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                                  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, 2000

                         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 $472,153,506 as of September 22, 2000.

There were issued and outstanding  27,087,709  common shares of the Registrant's
Common Stock as of September 22, 2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to  Shareholders  for the year ended June 30, 2000
are  incorporated  by reference into Part II of this Form 10-K.  Portions of the
Proxy Statement for the 2000 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..............................................      36

     Item 3    Legal Proceedings.......................................      38

     Item 4    Submission of Matters to a Vote of Security Holders.....      38

PART II

     Item 5    Market for Registrant's Common Stock and

               Related Stockholder Matters.............................      39

     Item 6    Earnings Summary and Selected Financial Data and
               Condensed Quarterly Statements of Operations............      39

     Item 7    Management's Discussion and Analysis of Financial
               Condition and Results of Operations.....................      39

     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>1

                                     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, 2000, the Company
had  consolidated  total  assets of $2.9  billion,  deposits of $1.8 billion and
stockholders'  equity of $306.4  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

      South Jersey  Financial  Corporation,  Inc. On March 15, 2000, the Company
and South Jersey  Financial  Corporation,  Inc.  ("South Jersey") entered into a
definitive  agreement  pursuant to which South  Jersey,  the holding  company of
South Jersey Savings and Loan Association,  a community savings association with
three full service  banking offices in the New Jersey counties of Gloucester and
Camden,  was acquired by the Company.  Under the terms of the  agreement,  South
Jersey  shareholders  will  receive  $20 per share in cash for each  outstanding
share  of  common  stock  of  South  Jersey.  The  total  transaction  value  is
approximately to be $68.0 million. The excess of cost over the fair value of net
assets  acquired  ("goodwill")  in the  transaction is estimated at $20 million,
which will be amortized on a straight  line basis over 20 years.  As of June 30,
2000 (unaudited), the total assets of South Jersey were $322.5 million, deposits
were  $238.1  million  and total  stockholders'  equity was $53.8  million.  The
acquisition was completed at the close of business on July 31, 2000.

      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 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

<PAGE>2

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 $31.4 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 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 $14.9 million, which is being amortized on a straight line basis
over 15 years.

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,  11 banking  offices in the  counties  of Camden,  Essex,  Gloucester,
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
Camden,  Essex,  Gloucester,  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   1999,   based  on  a  survey  by  a
nationally-recognized bank consulting firm, the Bank had 18.0% 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.

<PAGE>3

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.

      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,
                                   ------------------------------------------------------------------------------------------------
                                          2000                1999                1998                1997                1996
                                   -----------------  ------------------  ------------------  ------------------  -----------------
                                             Percent             Percent             Percent             Percent             Percent
                                               of                  of                  of                  of                  of
                                    Amount    Total     Amount    Total      Amount   Total     Amount    Total     Amount    Total
                                  ---------- -------  ---------- -------  ---------- -------  ---------- -------  ---------- -------
                                                                         (Dollars in thousands)
<S>                               <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>    <C>       <C>

Real estate loans:
 One- to four-family              $  810,853   51.1%  $  834,528   62.8%  $  470,385   72.2%  $  394,588   78.4%  $  325,139   76.3%
 Multifamily                         549,151   34.6      290,066   21.8       50,491    7.8        2,705    0.5        1,238    0.3
 Commercial real estate              108,532    6.8      107,280    8.1       55,416    8.5       40,713    8.1       39,892    9.3
 Construction and
   development                        65,603    4.1       51,044    3.8       31,297    4.8       18,343    3.7       12,812    3.0
 Home equity                          31,497    2.0       18,575    1.5       15,379    2.4       16,729    3.3       18,054    4.2
 Commercial                           16,020    1.0       14,557    1.1        6,783    1.0        6,662    1.3        6,300    1.5
 Consumer and student                  5,458    0.4       11,817    0.9       21,770    3.3       23,589    4.7       22,932    5.4
                                  ---------- -------  ---------- -------  ---------- -------  ---------- -------  ---------- -------
    Gross loans                   $1,587,114  100.0%  $1,327,867  100.0%  $  651,521  100.0%  $  503,329  100.0%  $  426,367  100.0%
                                             =======             =======             =======             =======             =======
Less:
 Unamortized discounts, net              598                 433                (631)               (788)               (947)
 Deferred loan costs (fees)              794                (888)                855                (813)             (1,354)
 Allowance for loan losses           (14,698)            (13,885)             (7,276)             (5,470)             (4,796)
                                  ----------          ----------          ----------          ----------          ----------
    Total loans, net               1,573,808           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                 $1,573,808          $1,313,527          $  644,469          $  496,258          $  418,115
                                  ==========          ==========          ==========          ==========          ==========

</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 37 mortgage brokers  operating  primarily on
Staten  Island and in  Brooklyn.  During the years ended June 30, 2000 and 1999,
the Bank originated $167.4 million and $129.9 million,  respectively, of one- to
four-family loans through mortgage brokers and $75.6 million and $120.3 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.

<PAGE>4

      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 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 and FNMA.

      At June 30, 2000, the Bank was servicing its own portfolio of $1.6 billion
of loans receivable and $260.5 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,  2000 and  June  30,  1999,  the Bank
originated  $243.0 million and $250.2 million of fixed-rate and  adjustable-rate
one- to  four-family  loans,  respectively,  of which $243.0  million and $250.2
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,  2000,  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  $273,000 of  participations  in loans at June 30,
2000.  The Bank acquired  $72.5 million in purchased  whole loans as a result of
the  acquisition  of Bayonne  Bancshares,  Inc.  At June 30, 2000 the balance of
purchased whole loans were $51.8 million.

      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,
                                                     ------------------------------------
                                                        2000         1999         1998
                                                     ----------   ----------   ----------
                                                                (In thousands)
<S>                                                  <C>          <C>          <C>
Gross loans:
Balance outstanding at beginning of period           $1,327,867   $  651,521   $  503,329
                                                     ----------   ----------   ----------
     Loans originated:
         One- to four-family                            242,965      250,204      118,384
         Multifamily                                    277,433      235,213        9,393
         Commercial real estate                          10,475       16,134       22,537
         Construction and development                    34,284       28,447       22,280
         Home equity                                      7,045        6,603        3,567
         Commercial                                      15,350        9,848       10,083
         Consumer and student                             2,059        2,458        7,024
                                                     ----------   ----------   ----------
           Total loans originated                       589,611      548,907      193,268
           Loans of acquired institutions                    --      332,639           --
     Loans purchased                                         --        1,500       38,616
                                                     ----------   ----------   ----------
           Total loans originated and purchased         589,611      883,046      231,884
                                                     ----------   ----------   ----------
Less:
     Principal repayments                               147,041      113,189       83,120
     Sales of loans                                      89,342       15,821           --
     Mortgage securitization                             93,596       77,159           --
     Transfers to real estate owned                         355          482          532
     Principal charged off                                   30           49           40
                                                     ----------   ----------   ----------
Total loans receivable held for investments at
end of period                                        $1,587,114   $1,327,867   $  651,521
                                                     ==========   ==========   ==========

</TABLE>

<PAGE>5

      Loan Maturity.  The following table shows the contractual  maturity of the
Bank's loan portfolio at June 30, 2000.  The table does not include  prepayments
or  scheduled  principal  amortization.   Prepayments  and  scheduled  principal
amortization on mortgage loans totaled $147.0 million, $113.2 million  and $83.1
million for the years ended June 30, 2000, 1999 and 1998, respectively.

