United States
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-K
     [ X ]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EXCHANGE ACT OF 1934

               For fiscal year ended December 31, 1997
                                       OR
     [   ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE
               SECURITIES EXCHANGE ACT OF 1934


                           Commission File # 0-26546.

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

              New Jersey                               22-3397900
     (State or other jurisdiction                   (I.R.S. Employer
          of incorporation or                        Identification
             organization)                               Number)

                  70 Sip Avenue, Jersey City, New Jersey  07306
          (Address of principal executive offices, including zip code)

                                 (201) 795-4000
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                      Common Stock, no par value  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 filers 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 the Form 10-K.

                                      [   ]

     As of February 27, 1998, there were issued 4,518,767 and outstanding
     4,509,164 shares of the registrant's Common Stock.  The aggregate
     market value of the voting stock held by non-affiliates of the
     registrant, computed by reference to the $22.75 closing price of such
     stock as of February 27, 1998, was $70,783,417.  (The exclusion from
     such amount of the market value of the shares owned by any person
     shall not be deemed an admission by the registrant that such person is
     an affiliate of the registrant.)

                       DOCUMENTS INCORPORATED BY REFERENCE

                  10-K Item                     Document Incorporated

      10.  Directors's and Executive     Proxy Statement for Annual Meeting
           Officers of Registrant        of Shareholders to be filed not
                                         later than April 30, 1998.


      11.  Executive Compensation        Proxy Statement for Annual Meeting
                                         of Shareholders to be filed not
                                         later than April 30, 1998.



      12.  Security Ownership of         Proxy Statement for Annual Meeting
           Certain Beneficial Owners     of Shareholders to be filed not
           and Management                later than April 30, 1998.


      13.  Certain Relationships and     Proxy Statement for Annual Meeting
           Related Transactions          of Shareholders to be filed not
                                         later than April 30, 1998.



                            STATEWIDE FINANCIAL CORP.


                                     PART I

     ITEM 1.   BUSINESS

     (a) and (c)    General Development of the Business; Narrative
     Description of Business.

     Statewide Financial Corp. (the "Company") is a New Jersey business
     corporation and unitary savings and loan holding company registered
     under the Home Owner's Loan Act of 1933, as amended (the "HOLA").  The
     Company was incorporated on May 31, 1995 for the purpose of acquiring
     Statewide Savings Bank, S.L.A. (the "Bank") in connection with the
     Bank's conversion from the mutual form of ownership to the stock form
     of ownership.  Management of the Bank believed that establishing a
     holding company structure in connection with the mutual to stock
     conversion would facilitate certain operations of the Bank, including
     acquisition of other financial institutions and provide additional
     financial flexibility for the growth of the Bank.  On September 29,
     1995, the Bank converted from a mutual to stock form and the Company
     acquired 100% of the outstanding stock of the Bank.  The principal
     activities of the Company are owning and supervising the Bank.

     The Bank was organized in 1943 as a New Jersey chartered savings and
     loan association.  The Bank's principal business is attracting retail
     deposits from the general public and investing those deposits,
     together with borrowings and other funds generated from operations and
     principal payments, primarily in one- to four-family residential
     mortgage loans and mortgage-backed securities and, to a lesser extent,
     commercial, consumer and other loans and investment securities.  The
     Bank's revenues are derived principally from interest on its loan and
     mortgage-backed securities portfolios and interest and dividends on
     its debt and equity securities.  The Bank's primary sources of funds
     are deposits, principal and interest payments on loans and mortgage-
     backed securities and borrowings from the Federal Home Loan Bank of
     New York ("FHLBNY").  Through its wholly owned subsidiary, Statewide
     Financial Services, Inc., the Bank also engages in the sale of annuity
     products.

                           MARKET AREA AND COMPETITION

     The Company conducts business as a community-oriented savings bank
     offering a variety of financial services to meet the needs of the
     communities it serves.  The Company's primary market area for deposit
     gathering includes the neighborhoods surrounding its sixteen offices.
     Nine of the Company's offices are located in Hudson County, two in
     Bergen County, one in Passaic and four are located in Union County,
     New Jersey.  The Company's primary market area for loan originations
     is northern and central New Jersey, although the Company originates
     loans throughout the State of New Jersey.  On December 11, 1997, the
     Company entered into a Purchase and Assumption Agreement with Banco
     Popular, F.S.B. pursuant to which it will sell its Passaic County
     branch.  Under the Agreement, Banco Popular, F.S.B. will assume all of
     the deposit liabilities associated with this branch, assume the
     Company's obligations under its lease of the branch location, and pay
     the Company a premium based upon the amount of deposits assumed.   It
     is anticipated that this transaction will be consummated in the first
     quarter of 1998.

     The Company faces significant competition both in making loans and in
     attracting deposits.  Northern New Jersey has a high density of
     financial institutions, many of which are branches of significantly
     larger money center and regional banks which have resulted from the
     recent consolidation of the banking industry in New Jersey and
     surrounding states and which have greater financial resources than the
     Company, and all of which are competitors of the Company to varying
     degrees.  The Company's competition for loans comes principally from
     commercial banks, savings banks, savings and loan associations, credit
     unions, mortgage banking companies and insurance companies.  Its most
     direct competition for deposits has historically come from commercial
     banks, savings banks, savings and loan associations and credit unions.
     The Company faces additional competition for deposits from short-term
     money market funds and other corporate and government securities funds
     and from other financial institutions such as brokerage firms and
     insurance companies.

                                    PERSONNEL

     At December 31, 1997, the Company had a total of 173 full-time
     employees and 50 part-time employees.  The employees are not
     represented by a collective bargaining unit and the Company considers
     its relationship with its employees to be good.


                           REGULATION AND SUPERVISION

     General

     The Bank is a New Jersey State chartered capital stock savings and
     loan association and its deposit accounts are insured up to applicable
     limits by the Federal Deposit Insurance Corporation ("FDIC") under the
     Savings Association Insurance Fund ("SAIF").  The Bank is subject to
     extensive regulation and supervision by the New Jersey Department of
     Banking and Insurance (the "Department"), as its chartering agency,
     the Office of Thrift Supervision ("OTS"), as its primary Federal
     regulator, and by the FDIC, as the deposit insurer.  The Bank must
     file reports with the Department, the OTS and the FDIC concerning its
     activities and financial condition, in addition to obtaining
     regulatory approvals prior to entering into certain transactions such
     as mergers with, or acquisitions of, other depository institutions.
     There are periodic examinations by the Department, the OTS, and the
     FDIC to assess the Bank's compliance with various regulatory
     requirements.  This regulation and supervision establishes a
     comprehensive framework of activities in which a savings and loan
     association can engage and is intended primarily for the protection of
     the insurance fund and depositors, not shareholders.  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.

     As a unitary savings and loan holding company, the Company is subject
     to supervision and regulation by the OTS.

     New Jersey Law

     The Department regulates the corporate activities of the Bank as well
     as its deposit taking, lending and investment activities.  The
     Department must approve changes to the Bank's Certificate of
     Incorporation, establishment or relocation of offices, mergers and the
     issuance of additional stock.  In addition, the Department conducts
     periodic examinations of the Bank.  Certain of the areas regulated by
     the Department are not subject to similar regulation by the OTS.

     Recent Federal and state legislative developments have reduced
     distinctions between commercial banks and SAIF insured savings
     institutions in New Jersey with respect to lending and investment
     authority as well as interest rate limitations.  As Federal law has
     expanded the authority of federally chartered savings institutions to
     engage in activities previously reserved for commercial banks, New
     Jersey legislation and regulations ("parity legislation") has given
     New Jersey chartered savings institutions, such as the Bank, the
     powers of federally chartered savings institutions.

     New Jersey law provides that, upon satisfaction of certain triggering
     conditions, as determined by the Department, insured institutions or
     savings and loan holding companies located in a state which has
     reciprocal legislation in effect on substantially the same terms and
     conditions as under New Jersey law may acquire, or be acquired by, New
     Jersey insured institutions or holding companies on either a regional
     or national basis.  New Jersey law explicitly prohibits interstate
     branching.


     Industry Recapitalization of SAIF

     On September 30, 1996, the Deposit Insurance Funds Act of 1996 (the
     "Deposit Act") became law.  The primary purpose of the Deposit Act was
     to recapitalize the SAIF by charging all SAIF member institutions a
     one time special assessment of 65.7 basis points of the institution's
     SAIF assessable deposits as of March 31, 1995.  In addition, the
     Deposit Act separates the FDIC assessment into two components: first,
     deposit insurance premiums, and second, payment of interest and
     principal due on certain bonds issued by the Federal Finance
     Corporation ("FICO") in the mid-1980's to fund a portion of the thrift
     bailout.  The Deposit Act also calls for the Federal banking agencies
     to study the various financial institution charters and propose a
     single standard Federal charter, thereby doing away with the separate
     bank and thrift charters.  If a single charter is adopted, the Bank
     Insurance Fund ("BIF") and SAIF will be merged on January 1, 1999.  At
     that time, all insured institutions will pay the same FDIC assessment.
     At this time, management is unable to predict when or if a unified
     Federal charter will be adopted and when and if the BIF and the SAIF
     will be merged, or the effect, if any, of these events upon the
     Company.

     Prompt Corrective Action

     Federal law establishes a system of prompt corrective action to
     resolve the problems of undercapitalized institutions and requires the
     Federal banking agencies, including the OTS, to take certain
     supervisory actions against undercapitalized institutions, the
     severity of which depends upon the institution's capital level.
     Generally, subject to a narrow exception, the appropriate Federal
     banking agency is required to appoint a receiver or conservator for an
     institution that is critically undercapitalized within 90 days after
     it becomes critically undercapitalized.

     Under the rules implementing the prompt corrective action provisions,
     an institution that has a total risk-based capital ratio of 10.0% or
     greater, a Tier 1 risk-based capital ratio of 6.0% or greater and a
     leverage ratio of 5.0% or greater, and is not subject to any written
     agreement, order, capital directive or prompt corrective action
     directive to meet and maintain a specific capital level for any
     capital measure is deemed to be "well-capitalized."  An institution
     that has a total risk-based capital ratio of 8.0% or greater, a Tier l
     risk-based capital ratio of 4.0% or greater and a leverage ratio of
     4.0% or greater (or a leverage ratio of 3.0% or greater if the bank is
     rated composite "1" under the FDIC financial institution grading
     system ("CAMEL rating") and is not experiencing or anticipating
     significant growth) and does not meet the definition of a
     "well-capitalized" bank is considered to be "adequately capitalized."
     An institution that has a total risk-based capital of less than 8.0%
     or has a Tier 1 risk-based capital ratio that is less than 4.0% or has
     a leverage ratio of less than 4.0% is considered "undercapitalized."
     An institution that has a total risk-based capital ratio of less than
     6.0%, or a Tier 1 risk-based capital ratio that is less than 3.0% or a
     leverage ratio that is less than 3.0% is considered to be
     "significantly undercapitalized," and a bank that has a ratio of
     tangible equity to total assets (core capital, such as common equity
     capital, and cumulative perpetual preferred stock minus all intangible
     assets, except for limited amounts of purchased mortgage servicing
     rights and of purchased credit card relationships) to assets equal to
     or less than 2.0% is deemed to be "critically undercapitalized."
     Under the rule, the appropriate Federal banking agency may reclassify
     a well-capitalized bank as adequately capitalized, and may require an
     adequately capitalized bank or an undercapitalized bank to comply with
     certain mandatory or discretionary supervisory actions as if the bank
     were in the next lower capital category (except that the appropriate
     Federal banking agency may not reclassify a significantly
     undercapitalized bank as critically undercapitalized), if the
     appropriate Federal banking agency determines the bank is in an unsafe
     or unsound condition, or the bank has received and not corrected a
     less than satisfactory rating for any of the categories of asset
     quality, management, earnings or liquidity.  At December 31, 1997, the
     Bank's leverage ratio as calculated under the prompt corrective action
     rule was 8.96%.  The Bank is deemed "well-capitalized" for purposes of
     Section 38 of the Federal Deposit Insurance Act ("FDI ACT") and the
     regulations of the FDIC implementing that Section.

     Generally, a bank that is "undercapitalized," "significantly
     undercapitalized" or "critically undercapitalized" becomes immediately
     subject to certain regulatory restrictions, including, but not limited
     to, restrictions on growth, investment activities, capital
     distributions and affiliate transactions.  In addition, an insured
     depository institution cannot make a capital distribution (as broadly
     defined to include, among other things, dividends, redemptions and
     other repurchases of stock), or pay management fees to any person that
     controls the institution, if thereafter it would be
     "undercapitalized."  An "undercapitalized" bank is required to submit
     an acceptable capital restoration plan to its primary Federal
     regulator, which must be guaranteed by any parent holding company of
     the bank.


     Insurance of Deposit Accounts

     The amount of insurance premiums paid by insured depository
     institutions is determined by the FDIC pursuant to a risk based
     system, whereby the FDIC assigns an institution to one of three
     capital categories consisting of (1) well-capitalized, (2) adequately
     capitalized, or (3) undercapitalized, and one of three supervisory
     categories.  An institution's assessment rate depends on the capital
     category and supervisory category to which it is assigned.  Under this
     system, there are nine assessment risk classifications (i.e.,
     combinations of capital categories and supervisory subgroups within
     each capital group) to which differing assessment rates are applied.
     Insurance premium assessment rates for SAIF insured institutions range
     from no assessment for an institution in the highest category (i.e.,
     well-capitalized and financially sound, with only a few minor
     weaknesses) to 0.27% of deposits for an institution in the lowest
     category (i.e., undercapitalized and posing a substantial probability
     of loss to the FDIC unless effective corrective action is taken).  In
     addition, SAIF insured institutions like the Bank must pay an
     additional assessment in connection with repayment of the FICO
     obligations of 6.3 basis points per $100 of deposits.

     Under the FDI Act, insurance of deposits may be terminated by the FDIC
     upon a finding that, among other things, the institution has engaged
     in, or is engaging 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 written agreement entered into with the FDIC.  The management
     of the Bank does not know of any practice, condition or violation that
     might lead to termination of deposit insurance.

     Regulatory Capital

     The OTS's capital requirements applicable to the Bank consist of a
     "tangible capital requirement," a "leverage limit" and a "risk-based
     capital requirement."

     Under the tangible capital requirement, a savings association must
     maintain tangible capital in an amount equal to at least 1.5% of
     adjusted total assets.  Tangible capital is defined as core capital
     less all intangible assets, plus a specified amount of purchased
     mortgage servicing rights.

     The leverage limit requires that the highest rated savings
     associations maintain "core capital" in an amount equal to at least
     3.0% of adjusted total assets.  All other savings associations will be
     required to maintain minimum core capital of 4.0% to 5.0% of total
     adjusted assets.  In determining the required minimum core capital
     ratio, the OTS will assess the quality of risk management and the
     level of risk in each savings association on a case-by-case basis.
     Core capital is defined as common stockholders' equity (including
     retained earnings), non-cumulative perpetual preferred stock, and
     minority interests in the equity accounts of consolidated
     subsidiaries, plus purchased mortgage servicing rights valued at the
     lower of 90.0% of fair market value, 90.0% of original cost or the
     current amortized book value as determined under generally accepted
     accounting principles ("GAAP"), less non-qualifying intangible assets.

     In April 1991, the OTS published a proposed amendment to the
     regulatory capital requirements applicable to all savings associations
     to conform to Office of the Comptroller of the Currency ("OCC")
     capital regulations applicable to national banks.  Under the OTS
     proposal, those savings associations receiving a CAMEL rating of "1",
     the best possible rating on a scale of 1 to 5, will be required to
     maintain a ratio of core capital to adjusted total assets of 3.0%.
     All other savings associations will be required to maintain minimum
     core capital of 4.0% to 5.0% of total adjusted assets.  In determining
     the required minimum core capital ratio, the OTS will assess the
     quality of risk management and the level of risk in each savings
     association on a case-by-case basis.  The OTS did not indicate in the
     proposed regulation the standards it will use in establishing the
     appropriate core capital requirement for savings associations not
     rated "1" under the CAMEL rating system.  At December 31, 1997, the
     Bank's ratio of core capital to  total adjusted assets was 8.96%.

     The risk-based capital standard for savings institutions requires the
     maintenance of total capital (which is defined as core capital and
     supplementary capital) to risk weighted assets of 8.0%.  In
     determining the amount of risk-weighted assets, all assets, including
     certain off-balance sheet assets, are multiplied by a risk weight of
     0-100% as assigned by the OTS capital regulation based on the risks
     the OTS believes are inherent in the type of asset.  The components of
     core capital are equivalent to those discussed above under the
     leverage capital standard.  The components of supplementary capital
     currently include cumulative preferred stock, long-term perpetual
     preferred stock, mandatory convertible securities, subordinated debt
     and intermediate preferred stock and the allowance for loan and lease
     losses.  Allowances for loan and lease losses includable in
     supplementary capital is limited to a maximum of 1.25% of total gross
     risk weighted assets.  Overall, the amount of supplementary capital
     included as part of total capital cannot exceed 100.0% of core
     capital.

     The OTS has amended its risk-based capital requirements to require
     institutions with an "above normal" level of interest rate risk to
     maintain additional capital.  A savings association is considered to
     have a "normal" level of interest rate risk if the decline in the
     market value of its portfolio equity after an immediate 200 basis
     point increase or decrease in market interest rates (whichever leads
     to the greater decline) is less than two percent of the current
     estimated market value of its assets.  The market value of portfolio
     equity is defined as the net present value of expected cash inflows
     and outflows from an association's assets, liabilities and off-balance
     sheet items.  The amount of additional capital that an institution
     with an above normal interest rate risk is required to maintain (the
     "interest rate risk component") equals one-half of the dollar amount
     by which its measured interest rate risk exceeds the normal level of
     interest rate risk.  The interest rate risk component is in addition
     to the capital otherwise required to satisfy the risk-based capital
     requirement.  Effectiveness of these risk-based capital requirements
     has been waived by the OTS until the OTS publishes final guidelines
     regarding implementation.  Although no final determination may be made
     until the regulations are implemented, management believes that the
     Bank will be found to have an "above normal" level of interest rate
     risk, but that the Bank's additional capital requirements will not
     adversely impact the Bank or its operations.

     Changes in the market value of a savings association's portfolio
     equity are calculated from data submitted by the savings association
     in a schedule to its Quarterly Thrift Financial Report.  Net present
     values are calculated by using various methodologies depending on the
     asset or liability being valued.  The OTS methodologies include an
     "option adjusted spread analysis" for assets and off-balance sheet
     items with prepayment risk, such as single-family mortgages and
     mortgage servicing assets, and the "static discounted cash flow
     analysis" for non-mortgage loans and for certain mortgage loans such
     as commercial and multi-family mortgages, construction and consumer
     loans, and second mortgages.  The static discounted cash flow analysis
     involves adding up the calculated present values of future payments
     from an asset based on the current values of United States Treasury
     securities due on the various payment dates.  The option adjusted
     spread analysis involves averaging the discounted predicted cash flows
     from a loan or other asset over approximately 200 different interest
     rate scenarios.  The Bank has determined that it will continue to meet
     its risk based capital requirements under the interest rate risk
     component regulation.

     The OTS and the FDIC generally are authorized to take enforcement
     action against a savings association that fails to meet its capital
     requirements, which action may include restrictions on operations and
     banking activities, the imposition of a capital directive, a cease-
     and-desist order, civil money penalties or harsher measures such as
     the appointment of a receiver or conservator or a forced merger into
     another institution.  In addition, under current regulatory policy, an
     association that fails to meet its capital requirements is prohibited
     from paying any dividends.

     Federal Home Loan Bank System

     The Bank is a member of the FHLBNY which is one of the 12 regional
     Federal Home Loan Banks ("FHLB").  As a member of the FHLBNY, the Bank
     is required to purchase and maintain stock in the FHLBNY in an amount
     equal to the greater of 1.0% of its aggregate unpaid residential
     mortgage loans, home purchase contracts or similar obligations at the
     beginning of each year, or 1/20 (or such greater fraction as
     established by the FHLBNY from time to time) of outstanding FHLBNY
     advances.  At December 31, 1997, the Bank had $10.3 million of FHLBNY
     stock, which was in compliance with this requirement.  In past years
     the Bank has received dividends on its FHLBNY stock.  Over the past
     five years such dividends have averaged 7.54%, and were 6.63% for the
     year ended December 31, 1997.  Certain provisions of the Financial
     Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
     require all 12 FHLB's to provide financial assistance for the
     resolution of troubled savings associations and to contribute to
     affordable housing programs through direct loans or interest subsidies
     on advances targeted for community investment and low and moderate-
     income housing projects.  These contributions could cause rates on the
     FHLBNY advances to increase and could affect adversely the level of
     FHLBNY dividends paid and the value of FHLBNY stock in the future.

     Each FHLB serves as a reserve or central bank for its members within
     its assigned region.  It is funded primarily from proceeds derived
     from the sale of consolidated obligations of the FHLB System.  It
     makes loans to members (i.e., advances) in accordance with policies
     and procedures established by the board of directors of the FHLB.
     These policies and procedures are subject to the regulation and
     oversight of the Federal Housing Finance Board (the "FHFB").

     Qualified Thrift Lender Test

     The Qualified Thrift Lender ("QTL") test requires that a savings
     association maintain at least 65.0% of its total "portfolio assets" in
     "qualified thrift investments" on an average basis in nine of every
     twelve months on a rolling basis.  For purposes of the test, portfolio
     assets are defined as the total assets of the savings association
     minus: goodwill and other intangible assets; the value of property
     used by the savings association to conduct its business; and liquid
     assets not to exceed a certain percentage of the savings association's
     total assets (20.0% under the Federal Deposit Insurance Corporation
     Improvement Act of 1991 ("FDICIA")).

     Under the QTL statutory and regulatory provisions, all forms of home
     mortgages, home improvement loans, home equity loans, and loans on the
     security of other residential real estate and mobile homes as well as
     a designated percentage of consumer loans are "qualified thrift
     investments," as are shares of stock of a FHLB, investments or
     deposits in other insured institutions, securities issued by the
     Federal National Mortgage Association ("FNMA"), the Federal Home Loan
     Mortgage Corporation ("FHLMC"), the Government National Mortgage
     Association ("GNMA"), or the RTC Financing Corporation and other
     mortgage-related securities.  Investments in non-subsidiary
     corporations or partnerships whose activities include servicing
     mortgages or real estate development are also considered qualified
     thrift investments in proportion to the amount of primary revenue such
     entities derive from housing-related activities.  Also included in
     qualified thrift investments are mortgage servicing rights, whether
     such rights are purchased by the insured institution or created when
     the institution sells loans and retains the right to service such
     loans.

     A savings institution that fails to become or maintain its status as a
     qualified thrift lender must either become a commercial bank or be
     subject to restrictions specified in FIRREA.  A savings institution
     that converts to a bank must pay the applicable exit and entrance fees
     involved in converting from one insurance fund to another.  A savings
     institution that fails to meet the QTL test and does not convert to a
     bank will be: (1) prohibited from making any investment or engaging in
     activities that would not be permissible for national banks; (2)
     prohibited from establishing any new branch office where a national
     bank located in the savings institution's home state would not be able
     to establish a branch office; (3) ineligible to obtain new advances
     from any FHLB; and (4) subject to limitations on the payment of
     dividends comparable to the statutory and regulatory dividend
     restrictions applicable to national banks.  Also, beginning three
     years after the date on which the savings institution ceases to be a
     qualified thrift lender, the savings institution would be prohibited
     from retaining any investment or engaging in any activity not
     permissible for a national bank and would be required to repay any
     outstanding advances to any FHLB.  A savings institution may re-
     qualify as a qualified thrift lender if it thereafter complies with
     the QTL test.  As of December 31, 1997, the Bank was in compliance
     with the QTL requirement.  At December 31, 1997, 89.0% of the Bank's
     "portfolio assets" were "qualified thrift investments."


     Limitations on Capital Distributions

     OTS regulations impose limitations upon all capital distributions by
     savings institutions, such as cash dividends, payments to repurchase
     or otherwise acquire shares, payments to shareholders of another
     institution in a cash-out merger and other distributions charged
     against capital.  The rule establishes three tiers of institutions,
     which are based primarily of an institution's capital level.  An
     institution that exceeds all fully phased-in regulatory capital
     requirements before and after a proposed capital distribution ("Tier 1
     Association") and has not been advised by the OTS that it is in need
     of more than normal supervision, could, after prior notice but without
     the approval of the OTS, make capital distributions during a calendar
     year equal to the greater of: (i) 100.0% of its net earnings to date
     during the calendar year plus the amount that would reduce by one-half
     its "surplus capital ratio" (the excess capital over its fully phased-
     in capital requirements) at the beginning of the calendar year; or
     (ii) 75.0% of its net earnings for the previous four quarters.  Any
     additional capital distributions would require prior OTS approval.  In
     the event the Bank's capital should fall below its fully phased-in
     requirement or the OTS should notify it that it is in need of more
     than normal supervision, the Bank's ability to make capital
     distributions could be restricted.  In addition, the OTS could
     prohibit a proposed capital distribution by any institution, which
     would otherwise be permitted by the regulation, if the OTS determines
     that such distribution would constitute an unsafe or unsound practice.
     Furthermore, under the OTS prompt corrective action regulations, the
     Bank is prohibited from making any capital distribution if, after the
     distribution, the Bank would have: (i) a total risk-based capital
     ratio of less than 8.0%; (ii) a Tier 1 risk-based capital ratio of
     less than 4.0%; or (iii) a leverage ratio of less that 4.0%.

     Holding Company Regulation

     The Company is registered with and is subject to OTS examination and
     supervision and certain reporting requirements as a unitary savings
     and loan holding company.  In addition, the operations of the Company
     are subject to regulations promulgated by the OTS from time to time,
     as well as regulations promulgated by the Department.  As a SAIF-
     insured subsidiary of a savings and loan holding company, the Bank
     will be subject to certain restrictions in dealing with the Company
     and with other persons affiliated with the Company, and will continue
     to be subject to examination and supervision by the OTS and FDIC.

     The HOLA prohibits a savings and loan holding company, directly or
     indirectly, from: (i) acquiring control (as defined) of another
     insured institution (or holding company thereof) without prior OTS
     approval; (ii) acquiring more than 5.0% of the voting shares of
     another insured institution (or holding company thereof) which is not
     a subsidiary, subject to certain exceptions; (iii) acquiring through
     merger, consolidation or purchase of assets, another savings
     association or holding company thereof, or acquiring all or
     substantially all of the assets of such institution (or holding
     company thereof) without prior OTS approval; or (iv) acquiring control
     of a depository institution not insured by the FDIC (except through a
     merger with and into the holding company's savings association
     subsidiary that is approved by the OTS).  A savings and loan holding
     company may acquire up to 15.0% of the voting shares of an
     undercapitalized savings association.  A savings and loan holding
     company may not acquire as a separate subsidiary an insured
     institution that has principal offices outside of the state where the
     principal offices of its subsidiary institution is located, except:
     (i) in the case of certain emergency acquisitions approved by the
     FDIC; (ii) if the holding company controlled (as defined) such insured
     institution as of May 5, 1987; or (iii) if the laws of the state in
     which the insured institution to be acquired is located specifically
     authorize a savings association chartered by that state to be acquired
     by a savings association chartered by the state where the acquiring
     savings association or savings and loan holding company is located, or
     by a holding company that controls such a state chartered association.
     No director or officer of a savings and loan holding company or person
     owning or controlling more than 25.0% of such holding company's voting
     shares may, except with the prior approval of the OTS, acquire control
     of any FDIC-insured depository institution that is not a subsidiary of
     such holding company.  If the OTS approves such an acquisition, any
     holding company controlled by such officer, director or person shall
     be subject to the activities limitations that apply to multiple
     savings and loan holding companies, unless certain supervisory
     exceptions apply.

