       609,410          65.99       2.29
                                     ----------         ------                 --------         ------

Certificates of deposit:
   Less than six months .......          43,366           3.82       4.37        21,096           2.28       4.42
   Over six through
      12 months ...............          84,035           7.41       4.87        57,081           6.18       5.09
   Over 12 through
      24 months ...............         172,659          15.23       5.14       152,047          16.47       5.59
   Over 24 months .............          58,647           5.17       5.89        51,293           5.55       5.81
   Certificates over
      $100,000 ................          53,459           4.71       5.28        32,589           3.53       5.46
                                     ----------         ------                 --------         ------

Total certificates
      of deposit ..............         412,166          36.34       5.17       314,106          34.01       5.44
                                     ----------         ------                 --------         ------

      Total average deposits ..      $1,134,326         100.00%      3.17      $923,516         100.00%      3.36
                                     ==========        =======                 ========         ======
</TABLE>

                                              For the Year Ended June 30,
                                    --------------------------------------------
                                                        1997
                                    --------------------------------------------
                                                       Percent
                                                       of Total    Weighted
                                       Average         Average      Average
                                       Balance         Deposits      Rate
                                    --------------   ------------  ------------

   Money market accounts ......        $ 37,552           4.48%      3.48%
   Savings accounts ...........         432,162          51.61       2.74
   NOW accounts ...............          15,652           1.87       2.36
   Non-interest-bearing
      accounts ................          78,483           9.37         --
                                       --------        -------
         Total ................         563,849          67.33       2.40
                                       --------        -------

Certificates of deposit:
   Less than six months .......          30,437           3.64       4.38
   Over six through
      12 months ...............          46,188           5.52       4.90
   Over 12 through
      24 months ...............         121,109          14.46       5.33
   Over 24 months .............          52,787           6.30       5.75
   Certificates over
      $100,000 ................          23,025           2.75       5.32
                                       --------        -------

Total certificates
      of deposit ..............         273,546          32.67       5.23
                                       --------        -------

      Total average deposits ..        $837,395         100.00%      3.33
                                       ========        =======











The following table presents, by various rate categories, the amount of
certificate of deposit accounts outstanding at the dates indicated.

<TABLE>
<CAPTION>

                                                              Period to Maturity from June 30, 1999
                                 ---------------------------------------------------------------------------------------------------

                                  Less than       One to          Two to        Three to      Four to      Five years
                                  One Year       Two years      Three years    Four years    Five years      or more
                                 ----------      ----------     ------------   ------------  ------------  ----------------
<S>                              <C>             <C>            <C>            <C>           <C>           <C>
                                                                                         (In thousands)
                                 ---------------------------------------------------------------------------------------------------


Certificates of deposit:

0 to 4.00% ..........          $  8,645          $    176          $     90          $     32          $      1          $     10

4.01 to 5.00% .......           305,245            58,310             4,878                59             2,934             1,028

5.01 to 6.00% .......           123,536            40,084             8,504             9,532            10,670             5,866

6.01 to 7.00% .......             3,243               294             3,711               765                --               127

7.01 to 8.00% .......             6,331               576             3,823                --                --                --
                               --------          --------          --------        ----------          --------          --------

  Total .............          $447,000          $ 99,440          $ 21,006        $   10,388          $ 13,605          $  7,031
                               ========          ========          ========        ==========          ========          ========

</TABLE>
                                                    At June 30,
                                 ----------------------------------------------
                                       1999             1998           1997
                                    ----------       ----------     ---------
                                -----------------------------------------------

Certificates of deposit:

0 to 4.00% .....................      $  8,954        $  4,871        $  3,369

4.01 to 5.00% ..................       372,454          42,512          75,534

5.01 to 6.00% ..................       198,192         266,741         205,325

6.01 to 7.00% ..................         8,140           6,950           9,553

7.01 to 8.00% ..................        10,730           4,274           4,285
                                      --------        --------        --------

  Total ........................      $598,470        $325,348        $298,066
                                      ========        ========        ========

                                       22
<PAGE>

Borrowed Funds. During fiscal year 1999, the Bank continued to leverage its
capital by utilizing borrowings as an additional source of funds for asset
growth. At June 30, 1999, the Bank had total borrowings of $757.8 million, which
consisted of repurchase agreements with established brokerage firms and advances
with the FHLB of New York. These borrowings are collateralized primarily by the
Bank's mortgage-backed securities. The Bank had $306.0 million in borrowings at
June 30, 1998 and no borrowings at June 30, 1997.

The Bank may continue to utilize borrowings in fiscal year 2000, which may
result in an increase in the Bank's overall cost of funds. The Bank's current
strategy is to invest such borrowed funds primarily in mortgage-backed and
mortgage-related securities. This strategy is intended to incrementally increase
net interest income, although it may have the effect of incrementally decreasing
net interest rate spread. The maximum amount that the FHLB will advance to
member institutions fluctuates from time-to-time, in accordance with the
policies of the OTS and the FHLB.

Other Activities

In addition to its traditional lending and deposit products, the Bank also
offers certain merchant banking services. These include providing credit card
deposit accounts to local merchants. The Bank receives a processing fee from the
customer for each credit card transaction processed. The Bank also receives
monthly income from terminal and printer sales and rentals. For the years ended
June 30, 1999 and 1998, $80,000 and $68,000, or 0.7% and 2.0%, respectively, of
total fee income was attributable to credit card processing fees. In addition,
the Bank has endorsed and promotes a credit card through a national affinity
credit card bank. Under the program, the affinity credit card bank receives and
underwrites all credit card applications. The Bank receives royalty payments
based on new accounts and renewal accounts, as well as a portion of finance
charges assessed. For the years ended June 30, 1999 and 1998, the Bank received
$51,000 and $47,000, or 0.4% and 1.4%, respectively, of total fee income through
the affinity credit card program.

Subsidiary Activities

RCSB Corp. RCSB Corp. ("RCSB"), a wholly owned subsidiary of the Bank
incorporated in the State of New York in 1976, was formed to purchase three
branch buildings from the Bank, which are leased back to the Bank. This is
currently the only business activity conducted by RCSB. The assets of RCSB
totaled $797,202 at June 30, 1999.

Richmond Enterprises, Inc. Richmond Enterprises, Inc., a wholly owned subsidiary
of the Bank incorporated in the State of New York in 1983, previously was a
partner in a joint-venture real estate development project with a local
developer. The development was completed in 1986, and Richmond Enterprises, Inc.
has been inactive since that date. Its total assets as of June 30, 1999, were
$4,021.

Richmond County Capital Corp. Richmond County Capital Corp. ("RCCC"), a wholly
owned subsidiary of the Richmond Investment Corporation, and was incorporated in
the State of New York on February 27, 1998, for the purpose of establishing a
Real Estate Investment Trust ("REIT"). On April 5, 1999, the Bank exchanged its
ownership in RCCC for full ownership in Richmond Investment Corp. Total assets
of RCCC as of June 30, 1999 were $284 million.

Richmond Investment Corporation. Richmond Investment Corporation ("RIC"), a
wholly owned subsidiary of the Bank, was incorporated in the State of Delaware
on March 19, 1999, as the holding company for RCCC. On April 5, 1999, the Bank
transferred its ownership of RCCC to RIC. In return, the Bank received full
ownership of RIC. As of June 30, 1999, the assets of RIC totaled $50,000.

RCBK Mortgage Corp. RCBK Mortgage Corp., a wholly owned subsidiary of the Bank,
was incorporated in New York State on July 9, 1998, and is licensed to conduct
business in the states of New Jersey and Pennsylvania. Total assets of RCBK
Mortgage Corp. as of June 30, 1999 were $42.3 million.

Bayonne Service Corp. Bayonne Service Corp. ("BSC"), a wholly owned subsidiary
of the Bank, was incorporated in the state of New Jersey on November 11, 1982.
The Bank assumed ownership of BSC with the acquisition of First Savings Bank of
New Jersey, SLA on March 22, 1999. The BSC offers brokerage services in the City
of Bayonne, New Jersey.

Bayonne Old Mill Service Corp. Bayonne Old Mill Service Corp. ("BOMSC"), a
wholly owned subsidiary of the Bank, incorporated on April 4, 1988, in the State
of New Jersey. BOMSC was a subsidiary of First Savings Bank of New

                                       23
<PAGE>

Jersey, SLA and the Bank assumed ownership when it acquired First Savings Bank
of New Jersey, SLA on March 22, 1999. It is currently inactive.

Final Bayonne Service Corp. Final Bayonne Service Corp. ("FBSC"), a wholly owned
subsidiary of the Bank was incorporated in New Jersey on January 1, 1992. The
Bank assumed ownership of FBSC when it acquired First Savings Bank of New
Jersey, SLA on March 22, 1999. It is currently inactive.