<TABLE>
<CAPTION>

                                                   At June 30, 2000
                                          ---------------------------------------------------------------------------------------
                                                   Real Estate Loans

                                          -----------------------------------------------------
                                           One- to                        Construction                      Consumer    Total
                                           Four-     Multi-   Commercial       and       Home                  and      Loans
                                           Family    Family   Real Estate Development   Equity   Commercial  Student  Receivable
                                          --------- -------- ------------ ------------ -------- ----------- --------- -----------
<S>                                       <C>       <C>      <C>          <C>          <C>       <C>        <C>       <C>
Amounts due:
  Within one year                         $  1,111  $    245   $  5,791    $ 55,599    $  1,122 $  9,012    $  1,575  $   74,455
                                          --------- -------- ------------ ------------ -------- ----------- --------- -----------
  After one year:
     More than one year
          to three years                     9,828     2,249     16,643      10,004         479    4,176       1,878      45,257
     More than three years
          to five years                      5,690       568      5,805          --         390    2,075          29      14,557
     More than five years
          to 10 years                      104,790    64,658     33,055          --       7,134      527       1,976     212,140
     More than 10 years
          to 20 years                      224,773   481,431     44,491          --       4,286      230          --     755,211
     More than 20 years                    464,661        --      2,747          --      18,086       --          --     485,494
                                          --------- -------- ------------ ------------ -------- ----------- --------- -----------
          Total due after June 30, 2000    809,742   548,906    102,741      10,004      30,375    7,008       3,883   1,512,659
                                          --------- -------- ------------ ------------ -------- ----------- --------- -----------
          Total amount due                $810,853  $549,151   $108,532    $ 65,603    $ 31,497 $ 16,020    $  5,458  $1,587,114
                                          ========= ======== ============ ============ ======== =========== ========= ===========
Less:
  Unamortized discounts, net                                                                                                 598
  Deferred loan costs, net                                                                                                   794
  Allowance for possible loan losses                                                                                     (14,698)
                                                                                                                      -----------
Loans receivable held for investment, net                                                                             $1,573,808
                                                                                                                      ===========
</TABLE>


      The  following  table sets forth at June 30,  2000,  the dollar  amount of
gross loans receivable  contractually  due after June 30, 2001, and whether such
loans have fixed interest rates or adjustable interest rates.
<TABLE>
<CAPTION>

                                             Due After June 30, 2001
                                          --------------------------------
                                            Fixed   Adjustable   Total

                                          --------- ---------- -----------
                                                  (In thousands)
     <S>                                  <C>        <C>       <C>
     Real estate loans:
        One- to four-family               $415,188   $394,554  $  809,742
        Multifamily                         56,602    492,304     548,906
        Commercial real estate              23,411     79,330     102,741
        Construction and development            --     10,004      10,004
        Home equity                         24,660      5,715      30,375
                                          --------- ---------- -----------
          Total real estate loans          519,861    981,907   1,501,768
     Commercial loans                        3,579      3,429       7,008
     Consumer and student loans              3,883         --       3,883
                                          --------- ---------- -----------
          Total loans receivable          $527,323   $985,336  $1,512,659
                                          ========= ========== ===========
</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 areas, 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, 2000,  the Bank's one- to  four-family  loans  totaled  $810.9
million,  or 51.1%, of gross loans. Of the one- to four-family loans outstanding
at  that  date,   51.5%   were   fixed-rate   mortgage   loans  and  48.5%  were
adjustable-rate  mortgage 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 or FNMA,  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

<PAGE>6

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, 2000,  $11.5 million,  or 0.7% 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 2000, the Bank originated  $277.4 million of multifamily  loans as
compared to originations of $235.2 million and $9.4 million in fiscal years 1999
and 1998, respectively.  As a result, the Bank had approximately $549.2 million,
or 34.6% of the total loan portfolio  invested in multifamily loans. The largest
multifamily  loan in the Bank's  portfolio  at June 30, 2000 was an $8.3 million
loan secured by 11 garden apartment  buildings with an aggregate of 156 units in
Doylestown, Pennsylvania.

      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 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

<PAGE>7

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 areas.  All mixed-use  properties  are classified as
commercial real estate. At June 30, 2000, the Bank's commercial real estate loan
portfolio  totaled  approximately  $108.5 million,  or 6.8%, 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 ten
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, 2000 was a $3.3  million  loan
secured by a shopping plaza on Staten Island.

      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  areas,  and  may  originate  construction  and
development loans outside its primary market area to existing customers. At June
30,  2000,  the Bank had $65.6  million  of  construction  loans,  most of which
related to the  construction of one- to four-family  properties,  of which $29.9
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  areas  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 areas 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 areas.  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, 2000,  the Bank had $21.2
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 areas; however, the Bank may originate land loans

<PAGE>8

outside its primary market areas to 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, 2000, was a $9.5 million
loan for the  construction of a 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, 2000,  the Bank's home equity loans and lines of credit
totaled  $31.5  million,  or  2.0%,  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 ten  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 areas.  At June
30, 2000, the Bank had $16.0 million of commercial loans, which amounted to 1.0%
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, 2000, there was $236,830 in 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 loans at June 30, 2000 were two loans for $1.0 million each.
At such date,  the Bank had $11.0  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.

<PAGE>9

      Consumer  and Student  Lending.  The Bank's  portfolio  of consumer  loans
consists primarily of unsecured personal loans and overdraft lines of credit. As
of June 30, 2000, consumer loans amounted to $5.5 million, or 0.4% of the Bank's
total loan portfolio.

      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 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 Directors' 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, 2000, 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.

<PAGE>10

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 the property and, thereafter,  appraisal of the
property on an as-needed  basis.  At June 30, 2000, the Bank had $5.2 million of
non-performing assets (defined as non-accruing loans and REO).

      At June 30, 2000,  the Bank's REO net,  consisting of  foreclosed  assets,
totaled  $509,000,  which was comprised of three one- to four-family  properties
and one 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.

<PAGE>11

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

      At June 30,  2000,  the Bank had $2.6  million  of  assets  designated  as
Substandard, consisting of 22 loans; there were no loans classified as Doubtful;
and $13,000,  consisting of seven consumer loans classified as Loss. At June 30,
2000,  the Bank had $2.1  million  of  assets  designated  as  Special  Mention,
consisting of 27 loans which were due to past loan delinquencies.