     Transactions with Affiliates

     Section 11 of HOLA provides that transactions between an insured
     subsidiary of a holding company and an affiliate thereof will be
     subject to the restrictions that apply to transactions between banks
     that are members of the Federal Reserve System and their affiliates
     pursuant to Sections 23A and 23B of the Federal Reserve Act.
     Generally, Sections 23A and 23B: (i) limit the extent to which a
     financial institution or its subsidiaries may engage in "covered
     transactions" with an "affiliate," to an amount equal to 10.0% of the
     institution's capital and surplus, and limit all "covered
     transactions" in the aggregate with all affiliates to an amount equal
     to 20.0% of such capital and surplus; and (ii) require that all
     transactions with an affiliate, whether or not "covered transactions,"
     be on terms substantially the same, or at least as favorable to the
     institution or subsidiary as those provided to a non-affiliate.  The
     term "covered transaction" includes the making of loans, purchase of
     assets, issuance of a guarantee and similar types of transactions.

     Management believes that the Bank is in compliance with the
     requirements of Sections 23A and 23B.  In addition to the restrictions
     that apply to financial institutions generally under Sections 23A and
     23B, Section 11 of the HOLA places three other restrictions on savings
     associations, including those that are part of a holding company
     organization.  First, savings associations may not make any loan or
     extension of credit to an affiliate unless that affiliate is engaged
     only in activities permissible for bank holding companies.  Second,
     savings associations may not purchase or invest in affiliate
     securities except for those of a subsidiary.  Finally, the Director is
     granted authority to impose more stringent restrictions when
     justifiable for reasons of safety and soundness.

     Extensions of credit by the Bank to executive officers, directors, and
     principal stockholders and related interests of such persons are
     subject to Sections 22(g) and 22(h) of the Federal Reserve Act and
     Subpart A of the Federal Reserve Board's Regulation O.  These rules
     prohibit loans to any such individual where the aggregate amount
     exceeds an amount equal to 15.0% of an institution's unimpaired
     capital and surplus plus an additional 10.0% of unimpaired capital and
     surplus in the case of loans that are fully secured by readily
     marketable collateral, and/or when the aggregate amount outstanding to
     all such individuals exceeds the institution's unimpaired capital and
     unimpaired surplus.  These rules also provide that no institution
     shall make any loan or extension of credit in any manner to any of its
     executive officers or directors, or to any person who directly or
     indirectly, or acting through or in concert with one or more persons,
     owns, controls, or has the power to vote more than 10.0% of any class
     of voting securities of such institution ("Principal Stockholder"), or
     to a related interest (i.e., any company controlled by such executive
     officer, director, or Principal Stockholder), or to any political or
     campaign committee the funds or services of which will benefit such
     executive officer, director, or Principal Stockholder or which is
     controlled by such executive officer, director, or Principal
     Stockholder, unless such loan or extension of credit is made on
     substantially the same terms, including interest rates and collateral,
     as those prevailing at the time for comparable transactions with other
     persons, does not involve more than the normal risk of repayment or
     present other unfavorable features, and the institution follows
     underwriting procedures that are not less stringent than those
     applicable to comparable transactions by the institution with persons
     who are not executive officers, directors, Principal Stockholders, or
     employees of the institution.  A savings association is therefore
     prohibited from making any new loans or extensions or credit to the
     savings association's executive officers, directors, and 10.0%
     stockholders at different rates or terms than those offered to the
     general public.  The rules identify limited circumstances in which an
     institution is permitted to extend credit to executive officers.
     Management believes that the Bank is in compliance with Sections 22(g)
     and 22(h) of the Federal Reserve Act and Subpart A of the Federal
     Reserve Board's Regulation O.

          (b)  Industry Segments - The Registrant has only one industry
               segment, banking.

          (d)  Financial Information About Foreign and Domestic Operations
               and Export Sales - Not Applicable

          (e)  Guide 3 Statistical Disclosure by Bank Holding Companies.

     The following tables provide certain statistical information required
     by Securities and Exchange Commission ("SEC") Guide 3. The remaining
     statistical disclosure required by SEC Guide 3 is contained in Part II
     Item 7.

     The following table shows the carrying value, weighted average yield,
     and maturities of the Company's debt and equity securities portfolio,
     at December 31, 1997:

     <TABLE>
     <CAPTION>


                                                             AT DECEMBER 31, 1997
                         --------------------------------------------------------------------------------------------
                                                                                                        Total Debt
                         Less Than 1 Year      1-5 Years         5-10 Years       Over 10 Years         Securities
                         ----------------  -----------------  ----------------- -----------------   ------------------
                                                            (Dollars in thousands)

                                 Weighted           Weighted          Weighted           Weighted            Weighted
                       Carrying   Average Carrying   Average Carrying  Average Carrying   Average  Carrying   Average
                         Value     Yield    Value     Yield    Value    Yield   Value      Yield    Value      Yield
                         -----     -----    -----     -----    -----    -----    -----     -----    -----      -----
      <S>                 <C>      <C>      <C>      <C>        <C>      <C>     <C>        <C>    <C>          <C>
      U.S. Government
        and agency
        securities        $3,031   7.48%    $6,028   6.89%        -       -      $5,760    7.82%    $14,819    7.37%
      Other                  209   1.41%       -       -          -       -       4,065    8.02%      4,274    7.70%
                          ------            ------              -----            ------             -------
      Total debt and
        equity securities $3,240            $6,028                -              $9,825             $19,093
                          ======            ======              =====            ======             =======
      Weighted average
        yield                      7.08%             6.89%                -                7.89%               7.44%
                                   ====              ====               ====               ====                ====
     </TABLE>


     The following table shows the contractual maturity of the Company's
     mortgage-backed securities at December 31, 1997.  The table does not
     include the effect of prepayments or scheduled principal amortization.


     <TABLE>
     <CAPTION>

                                                           AT DECEMBER 31, 1997
                        -------------------------------------------------------------------------------------------
                                                                                                   Total Mortgage-
                        Less Than 1 Year      1-5 Years         5-10 Years       Over 10 Years    Backed Securities
                        ----------------  ----------------   ----------------  -----------------  -----------------
                                                 (Dollars in thousands)

                                 Weighted          Weighted          Weighted           Weighted           Weighted
                       Carrying   Average Carrying  Average Carrying  Average  Carrying  Average  Carrying  Average
                         Value     Yield    Value    Yield    Value    Yield     Value    Yield    Value     Yield
                         -----     -----    -----    -----    -----    -----     -----    -----    -----   --------
     <S>                <C>       <C>     <C>        <C>     <C>       <C>     <C>        <C>     <C>        <C>
     GNMA               $  -        - %   $  -         - %   $  -       -  %   $ 91,643   7.19%   $ 91,643   7.19%
     FHLMC               2,516    7.60     14,525    6.86     21,889   7.60      72,944   7.13     111,874   7.20
     FNMA                  519    9.11     18,476    6.50     17,831   7.47      49,701   7.25      86,527   7.16
                        ------            -------            -------           --------           --------
     Total mortgage-
     backed securities  $3,035    7.86%   $33,001    6.66%   $39,720   7.54%   $214,288   7.18%   $290,044   7.18%
                        ======    ====    =======    ====    =======   ====    ========   ====    ========   ====
     </TABLE>

     The following table shows the contractual maturity of the Company's
     loans at December 31, 1997.  The table does not include the effect
     of prepayments or scheduled principal amortization.


     <TABLE>
     <CAPTION>
                                                    AT DECEMBER 31, 1997
                       ------------------------------------------------------------------------------
                                   First Mortgage Loans                   Other Loans
                       --------------------------------------------  --------------------

                      One-to-Four   Multi      Non-                                        Total Loans
                         Family     Family Residential  Construction Consumer  Commercial  Receivable
                         ------     ------ -----------  ------------ --------  ----------  ----------
                                                   (Dollars in thousands)
     <S>                <C>        <C>       <C>         <C>        <C>       <C>           <C>
     Amounts due:
     Within one year    $  6,001  $   752    $  -         $3,757     $ 3,612     $ 5,785    $ 19,907
                        --------  -------    -------      ------     -------     -------    --------
     After 1 year:
       1 to 3 years       15,396      -        2,068         568       6,885       3,738      28,655
       3 to 5 years       14,808      -        5,212          -        7,616       2,687      30,323
       5 to 10 years      42,533    3,411      4,338          -       10,216       3,856      64,354
       10 to 20 years     91,155    5,994      6,393          -       10,121         -       113,663
       Over 20 years      74,471    2,033      1,208          -          -           -        77,712
                        --------  -------    -------      ------     -------     -------    --------
     Total due after
       1 year            238,363   11,438     19,219         568      34,838      10,281     314,707
                         -------  -------     ------      ------     -------      ------    --------
       Total loans      $244,364  $12,190    $19,219      $4,325     $38,450     $16,066    $334,614
                        ========  =======    =======      ======     =======     =======    ========
     Less (Plus)
      unearned dis-
      counts (premiums)
      and deferred
      loan fees, net                                                                            (728)
     Less allowance
      for loan losses                                                                          2,833
                                                                                            --------
     Loans, net                                                                             $332,509
                                                                                            ========
     </TABLE>

     As of December 31, 1997, the dollar amount of all loans due after
     December 31, 1998, and the composition of fixed interest rates and
     adjustable interest rates were:

                                Due After December 31, 1998
                               -----------------------------
                                Fixed    Adjustable    Total
                                -----    ----------    -----
                                  (Dollars in thousands)

      Real estate mortgages     $58,355    $211,233   $269,588
      Other loans                34,030      11,089     45,119
                                -------    --------   --------
        Total loans             $92,385    $222,322   $314,707
                                =======    ========   ========

     The following table sets forth the activity in the Company's
     allowance for loan losses at or for the dates indicated:


     <TABLE>
     <CAPTION>

                                                                              At or For the
                                                                               Nine-Month     At or For the
                                                      At or For the Year      Period Ended     Year Ended
                                                      Ended December 31,       December 31,     March 31,
                                                    ----------------------   --------------   -------------
                                                     1997     1996    1995   1995     1994    1995    1994
                                                     ----     ----    ----   ----     ----    ----    ----
                                                                         (Dollars in thousands)
      <S>                                           <C>      <C>    <C>     <C>     <C>      <C>    <C>
      Balance, beginning of period                  $2,613  $3,241   $3,062  $3,048  $2,818  $2,818  $2,854
      Provisions charged to operations                 500     500      389     315     468     542   1,069
      Loans charged off:
        One-to-four family residential                  68     186      140      67     211     135   1,053
        Non-residential                                 -       -        -       -       -      151      -
        Land and construction                           -      848       -       -       -       -       -
        Commercial business                             10      -        -       -       -       -       -
        Consumer                                       219     106       83      66      23      45      67
                                                    ------  ------   ------  ------  ------  ------  ------
        Total loans charged off                        297   1,140      223     133     234     331   1,120
                                                    ------  ------   ------  ------  ------  ------  ------
      Recovery on loans:
        One-to-four family residential                   9       2        5       3       9      11      -
        Consumer                                         8      10        8       8       1       8      15
                                                    ------  ------   ------  ------  ------  ------  ------
        Total recovery on loans                         17      12       13      11      10      19      15
                                                    ------  ------   ------  ------  ------  ------  ------
        Net loans charged off                          280   1,128      210     122     224     312   1,105
                                                    ------  ------   ------  ------  ------  ------  ------
      Balance, end of period                        $2,833  $2,613   $3,241  $3,241  $3,062  $3,048  $2,818
                                                    ======  ======   ======  ======  ======  ======  ======
      Ratio of net charge offs during the period
       to average loans outstanding during the
       period                                          .09%    .42%     .12%    .07%    .13%    .18%    .52%
                                                       ===     ===      ===     ===     ===     ===     ===
     </TABLE>


     The allocation of the Company's allowance for loan losses is set
     forth below as indicated:

     <TABLE>
     <CAPTION>
                                                   At December 31,                                At March 31,
                                 ----------------------------------------------------  -----------------------------------
                                       1997              1996             1995               1995               1994
                                 ----------------- ---------------- -----------------  ----------------- -----------------

                                        Percentage       Percentage        Percentage         Percentage         Percentage
                                         of Loans         of Loans          of Loans           of Loans           of Loans
                                         to Total         to Total          to Total           to Total           to Total
                                 Amount    Loans  Amount    Loans   Amount    Loans    Amount    Loans   Amount    Loans
                                 ------    -----  ------    -----   ------    -----    ------    -----   ------    -----
     <S>                         <C>     <C>     <C>     <C>       <C>      <C>       <C>       <C>      <C>      <C>
                                                                         (Dollars in thousands)
     Allocation of allowance
      for loan losses:
       One-to-four family
        residential             $1,668     73.0%  $2,156    81.2%  $1,533    79.0%     $1,338     79.0%  $1,130    80.1%
       Multi-family
        residential                114      3.6       39     2.4        9     2.4          32      2.3       25     2.2
       Non-residential             189      5.8       47     2.9       41     2.0          16      1.1       12     1.4
       Land and construction        43      1.3        4     0.1    1,502     1.9       1,508      3.0    1,520     3.8
       Commercial business         533      4.8       92     2.8       -       -           -        -        -       -
       Consumer                    286     11.5      275    10.6      156    14.7         154     14.6      131    12.5
                                ------    -----   ------   -----   ------   -----      ------    -----   ------   -----
     Balance, end of period     $2,833    100.0%  $2,613   100.0%  $3,241   100.0%     $3,048    100.0%  $2,818   100.0%
                                ======    =====   ======   =====   ======   =====      ======    =====   ======   =====
     </TABLE>

     The following tables set forth the average dollar amount of deposits
     in the various types of savings programs, along with the weighted
     average effective rate paid for the periods indicated:

     <TABLE>
     <CAPTION>
                                                               For the Year Ended December 31,
                                     -----------------------------------------------------------------------------------
                                                 1997                        1996                       1995
                                     ---------------------------  -------------------------- --------------------------
                                                        Weighted                    Weighted                    Weighted
                                              Percent   Average           Percent   Average          Percent    Average
                                     Average  of Total Effective Average  of Total Effective Average of Total  Effective
                                     Balance  Deposits   Yield   Balance  Deposits   Yield   Balance Deposits    Yield
                                     -------  --------   -----   -------  --------   -----   ------- --------    -----
                                                                                (Dollars in thousands)
      <S>                           <C>         <C>     <C>    <C>            <C>     <C>    <C>           <C>     <C>
      Demand Deposit Accounts       $ 20,033     4.4%     - %   $ 13,237     3.0%     - %   $  9,208      2.2%     - %
      NOW Accounts                    48,535    10.8     2.4      45,275    10.1     2.8      46,158     11.0     2.8
      Money Market Accounts           44,405     9.9     3.1      44,516     9.9     3.1      41,661     10.0     2.7
      Savings Accounts               139,964    31.0     2.9     131,368    29.4     2.8     112,416     26.8     2.6
                                    --------   -----            --------   -----            --------    -----
      Total Core Deposits            252,937    56.1     2.6     234,396    52.4     2.7     209,443     50.0     2.5
                                    --------    ----            --------   -----            --------    -----
      Certificate Accounts
        31 Day                           437      .1     4.4       2,239      .5     5.2         838       .2     5.8
        2-4 Month                     18,803     4.2     4.9      17,705     4.0     4.8      13,105      3.1     4.7
        6 Month                       22,790     5.0     3.8      24,706     5.5     3.7      34,227      8.2     3.2
        7-9 Month                     25,582     5.7     5.0      30,133     6.8     5.0      32,476      7.7     5.3
        12 Month                      19,238     4.3     4.5      15,438     3.5     3.7      24,008      5.7     3.5
        18 Month                       1,198      .3     4.7       1,163      .3     4.5       2,251       .5     4.2
        24 Month                      10,774     2.4     5.5       5,770     1.3     4.9       7,494      1.8     4.2
        30 Month                       3,847      .8     4.8       4,104      .9     4.4       5,118      1.2     4.3
        48 Month                         877      .2     4.8       1,431      .3     5.1       1,937       .5     5.6
        60 Month                         721      .2     5.7         441      .1     5.7         638       .2     6.4
        13-120 Month                  68,064    15.1     5.4      83,218    18.6     5.6      60,179     14.4     5.9
        36-90 Month                    1,851      .4     5.3       1,757      .4     4.9       2,919       .7     4.8
        Fixed Rate IRA                16,737     3.7     5.4      17,634     3.9     5.4      17,886      4.2     5.6
        Variable Rate IRA              5,160     1.1     5.4       5,012     1.1     5.2       5,037      1.2     5.7
        Passbook Rate IRA              1,749      .4     2.5       1,834      .4     2.5       1,735       .4     2.5
                                    --------   -----            --------   -----            --------    -----
      Total Certificates             197,828    43.9     5.0     212,585    47.6     5.0     209,848     50.0     4.8
                                    --------   -----            --------    -----           --------    -----
      Total Deposits                $450,765   100.0%    3.7%   $446,981   100.0%    3.8%   $419,291    100.0%    3.7%
                                    ========   =====            ========   =====            ========    =====
     </TABLE>

     <TABLE>
     <CAPTION>
                                              For the Nine-Month Period
                                                  Ended December 31,
                                ------------------------------------------------------
                                         1995                          1994
                              ---------------------------   ---------------------------
                                                 Weighted                       Weighted
                                        Percent  Average             Percent     Average
                              Average  of Total Effective  Average   of Total   Effective
                              Balance  Deposits   Yield    Balance   Deposits     Yield
                              -------  --------   -----    -------   --------     -----
                                               (Dollars in thousands)
      <S>                    <C>         <C>        <C>   <C>         <C>         <C>
      Demand Deposit Accounts $  9,378     2.2%      - %  $  7,864      1.9%       - %
      NOW Accounts              44,317    10.4      2.8     67,172     16.1       2.9
      Money Market Accounts     41,782     9.9      2.8     47,782     11.5       2.5
      Savings Accounts         112,943    26.7      2.6    113,919     27.4       2.5
                               -------    ----             -------     ----
      Total Core Deposits      208,420    49.2      2.6    236,737     56.9       2.6
                               -------    ----             -------     ----
      Certificate Accounts
        31 Day                   1,063      .2      5.5         53       -        6.2
        2-4 Month               12,995     3.1      4.8      6,785      1.6       3.2
        6 Month                 31,554     7.4      3.2     56,728     13.6       3.1
        7-9 Month               35,581     8.4      3.6     10,940      2.6       3.5
        12 Month                21,941     5.2      3.6     41,184      9.9       3.4
        18 Month                 2,132      .5      4.1      2,774       .7       3.9
        24 Month                 6,658     1.6      4.2     12,269      3.0       4.4
        30 Month                 4,891     1.2      4.2      6,010      1.4       4.5
        48 Month                 1,735      .4      5.3      2,828       .7       6.3
        60 Month                   634      .1      6.5        702       .2       6.5
        13-120 Month            68,573    16.2      5.9     10,162      2.4       6.3
        36-90 Month              2,769      .7      4.8      3,560       .9       5.2
        Fixed Rate IRA          17,972     4.2      5.5     20,136      4.8       5.4
        Variable Rate IRA        5,124     1.2      5.5      4,463      1.1       5.4
        Passbook Rate IRA        1,680      .4      2.5        688       .2       2.5
                               -------    ----             -------     ----
      Total Certificates       215,302    50.8      5.0    179,282     43.1       3.8
                               -------    ----             -------     ----
      Total Deposits          $423,722   100.0%     3.8%  $416,019    100.0%      3.2%
                              ========   =====            ========    =====
     </TABLE>


     The following table shows rate information for the Company's
     certificates of deposit at the dates indicated and maturity
     information at December 31, 1997:

     <TABLE>
     <CAPTION>

                               At December 31,      Period to Maturity from December 31, 1997
                             ------------------  ----------------------------------------------

                                                                      Two to   Over
                                                  Within    One to    Three    Three
                                1997     1996    One Year  Two Years  Years    Years     Total
                                ----     ----    --------  ---------  -----    -----     -----
                                                    (Dollars in thousands)
     <S>                     <C>      <C>       <C>      <C>        <C>      <C>     <C>
     Certificates of Deposit
      3.99% or less          $ 26,361  $ 33,347  $ 26,259  $   102    $  -     $  -    $ 26,361
      4.00% to 4.99%           21,407    34,418    16,221    2,342     1,493    1,351    21,407
      5.00% to 5.99%          129,598   127,428   111,039   15,766     2,152      641   129,598
      6.00% to 6.99%            5,377     7,495     2,470      992       374    1,541     5,377
      7.00% to 7.99%            2,493     6,552       802    1,247       305      139     2,493
                             --------  --------  --------  -------    ------   ------  --------
        Total                $185,236  $209,240  $156,791  $20,449    $4,324   $3,672  $185,236
                             ========  ========  ========  =======    ======   ======  ========
     </TABLE>

     The following table sets forth the maturity dates of the Company's
     certificates of deposit of $100,000 or more at December 31, 1997:

             Maturity Period                Amount
             ---------------                ------
                                          (Dollars in
                                          thousands)

        Three months or less                $ 8,056
        Three through six months              5,345
        Six through twelve months             4,068
        Over twelve months                    1,836
                                            -------
             Total                          $19,305
                                            =======

     The following table sets forth the maximum month-end balance and
     average balance of borrowed funds for the periods indicated:

                                                            For the Nine-
                                                             Month Period
                                    For the Year                Ended
                                 Ended December 31,         December 31,
                            ----------------------------  -----------------
                                        (Dollars in thousands)
                              1997      1996      1995      1995     1994
                              ----      ----      ----      ----     ----

      Maximum balance       $196,512  $180,347  $50,992   $50,992   $48,492
      Average balance       $159,234  $124,087  $38,464   $37,814   $40,408
      Weighted average
       interest                 5.59%     5.50%    7.45%     7.46%     7.41%


     The following table sets forth certain information as to FHLBNY
     advances at the dates indicated:

                                           At December 31,
                                      --------------------------
                                        1997     1996      1995
                                        ----     ----      ----
                                        (Dollars in thousands)
      FHLBNY advances                 $14,150  $24,800   $19,100
      Weighted average interest
       rate of FHLBNY advances           6.63%    7.13%     5.88%


     ITEM 2.    PROPERTIES

     At December 31, 1997, the Bank conducted its business through its 16
     offices, including its home office at 70 Sip Avenue, Jersey City, New
     Jersey.
                                           Original
                                             Date
                                 Leased     Leased     Date of
                                   or         or        Lease
      Location                   Owned     Acquired   Expiration
      --------                   -----     ---------  ----------
     70 Sip Avenue               Owned       1/59         --
     Jersey City, NJ

     9 Path Plaza                Leased      2/76        6/01
     Jersey City, NJ

     241 Central Avenue          Owned       1/63         --
     Jersey City, NJ

     319 Martin Luther           Leased      1/59      Monthly
     King, Jr. Drive
     Jersey City, NJ

     214 Newark Avenue           Owned       1/63         --
     Jersey City, NJ

     12 Chapel Avenue            Leased      7/96       12/02
     Jersey City, NJ

     456 North Broad Street      Owned       8/86         --
     Elizabeth, NJ

     314 Elizabeth Avenue        Owned       1/75         --
     Elizabeth, NJ

     One Statewide Court         Owned       8/78         --
     Secaucus, NJ

     416 Anderson Avenue         Owned       1/74         --
     Cliffside Park, NJ

     35 South Main Street        Owned       1/76         --
     Lodi, NJ

     246 South Avenue            Owned       10/79        --
     Fanwood, NJ

     345 South Avenue            Owned       10/80        --
     Garwood, NJ

     400 Marin Boulevard         Leased      11/95       6/99
     Jersey City, NJ

     122 8th Street              Leased
     Passaic, New Jersey                     11/95       5/98

     86 River Street             Leased      1/96       12/01
     Hoboken, NJ

     Pursuant to a Purchase and Assumption Agreement dated December 11,
     1997 between the Company and Banco Popular, F.S.B. the Company is
     selling its Passaic branch to Banco Popular, F.S.B. and Banco Popular,
     F.S.B. will assume all of the Company's obligations under this lease.
     In addition, on February 27, 1998, the Bank entered into a 10-year
     lease for a bank branch in North Arlington, New Jersey.  The Bank
     expects to open this branch during the second quarter of 1998.

     ITEM 3.    LEGAL PROCEEDINGS

     The Company is involved from time to time as a party to legal
     proceedings occurring in the ordinary course of its business.  The
     Company believes that none of these proceedings would, if adversely
     determined, have a material effect on the Company's consolidated
     financial condition or results of operations.

     On December 1, 1995, the Bank initiated a suit against the Federal
     government alleging, among other things, breach of contract and
     seeking restitution for harm caused to the Bank through changes in
     Federal banking regulations regarding the treatment of goodwill in
     calculating the capital of thrift institutions.  The case relates to
     goodwill created by the Bank's 1982 acquisition of Arch Federal
     Savings and Loan Association.  The 1989 change in Federal regulations
     required a phase-out of goodwill from the calculation of a thrift
     institution's capital ratios and required that by January 1, 1995, no
     goodwill be counted as capital.  At the time the regulations went into
     effect, the Bank had $18.7 million in goodwill on its balance sheet.

     The Bank's suit was initially subject to a stay pending a ruling by
     the United States Supreme Court of the government's appeal of a
     decision of the Federal District of Columbia Circuit Court in another
     case which had upheld the right of  three thrift institutions to
     maintain such actions.  In July 1996, the U.S. Supreme Court ruled in
     "United States v. Winstar Corporation" upholding the Federal District
     of Columbia Circuit Court's ruling in favor of the thrift institutions
     involved in that suit.  Subsequently, the stay in all goodwill related
     cases was lifted.  The Federal government then filed a motion seeking
     to dismiss all goodwill related claims filed six years after the date
     of FIRREA's adoption, August 9, 1995.  The Bank had filed its claim on
     December 1, 1995.  The Bank, along with the approximately 25 other
     institutions subject to the motion, vigorously opposed the
     government's dismissal motion.  On January 7, 1997, the judge
     appointed to hear the issue in the United States Court of Federal
     Claims ruled against the Federal government, holding that the statute
     of limitations had not begun to run until OTS regulations implementing
     FIRREA were adopted on December 7, 1989.  The case is currently in the
     discovery phase, and no trial date has been set.  Accordingly, for
     these reasons and because of other facts affecting the predictability
     of litigation, management cannot predict the eventual outcome, the
     amount of damages, if any, or the timing of final disposition of the
     Bank's case.


                                     PART II

     ITEM 5.    MARKET INFORMATION

     The Company's stock is quoted on The Nasdaq Stock Market.  The
     symbol for the Company's common stock is SFIN.  As of December
     31, 1997, there were 385 registered holders of the Company's common
     stock.

     The following table presents the high and low bid prices for the
     common stock and dividends paid for the periods indicated below. The
     high and low bid range prices reflect inter dealer quotations, without
     commissions, and may not necessarily represent actual transactions.

                                    High   Low   Dividend
                                    ----   ---   --------
           1997
           ----

           Fourth Quarter         24      18        $ .11
           Third Quarter          22      17 3/4    $ .11
           Second Quarter         18 1/8  14 1/2    $ .10
           First Quarter          17 7/8  14 1/8    $ .10

           1996
           ----

           Fourth Quarter         14 5/8  12 5/8    $ .10
           Third Quarter          13 1/8  11 1/4    $ .10
           Second Quarter         13 1/8  11 3/4        -
           First Quarter          13 1/8  12 1/2        -


     During the third quarter of 1996, the Company declared its first
     quarterly dividend.  The Company increased its quarterly dividend to
     $0.11 per share during the third quarter of 1997.  The Company expects
     to continue to pay dividends.  However, no assurance can be given that
     dividends will be paid in the future since the payments of such
     dividends will be based upon current and prospective earnings,
     anticipated asset growth, and the capital position of the Company.  In
     addition, earnings and the financial condition of the Bank and
     applicable governmental policies and regulations could also affect the
     Company's ability to pay dividends.