Pacific Urban Renewal Corp. Pacific Urban Renewal Corp. ("PURC"), a wholly owned
subsidiary of the Bank was incorporated on February 2, 1988, in the State of New
Jersey. PURC owns a commercial rental property and is qualified to do business
under the provisions of the Urban Renewal Corporation and Association Law of New
Jersey. It was a wholly owned subsidiary of Ironbound Bank and the Bank assumed
ownership when it acquired Ironbound Bank on March 5, 1999.

Ironbound Investment Company. Ironbound Investment Company ("IIC"), is a wholly
owned subsidiary of the Bank and was incorporated in New Jersey on April 1,
1996. The Bank assumed ownership of IIC when it acquired Ironbound Bank on March
5, 1999. IIC holds various investment securities and as of June 30, 1999, its
assets totaled $29 million.

Personnel

As of June 30, 1999, the Bank had 434 full-time employees and 158 part-time
employees. The employees are not represented by a collective bargaining
agreement and the Bank considers its relationship with its employees to be good.



                           REGULATION AND SUPERVISION

General

The Company, as a savings and loan holding company, is required to file certain
reports and otherwise comply with the rules and regulations of the OTS under the
Home Owner's Loan Act, as amended ("HOLA").

The Bank is a New York State chartered stock savings bank and its deposit
accounts are insured up to applicable limits by the FDIC under the Bank
Insurance Fund ("BIF"). The Bank is subject to extensive regulation by the
Superintendent, the NYBB, the NYSBD, as its chartering agency, and by the FDIC,
as the deposit insurer. The Bank must file reports with the NYSBD and the FDIC
concerning its activities and financial condition, in addition to obtaining
regulatory approvals prior to entering into certain transactions, such as
establishing branches and mergers with, or acquisitions of, other depository
institutions. There are periodic examinations by the NYSBD and the FDIC to
assess the Bank's compliance with various regulatory requirements and financial
condition. This regulation and supervision establishes a framework of activities
in which a savings bank can engage and is intended primarily for the protection
of the insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement activities and examination policies, including policies with
respect to the classification of assets and the establishment of adequate loan
loss reserves for regulatory purposes. Any change in such regulation, whether by
the NYSBD, the FDIC or through legislation, could have a material adverse impact
on the Company and the Bank and their operations and stockholders. The Company
is also required to file certain reports with, and otherwise comply with the
rules and regulations, of the OTS, the NYSBD and the SEC under the federal
securities laws. Certain of the regulatory requirements applicable to the Bank
and to the Company are referred to below or elsewhere herein. The description of
statutory provisions and regulations applicable to savings banks and their
holding companies set forth in this Form 10-K does not purport to be a complete
description of such statutes and regulations and their effect upon the Bank and
the Company.

New York State Law

The Bank derives its lending, investment and other authority primarily from the
applicable provisions of New York State Banking Law and the regulations of the
NYBB, as limited by FDIC regulations. Under these laws and regulations, savings
banks, including the Bank, may invest in real estate mortgages, consumer and
commercial loans, certain types of debt securities, including certain corporate
debt securities and obligations of federal, state and local governments and
agencies,

                                       24
<PAGE>

certain types of corporate equity securities and certain other assets. Under the
statutory authority for investing in equity securities, a savings bank may
directly invest up to 7.5% of its assets in certain corporate stock and may also
invest up to 7.5% of its assets in certain mutual fund securities. Investment in
the stock of a single corporation is limited to the lesser of 2% of the
outstanding stock of such corporation or 1% of the savings bank's assets, except
as set forth below. Such equity securities must meet certain tests of financial
performance. A savings bank's lending powers are not subject to percentage of
asset limitations, although there are limits applicable to single borrowers. A
savings bank may also, pursuant to the "leeway" authority, make investments, not
otherwise authorized, under the New York State Banking Law. This authority
permits investments not otherwise authorized of up to 1% of the savings bank's
assets in any single investment, subject to certain restrictions and to an
aggregate limit for all such investments of up to 5% of assets. Additionally, in
lieu of investing in such securities in accordance with, and reliance upon, the
specific investment authority set forth in the New York State Banking Law,
savings banks are authorized to elect to invest under a "prudent person"
standard in a wider range of debt and equity securities as compared to the types
of investments permissible under such specific investment authority. However, in
the event a savings bank elects to utilize the "prudent person" standard, it
will be unable to avail itself of the other provisions of the New York State
Banking Law and regulations which set forth specific investment authority. A New
York State chartered stock savings bank may also exercise trust powers upon
approval of the NYBB.

New York State chartered savings banks may also invest in subsidiaries under
their service corporation investment power. A savings bank may use this power to
invest in corporations that engage in various activities authorized for savings
banks, plus any additional activities which may be authorized by the NYBB.
Investment by a savings bank in the stock, capital notes and debentures of its
service corporations is limited to 3% of the bank's assets, and such
investments, together with the bank's loans to its service corporations, may not
exceed 10% of the savings bank's assets.

The exercise by an FDIC-insured savings bank of the lending and investment
powers of a savings bank under the New York State Banking Law is limited by FDIC
regulations and other federal law and regulations. In particular, the applicable
provisions of New York State Banking Law and regulations governing the
investment authority and activities of an FDIC insured state-chartered savings
bank have been effectively limited by the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") and the FDIC regulations issued pursuant
thereto.

With certain limited exceptions, a New York State chartered savings bank may not
make loans or extend unsecured credit for commercial, corporate or business
purposes (including lease financing) to a single borrower, the aggregate amount
of which would be in excess of 15% of the bank's net worth. The Bank currently
complies with all applicable loans-to-one-borrower limitations.

Under New York State Banking Law, a New York State chartered stock savings bank
may declare and pay dividends out of its net profits, unless there is an
impairment of capital, but approval of the Superintendent is required if the
total of all dividends declared in a calendar year would exceed the total of its
net profits for that year combined with its retained net profits of the
preceding two years, subject to certain adjustments.

Under the New York State Banking Law, the Superintendent may issue an order to a
New York State chartered banking institution to appear and explain an apparent
violation of law, to discontinue unauthorized or unsafe practices and to keep
prescribed books and accounts. Upon a finding by the NYBB that any director,
trustee or officer of any banking organization has violated any law, or has
continued unauthorized or unsafe practices in conducting the business of the
banking organization, after having been notified by the Superintendent to
discontinue such practices, such director, trustee or officer may be removed
from office by the NYBB after notice and an opportunity to be heard. The Bank
does not know of any past or current practice, condition or violation that might
lead to any proceeding by the Superintendent or the NYBB against the Bank or any
of its Directors or Officers. The Superintendent also may take possession of a
banking organization under specified statutory criteria.

FDIC Regulations

Capital Requirements. The FDIC has adopted risk-based capital guidelines to
which the Bank is subject. The guidelines establish a systematic analytical
framework that makes regulatory capital requirements more sensitive to
differences in risk profiles among banking organizations. The Bank is required
to maintain certain levels of regulatory capital in relation to regulatory
risk-weighted assets. The ratio of such regulatory capital to regulatory
risk-weighted assets is referred to as the Bank's "risk-based capital ratio."
Risk-based capital ratios are determined by allocating assets and specified
off-balance

                                       25
<PAGE>

sheet items to four risk-weighted categories, ranging from 0% to 100%, with
higher levels of capital being required for the categories perceived as
representing greater risk.

These guidelines divide a savings bank's capital into two tiers. The first tier
("Tier I") includes common equity, retained earnings, certain non-cumulative
perpetual preferred stock (excluding auction rate issues), and minority
interests in equity accounts of consolidated subsidiaries, less goodwill and
other intangible assets (except mortgage servicing rights and purchased credit
card relationships subject to certain limitations) and deferred tax assets.
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible
securities, certain hybrid capital instruments, term subordinated debt and the
allowance for loan and lease losses, subject to certain limitations, less
required deductions. Savings banks are required to maintain a total risk-based
capital ratio of 8%, of which at least 4% must be Tier I capital.

In addition, the FDIC has established regulations prescribing a minimum Tier I
leverage ratio (Tier I capital to adjusted total assets as specified in the
regulations). These regulations provide for a minimum Tier I leverage ratio of
3% for banks that meet certain specified criteria, including that they have the
highest examination rating and are not experiencing or anticipating significant
growth. All other banks are required to maintain a Tier I leverage ratio of at
least 4%. The FDIC may, however, set higher leverage and risk-based capital
requirements on individual institutions when particular circumstances warrant.
Savings banks experiencing or anticipating significant growth are expected to
maintain capital ratios, including tangible capital positions, well above the
minimum levels.

