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, 1998
                                       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.

                                      [ X ]

     As of February 26, 1999, there were issued 4,053,509 and outstanding
     4,049,963 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 $18.00 closing price of such
     stock as of February 26, 1999, was $46,960,776.  (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, 1999.


      11.  Executive Compensation        Proxy Statement for Annual Meeting
                                         of Shareholders to be filed not
                                         later than April 30, 1999.



      12.  Security Ownership of         Proxy Statement for Annual Meeting
           Certain Beneficial Owners     of Shareholders to be filed not
           and Management                later than April 30, 1999.


      13.  Certain Relationships and     Proxy Statement for Annual Meeting
           Related Transactions          of Shareholders to be filed not
                                         later than April 30, 1999.



                            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, through its branch offices, 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
     as well as through the origination of commercial business, commercial
     mortgage and consumer loans.  In addition, the Company invests in U.S.
     government and agency obligations and other permissible investments. 
     Over the past several years, the Company has sought to emphasize more
     commercial lending and diversify its loan portfolio.  As part of this
     process, the Bank formed the Statewide Mortgage Funding division,
     which provides wholesale lines of credit to mortgage bankers.  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, three in
     Bergen County 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 April 10, 1998, the Company transferred
     the lease of, and sold the deposits from, the Passaic in-store branch
     to another financial institution.  Under this sale, the acquirer
     assumed all of the deposit liabilities associated with this branch,
     and assumed the Company's obligations under its lease of the branch
     location.  The Company realized a pretax gain of $0.3 million on the
     sale of these deposits.  On May 9, 1998, the Company opened a retail
     banking branch in North Arlington, New Jersey.

     The Company faces significant competition both in originating 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 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.  The
     Company competes for loans and deposits principally on the basis of:
     quality of service it provides to customers, rates charged on loans
     and paid to depositors and extended business hours maintained in the
     retail branches.

                                    PERSONNEL

     At December 31, 1998, the Company had a total of 166 full-time
     employees and 45 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.   

     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.

     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, 1998, the
     Bank's leverage ratio as calculated under the prompt corrective action
     rule was 7.95%.  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

     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.  As a result of the Deposit Act, insurance premiums for
     thrifts were equalized with those of commercial banks, with premiums
     ranging from 0% to 0.24% of assessed deposits.  Since adoption of the
     Deposit Act, various legislation modernizing the United States'
     financial system has been proposed, although no legislation has yet
     passed.  Some of these proposals would eliminate the thrift charter or
     restrict the activities of unitary thrift holding companies. 
     Management is currently unable to predict whether any of these
     proposals will be adopted or what effect the adoption of any of these
     proposals will have on the Company.

     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.  
     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.

     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, 1998, 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 7.14%, and were 7.25% for the
     year ended December 31, 1998.  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.

     Community Reinvestment Act

     Under the Community Reinvestment Act ("CRA"), every FDIC insured
     institution has a continuing and affirmative obligation consistent
     with safe and sound banking practices to help meet the credit needs of
     its community, including low and moderate income neighborhoods. The
     CRA does not establish specific lending requirements or programs for
     financial institutions nor does it limit an institution's discretion
     to develop the type of products and services that it believes are best
     suited to its particular community, consistent with the CRA.  The CRA
     requires the OTS, in connection with the examination of the Bank, to
     assess the institution's record of meeting the credit needs of its
     community and to take such records into account in its evaluation of
     certain applications, such as a merger or the establishment of a
     branch, by the Bank.  An unsatisfactory rating may be used as a basis
     for the denial of an application by the OTS.


     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, 1998, the Bank was in compliance
     with the QTL requirement.  At December 31, 1998, 92.0% 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%.

     In January 1999, the OTS issued an amendment to its current
     regulations with respect to capital distributions by savings
     associations.  The amended regulations will be effective April 1,
     1999.  Under the new regulation, savings associations that would
     remain at least adequately capitalized following the capital
     distribution, and that meet other specified requirements, would not be
     required to file a notice or application for capital distributions
     (such as cash dividends) declared below specified amounts.  Under the
     new regulation, saving associations which are eligible for expedited
     treatment under current OTS regulations are not required to file an
     application with the OTS if (i) the savings association would remain
     at least adequately capitalized following the capital distribution,
     (ii) the amount of capital distribution does not exceed an amount
     equal to the savings association's net income for that year to date,
     plus the savings association's retained net income for the previous
     two years and (iii) the proposed capital distribution would not
     violate any applicable law, regulation, agreement with or condition of
     the OTS.  Thus, under the new regulation, only undistributed net
     income for the prior two years may be distributed in addition to the
     current year's undistributed net income without the filing of an
     application with the OTS.  Savings associations which do not qualify
     for expedited treatment or which desire to make a capital distribution
     in excess of the specified amount, must file an application with, and
     obtain the approval of, the OTS prior to making the capital
     distribution.  A savings association that is not required to file an
     application is also not required to file a notice with the OTS prior
     to making the capital distribution, unless (i) the savings association
     would not be well capitalized following the distribution, or (ii) the
     proposed distribution would reduce the amount of or retire any part of
     the savings association's common stock, preferred stock or debt
     instruments included in capital or (iii) the savings association is a
     subsidiary of a savings and loan holding company.  The new OTS
     limitations on capital distributions are similar to the limitations
     imposed upon national banks.

     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.

          (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 Company has changed its fiscal year end from March 31st
     to a calendar year end, effective with the calendar year beginning
     January 1, 1996 and, accordingly, has provided certain information at
     or for the nine-month period ended December 31, 1995 and at or for the
     year ended March 31, 1995.

     The following table shows the carrying value, weighted average yield,
     and maturities of the Company's debt and equity securities portfolio,
     at December 31, 1998:

     <TABLE>
     <CAPTION>


                                                             AT DECEMBER 31, 1998
                         --------------------------------------------------------------------------------------------
                                                                                                        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. Treasury 
       securities and ob-
       ligations of U.S.
       Government corpor-
       ations and agency
       securities         $2,006   6.18%   $15,567   5.87%     $ -        - %   $  -         - %    $17,573    5.91%
      Corporate debt         -       -       8,761   5.99        -        -       3,147    7.19      11,908    6.31
      Trust preferred                                                
        securities           -       -         -       -         -        -      38,556    6.70      38,556    6.70
      Equity securities      275   1.09        -       -         -        -        -         -          275    1.09
                          ------            ------              ---             -------             -------
      Total debt and 
       equity securities  $2,281   5.75%   $24,328   5.91%     $ -        - %   $41,703    6.74%    $68,312    6.40%
                          ======   ====    =======   ====      ====      ===    =======    ====     =======    ====
     </TABLE>


     The following table shows the contractual maturity of the Company's
     mortgage-backed securities at December 31, 1998.  The table does not
     include the effect of prepayments or scheduled principal amortization.


     <TABLE>
     <CAPTION>
                                                                    
                                                           AT DECEMBER 31, 1998
                        -------------------------------------------------------------------------------------------
                                                                                                   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                   $  -       - %    $  -       - %   $   -        - %   $ 76,347   5.88%   $76,347   5.88%
     FHLMC                   3,445   7.14      4,172   6.74     16,159    7.15      42,611   7.52     66,387   7.36 
     FNMA                    3,555   7.40      6,574   6.96      4,247    7.60      34,308   7.43     48,684   7.38 
     Private label pass-
      through certificates     -       -         -       -         -        -       10,013   6.25     10,013   6.25 
    Private label collat-
      eralized mortgage
      obligations              -       -         -       -         -        -       46,604   6.34     46,604   6.34 
                            ------           -------           -------            --------          --------
     Total mortgage-
     backed securities      $7,000   7.27%   $10,746   6.87%   $20,406    7.24%   $209,883   6.59%  $248,035   6.67%
                            ======   ====    =======   ====    =======    ====    ========   ====   ========   ==== 
     </TABLE>


     The following table shows the contractual maturity of the Company's
     loans at December 31, 1998.  The table does not include the effect
     of prepayments or scheduled principal amortization.


     <TABLE>
     <CAPTION>
                                                           AT DECEMBER 31, 1998
                       -------------------------------------------------------------------------------------------
                                   First Mortgage Loans                         Other Loans
                      ---------------------------------------------   --------------------------------
                                                                                 Warehouse
                      One-to-Four   Multi      Non-                           Mortgage Lines Commercial Total Loans
                         Family    Family  Residential  Construction Consumer    of Credit    Business  Receivable
                         ------    ------  -----------  ------------ --------  -------------  --------  ----------
                                                         (Dollars in thousands)
     <S>                <C>        <C>       <C>         <C>        <C>       <C>            <C>         <C>
     Amounts due:
     Within one year    $  5,860  $   347    $  -         $4,959    $ 4,033         $47,752   $ 9,388     $ 72,339
                        --------  -------    -------      ------    -------         -------   -------     --------
     After 1 year:                                                                                                
       1 to 3 years       14,548      -        4,824       5,395      7,525             -       2,946       35,238
       3 to 5 years       13,757      201      6,338         -        8,194             -         891       29,381
       5 to 10 years      37,132   12,783     10,025         -       10,533             -       5,910       76,383
       10 to 20 years     72,330    7,812      5,562         -       10,619             -       1,850       98,173
       Over 20 years      56,518      536        643         -          -               -         -         57,697
                        --------  -------    -------      ------    -------         -------   -------     --------
     Total due after
       1 year            194,285   21,332     27,392       5,395     36,871             -      11,597      296,872
                         -------   ------     ------      ------    -------         -------   -------     --------
                               -
       Total loans      $200,145  $21,679    $27,392     $10,354    $40,904         $47,752   $20,985     $369,211
                        ========  =======    =======     =======    =======         =======   =======     ========
     Less (Plus)
      unearned dis-
      counts (premiums)
      and deferred
      loan fees, net                                                                                         (303)
     Less allowance
      for loan losses                                                                                       3,056 
                                                                                                         -------- 
     Loans, net
                                                                                                         $366,458 
                                                                                                         ======== 
     </TABLE>

     As of December 31, 1998, the dollar amount of all loans due after
     December 31, 1999, and the composition of fixed interest rates and 
     adjustable interest rates were:

                                Due After December 31, 1999
                               -----------------------------
                                Fixed    Adjustable    Total
                                -----    ----------    -----
                                  (Dollars in thousands)

      Real estate mortgages     $52,510    $195,894   $248,404
      Other loans                37,852      10,616     48,468
                                -------    --------   --------
        Total loans             $90,362    $206,510   $296,872
                                =======    ========   ========


     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       At or 
                                                                     Nine-Month      For the
                                                At or For the Year  Period Ended   Year Ended
                                                Ended December 31,  December 31,    March 31,
                                              --------------------- ------------   ----------
                                              1998    1997   1996       1995          1995
                                              ----    ----   ----       ----          ----
                                                          (Dollars in thousands)
      <S>                                      <C>    <C>    <C>       <C>           <C>
      Balance, beginning of period           $2,833  $2,613  $3,241      $3,048      $2,818
      Provisions charged to operations          642     500     500         315         542
      Loans charged off:
        One-to-four family residential          154      68     186          67         135
        Non-residential                         -        -       -           -          151
        Land and construction                   -        -      848          -           - 
        Commercial business                     -        10      -           -           - 
        Consumer                                300     219     106          66          45
                                             ------  ------  ------      ------      ------
        Total loans charged off                 454     297   1,140         133         331
                                             ------  ------  ------      ------      ------
      Recovery on loans:
        One-to-four family residential            9       9       2           3          11
        Consumer                                 26       8      10           8           8
                                             ------  ------  ------      ------      ------
        Total recovery on loans                  35      17      12          11          19
                                             ------  ------  ------      ------      ------
        Net loans charged off                   419     280   1,128         122         312
                                             ------  ------  ------      ------      ------
      Balance, end of period                 $3,056  $2,833  $2,613      $3,241      $3,048
                                             ======  ======  ======      ======      ======
      Ratio of net charge-offs during the
       period to average net loans out-
       standing during the period              0.12%   0.09%   0.42%       0.07%       0.18%
                                               ====    ====    ====        ====        ==== 
     </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,
                                  ----------------------------------------------------------------------  ----------------
                                        1998               1997              1996             1995              1995
                                  -----------------  ----------------- ---------------  ----------------  ----------------
                                          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               $1,579     51.7%  $1,668      73.0% $2,156     81.2%  $1,533    79.0%  $1,338    79.0%
       Multi-family                  217      7.1      114       3.6      39      2.4        9     2.4       32     2.3 
       Non-residential               313     10.2      189       5.8      47      2.9       41     2.0       16     1.1 
       Land and construction         104      3.4       43       1.3       4      0.1    1,502     1.9    1,508     3.0 
       Consumer                      329     10.8      286      11.5     275     10.6      156    14.7      154    14.6 
       Commercial business           418     13.7      533       4.8      92      2.8       -       -        -       -  
       Warehouse mortgage lines
        of credit                     96      3.1       -         -       -        -        -       -        -       -  
                                  ------    -----   ------     -----  ------    -----   ------   -----   ------   ----- 
     Balance, end of period       $3,056    100.0%  $2,833     100.0% $2,613    100.0%  $3,241   100.0%  $3,048   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,
                                     -----------------------------------------------------------------------------------
                                                 1998                        1997                        1996
                                     ---------------------------  -------------------------- ---------------------------
                                                        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       $ 28,177     6.4%      - %  $ 20,033     4.4%    - %    $ 13,237      3.0%     - %
      NOW Accounts                    45,307    10.2      1.5     48,535    10.8    2.4       45,275     10.1     2.8 
      Money Market Accounts           41,348     9.3      2.9     44,405     9.9    3.1       44,516      9.9     3.1 
      Savings Accounts               148,148    33.5      2.8    139,964    31.0    2.9      131,368     29.4     2.8 
                                    --------   -----            --------   -----            --------    ----- 
      Total Core Deposits            262,980    59.4      2.3    252,937    56.1    2.6      234,396     52.4     2.7 
                                    --------    ----            --------    ----            --------    ----- 
      Certificate Accounts
        31 Day                           520     0.1      4.8        437     0.1    4.4        2,239      0.5     5.2 
        2-4 Month                     14,888     3.4      4.8     18,803     4.2    4.9       17,705      4.0     4.8 
        6 Month                       12,612     2.8      3.2     22,790     5.0    3.8       24,706      5.5     3.7 
        7-9 Month                     33,939     7.7      5.3     25,582     5.7    5.0       30,133      6.8     5.0 
        12 Month                       9,835     2.2      3.8     19,238     4.3    4.5       15,438      3.5     3.7 
        18 Month                         759     0.2      4.4      1,198     0.3    4.7        1,163      0.3     4.5 
        24 Month                       9,013     2.0      5.4     10,774     2.4    5.5        5,770      1.3     4.9 
        30 Month                       3,172     0.7      5.0      3,847     0.8    4.8        4,104      0.9     4.4 
        48 Month                         530     0.1      4.6        877     0.2    4.8        1,431      0.3     5.1 
        60 Month                         726     0.2      5.6        721     0.2    5.7          441      0.1     5.7 
        13-120 Month                  68,989    15.6      5.3     68,064    15.1    5.4       83,218     18.6     5.6 
        36-90 Month                    1,737     0.4      5.3      1,851     0.4    5.3        1,757      0.4     4.9 
        Fixed Rate IRA                16,593     3.7      5.4     16,737     3.7    5.4       17,634      3.9     5.4 
        Variable Rate IRA              5,120     1.2      4.9      5,160     1.1    5.4        5,012      1.1     5.2 
        Passbook Rate IRA              1,392     0.3      2.4      1,749     0.4    2.5        1,834      0.4     2.5 
                                    --------   -----            --------   -----            --------    ----- 
      Total Certificates             179,825    40.6      5.0    197,828    43.9    5.0      212,585     47.6     5.0 
                                    --------   -----            --------   -----            --------     -----
      Total Deposits                $442,805   100.0%     3.4%  $450,765   100.0%   3.7%    $446,981    100.0%    3.8%
                                    ========   =====            ========   =====            ========    ===== 
     </TABLE>