     ITEM 6.    SELECTED FINANCIAL DATA

                                   At December 31,          At March 31,
                              -------------------------   ----------------
                                1997     1996     1995      1995    1994
                                ----     ----     ----      ----    ----
                                         (Dollars in thousands)

      SELECTED FINANCIAL
        CONDITION DATA:
      Total assets           $675,316 $636,042 $559,049  $475,168 $473,613
      Loans, net              332,509  325,470  195,773   169,909  185,377
      Mortgage-backed
         securities           290,044  240,974  260,107   203,677  195,734
      Debt and equity
         securities            19,093   40,243   80,126    80,987   66,070
      Other real estate
        owned, net                440      563      652       825    1,487
      Total deposits          443,878  457,056  438,021   407,758  423,647
      Borrowed funds          160,300  107,200   44,703    41,492   29,292
      Shareholders' equity     64,907   66,935   72,315    22,022   17,678

      REGULATORY CAPITAL
      RATIOS (BANK):
      Tangible capital ratio     8.96%    9.41%   10.28%     4.57%    3.66%
      Core capital ratio         8.96%    9.41%   10.28%     4.57%    3.74%
      Risk-based capital
        ratio                   22.93%   26.21%   32.88%    16.65%   13.14%

      ASSET QUALITY RATIOS:
      Non-performing loans
        to total net loans        .75%     .84%    2.87%     3.87%    6.26%
      Non-performing loans
        to total assets           .37%     .43%    1.01%     1.38%    2.45%
      Non-performing assets
        to total assets           .44%     .52%    1.12%     1.56%    2.76%
      Allowance for loan
        losses to non-
        performing loans       113.18%   95.43%   57.66%    46.37%   24.29%
      Allowance for loan
        losses to total net
        loans                     .85%     .80%    1.66%     1.79%    1.52%

      OTHER DATA:
      Number of deposit
        accounts               54,677   53,695   50,062    46,767   48,238
      Offices                      16       16       15        13       13


     <TABLE>
     <CAPTION>
                                                           At or For the
                                      At or For the         Nine-Month     At or For the
                                       Years Ended         Period Ended     Years Ended
                                       December 31,        December 31,      March 31,
                                  ----------------------   -------------   -------------
                                   1997    1996   1995     1995    1994    1995     1994
                                   ----    ----   ----     ----    ----    ----     ----
     <S>                           <C>     <C>    <C>      <C>     <C>     <C>      <C>
     SELECTED FINANCIAL RATIOS:
     Return on average assets (1)   .82%    .49%    .50%     .41%    .94%    .90%     .90%
     Return on average equity (1)  8.74    4.67    7.31     5.46   23.24   21.09    26.90
     Dividend payout ratio        32.31   29.41      -        -       -       -        -
     Equity to assets              9.61   10.52   12.94    12.94    4.44    4.63     3.73
     Net interest rate spread (2)  3.31    2.99    3.23     3.12    3.67    3.66     3.67
     Net interest margin (2)       3.77    3.45    3.52     3.45    3.79    3.78     3.74
     Non-interest income to
      average assets (4)            .24     .37     .50      .43     .28     .32      .29
     Non-interest expense to
      average assets (1)           2.52    2.87    2.84     2.87    2.34    2.43     2.50
     Efficiency ratio (1)(3)      65.91   81.65   77.47    80.87   61.49   63.31    68.67
     Average interest-earning
       assets to average
       interest-bearing
       liabilities               111.88% 112.32% 107.51%  108.45% 103.45% 103.52%  101.94%
     </TABLE>

     <TABLE>
     <CAPTION>
                                                          For the Nine-
                                                          Month Period
                                   For the Years Ended        Ended       For the Years
                                      December 31,        December 31,    Ended March 31,
                                 ----------------------- --------------   ---------------
                                     (Dollars in thousands, except per share amounts)
     SELECTED OPERATING DATA:
                                  1997    1996    1995    1995     1994    1995    1994
                                  ----    ----    ----    ----     ----    ----    ----
     <S>                        <C>      <C>     <C>    <C>       <C>     <C>     <C>
     Interest income            $50,191 $45,278 $35,260 $26,853  $25,012 $33,419 $34,215
     Interest expense            25,384  23,656  18,301  14,162   11,836  15,975  16,657
                                ------- ------- ------- -------  ------- ------- -------
     Net interest income         24,807  21,622  16,959  12,691   13,176  17,444  17,558
     Provision for loan losses      500     500     389     315      468     542   1,069
                                ------- ------- ------- -------  ------- ------- -------
     Net interest income after
      provision for loan losses  24,307  21,122  16,570  12,376   12,708  16,902  16,489
     Net (loss) gains on sales
      of securities                  69  (1,093)   (340)   (340)     -       -       -
     Other non-interest income    1,656   2,382   2,486   1,962      994   1,518   1,394
     Foreclosed real estate
      expense, net                   71     105     161      10     (134)     17     140
     FDIC SAIF assessment           -     2,651     -       -        -       -       -
     Other non-interest expense  17,041  15,687  13,942  10,858    8,560  11,644  12,084
                                ------- ------- -------  ------   ------  ------  ------
     Income before income
      taxes, extraordinary
      items and cumulative
      effect of change in
      accounting principles       8,920   3,968   4,613   3,130    5,276   6,759   5,659
     Income taxes                 3,333     796   1,712   1,152    1,906   2,466   1,938
                                ------- ------- -------  ------   ------  ------  ------
     Income before extra-
      ordinary items and
      cumulative effect of
      change in accounting
      principles                  5,587   3,172   2,901   1,978    3,370   4,293   3,721
     Extraordinary items:
     Penalties for pre-payment
      of debt, net of tax           -       -      (412)   (412)     -       -       -
     Cumulative effect of
      change in accounting
      principles                    -       -       -       -        -       -       669
                                ------- ------- ------- -------  ------- ------- -------
     Net income                 $ 5,587 $ 3,172 $ 2,489 $ 1,566  $ 3,370 $ 4,293 $ 4,390
                                ======= ======= ======= =======  ======= ======= =======
     Per share data:
     Basic earnings             $1.34   $ .68       -       -        -       -       -
     Diluted earnings           $1.30   $ .68       -       -        -       -       -
     Cash dividends declared    $ .42   $ .20       -       -        -       -       -

     (1)  1996 includes a one-time FDIC SAIF assessment of $2,651,000
          pre-tax, $1,697,000 after tax, incurred as a result of enactment
          of the Deposit Act.  Excluding the one-time FDIC SAIF assessment,
          selected financial ratio calculation percentages are as follows:
          return on average assets, 0.76%; return on average equity, 7.17%;
          non-interest expense to average assets, 2.45%; efficiency ratio,
          69.92%.

     (2)  Interest rate spread represents the difference between the
          weighted average yield on average interest-earning assets and the
          weighted average costs of average interest-bearing liabilities,
          and net interest margin represents net interest income as a
          percent of average interest-earning assets.

     (3)  Efficiency ratio represents total non-interest expense divided by
          the sum of net interest income after provision for loan losses,
          and recurring non-interest income.

     (4)  Excludes loss on sale of securities.


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


     General

     The Company's results of operations are dependent primarily on net
     interest income, which is the difference between the income earned on
     its loans, mortgage-backed and debt and equity securities and the
     interest paid on its deposits and other borrowings.  The Company's
     results of operations are also affected by its provision for loan
     losses, non-interest income and non-interest expense.  In addition,
     the Company's results of operations are significantly affected by
     general economic and competitive conditions, particularly changes in
     market interest rates, government policies and actions of regulatory
     authorities.  Future changes in applicable law, regulations or
     government policies also may materially impact the Company.

     Management Strategy

     The Company's goal is to enhance shareholder value by being the
     premier community bank in its market area.  Management's objectives
     toward accomplishing this goal are to: (1) aggressively market its
     lending products while maintaining credit quality, (2) seek low cost
     sources of funds, (3) deliver excellent customer service through an
     efficient, low cost network and (4) provide a fair return on
     investor's capital.

     The Company employs the following principal strategies to accomplish
     these objectives:

          it seeks to originate or purchase with servicing rights (1) one-
     to-four family residential mortgage loans, (2) consumer loans,
     primarily secured by junior liens on residential real estate, and (3)
     Federal Housing Administration ("FHA") Title 1 insured home
     improvement loans; the Company seeks to invest funds in excess of loan
     demand in mortgage-backed securities, classified as available for
     sale, which have risks and yields similar to mortgages the Company
     would have otherwise originated or purchased;

          it seeks to originate securitized commercial loans for equipment,
     inventory, working capital, real estate and other business purposes;

          it seeks to utilize its strong capital position, by borrowing
     funds to originate or purchase loans, or to invest in mortgage-backed
     securities, which are classified as available for sale, and whose
     average life, considering expected prepayments, is consistent with
     five and ten year Treasury instruments;

          it seeks to control its operating expenses by effectuating
     productivity savings from new systems and procedures, as well as
     through optimization of its retail delivery sites and systems;

          it seeks to offer superior service and competitive rates to
     maintain its existing core deposit base;

          it seeks, through enhanced marketing strategy, product cross
     selling and branch expansions, to increase its  core deposit base;

          it seeks to manage its capital through analysis of current
     alternatives for capital deployment; and

          it seeks to reduce its exposure to interest rate risk by
     purchasing and originating (1) floating rate commercial loans, (2)
     consumer loans, (3) adjustable rate first mortgage loans ("ARM"), and
     (4) fixed rate first mortgage loans with terms to maturity of no more
     than fifteen years, as well as by emphasizing retention and growth of
     core deposits and investing in mortgage-backed securities, which it
     classifies as available for sale, and whose expected lives are
     comparable to five and ten year Treasury instruments.

     In conjunction with its strategies, management expects that non-
     residential mortgage and commercial loans will constitute a greater
     percentage of the Company's loan portfolio in future periods. As a
     consequence of management's lending strategy, the Company may, in
     future periods, depending upon then current conditions, increase its
     provision for loan losses as well as its provision for losses on real
     estate owned over that experienced in the Company's most recent fiscal
     period.


                              RESULTS OF OPERATIONS

     As discussed more fully in the Notes to the Consolidated Financial
     Statements, the Company changed from a fiscal year end of March 31st
     to a calendar year end, effective with the calendar year commencing
     January 1, 1996.  For purposes of setting forth a meaningful
     comparison for Management's Discussion and Analysis, years ended
     December 31, 1997, 1996 and 1995 are presented.


     Selected Consolidated Statements of Income

     Set forth on the next page are the consolidated statements of income
     for the years ended December 31, 1997, 1996 and 1995.  The information
     for the year ended December 31, 1997 and 1996 should be read in
     conjunction with the Company's audited consolidated financial
     statements and the notes thereto, presented elsewhere herein.  The
     consolidated statement of income for the year ended December 31, 1995
     is unaudited, but in the opinion of management all adjustments
     (consisting of only normal recurring adjustments) necessary for a fair
     presentation of the results presented have been included.


                                                Year Ended December 31,
                                                -----------------------
                                                1997     1996     1995*
                                                ----     ----     ----
                                                (Dollars in thousands)

     INTEREST INCOME:
      Interest and fees on loans               $25,955  $21,206  $14,899
      Interest on mortgage-backed securities    21,577   19,377   14,382
      Interest and dividends on investment
       securities                                2,076    4,228    5,698
      Dividends on FHLBNY stock                    583      467      281
                                               -------  -------  -------
          Total interest and dividend income    50,191   45,278   35,260
                                               -------  -------  -------
     INTEREST EXPENSE:
      Deposits                                  16,481   16,827   15,437
      Borrowed funds                             8,903    6,829    2,864
                                               -------  -------  -------
          Total interest expense                25,384   23,656   18,301
                                               -------  -------  -------
     NET INTEREST INCOME                        24,807   21,622   16,959
      Provision for loan losses                    500      500      389
                                               -------  -------  -------
     NET INTEREST INCOME AFTER PROVISION
      FOR LOAN LOSSES                           24,307   21,122   16,570
     NON-INTEREST INCOME:
      Services charges                           1,496    1,236    1,013
      Net loss on sales of securities               69   (1,093)    (340)
      Other                                        160    1,146    1,473
                                               -------  -------  -------
          Total other income                     1,725    1,289    2,146
                                               -------  -------  -------
     NON-INTEREST EXPENSE:
      Salaries and employee benefits             9,605    8,511    7,209
      Occupancy, net                             2,278    2,140    1,735
      Federal deposit insurance premiums           287    1,011    1,177
      FDIC SAIF assessment                          -     2,651       -
      Professional fees                            594      645      608
      Insurance premiums                           180      273      292
      Data processing                              621      390      328
      Foreclosed real estate expense, net           71      105      161
      Other                                      3,476    2,717    2,593
                                               -------  -------  -------
          Total operating expenses              17,112   18,443   14,103
                                               -------  -------  -------
          Income before income taxes and
            extraordinary item                   8,920    3,968    4,613
     Income taxes                                3,333      796    1,712
                                               -------   ------  -------
          Income before extraordinary item       5,587    3,172    2,901
     Extraordinary item-penalties for pre-
       payment of debt, net of tax                  -        -       412
                                               -------  -------  -------
          Net income                           $ 5,587  $ 3,172  $ 2,489
                                               =======  =======  =======

     *unaudited


     RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

     General. Net income for the for the year ended December 31, 1997
     ("1997") was $5.6 million, or $1.30, per share, assuming dilution, as
     compared to $4.9 million, or $1.05, per share, assuming dilution, for
     the year ended December 31, 1996 ("1996").  Earnings during 1996 were
     affected by a one-time industry-wide assessment on thrift institutions
     to recapitalize the SAIF.  The impact of this charge has been added
     back to the prior year results in order to normalize these
     comparisons.  Inclusive of the one time SAIF assessment, the Company
     reported net income of $3.2 million, or $0.68, per share, assuming
     dilution, for the year ended 1996.  Basic earnings per share were
     $1.34 for 1997 as compared to $1.05 for 1996 as adjusted, or $0.68 for
     1996 inclusive of the SAIF assessment.  Net income and earnings per
     share, assuming dilution, for 1997 increased 14.7% and 23.8%,
     respectively as compared to 1996.  This increase is primarily the
     result of increased net interest income from the growth in average
     loans and investments at higher yields offset by an increase in
     borrowing costs due to increased average borrowing levels.  Partially
     offsetting this net interest income growth was lower non-interest
     income and increased non-interest expense.  In addition, the Company s
     average weighted shares outstanding during 1997 declined to 4,310,000
     as compared to 4,662,000 during 1996, reflecting the Company's stock
     repurchase programs.

     Net Interest Income.  Net interest income is the principal source of
     income for the Company and represents the difference between total
     interest and fees earned on loans, mortgage-backed securities and
     other investments, and total interest incurred on deposits and
     borrowed funds.  Net interest income increased $3.2 million, or 14.7%,
     to $24.8 million for 1997 as compared $21.6 million for 1996.  This
     increase resulted from a 5.3% growth in interest-earning assets and a
     32 basis point increase in net interest margin.  For 1997, net
     interest margin was 3.77% as compared to 3.45% for 1996.  Increase in
     net interest income resulted primarily from higher yield on and growth
     in interest-earning assets, partially offset by increases in the cost
     of interest-bearing liabilities.  Table 1 presents a summary of the
     Company's average balances, yields earned on average assets and costs
     incurred on average liabilities, and shareholders' equity for the
     years ended December 31, 1997, 1996, and 1995.

     Interest Income.  Total interest and dividend income for 1997
     increased to $50.2 million from $45.3 million for 1996, an increase of
     $4.9 million, or 10.9%, over the prior year.  The average balance of
     interest-earning assets increased $33.5 million, or 5.3%, to $660.0
     million for 1997 compared to $626.6 million for 1996.  The related
     yields increased between the two periods to 7.61% from 7.23%.
     Throughout 1996, the Company changed its mix of interest-earning
     assets by purchasing one-to-four family residential mortgages, and
     selling lower yielding mortgage backed securities and debt securities.
     In addition, the Company has focused its efforts on originating higher
     yielding commercial and consumer loans reflecting increases in average
     balances of 304.1% and 7.0%, respectively in these portfolios.  As a
     result, both the average balance and yield from interest-earning
     assets is higher for 1997.  The average balance of first mortgage
     loans increased $47.7 million, or 20.7%, as a result of the prior year
     purchases partially offset by current year repayments, net of
     originations.  However, yields on this portfolio decreased 10 basis
     points from 7.70% for 1996 to 7.60% for 1997, because of prepayments
     of higher yielding loans in the current low interest rate environment.

     Also for 1997, the yields on mortgage-backed securities increased due
     to sales of lower-yielding securities in 1996, and purchases during
     the current year of securities with yields in excess of the average
     yields in place for 1996.  These factors combined to increase yields
     on mortgage-backed securities 61 basis points to 7.37% for 1997
     compared to 6.76% for 1996.  The average balance of the Company's
     mortgage-backed securities portfolio increased by 2.0%.  Sales of
     lower-yielding debt securities during the fourth quarter of 1996
     coupled with calls and maturities during 1997 caused the current year
     average balance to decline $32.9 million while increasing the average
     yield on the remaining portfolio 34 basis points to 6.86%.

     Interest Expense.  Interest expense increased $1.7 million, or 7.3%,
     to $25.4 million for 1997 compared to $23.7 million for 1996.
     Interest expense on deposits decreased $0.3 million while interest
     expense on borrowed funds increased $2.1 million.  The increase in
     borrowed funds was due to increased borrowing levels coupled with a 9
     basis point rise in average costs.  The decrease in interest expense
     on total deposits was primarily caused by decreases in higher costing
     certificates of deposit partially offset by growth in core deposits.

     Average borrowed funds during 1997 increased $35.1 million, or 28.3%,
     to $159.2 million as compared to $124.1 million for 1996.  The
     increase in the average balance of borrowed funds reflects the
     Company's continued strategy to leverage its excess capital, and this
     growth funded the increase in commercial mortgage and business loans,
     consumer loans, and mortgage backed securities.  In addition these
     funds were also used in part to support the repurchase of the
     Company's common stock and in part to liquidate certificates of
     deposit for holders who sought rates higher than the Company's
     alternate borrowing rates.  The cost of borrowed funds increased 9
     basis points to 5.59% for 1997 from 5.50% for 1996.  The increase in
     rates reflected the Company's decision to migrate a greater portion of
     its short term borrowed funds into longer term instruments which
     lessens the impact of changes in short-term borrowing rates.  Of the
     outstanding borrowed funds at December 31, 1997, $14.2 million mature
     overnight and the balance has final maturity dates ranging from July
     2000 to September 2002.  All have earlier call options at the lender's
     discretion.  Borrowings of $86.0 million with interest rates ranging
     from 5.43% to 5.54% are first callable in 1998, and borrowings of
     $60.0 million with interest rates of 5.52% are first callable in
     November 1999.

     Total interest expense on deposits for 1997 totaled $16.5 million
     compared to $16.8 million for 1996.  The decrease in interest expense
     on deposits resulted primarily from the decrease of higher costing
     certificates of deposit and the change in mix of deposits during 1997.
     Total average deposits increased $3.8 million during 1997 resulting
     from decreases in certificates of deposit of $14.8 million, offset by
     increases in savings, NOW and non-interest bearing deposits of $18.5
     million.  The weighted average cost of interest-bearing deposits
     during 1997 decreased 5 basis points from 3.88% in 1996 to 3.83% in
     1997.  Although average deposits increased during the current year,
     1997 period-end deposit balances decreased $13.2 million primarily due
     to controlled runoff of certificates of deposit throughout the year.
     The Company's strategy during 1997 was to not match the competition's
     aggressive rates, unless management believes that relationships with
     deposit holders who have other deposits or loan relationships are in
     jeopardy.  Core deposits partially offset this decrease with growth of
     $10.8 million, or 4.4%, over 1996 period-end balances as customer
     relationships were developed through continued marketing efforts.

     Table 1 presents a summary of the Company's interest-earning assets
     and their average yields, interest-bearing liabilities and their
     average costs, and shareholders' equity at December 31, 1997.  Table 1
     also presents a summary of the Company's average balances, the yields
     earned on average assets and the cost of average liabilities and
     shareholders' equity for the years ended December 31, 1997, 1996 and
     1995.  The average loan balances include non-accrual loans.  The
     yields include loan fees which are considered adjustments to yields.

     Table 1:  Spread Analysis
                                               At December 31, 1997
                                               ---------------------
                                                 Actual    Average
                                                Balance  Yield/Cost
                                                -------  ----------
                                              (Dollars in thousands)
     Assets:
      Interest-earning assets:
       First mortgage loans                    $278,277     7.63%
       Consumer and other loans                  38,399     9.32
       Commercial business loans                 15,833     9.62
       Mortgage-backed securities               290,044     7.18
       Money market investment                      -         -
       Debt securities                           19,093     7.44
       FHLBNY stock                              10,260     8.77
                                               --------
          Total interest earning assets         651,906     7.58%
      Non-interest-earning assets                23,410     ----
                                               --------
          Total assets                         $675,316
                                               ========
     Liabilities and shareholders' equity:
      Interest-bearing liabilities:
       Savings accounts                        $142,399     2.91%
       NOW accounts                              47,564     1.52
       Money market accounts                     44,239     3.00
       Certificates of deposit                  185,236     5.04
       Borrowed funds                           160,300     5.59
                                               --------
          Total interest-bearing liabilities    579,738     4.21%
                                               --------     ----
     Non-interest bearing liabilities:
     Non-interest bearing deposits               24,440
     Other non-interest bearing liabilities       6,231
                                               --------
          Total non-interest bearing
            liabilities                          30,671
                                               --------
          Total liabilities                     610,409
     Shareholders' equity                        64,907
                                               --------
          Total liabilities and shareholders'
            equity                             $675,316
                                               ========
     Net interest income/net interest rate
      spread                                                3.37%
                                                            ====

     Net interest margin                                    3.86%
                                                            ====
     Ratio of interest-earning assets to
      interest-bearing liabilities                         113.52%
                                                           ======

</TABLE>
<TABLE>
     <CAPTION>
                                                                             Year Ended December 31,
                                              -----------------------------------------------------------------------------------
                                                         1997                        1996                        1995
                                               -------------------------  --------------------------  ---------------------------
                                              Average            Average  Average            Average  Average            Average
                                              Balance Interest Yield/Cost Balance Interest Yield/Cost Balance Interest Yield/Cost
                                              ------- --------  --------- ------- --------  --------- ------- --------  ---------
                                                                             (Dollars in thousands)
     <S>                                     <C>        <C>       <C>    <C>       <C>        <C>    <C>       <C>      <C>
     Assets:
      Interest-earning assets:
       First mortgage loans                   $277,511  $21,101   7.60%  $229,850  $17,698    7.70%  $146,882  $12,199     8.31%
       Consumer and other loans                 36,312    3,500   9.64     33,950    3,176    9.35     26,711    2,700    10.11
       Commercial business loans                14,383    1,354   9.41      3,559      332    9.33        -        -         -
       Mortgage-backed securities              292,671   21,577   7.37    286,794   19,377    6.76    208,763   14,382     6.89
       Money market investment                     140       10   7.14      2,088      113    5.41      7,152      414     5.79
       Debt securities                          30,228    2,066   6.86     63,092    4,115    6.52     89,055    5,284     5.93
       FHLBNY stock                              8,800      583   6.63      7,224      467    6.46      3,649      281     7.70
                                              --------  -------          --------  -------           --------  -------
          Total interest earning assets        660,045   50,191   7.61%   626,557   45,278    7.23%   482,212   35,260     7.31%
      Non-interest-earning assets               19,477  -------   ----     17,153  -------    ----     14,762  -------     ----
                                              --------                   --------                    --------
          Total assets                        $679,522                   $643,710                    $496,974
                                              ========                   ========                    ========
     Liabilities and shareholders' equity:
      Interest-bearing liabilities:
       Savings accounts                       $139,964    4,082   2.92%  $131,368    3,658    2.78%  $112,416    2,895     2.58%
       NOW accounts                             48,535    1,166   2.40     45,275    1,285    2.84     46,158    1,296     2.81
       Money market accounts                    44,405    1,382   3.11     44,516    1,365    3.07     41,661    1,137     2.73
       Certificates of deposit                 197,828    9,851   4.98    212,585   10,519    4.95    209,848   10,109     4.82
       Borrowed funds                          159,234    8,903   5.59    124,087    6,829    5.50     38,464    2,864     7.45
                                              --------  -------          --------  -------           --------  -------
          Total interest-bearing liabilities   589,966   25,384   4.30%   557,831   23,656    4.24%   448,547   18,301     4.08%
                                              --------  -------   ----   --------  -------    ----    -------  -------     ----
     Non-interest bearing liabilities:
     Non-interest bearing deposits              20,033                     13,237                       9,208
     Other non-interest bearing liabilities      5,627                      4,708                       5,162
                                              --------                   --------                    --------
          Total non-interest bearing
            liabilities                         25,660                     17,945                      14,370
                                              --------                   --------                    --------
          Total liabilities                    615,626                    575,776                     462,917
     Shareholders' equity                       63,896                     67,934                      34,057
                                              --------                   --------                    --------
          Total liabilities and shareholders'
            equity                            $679,522                   $643,710                    $496,974
                                              ========                   ========                    ========
     Net interest income/net interest rate
      spread                                            $24,807   3.31%            $21,622    2.99%            $16,959     3.23%
                                                        =======   ====             =======    ====             =======     ====

     Net interest margin                                          3.77%                       3.45%                        3.52%
                                                                  ====                        ====                         ====
     Ratio of interest-earning assets to
      interest-bearing liabilities                              111.88%                     112.32%                      107.51%
                                                                ======                      ======                       ======
     </TABLE>


     Table 2 presents the relative contribution of changes in the volume
     of interest-earning assets and interest-bearing liabilities to changes
     in net interest income for the periods indicated.  Loan origination
     fees are considered an adjustment to interest income.  For the purpose
     of calculating loan yields, average loan balances include non-accrual
     loans.

     Table 2:  Rate/Volume Analysis

     <TABLE>
     <CAPTION>
                                         Year Ended December 31, 1997      Year Ended December 31, 1996
                                            Compared to Year Ended            Compared to Year Ended
                                              December 31, 1996                 December 31, 1995
                                      ---------------------------------   ------------------------------

                                          Increase (Decrease)In Net         Increase (Decrease)In Net
                                            Interest Income Due To            Interest Income Due To
                                            ----------------------            ----------------------

                                                         Rate/                             Rate/
                                     Volume     Rate     Volume   Net     Volume    Rate  Volume    Net
                                     ------     ----     ------   ---      ------   ----  ------    ---
                                                            (Dollars in thousands)
     <S>                              <C>      <C>       <C>     <C>     <C>       <C>    <C>      <C>
     Interest-earning assets:
      First mortgage loans            $3,670    $ (221)  $ (46)  $3,403   $6,891  $(889)  $ (503)  $5,499
      Consumer and other loans           221        96       7      324      759   (202)     (81)     476
      Commercial business loans        1,010         3       9    1,022      332     -        -       332
      Mortgage-backed securities         397     1,769      34    2,200    5,376   (277)    (104)   4,995
      Money market investments          (105)       36     (34)    (103)    (293)   (27)      19     (301)
      Debt securities                 (2,143)      216    (122)  (2,049)  (1,540)   524     (153)  (1,169)
      FHLBNY stock                       102        12       2      116      275    (45)     (44)     186
                                      -------   ------   -----   ------   ------  -----   ------   ------
          Total                        3,152     1,911    (150)   4,913   11,800   (916)    (866)  10,018
                                      ------    ------   -----   ------   ------  -----   ------   ------
     Interest-bearing liabilities:
      Deposits                          (117)     (231)      2     (346)     892    472       26    1,390
      Borrowed funds                   1,934       109      31    2,074    6,375   (747)  (1,663)   3,965
                                      ------    ------   -----   ------   ------  -----   ------   ------
          Total                        1,817      (122)     33    1,728    7,267   (275)  (1,637)   5,355
                                      ------    ------   -----   ------   ------  -----   ------   ------
     Net change in net interest
      income                          $1,335    $2,033   $(183)  $3,185   $4,533  $(641)  $  771   $4,663
                                      ======    ======   =====   ======   ======  =====   ======   ======
     </TABLE>

     Provision for Loan Losses.  The provision for loan losses for 1997 was
     $500,000, equal to the amount recorded for 1996.  The provision for
     1997 was determined by management after review of, among other things,
     the composition of the Company's loan portfolio, the risk inherent in
     the Company's lending activities and the economy in the Company's
     market areas.  Further provisions for loan losses will continue to be
     based upon management's assessment of the loan portfolio and its
     underlying collateral, trends in non-performing loans, the current
     economic condition and other factors which may warrant recognition in
     order to maintain the allowance for loan losses at levels sufficient
     to cover estimated losses.  At December 31, 1997, allowance for loan
     losses was $2.8 million compared to $2.6 million at December 31, 1996,
     an increase of $0.2 million, or 8.4%.  As of December 31, 1997, non-
     performing loans, which consist of non-accrual loans and accruing
     loans delinquent 90 days or more, decreased $0.2 million, or 8.6%, to
     $2.5 million at December 31, 1997 from $2.7 million at December 31,
     1996.  The coverage ratio of allowance for loan losses to non-
     performing loans and also to net loans at December 31, 1997 was
     113.18% and 0.85%, respectively, as compared to 95.43% and 0.80%,
     respectively at December 31, 1996.