   The following is a summary of the Bank's regulatory capital at June 30, 1999:

   GAAP Capital to Total Assets ......................................    12.03%
   Total Capital to Risk-Weighted Assets .............................    19.84%
   Tier I Leverage Ratio .............................................    10.96%

In August 1995, the FDIC, along with the other federal banking agencies, adopted
a regulation providing that the agencies will take account of the exposure of a
bank's capital and economic value to changes in interest rate risk in assessing
a bank's capital adequacy. According to the agencies, applicable considerations
include the quality of the bank's interest rate risk management process, the
overall financial condition of the bank and the level of other risks at the bank
for which capital is needed. Institutions with significant interest rate risk
may be required to hold additional capital. The agencies also have issued a
joint policy statement providing guidance on interest rate risk management,
including a discussion of the critical factors affecting the agencies'
evaluation of interest rate risk in connection with capital adequacy. The
agencies have determined not to proceed with a previously issued proposal to
develop a supervisory framework for measuring interest rate risk and an explicit
capital component for interest rate risk.

Standards for Safety and Soundness. Federal law requires each federal banking
agency to prescribe for depository institutions under its jurisdiction standards
relating to, among other things, internal controls; information systems and
audit systems; loan documentation; credit underwriting; interest rate risk
exposure; asset growth; compensation; fees and benefits; and such other
operational and managerial standards as the agency deems appropriate. The
federal banking agencies adopted final regulations and Interagency Guidelines
Establishing Standards for Safety and Soundness (the "Guidelines") to implement
these safety and soundness standards. The Guidelines set forth the safety and
soundness standards that the federal banking agencies use to identify and
address problems at insured depository institutions before capital becomes
impaired. The Guidelines address internal controls and information systems;
internal audit system; credit underwriting; loan documentation; interest rate
risk exposure; asset growth; asset quality; earnings and compensation; fees and
benefits. Most recently, the agencies have adopted guidelines regarding Year
2000 computer compliance. If the appropriate federal banking agency determines
that an institution fails to meet any standard prescribed by the Guidelines, the
agency may require the institution to submit to the agency an acceptable plan to
achieve compliance with the standard, as required by the Federal Deposit
Insurance Act, as amended, ("FDIC Act").

Real Estate Lending Standards. The FDIC and the other federal banking agencies
have adopted regulations that prescribe standards for extensions of credit that
(1) are secured by real estate or (2) are made for the purpose of financing the
construction or improvements on real estate. The FDIC regulations require each
institution to establish and maintain written internal real estate lending
standards that are consistent with safe and sound banking practices and
appropriate to the size of the institution and the nature and scope of its real
estate lending activities. The standards also must be consistent with
accompanying FDIC guidelines, which include loan-to-value limitations for the
different types of real

                                       26
<PAGE>

estate loans. Institutions are also permitted to make a limited amount of loans
that do not conform to the proposed loan-to-value limitations so long as such
exceptions are reviewed and justified appropriately. The guidelines also list a
number of lending situations in which exceptions to the loan-to-value standard
are justified.

Dividend Limitations. The FDIC has authority to use its enforcement powers to
prohibit a savings bank from paying dividends if, in its opinion, the payment of
dividends would constitute an unsafe or unsound practice. Federal law prohibits
the payment of dividends by a bank that will result in the bank failing to meet
applicable capital requirements on a pro forma basis. Additionally, the Bank, as
a subsidiary of a savings and loan holding company, is required to provide the
OTS with 30 days prior written notice before declaring any dividend. The
Conversion also restricts the Bank's ability to pay a dividend, if payment of
the dividend would impair the liquidation account established in connection with
the Conversion.

Investment Activities

Since the enactment of FDICIA, all state-chartered financial institutions,
including savings banks and their subsidiaries, have generally been limited to
activities as principal and equity investments of the type and in the amount
authorized for national banks, notwithstanding state law. FDICIA and the FDIC
regulations, thereunder, permit certain exceptions to these limitations. For
example, certain state chartered banks, such as the Bank, may, with FDIC
approval, continue to exercise state authority to invest in common or preferred
stocks listed on a national securities exchange or the Nasdaq National Market
and in the shares of an investment company registered under the Investment
Company Act of 1940, as amended. Such banks may also continue to sell savings
bank life insurance. In addition, the FDIC is authorized to permit such
institutions to engage in state authorized activities or investments that do not
meet this standard (other than non-subsidiary equity investments) for
institutions that meet all applicable capital requirements, if it is determined,
that such activities or investments do not pose a significant risk to the BIF.
The FDIC has recently adopted revisions to its regulations governing the
procedures for institutions seeking approval to engage in such activities or
investments. These revisions, among other things, streamline certain application
procedures for healthy banks and impose certain quantitative and qualitative
restrictions on a bank's dealings with its subsidiaries engaged in activities
not permitted for national bank subsidiaries. All non-subsidiary equity
investments, unless otherwise authorized or approved by the FDIC, must have been
divested by December 19, 1996, pursuant to a FDIC-approved divestiture plan
unless such investments were grandfathered by the FDIC. The Bank received
grandfathering authority from the FDIC in February, 1993, to invest in listed
stocks and/or registered shares subject to the maximum permissible investment of
100% of Tier I capital, as specified by the FDIC's regulations, or the maximum
amount permitted by New York State Banking Law, whichever is less. Such
grandfathering authority is subject to termination upon the FDIC's determination
that such investments pose a safety and soundness risk to the Bank, or in the
event the Bank converts its charter or undergoes a change in control. As of June
30, 1999, the Bank had $38.6 million of securities, which were subject to such
grandfathering authority.

Prompt Corrective Regulatory Action

Federal law requires, among other things, that federal bank regulatory
authorities take "prompt corrective action" with respect to banks that do not
meet minimum capital requirements. For these purposes, the law establishes five
capital categories: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized.

The FDIC has adopted regulations to implement the prompt corrective action
legislation. Among other things, the regulations define the relevant capital
measures for the five capital categories. An institution is deemed to be "well
capitalized" if it has a total risk-based capital ratio of 10% or greater, a
Tier I risk-based capital ratio of 6% or greater, and a leverage ratio of 5% or
greater, and is not subject to a regulatory order, agreement or directive to
meet and maintain a specific capital level for any capital measure. An
institution is deemed to be "adequately capitalized" if it has a total
risk-based capital ratio of 8% or greater, a Tier I risk-based capital ratio of
4% or greater, and generally a leverage ratio of 4% or greater. An institution
is deemed to be "undercapitalized" if it has a total risk-based capital ratio of
less than 8%, a Tier I risk-based capital ratio of less than 4%, or generally a
leverage ratio of less than 4%. An institution is deemed to be "significantly
undercapitalized" if it has a total risk-based capital ratio of less than 6%, a
Tier I risk-based capital ratio of less than 3%, or a leverage ratio of less
than 3%. An institution is deemed to be "critically undercapitalized" if it has
a ratio of tangible equity (as defined in the regulations) to total assets that
is equal to or less than 2%.

                                       27
<PAGE>

"Undercapitalized" banks are subject to growth, capital distribution (including
dividend) and other limitations and are required to submit a capital restoration
plan. A bank's compliance with such plan is required to be guaranteed by any
company that controls the undercapitalized institutions in an amount equal to
the lesser of 5.0% of the bank's total assets when deemed undercapitalized or
the amount necessary to achieve the status of adequately capitalized. If an
"undercapitalized" bank fails to submit an acceptable plan, it is treated as if
it is "significantly undercapitalized." "Significantly undercapitalized" banks
are subject to one or more of a number of additional restrictions, including but
not limited to an order by the FDIC to sell sufficient voting stock to become
adequately capitalized, requirements to reduce total assets and cease receipt of
deposits from correspondent banks or dismiss directors or officers, and
restrictions on interest rates paid on deposits, compensation of executive
officers and capital distributions by the parent holding company. "Critically
undercapitalized" institutions also may not, beginning 60 days after becoming
"critically undercapitalized," make any payment of principal or interest on
certain subordinated debt or extend credit for a highly leveraged transaction or
enter into any material transaction outside the ordinary course of business. In
addition, "critically undercapitalized" institutions are subject to appointment
of a receiver or conservator. Generally, subject to a narrow exception, the
appointment of a receiver or conservator is required for a "critically
undercapitalized" institution within 270 days after it obtains such status.