     The following table shows rate information for the Company's
     certificates of deposit at the dates indicated and maturity
     information at December 31, 1998:

     <TABLE>
     <CAPTION>

                               At December 31,      Period to Maturity from December 31, 1998
                             ------------------  ----------------------------------------------

                                                                      Two to   Over
                                                  Within    One to    Three    Three
                                1998     1997    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          $ 21,016  $ 26,361  $ 19,433  $ 1,219    $  364   $   -   $ 21,016
      4.00% to 4.99%           51,138    21,407    37,612   11,256     1,408      862    51,138
      5.00% to 5.99%           94,435   129,598    87,853    5,462       516      604    94,435
      6.00% to 6.99%            2,785     5,377       930      242       714      899     2,785
      7.00% to 7.99%            1,731     2,493     1,255      327       -        149     1,731
                              -------  --------    ------   ------    ------    -----  --------
        Total                $171,105  $185,236  $147,083  $18,506    $3,002   $2,514  $171,105
                             ========  ========  ========  =======    ======   ======  ========
     </TABLE>

     The following table sets forth the maturity dates of the Company's
     certificates of deposit of $100,000 or more at December 31, 1998:

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

        Three months or less                $ 9,839
        Three through six months              5,705
        Six through twelve months             5,604
        Over twelve months                    2,206
                                            -------
             Total                          $23,354
                                            =======



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



                                             For the Year
                                          Ended December 31,
                                     ---------------------------
                                        (Dollars in thousands)
                                        1998     1997     1996
                                        ----     ----     ----

      Maximum balance                $206,681 $196,512  $180,347 
      Average balance                $148,120 $159,234  $124,087 
      Weighted average interest          5.56%    5.59%     5.50%


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

                                           At December 31,
                                      --------------------------
                                        1998     1997      1996
                                        ----     ----      ----
                                        (Dollars in thousands)
      FHLBNY advances                 $25,300  $14,150   $24,800 
      Weighted average interest
       rate of FHLBNY advances           5.13%    6.63%     7.13%



     ITEM 2.    PROPERTIES

     At December 31, 1998, the Bank conducted its business through its 16
     offices, including its home office at 70 Sip Avenue, Jersey City, New
     Jersey.
                                             Original
                                               Date
                                              Leased     Date of
                                  Leased        or        Lease
      Location                   or 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
     Elizabeth, NJ
       Building                   Owned         1/75       --
       Land                       Leased        4/74      3/99

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

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

     35 South Main Street
     Lodi, NJ
       Building                   Owned         1/76       --
       Adjacent parcel of land    Leased        1/74     12/00

     19 Schuyler Avenue           Leased        3/98      2/08
     North Arlington, NJ

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

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

     400 Marin Boulevard          Leased        6/95     6/10*
     Jersey City, NJ

     86 River Street              Leased        1/96     12/02
     Hoboken, NJ

     *The Bank has the option to cancel the lease on the fifth and tenth
     anniversary dates of the lease, with a six-month notice prior to that
     anniversary date.


     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 National Market.  The
     NASDAQ symbol for the Company's common stock is SFIN.  As of December
     31, 1998, there were 362 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
                                   ----    ---   --------
           1998
           ----

           Fourth Quarter        19 1/4   15 1/2   $ 0.13
           Third Quarter         21 1/2   15 1/4   $ 0.13
           Second Quarter        26 11/16 20 5/8   $ 0.11
           First Quarter         24 1/8   21 1/4   $ 0.11

           1997
           ----

           Fourth Quarter        24       18       $ 0.11
           Third Quarter         22       17 3/4   $ 0.11
           Second Quarter        18 1/8   14 1/2   $ 0.10
           First Quarter         17 7/8   14 1/8   $ 0.10


     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 and to $0.13 per
     share during the third quarter of 1998.  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 
                                        At December 31,           March 31,
                              ----------------------------------  ---------
                                1998      1997    1996     1995      1995
                                ----      ----    ----     ----      ----
                                         (Dollars in thousands)

      SELECTED FINANCIAL
        CONDITION DATA:
      Total assets           $717,517 $675,316  $636,042 $559,049 $475,168 
      Loans receivable, net   366,458  332,509   325,470  195,773  169,909 
      Mortgage-backed         
         securities           248,035  290,044   240,974  260,107  203,677 
      Debt and equity         
         securities            68,312   19,093    40,243   80,126   80,987 
      Other real estate
        owned, net                523      440       563      652      825 
      Total deposits          443,705  443,878   457,056  438,021  407,758 
      Borrowed funds          206,681  160,300   107,200   44,703   41,492 
      Shareholders' equity     60,499   64,907    66,935   72,315   22,022 

      REGULATORY CAPITAL
      RATIOS (BANK):
      Tangible capital ratio     7.95%    8.96%     9.41%   10.28%    4.57%
      Core capital ratio         7.95%    8.96%     9.41%   10.28%    4.57%
      Risk-based capital
        ratio                   13.72%   22.93%    26.21%   32.88%   16.65%

      ASSET QUALITY RATIOS:
      Non-performing loans
        to total net loans       0.68%    0.75%     0.84%    2.87%    3.87%
      Non-performing loans
        to total assets          0.35%    0.37%     0.43%    1.01%    1.38%
      Non-performing assets
        to total assets          0.42%    0.44%     0.52%    1.12%    1.56%
      Allowance for loan
        losses to non-
        performing loans       122.73%  113.18%    95.43%   57.66%   46.37%
      Allowance for loan
        losses to total net
        loans                    0.83%    0.85%     0.80%    1.66%    1.79%

      OTHER DATA:
      Number of deposit 
        accounts                52,272  54,677    53,695   50,062   46,767 
      Offices                       16      16        16       15       13 


     <TABLE>
     <CAPTION>
                                                          At or For the
                                       At or For the       Nine-Month   At or For the
                                        Years Ended       Period Ended    Year Ended
                                       December 31,       December 31,    March 31,
                                  ----------------------  ------------- -------------
                                    1998    1997   1996      1995          1995
                                    ----    ----   ----      ----          ----
     <S>                          <C>      <C>     <C>     <C>          <C>
     SELECTED FINANCIAL RATIOS:
     Return on average assets (1)   0.54%   0.82%   0.49%     0.41%          0.90%
     Return on average equity (1)   5.65    8.74    4.67      5.46          21.09 
     Dividend payout ratio         55.81   32.31   29.41        -              -  
     Equity to assets               8.43    9.61   10.52     12.94           4.63 
     Net interest rate spread (2)   2.97    3.31    2.99      3.12           3.66 
     Net interest margin (2)        3.46    3.77    3.45      3.45           3.78 
     Non-interest income to
      average assets (4)            0.43    0.24    0.37      0.43           0.32 
     Non-interest expense to
      average assets (1)            2.80    2.52    2.87      2.87           2.43 
     Efficiency ratio (1)(3)       77.32   65.91   81.65     80.87          63.31 
     Average interest-earning
      assets to interest-bearing
      liabilities                 113.36% 111.88% 112.32%   108.45%        103.52%
     </TABLE>

     <TABLE>
     <CAPTION>

                                                               For the 
                                                              Nine-Month   For the
                                    For the Years Ended      Period Ended Year Ended
                                        December 31,         December 31, March 31,
                                  -----------------------    ------------ ----------
                                  (Dollars in thousands, except per share amounts)
     SELECTED OPERATING DATA:
                                  1998     1997     1996       1995        1995
                                  ----     ----     ----       ----        ----
     <S>                        <C>       <C>       <C>       <C>          <C>
     Interest income              $45,261  $50,191 $45,278    $26,853      $33,419
     Interest expense              23,223   25,384  23,656     14,162       15,975
                                  -------  ------- -------    -------      -------
     Net interest income           22,038   24,807  21,622     12,691       17,444
     Provision for loan losses        642      500     500        315          542
                                  -------  ------- -------    -------      -------
     Net interest income after
      provision for loan losses    21,396   24,307  21,122     12,376       16,902
     Net (loss) gains on sales
      of securities                     4       69  (1,093)      (340)         -  
     Other non-interest income      2,848    1,656   2,382      1,962        1,518
     Foreclosed real estate
      expense, net                     85       71     105         10           17
     FDIC SAIF assessment             -        -     2,651        -            -  
     Other non-interest expense    18,402   17,041  15,687     10,858       11,644
                                  -------  ------- -------     ------       ------
     Income before income
      taxes and extraordinary
      item                          5,761    8,920   3,968      3,130        6,759
     Income taxes                   2,231    3,333     796      1,152        2,466
                                  -------  ------- -------     ------       ------
     Income before extra-
      ordinary item                 3,530    5,587   3,172      1,978        4,293
     Extraordinary item:
     Penalties for pre-payment
      of debt, net of tax             -        -       -         (412)         -  
                                  -------  ------- -------    -------      -------
     Net income                   $ 3,530  $ 5,587 $ 3,172    $ 1,566      $ 4,293
                                  =======  ======= =======    =======      =======
     Per share data:
     Basic earnings               $  0.90  $  1.34 $  0.68        -            -  
     Diluted earnings             $  0.86  $  1.30 $  0.68        -            -  
     Cash dividends declared      $  0.48  $  0.42 $  0.20        -            -  

     (1)  1996 includes a one-time FDIC SAIF assessment of $2,651,000
          pretax, $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 gain (loss) on sale of securities.


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


     General

     When used in this Form 10-K or future filings by the Company with the
     Securities and Exchange Commission, in the Company's press releases or
     other public or shareholder communications, or in oral statements made
     with the approval of an authorized executive officer, the words or
     phrases "will likely result", "are expected to", "will continue", "is
     anticipated", "estimate", "project", or similar expressions are
     intended to identify "forward-looking statements" within the meaning
     of the Private Securities Litigation Reform Act of 1995.  The Company
     believes such statements to be reasonable and makes them in good
     faith, however such forward-looking statements may vary from actual
     results. Risks and uncertainties which may make actual results for
     future periods differ materially from any opinions of statements
     expressed with respect to future periods in any current statements,
     include among other things, changes in economic conditions in the
     Company's market area, changes in policies by regulators, change in
     market interest rates, loan demand in the Company's market area and
     unforeseen competition.  Accordingly, the Company wishes to advise the
     reader that the various factors including those listed above could
     affect the Company's future financial performance and could cause the
     Company's actual results for future periods to differ materially from
     those anticipated or projected. 

     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


     RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997

     General.  Net income for the for the year ended December 31, 1998
     ("1998") was $3.5 million, or $0.86, per share, assuming dilution, as
     compared to $5.6 million, or $1.30, per share, assuming dilution, for
     the year ended December 31, 1997 ("1997").  Earnings during 1998
     include a pretax charge of $1.9 million incurred during the third
     quarter to recognize additional amortization of premiums related to
     estimated increases in prepayment speeds in the Company's mortgage-
     backed investment securities portfolio.  Basic earnings per share were
     $0.90 for 1998 as compared to $1.34 for 1997.  

     Net income for 1998 decreased $2.1 million as compared to 1997
     primarily from the $1.9 million pretax charge mentioned above.  Other
     factors affecting 1998 results versus 1997 were lower interest rates,
     initiating secured wholesale lending to mortgage bankers through the
     start-up of Statewide Mortgage Funding, commercial lending growth and
     related staff support, and restructuring the Company's fee schedules. 

     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, debt
     and equity securities, and other investments, and total interest
     incurred on deposits and borrowed funds.  Net interest income
     decreased $2.8 million, or 11.2%, to $22.0 million for 1998 as
     compared $24.8 million for 1997.  The decline reflects contracting
     spreads between short-term rates and long-term rates, accelerating
     prepayments of principal from mortgage-backed securities and loans. 
     Resulting cash flows were used to reinvest into commercial and
     consumer loans, bearing lower current market rates of interest,
     including those originated by Statewide Mortgage Funding, and also to
     pay off short-term borrowings and liquidate higher cost certificates
     of deposit.  The remainder was invested in short-term money market
     instruments.  These actions resulted in lower average interest-earning
     balances and lower deposit costs in 1998 compared to 1997.  Yields
     were affected by reinvestment of cash flows into this lower interest
     rate environment, and by additional premium amortization expense
     incurred as a result of higher prepayment speeds from those initially
     anticipated.  Notably, in the  third quarter of 1998 when applications
     for mortgage refinancings reached record levels, the Company incurred
     a $1.9 million pretax charge reflecting revised prepayment speed
     assumptions.  As a result of prepayments and lower current market
     interest rates, the Company's average yield on its interest-earning
     assets declined to 7.10% for the year ended December 31, 1998 from
     7.61% for the year ended December 31, 1997.

     Interest Income.  Total interest and dividend income for 1998
     decreased to $45.3 million from $50.2 million for 1997, a decrease of
     $4.9 million, or 9.8%.  The average balance of interest-earning assets
     decreased $22.1 million, or 3.4%, to $637.9 million for 1998 compared
     to $660.0 million for 1997.  The related yields decreased between the
     periods to 7.10% from 7.61%.