     Non-interest Income.  Non-interest income, exclusive of gains and
     losses on sales of investment securities, was $1.7 million for 1997,
     $726,000 less than 1996.  The prior year's non-interest income
     includes $917,000 from the collection of unaccrued interest associated
     with loans whose principal had been repaid in prior periods, with no
     like events occurring during the current year.  Excluding this item,
     non-interest income increased $191,000, or 13.0%, for 1997 as compared
     to the same period during 1996.  This increase resulted primarily from
     increased deposit account maintenance and service fees, surcharges,
     and earnings related to annuity sales partially offset by fewer
     mortgage late penalties.

     During 1997, the Company realized a gain of $0.1 million from the
     sales of securities compared to a loss of $1.1 million for 1996.
     Proceeds from the sales of securities during 1997 approximated $42.6
     million and were primarily used to repay short-term borrowings.
     Proceeds from the 1996 sales approximated $110.8 million and were used
     in conjunction with additional borrowings and deposits, to fund loan
     growth and for redeployment into higher-yielding securities.

     Non-interest Expense.  Non-interest expense totaled $17.1 million for
     1997, an increase of $1.3 million, or 8.4%, as compared to $15.8
     million for 1996, exclusive of the one-time SAIF assessment.
     Inclusive of the one-time SAIF assessment, total non-interest expense
     decreased $1.3 million, or 7.2%, from $18.4 million for 1996 to $17.1
     million for 1997.

     Salaries and employee benefits expenses for 1997 increased $1.1
     million, or 12.9%, compared to the prior year.  Of this amount,
     salaries expense increased $0.3 million and employee benefit expenses
     increased $0.8 million.  Salaries expense increased primarily as a
     result of two new branches opened during 1996, whose operations are
     fully reflected in the current year, and staffing costs for commercial
     and institutional loan officers and support hired during 1996.  There
     is limited expense for these items in the prior year. In addition, the
     current year also includes normal wage and salary increases. Employee
     benefit expense for 1997 includes an increase of $221,000 related to
     the Company's Employee Stock Ownership Plan ("ESOP") program over the
     same period of the prior year due to increases in the market value of
     the Company's stock for the current year period.  ESOP expense is
     included as compensation based on the market value of the shares
     awarded.  The current year also includes increased expense of $457,000
     for the Recognition and Retention Plan for Executive Officers and
     Employees ("Employee RRP").  Such plans was in effect for the full
     year of 1997 versus one-half year in 1996.

     Occupancy costs which include leasehold improvements, furniture,
     fixtures and equipment ("FF&E"), rent and other occupancy related
     maintenance costs increased $0.2 million, or 6.4%, to $2.3 million for
     1997 as compared to $2.1 million for 1996.  The current year increase
     primarily resulted from higher leasehold and FF&E depreciation related
     to the facilities refurbishment initiative started during 1996 along
     with the installation of a new operating system which was installed
     during the latter part of 1996.  Partially offsetting this increase
     were lower rent costs which resulted from a branch closing and lease
     buyout during 1996, and lower utility and maintenance costs incurred
     during 1997.

     Federal deposit insurance premiums decreased $0.7 million, or 71.6%,
     to $0.3 million for 1997 from $1.0 million for 1996.  This decrease
     was principally the result of lower assessment fees charged on
     deposits during the full year 1997 due to the recapitalization of the
     SAIF during the third quarter of 1996.

     Data processing costs increased $0.2 million, or 59.2%, to $0.6
     million for 1997 from $0.4 million for 1996.  The increase resulted
     from full year costs incurred during 1997 for a new upgraded operating
     system and its applications, which became operational during the
     second half of 1996.

     Insurance premiums expense decreased $0.1 million, or 34.1%, to $0.2
     million for 1997 compared to $0.3 million for the prior year.  The
     current year decrease resulted primarily from a net lower cost for
     insurance coverage.

     Other non-interest expense increased $0.8 million to $3.5 million for
     1997 compared to $2.7 million for 1996.  Advertising, marketing, and
     related printing were increased during 1997 as part of the Company's
     efforts to increase loan and core deposit growth.  In addition, loan
     and deposit operations costs increased during 1997 as a result of
     greater transactional volumes from the prior year.  Also, 1997
     reflects this full year's cost for the Recognition and Retention Plan
     for Outside Directors ("Director RRP"), whereas these costs are only
     reflected in the second half of the prior year.

     Income Tax Expense.  Income tax increased $2.5 million to $3.3 million
     for 1997 compared to $0.8 million for 1996.  Income tax expense for
     1997 reflects the tax effect of the pre-tax  income recognized in
     1997.  Income taxes for 1996 reflect the tax effect of the pre-tax
     income recognized for 1996, partially offset by a reversal of a
     $702,000 tax liability previously established, which expired during
     1996.

                               FINANCIAL CONDITION

     Total assets increased $39.3 million, or 6.2%, to $675.3 million at
     December 31, 1997 from total assets of $636.0 million at December 31,
     1996.  The increase was primarily attributable to increases in
     mortgage-backed securities and loans outstanding.  Partially
     offsetting this growth were decreases in debt and equity securities.
     The growth in assets was primarily funded through FHLBNY borrowings
     and by increased core deposits.  In addition, lower cost borrowed
     funds were used to fund the liquidation of higher rate certificates of
     deposit.

     At December 31, 1997, shareholders' equity was $64.9 million, a
     decrease of $2.0 million compared to $66.9 million at December 31,
     1996.  The ratios of shareholders' equity to total assets were 9.61%
     at December 31, 1997 and 10.52% at December 31, 1996.  The decrease
     from December 31, 1996 resulted principally from the purchase on the
     open market and retirement of 427,497 shares of common stock for $7.8
     million at an average price of $18.20 per share, and the payment of
     four quarterly dividends totaling $1.8 million.  Partially offsetting
     these decreases were net income of $5.6 million, a reduction of $1.3
     million in the unallocated and unearned ESOP, Employee RRP, and
     Director RRP shares, a net increase of $0.6 million (net of taxes) in
     the in the market value of the investment portfolio, and a tax benefit
     for RRP shares earned.

     LENDING ACTIVITIES

     Loan Portfolio Composition.  At December 31, 1997, the Company had
     total loans of $334.6 million compared to $327.1 million at December
     31, 1996.  The largest portion of the portfolio, $244.4 million, or
     73.0%, was one-to-four family first mortgage loans.  Other loan
     categories within the portfolio consist of: consumer loans of $38.5
     million, or 11.5% of the loan portfolio, and are primarily comprised
     of fixed rate second mortgage loans and FHA Title One insured home
     improvement loans; commercial mortgage and multi-family loans of $31.4
     million, or 9.4% of the loan portfolio; commercial business loans of
     $16.1 million, or 4.8% of the loan portfolio; and acquisition,
     development, and construction loans of $4.3 million, or 1.3% of the
     loan portfolio.

     The types of loans that the Company may originate or purchase are
     subject to Federal and state law and regulations.  Interest rates
     charged by the Company on loans are affected principally by the demand
     for such loans and the supply of money available for lending purposes
     and the rates offered by the Company's competitors.  These factors
     are, in turn, affected by general economic conditions, monetary
     policies of the Federal government, including the Federal Reserve
     Board, legislative tax policies and governmental budgetary matters.

     First Mortgage Lending.  The Company offers first mortgage loans
     secured by one-to-four family residences, including townhouse and
     condominium units.  Typically, such residences are single family homes
     that serve as the primary residence of the owner. Loans may be
     internally originated or purchased from other sources such as mortgage
     bankers and other financial intermediaries.  One-to-four family
     residential mortgage loans are generally underwritten to Federal
     National Mortgage Association ("FNMA") or Federal Home Loan Mortgage
     Corporation ("FHLMC") guidelines, except that loans may exceed the
     maximum loan limits for the FNMA or the FHLMC.

     During 1997, as a result of a tightened interest rate environment and
     increased competition, total one-to-four family first mortgage loans
     decreased $21.4 million, or 8.0%, to $244.4 million at December 31,
     1997 from $265.7 million at December 31, 1996.  This decrease
     reflected normal principal amortization and accelerated prepayments,
     partially offset by originations of $9.7 million of one-to-four family
     first mortgage loans.  The Company did not emphasize one-to-four
     family lending during 1997, as the spreads between competitive rates
     being offered and the cost of funding with consideration of credit and
     duration risks, was not a sufficient incentive for new investment.  Of
     the one-to-four family first mortgage loans outstanding at the current
     year end, 82.2% were ARM loans and 17.8% were fixed rate 15 and 30
     year loans.  The interest rate adjustment period on ARM loans ranges
     between 1 and 10 years, and as of December 31, 1997, the weighted
     average adjustment period approximated 3.0 years. The Company may
     offer ARM loans on which the interest rate for an initial period may
     be less than the fully indexed rate, although to be eligible, the
     Company requires that the borrower qualify for the maximum payment
     possible after the initial interest rate adjustment. ARM and fixed
     rate mortgages are originated for a term of up to 30 years.  The
     Company generally charges origination fees of up to 2.0% on one-to-
     four family residential mortgage loans.

     Generally, ARM loans pose credit risks different from the risks in
     fixed-rate loans, primarily because as interest rates rise, the
     underlying payments of the borrower rise, thereby increasing the
     potential for default.  At the same time, the marketability of the
     underlying property may be adversely affected by higher interest
     rates.

     The Company has emphasized and plans to continue to emphasize the
     origination of commercial business, commercial mortgage, and multi-
     family loans from in and around its market area.  The current non-
     residential loan portfolio consists of loans to businesses located in
     and secured by properties in New Jersey.  As a result of the Company's
     emphasis, these loans continue to be the fastest growing segment of
     the Company's loan portfolio.

     The Company's commercial and multi-family real estate loan portfolio
     is secured primarily by apartment buildings, mixed-use buildings,
     small office buildings and warehouses.  Commercial and multi-family
     real estate loans generally have terms that do not exceed 15 years and
     have a variety of rate adjustment features and other terms.  The loans
     are usually made in amounts up to 75% of the appraised value of the
     property securing the loan.  Adjustable rate commercial and multi-
     family real estate loans provide for a margin over either the U.S.
     Treasury security adjusted to a constant maturity of five years, with
     periodic adjustments after five years, or the Prime Rate as reported
     in the Wall Street Journal, or to a lesser extent, the Company also
     offers commercial and multi-family real estate loans with a margin
     over short-term U.S. Treasury securities or tied to other published
     indices.  In underwriting these loans, the Company  analyzes the
     current financial condition of the borrower, the borrower's credit
     history, and the reliability and predictability of the cash flow
     generated by the property securing the loan.  The Company generally
     requires personal guarantees of the borrowers.  Appraisals on
     properties securing commercial real estate loans originated by the
     Company are performed by independent appraisers approved by the
     Company's Board of Directors.  Updated financial statements are
     generally obtained, reviewed and analyzed annually to assure the
     strength of the borrower.

     Multi-family and commercial real estate loans present a higher level
     of risk than loans secured by one-to-four family residences.  This
     greater risk is due to several factors, including the concentration of
     principal in a limited number of loans and borrowers, the effect of
     general economic conditions on income-producing properties and the
     increased difficulty of evaluating and monitoring these types of
     loans.  Furthermore, the repayment of loans secured by multi-family
     and commercial real estate is typically dependent upon the successful
     operation of the related real estate project.  If the cash flow from
     the project is reduced (for example, if leases are not obtained or
     renewed, or a bankruptcy court modifies a lease term, or a major
     tenant is unable to fulfill its lease obligations), the borrower's
     ability to repay the loan may be impaired.

     Commercial Business Loans.  During 1997, the Company continued with
     its strategy of focusing its efforts on the origination of commercial
     business loans.  These loans are secured by business assets other than
     real estate such as equipment, inventory, machinery, accounts
     receivable, and vehicles, and are usually guaranteed by principals of
     the business.  Commercial business loans are in amounts which range
     from $50,000 to $2,500,000 at interest rates which are indexed to the
     prime rate, and for durations which coincide with the nature of the
     collateral, but not beyond ten years.  The Company's target market is
     enterprises with annual sales between $1 million and $25 million.
     Commercial business loans present a higher level of risk than do loans
     secured by one-to-four family residences.  The Company underwrites
     these loans by analyzing the current financial condition of the
     borrower including current and expected cash flows and historical and
     projected financial performance.  The Company also analyzes the value
     of the collateral available as security, and the borrower's credit
     history.  The Company seeks to maintain an active relationship with
     its commercial business borrowers in order to service their banking
     needs, and to keep current with their financial and operational
     condition.

     At December 31, 1997, the Company's total loan portfolio included
     $31.4 million, or 9.4% of commercial and multi-family mortgage loans
     and $16.1 million, or 4.8% of commercial business loans.  The combined
     total of $45.5 million at December 31, 1997 compares to $26.2 million
     of like loans at December 31, 1996.  In addition, at December 31,
     1997, $4.3 million, or 1.3% of the Company's total loan portfolio
     consisted of construction loans, an increase of $3.9 million as
     compared to $0.4 million at December 31, 1996.  The growth in these
     product lines has been the consequence of management's strategy to
     develop higher yielding, variable rate based, non-residential loans.
     This strategy helps to diversify the Company's loan offerings and
     portfolio mix.

     Consumer Loans.  The Company offers second mortgages secured by owner-
     occupied residences wherein the property may not be encumbered by
     other than a first mortgage loan.  These loans are generally subject
     to a 75% combined loan-to-value limitation, including any other
     outstanding mortgage or lien on the property.  As of December 31,
     1997, second mortgage loans amounted to $18.1 million, or 5.4% of
     total loans, an increase of $0.8 million, or 4.7%, from December 31,
     1996.

     The Company also originates and purchases FHA Title 1 improvement
     loans.  It originates these loans both on a direct basis and through a
     network of improvement contractors/dealers who are approved by the
     Company under FHA guidelines.  The Company purchases FHA Title 1
     improvement loans from FHA approved lenders who have originated the
     loans in accordance with the Company's lending criteria and within FHA
     underwriting guidelines.  These guidelines provide for more liberal
     equity and debt to income ratios than for non-FHA improvement loans.
     In the event of default, the FHA insures 90% of the principal balance
     plus accrued interest.  The interest rates are normally higher than
     the interest rates for one-to-four family mortgage loans due to the
     more liberal underwriting standards.  FHA Title 1 improvement loans
     amounted to $15.1 million, or 4.5% of total loans at December 31, 1997
     compared to $13.6 million as of December 31, 1996, an increase of $1.5
     million, or 11.0%.

     Remaining other loans are home equity lines of credit, other home
     improvement loans, secured and unsecured personal loans, and
     automobile loans.

     The following table sets forth the composition of the Company's loan
     portfolio in dollar amounts and in percentages of the total portfolio
     at the dates indicated:

     Table 3:  Composition of Loan Portfolio

     <TABLE>
     <CAPTION>
                                           At December 31,                              At March 31,
                          -------------------------------------------------   -------------------------------
                                1997              1996            1995             1995            1994
                          ----------------   --------------- ---------------  --------------  --------------

                                    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>

     First mortgage
     loans:
      One-to-four
       family             $244,364   73.0%  $265,748  81.2% $157,686   79.0% $137,317   79.0% $151,683   80.1%
      Multi-family          12,190    3.6      7,725   2.4     4,742    2.4     3,978    2.3     4,217    2.2
      Non-residential       19,219    5.8      9,304   2.9     4,055    2.0     1,987    1.1     2,600    1.4
      Construction           4,325    1.3        404    .1     3,707    1.9     4,217    2.4     4,924    2.6
      Land                     -       -         -      -         40      -     1,017     .6     2,250    1.2
                          --------  -----   -------- -----  --------  -----  --------  -----  --------  -----
       Total first
        mortgage loans     280,098   83.7    283,181  86.6   170,230   85.3   148,516   85.4   165,674   87.5
                          --------  -----   -------- -----  --------  -----  --------  -----  --------  -----

     Commercial business    16,066    4.8      9,210   2.8      -        -       -        -       -        -
                          --------  -----   -------- -----  --------  -----  --------  -----  --------  -----
     Consumer loans:
      Second mortgage       18,110    5.4     17,295   5.3    13,938    7.0    12,493    7.2    11,543    6.1
      FHA insured home
       improvement          15,115    4.5     13,613   4.2    12,527    6.3    10,611    6.1     9,701    5.1
      Unsecured consumer     1,896     .6      1,829    .6     1,088     .6       489     .3       382     .2
      Home equity lines
       of credit             1,485     .4      1,147    .4     1,263     .6     1,344     .8     1,544     .9
      Automobile loans         596     .2        413    .1        87     -         -      -        -       -
      Home improvement       1,051     .3        154    -          6     -         -      -        -       -
      Other                    197     .1        256    -        422     .2       397     .2       450     .2
                          --------  -----   -------- -----  --------  -----  --------  -----  --------  -----
       Total consumer
        loans               38,450   11.5     34,707  10.6    29,331   14.7    25,334   14.6    23,620   12.5
                          --------  -----   --------  ----  --------  -----  --------  -----  --------  -----
     Total loans           334,614  100.0%   327,098 100.0%  199,561  100.0%  173,850  100.0%  189,294  100.0%
                                    =====            =====            =====            =====            =====
      Less (plus):
       Unearned discounts/
       (premiums) and
       deferred loan fees,
       net                    (728)             (985)             547             893            1,099
       Allowance for loan
        losses               2,833             2,613            3,241           3,048            2,818
                          --------          --------         --------         --------        --------
        Total loans, net  $332,509          $325,470         $195,773         $169,909        $185,377
                          ========          ========         ========         ========        ========
     </TABLE>

     Credit Quality.  Maintenance of asset quality is one of management's
     most important objectives.  Management reviews delinquent loans on a
     continuous basis and, through an Asset Review Committee which meets
     quarterly to review the Company's loan portfolio, makes changes in the
     classification of assets which the Committee deems necessary. The
     Company hires outside counsel experienced in collections and
     foreclosure to pursue collections and to institute foreclosure and
     other procedures on the Company's delinquent loans.

     Lending policies are reviewed and approved annually by the Board of
     Directors of the Company.  Credit approval limits have been
     established for each of the Company's loan officers, however, the
     Company's Loan Committee approves all credit extensions exceeding
     $500,000.  It is the Company's policy for loans secured by real estate
     that an appraisal be obtained to ensure adequate value of the secured
     property and that title insurance be obtained on all first mortgage
     loans.  The Company has engaged an independent consulting firm which
     specializes in loan reviews to perform loan reviews and provide
     independent reports to the Company's Board of Directors quarterly.  In
     addition, loan officers monitor the Company's loans outstanding to
     identify potentially deteriorating loan situations which are reported
     to the Asset Review Committee.  This process allows management to
     implement a strategy to address potential credit concerns on a timely
     basis.  The Company's internal Audit Department reviews loan
     documentation and collateral as part of its regular audit procedures.

     Delinquent Loans and Foreclosed Assets

     Federal regulations provide for the classification of loans and other
     assets such as debt and equity securities considered by the OTS to be
     of lesser quality 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 savings institution
     will sustain "some loss" if the deficiencies are not corrected.
     Assets classified as "doubtful" have all of the weakness 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 that do not expose the savings
     institution to risk sufficient to warrant classification in one of the
     aforementioned categories, but which possess some weaknesses, are
     required to be designated "special mention" by management.  Loans
     designated as special mention are generally loans that have exhibited
     some potential weakness that, if not corrected, could increase the
     level of risk in the future.

     At December 31, 1997, the Company had loans categorized as special
     mention of $1.2 million, which consisted of $0.4 million in first and
     second mortgage loans, and $0.8 in commercial mortgage loans.
     Substandard assets totaled $4.7 million and consisted of $0.4 million
     in real estate owned ("REO"), $2.2 million in commercial loans, $1.7
     million in first and second mortgage loans, and $0.4 million in
     consumer loans.  In addition, at that date, the Company had doubtful
     loans of $0.3 million consisting of first and second mortgage loans
     and $0.1 million of loans classified as loss which are fully reserved.

     REO is transferred from the loan portfolio at the lower of cost or
     estimated fair value.  If the estimated fair value is lower than cost,
     such difference is charged to the allowance for loan losses at the
     time of transfer.  The Company also maintains a loss allowance for
     other real estate losses for subsequent declines to reduce the
     carrying book value to the estimated fair value of REO and estimated
     costs to sell.

     Interest is not accrued on FHA insured home improvement loans where
     interest or principal is 120 days or more past due, and on all other
     loans, where interest or principal is 90 days or more past due, unless
     the loans are well secured and in the process of collection.  Once the
     loans reach non-accrual status, accrued but unpaid interest is
     reversed and interest income is subsequently recognized only to the
     extent that payments are received.  Interest on loans that have been
     restructured is accrued according to the renegotiated terms.

     Table 4 below sets forth information regarding the Company's non-
     performing assets.  At December 31, 1997, the Company had no
     restructured loans within the meaning of Statement of Financial
     Accounting Standards ("SFAS") No. 15 and SFAS No. 114 issued by the
     Financial Accounting Standards Board ("FASB"):


     Table 4: Non-performing Assets

     <TABLE>
                                         At December 31,        At March 31,
                                     ------------------------  ---------------

                                       1997    1996    1995    1995      1994
                                       ----    ----    ----    ----      ----
                                                   (Dollars in thousands)
     <S>                            <C>       <C>      <C>     <C>    <C>

     Mortgage loans delinquent 90
       days more and still accruing  $  255   $  404  $  647  $  558   $   714
     Non-accrual delinquent
       mortgage loans                 1,767    1,884   1,472   1,802     5,653
     Non-accrual construction
      loans                              -        -    3,273   3,954     4,924
     Non-accrual commercial loans        38       -       -       -         -
     Other non-performing loans
       delinquent 90 days or more       443      450     229     259       310
                                     ------   ------  ------  ------   -------
        Total non-performing loans    2,503    2,738   5,621   6,573    11,601
     Total REO                          440      563     652     825     1,487
                                     ------   ------  ------  ------   -------
        Total non-performing
          assets                     $2,943   $3,301  $6,273  $7,398   $13,088
                                     ======   ======  ======  ======   =======
     Non-performing loans to total
       net loans                       0.75%    0.84%   2.87%   3.87%     6.26%
                                       ====     ====    ====    ====      ====
     Non-performing assets to
       total net loans and REO         0.88%    1.01%   3.19%   4.33%     7.00%
                                       ====     ====    ====    ====      ====
     Non-performing loans to total
       assets                          0.37%    0.43%   1.01%   1.38%     2.45%
                                       ====     ====    ====    ====      ====
     Non-performing assets to
       total assets                    0.44%    0.52%   1.12%   1.56%     2.76%
                                       ====     ====    ====    ====      ====
     Allowance for loan losses to
       non-performing loans          113.18%   95.43%  57.66%  46.37%    24.29%
                                     ======    =====   =====   =====     =====
     Allowance for loan losses to
       total net loans                 0.85%    0.80%   1.66%   1.79%     1.52%
                                       ====     ====    ====    ====      ====
     </TABLE>

     In addition to the loans included in the risk elements table above,
     the Company has at December 31, 1997, 48 loans delinquent between 31
     days and 90 days totaling $729,000.  These loans also have been
     considered in the analysis of the adequacy of the allowance for loan
     losses.

     For the years ended December 31, 1997, 1996, and 1995, the amounts of
     interest income that would have been recorded on non-accrual loans,
     had they been current, approximated $0.1 million, $0.2 million, and
     $0.4 million, respectively.  Also, for the years ended December 31,
     1997, 1996, and 1995, the amount of interest income on non-performing
     loans that was included in income approximated $80,000, $75,000, and
     $21,000, respectively.

     The Company's REO before allowance for losses on REO, was $638,000 at
     December 31, 1997 as compared to $741,000 at December 31, 1996.
     During 1997, $275,000 of new REO was acquired which was offset by the
     sale of $378,000 in existing REO properties.  The sales of REO
     reflects the continued efforts by the Company to dispose of REO
     outstanding in a timely manner.

     Allowance for Loan Losses

     The allowance for loan losses is established through charges
     (provisions for loan losses) to earnings.  Loan losses are charged
     against the allowance for loan losses when management believes that
     the recovery of principal is unlikely.  If, as a result of loans
     charged off or increases in the size or risk characteristics of the
     loan portfolio, management considers the allowance to be below the
     level necessary to absorb future loan losses on existing loans, an
     additional provision for loan losses is made to increase the allowance
     for loan losses to the level considered necessary to absorb possible
     losses on existing loans that may become uncollectible.  Management
     considers such factors as changes in the nature and volume of the loan
     portfolio, overall portfolio quality, review of specific problem loans
     and economic conditions that may affect the borrowers' ability to pay
     and the realization of collateral in determining the adequacy of the
     allowance.

     Management believes that the allowance for losses on loans is
     adequate.  While management uses available information to recognize
     losses on loans, future additions to the allowance may be necessary
     based on changes in economic conditions in the Company's market area.
     In addition, various regulatory agencies, as an integral part of their
     examination process, periodically review the Company's allowance for
     losses on loans.  Such agencies may require the Company to recognize
     additions to the allowance based on their judgments about information
     available to them at the time of their examinations.

     INVESTMENT ACTIVITIES

     The Company's earning assets, other than loans receivable, are its
     mortgage-backed securities, debt and equity securities, and Federal
     funds sold.  Mortgage-backed securities are directly insured or
     guaranteed by the GNMA, FNMA or FHLMC.  Debt and equity securities
     primarily consist of U.S. Government and agency securities, and
     corporate debt.  At December 31, 1997, investments increased $30.4
     million, or 10.5%, to $319.4 million compared to $289.0 million at
     December 31, 1996.  During 1997, mortgage-backed securities increased
     $49.1 million, or 20.4%, primarily from the purchase of $148.2 million
     of these securities which replaced lower-yielding securities sold
     during the third and fourth quarters of 1996.  Partially offsetting
     the purchases were mortgage-backed security sales of $42.6 million and
     $56.5 million of principal amortization and accelerated prepayments
     due to falling interest rates during the second half of the year.
     Offsetting the net increase in mortgage-backed securities were
     reductions of debt securities of $21.2 million, or 52.6%, resulting
     from $31.0 million of calls and maturities, partially offset by
     purchases of $9.6 million.

     The investment policy of the Company, which is approved by the Board
     of Directors and implemented by certain officers as authorized by the
     Board, is designed to provide and maintain liquidity and to manage the
     interest rate sensitivity of its overall assets and liabilities, and
     to generate a favorable return without incurring undue interest rate
     and credit risk.  In establishing its investment strategies, the
     Company considers its business and growth plans, the economic
     environment, its interest rate sensitivity position, the types of
     securities to be held, and other factors.