Transactions with Affiliates

Under current federal law, transactions between depository institutions and
their affiliates are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a savings bank is any company or entity that controls, is
controlled by, or is under common control with the savings bank, other than a
nonbanking subsidiary of the bank. In a holding company context, at a minimum,
the parent holding company of a savings bank and any companies, which are
controlled by such parent holding company, are affiliates of the savings bank.
The Federal Reserve Board has proposed regulations that would treat as an
affiliate, any subsidiary of a savings bank that engages in activities not
permissible for the parent savings bank to engage in directly. Generally,
Section 23A limits the extent to which the savings bank or its subsidiaries may
engage in "covered transactions" with any one affiliate to an amount equal to
10% of such savings bank's capital stock and surplus, and contains an aggregate
limit on all such transactions with all affiliates to an amount equal to 20% of
such capital stock and surplus. The term, "covered transaction," includes the
making of loans or other extensions of credit to an affiliate; the purchase of
assets from an affiliate; the purchase of, or an investment in, the securities
of an affiliate; the acceptance of securities of an affiliate as collateral for
a loan or extension of credit to any person; or issuance of a guarantee,
acceptance, or letter of credit on behalf of an affiliate. Section 23A also
establishes specific collateral requirements for loans or extensions of credit
to, or guarantees of, acceptances on letters of credit issued on behalf of an
affiliate. Section 23B requires that covered transactions and a broad list of
other specified transactions be on terms substantially the same, or no less
favorable, to the savings bank or its subsidiary as similar transactions with
nonaffiliates.

Further, Section 22(h) of the Federal Reserve Act restricts a savings bank with
respect to loans to directors, executive officers, and principal stockholders.
Under Section 22(h), loans to directors, executive officers and stockholders who
control, directly or indirectly, 10% or more of voting securities of a savings
bank, and certain related interests of any of the foregoing, may not exceed,
together with all other outstanding loans to such persons and affiliated
entities, the savings bank's total capital and surplus. Section 22(h) also
prohibits loans above amounts prescribed by the appropriate federal banking
agency to directors, executive officers, and shareholders who control 10% or
more of voting securities of a stock savings bank, and their respective related
interests, unless such loan is approved in advance by a majority of the board of
directors of the savings bank. Any "interested" director may not participate in
the voting. The loan amount (which includes all other outstanding loans to such
person) as to which such prior board of director approval is required, is the
greater of $25,000, or 5% of capital and surplus, or any loans over $500,000.
Further, pursuant to Section 22(h), loans to directors, executive officers and
principal shareholders must be made on terms substantially the same as offered
in comparable transactions to other persons, except for extensions of credit
made pursuant to a benefit or compensation program that is widely available to
the institution's employees and does not give preference to insiders over other
employees. Section 22(g) of the Federal Reserve Act places additional
limitations on loans to executive officers.

Enforcement

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

                                       28
<PAGE>

The FDIC has authority, under federal law, to appoint a conservator or receiver
for an insured savings bank under certain circumstances. The FDIC is required,
with certain exceptions, to appoint a receiver or conservator for an insured
state savings bank if that savings bank was "critically undercapitalized," on
average, during the calendar quarter beginning 270 days after the date on which
the savings bank became "critically undercapitalized." For this purpose,
"critically undercapitalized" means having a ratio of tangible equity to total
assets that is equal to or less than 2%. See "- Prompt Corrective Regulatory
Action." The FDIC may also appoint a conservator or receiver for a state savings
bank on the basis of the institution's financial condition or upon the
occurrence of certain events, including: (1) insolvency (whereby the assets of
the savings bank are less than its liabilities to depositors and others); (2)
substantial dissipation of assets or earnings through violations of law or
unsafe or unsound practices; (3) existence of an unsafe or unsound condition to
transact business; (4) likelihood that the savings bank will be unable to meet
the demands of its depositors or to pay its obligations in the normal course of
business; and (5) insufficient capital, or the incurring or likely incurring of
losses that will deplete substantially all of the institution's capital with no
reasonable prospect of replenishment of capital without federal assistance.

Insurance of Deposit Accounts

The FDIC has adopted a risk-based insurance assessment system. The FDIC assigns
an institution to one of three capital categories based on the institution's
financial information, as of the reporting period ending seven months before the
assessment period, consisting of (1) well capitalized, (2) adequately
capitalized or (3) undercapitalized, and one of three supervisory subcategories
within each capital group. The supervisory subgroup to which an institution is
assigned is based on a supervisory evaluation provided to the FDIC by the
institution's primary federal regulator and additional information which the
FDIC determines to be relevant to the institution's financial condition and the
risk posed to the deposit insurance funds. An institution's assessment rate
depends on the capital category and supervisory category to which it is
assigned. Assessment rates for BIF and Savings Association Insurance Fund
("SAIF") deposits currently range from zero basis points to 27 basis points, and
the FDIC has determined to retain such range of assessment rates for the first
half of 1999. The FDIC is authorized to raise the assessment rates in certain
circumstances, including to maintain or achieve the designated reserve ratio of
1.25%, which requirement the BIF and the SAIF currently meet. The FDIC has
exercised its authority to raise rates in the past and may raise insurance
premiums in the future. If such action is taken by the FDIC, it could have an
adverse effect on the earnings of the Bank. In addition, recent legislation
requires BIF-insured institutions, such as the Bank, to assist in the payment of
Financing Corporation bonds.

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

Federal Reserve System

The Federal Reserve Board regulations require depository institutions to
maintain non-interest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The Federal Reserve Board
regulations generally require that reserves be maintained against aggregate
transaction accounts as follows: for that portion of transaction accounts
aggregating $46.5 million or less (subject to adjustment by the Federal Reserve
Board) the reserve requirement is 3%; and for accounts greater than $46.5
million, the reserve requirement is $1.395 million plus 10% (subject to
adjustment by the Federal Reserve Board between 8% and 14%) against that portion
of total transaction accounts in excess of $46.5 million. The first $4.9 million
of otherwise reservable balances (subject to adjustments by the Federal Reserve
Board) are exempted from the reserve requirements. The Bank is in compliance
with the foregoing requirements. Because required reserves must be maintained in
the form of either vault cash, a non-interest-bearing account at a Federal
Reserve Bank or a pass-through account as defined by the Federal Reserve Board,
the effect of this reserve requirement is to reduce the Bank's interest-earning
assets. FHLB System members are also authorized to borrow from the Federal
Reserve "discount window," but Federal Reserve Board regulations require
institutions to exhaust all FHLB sources before borrowing from a Federal Reserve
Bank.

Community Reinvestment Act

Federal Regulation. Under the Community Reinvestment Act, as amended ("CRA"), as
implemented by FDIC regulations, a savings bank has a continuing and affirmative
obligation consistent with its safe and sound operation to help

                                       29
<PAGE>

meet the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the FDIC, in connection with its examination of a savings institution,
to assess the institution's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications
by such institution. The FIRREA amended the CRA to require, effective July 1,
1990, public disclosure of an institution's CRA rating and requires the FDIC to
provide a written evaluation of an institution's CRA performance utilizing a
four-tiered descriptive rating system, which replaced the five-tiered numerical
rating system. The Bank's latest CRA rating received from the FDIC was
"Satisfactory."

New York State Regulation. The Bank is also subject to provisions of the New
York State Banking Law, which impose continuing and affirmative obligations upon
banking institutions organized in New York State to serve the credit needs of
its local community ("NYCRA"), which are substantially similar to those imposed
by the CRA. Pursuant to the NYCRA, a bank must file copies of all federal CRA
reports with the NYSBD. The NYCRA also requires the Superintendent to consider a
bank's NYCRA rating when reviewing a bank's application to engage in certain
transactions, including mergers, asset purchases and the establishment of branch
offices or automated teller machines, and provides that such assessment may
serve as a basis for the denial of any such application. The NYSBD has adopted,
effective December 3, 1997, new regulations to implement the NYCRA. The NYSBD
replaced its process-focused regulations with performance-focused regulations
that are intended to parallel current CRA regulations of federal banking
agencies and to promote consistency in CRA evaluations by considering more
objective criteria. The new regulations require a biennial assessment of a
bank's compliance with the NYCRA, utilizing a four-tiered rating system, and
require the NYSBD to make available to the public such rating and a written
summary of the results. The Bank's latest NYCRA rating received from the NYSBD
was "Satisfactory."

Federal Home Loan Bank System

On October 24, 1997, the Bank became a member of the FHLB System, which consists
of 12 regional FHLBs. The FHLB provides a central credit facility primarily for
member institutions. The Bank, as a member of the FHLB, is required to acquire
and hold shares of capital stock in the FHLB in an amount at least equal to 1%
of the aggregate principal amount of its unpaid residential mortgage loans and
similar obligations at the beginning of each year, or 1/20 of its advances
(borrowings) from the FHLB, whichever is greater. FHLB advances must be secured
by specified types of collateral and all long-term advances may only be obtained
for the purpose of providing funds for residential housing finance.