     During 1998, the Company continued its efforts to change the mix of
     its interest-earning assets toward higher-yielding, shorter duration
     commercial and consumer lending, including the start-up of Statewide
     Mortgage Funding in mid-year 1998, to provide short-term secured
     funding to mortgage bankers.  As a result, 1998 average balances for
     the non-residential mortgage and commercial and consumer portfolios
     increased $46.6 million, or 63.3%, yielding 8.76% on the combined
     average balance of $120.3 million compared to the 1997 yield of 9.32%
     on combined average balances of $73.7 million.  These efforts more
     than offset the $34.6 million decline in one-to-four family mortgage
     loans.

     With respect to securities investments, the Company sought to
     emphasize short-term investments.  The average balance of securities
     investments during 1998 was $34.1 million less than in 1997, and the
     average yield on these portfolios was 117 basis points less, 6.14% in
     1998 versus 7.31% in 1997.  The 1998 yield was substantially affected
     by $2.7 million of additional premium expense recognized in 1998 over
     that incurred in 1997 as a result of the significant increase in
     actual and forecasted principal repayments.  In addition, yields were
     lower because the Company reinvested cash flows into shorter duration
     instruments during 1998.

     Interest Expense.  Interest expense decreased $2.2 million, or 8.5%,
     to $23.2 million for 1998 compared to $25.4 million for 1997. 
     Interest expense on deposits and borrowed funds decreased $1.5 million
     and $0.7 million, respectively.  The decrease in interest on deposits
     was as a result of lower rates paid on interest-bearing deposits,
     growth in non-interest-bearing demand deposits, and a decline in
     certificates of deposit, partially offset by growth in the average
     balance of core deposits.  The decrease in borrowed funds resulted
     from decreased average borrowing levels coupled with a three basis
     point drop in average costs.  

     Interest expense on deposits for 1998 totaled $15.0 million compared
     to $16.5 million for 1997.  The decline in total interest expense on
     deposits reflects lower rates paid on deposits due to the lower
     interest rate environment, an increase in demand deposits from the
     Company's relationship-building efforts with its commercial customers,
     and a decline in certificates of deposit balances.  Interest expense
     on core deposits decreased $0.7 million, reflecting a 35 basis point
     decrease in cost for these funds partially offset by the increase in
     average core deposits of $10.0 million, or 4.0%, during 1998 over
     1997.  Interest expense on certificates of deposits decreased $0.8
     million from a decline of $18.0 million in the average balance of
     certificates of deposit, partially offset by a four basis point
     increase in average yield.  During 1998, the Company continued with
     its strategy of not matching the most aggressive rates for
     certificates of deposit.   

     Average borrowed funds decreased $11.1 million during 1998 to $148.1
     million over the $159.2 million during 1997.  The cost of borrowed
     funds declined three basis points to 5.56% for 1998 from 5.59% for
     1997.  The decrease in borrowed funds was a result of decreased
     borrowing levels as the Company used cash flows from investing
     activities to repay its short-term debt rather than reinvesting in
     lower yielding investments.   

     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, 1998.  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, 1998, 1997 and
     1996.  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, 1998
                                               ---------------------
                                                 Actual     Average
                                                Balance    Yield/Cost
                                                -------    ----------
                                               (Dollars in thousands)
     Assets:
      Interest-earning assets:
       One-to-four family mortgage loans         $198,794     7.29%
       Consumer and other loans                    40,739     8.82
       Commercial business loans                   20,477     8.81
       Multi-family, non-residential and
        construction mortgage loans                58,791     8.50
       Warehouse mortgage lines of credit          47,657     8.17
                                                 --------
          Total loans, net                        366,458     7.85

       Mortgage-backed securities                 248,035     6.67
       Debt and equity securities                  68,312     6.40
       Money market investment                        -         -
       FHLBNY stock                                10,315     6.90
                                                 --------
          Total interest earning assets           693,120     7.27%
                                                              ----
      Non-interest-earning assets                  24,397
                                                 --------
          Total assets                           $717,517
                                                 ========
     Liabilities and shareholders' equity:
      Interest-bearing liabilities:
       Savings accounts                          $156,872     2.46%
       NOW accounts                                44,764     1.29
       Money market accounts                       37,811     2.73
       Certificates of deposit                    171,105     4.85
       Borrowed funds                             206,681     5.49
                                                 --------
          Total interest-bearing liabilities      617,233     4.07%
                                                              ----
      Non-interest-bearing liabilities:
       Non-interest-bearing deposits               33,153
       Other non-interest bearing liabilities       6,632
                                                 --------
          Total non-interest-bearing
           liabilities                             39,785
                                                 --------
          Total liabilities                       657,018
     Shareholders' equity                          60,499
                                                 --------
          Total liabilities and shareholders'
            equity                               $717,517
                                                 ========
     Net interest income/net interest rate
      spread                                                  3.20%
                                                              ====

     Net interest margin                                      3.65%
                                                              ====
     Ratio of interest-earning assets to
      interest-bearing liabilities                          112.29%
                                                            ======

     
</TABLE>
<TABLE>
     <CAPTION>
                                                                             Year Ended December 31,
                                              -----------------------------------------------------------------------------------
                                                         1998                        1997                        1996
                                               -------------------------  --------------------------  ---------------------------
                                              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:
       One-to-four family mortgage loans      $219,906  $16,481   7.49%  $254,523  $19,085    7.50%  $219,693  $16,971     7.72%
       Consumer and other loans                 39,674    3,652   9.21     36,312    3,500    9.64     33,950    3,176     9.35 
       Commercial business loans                17,462    1,550   8.88     14,383    1,354    9.41      3,559      332     9.33 
       Multi-family, non-residential and
        construction mortgage loans             45,010    3,861   8.58     22,988    2,016    8.77     10,157      727     7.16 
       Warehouse mortgage lines of credit       18,153    1,472   8.11        -        -       -          -        -         -  
                                              --------  -------          --------  -------           --------  -------
          Total loans, net                     340,205   27,016   7.94    328,206   25,955    7.91    267,359   21,206     7.93 

       Mortgage-backed securities              235,110   13,995   5.96    292,671   21,577    7.37    286,794   19,377     6.76 
       Debt and equity securities               41,544    2,910   7.03     30,228    2,066    6.86     63,092    4,115     6.52 
       Money market investment                  10,809      596   5.51        140       10    7.14      2,088      113     5.41 
       FHLBNY stock                             10,260      744   7.25      8,800      583    6.63      7,224      467     6.46 
                                              --------  -------          --------  -------           --------  -------
          Total interest-earning assets        637,928   45,261   7.10%   660,045   50,191    7.61%   626,557   45,278     7.23%
                                                        -------   ----             -------    ----             -------     ---- 
      Non-interest-earning assets               21,172                     19,477                      17,153                   
                                              --------                   --------                    --------
          Total assets                        $659,100                   $679,522                    $643,710
                                              ========                   ========                    ========
     Liabilities and shareholders' equity:
      Interest-bearing liabilities:
       Savings accounts                       $148,148    4,090   2.76%  $139,964    4,082    2.92%  $131,368    3,658     2.78%
       NOW accounts                             45,307      663   1.46     48,535    1,166    2.40     45,275    1,285     2.84 
       Money market accounts                    41,348    1,207   2.92     44,405    1,382    3.11     44,516    1,365     3.07 
       Certificates of deposit                 179,825    9,031   5.02    197,828    9,851    4.98    212,585   10,519     4.95 
       Borrowed funds                          148,120    8,232   5.56    159,234    8,903    5.59    124,087    6,829     5.50 
                                              --------  -------          --------  -------           --------  -------
          Total interest-bearing liabilities   562,748   23,223   4.13%   589,966   25,384    4.30%   557,831   23,656     4.24%
                                              --------  -------   ----   --------  -------    ----   --------  -------     ---- 
      Non-interest-bearing liabilities:
       Non-interest-bearing deposits            28,177                     20,033                      13,237
       Other non-interest bearing liabilities    5,681                      5,627                       4,708
                                              --------                   --------                    --------
          Total non-interest-bearing 
           liabilities                          33,858                     25,660                      17,945
                                              --------                   --------                    --------
          Total liabilities                    596,606                    615,626                     575,776
     Shareholders' equity                       62,494                     63,896                      67,934
                                              --------                   --------                    --------
          Total liabilities and shareholders'
            equity                            $659,100                   $679,522                    $643,710
                                              ========                   ========                    ========
     Net interest income/net interest rate
      spread                                            $22,038   2.97%            $24,807    3.31%            $21,622     2.99%
                                                        =======   ====             =======    ====             =======     ==== 

     Net interest margin                                          3.46%                       3.77%                        3.45%
                                                                  ====                        ====                         ==== 
     Ratio of interest-earning assets to
      interest-bearing liabilities                              113.36%                     111.88%                      112.32%
                                                                ======                      ======                       ====== 
     </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,
                                        ------------------------------------------------------------------
                                                 1998 vs 1997                         1997 vs 1996
                                      ---------------------------------      ------------------------------

                                          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:
      One-to-four family mortgage
       loans                         $(2,596)  $   (10)   $  2  $(2,604)      $2,691  $ (498) $ (79) $2,114 
      Consumer and other loans           324      (157)    (15)     152          221      96      7     324 
      Commercial business loans          290       (77)    (17)     196        1,010       3      9   1,022 
      Multi-family, non-residential
       and construction mortgage
       loans                           1,931       (44)    (42)   1,845          918     164    207   1,289 
      Warehouse mortgage lines of
       credit                          1,472        -        -    1,472           -        -      -      -  
      Mortgage-backed securities      (4,244)   (4,125)    787   (7,582)         397   1,769     34   2,200 
      Debt securities                    777        50      17      844       (2,143)    216   (122) (2,049)
      Money market investments           762        (2)   (174)     586         (105)     36    (34)   (103)
      FHLBNY stock                        97        55       9      161          102      12      2     116 
                                     --------  -------   -----  -------       ------- ------  -----  ------ 
          Total                       (1,187)   (4,310)    567   (4,930)       3,091   1,798     24   4,913 
                                     --------  -------   -----  -------       ------  ------  -----  ------ 
     Interest-bearing liabilities:
      Deposits                          (616)     (908)     34   (1,490)        (117)   (231)     2    (346)
      Borrowed funds                    (621)      (53)      3     (671)       1,934     109     31   2,074 
                                     --------  -------   -----  -------       ------  ------  -----  ------ 
          Total                       (1,237)     (961)     37   (2,161)       1,817    (122)    33   1,728 
                                     --------  -------   -----  -------       ------  ------  -----  ------ 
     Net change in net interest
      income                         $   (50)  $(3,349)  $ 530  $(2,769)      $1,274  $1,920  $  (9) $3,185 
                                     =======   =======   =====  =======       ======  ======  =====  ====== 
     </TABLE>

     Provision for Loan Losses.  Provision for loan losses for 1998
     increased to $642,000 from $500,000 for 1997.  The increase in
     provision for loan losses in 1998 was determined by management after
     review of, among other things, the composition and volume of the
     Company's loan portfolio, the risk inherent in the Company's lending
     activities, and the economy in the Company's market areas.  The
     increased provision in 1998 reflects both the increased average
     balance of loans as well as the change in composition of the portfolio
     toward more commercial loans.  Commercial loans generally involve more
     potential risk than do loans secured by one-to-four family residences. 
     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, 1998, allowance for loan losses was
     $3.1 million compared to $2.8 million at December 31, 1997, an
     increase of $223,000, or 7.9%.  Non-performing loans, which consist of
     non-accrual loans and accruing loans delinquent 90 days or more,
     decreased slightly to $2,490,000 at December 31, 1998 from $2,503,000
     at December 31, 1997.  The coverage ratio of allowance for loan losses
     to non-performing loans and also to net loans at December 31, 1998 was
     122.73% and 0.83%, respectively, as compared to 113.18% and 0.85%,
     respectively, at December 31, 1997.

     Non-interest Income.  Non-interest income for 1998 was $2.9 million
     compared to $1.7 million for 1997.  Recurring non-interest income,
     exclusive of gains on sales of investment securities and the gain on
     the sale of the Passaic branch, was $2.5 million for 1998, an increase
     of $0.8 million or 53.8%, over 1997. Core deposit and commercial
     lending growth, along with increases in the Company's fees schedule
     during mid-second quarter 1998, were the principal reasons for the
     increase in recurring non-interest income.  Specifically, this rise
     reflects increased deposit account fees for monthly maintenance on
     checking and savings products, returned check assessment charges, ATM
     surcharges for non-customer service usage, increased earned loan fees
     and charges, and higher annuity sales generated through cross selling
     efforts in our branch network. 

     During 1998, the Company realized a gain on the sale of the Passaic
     branch of $0.3 million and a gain of $4,000 from the sale of
     securities compared to a gain of $69,000 from the sale of securities
     in 1997.

     Non-interest Expense.  Non-interest expense totaled $18.5 million for
     1998, an increase of $1.4 million, or 8.0%, as compared to $17.1
     million for 1997.  The current year reflects increases in salaries and
     benefits costs, professional fees, occupancy, postage, communications
     and ATM and MAC service costs.

     Salaries and employee benefits expense is the largest component within
     non-interest expense, and increased $0.8 million, or 8.0%, during 1998
     as compared to 1997.  Of this amount, salary expense increased $0.4
     million and employee benefit expense increased $0.4 million.  The
     increase in salary and benefits expense reflects current year staff
     additions and annual wage increases, partially offset by the virtual
     elimination of the 1998 executive incentive plan benefits.  During
     1998, staffing increased for the newly formed Statewide Mortgage
     Funding division, expansion of the commercial lending division and for
     the opening of the North Arlington N.J. branch, partially offset by
     the sale of the Passaic branch during the second quarter of 1998.
     Employee benefit expense for 1998 includes an increase of $96,000
     related to the Company's Employee Stock Ownership Plan ("ESOP") over
     the same period of the prior year because of an increase in the market
     value of the Company's stock for the current period over 1997.  ESOP
     expense is included as compensation based upon the market value of the
     shares awarded.  The increase in employee benefit expense was also
     caused by an unrealized market loss in the cash surrender value of
     policies held in conjunction with Company life insurance programs,
     higher employee recruitment costs, and a proportionate increase in
     payroll related taxes.       

     Occupancy expense, which includes rent, leasehold improvements,
     furniture, fixtures and equipment ("FF&E") and other occupancy related
     maintenance, was $2.3 million in 1998, $70,000 more than the expense
     incurred in 1997.  The current year reflects the additional expense of
     operating system improvements, start-up of Statewide Mortgage Funding,
     increases in real estate taxes and utilities as well as ongoing
     facility renovations throughout the Company.  In addition, the change
     in this expense reflects the closing of the Passaic, New Jersey and
     the opening of the North Arlington, New Jersey branches.