     Current regulatory and accounting guidelines regarding investment
     portfolio policy require securities to be classified as "held to
     maturity", "available for sale" or "trading."  In November 1995, the
     FASB issued "Special Report, A Guide to Implementation of Statement
     115 on Accounting for Certain Investments in Debt and Equity
     Securities" within which there was offered transition guidance
     permitting an enterprise to reassess the appropriateness of the
     classifications of all of its securities before December 31, 1995.
     The Company reassessed its classifications and on December 5, 1995, it
     transferred all of its securities previously classified as held to
     maturity, with an amortized cost of $291.3 million, to the available
     for sale classification. The related unrealized gain as of the date of
     transfer was $1,548,000 which has been recognized and reported, net of
     income tax of $557,000, as a separate component of shareholders'
     equity. At December 31, 1997 and 1996, all of the Company's securities
     were classified as available for sale. Decisions to purchase or sell
     these securities are made within the framework of the Company's
     investment policy and are based on economic conditions including
     changes in interest rates, liquidity, and asset liability management
     strategies.


     The following table sets forth the composition of the Company's
     investment in Federal funds sold, debt and equity securities and
     FHLBNY stock at the dates indicated:

     Table 5:  Federal Funds Sold, Debt and Equity Securities
     <TABLE>
     <CAPTION>
                                            At December 31,
                              --------------------------------------------
                                  1997            1996           1995
                             --------------   -------------  -------------

                                    Percent          Percent         Percent
                                       of               of             of
                             Amount  Total   Amount   Total  Amount   Total
                             ------  -----   ------   -----  ------   -----
                                         (Dollars in thousands)
     <S>                     <C>     <C>     <C>      <C>   <C>      <C>
     Federal funds sold     $  -        - %  $  -       - % $ 1,650     1.9%
     Debt and equity
       securities:
      U.S. Government and
       agency securities     14,819   50.5    40,103  83.5   80,017    93.7
      Corporate debt          4,065   13.8       -      -       -        -
      Other                     209     .7       140    .3      109      .1
                            -------  -----   -------  ----   ------    ----
     Sub-total               19,093   65.0    40,243  83.8   81,776    95.7
     FHLBNY stock            10,260   35.0     7,768  16.2    3,627     4.3
                            -------  -----   -------  ----   ------    ----
     Total Federal funds
      sold, debt and
      equity securities
      and FHLBNY stock      $29,353  100.0%  $48,011 100.0% $85,403   100.0%
                            =======  =====   ======= =====  =======   =====
     </TABLE>

     The following table sets forth the composition of the Company's
     mortgage-backed securities portfolio in dollar amounts and in
     percentages of its total portfolio at the dates indicated:


     Table 6:  Mortgage-backed Securities
     <TABLE>
     <CAPTION>
                                              At December 31,
                             --------------------------------------------------
                                  1997             1996              1995
                             --------------   --------------   ----------------
                                    Percent           Percent           Percent
                                       of               of                of
                            Amount   Total   Amount    Total   Amount    Total
                            ------   -----   ------    -----   ------    -----
                                          (Dollars in thousands)
     <S>                    <C>       <C>    <C>       <C>     <C>        <C>
     Mortgage-backed
      securities:
       GNMA                $ 88,692    31.5% $ 77,717   33.0%   $ 51,435   20.1%
       FHLMC                109,206    38.7    92,262   39.1     107,021   41.7
       FNMA                  84,111    29.8    65,706   27.9      97,919   38.2
                           --------   -----  --------   ----     -------   ----
     Total mortgage-
      backed securities     282,009   100.0%  235,685  100.0%    256,375  100.0%
                                      =====            =====              =====
     Unamortized
      premiums, net           8,035             5,289              3,732
                           --------          --------             ------
     Mortgage-backed
      securities, net      $290,044          $240,974           $260,107
                           ========          ========           ========
     </TABLE>

     DEPOSITS

     Deposit accounts have traditionally been the principal source of the
     Company's funds for use in lending and for other general business
     purposes.  The Company does not actively solicit brokered deposits. In
     addition to deposits, the Company's sources of funds are primarily
     borrowings from the FHLBNY, loan and investment security repayments
     and cash flow generated from operations including interest payments on
     loans and investment securities and fees.  See "Liquidity and Capital
     Resources."

     The Company offers a variety of deposit accounts having a range of
     interest rates and terms.  The Company presently offers passbook
     accounts, demand deposit accounts, NOW accounts, money market
     accounts, fixed interest rate certificates of deposit with varying
     maturities and individual retirement accounts ("IRA's").  The Company
     emphasizes retention of its core deposits, as management believes that
     these deposits are a much more stable source of funds and are less
     sensitive to changes in the market level of interest rates.  However,
     depending on its funding needs, interest rate risk management and
     other considerations, the Company may from time to time emphasize the
     origination of certificates of deposit.  At December 31, 1997 and
     1996, the percentage of core deposits to total deposits was 58.3% and
     54.2%, respectively.

     At December 31, 1997, deposits were $443.9 million compared to $457.1
     million at December 31, 1996, a decrease of $13.2 million.  During
     1997, the Company's strategy was, and continues to be, to not match
     the competitions' aggressive interest rates unless the Company
     believes that relationships with deposit holders who have other
     deposit or loan relationships are in jeopardy.  As a result, higher
     costing certificates of deposit, through controlled runoff, decreased
     from $209.2 million at December 31 1996 to $185.2 million at December
     31, 1997.  Also during 1997, through the Company's continuing cross
     selling efforts, marketing strategy and development of new customer
     relationships, core deposits grew from $247.8 million at December 31,
     1996 to $258.6 million at December 31, 1997.  The majority of the core
     deposit growth during 1997 was in non-interest-bearing deposit
     accounts which increased $8.1 million, or 49.3%.  This increase
     resulted primarily from new commercial and municipality relationships.

     During calendar year 1998, $156.8 million of the Company's
     certificates of deposit will be maturing.  Certificates currently
     carry interest rates ranging from 2.50% to 7.07% and a weighted
     average interest rate of 5.04%.  As of December 31, 1997,
     the Company's current  interest rates offered, for certificates with
     similar maturities, were between 2.90% and 5.50%.  Management does not
     believe that the maturity of these time deposits will have a material
     impact to the Company's liquidity.

                         LIQUIDITY AND CAPITAL RESOURCES

     The Company's liquidity is a measure of its ability to fund loans,
     withdrawals of deposits and repay maturing borrowed funds in a cost
     effective manner.  The Company's primary financing sources are
     deposits obtained in its own market area, advances from the FHLBNY and
     securities sold under repurchase agreements.  Other sources of funds
     include scheduled amortization and prepayments of loan principal and
     mortgage-backed securities, maturities of debt securities and funds
     provided by operations.  At December 31, 1997, the Company had total
     liquid assets (consisting of cash and amounts due from banks, Federal
     funds sold, debt, equity and mortgage-backed securities, having final
     maturities within one year, and accrued interest from debt and
     mortgage-backed securities), which represented 0.9 % of total assets
     and 1.4% of total deposits at December 31, 1997.  At December 31, 1997
     the Company had available to it $19.5 million under a line of credit
     with the FHLBNY, expiring October 31, 1998 and approximately $21.5
     million of excess collateral pledged with the FHLBNY.  In addition,
     the Company has approximately $52.0 million in unpledged debt, equity
     and mortgage-backed securities which could be used to collateralize
     additional borrowings. Finally, all of the Company's securities are
     available for sale.

     At December 31, 1997, capital resources were sufficient to meet
     outstanding loan commitments of $26.7 million, commitments on unused
     lines of credit of $8.6 million and commercial letters of credit of
     $1.5 million.  Certificates of deposit which are scheduled to mature
     in one year or less from December 31, 1997 totaled $156.8 million.
     Management is unable to predict the amount of such deposits that will
     renew with the Company.  As a result of the Company's liquidity
     position, management does not believe the Company's operations will be
     materially affected by a failure to renew these deposits.  However,
     experience indicates that a significant portion of such deposits
     should remain with the Company.

     In addition to $8.6 million of funds provided from 1997 operating
     activities, the Company's current year principal funding needs were
     primarily provided by net increases on advances from the FHLBNY of
     $53.1 million, and net proceeds received on debt securities of $21.4
     million.  During 1997, cash provided was principally used for
     investing and financing activities.  Purchases of mortgage-backed
     securities, net of repayments and sales, totaled   $49.1 million and
     origination and purchase of loans exceeded principal collections by
     $8.0 million.  In addition, funds used for financing activities
     included decreases in deposits, principally to liquidate high costing
     certificates of deposit, purchase and retirement of the Company's
     common stock, and for 1997 dividend payments.

     During the year ended December 31, 1996, the principal requirement for
     funds was for lending activities.  Purchase and originations of loans
     exceeded principal collections by $130.6 million.  The principal
     sources of funding for lending were increases in borrowings from the
     FHLBNY, net of repayments of $62.5 million, an excess of principal
     repayments, maturities, calls and sales of mortgage-backed securities
     and debt and equity securities over purchases of mortgage-backed
     securities of $53.1 million and an increase in deposits of $19.0
     million.

     Liquidity management is an important function and component of
     managements strategy.  It allows the Company to support asset growth
     while satisfying the borrowing need and deposit withdrawal
     requirements of customers.  As interest rates increase or decrease
     based on the economic environment, management determines the Company's
     anticipated funding requirements and the best source and duration of
     funding available.  Interest rate market conditions determine the
     duration and level of borrowed funds the Company will use to leverage
     its excess capital.  Purchases of mortgage-backed securities continued
     to increase through 1997, as the Company sought to further balance and
     replace lower-yielding mortgage-backed and debt securities sold during
     the third and fourth quarter of 1996 with higher yielding intermediate
     term mortgage-backed securities.  These purchases along with loan
     growth during 1997 were funded with borrowings from the FHLBNY.
     During 1997, the Company increased and extended the term of its
     borrowings.  Of the outstanding borrowed funds at December 31, 1997,
     $14.2 million mature overnight and the balance has final maturity
     dates ranging from July 2000 to September 2002.  All have earlier call
     options at the lender's discretion. Borrowings of $86.0 million with
     interest rates ranging from 5.43% to 5.54% are first callable in 1998,
     and borrowings of $60.0 million with interest rates of 5.52% are first
     callable in November 1999.


     RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

     General. Net income for the year ended December 31, 1996 ("1996"), was
     $3.2 million, or $0.68 per share basic and diluted, as compared to
     $2.5 million for the year December 31, 1995 ("1995").  1996 includes a
     pre-tax charge of $2,651,000, representing the Company's portion of a
     one-time industry-wide assessment on thrift institutions to
     recapitalize the SAIF.  The assessment reduced net income by
     $1,697,000, or $0.37 per share, basic and assuming dilution.
     Exclusive of the SAIF assessment, the net income of the Company for
     1996 was $4.9 million, or $1.05 per share basic and assuming dilution,
     which is an increase of $2.4 million over 1995 net income.  This
     increase is primarily the result of increased loans and investments,
     which the Company has made since September 1995, that has lead to
     higher net interest income, partially offset by increased non-interest
     expense incurred to position the Company for the growth which it has
     experienced.

     Net Interest Income.  Net interest income of $21.6 million for 1996
     increased $4.6 million, or 27.5%, from $17.0 million in 1995. This
     increase is the result of an increase in interest income larger than
     the increase in interest expense.

     Interest Income.  Interest income of $45.3 million was up $10.0
     million, or 28.4%, in 1996 over 1995 interest income of $35.3 million.
     The increase reflects a 30% rise in average interest-earning assets
     during 1996 compared to 1995, as a result of asset investments funded
     by:  (1) the proceeds of the Company's initial public offering at the
     end of September 1995; (2) increased borrowing during 1996 from the
     FHLBNY; and (3) increased core deposits during 1996.

     The average balance of total interest-earning assets for 1996
     increased $144.3 million to $626.6 million from $482.2 million during
     1995, principally from growth in first mortgage lending and from
     fourth quarter 1995 investments in mortgage-backed securities.  During
     1996, as part of its strategy to grow and diversify its assets, the
     Company increased its net loan portfolio 66% including non-residential
     mortgages and commercial loans, which increased to $18.5 million at
     December 31, 1996 compared to $4.1 million at December 31, 1995.  In
     addition, during 1996 a full year's income was earned from investments
     made during the 1995 fourth quarter.

     The Company's mortgage lending in 1996 was at market rates which were
     less than those imbedded in its prior year's average balances.  This
     was largely offset by redeployment of proceeds from sales of lower
     yielding securities into higher yielding assets.  The combined effect
     of these factors upon average yields for 1996 was a reduction of 8
     basis points to 7.23% from 7.31% in 1995.

     The decrease in the actual balance of interest-earning assets at
     December 31, 1996 as compared to the 1996 average balance reflects the
     sale during the latter part of 1996 of mortgage-backed securities and
     debt securities, which were all held as available for sale.  The
     proceeds were used to repay borrowings and to fund growth in the
     Company's net loan portfolio.  The increase in average yield on the
     balance sheet for December, 1996 over the average yield for the full
     year 1996 reflects the change in the mix of the interest-earning
     assets which occurred during the latter part of 1996.  This increased
     the yield on interest-earning assets by 21 basis points to 7.44% at
     December 31, 1996 as compared to 7.23% for the year ended 1996.

     Interest Expense.  Interest expense increased by $5.4 million, or
     29.3%, during 1996 compared to the previous year.  Of this, interest
     expense on borrowed funds increased $4.0 million and interest expense
     on deposits increased $1.4 million.  The increase in interest expense
     on borrowed funds was due to a significant increase in the average
     balance of outstanding borrowings at average rates substantially lower
     than those of the prior year; and the increase in interest expense on
     deposits results from more core deposits in 1996 than 1995, at
     slightly higher rates.

     The average balance of borrowed funds during 1996 increased $85.6
     million, or 222.6%, to $124.1 million as compared to the same period
     for 1995.  This increase in borrowings reflects implementation of the
     Company's strategy to leverage its excess capital.  These borrowings,
     along with increased deposits and the capital provided through the
     Company's initial public offering, have funded the increase in assets
     which has occurred since September 1995.  The weighted average
     borrowing cost decreased during 1996 by 195 basis points from 7.45% in
     1995 to 5.50% in 1996.  The decrease reflects the Company's decision
     in December 1995 to repay $23.9 million of higher cost, longer term
     borrowings and replace it with short-term, lower cost 30 to 90 day
     borrowings.  The Company maintained that duration with all of its
     borrowings until December 1996 when it replaced $60 million of its
     short-term borrowings with a five year, 5.52% borrowing from the
     FHLBNY, which is callable after three years.  At December 31, 1996,
     the Company's remaining short-term borrowings were $47.2 million,
     which mature within 90 days.

     The average balance of interest-bearing deposits increased $23.6
     million, or 5.8%, to $433.7 million for 1996 from $410.1 million in
     1995.  Also, the average cost of interest-bearing deposits grew to
     3.88% during 1996 as compared to 3.76% for the previous year.  This
     cost increase primarily reflects the full period's effect of changes
     in the Company's costs of certificates of deposit made when the
     Company began, in late 1994, to market CD's with competitive rates,
     generally for terms of less than 18 months in conjunction with
     advertising campaigns geared toward re-emphasizing the Company's
     presence in its markets.  Although these rates were not the highest in
     the Company's market territory, they were higher than those it
     traditionally offered.  It continued with these rate offerings when
     the Company opened new branches in June and December of 1995 and March
     and October of 1996.  In addition, interest rates on savings accounts
     have increased as a result of paying bonuses on statement savings
     accounts, on a limited basis, to customers of those new branches.
     Also, during mid-third quarter of 1995, the Company started to market
     its products, including deposits to affinity groups.  Under this
     program, the Company offers higher savings rates which are tied to the
     three month U.S. Treasury rate.

     Provision for Loan Losses.  The provision for loan losses increased
     $111,000 to $500,000 for the year ended December 31, 1996 from
     $389,000 for the prior year.  The provision for 1996 was determined by
     management after review of, among other things, the Company's loan
     portfolio, the risks inherent in the Company's lending activities and
     the local economy in the Company's market areas.  As of December 31,
     1996, non-performing loans, defined as non-accrual loans and accruing
     loans delinquent 90 days or more, decreased $2.9 million, or 51.3%, to
     $2.7 million at December 31, 1996 from $5.6 million at December 31,
     1995.  At December 31, 1996, the allowance for loan losses was $2.6
     million, compared to $3.2 million at December 31, 1995, a decrease of
     $0.6 million, or 19.4%.  Despite this decrease, the percentage of the
     allowance for loan losses to total non-performing loans increased to
     95.4% at December 31, 1996 from 57.7% at December 31, 1995 because
     $2.4 million of a $3.3 million non-performing construction loan was
     repaid during 1996.  The remaining balance on this loan of $848,000
     was charged against a specific reserve of $1.5 million which had
     previously been established for this loan.  After the charge-off, the
     remaining balance of the specific reserve was allocated within the
     allowance for loan losses to other classes of loans.

     Non-interest Income.  Non-interest income decreased $0.8 million to
     $1.3 million for 1996 compared to $2.1 million for 1995.  The
     principal reason was the loss of $1.1 million on the sale of
     securities during 1996 as compared to a loss of $340,000 on the sale
     of securities for 1995.  The securities sold in 1996 had an
     approximate book value of $112.5 million.  Proceeds from the 1996
     sales, in conjunction with additional borrowings and deposits, were
     used to fund loan growth and for redeployment into higher yielding
     securities.  The effect of this loss was to reduce 1996 earnings per
     share by $0.15, basic and assuming dilution.

     Aside from the effect of the above described securities transactions,
     1996 includes $917,000 from the collection of unaccrued interest
     associated with loans, the principal of which has been repaid, as
     compared to $932,000 in collections for the same period of the prior
     year.  The interest on all of these loans has been completely repaid.
     The effect of this non-recurring income to 1996 earnings per share was
     $0.12, basic and assuming dilution.  Absent the above mentioned losses
     and credits, non-interest income decreased $89,000 during 1996 as
     compared to the same period of the prior year.  This decrease occurred
     in the first quarter of 1996, primarily due to decreases in
     commissions from annuity sales as the Company focused its resources on
     developing its new branches and marketing its core products rather
     than selling annuities.

     Non-interest Expense.  Non-interest expense totaled $18.4 million for
     1996, an increase of $4.3 million, or 30.8%, as compared to $14.1
     million incurred during the prior year.  Exclusive of the SAIF
     assessment, total non-interest expense increased $1.7 million, or
     12.0%, to $15.8 million for 1996 from $14.1 million in 1995.

     Salaries and employee benefits expenses for 1996 increased $1.3
     million, or 18.1%, compared to the prior year.  Of this amount,
     approximately $0.5 million was related to increased staffing
     requirements necessary to position the Company to achieve its
     marketing and operational objectives, including increased executive
     and loan administrative staff, and staffing and training for the
     Company's three new branches opened during the period since December
     1995.  Other salary and benefit expenses, incurred for the same
     reason, include provisions for additional incentive programs for
     employees at all levels of the Company, including $0.7 million
     associated with the Company's ESOP established September 29, 1995 and
     $0.2 million associated with the Employee RRP adopted midway through
     1996.  Finally, salary and benefit expenses also reflect normal salary
     increases from salary in place during the same period of the prior
     year.

     Occupancy costs increased $0.4 million, or 23.3%, to $2.1 million for
     1996 from $1.7 million for 1995.  The increase is principally the
     result of new lease costs for the three new branches the Company has
     opened since the quarter ended December 1995, and the related
     amortization of leasehold improvements to these branches as well as
     refurbishment of existing facilities.

     Data processing expense increased $0.1 million, or 18.9%, to $0.4
     million for 1996 compared to $0.3 million for the prior year.  This
     increase reflects additional costs as the Company upgraded its
     operating system and all of its applications to provide more
     capability for services to its customers base.

     Foreclosed real estate expense, net decreased $0.1 million, or 34.8%,
     to $0.1 million from $0.2 million for 1995.  The primary reason for
     this decrease was lower real estate tax, insurance, maintenance and
     repair expenses associated with foreclosed properties as compared to
     the prior year.

     Other non-interest expense increased $0.1 million, or 4.8%, to $2.7
     million compared to $2.6 million for the prior year, principally due
     to advertising and promotional expenses in conjunction with the growth
     of core deposits and the promotions associated with loan growth and
     new branches.

     Income Tax Expense.  Income taxes for 1996 reflect the tax effect of
     the pre-tax income recognized for 1996, partially offset by a reversal
     of a $702,000 tax liability, previously established, which expired
     during 1996. The effect of this reversal was to increase earnings per
     share $0.15, basic and assuming dilution for 1996.  Income tax expense
     for 1995 is solely the result of the tax effect of the pre-tax income
     recognized in that period.

                     IMPACT OF INFLATION AND CHANGING PRICES

     The financial statements and related financial data presented herein
     have been prepared in accordance with GAAP, which requires the
     measurement of financial position and operating results in terms of
     historical dollars, without considering changes in relative purchasing
     power over time due to inflation.

     Unlike most industrial companies, virtually all of the Company's
     assets and liabilities are monetary in nature.  As a result, interest
     rates generally have a more significant impact on a financial
     institution's performance than does the effect of inflation.

                                   MARKET RISK

     The Company's operations may be subject to a variety of market risks,
     the most material of which is the risk of changing interest rates.
     Most generally, interest rate risk ("IRR") is the volatility in
     financial performance, attributable to changes in market interest
     rates, which may result in either fluctuation of net interest income
     or changes to the economic value of the equity of the Company.

     The principal objective of the Company's IRR management activities is
     to provide maximum levels of net interest income while maintaining
     acceptable levels of interest rate and liquidity risk and facilitating
     the funding needs of the Company.

     Consistent with its definition of IRR, the Company measures earnings
     at risk and value at risk.  To measure earnings at risk, the Company
     utilizes an income simulation model which starts with a detailed
     inventory of balance sheet items and factors in the probability of the
     maturity and repricing characteristics of assets and liabilities,
     including assumed prepayment risks.  Simulation of net interest income
     takes into account the relative sensitivities of these balance sheet
     items to dynamic rates and projects their behavior over an extended
     period of time.  Simulation analysis of net interest income reflects
     both the possibility and probability of the behavior of balance sheet
     items.

     In addition to simulating net interest income to measure earnings at
     risk, the Company also measures IRR from the perspective of value at
     risk.  Such analysis is the measurement and management of IRR from the
     longer term perspective of the economic value of the equity of the
     Company.  This is performed through Net Portfolio Value (NPV) analysis
     which is intended to address the changes in equity value arising from
     movements in interest rates.  The NPV analysis first reprices all of
     the assets and liabilities under the current interest rate
     environment, then compares this result to repricing under a changed
     interest rate environment, thus evaluating the impact of immediate and
     sustained interest rate shifts across the current interest rate yield
     curve on the market value of the current balance sheet.  A significant
     limitation inherent in NPV analysis is that it is static.
     Consequently, there is no recognition of the potential for strategy
     adjustments in a volatile rate environment which would protect or
     conserve equity values.

     Changes in the estimates and assumptions made for IRR analysis could
     have a significant impact on projected results and conclusions.  These
     analyses involve a variety of significant estimates and assumptions,
     including, among others: (1) estimates concerning assets and
     liabilities without definite maturities or repricing characteristics;
     (2) how and when yields on interest-earning assets and costs of
     interest-bearing liabilities will change in response to movement of
     market interest rates; (3) prepayment speeds; (4) future cash flows;
     and (5) discount rates.  Therefore, these techniques may not
     accurately reflect the impact of general market interest rate
     movements on the Company's net interest income or the value of its
     economic equity.

     The table below sets forth the assumed change to the Company's
     estimated net portfolio value at December 31, 1997, based upon an
     immediate and sustained interest rate change from the interest rate
     yield curve at December 31, 1997 of plus 100 and 200 basis points and
     minus 100 and 200 basis points.

                                                    Change
                                                ----------------
                                      Amount    Amount   Percent
                                      ------    ------   -------
                                       (Dollars in thousands)
     Change in rates:
     +200 basis points                $55,053  $(24,267)  (31)%
     +100 basis points                $68,760  $(10,560)  (13)%
     Estimated Net Portfolio Value
      at December 31, 1997:           $79,320  $    -      -  %
     -100 basis points                $85,269  $  5,949     8 %
     -200 basis points                $90,492  $ 11,172    14 %


     The table below sets forth the estimated change to the Company's
     estimate of its net interest income based upon the December 31, 1997
     balance sheet, assuming an interest rate change from the December 31,
     1997 interest rate yield curve of plus 200 basis points and minus 200
     basis points.  Such rate shift is assumed to occur linearly over the
     first twelve months, and to be stable at the new levels over the
     second twelve months.

                                      Percent Change
                               ---------------------------
                                 Year 1   Year 2    Total
                                 ------   ------    -----
     Change in rates:
     +200 basis points           (1.20)%    0.37 %  (0.41)%
     -200 basis points           (0.10)%   (9.95)%  (5.07)%


     The Company manages its IRR through use of the tools described above,
     and its actions are taken under the guidance of the Asset Liability
     Committee ("ALCO") comprised of management with oversight provided by
     the Board of Directors.  In addition to these tools, ALCO's review
     includes the book and market value of assets and liabilities,
     unrealized gains and losses, market conditions and interest rates, and
     cash flow needs with regard to investment activity, including loans,
     and deposit flow.

                                    YEAR 2000

     Management of the Company has reviewed the Company's status regarding
     "Year 2000" computer issues.  Failure of the Company to adequately
     address any "Year 2000" deficiencies in the Company's computer
     operations could have a material adverse effect on the Company's
     results of operations in future periods.  The Company's deposit and
     loan account transactions and applications are processed offsite by a
     third party.  Based upon interface with these deposit and loan
     application systems, the Company internally generates deposit and loan
     transactions, and processes its general ledger and several other
     systems on its resident hardware.  A significant amount of the
     Company's computer hardware has been purchased since July 1996 and is
     "Year 2000" compliant.  In addition, management believes that it is
     taking all necessary steps to ensure "Year 2000" compliance, and its
     vendor has committed to being "Year 2000" compliant prior to year-end
     1998, thereby leaving sufficient time for testing all applications,
     both internally and externally processed, prior to year-end 1999.
     Management believes that the cost to be incurred for "Year 2000"
     compliance, both with regard to the Company's internal and outsourced
     data processing operations, will not be material.  In addition,
     management believes the Company to be in compliance with all bank
     regulatory requirements regarding "Year 2000".

                        RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
     Income."  SFAS No. 130 established standards for reporting and display
     of comprehensive income and its components in a full set of general
     purpose financial statements.  Under SFAS No. 130, comprehensive
     income is separated into net income and other comprehensive income.
     Other comprehensive income includes items previously recorded directly
     in equity, such as unrealized gains or losses on securities available
     for sale.  SFAS No. 130 is effective for interim and annual periods
     beginning after December 15, 1997.  Comparative financial statements
     provided for earlier periods are required to be reclassified to
     reflect application of the provisions of the Statement.

     In June 1997, the FASB issued SFAS No. 131, "Disclosures about
     Segments of an Enterprise and Related Information."  SFAS No. 131
     establishes reporting standards for operating segments in annual
     financial statements and requires those enterprises to report selected
     financial information about operating segments in interim financial
     reports to shareholders.  SFAS No. 131 is effective for financial
     statements for periods beginning after December 15, 1997.