The FHLBs are required to provide funds for the resolution of insolvent thrifts
and to contribute funds for affordable housing programs. These requirements
could reduce the amount of dividends that the FHLBs pay to their members and
could also result in the FHLBs imposing a higher rate of interest on advances to
their members. If dividends were reduced, the Bank's net interest income will
likely also be reduced. Further, there can be no assurance that the impact of
recent or future legislation on the FHLBs will not also cause a decrease in the
value of the FHLB stock that will be held by the Bank.

Holding Company Regulation

Federal law allows a state savings bank that qualifies as a "qualified thrift
lender" ("QTL"), discussed below, to elect to be treated as a savings
association for purposes of the savings and loan holding company provisions of
the HOLA. Such election would result in its holding company being regulated as a
savings and loan holding company by the OTS, rather than as a bank holding
company by the Federal Reserve Board. The Bank made such election and received
approval from the OTS to become a savings and loan holding company. The Company
is regulated as a non-diversified unitary savings and loan holding company,
within the meaning of the HOLA. As such, the Company registered with the OTS and
is subject to OTS regulations, examinations, supervision and reporting
requirements. In addition, the OTS has enforcement authority over the Company
and its non-savings institution subsidiaries. Among other things, this authority
permits the OTS to restrict or prohibit activities that are determined to be a
serious risk to the subsidiary savings institution. Additionally, the Bank is
required to notify the OTS at least 30 days before declaring any dividend to the
Company.

As a unitary savings and loan holding company, the Company generally is not
restricted under existing laws as to the types of business activities in which
it may engage. Upon any non-supervisory acquisition by the Company of another
savings

                                       30
<PAGE>

association as a separate subsidiary, the Company would become a multiple
savings and loan holding company and would be subject to extensive limitations
on the types of business activities in which it could engage. The HOLA limits
the activities of a multiple savings and loan holding company and its non-
insured institution subsidiaries primarily to activities permissible for bank
holding companies under Section 4(c)(8) of the Bank Holding Company Act, as
amended ("BHC Act"), subject to the prior approval of the OTS, and to other
activities authorized by OTS regulations. Multiple savings and loan holding
companies are prohibited from acquiring or retaining, with certain exceptions,
more than 5% of a non-subsidiary holding company, or a non-subsidiary company
engaged in activities other than those permitted by the HOLA. Legislation under
consideration in Congress would impose restrictions on the activities of unitary
savings and loan holding companies subject to grandfathering of existing unitary
savings and loan holding companies.

The HOLA prohibits a savings and loan holding company, directly or indirectly,
or through one or more subsidiaries, from acquiring more than 5% of the voting
stock of another savings institution or holding company thereof or from
acquiring such an institution or company by merger, consolidation or purchase of
its assets, without prior written approval of the OTS. In evaluating
applications by holding companies to acquire savings institutions, the OTS must
consider the financial and managerial resources and future prospects of the
company and institution involved, the effect of the acquisition on the risk to
the insurance funds, the convenience and needs of the community and competitive
factors.

The OTS is prohibited from approving any acquisition that would result in a
multiple savings and loan holding company controlling savings institutions in
more than one state, except: (1) interstate supervisory acquisitions by savings
and loan holding companies, and (2) the acquisition of a savings institution in
another state if the laws of the state of the target savings institution
specifically permit such acquisitions. The states vary in the extent to which
they permit interstate savings and loan holding company acquisitions.

In order to elect and continue to be regulated as a savings and loan holding
company by the OTS (rather than as a bank holding company by the Federal Reserve
Board), the Bank must continue to qualify as a QTL. In order to qualify as a
QTL, the Bank must maintain compliance with a Qualified Thrift Lender Test ("QTL
Test"). Under the QTL Test, a savings institution is required to maintain at
least 65% of its "portfolio assets" (total assets less: (1) specified liquid
assets up to 20% of total assets; (2) intangibles, including goodwill; and (3)
the value of property used to conduct business) in certain "qualified thrift
investments" (primarily residential mortgages and related investments, including
certain mortgage-backed and related securities) in at least nine months out of
each 12 month period. A holding company of a savings institution that fails the
QTL Test must either convert to a bank holding company and thereby become
subject to the regulation and supervision of the Federal Reserve Board or
operate under certain restrictions. As of June 30, 1999, the Bank maintained in
excess of 74.27% of its portfolio assets in qualified thrift investments. The
Bank also met the QTL Test in each of the prior 12 months. Recent legislation
amendments have broadened the scope of "qualified thrift investments" that go
toward meeting the QTL Test to fully include credit card loans, student loans
and small business loans. A savings association may also satisfy the QTL Test by
qualifying as a "domestic building and loan association" as defined in the
Internal Revenue Code of 1986 (the "Code").

New York State Holding Company Regulation. In addition to the federal holding
company regulations, a bank holding company organized or doing business in New
York State may be also subject to regulation under the New York State Banking
Law. The term "bank holding company," for the purposes of the New York State
Banking Law, is defined generally to include any person, company or trust that
directly or indirectly either controls the election of a majority of the
directors or owns, controls or holds with power to vote more than 10% of the
voting stock of a bank holding company or, if the company is a banking
institution, another banking institution, or 10% or more of the voting stock of
each of two or more banking institutions, including commercial banks and state
savings banks and savings and loan associations organized in stock form. In
general, a holding company controlling, directly or indirectly, only one banking
institution will not be deemed to be a bank holding company for the purposes of
the New York State Banking Law. Under New York State Banking Law, the prior
approval of the NYSBD is required before: (1) any action is taken that causes
any company to become a bank holding company; (2) any action is taken that
causes any banking institution to become or to be merged or consolidated with a
subsidiary of a bank holding company; (3) any bank holding company acquires
direct or indirect ownership or control of more than 5% of the voting stock of a
banking institution; (4) any bank holding company or subsidiary thereof acquires
all or substantially all of the assets of a banking institution; or (5) any
action is taken that causes any bank holding company to merge or consolidate
with another bank holding company. Additionally, certain restrictions apply to
New York State bank holding companies regarding the acquisition of banking
institutions which have been chartered five years or less and are located in
smaller communities. Officers, directors and employees of New York State bank
holding companies are subject to limitations regarding their affiliation with
securities underwriting or brokerage firms

                                       31
<PAGE>

and other bank holding companies and limitations regarding loans obtained from
its subsidiaries. Although the Company is not a bank holding company for
purposes of New York State law, any future acquisition of ownership, control, or
the power to vote 10% or more of the voting stock of another New York banking
institution or bank holding company would cause it to become such.

Interstate Banking and Branching

The Company, as a savings and loan holding company, is limited under HOLA with
respect to its acquisition of a savings association located in a state other
than New York. In general, a savings and loan holding company may not acquire an
additional savings association subsidiary that is located in a state other than
the home state of its first savings association subsidiary, unless such an
interstate acquisition is permitted by the statutes of such other state. Many
states permit such interstate acquisitions if the statutes of the home state of
the acquiring savings and loan holding company satisfy various reciprocity
conditions. New York is one of a number of states that permit, subject to the
reciprocity conditions of the New York Banking Law, out-of-state bank and
savings and loan holding companies to acquire New York savings associations.

In contrast, bank holding companies are generally authorized to acquire banking
subsidiaries in more than one state, irrespective of any state law restrictions
on such acquisitions. The Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 ("Interstate Banking Act"), which was enacted on
September 29, 1994, permits approval under the BHC Act of the acquisition of a
bank located outside of the holding company's home state, regardless of whether
the acquisition is permitted under the law of the state of the acquired bank.
The Federal Reserve Board may not approve an acquisition under the BHC Act that
would result in the acquiring holding company controlling more than 10% of the
deposits in the United States or more than 30% of the deposits in any particular
state.

The Interstate Banking Act permitted, beginning June 1, 1997, the responsible
federal banking agencies to approve merger transactions between banks located in
different states, regardless of whether the merger would be prohibited under the
law of the two states. The Interstate Banking Act also permitted a state to "opt
in" to the provisions of the Interstate Banking Act prior to June 1, 1997, and
permitted a state to "opt out" of the provisions of the Interstate Banking Act
by adopting appropriate legislation before that date. Accordingly, the
Interstate Banking Act, beginning June 1, 1997, permitted a bank, such as the
Bank, to acquire branches in a state other than New York unless the other state
had opted out of the Interstate Banking Act. The Interstate Banking Act also
authorizes de novo branching into another state if the host state enacts a law
           -- ----
expressly permitting out of state banks to establish such branches within its
borders.

The Bank has exercised the branching authority provided by the Interstate
Banking Act to acquire institutions in New Jersey and establish branches at the
offices of the acquired institutions. The Interstate Banking Act provides that
the laws of the host state, i.e., New Jersey, regarding community reinvestment,
consumer protection, fair lending and establishing interstate branches apply to
any branch in the host state to the same extend that such laws could apply to a
branch of an out of state national bank. The laws of the home state, i.e., New
York, apply to the extent host state law is inapplicable.