     Professional fees increased $0.2 million, or 41.8%, to $0.8 million
     for 1998 as compared to $0.6 million in 1997 because of increased
     legal activity in conjunction with the Company's pursuit of its FIRREA
     litigation against the Federal government and review of its ESOP and
     other Company benefit plans, and because of increases in fees paid to
     other professionals for a study which resulted in a revision to the
     Company's non-interest income fees schedule.

     Data processing costs increased $0.1 million, or 11.9%, to $0.7
     million for 1998 from $0.6 for 1997.  The increase resulted from
     higher transaction activity costs on loan and deposit products, and
     costs related to expansion and enhancements of the Company's
     application and network systems.

     The remaining components of non-interest expense increased $0.2
     million, or 5.4%, to $4.2 million for 1998 compared to $4.0 million
     for 1997 principally as a result of the Company's expansion and
     growth.  Advertising and marketing expenses increased $218,000 over
     1997 because of the opening of the North Arlington, New Jersey branch,
     efforts to increase name recognition and specific financial products. 
     Transaction growth resulted in a 1998 expense increase of $122,000
     from higher postage, communication and ATM expenses.  These expense
     increases were partially offset by $162,000 from reductions in
     director benefits, bank correspondent fees and miscellaneous losses as
     well as lower charges for printing. 

     Income Tax Expense.  Income tax decreased $1.1 million to $2.2 million
     for 1998 compared to $3.3 million for 1997.  The reduction is
     principally the result of the tax effect of the $3.2 million reduction
     in pretax income for 1998 as compared to 1997.


                               FINANCIAL CONDITION

     Total assets increased $42.2 million, or 6.2%, to $717.5 million at
     December 31, 1998 from total assets of $675.3 million at December 31,
     1997.  Net loans at December 31, 1998 were $33.9 million more than a
     year ago as originations of commercial mortgages, commercial business
     and consumer loans and wholesale mortgage loans to mortgage bankers,
     more than offset repayments in these portfolios and in the one-to-four
     family mortgage loan portfolio during 1998.  Debt and equity
     securities at December 31, 1998 were $49.2 million more than the
     outstanding balance at the prior year end, primarily reflecting the
     purchase of corporate debt issues partially offset by maturities,
     calls and sales of federal agency and corporate debt securities during
     1998.  At December 31, 1998 mortgage-backed securities were $42.0
     million lower than the investment at the prior year-end reflecting
     normal and accelerated principal payments in this portfolio, partially
     offset by purchases of mortgage-backed securities during the fourth
     quarter of 1998.  Asset growth at December 31, 1998 over the prior
     year-end was primarily funded through short-term FHLB borrowings and
     an increase in core deposits, partially offset by a decrease in higher
     yielding certificates of deposit.  

     At December 31, 1998, shareholders' equity was $60.5 million, a
     decrease of $4.4 million compared to $64.9 million at December 31,
     1997.  The ratios of shareholders' equity to total assets was 8.43% at
     December 31, 1998 and 9.61% at December 31, 1997.  The current year
     decrease resulted primarily from the purchase on the open market and
     retirement of 363,258 shares of common stock for $7.1 million at an
     average price of $19.53 per share, the payment of four quarterly
     dividends totaling $1.9 million and a net decrease of $0.4 million
     (net of taxes) in the market value of the investment portfolio. 
     Partially offsetting these decreases were net income of $3.5 million,
     a reduction of $1.4 million in the unallocated and unearned ESOP,
     Employee RRP, and Director RRP shares.


     LENDING ACTIVITIES

     Loan Portfolio Composition.  At December 31, 1998, the Company had
     total loans of $369.2 million compared to $334.6 million at December
     31, 1997.  Total loans increased $34.6 million, or 10.3%, during 1998
     over 1997 as the Company's efforts continue towards the origination of
     commercial and multi-family mortgages, and commercial business and
     consumer loans. The largest portion of the portfolio continues to be
     one-to-four family first mortgage loans which totaled $200.1 million,
     or 54.2%, of the loan portfolio as compared to 73.0% of the loan
     portfolio at December 31, 1997.  Other loan categories within the
     portfolio consist of: commercial business and wholesale funding loans
     of $68.7 million, or 18.6% of the loan portfolio; multi-family and
     non-residential mortgage loans of $49.1 million, or 13.3% of the loan
     portfolio; consumer loans primarily comprised of fixed rate second
     mortgage loans and FHA Title One insured home improvement loans of
     $40.9 million, or 11.1% of the loan portfolio; and acquisition, and
     construction loans of $10.4 million, or 2.8% of the loan portfolio.

     The types and amount of loans that the Company may originate or
     purchase and hold in its portfolio 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 1998, as a result of the continued low interest rate
     environment and increased rate competition, total one-to-four family
     first mortgage loans decreased $44.3 million, or 18.1%, to $200.1
     million at December 31, 1998 from $244.4 million at December 31, 1997. 
     This decrease reflected normal principal amortization and accelerated
     prepayments, partially offset by originations of $10.4 million of
     one-to-four family first mortgage loans.  The Company did not
     emphasize one-to-four family lending during 1998, as the spreads
     between competitors' rates and the cost of funds 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, 74.9% were ARM loans and 25.1%
     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, 1998, the weighted average adjustment period approximated 2.3
     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 1.0%
     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's commercial and multi-family real estate loan portfolio
     is secured primarily by apartment buildings, mixed-use buildings,
     small office buildings, strip shopping centers, 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 three or five years, with periodic adjustments
     after three or 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, LIBOR 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.

     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, 1998, second mortgage loans amounted to $17.9 million, or 4.9%, of
     total loans, a decrease of $0.2 million, or 1.0%, from December 31,
     1997.

     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 $14.4 million, or 3.9%, of total loans at December 31,
     1998.

     Remaining other loans are home equity lines of credit, other home
     improvement loans, secured and unsecured personal loans, and
     automobile loans.  As of December 31, 1998, these loans amounted to
     $8.5 million, or 2.3%, of total loans, an increase of $3.3 million, or
     63.1%, from December 31, 1997.

     Warehouse Mortgage Lines of Credit.  During 1998, the Company started
     its Statewide Mortgage Funding division which originates revolving
     lines of credit to small and medium-sized mortgage banking companies
     at interest rates approximating prime.  The lines are drawn upon by
     these companies to fund the origination of mortgages, primarily one-
     to-four family loans, where the amount of the draw is generally no
     higher than 97% of the loan which, in turn, is no higher than 80% of
     the appraised value of the property.  The loans are repaid upon
     completion of the sale of the mortgage loan to third parties which
     usually occurs within 90 days.  During the period that the loans are
     outstanding, the Company maintains possession of the original
     mortgage.  The customers of Statewide Mortgage Funding are primarily
     located in New Jersey and surrounding states.  However, the Company is
     seeking to expand this business line and may expand into other
     geographic regions.  This is the fastest growing segment of the
     Company's loan portfolio, but these loans are short duration and made
     to a customer base who have approximately 50% of their business from
     mortgage refinancing.  In the event of rising interest rates, the
     Company expects that utilization of these lines of credit, made
     through Statewide Mortgage Funding, would be substantially reduced and
     replaced only to the extent of strength in the general housing
     markets.

     Commercial Business Loans.  During 1998, 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.

     Commercial Lending.  At December 31, 1998, the Company's total loan
     portfolio included $49.1 million, or 13.3%, of commercial and
     multi-family mortgage loans and $68.7 million, or 18.6%, of commercial
     business loans, including loans made through Statewide Mortgage
     Funding.  The combined total of $117.8 million at December 31, 1998
     compares to $47.5 million of like loans at December 31, 1997. 
     Commercial business loans totaled $21.0 million, an increase of $4.9
     million, or 30.6%, over the prior year-end and wholesale loans to
     mortgage bankers totaled $47.8 million with no balance outstanding at
     year-end 1997.  In addition, at December 31, 1998, $10.4 million, or
     2.8%, of the Company's total loan portfolio consisted of construction
     loans, an increase of $6.1 million as compared to $4.3 million at
     December 31, 1997.  The growth in these product lines was the result
     of management's strategy to develop higher yielding, variable rate
     based, non-residential loans.  Additionally, the growth in Statewide
     Mortgage Funding was the result of management's strategy to find a
     secure, short duration investment alternative to accommodate increased
     cash flows from mortgage refinancing.  Statewide Mortgage Funding
     allows the Company to place its cash flows into higher-yielding loans
     in the industry that is the driver for the accelerated prepayments. 
     Management's strategy is that when prepayments slow, and consequently
     mortgage bankers' demand for wholesale funding slows, there will be
     opportunities for higher yields and spreads through other commercial
     lending and consumer lending as well as through investment in
     securities.  These strategies help to diversify the Company's loan
     offerings and portfolio mix, and facilitate interest rate risk
     management.

     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,
                           ---------------------------------------------------------------     ------------
                                1998              1997            1996             1995            1995
                           ---------------   --------------- ---------------   ------------     ---------

                                    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  $200,145   54.2%  $244,364  73.0% $265,748  81.2% $157,686   79.0%  $137,317  79.0%
      Multi-family          21,679    5.9     12,190   3.6     7,725   2.4     4,742    2.4      3,978   2.3 
      Non-residential       27,392    7.4     19,219   5.8     9,304   2.9     4,055    2.0      1,987   1.1 
      Construction          10,354    2.8      4,325   1.3       404   0.1     3,707    1.9      4,217   2.4 
      Land                     -       -         -      -        -      -         40     -       1,017   0.6 
                          --------   ----   -------- -----  -------- -----  --------   -----  -------- ----- 
       Total first
        mortgage loans     259,570   70.3    280,098  83.7   283,181  86.6   170,230    85.3   148,516  85.4 
                          --------  -----   -------- -----  -------- -----  --------   -----  -------- ----- 

     Consumer loans:
      Second mortgage       17,937    4.9     18,110   5.4    17,295   5.3    13,938     7.0    12,493   7.2 
      FHA insured home
       improvement          14,447    3.9     15,115   4.5    13,613   4.2    12,527     6.3    10,611   6.1 
      Unsecured consumer     1,533    0.4      1,896   0.6     1,829   0.6     1,088     0.6       489   0.3 
      Home equity lines
       of credit             3,737    1.0      1,485   0.4     1,147   0.4     1,263     0.6     1,344   0.8 
      Automobile loans         664    0.2        596   0.2       413   0.1        87     -          -     -  
      Home improvement       2,415    0.7      1,051   0.3       154    -          6     -          -     -  
      Other                    171     -         197   0.1       256    -        422     0.2       397   0.2 
                          --------  -----   -------- -----  -------- -----  --------   -----  -------- ----- 
       Total consumer
        loans               40,904   11.1     38,450  11.5    34,707  10.6    29,331    14.7    25,334  14.6 
                          --------  -----   -------- -----  -------- -----  --------   -----  -------- ----- 
     Warehouse mortgage
      lines of credit       47,752   12.9        -      -        -      -       -        -        -       -  
     Commercial business    20,985    5.7     16,066   4.8     9,210   2.8      -        -        -       -  
                          --------  -----   -------- -----  --------  ----  --------   -----  -------- ----- 
     Total loans           369,211  100.0%   334,614 100.0%  327,098 100.0%  199,561  100.0%   173,850 100.0%
                                    =====            =====           =====            =====            ===== 
      Less (plus):
       Unearned discounts/
       (premiums) and
       deferred loan fees,
       net                    (303)             (728)            (985)           547               893
       Allowance for loan
        losses               3,056             2,833            2,613          3,241             3,048
                          --------          --------         --------       --------          --------
        Total loans, net  $366,458          $332,509         $325,470       $195,773          $169,909
                          ========          ========         ========       ========          ========
     </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 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 then 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 Bank 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 Bank 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, 1998, the Company had loans categorized as special
     mention of $3.1 million, which consisted of $1.9 million in commercial
     business loans, $1.0 million in commercial mortgage loans, and $0.2
     million in first and second mortgage loans.  Substandard assets
     totaled $2.8 million and consisted of $0.5 million in real estate
     owned ("REO"), $0.7 million in commercial loans, and $1.6 million in
     first and second mortgage loans.  In addition, at that date, the
     Company had doubtful loans of $0.4 million consisting of first and
     second mortgage loans and $38,000 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, 1998, 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,
                                           ------------------------    --------

                                           1998    1997  1996    1995    1995
                                           ----    ----  ----    ----    ----
                                                 (Dollars in thousands)
     <S>                                <C>     <C>      <C>     <C>    <C>

     Mortgage loans delinquent 90
       days more and still accruing     $  236  $  255  $  404 $  647   $  558 
     Non-accrual delinquent                                    
       mortgage loans                    1,477   1,767   1,884  1,472    1,802 
     Non-accrual construction loans         -       -       -   3,273    3,954 
     Non-accrual commercial loans           96      38      -      -        -  
     Other non-performing loans
       delinquent 90 days or more          681     443     450    229      259 
                                        ------  ------  ------ ------   ------ 
        Total non-performing loans       2,490   2,503   2,738  5,621    6,573 
     Total REO                             523     440     563    652      825 
                                        ------  ------  ------ ------   ------ 
        Total non-performing
          assets                        $3,013  $2,943  $3,301 $6,273   $7,398 
                                        ======  ======  ====== ======   ====== 
     Non-performing loans to total
       net loans                          0.68%   0.75%   0.84%  2.87%    3.87%
                                          ====    ====    ====   ====     ==== 
     Non-performing assets to
       total net loans and REO            0.82%   0.88%   1.01%  3.19%    4.33%
                                          ====    ====    ====   ====     ==== 
     Non-performing loans to total
       assets                             0.35%   0.37%   0.43%  1.01%    1.38%
                                          ====    ====    ====   ====     ==== 
     Non-performing assets to total
       assets                             0.42%   0.44%   0.52%  1.12%    1.56%
                                          ====    ====    ====   ====     ==== 
     Allowance for loan losses to
       non-performing loans             122.73% 113.18%  95.43% 57.66%   46.37%
                                        ======  ======   =====  =====    ===== 
     Allowance for loan losses to
       total net loans                    0.83%   0.85%   0.80%  1.66%    1.79%
                                          ====    ====    ====   ====     ==== 
     </TABLE>

     In addition to the loans included in the risk elements table above,
     the Company has at December 31, 1998, 23 loans delinquent between 31
     days and 90 days totaling $230,000.  These loans also have been
     considered in the analysis of the adequacy of the allowance for loan
     losses.