<PAGE>12

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

                                                     At June 30, 2000
                                               60-89 Days         90 Days or More
                                          -------------------   -------------------
                                            Number  Principal     Number  Principal
                                          --------- ---------   --------- ---------
                                                    (Dollars in thousands)
<S>                                       <C>       <C>         <C>       <C>
One- to four-family                           16     $2,187         40     $3,411
Multifamily                                   --         --         --         --
Commercial real estate                        --         --          3        738
Construction and development                   2        123          3        437
Home equity                                    3         89          2         72
Commercial loans                               7        454          1         48
Consumer and student loans                    11          9          7         13
                                          --------- ---------   --------- ---------
     Total                                    39     $2,862         56     $4,719
                                          ========= =========   ========= =========

Delinquent loans to total loans(1)                     0.18%                 0.30%
                                                    =========             =========


<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%
                                                    =========             =========
</TABLE>


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

<PAGE>13

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

<TABLE>
<CAPTION>

                                                         At June 30,
                                            -------------------------------------------
                                             2000     1999     1998     1997     1996
                                           -------- -------- -------- -------- --------
                                            (Dollars in thousands)
<S>                                         <C>      <C>      <C>      <C>      <C>
Non-accrual loans:
   One- to four-family                      $3,483   $3,959   $3,306   $1,676   $1,695
   Multifamily                                  --       --       --       --       --
   Commercial real estate                      738    1,461    1,619      876      939
   Construction and development                437       90      606      120      120
   Commercial                                   48      329       --       --       --
   Consumer and student                         13       18        3       --       --
                                           -------- -------- -------- -------- --------
     Total non-accrual loans                 4,719    5,857    5,534    2,672    2,754
Loans contractually past due 90 days or
  more and still accruing interest(1)           --       --       --    1,205    1,066
                                           -------- -------- -------- -------- --------
     Total non-performing loans              4,719    5,857    5,534    3,877    3,820
Real estate owned                              509      997      322      662      612
                                           -------- -------- -------- -------- --------
     Total non-performing assets            $5,228   $6,854   $5,856   $4,539   $4,432
                                           ======== ======== ======== ======== ========
Allowance for possible loan losses as a
  percent of loans(2)                         0.93%    1.05%    1.12%    1.10%    1.14%
Allowance for possible loan losses as a
  percent of total non-performing loans(3)  311.53   237.07   131.50   141.09   125.55
Non-performing loans as a
  percent of loans(2)(3)                      0.30     0.45     0.85     0.78     0.91
Non-performing assets as a
  percent of total assets(3)                  0.18     0.25     0.37     0.46     0.48
</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 $4.7 million as of June 30, 2000, which included
42 one- to four-family  loans, with an aggregate balance of $3.5 million and six
commercial real estate loans and construction loans with an aggregate balance of
$1.2 million.

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.

     As of June 30, 2000,  the Bank's  allowance  for  possible  loan losses was
$14.7 million,  or 0.9% of total loans,  and 311.5% of  non-performing  loans as
compared to $13.9 million,  or 1.1% of total loans, and 237.1% of non-performing
loans,  as of June 30,  1999.  The Bank had total  non-performing  loans of $4.7
million and $5.9 million at June 30, 2000 and June 30, 1999,  respectively,  and
non-performing  loans to total  loans of 0.3% and 0.5%,  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

<PAGE>14

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>

                                                       Year Ended June 30,
                                           ---------------------------------------------
                                             2000     1999     1998     1997     1996
                                           -------- -------- --------- -------- --------
                                                          (In thousands)
<S>                                        <C>      <C>      <C>      <C>      <C>

Balance at beginning of period             $13,885  $ 7,276   $5,470   $4,796   $3,275
                                           -------- -------- -------- -------- --------
Allowance of acquired institutions              --    4,357       --       --       --
Provision for loan losses                    1,200    2,550    2,200    1,080    1,600
Charge-offs:
   Real estate loans                            67       60      110      174      166
   Commercial real estate                      315       50      142       15       --
   Consumer loans                              109      235      281      286      186
                                           -------- -------- -------- -------- --------
     Total charge-offs                         491      345      533      475      352
Recoveries:
   Real estate loans                            17       --       --       45       97
   Commercial real estate                       34       --       88       --      122
   Consumer loans                               53       47       51       24       54
                                           -------- -------- -------- -------- --------
     Total recoveries                          104       47      139       69      273
Net charge-offs                                387      298      394      406       79
                                           -------- -------- -------- -------- --------
Balance at end of period                   $14,698  $13,885   $7,276   $5,470   $4,796
                                           ======== ======== ======== ======== ========
</TABLE>

      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,
                                            ---------------------------------------------------------------------------
                                                          2000                                   1999
                                            ---------------------------------------------------------------------------
                                                                     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)                               $ 8,280        56%          99%        $ 6,966        50%          98%
Commercial                                       247         2            1             230         2            1
Consumer                                          95         1           --             195         1            1
Unallocated                                    6,076        41           --           6,494        47           --
                                            ---------  -----------  ------------   ---------  -----------  ------------
Total allowance for
   possible loan losses                      $14,698       100%         100%        $13,885       100%         100%
                                            =========  ===========  ============   =========  ===========  ============
</TABLE>

<PAGE>15

<TABLE>
<CAPTION>

                                                                                At June 30,
                                            ---------------------------------------------------------------------------
                                                         1998                                   1997
                                            ---------------------------------------------------------------------------
                                                                     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)                                $3,581        49%          96%         $2,619        48%          94%
Commercial                                       156         2            1             355         6            1
Consumer and student                             325         5            3             321         6            5
Unallocated                                    3,214        44           --           2,175        40           --
                                            ---------  -----------  ------------   ---------  -----------  ------------
Total allowance for
   possible loan losses                       $7,276       100%         100%         $5,470       100%         100%
                                            =========  ===========  ============   =========  ===========  ============
</TABLE>

<TABLE>
<CAPTION>

                                                       At June 30,
                                            ------------------------------------
                                                          1996
                                            ------------------------------------
                                                                     Percent of
                                                       Percent of     Loans in
                                                        Allowance       Each
                                                        to Total    Category to
                                             Amount     Allowance   Total Loans
                                            ---------  -----------  ------------
                                                          (Dollars in thousands)
<S>                                         <C>        <C>          <C>

Real estate(1)                                $2,173        45%          93%
Commercial                                       380         8            3
Consumer and student                             315         7            4
Unallocated                                    1,928        40           --
                                            ---------  -----------  ------------
Total allowance for
   possible loan losses                       $4,796       100%         100%
                                            =========  ===========  ============
</TABLE>
--------------------------

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

Securities Investment Activities

      The  investment  policy of the  Company  and the Bank,  as 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 four 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  the  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.