Federal Securities Laws

The Company's Common Stock is registered with the SEC under section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company is
subject to the information, proxy solicitation, insider trading restrictions and
other requirements under the Exchange Act.

The registration, under the Securities Act of 1933, as amended (the "Securities
Act"), of shares of the Common Stock that were issued in the Bank's Conversion
does not cover the resale of such shares. Shares of the Common Stock purchased
by persons who are not affiliates of the Company may be resold without
registration. Shares purchased by an affiliate of the Company will be subject to
the resale restrictions of Rule 144 under the Securities Act. If the Company
meets the current public information requirements of Rule 144 under the
Securities Act, each affiliate of the Company who complies with the other
conditions of Rule 144 (including those that require the affiliate's sale to be
aggregated with those of certain other persons) would be able to sell in the
public market, without registration, a number of shares not to exceed, in any
three-month period, the greater of (1) 1% of the outstanding shares of the
Company or (2) the average weekly volume of trading in such shares during the
preceding four calendar weeks. Provision may be made in the future by the
Company to permit affiliates to have their shares registered for sale under the
Securities Act under certain circumstances.

                                       32
<PAGE>

                           FEDERAL AND STATE TAXATION

Federal Taxation

General. The Company and the Bank will report their income on a consolidated
basis, using a calendar year and the accrual method of accounting, and will be
subject to federal income taxation in the same manner as other corporations with
some exceptions, including particularly the Bank's treatment of its reserve for
bad debts discussed below. The following discussion of tax matters is intended
only as a summary and does not purport to be a comprehensive description of the
tax rules applicable to the Bank or the Company. The Bank had been audited by
the IRS for the years ended December 31, 1993, 1994 and 1995.

Bad Debt Reserves. The Small Business Job Protection Act of 1996 (the "1996
Act"), which was enacted on August 20, 1996, made significant changes to
provisions of the Code relating to a savings institution's use of bad debt
reserves for federal income tax purposes and requires such institutions to
recapture (i.e., take into income) certain portions of their accumulated bad
debt reserves. The effect of the 1996 Act on the Bank is discussed below. Prior
to the enactment of the 1996 Act, the Bank was permitted to establish tax
reserves for bad debts and to make annual additions thereto, which additions,
within specified formula limits, were deducted in arriving at the Bank's taxable
income. The Bank's deduction with respect to "qualifying loans," which are
generally loans secured by certain interests in real property, could be computed
using an amount based on a six-year moving average of the Bank's actual loss
experience (the "Experience Method"), or a percentage equal to 8% of the Bank's
taxable income (the "PTI Method"), computed without regard to this deduction and
with additional modifications and reduced by the amount of any permitted
addition to the non-qualifying reserve. The Bank's deduction with respect to
non-qualifying loans was required to be computed under the Experience Method.

The 1996 Act. Under the 1996 Act, for its current and future taxable years, the
Bank is not permitted to make additions to its tax bad debt reserves. In
addition, the Bank is required to recapture (i.e., take into income) over a six
year period, the excess of the balance of its tax bad debt reserves as of
December 31, 1995, over the balance of such reserves as of December 31, 1987. As
of December 31, 1995, $2.5 million of the Bank's bad debt reserve was subject to
recapture for which deferred taxes have been provided.

Distributions. Under the 1996 Act, if the Bank makes "non-dividend
distributions" to the Company, such distributions will be considered to have
been made from the Bank's unrecaptured tax bad debt reserves (including the
balance of its reserves as of December 31, 1987) to the extent thereof, and an
amount based on the amount distributed (but not in excess of the amount of such
reserves) will be included in the Bank's income. The term "non-dividend
distributions" is defined as distributions in excess of the Bank's current and
accumulated earnings and profits, as calculated for federal income tax purposes,
distributions in redemption of stock, and distributions in partial or complete
liquidation. Dividends paid out of the Bank's current or accumulated earnings
and profits will not cause this pre-1988 reserve to be included in the Bank's
income.

The amount of additional taxable income created from a non-dividend distribution
is an amount that, when reduced by the tax attributable to the income, is equal
to the amount of the distribution. Thus, if the Bank makes a non-dividend
distribution to the Company, approximately one and one-half times the amount of
such distribution (but not in excess of the amount of such reserves) would be
includable in income for federal income tax purposes, assuming a 35% federal
corporate income tax rate. See "Regulation and Supervision" for limits on the
payment of dividends by the Bank. The Bank does not intend to pay dividends that
would result in a recapture of any portion of its tax bad debt reserves.

Corporate Alternative Minimum Tax. The Code imposes a tax on alternative minimum
taxable income ("AMTI") at a rate of 20%. Only 90% of AMTI can be offset by net
operating loss carryforwards. The adjustment to AMTI, based on book income, will
be an amount equal to 75% of the amount by which a corporation's adjusted
current earnings exceeds its AMTI (determined without regard to this adjustment
and prior to reduction for net operating losses). Certain payments of AMTI may
be used as credits against regular tax liabilities in future years. For tax
years prior to the 1996 tax year, the excess of the bad debt reserve deduction
using the percentage of taxable income method over the deduction that would have
been allowable under the Experience Method is treated as a preference item for
purposes of computing the AMTI. In addition, for taxable years beginning after
December 31, 1986 and before January 1, 1996, an environmental tax of .12% of
the excess of AMTI (with certain modifications) over $2 million, is imposed on
corporations, including the Bank,

                                       33
<PAGE>

whether or not an Alternative Minimum Tax ("AMT") is paid. The Bank has not been
subject to the AMT and no such amounts have been accrued for carryover.

Dividends Received Deduction and Other Matters. The Company may exclude from its
income, 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Company and the Bank will not file a consolidated tax return,
except that if the Company and the Bank own more than 20% of the stock of a
corporation distributing a dividend, then 80% of any dividends received may be
excluded.

State and Local Taxation

New York State and New York City Taxation. The Bank is subject to the New York
State Franchise Tax on Banking Corporations in an annual amount equal to the
greater of (1) 9% of the Bank's "entire net income" allocable to New York State
during the taxable year, or (2) the applicable alternative minimum tax. The
alternative minimum tax is generally the greatest of (a) .01% of the average
value of the taxable assets allocable to New York State with certain
modifications, (b) 3% of the Bank's "alternative entire net income" allocable to
New York State or (c) $250. Entire net income is similar to federal taxable
income, subject to certain modifications (including that net operating losses
cannot be carried back or carried forward) and alternative entire net income is
equal to entire net income without certain adjustments. The Bank is also subject
to New York City Corporation Tax, which is imposed using SMTI or alternative
taxable income method. For purposes of computing its entire net income, the Bank
is permitted a deduction for an addition to the reserve for losses on qualifying
real property loans. For New York State and City purposes, the applicable
percentage to calculate bad debt deduction under the percentage of taxable
income method is 32%. The New York State and New York City tax laws were
recently amended to prevent the recapture of tax bad debt reserves that would
otherwise occur as a result of the enactment of the 1996 Act for both New York
State and City tax purposes. However, the New York bad debt reserve is subject
to recapture for "non-dividend distributions" in a manner similar to the
recapture of the federal bad debt reserves for such distributions. Also, the New
York bad debt reserve is subject to recapture in the event that the Bank fails
to satisfy certain definitional tests relating to its assets and the nature of
its business. The Bank's deduction with respect to non-qualifying loans must be
computed under the Experience Method which is based on the Bank's actual charge-
offs.

A Temporary Metropolitan Transportation Business Tax Surcharge on banking
corporations doing business in the metropolitan district has been applied since
1982. Through December 31, 1998, the Bank did a substantial portion of its
business within this District and is subject to this surcharge. For the tax year
ended December 31, 1998, the surcharge rate is 17% of the New York State
Franchise Tax liability.

Delaware State Taxation. As a Delaware holding company not earning income in
Delaware, the Company is exempted from Delaware corporate income tax but is
required to file an annual report with and pay an annual franchise tax to the
State of Delaware.

New Jersey State Taxation. For New Jersey tax purposes, there is imposed upon
every savings institution for the privilege of doing business within the state
an excise tax at the rate of 3% upon its net income. Net income means total
income derived from all New Jersey sources, and the amount of net income is
presumed to be equal to the taxable income, before net operating loss deduction
and special deductions, which are reported for the purpose of computing Federal
income tax. However, "net income" shall exclude 100% of dividends which were
included in computing such taxable income which were paid to the Company by one
or more qualified subsidiaries owned by it.