     For the years ended December 31, 1998, 1997, and 1996, the amounts of
     interest income that would have been recorded on non-accrual loans,
     had they been current, approximated $0.1 million, $0.1 million, and
     $0.2 million, respectively.  Also, for the years ended December 31,
     1998, 1997, and 1996, the amount of interest income on non-accruing
     loans that was included in income approximated $41,000, $80,000, and
     $75,000, respectively.

     The Company's REO before allowance for losses on REO, was $629,000 at
     December 31, 1998 as compared to $638,000 at December 31, 1997. 
     During 1998, $642,000 of new REO was acquired which was offset by the
     sale of $651,000 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 probable
     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, including collateralized
     mortgage obligations ("CMO's"), are issued, insured or guaranteed by
     the GNMA, FNMA or FHLMC, or are investment grade private issues.  Debt
     and equity securities primarily consist of high grade corporate debt
     investment and U.S. Government and agency securities.  At December 31,
     1998, investments increased $7.3 million, or 2.3%, to $326.7 million
     compared to $319.4 million at December 31, 1997.  During 1998, debt
     securities increased $49.2 million, or 257.8%, primarily from the
     purchase $77.0 million of corporate debt, including certain investment
     grade trust preferred securities of other financial institutions,
     offset by maturities, calls and sales of $24.9 million of federal
     agency debt and $3.2 million of corporate debt during the period. 
     Offsetting the net increase in debt securities were reductions of
     mortgage-backed securities of $42.0 million, or 14.5%, resulting from
     $114.7 million of principal amortization and accelerated prepayments
     due to the continued low interest rate environment, partially offset
     by purchases of $77.0 million late in the fourth quarter of 1998.   

     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."  At December 31, 1998,
     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 debt and equity securities and FHLBNY stock at the dates
     indicated:

     Table 5:  Debt and Equity Securities
     <TABLE>
     <CAPTION>
                                            At December 31,
                              --------------------------------------------
                                  1998            1997           1996
                             --------------   -------------  -------------
                                    Percent          Percent         Percent
                                       of               of             of 
                             Amount  Total   Amount   Total  Amount   Total
                             ------  -----   ------   -----  ------   -----
                                         (Dollars in thousands)
     <S>                     <C>     <C>     <C>      <C>   <C>      <C>
     Debt and equity 
       securities:
      U.S. Government and
       agency securities    $17,573   22.3%  $14,819  50.5% $40,103    83.5%
      Trust preferred 
       securities            38,556   49.0       -      -       -        -  
      Corporate debt         11,908   15.2     4,065  13.8      -        -  
      Equity securities         275    0.4       209   0.7      140     0.3 
                            -------  -----   ------- -----  -------    ---- 
     Sub-total               68,312   86.9    19,093  65.0   40,243    83.8 
     FHLBNY stock            10,315   13.1    10,260  35.0    7,768    16.2 
                            -------  -----   ------- -----  -------    ---- 
     Total debt and equity
      securities and FHLBNY
      stock                 $78,627  100.0%  $29,353 100.0% $48,011   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, 
                             --------------------------------------------------
                                  1998             1997              1996
                             --------------   --------------   ----------------
                                     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                   $74,294   30.5%$ 88,692    31.5%  $ 77,717   33.0%
       FHLMC                   64,954   26.7  109,206    38.7     92,262   39.1 
       FNMA                    47,472   19.5   84,111    29.8     65,706   27.9 
       Private label pass-
        through certificates   10,013    4.1      -        -         -       -  
       Private label CMO's     46,604   19.2      -        -         -       -  
                              -------  ----- --------   -----   --------  ----- 
     Total mortgage-
      backed securities       243,337  100.0% 282,009   100.0%   235,685  100.0%
                                       =====            =====             ===== 
     Unamortized
      premiums, net             4,698           8,035              5,289
                             --------        --------           --------
     Mortgage-backed
      securities, net        $248,035        $290,044           $240,974
                             ========        ========           ========
     </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, 1998 and
     1997, the percentage of core deposits to total deposits was 61.4% and
     58.3%, respectively.

     At December 31, 1998, deposits were $443.7 million compared to $443.9
     million at December 31, 1997, a decrease of $0.2 million.  During
     1998, the Company's strategy was, and continues to be, to not match
     the competitions' most aggressive interest rates unless the Company
     believes that key relationships with deposit holders who have other
     deposit and/or loan relationships are in jeopardy.  As a result,
     higher costing certificates of deposit, through controlled runoff,
     decreased $14.1 million from $185.2 million at December 31, 1997 to
     $171.1 million at December 31, 1998.  During the second quarter of
     1998, the Company transferred the lease and sold the deposits of the
     Company's Passaic, New Jersey branch.  Despite the branch sale,
     through the Company's continuing cross selling efforts, marketing
     strategy and development of new customer relationships, core deposits
     grew $14.0 million, to $272.6 million at December 31, 1998 from $258.6
     million at December 31, 1997.  Within core deposits, growth in savings
     accounts of $14.5 million coupled with a $5.9 million increase in non-
     interest bearing demand and NOW accounts was partially offset by a
     decrease in money market deposits of $6.4 million. 

     During calendar year 1999, $147.1 million of the Company's
     certificates of deposit will be maturing.  Certificates of deposit
     currently carry interest rates ranging from 2.00% to 7.07% and a
     weighted average interest rate of 4.85%.  As of December 31, 1998, the
     Company's current interest rates offered, for certificates with
     similar maturities, were between 2.90% and 4.50%.  Management does not
     believe that the maturity of these time deposits will have a material
     impact on 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 and calls of debt securities
     and funds provided by operations.  At December 31, 1998, 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 5.2% of total
     assets and 8.3% of total deposits at December 31, 1998.  At December
     31, 1998, the Company had additional borrowing capacity to meet any
     funding needs of $7.5 million under a line of credit with the FHLBNY,
     expiring November 2, 1999.  In addition, the Company has approximately
     $119.8 million in unpledged debt, equity and mortgage-backed
     securities which are classified as available for sale, and approximate
     $200.0 million in loans which could be used to collateralize
     additional borrowings or sold to provide liquidity.

     At December 31, 1998, capital resources were sufficient to meet
     outstanding loan commitments of $59.6 million, commitments on unused
     lines of credit of $48.2 million and commercial letters of credit of
     $2.9 million.  An important source of the Company's funds is the
     Bank's core deposits.  Management believes that a substantial portion
     of the Bank's $272.6 million of its core deposits are a dependable
     source of funds due to long-term customer relationships.  Certificates
     of deposit which are scheduled to mature in one year or less from
     December 31, 1998 totaled $147.1 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, the Company's experience
     indicate that a significant portion of such deposits should remain
     with the Company.

     In addition to $10.7 million of funds provided from 1998 operating
     activities, the Company's current year principal funding needs were
     primarily provided by net increases on advances from the FHLBNY of
     $46.4 million, net proceeds received on mortgage-backed securities of
     $37.7 million and a net increase in deposits of $6.3 million.  During
     1998, cash provided was principally used for investing and financing
     activities.  Purchases of debt securities, net of repayments and
     sales, totaled $48.9 million and origination and purchase of loans
     exceeded principal collections by $35.5 million.  In addition, funds
     used for financing activities included the purchase and retirement of
     the Company's common stock, payment for the transfer of deposits from
     the sale of the Passaic branch, and for 1998 dividend payments.

     During the year ended December 31, 1997, the Company's 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.

     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 debt securities throughout 1998 and
     mortgage-backed securities during the fourth quarter of 1998 continued
     as the Company sought to further balance and replace accelerated
     prepaying mortgage-backed securities during 1998 with higher yielding
     debt securities and intermediate term mortgage-backed securities. 
     These purchases, along with loan growth during 1998, were funded with
     borrowings from the FHLBNY and prepayments of mortgage-backed
     securities.  During the latter part of 1998, the Company increased its
     short-term borrowings as leveraging again became a viable growth
     strategy as the Company's borrowing rates declined with the decrease
     in the Federal Funds target rate.  Borrowed funds at December 31, 1998
     were $206.7 million, an increase of $46.4 million, or 28.9%, compared
     to $160.3 million for 1997.  Of the outstanding borrowed funds at
     December 31, 1998, $60.3 million matures within 30 days, $0.4 million
     matures within 90 days, and the remaining $146.0 million have 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 callable
     quarterly through maturity, and borrowed funds of $60.0 million, with
     interest rates of 5.52%, are first callable in November 1999 and
     quarterly thereafter.


     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. 

     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.

     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 sale
     of securities compared to a loss of $1.1 million for 1996.  Proceeds
     from the sale 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, salary
     expense increased $0.3 million and employee benefit expenses increased
     $0.8 million.  Salary 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
     buy out 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 pretax income recognized in 1997. 
     Income taxes for 1996 reflect the tax effect of the pretax income
     recognized for 1996, partially offset by a reversal of a $702,000 tax
     liability previously established, which expired during 1996.


                     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, 1998, based upon an
     immediate and sustained interest rate change from the interest rate
     yield curve at December 31, 1998 of plus 100 and 200 basis points and
     minus 100 and 200 basis points.

     1998                                           Change
     ----                                       ----------------
                                      Amount    Amount   Percent
                                      ------    ------   -------
                                       (Dollars in thousands)
     Change in rates:
     +200 basis points                $50,808  $(21,042)  (29)%
     +100 basis points                $62,090  $ (9,760)  (14)%
     Estimated Net Portfolio Value
      at December 31, 1998:           $71,850  $    -       - %
     -100 basis points                $82,150  $ 10,300    14 %
     -200 basis points                $94,362  $ 22,512    31 %


     The table below sets forth the estimated change to the Company's
     estimate of its net interest income based upon the December 31, 1998
     balance sheet, assuming an interest rate change from the December 31,
     1998 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.

     1998                             Percent Change
     ----                      ---------------------------
                                 Year 1   Year 2    Total
                                 ------   ------    -----
     Change in rates:
     +200 basis points            1.27%     6.20 %   3.72 %
     -200 basis points            0.02%    (6.10)%  (3.02)%


     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 READINESS

     The Year 2000 technology issues pose potential problems to financial
     institutions and other businesses who rely on computers to assist in
     normal daily operations of their business.  Many computer programs and
     applications which use date fields may cease to function normally as a
     result of the way date fields have been programmed historically.  Date
     sensitive software may recognize a date using 00 as the year 1900
     rather than the year 2000.  This could result in a system failure,
     miscalculations or lost systems files, causing disruptions of
     operations and could result in a temporary inability to process
     transactions or conduct normal business activity.

     The Company has implemented a Year 2000 compliance plan and the
     execution of this plan is currently on target.  The objective of this
     plan is to ensure that the Company will be Year 2000 ready prior to
     the turn of the century.  To monitor and execute the Company's Year
     2000 plan, the Company formed a Year 2000 Steering Committee and a
     Year 2000 Action Committee.  The Year 2000 Steering Committee consists
     of senior executive officers of the Bank who review the progress of
     the plan and approve the course of action taken by the Year 2000
     Action Committee.  The Year 2000 Action Committee consists of
     department heads from various operating areas of the Company.  This
     action committee performs the necessary steps needed to assure the
     Company is Year 2000 ready.  

     As recommended by the Federal Financial Institutions Examination
     Council ("FFIEC")guide, the Year 2000 compliance plan includes the
     following phases: awareness, assessment, renovation, validation
     (testing), and implementation.  Completing these phases will enable
     the Company to assess the risks and effects of the Year 2000 issues,
     develop a strategic plan and a systematic approach guide, perform
     adequate testing, and implement corrective action necessary to be
     adequately assured that the Company's processing and information
     systems are Year 2000 ready.  As of December 31, 1998, the Company has
     substantially completed the awareness, assessment and renovation
     phases of the Year 2000 compliance plan.  The Company is currently in
     the testing phase.

     The Company's deposit and loan account application systems are
     processed off site by a third party vendor.  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.  The
     Company has confirmed that this vendor has developed a Year 2000
     action plan, that certain of its application modules are currently
     Year 2000 ready, and that it is currently testing its remaining
     systems and remedying as necessary.  In addition, the Company and the
     vendor are jointly testing the Company's applications which are
     processed or affected by the vendor.  This testing phase is on target
     for completion in April 1999, and the implementation phase is targeted
     for completion by the end of the second quarter 1999.  The vendor also
     expects to have all of its systems tested, remedied and Year 2000
     ready by the end of the second quarter 1999.  In the event that the
     vendor does not meet acceptable target dates, the Company will proceed
     with its contingency plan to convert to the vendor's client server-
     based system, which is currently Year 2000 ready.

     The Company is in the implementation phase for its hardware and other
     software.  Its ATM software upgrades will be installed by May 1999. 
     This software has been certified as Year 2000 ready.  The Company's
     wide area network and hardware along with its facilities, HVAC, alarm
     systems and elevators are all Year 2000 ready.

     The Company has initiated formal communication with all of its vendors
     to determine the extent to which the Company is vulnerable to third
     parties' failure to become Year 2000 ready.  Replies received indicate
     that vital vendors, including power and telephone companies, are in
     various "in process" stages of the Year 2000 compliance issue. 
     Continued contact and follow up will be maintained.

     The Company has analyzed and segregated its loan portfolio into two
     categories for Year 2000 ready issues: loans collateralized by real
     estate and loans not collateralized by real estate, in order to
     determine and minimize the potential impact of its borrower's failure
     to become Year 2000 ready.  The underlying value of the real estate on
     the loans secured by real estate minimizes the risk related to Year
     2000 readiness.  Of the remaining loans, which are not secured by real
     estate, the Company has identified and initiated formal communication
     with borrowers to determine who may experience a disruption in their
     business, because of a failure to become Year 2000 ready.  Replies
     received indicate that the majority of these borrowers are in various
     "in process" stages of the Year 2000 compliance issue and are expected
     to be Year 2000 ready.  A minimal number of borrowers have been
     identified as having additional credit risk as a direct result of the
     Year 2000 issue.  Those risks have been estimated and incorporated in
     the analysis of the adequacy of the loan loss allowance.  Assessment
     of Year 2000 readiness is part of the underwriting process for all new
     loan customers and renewals of existing loans.  Continued contact and
     follow up will be maintained.  However, there can be no guarantee that
     the systems of external third party venders, of which the Company
     relies, will become Year 2000 ready, or that the failure of the Bank's
     loan customers to become Year 2000 ready would not have a material
     adverse effect on the Company. 
      