      As of June 30,  2000,  the  Company's  securities  portfolio  totaled $1.0
billion,  or 35.5% of total assets,  with $964.9 million classified as available
for sale and $57.2 million classified as held to maturity.

      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, 2000,  mortgage-backed and mortgage-related
securities  totaled $764.6  million,  or 26.5% of total assets,  with a weighted
average yield of 6.63%.  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 the leverage  strategy  conducted.  At June 30, 2000, the Company's
CMO portfolio  totaled $306.8 million,  or 10.6% of total assets,  consisting of
$247.0 million of CMOs issued by private issuers and $59.8 million issued by the
government  sponsored  agencies.  The Company policy limits its privately issued
CMOs to

<PAGE>16

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 that have an average life of ten 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 5.1 years and a weighted average yield of 6.52%.

      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,   2000,  the  Company's  U.S.
government agency securities portfolio totaled $29.6 million,  with a weighted
average  yield of 7.15%.  It  consists  of $20.4  million of  callable  agency
zero-coupon medium term notes and $9.2 million of short-term callable notes.

      Financial  Bonds.  At June 30, 2000, the financial bond portfolio  totaled
$187.7  million with a weighted  average  yield of 8.28%,  consisting  of $122.2
million fixed-rate and $65.5 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  ten year  holding  period.  The  floating-rate  bonds  have a
weighted average coupon of 6.98% and reset  quarterly,  based on the Three Month
LIBOR  (London  Interbank  Offer Rate) Index plus margins  ranging from 0.50% to
2.50%. 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, 2000,  the  Company's  equity  securities
portfolio  totaled $40.2  million,  all of which was classified as available for
sale. Such portfolio consisted of investments of $28.1 million of investments in
preferred  stock and $12.1 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.

<PAGE>17

      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,
                                            ------------------------------------------------------------------------
                                                      2000                     1999                     1998
                                            ------------------------------------------------------------------------
                                                          Percent                  Percent                  Percent
                                                            of                       of                       of
                                               Amount      Total        Amount      Total        Amount      Total
                                            -----------  ---------   -----------  ---------   -----------  ---------
                                                       (Dollars in thousands)
<S>                                         <C>          <C>         <C>          <C>         <C>          <C>
Debt securities:
   Corporate bonds                          $       --        --%    $       --        --%      $  5,213      0.62%
   U.S. Government obligations                      --        --            300      0.03          8,989      1.07
   Agency securities                            29,615      2.90         39,312      3.37         24,675      2.93
   Public utilities                                 --        --             --        --         14,385      1.70
   Municipal bonds                                  --        --          1,572      0.14          1,182      0.14
   Other debt obligations (1)                       --        --          1,763      0.15          2,249      0.27
   Asset-backed notes                               --        --          9,963      0.86          9,988      1.18
   Financial bonds                             187,687     18.36        198,246     17.02        115,863     13.74
                                            -----------  ---------   -----------  ---------   -----------  ---------
     Total debt securities                     217,302     21.26        251,156     21.57        182,544     21.65
                                            -----------  ---------   -----------  ---------   -----------  ---------
Equity securities:
   Preferred stock                              28,113      2.75         30,097      2.59         28,448      3.37
   Common stock                                 12,070      1.18         16,358      1.40         27,056      3.21
   Mutual funds                                     --        --             --        --            842      0.10
                                            -----------  ---------   -----------  ---------   -----------  ---------
      Total equity securities                   40,183      3.93         46,455      3.99         56,346      6.68
                                            -----------  ---------   -----------  ---------   -----------  ---------
Mortgage-backed and mortgage-related
   securities:
   FHLMC pass-through                          118,841     11.63        161,472     13.86         97,362     11.55
   GNMA pass-through                           135,389     13.25        159,247     13.68        185,023     21.94
   FNMA pass-through                           124,655     12.20         97,055      8.33         76,451      9.07
   Private issuer pass-through                  78,867      7.71         89,734      7.71         18,208      2.16
   Agency CMOs                                  59,829      5.85         54,922      4.72         39,125      4.64
   Private issuer CMOs                         247,026     24.17        304,414     26.14        188,135     22.31
                                            -----------  ---------   -----------  ---------   -----------  ---------
      Total mortgage-backed and
       mortgage-related securities             764,607     74.81        866,844     74.44        604,304     71.67
                                            -----------  ---------   -----------  ---------   -----------  ---------
      Total securities                      $1,022,092    100.00%    $1,164,455    100.00%      $843,194    100.00%
                                            ===========  =========   ===========  =========   ===========  =========
      Total debt and equity securities
       available for sale                   $  257,485     25.19%    $  297,611     25.56%      $238,890     28.33%
                                            -----------  ---------   -----------  ---------   -----------  ---------
Mortgage-backed and mortgage-related
   securities available for sale               707,446     69.22        866,844     74.44        604,304     71.67
Mortgage-backed and mortgage-related
   securities held to maturity                  57,161      5.59             --        --             --        --
                                            -----------  ---------   -----------  ---------   -----------  ---------
      Total mortgage-backed and
         mortgage-related securities           764,607     74.81        866,844     74.44        604,304     71.67
                                            -----------  ---------   -----------  ---------   -----------  ---------
      Total securities                      $1,022,092    100.00%    $1,164,455    100.00%      $843,194    100.00%
                                            ===========  =========   ===========  =========   ===========  =========
----------------------------------

</TABLE>

(1)    Consists of railroad, foreign and other bonds.

<PAGE>18

      The following table sets forth the Company's securities activities for the
periods indicated:
<TABLE>
<CAPTION>

                                                                  For the Year
                                                                 Ended June 30,
                                                          ----------------------------------------
                                                              2000          1999          1998
                                                          ------------  ------------  ------------
                                                                 (In thousands)
<S>                                                       <C>           <C>           <C>

Beginning balance                                          $1,164,455      $843,194      $437,427
                                                          ============  ============  ============
Add:
Debt and equity securities purchased available for sale        49,156        96,028       173,260
Mortgage-backed and mortgage-related securities
   purchased available for sale                                39,273       384,631       608,059
Securitization                                                 93,427        77,159            --
Investments of acquired institutions, net                          --       233,150            --
Change in net unrealized gains on
   available for sale securities                              (38,718)      (34,671)        6,179

Less:
Maturities and redemptions of debt and equity securities
   held to maturity                                                --            --        55,972
Sales and redemptions of debt and equity securities
   available for sale                                          67,787       107,141       108,936
Maturities and redemptions of mortgage-backed and
   mortgage-related securities held to maturity                    --            --        29,237
Principal repayments on mortgage-backed and
   mortgage-related securities held to maturity                   402            --        31,987
Sales and redemptions of mortgage-backed and
   mortgage-related securities available for sale              94,521        63,931        69,074
Principal repayments on mortgage-backed and
   mortgage-related securities available for sale             117,255       264,460        86,073
Realized losses/(gains) on sales of mortgage-backed and
   mortgage-related securities                                  6,901          (272)          287
Realized gains on debt and equity securities                     (892)       (2,800)         (317)
Amortization of investment premiums, net,
   accretion of discount                                         (473)        2,576           482
                                                          ------------  ------------  ------------
Ending balance                                             $1,022,092    $1,164,455     $843,194
                                                          ============  ============  ============
</TABLE>