The Company may be required to file a New Jersey income tax return if it
derives income from sources within New Jersey. For New Jersey tax purposes, the
Company would be taxed at a rate equal to 7.25% of its entire net income
allocable to New Jersey if such entire net income is less than $100,000 or 9.00%
if entire net income allocable to New Jersey is $100,000 or greater. For this
purpose, "entire net income" means total net income from all sources and shall
be deemed to equal in amount to the taxable income, before net operating loss
deduction and special deductions, which the taxpayer is required to report to
the United States Treasury Department for the purpose of computing its Federal
Income Tax. However, "entire net income" shall exclude 100% of dividends which
were included in computing such taxable income which were paid to the Company by
one or more qualified subsidiaries owned by it.

                                       34
<PAGE>

Item 2.  Properties

Properties

     The Bank currently conducts its business through 23 full-service banking
offices. The following table sets forth the Bank's offices as of June 30, 1999.

<TABLE>
<CAPTION>
                                                                     Original                                      Net Book Value
                                                                       Year                                        of Property or
                                                Leased                Leased                 Date of                 Leasehold
                                                  or                    or                    Lease               Improvements at
                Location                        Owned                Acquired              Expiration              June 30, 1999
------------------------------------------  ---------------     -------------------     ------------------    ----------------------
                                                                          (Dollars in thousands)
<S>                                             <C>                <C>                     <C>                         <C>
Administrative/Home Office:

West New Brighton Office (1):
1214 Castleton Avenue
Staten Island, NY  10310..................      Owned                   1916                    -                         $1,439

Branch Offices:

Port Richmond Office:
282 Port Richmond Avenue
Staten Island, NY 10302...................      Owned                   1951                    -                            106

Great Kills Office:
3879 Amboy Road
Staten Island, NY 10308...................      Owned                   1975                    -                          1,382

Annadale Office:
820 Annadale Road
Staten Island, NY 10312...................      Owned                   1967                    -                            318

Bull's Head Office (2):
1460 Richmond Avenue
Staten Island, NY 10314...................      Owned                   1971                    -                            733

Dongan Hills Office:
1833 Hylan Boulevard
Staten Island, NY 10305...................      Owned                   1974                    -                          1,167

New Springville Office:
2555 Richmond Avenue
Staten Island, NY 10134...................      Leased                  1976                 2005                            308

Woodrow Plaza Office:
645-100 Rossville Avenue
Staten Island, NY 10309...................      Leased                  1983                 2013                            321

Tottenville Office:
179 Main Street
Staten Island, NY 10307...................      Owned                   1988                    -                            345

Westerleigh Office:
832 Jewett Avenue
Staten Island, NY 10314...................      Owned                   1992                    -                            651

Eltingville Office (3):
4523 Amboy Road
Staten Island, NY 10312...................      Owned                   1992                    -                          2,438

Grasmere Office (4):
1100 Hylan Boulevard
Staten Island, NY 10305...................      Leased                  1992                 2005                            402
</TABLE>

                                       35
<PAGE>

<TABLE>
<CAPTION>
                                                                       Original                                      Net Book Value
                                                                         Year                                        of Property or
                                                  Leased                Leased                 Date of                 Leasehold
                                                    or                    or                    Lease               Improvements at
                 Location                         Owned                Acquired              Expiration              June 30, 1999
--------------------------------------------  ---------------     -------------------     ------------------    --------------------
                                                                           (Dollars in thousands)
<S>                                               <C>                  <C>                  <C>                    <C>
Brooklyn Office:
132 Avenue U
Brooklyn, NY 11223..........................      Leased                  1977                 1997(5)                     $  301(6)

New Dorp Office:
2595 Hylan Boulevard
Staten Island, NY 10306.....................      Leased                  1998                 2013                         1,873

Sunnyside Office:
1270 Clove Road
Staten Island, NY 10301.....................      Leased                  1998                 2013                           446

Jericho Office:
100 Jericho Quadrangle, Suite 334
Jericho, NY 11753...........................      Leased                  1998                 2005                             -

Pacific Street Office:
36 Pacific Street
Newark, NJ 07105............................      Owned                   1999                    -                         1,194

Ferry Street Office:
120-122 Ferry Street
Newark, NJ  07105...........................      Leased                  1999                 2000                         1,265

Elizabeth  Office:
715 Elizabeth Street
Elizabeth, NJ  07201........................      Owned                   1999                    -                           466

26th Street Office:
568 Broadway
Bayonne, NJ  07002..........................      Owned                   1999                    -                           366

6th Street Office:
171-173 Broadway
Bayonne, NJ  07002..........................      Owned                   1999                    -                       $ 1,153

20th Street Office:
441 Broadway
Bayonne, NJ  07002..........................      Owned                   1999                    -                           816

46th Street Office:
949 Broadway
Bayonne, NJ  07002..........................      Owned                   1999                    -                         1,235

Financial Center:
447 Broadway
Bayonne, NJ  07002..........................      Owned                   1999                    -                           680

Public Accommodation Offices:

Brooklyn Public Accommodation Office:
81 Avenue U
Brooklyn, NY 11223..........................     Leased                   1980                 1999                             -

Staten Island Public Accommodation Office:
1445 Richmond Avenue
Staten Island, NY  10314....................     Leased                   1998                 2013                             -

</TABLE>

                                       36
<PAGE>

<TABLE>
<CAPTION>
                                                                       Original                                      Net Book Value
                                                                         Year                                        of Property or
                                                  Leased                Leased                 Date of                 Leasehold
                                                    or                    or                    Lease               Improvements at
                Location                          Owned                Acquired              Expiration              June 30, 1999
--------------------------------------------  ---------------     -------------------     ------------------    --------------------
                                                                           (Dollars in thousands)

<S>                                              <C>                      <C>                   <C>                      <C>
Other Properties:
Garwood:
Undeveloped Building Lot
358 North Avenue
Garwood, NJ 07027 ..........................      Owned                   1999                    -                           $475


Second Street Building Site:
42-62 Avenue C
35 West 2nd Street
Bayonne, NJ  07002..........................      Owned                   1999                    -                            606
</TABLE>


(1) Certain portions of the Bank's administrative operations are located at
    properties not included in the table.
(2) Includes the Staten Island Public Accomadation Office.
(3) The Eltingville office includes the Bank's lending center.
(4) The Bank owns the parking area of the Grasmere Office and it leases the
    Grasmere Office building.
(5) Includes the Brooklyn Public Accommodation Office.
(6) The Bank has the option to extend the lease on the Brooklyn office for two
    five-year periods.

Item 3.  Legal Proceedings

The Company is not involved in any pending legal proceedings, other than routine
legal proceedings occurring in the ordinary course of business, which, in the
aggregate, involve amounts which are believed by management to be immaterial to
the financial condition and results of operations of the Company.

Item 4.  Submission of Matters to a Vote of Security Holders

None.

                                       37
<PAGE>

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
-------  MATTERS

Richmond County Financial Corp. became a publicly traded company on February 18,
1998. The Company's common stock is traded on the Nasdaq National Market under
the symbol "RCBK." Information regarding the market for the Company's common
equity and related stockholder matters appears in the 1999 Annual Report to
Shareholders under the caption "Market Price of Common Stock" and is
incorporated herein by reference.

As of September 15, 1999, the Company had 31,039,812 shares of common stock
outstanding and entitled to vote and approximately 9,705 shareholders of
record, not including persons or entities holding stock in nominee or street
name through brokers or banks.

ITEM 6.  EARNINGS SUMMARY AND SELECTED FINANCIAL DATA
-------

That section of the Company's Annual Report to Shareholders for the fiscal year
ended June 30, 1999 entitled "Selected Consolidated Financial and Other Data of
the Company," pages 13 through 14, is incorporated herein by reference.

This section of the Company's Annual Report to Shareholders for the fiscal year
ended June 30, 1999 entitled "Selected Quarterly Financial Data," page 55, is
incorporated herein by reference. Richmond County Financial Corp. became a
public company on February 18, 1998. Richmond County Financial Corp. Common
Stock is traded on The Nasdaq National Market under the symbol "RCBK."

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
------- OF OPERATIONS

That section of the Company's Annual Report to shareholders for the fiscal year
ended June 30, 1999 entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations," pages 15 through 30, is incorporated
herein by reference.

                                       38
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
--------

That section of the Company's Annual Report to Shareholders for the fiscal year
ended June 30, 1999 entitled "Asset and Liability Management and the Management
of Interest Rate Risk," pages 25 through 27, is incorporated herein by
reference.