     Currently, management believes that the cost incurred to become Year
     2000 ready, both with regard to the Company's internal and outsourced
     data processing operations, will not be material.  The costs
     identified directly with the Year 2000 contingency plan are not
     expected to exceed $75,000.  These costs are being funded through
     operating cash flows and expensed as incurred.  To date, costs
     totaling $18,000 have been incurred.  A significant amount of the
     Company's hardware has been purchased since July 1996, and is Year
     2000 ready.  However, costs will also be incurred for replacement of
     various personal computers, software upgrades, and upgraded server
     software.  The Company planned to upgrade and replace these items and
     accordingly did not accelerate replacement due to Year 2000
     compliance.  These estimated costs are management's best estimates
     based upon currently known information. There can be no guarantee that
     actual costs incurred to become Year 2000 ready will not increase due
     to additional issues which may arise internally in the future, and by
     the failure of third parties to fail to become Year 2000 ready.


                        RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1997, the FASB issued SFAS No. 131 "Disclosure About Segments
     of an Enterprise and Related Information".  SFAS No. 131 establishes
     standards for the way public business enterprises are to report
     information about 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.  Based upon the current
     operations of the Company and established reporting mechanisms, the
     Company does not have separate reportable operating segments and
     therefore, the adoption of SFAS No. 131 did not have an impact on the
     Company's financial disclosure.

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
     Instruments and Hedging Activities".  This statement establishes
     accounting and reporting standards for derivative instruments and
     hedging activities.  SFAS No. 133 supersedes the disclosure
     requirements in SFAS Nos. 80, 105 and 119.  This statement is
     effective for periods ending after June 15, 1999.  The adoption of
     SFAS No. 133 is not expected to have an impact on the financial
     position or results of operations of the Company.

     In October 1998, the FASB issued SFAS No. 134, "Accounting for
     Mortgage-Backed Securities Retained After the Securitization of
     Mortgage Loans Held for Sale by a Mortgage Banking Enterprise".  This
     statement amends SFAS No. 65  Accounting for Certain Mortgage Banking
     Activities , to require that after the securitization of mortgage
     loans held for sale, an entity engaged in mortgage banking activities
     classify the resulting mortgage-backed securities or other retained
     interests based on its ability and intent to sell or hold those
     investments.  This statement is effective for periods beginning after
     December 15, 1998.  The adoption of this statement is not expected to
     have a material impact on the financial position or results of
     operations of the Company.


                       UNAUDITED QUARTERLY FINANCIAL DATA

     Table 8 presents selected quarterly consolidated financial data:

     Table 8:  Selected Consolidated Financial Quarterly Data (Unaudited)

     <TABLE>
     <CAPTION>
                          Dec. 31, Sept. 30, June 30, March 31,  Dec. 31,  Sept. 30,  June 30, March 31,
                            1998      1998     1998      1998      1997      1997       1997      1997
                            ----      ----     ----      ----      ----      ----       ----      ----
                                        (Dollars in thousands, except per share amounts)
     <S>                 <C>      <C>       <C>        <C>       <C>        <C>      <C>      <C>

     Interest Income      $11,783  $9,738    $11,773    $11,967  $12,445   $12,569    $12,690   $12,487
     Net interest income    6,141   3,928      5,907      6,062    6,177     6,122      6,255     6,253
     Provision for loan 
      losses                  171     171        150        150      125       125        125       125
     Income (loss) before
      taxes                 2,100    (386)     1,965      2,082    2,241     2,225      2,243     2,211
     Net income (loss)      1,353    (341)     1,214      1,304    1,430     1,382      1,391     1,384
     Earnings (loss) per
      common share:
     Basic                   0.36   (0.09)      0.30       0.32     0.36      0.33       0.33      0.32
     Assuming dilution       0.35   (0.09)      0.29       0.31     0.34      0.32       0.32      0.31
     </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,
     1998 and 1997, and for the years ended December 31, 1998 and 1997 and
     1996, 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, 1999.


     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, 1999.


     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, 1999.


     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, 1999.


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

               8-K

     (a)  (1) Consolidated financial statements of the Company as of
     December 31, 1998 and 1997, and for the years ended December 31, 1998,
     1997 and 1996, 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         Statewide Financial Corp. 1996 Amended and
                            Restated Incentive Stock Option Plan**

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

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

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

               21           Subsidiaries of the Registrant

               23           Consent of KPMG LLP

               27           Financial Data Schedule


               *    Incorporated by reference from Exhibits 3.1, 3.2, 10.1
                    and 10.2 of the Registrant's Registration Statement 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.


     (b)  Reports on Form 8-K.

     The Registrant has filed the following reports on Form 8-K during the
     quarter ended December 31, 1998.

               Date                             Item Reported
               ----                             -------------
               November 5, 1998   Item 5 - Reporting on the Registrant's
                                  quarterly earnings and stock repurchase
                                  program

               November 19, 1998  Item 5 - Reporting the Registrant's 
                                  quarterly dividend.

                    STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     Independent Auditors' Report of KPMG LLP

     Consolidated Financial Statements:
          Consolidated Statements of Financial Condition 
               December 31, 1998 and 1997
          Consolidated Statements of Income
               Years Ended December 31, 1998, 1997 and 1996
          Consolidated Statements of Shareholders' Equity 
               Years Ended December 31, 1998, 1997 and 1996 
          Consolidated Statements of Cash Flows
               Years Ended December 31, 1998, 1997 and 1996 
          Notes to Consolidated Financial Statements 
               December 31, 1998, 1997 and 1996


                          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, 1998 and 1997 and
     for the each of the years ended in the three-year period ended
     December 31, 1998, 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, 1998
     and 1997, and the results of their operations and their cash flows for
     each of the years in the three-year period ended December 31, 1998, in
     conformity with generally accepted accounting principles.



     KPMG LLP

     Short Hills, New Jersey
     January 26, 1999



                    STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


                                                       December 31,
                                                   -------------------
                                                      1998     1997
                                                      ----     ----
                                                (Dollars in thousands)
     ASSETS

     Cash and amounts due from depository
      institutions                                 $  7,090  $  6,767 
     Mortgage-backed securities available for sale  248,035   290,044 
     Debt and equity securities available for sale   68,312    19,093 
     Loans receivable, net                          366,458   332,509 
     Accrued interest receivable, net                 4,759     3,969 
     Real estate owned, net                             523       440 
     Premises and equipment, net                      6,547     6,064 
     FHLBNY stock, at cost                           10,315    10,260 
     Excess of cost over fair value of net assets
      acquired                                           70       106 
     Other assets                                     5,408     6,064 
                                                   --------  -------- 
               Total assets                        $717,517  $675,316 
                                                   ========  ======== 
     LIABILITIES AND SHAREHOLDERS' EQUITY

     Liabilities:
      Deposits                                     $443,705  $443,878 
      Borrowed funds:
       Securities sold under agreements to
        repurchase                                  181,381   146,150 
       FHLBNY advances                               25,300    14,150 
                                                   --------  -------- 
          Total borrowed funds                      206,681   160,300 

      Advance payments by borrowers for taxes
       and insurance                                  1,611     1,749 
      Accounts payable and other liabilities          5,021     4,482 
                                                   --------  -------- 
          Total liabilities                         657,018   610,409 
                                                   --------  -------- 
     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; 4,155,509 shares issued
       and 4,151,963 shares outstanding at         
       December 31, 1998, and 4,518,767 shares
       issued and 4,509,531 shares outstanding at
       December 31, 1997                                -         -   
      Paid in capital                                32,904    39,533 
      Unallocated ESOP shares                        (2,856)   (3,280)
      Unearned Recognition and Retention Plan
       shares                                        (1,282)   (1,755)
      Retained earnings - substantially restricted   31,190    29,580 
      Treasury stock, 3,546 and 9,236 shares at
       December 31, 1998 and 1997                       (44)     (119)
      Accumulated other comprehensive income:
       Net unrealized gain on securities available
        for sale, net of income tax                     587       948 
                                                   --------  -------- 
          Total shareholders' equity                 60,499    64,907 
                                                   --------  -------- 
     Commitments and contingencies                      -         -   
                                                   --------  -------- 
          Total liabilities and shareholders' 
             equity                                $717,517  $675,316 
                                                   ========  ======== 

     See accompanying notes to consolidated financial statements.



                    STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME

                                              Year Ended December 31,
                                              -----------------------
                                               1998     1997    1996
                                               ----     ----    ----
                                               (Dollars in thousands,
                                             except per share amounts)
     INTEREST INCOME:
      Interest and fees on loans             $27,016  $25,955 $21,206
      Interest on mortgage-backed securities  13,995   21,577  19,377
      Interest and dividends on debt and
       equity securities                       3,506    2,076   4,228
      Dividends on FHLBNY stock                  744      583     467
                                             -------  ------- -------
          Total interest and dividend income  45,261   50,191  45,278
                                             -------  ------- -------
     INTEREST EXPENSE:
      Deposits                                14,991   16,481  16,827
      Borrowed funds                           8,232    8,903   6,829
                                             -------  ------- -------
          Total interest expense              23,223   25,384  23,656
                                             -------  ------- -------
     NET INTEREST INCOME                      22,038   24,807  21,622
      Provision for loan losses                  642      500     500
                                             -------  ------- -------
     NET INTEREST INCOME AFTER PROVISION FOR
      LOAN LOSSES                             21,396   24,307  21,122
     NON-INTEREST INCOME:
      Mortgage banking fees                       54       -       - 
      Service charges                          1,326      879     771
      Loan and other fees                        912      617     465
      Net gain (loss) on sales of securities       4       69  (1,093)
      Other                                      556      160   1,146
                                             -------  ------- -------
          Total non-interest income            2,852    1,725   1,289
                                             -------  -------   -----
     NON-INTEREST EXPENSE:
      Salaries and employee benefits          10,373    9,605   8,511
      Occupancy, net                           2,348    2,278   2,140
      Federal deposit insurance premiums         268      287   1,011
      SAIF assessment                             -        -    2,651
      Professional fees                          842      594     645
      Insurance premiums                         178      180     273
      Data processing fees                       695      621     390
      Foreclosed real estate expense, net         85       71     105
      Other                                    3,698    3,476   2,717
                                             -------  ------- -------
          Total non-interest expenses         18,487   17,112  18,443
                                             -------  ------- -------
          Income before income taxes           5,761    8,920   3,968
     Income taxes                              2,231    3,333     796
                                             -------  ------- -------
          Net income                         $ 3,530  $ 5,587 $ 3,172
                                             =======  ======= =======

     Earnings per common share:
       Basic                                   $0.90    $1.34  $ 0.68
       Assuming dilution                       $0.86    $1.30  $ 0.68
     Weighted average number of shares
     (in thousands):
       Basic                                   3,937    4,165   4,648
       Assuming dilution                       4,099    4,310   4,662

     See accompanying notes to consolidated financial statements.



     <TABLE>
     <CAPTION>
                                                         STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
                                                     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                                    Total   Paid in   Retained  Treasury    Un-       Unearned         Comprehensive
                                   Share-   Capital   Earnings    Stock  allocated   Recognition          Income
                                  holders'           (substan-             ESOP    and Retention   --------------------
                                   Equity              tially             Shares        Plan      Accumulated   Current
                                                    restricted)                        Shares        Other       Period
                                   -------  -------  ----------   -----   ------       ------        ------    | ------
                                                                  (Dollars in thousands)
     <S>                           <C>       <C>       <C>      <C>      <C>         <C>            <C>        | <C>
                                                                                                               |
     Balance at December 31, 1995 $72,315   $50,770    $23,537    $  -     $(4,232)        $  -       $2,240   |
                                                                                                      ------   |
      Comprehensive Income:                                                                                    |
       Net income for the year      3,172      -         3,172       -         -              -           -    |$ 3,172 
       Other comprehensive                                                                                     |
         income, net of tax:                                                                                   |
        Holding losses on                                                                                      |
         securities available-                                                                                 |
         for-sale, net of income                                                                               |
         tax of $1,463             (2,604)      -          -        -          -              -       (2,604)  |    -   
        Less: reclassification                                                                                 |
         adjustment for losses                                                                                 |
         realized in net income,                                                                               |
         net of tax of $393            700      -          -        -          -              -          700   |    -   
                                                                                                      ------   |
       Change in net unrealized                                                                                |
        gain on securities                                                                                     |
        available-for-sale, net                                                                                |
        of income tax of $1,070        -        -          -        -          -              -       (1,904)  | (1,904)
                                                                                                      ------   |------- 
      Comprehensive income             -        -          -        -          -              -          -     |$ 1,268 
                                                                                                               |======= 
      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)       -      2,188        -           (2,055)       -     |
      Amortization of Recognition                                                                              |
       and Retention Plan awards      183      -           -         -         -              183        -     |
      Allocation of ESOP shares       675       146        -         -         529             -         -     |
      Purchase and Retirement of                                                                               |
       323,488 shares of common                                                                                |
       stock                       (3,976)   (3,976)       -         -         -              -          -     |
      Dividends declared on                                                                                    |
       common stock                  (912)     -          (912)      -         -              -          -     |
                                   ------   -------    -------     ----    -------        -------     ------   |
     Balance at December 31, 1996  66,935    46,807     25,797     (430)    (3,703)        (1,872)       336   |
                                                                                                      ------   |
      Comprehensive Income:                                                                                    |
       Net income for the year      5,587       -        5,587       -         -              -           -    |$ 5,587 
       Other comprehensive                                                                                     |
         income, net of tax:                                                                                   |
        Holding gains on                                                                                       |
         securities available-                                                                                 |
         for-sale, net of income                                                                               |
         tax of $368                  656       -          -        -          -              -          656   |    -   
        Less: reclassification                                                                                 |
         adjustment for gains                                                                                  |
         realized in net income,                                                                               |
         net of tax of $25            (44)      -          -        -          -              -          (44)  |    -   
                                                                                                      ------   |
       Change in net unrealized                                                                                |
        gain on securities                                                                                     |
        available-for-sale, net                                                                                |
        of income tax of $343         -         -          -        -          -              -          612   |    612 
                                                                                                      ------   |------- 
      Comprehensive income            -         -          -        -          -              -          -     |$ 6,199 
                                                                                                               |======= 
      Award of 33,592 shares and                                                                               |
       forfeiture of 8,464 shares                                                                              |
       of common stock under                                                                                   |
       Recognition and Retention                                                                               |
       Plans                          -          67        -        311        -             (378)       -     |
      Amortization of Recognition                                                                              |
       and Retention Plan awards      586        91        -         -         -              495        -     |
      Allocation of ESOP shares       771       348        -         -         423            -          -     |
      Purchase and retirement of                                                                               |
       427,497 shares of common                                                                                |
       stock                       (7,780)   (7,780)       -         -         -              -          -     |
      Dividends declared on                                                                                    |
       common stock                (1,804)      -       (1,804)      -         -              -          -     |
                                  -------   -------    -------     ----    -------        -------     ------   |
     Balance at December 31, 1997  64,907    39,533     29,580     (119)    (3,280)        (1,755)       948   |
      Comprehensive income:                                                                                    |
       Net income for the year      3,530       -        3,530       -         -              -           -    |$ 3,530 
       Other comprehensive                                                                                     |
         income, net of tax:                                                                                   |
        Holding losses on                                                                                      |
         securities available-                                                                                 |
         for-sale, net of income                                                                               |
         tax of $202                 (358)      -          -        -          -              -         (358)  |    -   
        Less: reclassification                                                                                 |
         adjustment for gains                                                                                  |
         realized in net income,                                                                               |
         net of tax of $1              (3)      -          -        -          -              -           (3)  |    -   
                                                                                                       ------  |
       Change in net unrealized                                                                                |
        gain on securities                                                                                     |
        available-for-sale, net                                                                                |
        of income tax of $203         -         -          -        -          -              -         (361)  |   (361)
                                                                                                               |------- 
      Comprehensive income            -         -          -        -          -              -          -     |$ 3,169 
                                                                                                               |======= 
      Award of 2,000 shares and                                                                                |
       forfeiture of 2,000 shares                                                                              |
       of common stock under                                                                                   |
       Recognition and Retention                                                                               |
       Plans                          -           8        -         -         -              (8)         -    |
      Amortization of Recognition                                                                              |
       and Retention Plan awards      502        21        -         -         -              481         -    |
      Allocation of ESOP shares       868       439        -          5        424            -           -    |
      Purchase and retirement of                                                                               |
       363,258 shares of common                                                                                |
       stock                       (7,096)   (7,096)       -         -         -              -           -    |
      Dividends declared on                                                                                    |
       common stock                (1,920)      -       (1,920)      -         -              -           -    |
      5,690 shares of common                                                                                   |
       stock issued through                                                                                    |
       exercise of stock options       69        (1)       -         70        -              -           -    |
                                  -------   -------    -------     ----    -------        -------     ------   |
     Balance at December 31, 1998 $60,499   $32,904    $31,190     $(44)   $(2,856)       $(1,282)    $  587   |
                                  =======   =======    =======     ====    =======        =======     ====== 
     </TABLE>