<PAGE>19

      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,
                                            ------------------------------------------------------------------------------------
                                                       2000                          1999                        1998
                                            ------------------------------------------------------------------------------------
                                             Amortized       Market       Amortized       Market       Amortize        Market
                                                Cost         Value           Cost         Value          Cost          Value
                                            ------------  ------------   ------------  ------------   ------------  ------------
                                                                               (In thousands)
<S>                                         <C>           <C>            <C>            <C>           <C>           <C>
Debt securities available for sale:
   U.S. Government obligations               $       --    $       --     $      300    $      300     $    8,960    $    8,989
   Agency securities                             34,406        29,615         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                              211,900       187,687        204,447       198,246        114,153       115,863
                                            ------------  ------------   ------------  ------------   ------------  ------------
    Total debt securities
      available for sale                        246,306       217,302        259,629       251,156        180,313       182,544
                                            ------------  ------------   ------------  ------------   ------------  ------------
Equity securities available for sale:
   Mutual funds                                      --            --             --            --            605           842
   Preferred stock                               29,629        28,113         29,687        30,097         27,146        28,448
   Common stock                                  13,908        12,070         16,218        16,358         24,786        27,056
                                            ------------  ------------   ------------  ------------   ------------  ------------
    Total equity securities
      available for sale                         43,537        40,183         45,905        46,455         52,537        56,346
                                            ------------  ------------   ------------  ------------   ------------  ------------
Mortgage-backed and mortgage-related
   securities:
Held to maturity:
   FNMA pass-through                             57,161        54,068             --            --             --            --
                                            ------------  ------------   ------------  ------------   ------------  ------------
    Total mortgage-backed and mortgage-
      related securities held to maturity        57,161        54,068             --            --             --            --
                                            ------------  ------------   ------------  ------------   ------------  ------------
Available for sale:
   FHLMC pass-through                           124,736       118,841        166,129       161,472         96,970        97,362
   GNMA pass-through                            140,365       135,389        162,446       159,247        185,098       185,023
   FNMA pass-through                             70,121        67,494         98,465        97,055         76,616        76,451
   Private issuer pass-through                   83,095        78,867         92,664        89,734         18,143        18,208
   Agency CMOs                                   63,977        59,829         55,849        54,922         39,165        39,125
   Private issuer CMOs                          260,081       247,026        311,274       304,414        187,587       188,135
                                            ------------  ------------   ------------  ------------   ------------  ------------
    Total mortgage-backed and mortgage-
      related securities available for sale     742,375       707,446        886,827       866,844        603,579       604,304
Net unrealized (loss) gain on available
   for sale securities                          (67,287)           --        (27,906)           --          6,765            --
                                            ------------  ------------   ------------  ------------   ------------  ------------
Total securities                             $1,022,092    $1,018,999     $1,164,455    $1,164,455     $  843,194    $  843,194
                                            ============  ============   ============  ============   ============  ============
</TABLE>
--------------------------------------
(1)   Consists of railroad, foreign and other bonds.

<PAGE> 20

      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, 2000.
<TABLE>
<CAPTION>

                                                                       At June 30, 2000
                                      ------------------------------------------------------------------------------
                                                            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>

Held to maturity:
  Mortgage-backed and
    mortgage-related securities:
    FNMA pass-through                 $     --     --%   $     --      --%   $     --      --%   $  57,161   6.61%
     Total mortgage-backed
      and mortgage-related
      securities held to maturity           --     --          --      --          --      --    $  57,161   6.61
                                      --------           --------            --------            ---------
Total securities held to maturity     $     --     --    $     --      --    $     --      --    $  57,161   6.61
                                      ========           ========            ========            =========
Available for sale:
  Debt securities:
   Agency securities                  $     --     --%   $     --      --%   $  9,200    6.45%   $  20,415   7.44%
   Financial bonds                          --     --      11,432   10.15       3,888    8.65      172,367   8.16
                                      --------           --------            --------            ---------
     Total debt securities
      available for sale                    --     --      11,432   10.15      13,088    7.08      192,782   8.08
                                      --------           --------            --------            ---------
Mortgage-backed and
   mortgage-related securities:
      FHLMC pass-through                 1,071   6.19          --      --          --      --      117,770   6.64
      GNMA pass-through                     --     --          --      --          --      --      135,389   7.00
      FNMA pass-through                  1,958   4.63      10,771    6.66          --      --       54,765   6.71
      Private issuer pass-through           --     --          --      --       1,856    6.68       77,011   6.40
      Agency CMOs                           --     --          --      --          --      --       59,829   6.49
      Private issuer CMOs                   --     --          --      --          --      --      247,026   6.53
                                      --------           --------            --------            ---------
    Total mortgage-backed
     and mortgage-related
     securities available for sale       3,029   5.18      10,771    6.66       1,856    6.68      691,790   6.64
                                      --------           --------            --------            ---------
Equity securities:
   Preferred stock                          --     --       4,359    5.09      11,847    6.19       11,907   6.19
   Common stock                             --     --          --      --          --      --       12,070   3.24
                                      --------           --------            --------            ---------
    Total equity securities                 --     --       4,359    5.09      11,847    6.19       23,977   4.67
                                      --------           --------            --------            ---------
Total securities available for sale   $  3,029   5.18    $ 26,562    7.91    $ 26,791    6.67    $ 908,549   6.91
                                      ========           ========            ========            =========

Total securities                      $  3,029   5.18    $ 26,562    7.91    $ 26,791    6.67    $ 965,710   6.89
                                      ========           ========            ========            =========
</TABLE>

<TABLE>
<CAPTION>

                                        At June 30, 2000
                                      ---------------------

                                              Total
                                      ---------------------
                                                 Weighted
                                      Carrying    Average
                                       Value       Yield
                                      -------- ------------
                                      (Dollars in thousands)
<S>                                   <C>      <C>