ITEM 8.  FINANCIAL STATEMENTS
-------

Those sections of the Company's Annual Report to Shareholders for the fiscal
year ended June 30, 1999 entitled "Report of Independent Auditors," page 56,
"Consolidated Statements of Financial Condition," page 31, "Consolidated
Statements of Operation, page 32, "Consolidated Statements of changes in
Stockholders' Equity," page 33, "Consolidated Statements of Cash Flows," pages
34 through 35, "Notes to Consolidated Financial Statements," pages 36 through
55, inclusive, are incorporated herein by reference.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
-------  FINANCIAL DISCLOSURE

None

                                       39
<PAGE>

                                   PART III

Item 10.  Directors and Executive Officers of the Company

EXECUTIVE OFFICERS OF THE REGISTRANT AND THE BANK

Information regarding the directors and executive officers of the Company is
incorporated herein by reference to the Company's Proxy Statement for the Annual
Meeting of Shareholders to be held on October 28, 1999 under the caption
"Information with Respect to the Nominees, Continuing Directors, and Certain
Executive Officers of the Company." Pursuant to General Instruction G(3) to the
Form 10-K, the Company's Proxy Statement for the Annual Meeting of Shareholders
to be held on October 28, 1999 will be filed with the Commission not later than
120 days after the end of the fiscal year covered by this Form 10-K.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's executive officers and
directors, and persons who own more than 10% of any registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Executive officers,
directors and greater than 10% shareholders are required by regulation to
furnish the Company with copies of all Section 16(a) forms they file.

Based solely on its review of the copies of such forms it has received, as
provided to the Company by the above referenced persons, the Company believes
that, during the fiscal year ended June 30, 1999, all filing requirements
applicable to its reporting officers, directors and greater than 10%
shareholders were properly and timely complied with.

Item 11.  Executive Compensation

Information regarding executive compensation appears on page 14 of the Company's
Proxy Statement for the Annual Meeting of Stockholders to be held on October 28,
1999, under the caption "Executive Compensation" and is incorporated herein by
reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

Information regarding security ownership of certain beneficial owners appears on
page 4 of the Company's Proxy Statement for the Annual Meeting of Shareholders
to be held October 28, 1999, under the caption "Security Ownership of Certain
Beneficial Owners" and is incorporated herein by this reference.

Information regarding security ownership of management appears on pages 6
through 7 of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held October 28, 1999, under the caption "Information with
Respect to the Nominees, Continuing Directors and Named Executive Officers of
the Company" and is incorporated herein by this reference.

Item 13.  Certain Relationships and Related Transactions

Information regarding certain relationships and related transactions appears on
page 19 of the Company's Proxy Statement for the Annual Meeting of Stockholders
to be held on October 28, 1999 under the caption "Transactions With Certain
Related Persons" and is incorporated by this reference.

                                       40
<PAGE>

                                    PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)  Financial Statements:

See "Part II - Item 8. Financial Statements"

EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------

   (a)      Exhibits
            --------
    2.1     Plan of Conversion (including the Restated Organization
            Certificate and Stock Bylaws of Richmond County Savings Bank).*
    2.2     Agreement and Plan of Merger, dated as of July 17, 1998, by and
            between Richmond County Financial Corp. and Ironbound Bankcorp,
            NJ.**
    2.3     Agreement and Plan of Merger, amended and restated as of October 14,
            1998, by and between Richmond County Financial Corp. and Bayonne
            Bancshares, Inc.****
    3.1     Certificate of Incorporation of Richmond County Financial Corp.*
    3.2     Bylaws of Richmond County Financial Corp.*
   10.1     Form of Richmond County Savings Bank Employee Stock Ownership Plan
            and Trust.*
   10.2     Form of ESOP Loan Commitment Letter and ESOP Loan Documents.*
   10.3     Employment Agreement between Richmond County Financial Corp. and
            Michael F. Manzulli (As Amended and Restated).
   10.4     Employment Agreement between Richmond County Savings Bank and
            Michael F. Manzulli.*
   10.5     Employment Agreement between Richmond County Financial Corp. and
            Anthony E. Burke (As Amended and Restated).
   10.6     Employment Agreement between Richmond County Savings Bank and
            Anthony E. Burke.
   10.7     Employment Agreement between Richmond County Financial Corp. and
            Thomas R. Cangemi (As Amended and Restated).
   10.8     Employment Agreement between Richmond County Savings Bank and Thomas
            R. Cangemi.
   10.9     Employment Agreement between Richmond County Savings Bank and
            Michael J. Gagliardi.***
   10.10    Employment Agreement between Richmond County Savings Bank and Thomas
            R. Lupo.***
   10.11    Employment Agreement between Richmond County Savings Bank and
            Michael A. Nilan.***
   10.12    Form of Change in Control Agreement between Richmond County Savings
            Bank and certain executive officers.*
   10.13    Form of Proposed Richmond County Savings Bank Employee Severance
            Compensation Plan.*
   10.14    Richmond County Financial Corp. Supplemental Executive Retirement
            Plan (As Amended and Restated).
   10.15    Richmond County Financial Corp. 1998 Stock-Based Incentive Plan.****
   11.0     Statement re: Computation of Per Share Earnings.
   13.0     1999 Annual Report to Shareholders.
   21.0     Subsidiaries Information included in Part I.
   23.0     Consent of Independent Auditors.
   27.0     Financial Data Schedule (EDGAR version only).

   *        Incorporated by reference from the Form S-1 (Registration No. 333-
            37009), as amended, filed on October 2,1997.

   **       Incorporated by reference from the Form 8-K (File No. 0-23271),
            filed with the SEC on July 27,1998.

   ***      Incorporated by reference from the Form 10-Q (File No. 0-23271),
            filed with the SEC on May 17,1999.

   ****     Incorporated by reference from the Form 8-K (File No. 0-23271),
            filed with the SEC on October 16,1998.

   *****    Incorporated by reference from the DEF 14A (File No. 0-23271),
            filed with the SEC on August 28,1998.


   (b)      Reports on Form 8-K
            -------------------
          i.   The Company filed a report on Form 8-K with the SEC (File No.
               0-23271) on March 8, 1999, which report announced that the
               Company had consummated its acquisition of Ironbound Bankcorp, NJ
               as well as to announce the consummation of the merger of
               Ironbound Bank with and into Richmond County Savings Bank.

          ii.  The Company filed a report on Form 8-K with the SEC (File No.
               0-23271) on March 24, 1999, which report announced that the
               Company had consummated its acquisition of Bayonne Bancshares,
               Inc. as well as to announce the consummation of the merger of
               First Savings Bank of New Jersey with and into Richmond County
               Savings Bank.












                                       41
<PAGE>


          iii. The Company filed a report on Form 8-K with the SEC (File No.
               0-23271) on April 15, 1999, to report that the Company had issued
               a press release reporting the pending introduction of Internet
               banking services by its wholly-owned subsidiary, Richmond County
               Savings Bank.

          iv.  The Company filed a report on Form 8-K/A with the SEC (File No.
               0-23271) on June 8, 1999, which report supplemented the
               information contained in the Form 8-K the Company filed with the
               SEC on March 24, 1999.

                                       42
<PAGE>

                                  SIGNATURES


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                   RICHMOND COUNTY FINANCIAL CORP.
                   -------------------------------
                            (Registrant)

                   /s/ Michael F. Manzulli              Date: September 28, 1999
                   -------------------------------           -------------------
                   Michael F. Manzulli
                   Chairman of the Board and
                   Chief Executive Officer

            Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities indicated on September 28, 1999.

<TABLE>
<CAPTION>
NAME                                    TITLE                                     DATE
------                               ----------                                 --------
<S>                                  <C>                                        <C>
/s/ Michael F. Manzulli              Chairman of the Board, Chief               September 28, 1999
--------------------------------     Executive Officer and Director             ------------------
     Michael F. Manzulli

/s/ Anthony E. Burke                 President, Chief Operating Officer         September 28, 1999
--------------------------------     and Director                               ------------------
     Anthony E. Burke

/s/ Thomas R. Cangemi                Senior Vice President, Chief               September 28, 1999
--------------------------------     Financial Officer, and Treasurer           ------------------
     Thomas R. Cangemi

/s/ Godfrey H. Carstens, Jr.         Director                                   September 28, 1999
--------------------------------                                                ------------------
     Godfrey H. Carstens, Jr.

/s/ Robert S. Farrell                Director                                   September 28, 1999
--------------------------------                                                ------------------
     Robert S. Farrell

/s/ William C. Frederick             Director                                   September 28, 1999
--------------------------------                                                ------------------
     William C. Frederick, M.D.

/s/ James L. Kelley                  Director                                   September 28, 1999
--------------------------------                                                ------------------
     James L. Kelley

/s/ Patrick F. X. Nilan              Director                                   September 28, 1999
--------------------------------                                                ------------------
     Patrick F. X. Nilan

/s/ T. Ronald Quinlan, Jr.           Director                                   September 28, 1999
--------------------------------                                                ------------------
     T. Ronald Quinlan, Jr.

/s/ Maurice K. Shaw                  Director                                   September 28, 1999
--------------------------------                                                ------------------
     Maurice K. Shaw
</TABLE>

                                       43