     See accompanying notes to consolidated financial statements.

                    STATEWIDE FINANCIAL CORP. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


                                               Year Ended December 31,
                                             --------------------------
                                              1998      1997      1996
                                              ----      ----      ----
                                               (Dollars in thousands)

     Cash flows from operating activities:
      Net income                             $ 3,530  $ 5,587  $  3,172 
      Adjustments to reconcile net income
       to net cash provided by operating
       activities:
      Provision for loan losses                  642      500       500 
      Provision for losses on foreclosed                                
       real estate                                85       35        34 
      Depreciation and amortization            1,155    1,024       785 
      Net amortization of deferred premiums
       and unearned discounts                  3,748    1,045     1,928 
      Net (gain) loss on sales of
       securities                                 (4)     (69)    1,093 
      Amortization of RRP awards and
       allocation of ESOP shares               1,349    1,266       858 
      Net (gain) loss on sale of real
       estate owned                              (90)     (12)       10 
      Net gain on sale of deposits              (301)       -        -  
      Gain on sale of premises and
       equipment                                 (10)       -        -  
      Changes in assets and liabilities:
        (Increase) decrease in accrued
          interest receivable                   (790)     327       114 
        Increase in accrued interest
          payable                                 17      265       256 
        Decrease (increase) in other assets      860   (2,697)   (2,591)
        Increase in accounts payable and
          other liabilities                      543    1,310       834 
                                             -------  -------   ------- 
               Net cash provided by 
                operating activities          10,734    8,581     6,993 
                                             -------  -------   ------- 
     Cash flows from investing activities:
      Net disbursements from lending
        activities                           (34,357)  (4,859)  (14,900)
      Proceeds from the sale of loans             95        -        -  
      Purchase of loans                       (1,224)  (3,181) (115,694)
      Proceeds from mortgage-backed 
       securities principal repayments       114,659   56,484    54,119 
      Proceeds from the sale of mortgage-
       backed securities                         -     42,558    90,657 
      Purchase of mortgage-backed
       securities                            (77,004)(148,157) (130,385)
      Proceeds from debt securities
       principal repayments                   24,941   31,000    18,000 
      Proceeds from sale of debt securities    3,150      -      20,704 
      Purchase of debt and equity
       securities                            (77,013)  (9,602)      -   
      Purchase of FHLBNY stock                   (55)  (2,492)   (4,141)

      Proceeds from collection and sale
       of real estate owned                      565      376       369 
      Proceeds from the sale of premises
       and equipment                             221       -         -  
      Purchases and improvement of
       premises and equipment                 (1,813)    (761)   (2,185)
                                             -------  -------   ------- 
               Net cash used in investing
               activities                    (47,835) (38,634)  (83,456)
                                             -------  -------   ------- 
     Cash flows from financing activities:
      Net increase (decrease)in deposits       6,336  (13,178)   19,035 
      Payment for sale of deposits            (6,208)      -         -  
      Repayment of borrowings                (58,350)(773,100) (745,240)
      Proceeds from borrowings               104,731  826,200   807,737 
      (Decrease) increase in advance
       payments by borrowers for taxes
       and insurance                            (138)    (104)      820 
      Cash dividends paid                     (1,920)  (1,804)     (912)
      Proceeds from issuance of common
       stock                                      69      -         -   
      Purchase of common stock                (7,096)  (7,780)   (6,594)
                                             -------  -------   ------- 
               Net cash provided by
                financing activities          37,424   30,234    74,846 
                                             -------  -------   ------- 
               Net increase (decrease) in
                cash and cash equivalents        323      181    (1,617)
     Cash and cash equivalents at                    
      beginning of period                      6,767    6,586     8,203 
                                             -------  -------   ------- 
     Cash and cash equivalents at end of
      period                                 $ 7,090  $ 6,767   $ 6,586 
                                             =======  =======   ======= 
     Supplemental disclosures of cash flow
     information:
      Cash paid during the year for:
       Income taxes                          $ 1,569  $ 2,850   $ 1,776 
                                             =======  =======   ======= 

       Interest                              $23,177  $25,226   $23,400 
                                             =======  =======   ======= 
     Non-cash investing and financing
     activities:
       Transfer from loans receivable to
        real estate owned, net               $   643  $   275   $   324 
                                             =======  =======   ======= 
       Change in unrealized (loss) gain on
        securities available for sale, net
        of income tax                        $  (361) $   612   $(1,904)
                                             =======  =======   ======= 


     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 Note 2, 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. 

     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, 1998.  The Bank operates
     sixteen banking offices in Hudson, Union and Bergen 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 at time of purchase among three categories:  held to
     maturity, trading, and available for sale based upon management's
     intent and the Company's ability to hold such securities.

     Currently, the Company classifies 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
     charged against current income 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 estimate life of the loan using the level-yield method. 

     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, discounted
     at the loan's effective interest rate 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 or due to
     the deterioration of the financial conditions of the Company's
     borrowers.  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
          --------------------
     Basic earnings per share is computed by dividing net income by the
     weighted average number of common shares outstanding during the
     period.  Earnings per share, assuming dilution, starts with the
     calculation of basic earnings per share and adds to it the dilutive
     effect of common stock equivalents.  Such equivalents are the number
     of shares which would be issued assuming exercise of in-the-money
     options, and vesting of restricted awards, net of shares which could
     be purchased in the open market with proceeds from the assumed
     exercise of such options and from tax benefits and the future
     amortization associated with vesting of restricted awards.

     (j)  Comprehensive Income
          --------------------
     On January 1, 1998, the Company adopted the provisions of SFAS No.
     130, "Reporting Comprehensive Income".  SFAS No. 130 establishes
     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 includes 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.  Compensation income is
     reported in the consolidated statements of shareholders' equity for
     all periods presented.

     (k)  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 14-
     "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.   LIQUIDATION ACCOUNT
          -------------------
     In connection with the Bank's conversion from the mutual to stock form
     and its acquisition by the Company, 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, 1998 and 1997
     was approximately $3.9 million and $5.3 million, respectively.


     3.   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, 1998 and 1997 are as
     follows:

     <TABLE>
     <CAPTION>
                                                            1998
                                         ------------------------------------------
                                                      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                    $ 1,999  $    7        $ -      $ 2,006
        After one year but within five
         years                              15,500      67          -       15,567
     Trust preferred securities maturing:
        After ten years                     38,483     783         710      38,556
     Corporate debt maturing:
        After one but within five years      8,779      -           18       8,761
        After five years but within ten
         years                               3,103      44          -        3,147
                                           -------  ------         ---     -------
     Debt securities available for sale     67,864     901         728      68,037
     Equity securities available for sale       37     238          -          275
                                           -------  ------         ---     -------
     Debt and equity securities available
      for sale                             $67,901  $1,139        $728     $68,312
                                           =======  ======        ====     =======

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

     Sales of debt securities during the year ended December 31, 1998
     resulted in proceeds of $3.2 million and a gross realized gain of
     $4,000.  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 resulted in proceeds of $20.7
     million and gross realized losses of $251,000.

     4.   MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE
          ---------------------------------------------
     The amortized cost and estimated market values of mortgage-backed
     securities available for sale at December 31, 1998 and 1997 are as
     follows:

     <TABLE>
     <CAPTION>
                                                           1998
                                         -----------------------------------------
                                                      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 $2,053)                $76,474      $143        $270   $ 76,347
     FHLMC pass-through certificates
      (net of deferred premiums of
      $1,433)                             65,933       554         100     66,387
     FNMA pass-through certificates
      (net of deferred premiums of
      $1,212)                             48,478       238          32     48,684
     Private label pass-through
      certificates                        10,000        13          -      10,013
     Private label collateralized
      mortgage obligations (CMO's)        46,664         -          40     46,604

                                        --------      ----        ----   --------
     Mortgage-backed securities 
      available for sale                $247,529      $948        $442   $248,035
                                        ========      ====        ====   ========




     <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
                                        ========     ======       ====   ========

     </TABLE>

     Mortgage-backed securities were pledged to secure FHLBNY advances and
     securities sold under agreement to repurchase at December 31, 1998 and
     1997.  The estimated market value of securities so pledged at December
     31, 1998 and 1997 were $210.9 million and $255.3 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, 1998 and 1997 were $129,457 and $186,000,
     respectively.

     There were no sales of mortgage-backed securities during the year
     ended December 31, 1998.  Sales of mortgage-backed securities during
     the year ended December 31, 1997 resulted in proceeds of $42.6
     million, 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.
       
     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.

     5.   LOANS RECEIVABLE, NET
          ---------------------
     A summary of loans receivable, net at December 31, 1998 and 1997
     is as follows:

                                           December 31,
                                      -----------------------
     (Dollars in thousands)              1998         1997
                                         ----         ----
     First mortgage loans:
      One-to-four family               $200,145    $244,364 
      Multi-family                       21,679      12,190 
      Non-residential                    27,392      19,219 
      Construction                       10,354       4,325 
                                       --------    -------- 
                                        259,570     280,098 
     Consumer loans:
      Second mortgage                    17,937      18,110 
      FHA insured home improvement       14,447      15,115 
      Unsecured consumer                  1,533       1,896 
      Home equity line of credit          3,737       1,485 
      Home improvement                    2,415       1,051 
      Automobile                            664         596 
      Other                                 171         197 
                                       --------    -------- 
                                         40,904      38,450 
                                       --------    -------- 
     Warehouse mortgage lines of
      credit                             47,752          -  
     Commercial business                 20,985      16,066 
                                       --------    -------- 
          Total loans                   369,211     334,614 
     Less (plus):
      Deferred loan fees                    754         594 
      Deferred (premiums), unearned
       discounts, net                    (1,057)     (1,322)
      Allowance for loan losses           3,056       2,833 
                                       --------    -------- 
                                          2,753       2,105 
                                       --------    -------- 
          Loans receivable, net        $366,458    $332,509 
                                       ========    ======== 

     At December 31, 1998 and 1997, the Company serviced loans for others,
     including loan participations to others, amounting to $10.0 million
     and $4.8 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, 1998 and 1997, loans in arrears three months or more
     or in the process of foreclosure are as follows:

                                                   December 31,
                                                ------------------
     (Dollars in thousands)                       1998      1997
                                                  ----      ----
     Conventional first mortgage loans
      (non-accrual)                              $1,477    $1,767
     FHA insured and VA guaranteed (accruing)       297       291
     Commercial loans (non-accrual)                  96        38
     Consumer loans (non-accrual)                   620       407
                                                 ------    ------
                                                 $2,490    $2,503
                                                 ======    ======
     Percent of net loans outstanding              0.68%     0.75%
                                                   ====      ==== 

     The amount of interest income on non-accrual loans which would have
     been recorded for the years ended December 31, 1998, 1997 and 1996 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, $0.1 million
     and $0.2 million, respectively.  In addition, during the years ended
     December 31, 1998, 1997 and 1996 the amounts of interest income on
     non-accruing loans that was included in interest income totaled
     $41,000, $80,000 and $75,000, respectively.

     An analysis of the allowance for loan losses for the years ended
     December 31, 1998, 1997 and 1996 is as follows:

                                           December 31,
                                       ---------------------
     (Dollars in thousands)             1998    1997   1996
                                        ----    ----   ----

     Balance at beginning of period   $2,833  $2,613  $3,241 
     Provision charged to operations     642     500     500 
     Charge-offs                        (454)   (297) (1,140)
     Recoveries                           35      17      12 
                                      ------  ------  ------ 
     Balance at end of period         $3,056  $2,833  $2,613 
                                      ======  ======  ====== 

     At December 31, 1998, 1997 and 1996, no loans were designated as
     impaired.  The average balance of impaired loans for the years ended
     December 31, 1998, 1997 and 1996 were $0, $0 and $2,781,000,
     respectively.

     A substantial portion of the Company's loans are 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.