Held to maturity:
  Mortgage-backed and
    mortgage-related securities:
    FNMA pass-through                 $   57,161   6.61%
     Total mortgage-backed
      and mortgage-related
      securities held to maturity         57,161   6.61
                                      ----------
Total securities held to maturity     $   57,161   6.61
                                      ==========
Available for sale:
  Debt securities:
   Agency securities                  $   29,615   7.15%
   Financial bonds                       187,687   8.28
                                      ----------
     Total debt securities
      available for sale                 217,302   8.12
                                      ----------
Mortgage-backed and
   mortgage-related securities:
      FHLMC pass-through                 118,841   6.63
      GNMA pass-through                  135,389   7.00
      FNMA pass-through                   67,494   6.65
      Private issuer pass-through         78,867   6.41
      Agency CMOs                         59,829   6.49
      Private issuer CMOs                247,026   6.53
                                      ----------
    Total mortgage-backed
     and mortgage-related
     securities available for sale       707,446   6.63
                                      ----------
Equity securities:
   Preferred stock                        28,113   6.02
   Common stock                           12,070   3.24
                                      ----------
    Total equity securities               40,183   5.13
                                      ----------
Total securities available for sale   $  964,931   6.92
                                      ==========

Total securities                      $1,022,092   6.91
                                      ==========
</TABLE>

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/N.O.W.  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, 2000, the Bank's deposits totaled $1.8 billion, of which 88.3%
were  interest-bearing  deposits.  For the year ended June 30, 2000, the average
balance  of core  deposits  totaled  $1.1  billion,  or 62.6%  of total  average

<PAGE>21

deposits.  At  June  30,  2000,  the  Bank  had a total  of  $693.3  million  in
certificates of deposit, of which $550.5 million had maturities of less than one
year.  For the year ended June 30, 1999,  the average  balance of core  deposits
represented  approximately  63.7% of total  deposits  and  certificate  accounts
represented  36.3%,  as compared to core  deposits  representing  62.6% of total
deposits and certificate  accounts  representing  37.4% of deposits for the year
ended June 30, 2000. 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.

      The flow of  deposits  is  influenced  significantly  by general  economic
conditions,  changes  in money  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,
                                               ----------------------------
                                                 2000      1999      1998
                                               --------  --------  --------
                                                      (In thousands)
<S>                                            <C>       <C>       <C>
Net deposits                                   $115,696  $108,989  $ 34,168
Deposits of acquired institutions,net                --   523,742        --
Interest credited on deposit accounts            54,710    35,931    30,822
                                               --------  --------  --------
  Total increase in deposit accounts           $170,406  $668,662   $64,990
                                               ========  ========  ========
</TABLE>

      At June 30, 2000 the Bank had outstanding  $91.7 million in certificate of
deposit accounts in amounts of $100,000 or more, maturing as follows:
<TABLE>
<CAPTION>
                                                         Weighted
                                                          Average
            Maturity Period                     Amount     Rate
            ---------------                    --------  --------
                                             (Dollars in thousands)
            <S>                                <C>       <C>
            Three months or less               $17,494     4.87%
            Over three through six months       16,702     5.27
            Over six through 12 months          38,360     5.91
            Over 12 months                      19,109     6.08
                                               --------
             Total                             $91,665     5.63
                                               ========
</TABLE>

<PAGE>22
      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 period ended June
30, 1998 presented  utilize average month-end  balances.  The periods ended June
30, 2000 and 1999 utilized daily average balances.
<TABLE>
<CAPTION>
                                                            For the Year Ended June 30,
                                     ---------------------------------------------------------------------------------------------
                                                  2000                             1999                            1998
                                     ----------------------------------------------------------------------------------------------
                                                 Percent                         Percent                         Percent
                                                 of Total Weighted               of Total Weighted               of Total Weighted
                                      Average    Average  Average     Average    Average  Average     Average    Average  Average
                                      Balance    Deposits   Rate      Balance    Deposits   Rate      Balance    Deposits   Rate
                                     ---------- --------- --------   ---------- --------- --------   ---------- --------- --------
                                                                          (Dollars in thousands)
<S>                                  <C>        <C>       <C>        <C>        <C>       <C>        <C>        <C>       <C>
Money market accounts                $   48,766    2.88%    3.25%    $   42,973    3.79%    3.22%    $   39,075    4.23%    3.46%
Savings accounts                        747,253   44.19     2.62        510,476   45.00     2.48        445,057   48.19     2.73
N.O.W. accounts                          73,671    4.36     1.48         35,004    3.08     1.70         19,089    2.07     2.34
Non-interest-bearing accounts           189,072   11.18       --        133,707   11.79       --        106,189   11.50       --
                                     ---------- ---------            ---------- ---------            ---------- ---------
     Total                            1,058,762   62.61     2.03        722,160   63.66     2.03        609,410   65.99     2.29
                                     ---------- ---------            ---------- ---------            ---------- ---------
Certificates of deposit:
  Less tan six months                    57,436    3.40     4.21         43,366    3.82     4.37         21,096    2.28     4.42
  Over six through 12 months            134,474    7.95     4.83         84,035    7.41     4.87         57,081    6.18     5.09
  Over 12 through 24 months             289,045   17.10     5.32        172,659   15.23     5.14        152,047   16.47     5.59
  Over 24 months                         69,045    4.08     5.74         58,647    5.17     5.89         51,293    5.55     5.81
  Certificates over $100,000             82,258    4.86     5.26         53,459    4.71     5.28         32,589    3.53     5.46
                                     ---------- ---------            ---------- ---------            ---------- ---------
     Total certificates of deposit      632,258   37.39     5.15        412,166   36.34     5.17        314,106   34.01     5.44
                                     ---------- ---------            ---------- ---------            ---------- ---------
     Total average deposits          $1,691,020  100.00%    3.17     $1,134,326  100.00%    3.17     $  923,516  100.00%    3.36
                                     ========== =========            ========== =========            ========== =========
</TABLE>

      The following table presents,  by various rate  categories,  the amount of
certificate of deposit accounts outstanding at the dates indicated.
<TABLE>
<CAPTION>
                                             Period of Maturity from June 30, 2000                        At June 30,
                             ----------------------------------------------------------------- --------------------------------
                             Less than   One to    Two to     Three to   Four to    Five Years
                             One Year  Two Years Three Years Four Years Five Years   or More      2000       1999       1998
                             --------- --------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
                                                                       (In thousands)
<S>     <C>                  <C>       <C>       <C>         <C>        <C>        <C>         <C>        <C>        <C>
Certificates of deposit:
     0 to 4.00%              $  4,009  $    469  $      20   $    --    $     --   $      8    $  4,506   $  8,954   $  4,871
     4.01 to 5.00%            190,025    23,541      1,486     2,168         859         --     218,079    372,454     42,512
     5.01 to 6.00%            284,556     9,207     10,539     7,749       2,560      5,325     319,936    198,192    266,741
     6.01 to 7.00%             71,158    71,069      2,554        56       1,128        125     146,090      8,140      6,950
     7.01 to 8.00%                678     3,944         --        --          --         --       4,622     10,730      4,274
     8.01 to 9.00%                 43        --         --        --          --         --          43         --         --
                             --------- --------- ----------- ---------- ---------- ----------- ---------- ---------- ----------
          Total              $550,469  $108,230  $  14,599   $  9,973   $  4,547   $  5,458    $693,276   $598,470   $325,348
                             ========= ========= =========== ========== ========== =========== ========== ========== ==========
</TABLE>

      Borrowed  Funds.  During fiscal year 2000,  the Bank continued to leverage
its capital by utilizing  borrowings as an additional  source of funds for asset
growth. At June 30, 2000, the Bank had total borrowings of $773.7 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  $757.8  million  and  $306.0
million in borrowings at June 30, 1999 and 1998, respectively.