                       UNAUDITED QUARTERLY FINANCIAL DATA

     Table 7 presents selected quarterly consolidated financial data:

     Table 7:  Selected Consolidated Financial Quarterly Data (Unaudited)

     <TABLE>
     <CAPTION>
                          Dec. 31, Sept. 30, June 30, March 31,  Dec. 31,  Sept. 30,  June 30, March 31,
                            1997      1997     1997      1997      1996      1996       1996      1996
                            ----      ----     ----      ----      ----      ----       ----      ----
                                        (Dollars in thousands, except per share amounts)
     <S>                 <C>      <C>       <C>        <C>       <C>        <C>       <C>      <C>

     Interest income      $12,445  $12,569   $12,690    $12,487  $11,143   $11,853    $11,452   $10,830
     Net interest income    6,177    6,122     6,255      6,253    5,520     5,488      5,413     5,201
     Provision for loan
      losses                  125      125       125        125      125       125        125       125
     Income (loss) before
      taxes                 2,241    2,225     2,243      2,211    2,206    (1,923)     1,803     1,882
     Net income (loss)      1,430    1,382     1,391      1,384    1,305      (492)     1,154     1,205
     Earnings (loss) per
      common share:
       Basic                  .36      .33       .33        .32      .29      (.09)       .24       .25
       Assuming dilution      .34      .32       .32        .31      .29      (.09)       .24       .25
     </TABLE>


     ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     See Item 7 - "Management Discussion and Analysis - Market Risk"


     ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Consolidated financial statements of the Company as of December 31,
     1997 and 1996, and for the years ended December 31, 1997 and 1996, and
     the nine-month period ended December 31, 1995, and the auditors'
     report thereon, are included herewith as indicated on "Index to
     Financial Statements and Schedule" on page F-1.


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

               Not applicable.


                                    PART III

     ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

     Information concerning directors and executive officers is included in
     the definitive Proxy Statement for the Company's Annual Meeting of
     Shareholders, which is incorporated herein by reference.  It is
     expected that such Proxy Statement will be filed with the SEC no later
     than April 30, 1998.


     ITEM 11.   EXECUTIVE COMPENSATION

     Information concerning executive compensation is included in the
     definitive Proxy Statement for the Company's Annual Meeting of
     Shareholders, which is incorporated herein by reference.  It is
     expected that such Proxy Statement will be filed with the SEC no later
     than April 30, 1998.


     ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT

     Information concerning security ownership of certain beneficial owners
     and management is included in the definitive Proxy Statement for the
     Company's Annual Meeting of Shareholders, which is incorporated herein
     by reference.  It is expected that such Proxy Statement will be filed
     with the SEC no later than April 30, 1998.


     ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information concerning certain relationships and related transactions
     is included in the definitive Proxy Statement for the Company's Annual
     Meeting of Shareholders, which is incorporated herein by reference.
     It is expected that such Proxy Statement will be filed with the SEC no
     later than April 30, 1998.


     ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM
               8-K

     (a)  (1) Consolidated financial statements of the Company as of
     December 31, 1997 and 1996, and for the years ended December 31, 1997
     and 1996, and the nine-month period ended December 31, 1995, and the
     auditors' report thereon, are included herewith as indicated on "Index
     to Consolidated Financial Statements" in Item 8.

          (2) None

          (3) Exhibits:

               Exhibit No.                    Description
               -----------                    -----------
               3(i)         Certificate of Incorporation of the Company*

               3(ii)        Bylaws of the Company*

               10.1         Second amended and restated Employment Agreement
                            by and among Statewide Financial Corp.,
                            Statewide Savings Bank and Victor M. Richel*

               10.2         Statewide Savings Bank, S.L.A. Employee Stock
                            Ownership Plan*

               10.3         Employment Agreement by and among Statewide
                            Financial Corp., Statewide Savings Bank, S.L.A.
                            and Michael J. Griffin***

               10.4         Statewide Financial Corp. 1996 Amended and
                            Restated Incentive Stock Option Plan**

               10.5         Statewide Financial Corp. 1996 Amended and
                            Restated Incentive Stock Option Plan for Outside
                            Directors**

               10.6         Statewide Financial Corp. Amended and Restated
                            Recognition and Retention Plan for Executive
                            Officers and Employees**

               10.7         Statewide Financial Corp. Amended and Restated
                            Recognition and Retention Plan for Outside
                            Directors**

               21           Subsidiaries of the Registrant

               23           Consent of KPMG Peat Marwick LLP

               27           Financial Data Schedule


               *    Incorporated by reference from Exhibits 3.1, 3.2, 10.1
                    and 10.2 of the Registrant's Registration Statements on
                    Form S-1. 33-93380.

               **   Incorporated by reference from Exhibits A through D of
                    the Company's Definitive Proxy Statement for the 1997
                    Annual Meeting of Shareholders.

               ***  Incorporated by reference from Exhibit No. 3 of the
                    Registrant's Annual Report on Form 10-K for the fiscal
                    year ended December 31, 1996.

     (b)  Reports on Form 8-K.

     The Registrant has filed the following reports on Form 8-K during the
     quarter ended December 31, 1997.

               Date                             Item Reported
               ----                             -------------
               November 3, 1997   Item 5 - Reporting on the Registrant's
                                  quarterly earnings.

               November 26, 1997  Item 5 - Reporting the Registrant's
                                  quarterly dividend.

                    STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     Independent Auditors' Report of KPMG Peat Marwick LLP

     Consolidated Financial Statements:
          Consolidated Statements of Financial Condition
               December 31, 1997 and 1996
          Consolidated Statements of Income
               Years Ended December 31, 1997 and 1996
               Nine-Month Period Ended December 31, 1995
          Consolidated Statements of Shareholders' Equity
               Years Ended December 31, 1997 and 1996
               Nine-Month Period Ended December 31, 1995
          Consolidated Statements of Cash Flows
               Years Ended December 31, 1997 and 1996
               Nine-Month Period Ended December 31, 1995
          Notes to Consolidated Financial Statements
               December 31, 1997, 1996 and 1995


                          INDEPENDENT AUDITORS' REPORT


     To the Board of Directors of
     Statewide Financial Corp.


     We have audited the consolidated financial statements of Statewide
     Financial Corp. and subsidiary as of December 31, 1997 and 1996, and
     for the years ended December 31, 1997 and 1996, and the nine-month
     period ended December 31, 1995, as listed in the accompanying index.
     These consolidated financial statements are the responsibility of the
     Company's management.  Our responsibility is to express an opinion on
     these consolidated financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
     standards.  Those standards require that we plan and perform the audit
     to obtain reasonable assurance about whether the financial statements
     are free of material misstatement.  An audit includes examining, on a
     test basis, evidence supporting the amounts and disclosures in the
     financial statements.  An audit also includes assessing the accounting
     principles used and significant estimates made by management, as well
     as evaluating the overall financial statement presentation.  We
     believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to
     above present fairly, in all material respects, the financial position
     of Statewide Financial Corp. and subsidiary as of December 31, 1997
     and 1996, and the results of their operations and their cash flows for
     the years ended December 31, 1997 and 1996, and the nine-month period
     ended December 31, 1995 in conformity with generally accepted
     accounting principles.


                                                      KPMG Peat Marwick LLP





     Short Hills, New Jersey
     January 26, 1998



                    STATEWIDE FINANCIAL CORP. AND SUBSIDIARY

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                           DECEMBER 31, 1997 AND 1996

                                                       December 31,
                                                   -------------------
                                                      1997     1996
                                                      ----     ----
                                                (Dollars in thousands)
     ASSETS

     Cash and amounts due from depository
      institutions                                  $  6,767  $  6,586
     Mortgage-backed securities available for sale   290,044   240,974
     Debt and equity securities available for sale    19,093    40,243
     Loans receivable, net                           332,509   325,470
     Accrued interest receivable, net                  3,969     4,296
     Real estate, owned                                  440       563
     Premises and equipment, net                       6,064     6,296
     FHLBNY stock, at cost                            10,260     7,768
     Excess of cost over fair value of net assets
      acquired                                           106       137
     Other assets                                      6,064     3,709
                                                    --------  --------
               Total assets                         $675,316  $636,042
                                                    ========  ========
     LIABILITIES AND SHAREHOLDERS' EQUITY

     Liabilities:
      Deposits                                      $443,878  $457,056
      Borrowed funds:
       Securities sold under agreements to
        repurchase                                   146,150    82,400
       FHLBNY advances                                14,150    24,800
                                                    --------  --------
          Total borrowed funds                       160,300   107,200
      Advance payments by borrowers for taxes
       and insurance                                   1,749     1,853
      Accounts payable and other liabilities           4,482     2,998
                                                    --------  --------
          Total liabilities                          610,409   569,107
                                                    --------  --------
     Shareholders' Equity
      Preferred stock, no par value, 2,000,000
       shares authorized; no shares issued or            -         -
       outstanding
      Common stock, no par value, 12,000,000
       shares authorized; 4,518,767 shares issued
       and 4,509,164 shares outstanding at
       December 31, 1997, and 4,946,264 shares           -         -
       issued and 4,911,533 shares outstanding at
       December 31, 1996
       Paid in capital                                39,533    46,807
      Unallocated ESOP shares                         (3,280)   (3,703)
      Unearned Recognition and Retention Plan
       shares                                         (1,755)   (1,872)
      Retained earnings - substantially restricted    29,580    25,797
      Treasury stock, 9,603 and 34,731 shares at
       December 31, 1997 and 1996                       (119)     (430)
      Net unrealized gain on securities available
       for sale, net of income tax                       948       336
                                                    --------  --------
          Total shareholders' equity                  64,907    66,935
                                                    --------  --------
     Commitments and contingencies                       -         -
                                                    --------  --------
          Total liabilities and shareholders'
             equity                                 $675,316  $636,042
                                                    ========  ========

     See accompanying notes to consolidated financial statements.



                    STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                   YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
                    NINE-MONTH PERIOD ENDED DECEMBER 31, 1995

                                                    December 31,
                                              -----------------------
                                               1997     1996    1995
                                               ----     ----    ----
                                               (Dollars in thousands,
                                             except per share amounts)
     INTEREST INCOME:
      Interest and fees on loans             $25,955  $21,206 $11,287
      Interest on mortgage-backed securities  21,577   19,377  10,741
      Interest and dividends on debt and
       equity securities                       2,076    4,228   4,620
      Dividends on FHLBNY stock                  583      467     205
                                             -------  ------- -------
          Total interest and dividend income  50,191   45,278  26,853
                                             -------  ------- -------
     INTEREST EXPENSE:
      Deposits                                16,481   16,827  12,044
      Borrowed funds                           8,903    6,829   2,118
                                             -------  ------- -------
          Total interest expense              25,384   23,656  14,162
                                             -------  ------- -------
     NET INTEREST INCOME                      24,807   21,622  12,691
      Provision for loan losses                  500      500     315
                                             -------  ------- -------
     NET INTEREST INCOME AFTER PROVISION FOR
      LOAN LOSSES                             24,307   21,122  12,376
     NON-INTEREST INCOME:
      Service charges                          1,496    1,236     760
      Net gain (loss) on sales of securities      69   (1,093)   (340)
      Other                                      160    1,146   1,202
                                             -------  ------- -------
          Total other income                   1,725    1,289   1,622
                                             -------    ----- -------
     NON-INTEREST EXPENSE:
      Salaries and employee benefits           9,605    8,511   5,712
      Occupancy, net                           2,278    2,140   1,337
      Federal deposit insurance premiums         287    1,011     885
      SAIF assessment                             -     2,651      -
      Professional fees                          594      645     501
      Insurance premiums                         180      273     227
      Data processing fees                       621      390     243
      Foreclosed real estate expense, net         71      105      10
      Other                                    3,476    2,717   1,953
                                             -------  ------- -------
          Total operating expenses            17,112   18,443  10,868
                                             -------  ------- -------
          Income before income taxes and
          extraordinary item                   8,920    3,968   3,130
     Income taxes                              3,333      796   1,152
                                             -------  ------- -------
          Income before extraordinary item     5,587    3,172   1,978
     Extraordinary item - penalty for pre-
      payment of debt, net of tax                 -       -       412
                                             -------  ------- -------
          Net income                         $ 5,587  $ 3,172 $ 1,566
                                             =======  ======= =======

     Earnings per common share:
       Basic                                   $1.34    $ .68     -
       Assuming dilution                       $1.30    $ .68     -
     Weighted average number of shares:
       Basic                                   4,165    4,648     -
       Assuming dilution                       4,310    4,662     -

     See accompanying notes to consolidated financial statements.

     <TABLE>
     <CAPTION>
                                                        STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
                                                     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                       YEARS ENDED DECEMBER 31, 1997 AND 1996 AND
                                                        NINE-MONTH PERIOD ENDED DECEMBER 31, 1995



                                                                                                    Net
                                                                 Unearned                        Unrealized
                                                                Recognition   Retained          Gain (loss)
                                                        Un-         and       Earnings               on       Total
                                                     allocated  Retention    (substan-           Securities  Share-
                                    Common  Paid in     ESOP       Plan        tially   Treasury Available  holders'
                                    Stock   Capital    Shares     Shares    restricted)   Stock   for Sale   Equity
                                    ------  -------    ------     ------     ----------   -----   --------   ------
                                                                 (Dollars in thousands)
     <S>                           <C>      <C>       <C>        <C>          <C>      <C>         <C>     <C>

     Balance at March 31, 1995     $  -     $  -        $  -      $  -        $21,971    $  -     $   41   $22,012
     Net proceeds from initial
      public offering, net of
      expenses of $1,927              -      50,770     (4,232)      -            -         -         -     46,538
     Net income for the period        -        -           -         -          1,566       -         -      1,566
     Unrealized gain on securities
      transferred on 12/5/95 from
      held-to- maturity to
      available-for-sale, net of
      income tax of $557              -        -           -         -            -         -        991       991
     Change in net unrealized gain
      on securities available for
      sale during the period, net
      of income tax of $679           -        -           -         -            -         -      1,208     1,208
                                   -------  -------    -------   -------     --------    ------   ------   -------
     Balance at December 31, 1995     -      50,770     (4,232)      -         23,537       -      2,240    72,315
     Net income for the year          -        -           -         -          3,172       -         -      3,172
     Acquisition of 211,600 shares
      of common stock                 -        -           -         -            -      (2,618)      -     (2,618)
     Award of 176,869 shares of
      common stock under
      Recognition and Retention
      plans                           -        (133)       -      (2,055)         -       2,188       -        -
     Amortization of Recognition
      and Retention awards            -        -           -         183          -         -         -        183
     Allocation of ESOP shares        -         146        529       -            -         -         -        675
     Purchase and Retirement of
      323,488 shares of common
      stock                           -      (3,976)       -         -            -         -         -     (3,976)
     Dividends paid ($0.20 per
      share)                          -        -           -         -           (912)      -         -       (912)
     Change in net unrealized gain
      on securities available-for-
      sale during the year, net
      of income tax of $(1,070)       -         -          -         -            -         -     (1,904)   (1,904)
                                   ------   -------   --------   -------      -------    ------   ------    ------

     Balance at December 31, 1996     -      46,807     (3,703)   (1,872)      25,797      (430)     336    66,935
     Net income for the year          -         -          -         -          5,587       -         -      5,587
     Award of 33,592 shares and
      forfeiture of 8,464 shares
      of common stock under
      Recognition and Retention
      Plans                           -          67        -        (378)         -         311       -        -
     Amortization of Recognition
      and Retention awards,
      inclusive of tax benefit        -          91        -         495          -         -         -        586
     Allocation of ESOP shares        -         348        423       -            -         -         -        771
     Purchase and retirement of
      427,497 shares of common
      stock                           -      (7,780)       -         -            -         -         -     (7,780)
     Dividends paid ($0.42 per
      share)                          -         -          -         -         (1,804)      -         -     (1,804)
     Change in net unrealized gain
      on securities available for
      sale during the year, net of
      income tax of $343              -         -          -         -            -         -        612       612
                                   ------   -------    -------   -------      -------    ------   ------   -------
     Balance at December 31, 1997  $  -     $39,533    $(3,280)  $(1,755)     $29,580    $ (119)  $  948   $64,907
                                   ======   =======    =======   =======      =======    ======   ======   =======
     </TABLE>

     See accompanying notes to consolidated financial statements.

                    STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    YEAR ENDED DECEMBER 31, 1997 AND 1996 AND
                    NINE-MONTH PERIOD ENDED DECEMBER 31, 1995

                                                    December 31,
                                             --------------------------
                                              1997      1996      1995
                                              ----      ----      ----
                                               (Dollars in thousands)

     Cash flows from operating activities:
      Net income                             $ 5,587  $  3,172   $  1,566
      Adjustments to reconcile net income
       to net cash provided by operating
       activities:
      Provision for loan losses                  500       500        315
      Provision for losses on foreclosed
       real estate                                35        34          2
      Depreciation and amortization            1,024       785        436
      Net amortization of deferred premiums
       and unearned discounts                  1,045     1,928        169
      Net (gain) loss on sales of
       securities                                (69)    1,093        340
      Amortization of RRP awards and
       allocation of ESOP shares               1,266       858        -
      Net (gain) loss on sale of real
       estate owned                              (12)       10        (78)
      Changes in assets and liabilities:
        Decrease (increase) in accrued
          interest receivable                    327       114     (1,211)
        Increase in accrued interest
          payable                                265       256         45
        (Increase) decrease in other assets   (2,697)   (2,591)       511
        Increase (decrease) in accounts
          payable and other liabilities        1,310       834     (1,089)
                                             -------   -------   --------
               Net cash provided by
                operating activities           8,581     6,993      1,006
                                             -------   -------   --------
     Cash flows from investing activities:
       Net (disbursements) receipts from
        lending activities                    (4,859)  (14,900)     4,579
      Purchase of loans                       (3,181) (115,694)   (31,782)
      Proceeds from mortgage-backed
       securities principal repayments        56,484    54,119     22,143
      Purchase of mortgage-backed
       securities                           (148,157) (130,385)   (76,689)
      Purchase of debt and equity
       securities                             (9,602)      -      (40,986)
      Proceeds from sale of debt and
       equity securities                         -      20,704     30,543
      Proceeds from the sale of mortgage-
       backed securities                      42,558    90,657        -
      Proceeds from maturities and calls
       of debt securities                     31,000    18,000     12,000
      Purchase of FHLBNY stock                (2,492)   (4,141)       -
      Proceeds from sale of real estate
       owned                                     376       369      1,618
      Purchases and improvement of
       premises and equipment                   (761)   (2,185)    (1,339)
                                             -------   -------   --------
               Net cash used in investing
               activities                    (38,634)  (83,456)   (79,913)
                                             -------   -------   --------
     Cash flows from financing activities:
      Net (decrease) increase in deposits    (13,178)   19,035     30,263
      Repayment of borrowings               (773,100) (745,240)   (90,092)
      Proceeds from borrowings               826,200   807,737     93,303
      (Decrease) increase in advance
       payments by borrowers for taxes
       and insurance                            (104)      820        (87)
      Cash dividends paid                     (1,804)     (912)       -
      Proceeds from issuance of common
       stock                                     -         -       46,538
      Purchase of common stock                (7,780)   (6,594)       -
                                             -------   -------   --------
               Net cash provided by
                financing activities          30,234    74,846     79,925
                                             -------   -------   --------
               Net increase (decrease) in
                cash and cash equivalents        181    (1,617)     1,018
     Cash and cash equivalents at
      beginning of period                      6,586     8,203      7,185
                                             -------   -------   --------
     Cash and cash equivalents at end of
      period                                 $ 6,767   $ 6,586   $  8,203
                                             =======   =======   ========
     Supplemental disclosures of cash flow
      information:
        Cash paid during the year for:
               Income taxes                  $ 2,850   $ 1,776   $  2,216
                                             =======   =======   ========

               Interest                      $25,226   $23,400   $ 14,117
                                             =======   =======   ========
     Non-cash investing and financing
      activities:
      Transfer from loans receivable to
       real estate owned, net                $   275   $   324   $    396
                                             =======   =======   ========

      Transfer of investment securities to
       investment securities available for
       sale                                  $   -     $   -     $110,913
                                             =======   =======   ========
      Transfer of mortgage-backed
       securities to mortgage-backed
       securities available for sale         $   -     $   -     $180,400
                                             =======   =======   ========
      Change in unrealized gain (loss) on
       securities available for sale, net
       of income tax                         $   612   $(1,904)  $  2,199
                                             =======   =======   ========


     See accompanying notes to consolidated financial statements.

                    STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          ------------------------------------------

     (a)  Principles of Consolidation and Basis of Presentation
          -----------------------------------------------------
     As more fully described in Notes 2 and 3, Statewide Savings Bank,
     S.L.A. (the "Bank") converted from a mutual to capital stock form of
     ownership on September 29, 1995 and 100% of its outstanding common
     stock shares were acquired by Statewide Financial Corp., (the
     "Company") formed for that purpose.  In addition, the Company has
     changed its fiscal year from March 31st to a calendar year-end,
     effective with the calendar year beginning January 1, 1996.  The
     adoption of this change facilitates comparisons of the Company's
     annual results with those of other financial institutions, most of
     whom report on a calendar year basis.  Accordingly, consolidated
     financial statements for the years ended December 31, 1997 and 1996
     and the nine-month period ended December 31, 1995 have been herein
     presented.

     The consolidated financial statements include the accounts of the
     Company and its wholly-owned subsidiary, the Bank, and its wholly
     owned subsidiaries, Seventy Sip Corporation, Statewide Atlantic
     Corporation and Statewide Financial Services Inc.  All significant
     intercompany balances and transactions have been eliminated in
     consolidation.  The Bank and Statewide Financial Services Inc. are the
     only active subsidiaries at December 31, 1997.  The Bank operates
     sixteen banking offices in Hudson, Union, Bergen and Passaic counties;
     and through its wholly owned subsidiary, Statewide Financial Services,
     Inc., the Bank also engages in the sale of annuity products.  Both the
     Company and the Bank are subject to supervision and regulation by
     various agencies including the New Jersey Department of Banking and
     Insurance, the OTS and the FDIC.

     In preparing the consolidated financial statements, management is
     required to make certain estimates and assumptions that affect the
     reported amounts of assets and liabilities as of the date of the
     consolidated statements of financial condition and income for the
     periods presented.  Actual results could differ from these estimates.
     Estimates that are susceptible to change include the determination of
     the allowances for losses on loans and the valuation of real estate
     acquired through foreclosure.

     (b)  Cash and Cash Equivalents
          -------------------------
     Cash and cash equivalents include cash on hand, amounts due from
     depository institutions and Federal funds sold.  Generally, Federal
     funds sold are sold for a one day period.

     (c)  Debt, Equity and Mortgage-backed Securities
          -------------------------------------------
     The Company classifies its investment securities and mortgage-backed
     securities among three categories:  held to maturity, trading, and
     available for sale.  In November 1995, the Financial Accounting
     Standards Board issued "Special Report, A Guide to Implementation of
     Statement 115 on Accounting for Certain Investments in Debt and Equity
     Securities" within which there was offered transition guidance
     permitting an enterprise to reassess the appropriateness of the
     classifications of all of its securities before December 31, 1995.
     The Company reassessed its classifications and on December 5, 1995,
     transferred all of its securities previously classified as held to
     maturity, with an amortized cost of $291.3 million, to the available
     for sale classification.  The related unrealized gain as of the date
     of transfer was $1,548,000 which has been recognized and reported as a
     separate component of shareholders' equity net of income tax of
     $557,000.

     At December 31, 1997 and 1996, the Company classified all of its debt,
     equity and mortgage-backed securities as available for sale.  These
     securities are reported at fair value with unrealized gains and losses
     reported, net of income tax, as a separate component of shareholders'
     equity.  Premiums and discounts are recognized over the lives of the
     securities using the level-yield method, as adjusted for prepayments
     for mortgage-backed securities.  Realized gains and losses are
     determined using the specific identification method.

     (d)  Loans, Fees, Premiums and Discounts
          -----------------------------------
     Interest is not accrued on FHA insured home improvement loans where
     interest or principal is 120 days or more past due and on all other
     loans where interest or principal is 90 days or more past due, unless
     the loans, including impaired loans, are well secured and in the
     process of collection.  Once the loans reach non-accrual status or are
     considered impaired, accrued but unpaid interest is reversed and
     interest income is subsequently recognized only to the extent that
     payments are received and any remaining principal balance is deemed
     fully collectible.  Interest on loans that have been restructured,
     under certain circumstances, is accrued according to the renegotiated
     terms.

     Non-refundable loan origination fees, net of certain direct loan
     origination costs, are deferred.  Net deferred fees, premiums and
     discounts on loans purchased are amortized as an adjustment of the
     yield over the life of the loan using the level-yield method over
     either the initial reset period or life of the loan, as appropriate.

     A loan is considered to be impaired when it is probable that the
     Company will be unable to collect all amounts due according to the
     contractual terms of the loan agreement.  Impaired loans are measured
     based upon the present value of expected future cash flows or the fair
     value of the underlying collateral, if the loan is collateral
     dependent.  Conforming residential mortgage, consumer and all other
     loans less than $100,000 are excluded from the definition of impaired
     loans as they are characterized as smaller balance, homogeneous loans
     and are collectively evaluated.  Impairment losses are included in the
     allowance for loan losses through provisions charged to operations.

     (e)  Allowance for Loan Losses
          -------------------------
     The allowance for loan losses is established through charges
     (provision) to earnings.  Loan losses (loans charged off, net of
     recoveries) are charged against the allowance for loan losses when
     management believes that the recovery of principal is unlikely.  If,
     as a result of loans charged off or increases in the size or risk
     characteristics of the loan portfolio, the allowance is below the
     level necessary to absorb loan losses on existing loans, an additional
     provision for loan losses is made to increase the allowance for loan
     losses to the level considered necessary to absorb losses on existing
     loans that may become uncollectible.  Management considers such
     factors as changes in the nature and volume of the loan portfolio,
     overall portfolio quality, review of specific problem loans and
     economic conditions that may affect the borrowers' ability to pay and
     the realization of collateral in determining the adequacy of the
     allowance.

     Management believes that the allowance for loan losses is adequate.
     While management uses available information to recognize losses on
     loans, future additions to the allowance may be necessary based on
     changes in economic conditions in the Company's market area.  In
     addition, various regulatory agencies, as an integral part of their
     examination process, periodically review the Company's allowance for
     losses on loans.  Such agencies may require the Company to recognize
     additions to the allowance based on their judgments about information
     available to them at the time of their examination.

     (f)  Real Estate Owned
          -----------------
     Real estate owned is recorded at the lower of cost or estimated fair
     value, with any initial write-down at date of transfer from the loan
     portfolio charged to the allowance for loan losses.  Fair value is
     generally determined using outside appraisals.  The Company maintains
     an allowance for other real estate losses for subsequent declines in
     the estimated fair value and estimated costs to sell.  Routine holding
     costs are charged to expense as incurred, and improvements to real
     estate owned that enhance the value of real estate owned are
     capitalized.  Gains on the sale of real estate are recognized or
     deferred upon disposition of the property based on the specific terms
     of the transaction.  Losses are charged to operations as incurred.

     (g)  Premises and Equipment
          ----------------------
     Premises and equipment are stated at cost, less accumulated
     depreciation and amortization.  Provisions for depreciation of
     premises and equipment are computed using the straight-line method
     over three to ten years for furniture, fixtures and equipment and 40
     years for buildings.  If there is an event or change in circumstances
     that indicates that the basis of premises and equipment may not be
     recoverable, management assesses the possible impairment of value
     through evaluation of the estimated future cash flow of the asset on
     an undiscounted basis as compared to the current carrying value.  An
     asset's carrying value would be adjusted, if necessary, to its fair
     market value.  Amortization of leasehold improvements is provided
     using the straight-line method over the shorter of either the
     respective lease or the estimated useful life of the improvement.
     System conversion costs and related equipment have been capitalized
     and is depreciated and amortized over the life of the system's
     services contract.

     (h)  Income Taxes
          ------------
     The Company and its subsidiary file a consolidated Federal income tax
     return on a calendar year basis.  Income taxes are allocated to the
     Bank and its subsidiaries based on the use of their income or loss in
     the consolidated return.  Separate state income tax returns are filed
     by the Bank and its subsidiaries.