      The Bank may continue to utilize borrowings in fiscal year 2001, 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.

<PAGE>23

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, 2000 and 1999, $77,000 and $80,000, or 0.8% and 6.7%, 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, 2000 and 1999, the Bank received
$62,000 and $51,000, or 0.6% 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 $743,012 at June 30, 2000.

      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, 2000, 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, 2000 were $455.3 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, 2000, the assets of RIC totaled $419.0 million.

      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, 2000 were $42.6 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.  BSC  offered  brokerage
services in the City of Bayonne,  New Jersey. Total assets of BSC as of June 30,
2000 were $204,133. On August 9, 2000, BSC was sold.

      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. Total
assets of PURC as of June 30, 2000 were $2.2 million.

      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. Total assets of IIC as of June 30, 2000 were $28.9 million.

<PAGE>24

Personnel

      As of June  30,  2000,  the  Bank  had  465  full-time  employees  and 159
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,  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.

<PAGE>25

      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  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

<PAGE>26

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,
2000:
<TABLE>
<CAPTION>
         <S>                                                    <C>

         GAAP Capital to Total Assets                              8.84%
         Total Capital to Risk-Weighted Assets                    14.77%
         Tier 1 Leverage Ratio                                     7.71%
</TABLE>

      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.   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 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 savings banks  conversion  plan 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.

<PAGE>27

Investment Activities

Since the enactment of FDICIA,  all  state-chartered  banks,  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, 2000,  the Bank had $36.0 million
of securities, which were subject to such grandfathering authority.

      The  Graham-Leach-Bliley Act of 1999 authorizes state chartered banks that
meet specified conditions to invest in "financial  subsidiaries" which engage as
principal in activities  deemed  financial in nature and incidental to financial
activities. A "financial subsidiary" may not engage in insurance underwriting or
real estate investment.

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%.

      "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

<PAGE>28

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
certain nonbanking  subsidiaries 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.  In  addition,  the  savings  bank may not lend to any  affiliate
engaged in  activities  not  permitted  for hank holding  companies  and may not
purchase the securities of an affiliate, other than a subsidiary.

      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.

      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

<PAGE>29

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 2000. 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  $44.3 million or less (subject to adjustment by the Federal Reserve
Board) the  reserve  requirement  is 3%;  and for  accounts  greater  than $44.3
million,  the  reserve  requirement  is  $1.329  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 $44.3 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 meet
the credit needs of its entire  community,  including  low and  moderate  income
neighborhoods.

<PAGE>30

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  Financial  Institutions  Reform,  Recovery,  and  Enforcement
Act("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  results 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.

      Under prior law, a unitary savings and loan holding  company,  such as the
Company,  was not generally restricted as to the types of business activities in
which it may engage,  provided  that the Savings  Bank  continued to be a QTL as
described below. The Gramm-Leach-Bliley Act of 1999 provides that no company may
acquire control

<PAGE>31

of a  "savings  association"  after May 4, 1999  unless  the  company  governing
engages only in the activities permitted for "financial holding companies" under
Federal law and for  multiple  savings and loan  holding  companies as described
below. Further, the  Gramm-Leach-Bliley  Act specifies that existing savings and
loan   holding   companies   may   only   engage   in   such   activities.   The
Gramm-Leach-Bliley  Act, however,  grandfathered the unrestricted  authority for
activities with respect to unitary savings and loan holding  companies  existing
prior to May 4, 1999, such as the company, so long as the Savings Bank continues
to comply with the QTL Test. Upon any non-supervisory acquisition by the Company
of another  savings  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, 2000, the Bank maintained in
excess of 69.02% 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

<PAGE>32

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 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.

<PAGE>33

      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.

                           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

<PAGE>34

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,
was imposed on corporations,  including the Bank,  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,  1999,  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,  1999,  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
on every savings  institution  doing business  within the state an excise tax at
the rate of 3% on 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.

<PAGE>35

      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.

<PAGE>36

Item 2.  Properties
-------------------

Properties

      The Bank currently  conducts its business  through 24 full service banking
offices. The following table sets forth the Bank's offices as of June 30, 2000.
<TABLE>
<CAPTION>
                                                                     Net Book Value
                                              Original               of Property or
                                      Leased   Year        Date of     Leasehold
                                       or     Leased or     Lease     Improvements at
Location                              Owned   Acquired   Expiration    June 30, 2000
--------                              ------  ---------  ----------  ----------------
                                                   (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          --          $1,406

Branch Offices:

Port Richmond Office:
282 Port Richmond Avenue
Staten Island, NY  10302              Owned     1951          --             112

Great Kills Office:
3879 Amboy Road
Staten Island, NY  10308              Owned     1975          --           1,346

Annadale Office:
820 Annadale Road
Staten Island, NY  10312              Owned     1967          --             310

Bull's Head Office (2)
1460 Richmond Avenue
Staten Island, NY  10314              Owned     1971          --             716

Dongan Hills Office:
1833 Hylan Boulevard
Staten Island, NY  10305              Owned     1974          --           1,146

New Springville Office:
2555 Richmond Avenue
Staten Island, NY  10314              Leased    1976        2005             304

Woodrow Plaza Office:
645-100 Rossville Avenue
Staten Island, NY  10309              Leased    1983        2013             329

Tottenville Office:
179 Main Street
Staten Island, NY  10307              Owned     1988          --             346

Westerleigh Office:
832 Jewett Avenue
Staten Island, NY  10314              Owned     1992          --             642

Eltingville Office (3):
4523 Amboy Road
Staten Island, NY  10312              Owned     1992          --           2,402
</TABLE>

<PAGE>37

<TABLE>
<CAPTION>

                                                                     Net Book Value
                                              Original               of Property or
                                      Leased   Year        Date of     Leasehold
                                       or     Leased or     Lease     Improvements at
Location                              Owned   Acquired   Expiration    June 30, 2000
--------                              ------  ---------  ----------  ----------------
                                                   (Dollars in thousands)
<S>                                   <C>     <C>        <C>         <C>
Grasmere Office (4):
1100 Hylan Boulevard
Staten Island, NY  10305              Leased    1992        2005             418

Brooklyn Office(5):
132 Avenue U
Brooklyn, NY  11223                   Leased    1977        2007             296

New Dorp Office:
2595 Hylan Boulevard
Staten Island, NY  10306              Leased    1998        2013           1,798

Sunnyside Office:
1270 Clove Road
Staten Island, NY  10301              Leased    1998        2013             440