     Income taxes are accounted for under the asset and liability method.
     Deferred tax assets and liabilities are recognized for the future tax
     consequences attributable to differences between the financial
     statement carrying amounts of existing assets and liabilities and
     their respective tax bases and operating loss and tax credit carry-
     forwards.  Deferred tax assets and liabilities are measured using
     enacted tax rates expected to apply to taxable income in the years in
     which those temporary differences are expected to be recovered or
     settled.  The effect on deferred tax assets and liabilities of a
     change in tax rates is recognized in income in the period that
     includes the enactment date.

     (i)  Earnings Per Share
          --------------------
     The Company adopted the provisions of SFAS No. 128, "Earnings Per
     Share", which became effective for periods ending after December 15,
     1997.  All prior-period earnings per share data have been restated in
     accordance with SFAS No. 128.  Basic earnings per share is computed by
     dividing net income by the actual weighted average number of common
     shares outstanding during the period.  Earnings per share, assuming
     dilution, is computed by dividing net income by the actual weighted
     average number of common shares outstanding during the period plus the
     weighted average number of net shares that would be issued upon
     exercise of dilutive options and restricted stock awards issued,
     assuming proceeds used to repurchase shares pursuant to the treasury
     stock method.  The computation of earnings per share, assuming
     dilution, does not assume conversion of options that would have an
     anti-dilutive effect on earnings per share.  The Company's initial
     public offering was completed on September 29, 1995.  Accordingly,
     prior to 1996, per share data is not meaningful and has not been
     presented.

     (j)  Stock Based Compensation
          ------------------------
     The Company accounts for its stock option plans in accordance with the
     provisions of Accounting Principles Board ("APB") Opinion No.  25,
     "Accounting for Stock Issued to Employees", and related
     interpretations.  As such, compensation is recorded on the date of
     grant only if the current market price of the underlying stock exceeds
     the exercise price.  As permitted by SFAS No. 123, "Accounting for
     Stock-Based Compensation," the Company provides within Footnote 15-
     "Stock Plans", pro forma earnings and earnings per share disclosures
     for employee stock option grants as if the fair-value-based method
     defined in SFAS No. 123 had been applied.

     2.   CHARTER CONVERSION
          ------------------
     On September 29, 1995, the Bank converted from a New Jersey State
     chartered mutual savings and loan association to a New Jersey State
     chartered capital stock savings and loan association.  On this date,
     the Bank, in connection with the Company's initial public offering
     (See Note 3), issued all of its capital stock to the Company in
     exchange for a capital contribution of $38.4 million.

     3.   INITIAL PUBLIC OFFERING
          -----------------------
     The Company was organized on May 31, 1995 for the purpose of acquiring
     all of the capital stock of the Bank.  On September 29, 1995, the
     Company completed an initial public offering.  The offering resulted
     in the issuance of 5,269,752 shares of common stock including 423,200
     shares to the Company's tax qualified Employee Stock Benefit Plan and
     Trust (the "ESOP").  Proceeds of the offering, net of expenses, were
     approximately $46.5 million.

     At the time of the offering, the Company was required to establish a
     liquidation account in an amount equal to the Bank's capital as of
     June 30, 1995.  The liquidation account will be reduced to the extent
     that eligible account holders reduce their qualifying deposits.  In
     the unlikely event of a complete liquidation of the Bank, each
     eligible account holder will be entitled to receive a distribution
     from the liquidation account.  The Bank is not permitted to declare or
     pay dividends on its capital stock, or repurchase any of its
     outstanding stock, if the effect thereof would cause its shareholders'
     equity to be reduced below the amount required for the liquidation
     account or applicable regulatory capital requirements.  The balance of
     the liquidation account at December 31, 1997 and 1996 was
     approximately $5.3 million and $9.4 million, respectively.


     4.   DEBT AND EQUITY SECURITIES AVAILABLE FOR SALE
          ---------------------------------------------
     The amortized cost and estimated market values of debt and equity
     securities available for sale at December 31, 1997 and 1996 are as
     follows:

     <TABLE>
     <CAPTION>
                                                            1997
                                         ------------------------------------------
                                                      Gross      Gross    Estimated
                                         Amortized  Unrealized Unrealized   Market
     (Dollars in thousands)                Cost       Gains      Losses     Value
                                           ----       -----      ------     -----
     <S>                                   <C>        <C>        <C>       <C>
     U.S. Treasury securities and
      obligations of U.S. Government
      corporations and agencies maturing:
        Within one year                    $ 3,000    $ 31       $  -      $ 3,031
        After one year but within five
         years                               5,995      33          -        6,028
        After ten years                      5,759       1          -        5,760
     Corporate debt maturing:
        After ten years                      3,991      74          -        4,065
                                           -------    ----       -----     -------
     Debt securities available for sale     18,745     139          -       18,884
     Equity securities available for sale       10     199          -          209
                                           -------    ----       -----     -------
     Debt and equity securities available
      for sale                             $18,755    $338       $  -      $19,093
                                           =======    ====       =====     =======

     <CAPTION>
                                                             1996
                                         -------------------------------------------
                                                      Gross      Gross     Estimated
                                         Amortized Unrealized  Unrealized   Market
     (Dollars in thousands)                 Cost      Gains      Losses      Value
                                            ----      -----      ------      -----
     <S>                                   <C>       <C>        <C>        <C>

     U.S. Treasury securities and
      obligations of U.S. Government
      corporations and agencies maturing:
        Within one year                    $ 7,022     $ 31        $-       $ 7,053
        After one year but within five
         years                              32,985      127         62       33,050
                                           -------     ----        ---      -------
     Debt securities available for sale     40,007      158         62       40,103
     Equity securities available for sale       10      130         -           140
                                           -------     ----        ---      -------
     Debt and equity securities available
      for sale                             $40,017     $288        $62      $40,243
                                           =======     ====        ===      =======
     </TABLE>

     There were no sales of debt or equity securities during the year ended
     December 31, 1997.  Sales of debt and equity securities during the
     year ended December 31, 1996 and the nine-month period ended December
     31, 1995, resulted in proceeds of $20.7 million and $30.5 million and
     gross realized losses $251,000 and $340,000, respectively.


     5.   MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
          ---------------------------------------------
     The amortized cost and estimated market values of mortgage-backed
     securities available for sale at December 31, 1997 and 1996 are as
     follows:

     <TABLE>
     <CAPTION>
                                                           1997
                                         -----------------------------------------
                                                      Gross     Gross    Estimated
                                         Amortized Unrealized Unrealized   Market
     (Dollars in thousands)                Cost       Gains     Losses     Value
                                         --------   --------   --------   --------
     <S>                                 <C>        <C>          <C>      <C>
     GNMA guaranteed pass-through
      certificates (net of deferred
      premiums of $2,951)               $ 91,631     $  238       $226   $ 91,643
     FHLMC pass-through certificates
      (net of deferred premiums of
      $2,668)                            111,050        916         92    111,874
     FNMA pass-through certificates
      (net of deferred premiums of
      $2,416)                             86,221        414        108     86,527
                                        --------     ------       ----   --------
     Mortgage-backed securities
      available for sale                $288,902     $1,568       $426   $290,044
                                        ========     ======       ====   ========

     <CAPTION>
                                                            1996
                                         -----------------------------------------
                                                      Gross     Gross    Estimated
                                         Amortized Unrealized Unrealized   Market
     (Dollars in thousands)                 Cost      Gains     Losses     Value
                                          --------  --------   --------   --------
     <S>                                  <C>       <C>          <C>      <C>

     GNMA guaranteed pass-through
      certificates (net of deferred
      premiums of $2,313)               $ 80,368     $  192       $530   $ 80,030
     FHLMC pass-through certificates
      (net of deferred premiums of
      $1,487)                             93,173        814        238     93,749
     FNMA pass-through certificates
      (net of deferred premiums of
      $1,489)                             67,134        148         87     67,195
                                        --------     ------       ----   --------
     Mortgage-backed securities
      available for sale                $240,675     $1,154       $855   $240,974
                                        ========     ======       ====   ========

     </TABLE>

     Mortgage-backed securities were pledged to secure FHLBNY advances and
     securities sold under agreement to repurchase at December 31, 1997 and
     1996.  The estimated market value of securities so pledged at December
     31, 1997 and 1996 were $255.3 million and $141.7 million respectively.
     Mortgage-backed securities are also pledged to secure public deposits.
     The estimated market value of securities pledged for public deposits
     at December 31, 1997 and 1996 were $186,000 and $234,000,
     respectively.

     Sales of mortgage-backed securities during the year ended December 31,
     1997 resulted in proceeds of $42.6 million and gross realized gains of
     $207,000, and gross realized losses of $138,000.  Sales of mortgage-
     backed securities during the year ended December 31, 1996 resulted in
     proceeds of $90.7 million and gross realized losses of $842,000.
     There were no sales of mortgage-backed securities during the nine-
     month period ended December 31, 1995.

     The contractual maturities of mortgage-backed securities generally
     exceed five years.  However, the effective lives are expected to be
     shorter due to prepayments of the underlying mortgages.

     6.   LOANS RECEIVABLE, NET
          ---------------------
     A summary of loans receivable, net at December 31, 1997 and 1996 is as
     follows:

                                           December 31,
                                      -----------------------
                                         1997         1996
                                         ----         ----
                                     (Dollars in thousands)
     First mortgage loans:
      One-to-four family              $244,364      $265,748
      Multi-family                      12,190         7,725
      Non-residential                   19,219         9,304
      Construction                       4,325           404
                                      --------      --------
                                       280,098       283,181

     Commercial business                16,066         9,210

     Consumer loans:
      Second mortgage                   18,110        17,295
      FHA insured home improvement      15,115        13,613
      Unsecured consumer                 1,896         1,829
      Home equity line of credit         1,485         1,147
      Home improvement                   1,051           154
      Automobile                           596           413
      Other                                197           256
                                      --------      --------
                                        38,450        34,707
                                      --------      --------
          Total loans                  334,614       327,098
     Less:
      Deferred loan fees                   594           404
      Deferred (premiums), unearned
       discounts, net                   (1,322)       (1,389)
      Allowance for loan losses          2,833         2,613
                                      --------      --------
                                         2,105         1,628
                                      --------      --------
          Loans receivable, net       $332,509      $325,470
                                      ========      ========


     At December 31, 1997 and 1996, the Company serviced loans for others
     amounting to $4.8 million and $5.4 million, respectively.  Servicing
     loans for others generally consists of collecting mortgage payments,
     maintaining escrow accounts, disbursing payments to investors and
     foreclosure processing.  Loan servicing income is recorded on the
     accrual basis and includes servicing fees from investors and certain
     charges collected from borrowers, such as late payment fees.

     At December 31, 1997 and 1996, loans in arrears three months or more
     or in the process of foreclosure are as follows:

                                                   December 31,
                                                ------------------
     (Dollars in thousands)                       1997      1996
                                                  ----      ----
     Conventional first mortgage loans
      (non-accrual)                              $1,767    $1,884
     FHA insured and VA guaranteed (accruing)       291       404
     Commercial loans (non-accrual)                  38        -
     Consumer loans (non-accrual)                   407       450
                                                 ------    ------
                                                 $2,503    $2,738
                                                 ======    ======
     Percent of net loans outstanding              0.75%     0.84%
                                                   ====      ====

     The amount of interest income on non-accrual loans which would have
     been recorded for the years ended December 31, 1997 and 1996, and the
     nine-month period ended December 31, 1995 had these loans continued to
     pay interest in accordance with their original terms or since the date
     of origination if outstanding for only part of the period, was
     approximately $0.1 million, $0.2 million and $0.3 million,
     respectively.  In addition, during the years ended December 31, 1997
     and 1996 and the nine-month period ended December 31, 1995, the
     amounts of interest income on non-performing loans that was included
     in interest income totaled $80,000, $75,000, and $11,000,
     respectively.

     An analysis of the allowance for loan losses for the year ended
     December 31, 1997 and 1996 and the nine-month period ended December
     31, 1995 is as follows:

                                           December 31,
                                       ---------------------
     (Dollars in thousands)             1997    1996   1995
                                        ----    ----   ----

     Balance at beginning of period   $2,613  $3,241  $3,048
     Provision charged to operations     500     500     315
     Charge-offs                        (297) (1,140)   (133)
     Recoveries                           17      12      11
                                      ------  ------  ------
     Balance at end of period         $2,833  $2,613  $3,241
                                      ======  ======  ======

     At December 31, 1997 and 1996, no loans were designated as impaired.
     The average balance of impaired loan for the years ended December 31,
     1997 and 1996 and the nine-month period ended December 31, 1995 were
     $0, $2,781,000 and $3,443,000, respectively.

     A substantial portion of the Company's loans is secured by real estate
     in the New Jersey market area.  Accordingly, as with most financial
     institutions in the area, the ultimate collectibility of a portion of
     the Company's loan portfolio is susceptible to change in market
     conditions.

     7.   ACCRUED INTEREST RECEIVABLE, NET
          --------------------------------
     A summary of accrued interest receivable at December 31, 1997 and 1996
     is as follows:

                                       December 31,
                                     -----------------
     (Dollars in thousands)            1997     1996
                                       ----     ----

     Loans                           $1,901   $1,977
     Mortgage-backed securities       1,908    1,571
     Debt securities                    160      748
                                     ------   ------
                                     $3,969   $4,296
                                     ======   ======

     8.   PREMISES AND EQUIPMENT, NET
          ---------------------------
     A summary of premises and equipment at December 31, 1997 and 1996 is
     as follows:

                                            December 31,
                                         -----------------
     (Dollars in thousands)                1997      1996
                                           ----      ----

     Land                                $ 1,056   $ 1,056
     Buildings                             5,157     5,066
     Leasehold improvements                  974       915
     Furniture, fixtures and equipment     6,971     6,383
                                          ------   -------
          Total                          $14,158   $13,420
                                         -------   -------
     Less accumulated depreciation         8,094     7,124
                                         -------   -------
                                         $ 6,064   $ 6,296
                                         =======   =======

     Depreciation and amortization expense included in occupancy and other
     expense in the consolidated statements of income amounted to $993,000,
     $708,000 and $398,000 for the years ended December 31, 1997, 1996 and
     the nine-month period ended December 31, 1995, respectively.

     9.   REAL ESTATE OWNED, NET
          ----------------------
     Real estate owned, net at December 31, 1997 and 1996 is summarized as
     follows:

                                            December 31,
                                          ----------------
     (Dollars in thousands)                 1997   1996
                                            ----   ----
     Acquired by foreclosure or deed in
      lieu of foreclosure                  $638     $741
     Less allowance for losses on real
      estate owned                          198      178
                                           ----     ----
                                           $440     $563
                                           ====     ====

     An analysis of the allowance for losses on real estate owned for the
     years ended December 31, 1997 and 1996 and the nine-month period ended
     December 31, 1995 is as follows:

                                              December 31,
                                         -----------------------
     (Dollars in thousands)               1997    1996    1995
                                          ----    ----    ----
     Balance at beginning of period       $178    $223   $540
     Provision charged to operations        35      34      2
     Charge-offs                           (15)    (79)  (319)
                                          ----    ----   ----
     Balance at end of period             $198    $178   $223
                                          ====    ====   ====

     Results of real estate operations for the years ended December 31,
     1997 and 1996 and the nine-month period ended December 31, 1995 are as
     follows:

                                              December 31,
                                         ---------------------
     (Dollars in thousands)                1997    1996   1995
                                           ----    ----   ----
     Acquired by foreclosure or deed in
      lieu of foreclosure:
       Net (gain) loss on sales of real
        estate                            $(12)   $ 10   $(78)
       Holding costs                        48      61     86
       Provision charged to operations      35      34      2
                                           ---    ----    ---
     Foreclosed real estate expense, net  $ 71    $105   $ 10
                                          ====    ====   ====

     10.  DEPOSITS
          --------
     The weighted average cost of funds on deposits at December 31, 1997
     and 1996 was 3.47% and 3.79%, respectively.  A summary of deposits by
     type of account is as follows:

                                          December 31,
                              -----------------------------------
                                     1997              1996
                               ----------------  ----------------
                                       Weighted         Weighted
                                        Average          Average
                                       Interest         Interest
     (Dollars in thousands)    Amount    Rate    Amount   Rate
                               ------    ----    ------   ----

     Savings accounts         $142,399  2.91%   $139,651   2.92%
     Money market accounts      44,239  3.00      44,404   3.24
     Non-interest bearing
      deposits                  24,440    -       16,374     -
     NOW accounts               47,564  1.52      47,387   2.86
                              --------          --------
          Core deposits        258,642  2.36     247,816   2.77
     Certificates of deposit
      maturing:
       One year or less        156,791  4.98     176,409   4.90
       One to three years       24,773  5.49      29,090   5.44
       Three to five years       3,120  5.36       3,334   5.57
       Five years and
        thereafter                 552  6.12         407   6.34
                              --------          --------
          Total certificates   185,236  5.04%    209,240   4.99%
                              --------          --------
               Total deposits $443,878          $457,056
                              ========          ========

     Interest rates on certificates of deposit accounts ranged from 2.50%
     to 7.07% and 2.50% to 7.60% at December 31, 1997 and 1996,
     respectively.  At December 31, 1997, the Company had approximately
     $19.3 million of certificates of deposit of $100,000 or more.

     Interest expense on deposits for the years ended December 31, 1997 and
     1996 and the nine-month period ended December 31, 1995 is summarized
     as follows:

                                                 December 31,
                                          --------------------------
     (Dollars in thousands)                 1997     1996     1995
                                            ----     ----     ----
     Passbook savings and club accounts    $ 4,082 $ 3,658  $ 2,218
     NOW and money market accounts           2,548   2,650    1,817
     Certificates of deposit                 9,851  10,519    8,009
                                           ------- -------  -------
                                           $16,481 $16,827  $12,044
                                           ======= =======  =======

     11.  BORROWED FUNDS
          --------------

     The following table sets forth certain information as to securities
     sold under agreements to repurchase for the years ended December 31,
     1997 and 1996 and the nine-month period ended December 31, 1995.

                                                             Nine-month
                                                            Period Ended
     (Dollars in thousands)                December 31,     December 31,
                                        ------------------  ------------
                                          1997      1996        1995
                                          ----      ----        ----

     Maximum balance                   $187,000  $163,047     $25,603
     Average balance                   $146,245  $108,434     $ 1,777
     Weighted average interest rate        5.59%     5.50%       5.91%

     At December 31, 1997, securities sold under an agreement to repurchase
     with the FHLBNY consisted of FHLB bonds and mortgage pass-through
     certificates with an amortized cost and market value of $198.0 million
     and $198.7 million, respectively.  The securities sold are carried as
     assets, and the funds received are shown as funds borrowed under
     security repurchase agreements.  All securities used as collateral for
     repurchase agreements are held at, and are under the control of, the
     FHLBNY.

     The scheduled maturities of securities sold under agreements to
     repurchase are summarized as follows:

                                       December 31,
     (Dollars in thousands)          -----------------
                                       1997      1996
                                       ----      ----
     Maturity:
       Maturing within 30 days       $    150  $22,400
       Maturing within 2-3 years       28,000      -
       Maturing within 3-4 years       60,000      -
       Maturing within 4-5 years       58,000   60,000
                                     --------  -------
                                     $146,150  $82,400
                                     ========  =======

     Advances from the FHLBNY are collateralized by pledged mortgage-backed
     securities and debt securities.  The estimated market value of
     securities so pledged at December 31, 1997 and 1996 was $56.6 million
     and $44.2 million, respectively.

     At December 31, 1997, the Company had a line of credit with the FHLBNY
     of $33.7 million which expires on October 31, 1998.  At December 31,
     1997, the Company had outstanding an overnight advance of $14.2
     million against this line at an interest rate of 6.63%.  At December
     31, 1996, the Company's FHLBNY credit line was $34.0 million against
     which it then had an outstanding overnight advance of $24.8 million at
     an interest rate of 7.13%.

     The following table sets forth the maximum month-end balance and
     average balance of FHLBNY advances for the periods indicated:

                                                     Nine-Month
                                    Years Ended     Period Ended
     (Dollars in thousands)         December 31,    December 31,
                                  ---------------   ------------
                                    1997     1996       1995
                                   -----     ----       ----

     Maximum balance             $28,800  $26,300     $50,992
     Average balance             $12,990  $15,639     $37,814
     Weighted average interest
     rate                           5.64%    5.52%       7.46%


     12.  INCOME TAXES
          ------------

     Income tax expense for the years ended December 31, 1997 and 1996 and
     the nine-month period ended December 31, 1995 is made up of the
     following components:

                                         December 31,
                                  -------------------------
     (Dollars in thousands)         1997     1996     1995
                                    ----     ----     ----
     Current tax expense:
          Federal                 $3,428   $1,672    $1,051
          State                      302      204        57
                                  ------   ------    ------
                                   3,730    1,876     1,108
     Deferred tax expense:
          Federal                   (364)    (990)       42
          State                      (33)     (90)        2
                                  ------   ------    ------
                                    (397)  (1,080)       44
                                  ------   ------    ------
                                  $3,333   $  796    $1,152
                                  ======   ======    ======

     A reconciliation between the effective income tax expense and the
     amount calculated by multiplying the applicable statutory Federal
     income tax rate of 34% for the years ended December 31, 1997 and 1996
     and the nine-month period ended December 31, 1995 is as follows:

                                             December 31,
                                        ---------------------
                                         1997     1996   1995
                                         ----     ----   ----
     Computed "expected" Federal tax
      expense                             34.0%  34.0%   34.0%
     State income tax, net of Federal
      tax benefit                          2.0    2.0     2.0
     Tax benefit from closed tax years      -   (17.7)      -
     Other                                 1.4    1.7      .8
                                          ----   ----    ----
                                          37.4%  20.0%   36.8%
                                          ====   ====    ====

     Under tax law that existed prior to 1996, the Bank was generally
     allowed a special bad debt deduction in determining income for tax
     purposes.  The deduction was based on either a specified experience
     formula or a percentage of taxable income before such deduction
     ("reserve method").  The reserve method was used in preparing the
     income tax returns for 1995.  Legislation was enacted in August 1996
     which repealed the reserve method for tax purposes.  As a result, the
     Bank must instead use the direct charge-off method to compute its bad
     debt deduction.  The legislation also requires the Bank to recapture
     its post-1987 net additions to its tax bad debt reserves.  The Bank
     has previously provided for this liability in the financial
     statements.

     The Bank does not provide deferred taxes for the difference between
     book and tax bad debt expense taken in years prior to, or ending at,
     December 31, 1987.  The tax bad debt expense deducted in those years
     (net of charge-off and recoveries) created an approximate $11.7
     million tax loan loss reserve which could be recognized as taxable
     income and create a current and/or deferred tax liability of up to
     $4.2 million, under current income tax rates, if one of the following
     occurs:  (a) the Bank's retained earnings represented by this reserve
     are used for purposes other than to absorb losses from bad debts,
     including excess dividends or distributions in liquidation; (b) the
     Bank redeems its stock; (c) the Bank fails to meet the definition
     provided by the Code for a Bank; or (d) there is a change in the
     Federal tax law.

     The tax effects of temporary differences that give rise to significant
     portions of the deferred tax assets and deferred tax liabilities at
     December 31, 1997 and 1996 are as follows:

                                                  December 31,
                                                 --------------
     (Dollars in thousands)                       1997    1996
                                                  ----    ----
     From operations:
       Deferred tax assets:
          Non-accrual loan interest             $   59   $   55
          Allowance for loan losses                964      882
          Deferred loan fees                       200      138
          Purchase accounting discount on
           mortgage loans                           38       49
          Employee benefit plans                   624      304
          Other                                     46      218
                                                ------   ------
            Total gross deferred tax assets      1,931    1,646
       Deferred tax liabilities:
          Accelerated depreciation                  70       93
          Amortization of discounts on
           purchases of securities                  30       79
          Other                                     11       10
          Additions to post 1987 tax reserve       164      205
                                                ------   ------
            Total gross deferred tax
               liabilities                         275      387
                                                ------   ------
            Net deferred tax asset from
               operations                        1,656    1,259
     Shareholders' equity - unrealized (gains)
      on securities available for sale            (533)    (189)
                                                ------   ------
            Total net deferred tax asset        $1,123   $1,070
                                                ======   ======

     The Company believes, based upon current information, that it is more
     likely than not there will be sufficient taxable income in future
     periods to realize the net deferred tax asset.  However, there can be
     no assurance about the level of future earnings.

     13.  EMPLOYEE STOCK OWNERSHIP PLAN
          -----------------------------

     In connection with the conversion from a mutual to a stock form, the
     Company established the ESOP for the benefit of employees of the
     Company and the Bank.  Full time employees of the Company and the Bank
     who have been credited with at least 1,000 hours of service during a
     twelve-month period and who attained age 21 are eligible to
     participate in the ESOP.

     The Company funded the ESOP upon completion of the conversion, by
     granting it 423,000 shares, valued at $4.2 million.  When the ESOP was
     funded, these shares were held in a suspense account within the ESOP,
     as unallocated shares to the participants.  These shares will be
     released to participants as the Company recognizes related
     compensation expense.  Shares released are allocated among
     participants on the basis of their compensation.  Participants will
     vest in 20% of their right to receive their account balances within
     the ESOP after three years of service.  For vesting purposes,
     participants were credited for years of service prior to the adoption
     of the ESOP.  Thereafter, vesting is an additional 20% per year.

     Compensation expense related to the ESOP includes dividends on
     unallocated ESOP shares.  It is anticipated that annual compensation
     expense related to the ESOP will be an amount necessary to amortize
     the initial value of these shares evenly over a ten year period,
     inclusive of dividends on unallocated ESOP shares, plus or minus a
     valuation adjustment which is the difference between the fair value of
     the unallocated shares during the periods in which they become
     committed to be released and their initial value.  This valuation
     adjustment will also be adjusted to equity.  The Company receives a
     tax deduction equal to the initial value of the shares released.

     The compensation expense related to the ESOP totaled $771,000 and
     $569,000 for the years ended December 31, 1997 and 1996, and $106,000
     for the nine-month period ended December 31, 1995.  Such expense for
     1997 and 1996 includes $348,000 and $146,000, respectively for the
     valuation adjustment to reflect the increase in the average fair value
     of the allocated shares over their initial value and $160,000 and
     $85,000, respectively for dividends on unallocated shares.  At
     December 31, 1997, the ESOP held 338,560 shares in suspense as
     unallocated shares, and 84,640 shares as allocated to participants.
     The fair value of the unallocated ESOP shares at December 31, 1997 was
     approximately $8.1 million, based upon a $24.00 closing price per
     share.  Unallocated ESOP shares are a reduction of shareholders'
     equity and are excluded from the average number of shares outstanding
     in computing earnings per share.

     14.  EMPLOYEE BENEFIT PLAN
          ---------------------

     The Bank currently offers a 401(k) profit sharing plan (the Plan)
     covering all employees wherein employees can invest up to 18% of their
     pre-tax base earnings.  The Bank will contribute 50% of each
     employee's contribution, up to 3% of his or her annual earnings.  The
     Bank made matching contributions of $115,000, $110,000, and $75,000 in
     the years ended December 31, 1997 and 1996 and in the nine-month
     period ended December 31, 1995, respectively.

     The Company does not have a qualified defined benefit pension plan.
     In lieu thereof, the Company seeks to provide primary retirement
     benefits for executive officers of the Company and certain officers of
     the Bank and their beneficiaries through its non-qualified, unfunded
     Supplemental Executive Retirement Plans ("SERP's").  The projected
     benefit obligation of the SERP's was $3.3 million as of December 31,
     1997, $2.9 million as of December 31, 1996 and $2.5 million as of
     December 31, 1995, and the expense for the SERP's was approximately
     $570,000 and $501,000 for the years ended December 31, 1997 and 1996,
     and $344,000 for the nine-month period ended December 31, 1995.

     15.  STOCK PLANS
          -----------

     During 1996, the Company established two non-qualified plans, the
     Employee RRP and the Director RRP, as a method of providing executive
     officers, employees and outside directors of the Company and Bank and
     its affiliates with a proprietary interest in the Company as an
     incentive designed to encourage such persons to promote the growth and
     profitability of the Company and the Bank.  The Employee RRP and
     Director RRP authorizes the granting of plan share awards for up to
     148,120 shares and 63,480 shares of common stock, respectively.  Plan
     share awards of common stock of 25,128 and 176,869, net of forfeitures
     were granted during 1997 and 1996, respectively.  The plan share
     awards of common stock vest in five equal annual installments
     commencing one year from the date of grant.  Compensation expense is
     based upon the fair market value of the stock at the date of grant.
     For the years ended December 31, 1997 and 1996, the Company recorded
     expense of $495,000 and $183,000, respectively,  related to the
     Employee RRP and Director RRP.

     During 1996, the Company established two fixed stock option plans
     which are described below.  The Company applies APB No. 25 and related
     interpretations in accounting for its plans.  Accordingly, no
     compensation costs have been recognized for its fixed stock option
     plans.  Had compensation cost for the Company's two stock-based
     compensation plans been determined in accordance with FASB No. 123,
     the Company's net income and earnings per share for 1997 and 1996
     would have been reduced on a pro forma basis to $5.4 million, or $1.30
     per share basic, and $1.28 per share, assuming dilution and $3.1
     million, or $0.67 per share basic and assuming dilution, respectively.

     The fair value of options for both plans granted in 1997 and 1996 was
     estimated at the date of grant using the Black-Scholes option-pricing
     model with the following weighted average assumptions, respectively:
     dividend yield of 2.28% and 3.28%; expected volatility of 21.5% and
     25.0%; risk free interest rates of 6.05% and 6.81%; and expected lives
     of 5 years.

     The 1996 Incentive Stock Option Plan authorized the granting of stock
     options to all key employees of the Company and its affiliates for the
     purchase of up to 370,300 shares of common stock.  The 1996 Stock
     Option Plan for Outside Directors authorized the granting of non-
     statutory options for the purchase of up to 158,700 shares of common
     stock to members of the Board of Directors of the Company and the Bank
     who are not also serving as employees of the Company or its
     affiliates.  The exercise price of the options, under both plans, is
     equal to the fair market value of the underlying common stock at the
     time of grant.  Each plan has a 5 year vesting schedule with options
     becoming exercisable on the anniversary date of the grant, and has a
     maximum term of 10 years.

     A summary of the status and activity of the Company's two fixed stock
     option plans for the years ended December 31, 1997 and 1996 is as
     follows:
                                             1997              1996
                                       ----------------- ----------------
                                                Weighted          Weighted
                                       Number   Average  Number    Average
                                         of     Exercise   of     Exercise
                                       Shares    Price   Shares     Price
                                       ------    -----   ------     -----

     Outstanding at beginning of year  358,280  $12.1875     -     $   -
     Granted                           163,150   19.2739  389,980   12.1875
     Canceled                           21,160   12.1875   31,700   12.1875
                                       -------            -------
     Outstanding at end of year        500,270  $14.4985  358,280  $12.1875
                                       =======            =======
     Weighted average fair value of
      options granted during the year           $ 4.69             $ 3.01
                                                ======             ======

     At December 31, 1997, there were 67,424 options exercisable under the
     two fixed stock option plans.  At December 31, 1996, no options were
     exercisable under the two fixed stock option plans.

     A summary of the fixed stock options outstanding under the Company's
     two fixed stock option plans at December 31, 1997 is as follows:

                                 Weighted
                                  Average    Weighted              Weighted
        Range of      Number     Remaining    Average    Number    Average
        Exercise    Outstanding Contractual  Exercise Exercisable  Exercise
         Prices     at 12/31/97    Life        Price  at 12/31/97   Price
         ------     -----------    ----        -----  -----------   -----

      $12.19-$14.35  395,270      8.59       $12.50      67,424    $12.19
      $18.93-$22.48  105,000      9.97        22.01         -        -
                     -------                             ------
                     500,270      8.88       $14.50      67,424    $12.19
                     =======                             ======


     16.  EARNINGS PER SHARE COMPUTATION
          ------------------------------

     The following tables set forth information as to the calculation of
     basic and diluted earnings per share for the years ended December 31,
     1997 and 1996.  The Company's initial public offering was completed on
     September 29, 1995.  Accordingly, prior to 1996, per share data is not
     meaningful and has not been presented.

                                             For the Year Ended 1997
                                        ----------------------------------
                                          Income        Shares   Per Share
                                       (numerator)  (denominator)  Amount
                                        ---------    -----------   ------
     Basic Earnings Per Share:
       Income available to common
        stockholders                    $5,587,000    4,164,861     $1.34
                                                                    =====
     Effect of Dilutive Stock
     Equivalents:
       Unvested restricted stock              -          50,009
       Stock options                          -          95,162
                                        ----------    ---------
     Earnings Per Share, Assuming
     Dilution:
       Income available to common
        shareholders with assumed
        conversion                      $5,587,000    4,310,032     $1.30
                                        ==========    =========     =====


                                             For the Year Ended 1996
                                        ----------------------------------
                                          Income        Shares   Per Share
                                       (numerator)  (denominator)  Amount
                                        ---------    -----------   ------
     Basic earnings per share:
       Income available to common
        stockholders                    $3,172,000    4,648,310     $0.68
                                                                    =====
     Effect of dilutive stock
     equivalents:
       Unvested restricted stock              -           6,028
       Stock options                          -           8,113
                                        ----------    ---------
     Earnings per share, assuming
     dilution:
       Income available to common
        shareholders with assumed
        conversion                      $3,172,000    4,662,451     $0.68
                                        ==========    =========     =====


     17.  COMMITMENTS AND CONTINGENCIES
          -----------------------------

     Leases and Service Contract
     ---------------------------
     Certain premises are leased under operating leases with terms expiring
     through the year 2002, exclusive of renewal options.  The Bank has the
     option to renew or extend certain of the leases on premises from two
     years to 25 years beyond the original term.  Some leases require the
     Bank to pay for insurance, increases in property taxes and other
     incidental costs.  Future minimum rental payments due under
     noncancellable operating leases are as follows:

             Year ended December 31:    (Dollars in thousands)
                    1998                      $  318
                    1999                         285
                    2000                         256
                    2001                         167
                    2002                           8
                    Thereafter                    -
                                              ------
                         Total                $1,034
                                              ======


     Net rental expense included in occupancy expense in the consolidated
     statements of income amounted to $342,000, $418,000 and $165,000 for
     the years ended December 31, 1997 and 1996 and the nine-month period
     ended December 31, 1995, respectively.

     The Company has entered into a contract to receive data processing
     services through October 4, 2002.  Future minimum payments under this
     contract are expected to total $540,000 annually through its
     expiration.

     Litigation
     ----------
     The Company is involved from time to time as a party to legal
     proceedings occurring in the ordinary course of its business.  The
     Company believes that none of these proceedings would, if adversely
     determined, have a material effect on the Company's consolidated
     financial condition or results of operations.

     On December 1, 1995, the Bank initiated suit against the Federal
     government alleging, among other things, breach of contract and
     seeking restitution for harm caused to the Bank through changes in
     Federal banking regulations regarding the treatment of goodwill in
     calculating the capital of thrift institutions.  The case relates to
     goodwill created by the Bank's 1982 acquisition of Arch Federal
     Savings and Loan Association.  A 1989 change in Federal regulations
     required a phase-out of goodwill from the calculation of a thrift
     institution's capital ratios and required that by January 1, 1995, no
     goodwill be counted as capital.  At the time the regulations went into
     effect, the Bank had $18.7 million in goodwill on its balance sheet.

     The Bank's suit was initially subject to a stay pending a ruling by
     the United States Supreme Court of the government's appeal of a
     decision of the Federal District of Columbia Circuit Court in another
     case which had upheld the right of three thrift institutions to
     maintain such actions.  In July 1996, the U.S. Supreme Court ruled in
     "United States v.  Winstar Corporation" upholding the Federal District
     of Columbia Circuit Court's ruling in favor of the thrift institutions
     involved in that suit.  Subsequently, the stay in all goodwill related
     cases was lifted.  The Federal government then filed a motion seeking
     to dismiss all goodwill related claims filed six years after the date
     of FIRREA's adoption, August 9, 1995.  The Bank had filed its claim on
     December 1, 1995.  The Bank, along with the approximately 25 other
     institutions subject to the motion, vigorously opposed the
     government's dismissal motion.  On January 7, 1997, the judge
     appointed to hear the issue in the United States Court of Federal
     Claims ruled against the Federal government, holding that the statute
     of limitations had not begun to run until OTS regulations implementing
     FIRREA were adopted on December 7, 1989.  The case is currently in the
     discovery phase, and no trial date has been set.  Accordingly, for
     these reasons and because of other facts affecting the predictability
     of litigation, management cannot predict the eventual outcome, the
     amount of damages, if any, or the timing of final disposition of the
     Bank's case.

     Financial Instruments with Off-balance-sheet Risk
     -------------------------------------------------
     The Company is a party to financial instruments with off-balance-sheet
     risk in the normal course of business to meet the financing needs of
     its customers.  These financial instruments include commitments to
     extend credit and standby letters of credit.  These instruments
     involve, to varying degrees, elements of credit risk in excess of the
     amount recognized in the consolidated statements of financial
     condition.

     The Company's exposure to credit loss in the event of non-performance
     by the other party to the financial instrument for commitments to
     extend credit and standby letters of credit is represented by the
     contractual notional amount of these instruments.  The Company uses
     the same credit policies in making commitments and conditional
     obligations as it does for on-balance-sheet instruments.

     (Dollars in thousands)                          December 31,
                                                  ------------------
                                                      1997     1996
                                                      ----     ----
     Financial instruments whose contract
      amounts represent credit risk
      (contract or notional amount):

          Commitments to extend fixed rate credit   $ 1,530 $10,827
          Commitments to extend variable rate
           credit                                    25,153  10,427
          Commitments to purchase variable rate
           mortgages                                    -     3,654
          Commercial letters of credit                1,520   2,963
          Standby letters of credit                     -       145
          Unused lines of credit                      8,615   4,318
                                                    -------  ------
                                                    $36,818 $32,334
                                                    ======= =======

     Commitments to extend credit are legally binding agreements to lend to
     a customer as long as there is no violation of any condition
     established in the contract.  Commitments generally have fixed
     expiration dates or other termination clauses.  The total commitment
     amounts do not necessarily represent future cash requirements since
     some of the commitments are expected to expire without being drawn
     upon.  The Company evaluates each borrower's creditworthiness.  The
     amount of collateral obtained by the Company upon extension of credit
     is based on such evaluation of the borrower.  Collateral held varies
     but may include mortgages on commercial and residential real estate,
     deposit accounts with the Company, and automobiles.

     Standby letters of credit are conditional commitments issued by the
     Company to ensure the performance of obligations to a third party.
     These commitments are primarily issued to support performance bonds in
     favor of local municipalities and private obligations of borrowers for
     work performed by third parties.  Most of the Company's standby
     letters of credit extend for less than one year.  The Company obtains
     personal guarantees supporting these commitments.

     Unused lines of credit are legally binding agreements to lend as long
     as there is no violation of any condition established in the contract.
     Lines of credit generally have fixed expiration dates or other
     termination clauses.  The amount of collateral obtained, if deemed
     necessary by the Company, is based on credit evaluation of the
     borrower.

     18.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
          -----------------------------------------------------

     Fair value estimates are made at a specific point in time, based on
     relevant market information and information about financial
     instruments.  These estimates do not reflect any premium or discount
     that could result from offering for sale, at one time, the Company's
     entire holdings of a particular financial instrument.  Because no
     market exists for a significant portion of the Company's financial
     instruments, fair value estimates are based on judgments regarding
     future expected loss experience, current economic conditions, risk
     characteristics of various financial instruments and other factors.
     These estimates are subjective in nature and involve uncertainties and
     matters of significant judgment, and therefore cannot be determined
     with precision.  Changes in assumptions could significantly affect the
     estimates.  The table below excludes all non-financial instruments.
     In addition, the tax ramifications related to the realization of the
     unrealized gains and losses can have a significant effect on fair
     value estimates and have not been considered in the estimates.
     Accordingly, the aggregate fair value amounts presented do not
     represent the underlying value of the Company.

     The carrying amounts and estimated fair values of the Company's
     financial instruments at December 31, 1997 and 1996 are as follows:

                                                  December 31,
                                      -------------------------------------
                                             1997              1996
                                       ----------------- -----------------
                                               Estimated          Estimated
                                       Carrying   Fair   Carrying    Fair
                                        Amount   Value    Amount    Value
                                        ------   -----    ------    -----
                                              (Dollars in thousands)

     Financial assets:
        Cash and amounts due from
          depository institutions    $  6,767  $  6,767 $  6,586 $  6,586
        Debt and equity securities,
          available for sale           19,093    19,093   40,243   40,243
        Mortgage-backed securities,
          available for sale          290,044   290,044  240,974  240,974
        Net loans                     332,509   337,539  325,470  327,264
        FHLBNY stock                   10,260    10,260    7,768    7,768

     Financial liabilities:
        Deposits                     $443,878  $443,671 $457,056 $455,337
        Borrowed funds                160,300   159,913  107,200  106,622


     The following methods and assumptions were used to estimate the fair
     value of each class of financial instruments for which it is
     practicable to estimate fair value:

     Cash and Amounts Due From Depository Institutions and FHLBNY Stock
     ------------------------------------------------------------------

     For these short-term instruments, the carrying amount is a reasonable
     estimate of fair value.

     Debt, Equity and Mortgage-backed Securities
     -------------------------------------------
     For debt, equity and mortgage-backed securities fair values are based
     on quoted market prices.

     Loans
     -----
     Fair values are estimated for portfolios of loans with similar
     financial characteristics.  The total loan portfolio is first divided
     into performing and non-performing categories.  Performing loans are
     then segregated into adjustable and fixed rate interest terms.  Fixed
     rate loans are segmented by type, such as construction and land
     development, other loans secured by real estate, commercial and
     industrial loans, and loans to individuals.  Certain types, such as
     commercial loans and loans to individuals, are further segmented by
     maturity and type of collateral.

     For performing loans, the carrying amount is reduced by credit risk
     adjustment based on internal loan classifications and the fair value
     is calculated by discounting scheduled future cash flows through
     estimated maturity using a discount rate equivalent to average loan
     rates within the Company's market for loans which are similar with
     regard to collateral, maturity and the type of borrower.  Based on the
     current composition of the Company's loan portfolio, as well as both
     past experience and current economic conditions and trends, future
     prepayments are not expected to materially impact scheduled future
     maturities and, accordingly, have not been considered in calculating
     fair value.

     For non-performing loans, fair value is calculated by first reducing
     the carrying value by a credit risk adjustment based on internal loan
     classifications, and then discounting the estimated future cash flows
     from the remaining carrying value at the rate at which the Company
     would currently make similar loans to creditworthy borrowers.

     Deposit Liabilities
     -------------------
     The fair value of deposits with no stated maturity, such as non-
     interest-bearing demand deposits, money market accounts, interest
     checking accounts, and savings accounts is equal to the amount payable
     on demand.  Time deposits are segregated by type, size and remaining
     maturity.  The fair value of time deposits is based on the discounted
     value of contractual cash flows.  The discount rate is equivalent to
     the rate currently offered in the Company's market for deposits of
     similar size, type and remaining maturity.

     Borrowed Funds
     --------------
     The fair value of the Company's borrowed funds is estimated based on
     the discounted value of future contractual payments.  The discount
     rate is equivalent to the estimated rate at which the Company could
     currently obtain similar financing.

     Commitments to Extend Credit, Letters of Credit and Commitments to
     ------------------------------------------------------------------
     Purchase Loans
     --------------
     The commitments to originate and purchase loans and extend credit have
     terms that are consistent with current market terms.  Accordingly, the
     Company estimates that the fair value of these commitments
     approximates carrying value.

     19.  REGULATORY MATTERS
          ------------------

     The Bank is required to maintain certain levels of capital in
     accordance with FIRREA and OTS regulations.  Savings associations must
     maintain tangible capital of 1.5% of adjusted assets and investments
     in certain non-includable subsidiaries.  Tangible capital, as defined
     by FIRREA and OTS regulations, consists generally of shareholders'
     equity less most intangible assets and investments in certain non-
     includable subsidiaries.  The OTS requires that savings associations
     maintain core capital of 3% of adjusted tangible assets.  Core capital
     consists of tangible capital plus certain intangible assets.  There is
     also a risk-based capital requirement of 8% of risk-weighted assets
     for savings associations.

     The OTS has incorporated an interest rate risk component that may
     require that an amount be added to an institution's risk-based capital
     requirement.  The OTS has postponed the date on which the component
     will first be deducted from an institution's total capital until an
     appeals process is developed for the measurement of an institution's
     interest rate risk.  In the opinion of management, the Bank would
     continue to exceed its risk-based minimum capital requirements under
     the new rule.

     The FDICIA was signed into law on December 19, 1991.  Regulations
     implementing the prompt corrective action provisions of FDICIA became
     effective on December 19, 1992.  In addition to the prompt corrective
     action requirements, FDICIA includes significant changes to the legal
     and regulatory environment for insured depository institutions,
     including reductions in insurance coverage for certain kinds of
     deposits, increased supervision by the Federal regulatory agencies,
     increased reporting requirements for insured institutions, and new
     regulations concerning internal controls, accounting and operations.

     The prompt corrective action regulations define specific capital
     categories based on an institution's capital ratios.  The capital
     categories, in declining order, are "well capitalized," "adequately
     capitalized," "undercapitalized", "significantly undercapitalized,"
     and "critically undercapitalized."  Institutions categorized as
     "undercapitalized" or worse are subject to certain restrictions,
     including the requirement to file a capital plan with the OTS,
     prohibitions on the payment of dividends and management fees,
     restrictions on executive compensation, and increased supervisory
     monitoring, among other things.  Other restrictions may be imposed on
     the institution either by the OTS or by the FDIC, including
     requirements to raise additional capital, sell assets, or sell the
     entire institution.  Once an institution becomes "critically
     undercapitalized," it is generally placed in receivership or
     conservatorship within 90 days.

     To be considered "adequately capitalized," an institution must
     generally have a core ratio of at least 4%, a Tier 1 risk-based
     capital ratio of at least 4%, and a total risk-based capital ratio of
     at least 8%.  Generally, an institution is considered well capitalized
     if it has a Tier 1 (core) capital ratio of at least 5.0%; a Tier 1
     risk-based capital ratio of at least 6.0%; and a total risk-based
     capital ratio of at least 10.0%.

     The foregoing capital ratios are based in part on specific
     quantitative measures of assets, liabilities and certain off-balance
     sheet items as calculated under regulatory accounting practices.
     Capital amounts and classifications are also subject to qualitative
     judgments by the OTS about capital components, risk weightings and
     other factors.

     Management believes that, as of December 31, 1997, the Bank meets all
     capital adequacy requirements of the OTS.  Further, the most recent
     OTS notification categorized the Bank as a well-capitalized
     institution under the prompt corrective action regulations.  There
     have been no conditions or events since that notification that
     management believes have changed the Bank's capital classification.

     The following is a summary of the Bank's actual capital amounts and
     ratios as of December 31, 1997 and 1996, compared to the OTS minimum
     capital adequacy requirements and the OTS requirements for
     classification as a well-capitalized institution:

                                                    OTS REQUIREMENTS
                                            -------------------------------

                                                                  FOR
                                                             CLASSIFICATION
                                             MINIMUM CAPITAL    AS WELL-
                                 THE BANK       ADEQUACY      CAPITALIZED
                              -------------  --------------- --------------

                               Amount  Ratio Amount   Ratio  Amount   Ratio
                               ------  ----- ------   -----  ------   ----
                                          (Dollars in thousands)
     December 31, 1997
      Tangible capital       $60,298   8.96% $10,095  1.50%
      Tier 1 (core) capital   60,298   8.96   26,919  4.00  $33,649   5.00%
      Risk-based capital:
        Tier 1                60,298  21.97   10,981  4.00   16,471   6.00
        Total                $62,953  22.93% $21,961  8.00% $27,451  10.00%

     December 31, 1996
      Tangible capital       $59,794   9.41% $ 9,532  1.50%
      Tier 1 (core) capital   59,794   9.41   25,419  4.00  $31,774   5.00%
      Risk-based capital:
        Tier 1                59,794  25.18    9,500  4.00   14,249   6.00
        Total                $62,235  26.21% $18,999  8.00% $23,749  10.00%

     The Deposit Act (the BIF/SAIF Act) was enacted into law on September
     30, 1996.  The BIF/SAIF Act mitigated the disparity between insurance
     premiums for deposits insured by SAIF and deposits insured by the BIF.

     Effective January 1, 1997, SAIF members have the same risk-based
     assessment schedule as BIF members - zero to 27 basis points.  FICO
     debt service assessments of 6.3 and 1.3 basis points will be added to
     the regular assessment for the SAIF-assessable base, and the BIF-
     assessment base, respectively, until December 31, 1999, unless the
     Federal thrift and bank charters have been consolidated.  Upon the
     earlier of January 1, 2001 or the date of such consolidation, the BIF
     and SAIF will be merged and there will be full pro rata FICO debt
     service sharing.

     Immediately preceding the enactment of the BIF/SAIF Act, the Company
     was incurring deposit insurance expense at a rate of 23 cents per $100
     of deposits.  Effective January 1, 1997, the Company was not required
     to pay a deposit insurance assessment and is required to pay a FICO
     assessment of 6.4 cents per $100 of deposits.  In addition, pursuant
     to the recapitalization provision of the BIF/SAIF ACT, the Company
     incurred $2,651,000 additional FDIC insurance expense, a one time
     assessment of 65.7 basis points on the amount of deposits held at
     March 31, 1995.

     20.  LOANS TO RELATED PARTIES
          ------------------------

     The Company has had, and expects to have in the future, banking
     transactions in the ordinary course of business with directors,
     executive officers and their affiliates on the same terms as those
     prevailing for comparable transactions with other borrowers.  These
     loans amounted to $3,584,000 and $347,000 at December 31, 1997 and
     1996, respectively, and do not involve more than normal risks of
     repayment.  During the year ended December 31, 1997, new loans of
     $3,296,000 were made to related parties and principal repayments of
     $59,000 were received. During the year ended December 31, 1996, new
     loans of $352,000 were made to related parties and repayments were
     $35,000.  Other decreases of $194,000 resulted from loans to
     individuals who no longer meet the criteria to be classified as an
     insider loan.

     21.  PARENT COMPANY FINANCIAL INFORMATION
          ------------------------------------

     Statewide Financial Corp. (the parent company) was incorporated on May
     31, 1995 and acquired all of the capital stock of the Bank on
     September 29, 1995.  The following are the parent only financial
     statements as of December 31, 1997 and 1996, for the years ended
     December 31, 1997 and 1996, and the period May 31, 1995 to December
     31, 1995 and should be read in conjunction with the Notes to the
     consolidated financial statements.

     PARENT COMPANY ONLY - STATEMENTS OF FINANCIAL CONDITION

                                            December 31,
                                        -------------------
     (Dollars in thousands)                1997     1996
                                           ----     ----
     Assets:
        Cash                            $     3   $   245
        Due from ESOP trust                 106       106
        Due from subsidiary               3,612     6,267
        Investment in subsidiary         61,352    60,267
        Other assets                         -         85
                                        -------   -------
          Total Assets                  $65,073   $66,970
                                        =======   =======
     Liabilities:
        Accrued taxes                   $   166   $    35
                                        -------   -------
     Shareholders' equity:
        Paid in capital                  39,533    46,807
        Unallocated ESOP shares          (3,280)   (3,703)
        Unearned RRP shares              (1,755)   (1,872)
        Treasury stock                     (119)     (430)
        Retained earnings                30,528    26,133
                                        -------   -------
          Total shareholders' equity     64,907    66,935
                                        -------   -------
               Total liabilities and
               shareholders' equity     $65,073   $66,970
                                        =======   =======


     PARENT COMPANY ONLY - STATEMENTS OF INCOME

                                        For the Years   For the Period
                                            Ended       May 31, 1995 to
     (Dollars in thousands)              December 31,  December 31, 1995
                                         ------------  -----------------
                                         1997    1996
                                         ----    ----

     Other income                       $  326 $  396         $207
     Expenses                               -       9           -
                                        ------ ------         ----
        Income before taxes                326    387          207
                                        ------ ------         ----
     Income taxes                          118    140           74
                                        ------ ------         ----
        Net income before equity in
         earnings of subsidiary            208    247          133
     Equity in earnings of subsidiary    5,379  2,925          338
                                        ------ ------         ----
          Net income                    $5,587 $3,172         $471
                                        ====== ======         ====


     PARENT COMPANY ONLY - STATEMENTS OF CASH FLOWS

                                           For the Years   For the Period
                                               Ended       May 31, 1995 to
     (Dollars in thousands)                December 31,   December 31, 1995
                                          --------------  -----------------
                                           1997    1996
                                           ----    ----
     Cash flows from operating
     activities:
       Net income                        $5,587   $3,172       $  471
     Adjustments to reconcile net
     income to net cash provided
     from operating activities:
       Equity in earnings of subsidiary  (5,379)  (2,925)        (338)
       Decrease (increase) in due from
        subsidiary                        2,655    1,843       (8,110)
       (Increase) in due from ESOP
         trust                               -      (106)          -
       Decrease (increase) in other
        assets                               85      122         (207)
       Increase (decrease) in accrued
         taxes                              131      (39)          74
                                         ------   ------       ------
          Net cash provided from
           (used in) operating
           activities                     3,079    2,067       (8,110)
                                         ------   ------       ------
     Cash flows from investing
     activities:
       Return of investment from
        subsidiary                        6,000   13,350           -
       Investment in subsidiary            (160)  (8,195)     (38,428)
                                         ------   ------       ------
          Net cash provided from
           (used in) investing
           activities                     5,840    5,155      (38,428)
                                         ------   ------       ------
     Cash flows from financing
     activities:
       (Repurchase) issuance of
        common stock                     (7,780)  (6,594)      50,770
       Dividends paid                    (1,804)    (912)          -
       Contribution of common stock
        to ESOP trust                        -        -        (4,232)
       Allocation of ESOP shares            423      529           -
                                         ------   ------       ------
          Net cash (used in)
           provided from financing
           activities                    (9,161)  (6,977)      46,538
                                         ------   ------       ------
          Net change in cash and
           cash equivalents                (242)     245           -
     Cash and cash equivalents at
     beginning of period                    245       -            -
                                         ------   ------       ------
     Cash and cash equivalents at
     end of period                       $    3   $  245       $   -
                                         ======   ======       ======


                                   SIGNATURES

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

                                   STATEWIDE FINANCIAL CORP.


     Dated:  March 30, 1998            By:   BERNARD F. LENIHAN
                                             ------------------
                                             Bernard F. Lenihan
                                             Senior Vice President and
                                             Chief Financial Officer


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

             Signature                  Title              Date
             ---------                  -----              ----

                               Chairman of the Board,
                               President and Chief
         VICTOR M. RICHEL      Executive Officer      March 16, 1998
         Victor M. Richel
                               Senior Vice President
                               and Chief Financial
         BERNARD F. LENIHAN    Officer                March 30, 1998
         Bernard F. Lenihan


         MARIA F. RAMIREZ      Director               March 16, 1998
         Maria F. Ramirez


         WALTER G. SCOTT       Director               March 16, 1998
         Walter G. Scott


         THOMAS SHARKEY, SR.   Director               March 16, 1998
         Thomas Sharkey, Sr.


         STEPHEN R. TILTON     Director               March 16, 1998
         Stephen R. Tilton


         THOMAS V. WHELAN      Director               March 16, 1998
         Thomas V. Whelan


                                INDEX TO EXHIBITS

           Exhibit No.                        Description
           -----------                        -----------

           21                 Subsidiaries of the Registrant

           23                 Consent of KPMG Peat Marwick LLP

           27                 Financial Data Schedule