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

Pacific Street Office:
36 Pacific Street
Newark, NJ  07105                     Owned     1999          --           1,156

Ferry Street Office:
120-122 Ferry Street
Newark, NJ  07105                     Leased    1999        2005           1,258

Elizabeth Office:
715 Elizabeth Street
Elizabeth, NJ  07201                  Owned     1999          --             464

Union Office:
I000 Pine Avenue
Union, NJ  07083                      Owned     1999          --           1,743

26th Street Office:
568 Broadway
Bayonne, NJ  07002                    Owned     1999          --             390

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

20th Street Office:
441 Broadway
Bayonne, NJ  07002                    Owned     1999          --             744

46th Street Office:
949 Broadway
Bayonne, NJ  07002                    Owned     1999          --           1,164

Financial Center:
447 Broadway
Bayonne, NJ  07002                    Owned     1999          --             629
</TABLE>

<PAGE>38
<TABLE>
<CAPTION>

                                                                     Net Book Value
                                              Original               of Property or
                                      Leased   Year        Date of     Leasehold
                                       or     Leased or     Lease     Improvements at
Location                              Owned   Acquired   Expiration    June 30, 2000
--------                              ------  ---------  ----------  ----------------
                                                   (Dollars in thousands)
<S>                                   <C>     <C>        <C>         <C>

Public Accommodation Offices:

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

Other Properties:

Garwood:
Undeveloped Building Lot
358 North Avenue
Garwood, NJ  07027                    Owned     1999          --             475

Staten Island:
Seguine Avenue (Denovo Branch)
Staten Island, NY                     Leased    2000          --             144

</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 Accommodation 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) 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.

<PAGE>39


                                     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 2000
Annual Report to  Shareholders  under the caption "Market Price of Common Stock"
and is incorporated herein by reference.

      As of September  22,  2000,  the Company had  27,087,709  shares of common
stock outstanding and entitled to vote and approximately  8,466  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, 2000  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, 2000 entitled "Selected  Quarterly Financial Data," page 51,
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,  2000  entitled  "Management's  Discussion  and  Analysis of
Financial  Condition  and  Results  of  Operations,"  pages 15  through  30,  is
incorporated herein by reference.

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,  2000  entitled  "Asset and  Liability  Management  and the
Management of Interest Rate Risk," pages 24 through 26, 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, 2000 entitled "Report of Independent  Auditors," page
52,  "Consolidated  Statements of Financial  Condition," page 28,  "Consolidated
Statements  of  Operation,  page 29,  "Consolidated  Statements  of  changes  in
Stockholders'  Equity," page 30, "Consolidated  Statements of Cash Flows," pages
31 through 32, "Notes to Consolidated  Financial  Statements,"  pages 33 through
51, inclusive, are incorporated herein by reference.

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

      None

<PAGE>40

                                    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 November 3, 2000 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 November 3, 2000 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 from the individuals required  to  file the reports, the
reports, the Company believes that, with the exception of Thomas Lupo, a  Senior
Vice President of Richmond County Savings who filed a Form 4 one day late due to
a clerical oversight, each of the Company's executive officers and directors has
complied with applicable  reporting  requirements for  transactions  in Richmond
County's common stock during the fiscal year ended June 30, 2000.

Item 11.  Executive Compensation
--------------------------------

     Information regarding executive  compensation appears on pages 9 through 11
and  13  through  15  Company's  Proxy  Statement  for  the  Annual  Meeting  of
Stockholders  to be held on  November  3, 2000,  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 November 3, 2000, under the caption  "Stock  Ownership"
and is incorporated herein by this reference.

     Information regarding security ownership of management appears on page 5 of
the Company's  Proxy Statement for the Annual Meeting of Shareholders to be held
November 3, 2000, under the caption "Stock Ownership and is incorporated  herein
by this reference.

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

      Information  regarding  certain  relationships  and  related  transactions
appears on page 17 of the Company's  Proxy  Statement for the Annual  Meeting of
Stockholders to be held on November 3, 2000 under the caption "Transactions With
Certain Related Persons" and is incorporated by this reference.

<PAGE>41

                                     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.***
      2.4   Agreement  and Plan of  Merger,  dated  March  15,  2000,  by and
            among Richmond County  Financial  Corp.,  Richmond  County
            Acquisition, Inc. and South Jersey Financial Corporation,Inc.******
      3.1   Certificate of Incorporation of Richmond County Financial Corp.*
      3.2   Amended and Restated 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.*****
      10.12 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  2000 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 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.

<PAGE>42

      ***** Incorporated  by  reference  from  the Form 10-K (File No. 0-23271),
            filed with the SEC on September 29, 1999.

     ****** Incorporated  by  reference  from the Form 8-K (File  No.  0-24997),
            filed with the SEC on March 22, 2000.

(b)   Reports on Form 8-K

      (i)   The  Company  filed a report  on Form 8-K  with  the SEC  (File  No.
            0-24997) on August 1, 2000,  which report announced that the Company
            had   consummated   its   acquisition  of  South  Jersey   Financial
            Corporation, Inc.

<PAGE>43

                                   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
                         -----------------------
                         Michael F. Manzulli
                         Chairman of the Board and
                         Chief Executive Officer

Date:  September 28, 2000
       ------------------

      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, 2000.

<TABLE>
<CAPTION>

NAME                                  TITLE                                 DATE
------                                -------                               -------

<S>                                   <C>                                   <C>    <C>

/s/ Michael F. Manzulli               Chairman of the Board, Chief          September 28, 2000
------------------------------        Executive Officer and Director        ------------------
Michael F. Manzulli

/s/ Anthony E. Burke                  President, Chief Operating Officer    September 28, 2000
------------------------------        and Director                          ------------------
Anthony E. Burke

/s/ Thomas R. Cangemi                 Executive Vice President, Chief       September 28, 2000
------------------------------        Financial Officer and Treasurer       ------------------
Thomas R. Cangemi

/s/ Godfrey H. Carstens, Jr.          Director                              September 28, 2000
------------------------------                                              ------------------
Godfrey H. Carstens, Jr.

/s/ Robert S. Farrell                 Director                              September 28, 2000
------------------------------                                              ------------------
Robert S. Farrell

/s/ William C. Frederick              Director                              September 28, 2000
------------------------------                                              ------------------
William C. Frederick

/s/ James L. Kelley                   Director                              September 28, 2000
------------------------------                                              ------------------
James L. Kelley

/s/ Patrick F.X. Nilan                Director                              September 28, 2000
------------------------------                                              ------------------
Patrick F.X. Nilan

/s/ T. Ronald Quinlan, Jr.            Director                              September 28, 2000
------------------------------                                              ------------------
T. Ronald Quinlan, Jr.

/s/ Maurice K. Shaw                   Director                              September 28, 2000
------------------------------                                              ------------------
Maurice K. Shaw

</TABLE>