     6.   ACCRUED INTEREST RECEIVABLE, NET
          --------------------------------
     A summary of accrued interest receivable at December 31, 1998 and 1997
     is as follows:

                                       December 31,
                                     -----------------
     (Dollars in thousands)            1998     1997
                                       ----     ----

     Loans                           $2,137   $1,901
     Mortgage-backed securities       1,288    1,908
     Debt securities                  1,334      160
                                     ------   ------
                                     $4,759   $3,969
                                     ======   ======

     7.   PREMISES AND EQUIPMENT, NET
          ---------------------------
     A summary of premises and equipment at December 31, 1998 and 1997 is
     as follows:

                                            December 31,
                                          ----------------
     (Dollars in thousands)                1998      1997
                                           ----      ----

     Land                                $ 1,056   $ 1,056
     Buildings                             5,614     5,157
     Leasehold improvements                  998       974
     Furniture, fixtures and equipment     7,880     6,971
                                         -------   -------
          Total                          $15,548   $14,158
                                         -------   -------
     Less accumulated depreciation         9,001     8,094
                                         -------   -------
                                         $ 6,547   $ 6,064
                                         =======   =======

     Depreciation and amortization expense included in occupancy and other
     expense in the consolidated statements of income amounted to
     $1,119,000, $993,000, and $708,000 for the years ended December 31,
     1998, 1997, 1996, respectively.

     8.   REAL ESTATE OWNED, NET
          ----------------------
     Real estate owned, net at December 31, 1998 and 1997 is summarized as
     follows:

                                            December 31,
                                          ----------------
     (Dollars in thousands)                 1998   1997
                                            ----   ----
     Acquired by foreclosure or deed in
      lieu of foreclosure                  $629     $638
     Less allowance for losses on real
      estate owned                          106      198
                                           ----     ----
                                           $523     $440
                                           ====     ====

     An analysis of the allowance for losses on real estate owned for the
     years ended December 31, 1998, 1997 and 1996 is as follows:

                                              December 31,
                                         -----------------------
     (Dollars in thousands)               1998    1997    1996
                                          ----    ----    ----
     Balance at beginning of period       $198    $178   $223 
     Provision charged to operations        85      35     34 
     Charge-offs                          (177)    (15)   (79)
                                          ----    ----   ---- 
     Balance at end of period             $106    $198   $178 
                                          ====    ====   ==== 

     Results of real estate operations for the years ended December 31,
     1998, 1997 and 1996 are as follows:

                                              December 31,
                                         ---------------------
     (Dollars in thousands)                1998    1997   1996
                                           ----    ----   ----
     Acquired by foreclosure or deed in
      lieu of foreclosure:
       Net (gain) loss on sales of real
        estate                             (90)   $(12)  $ 10 
       Holding costs                        90      48     61 
       Provision charged to operations      85      35     34 
                                           ---     ---   ---- 
     Foreclosed real estate expense, net   $85    $ 71   $105 
                                          ====    ====   ==== 

     9.   DEPOSITS
          --------
     The weighted average cost of funds on deposit at December 31, 1998 and
     1997 was 3.12% and 3.47%, respectively.  A summary of deposits by type
     of account is as follows:

                                          December 31,
                              -----------------------------------
                                     1998              1997
                               ----------------  ----------------
                                       Weighted         Weighted
                                        Average          Average
                                       Interest         Interest
     (Dollars in thousands)    Amount    Rate    Amount   Rate
                               ------    ----    ------   ----
     Savings accounts         $156,872   2.46%  $142,399   2.91%
     Money market accounts      37,811   2.73     44,239   3.00
     Non-interest bearing
      deposits                  33,153    -       24,440     -
     NOW accounts               44,764   1.29     47,564   1.52
                              --------          --------
          Core deposits        272,600   2.03    258,642   2.36

     Certificates of deposit
      maturing:
       One year or less        147,083   4.85    156,791   4.98
       One to three years       21,508   4.81     24,773   5.49
       Three to five years       1,862   5.35      3,120   5.36
       Five years and
        thereafter                 652   5.91        552   6.12
                              --------          --------
          Total certificates   171,105   4.85%   185,236   5.04%
                              --------          --------
               Total deposits $443,705          $443,878
                              ========          ========

     Interest rates on certificate of deposit accounts ranged from 2.00% to
     7.07% and 2.50% to 7.07% at December 31, 1998, and 1997, respectively. 
     At December 31, 1998, the Company had approximately $23.4 million of
     certificates of deposit of $100,000 or more.

     Interest expense on deposits for the years ended December 31, 1998,
     1997 and 1996 is summarized as follows:

                                                 December 31,
                                          --------------------------
     (Dollars in thousands)                 1998     1997     1996
                                            ----     ----     ----
     Savings and club accounts             $ 4,090 $ 4,082  $ 3,658
     NOW and money market accounts           1,870   2,548    2,650
     Certificates of deposit                 9,031   9,851   10,519
                                           ------- -------  -------
                                           $14,991 $16,481  $16,827
                                           ======= =======  =======

     10.  BORROWED FUNDS
          --------------

     The following table sets forth certain information as to securities
     sold under agreements to repurchase for the years ended December 31,
     1998, 1997 and 1996.


                                                 December 31,
                                         ----------------------------
     (Dollars in thousands)               1998      1997       1996
                                          ----      ----       ----

     Maximum balance                   $181,381  $187,000   $163,047 
     Average balance                    146,356  $146,245   $108,434 
     Weighted average interest rate        5.56%     5.59%      5.50%

     At December 31, 1998, securities sold under agreements to repurchase
     with the FHLBNY consisted of FHLB bonds and mortgage pass-through
     certificates with an amortized cost and market value of $180.1 million
     and $180.6 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)            1998      1997
                                       ----      ----
     Maturity:
       Maturing within 90 days        $35,381 $    150
       Maturing within 1-2 years       28,000      -  
       Maturing within 2-3 years       60,000   28,000
       Maturing within 3-4 years       58,000   60,000
       Maturing within 4-5 years          -     58,000
                                     -------- --------
                                     $181,381 $146,150
                                     ========  =======

     Borrowed funds with final maturities greater than 1 year consist of
     $86.0 million which are currently callable quarterly and $60.0 million
     which are first callable in November 1999 by the FHLBNY.

     At December 31, 1998, the Company had a line of credit with the FHLBNY
     of $32.8 million which expires on November 2, 1999.  At December 31,
     1998, the Company had outstanding an overnight advance of $25.3
     million against this line at an interest rate of 5.125%.  At December
     31, 1997, the Company's FHLBNY credit line was $33.7 million against
     which it then had an outstanding overnight advance of $14.2 million at
     an interest rate of 6.63%.

     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, 1998 and 1997 was $30.3 million
     and $56.6 million, respectively.

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


                                     Years Ended December 31,
                                     ------------------------
     (Dollars in thousands)           1998     1997     1996
                                     -----     ----     ----

     Maximum balance                $25,300  $28,800  $26,300 
     Average balance                  1,764  $12,990  $15,639 
     Weighted average interest rate    5.03%    5.64%    5.52%


     11.  INCOME TAXES
          ------------

     Income tax expense for the years ended December 31, 1998, 1997 and
     1996 is made up of the following components:

                                         December 31,
                                  -------------------------
     (Dollars in thousands)         1998     1997     1996
                                    ----     ----     ----
     Current tax expense:
          Federal                 $2,313   $3,428    $1,672 
          State                      193      302       204 
                                  ------   ------    ------ 
                                   2,506    3,730     1,876 
     Deferred tax expense:
          Federal                   (252)    (364)     (990)
          State                      (23)     (33)      (90)
                                  ------   ------    ------ 
                                    (275)    (397)   (1,080)
                                  ------   ------    ------ 
                                  $2,231   $3,333    $  796 
                                  ======   ======     ======

     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, 1998, 1997
     and 1996 is as follows:

                                             December 31,
                                        ---------------------
                                         1998     1997   1996
                                         ----     ----   ----
     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                                 2.7     1.4    1.7  
                                          ----    ----   ----  
                                          38.7%   37.4%  20.0% 
                                          ====    ====   ====  


     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, 1998 and 1997 are as follows:

                                                  December 31,
                                                 --------------
     (Dollars in thousands)                       1998    1997
                                                  ----    ----
     From operations:
       Deferred tax assets:
          Non-accrual loan interest             $  -     $   59 
          Allowance for loan losses              1,013      964 
          Deferred loan fees                       145      200 
          Purchase accounting discount on
           mortgage loans                           25       38 
          Employee benefit plans                   781      624 
          Other                                    172       46 
                                                ------   ------ 
            Total gross deferred tax assets      2,136    1,931 
       Deferred tax liabilities:
          Accelerated depreciation                  70       70 
          Amortization of discounts on
           purchases of securities                  11       30 
          Other                                      1       11 
          Additions to post 1987 tax reserve       123      164 
                                                ------   ------ 
            Total gross deferred tax
               liabilities                         205      275 
                                                ------   ------ 
            Net deferred tax asset from
               operations                        1,931    1,656 
     Shareholders' equity - unrealized gains
      on securities available for sale            (330)    (533)
                                                ------   ------ 
            Total net deferred tax asset        $1,601   $1,123 
                                                ======   ====== 

     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.

     12.  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 423,200 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 total 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.  The annual compensation expense related to
     the ESOP is the 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 $868,000,
     $771,000 and $569,000 for the years ended December 31, 1998, 1997 and
     1996.  Such expense for 1998, 1997 and 1996 includes $444,000, 
     $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 $163,000, $160,000 and $85,000,
     respectively for dividends on unallocated shares.  At December 31,
     1998, the ESOP held 296,240 shares in suspense as unallocated shares,
     and 126,960 shares as allocated to participants.  The fair value of
     the unallocated ESOP shares at December 31, 1998 was approximately
     $5.6 million, based upon a $19.00 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. 

     13.  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
     pretax base earnings.  The Bank currently contributes 50% of each
     employee's contribution, up to 3% of his or her annual earnings.  The
     Bank made matching contributions of $112,000, $115,000 and $110,000 in
     the years ended December 31, 1998, 1997 and 1996, 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 $4.0 million as of December 31,
     1998, $3.3 million as of December 31, 1997, and $2.9 million as of
     December 31, 1996, and the expense for the SERP's was approximately
     $649,000, $570,000 and $501,000 for the years ended December 31, 1998,
     1997 and 1996.


     14.  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 2,000, 33,592 and 199,881 were granted
     and forfeitures of plan share awards of common stock of 2,000, 0 and
     23,012 were recorded during 1998, 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, 1998, 1997 and 1996, the
     Company recorded expense of $481,000, $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 1998, 1997 and
     1996 would have been reduced on a pro forma basis as follows:

     (Dollars in thousands         1998    1997    1996
      except per share amounts)    ----    ----    ----

     Net income:
        As reported               $3,530  $5,587  $3,172
        Pro forma                  3,227   5,420   3,103

     Earnings per share:
     Basic
        As reported               $0.90   $1.34   $0.68 
        Pro forma                  0.82    1.30    0.67 
     Assuming dilution
        As reported               $0.86   $1.30   $0.68 
        Pro forma                  0.80    1.28    0.67 


     The fair value of options for both plans granted in 1998, 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 2.98%, 2.28% and 3.28%; expected
     volatility of 22.71%, 21.54% and 25.00%; risk free interest rates of
     4.63%, 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, 1998 and 1997 is as
     follows:

     <TABLE>
     <CAPTION>
                                     1998              1997            1996
                               ----------------- --------------- ----------------
                                        Weighted        Weighted         Weighted
                               Number    Average  Number Average  Number  Average
                                 of     Exercise    of  Exercise    of   Exercise
                                Shares    Price   Shares  Price   Shares   Price
                                ------    -----   ------  -----   ------   -----
     <S>                     <C>       <C>       <C>     <C>     <C>      <C>
     Outstanding at 
      beginning of year        498,270 $14.4665  358,280 $12.1875     -   $   -   
     Granted                    34,530  17.3429  161,150  19.2739 389,980  12.1875
     Exercised                   5,690  12.1875     -        -        -       -   
     Canceled                    1,560  12.1875   21,160  12.1875  31,700  12.1875
                               -------           -------          -------
     Outstanding at end
      of year                  525,550 $14.6870  498,270 $14.4665 358,280 $12.1875
                               =======           =======          =======
     Weighted average fair
      value of options
      granted during the year          $ 3.55            $ 4.69           $ 3.01  
                                       ======            ======           ======  
     </TABLE>

     At December 31, 1998 and 1997, there were 164,562 and 67,424 options
     exercisable under the two fixed stock option plans, respectively. 

     A summary of the fixed stock options outstanding under the Company's
     two fixed stock option plans at December 31, 1998 is as follows:

                                 Weighted
                                  Average
                                 Remaining   Weighted              Weighted
        Range of      Number    Contractual   Average    Number    Average
        Exercise    Outstanding    Life      Exercise Exercisable  Exercise
         Prices     at 12/31/98 (in years)     Price  at 12/31/98   Price
         ------     -----------    ----        -----  -----------   -----

      $12.19-$14.35  388,020       7.59      $12.51     143,962    $12.36
      $18.93-$22.48  137,530       9.19       20.83      20,600     22.00
                     -------                            -------
                     525,550       8.01      $14.69     164,562    $13.57
                     =======                            =======


     15.  EARNINGS PER SHARE COMPUTATION
          ------------------------------

     The following table sets forth information as to the calculation of
     basic and diluted earnings per share for the years ended December 31,
     1998, 1997 and 1996. 
                                            For the Years Ended December 31,
                                           ---------------------------------
                                               1998       1997       1996
                                               ----       ----       ----
     Net income available to common 
      shareholders                         $3,530,000  $5,587,000 $3,172,000
                                           ==========  ========== ==========
     Weighted average common shares
      outstanding for computation of 
      basic earnings per share              3,936,527   4,164,861  4,648,310
     Effective of dilutive stock
     equivalent:
        Unvested restricted stock              46,574      50,009      6,028
        Stock options                         116,242      95,162      8,113
                                            ---------   ---------  ---------
     Weighted average common shares 
      outstanding for computation of 
      earnings per share, assuming
      dilution                              4,099,343   4,310,032  4,662,451
                                            =========   =========  =========

     Earnings per common share
        Basic                                  $0.90       $1.34      $0.68 
                                               =====        ====      ===== 

        Assuming dilution                      $0.86       $1.30      $0.68 
                                               =====       =====      ===== 



     16.  COMMITMENTS AND CONTINGENCIES
          ----------------------------- 

     Leases and Service Contract
     ---------------------------
     Certain premises are leased under operating leases with terms expiring
     through the year 2003, 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)
                    1999                      $  329
                    2000                         233
                    2001                         159
                    2002                          60
                    2003                          57
                    Thereafter                   244
                                              ------
                         Total                $1,082
                                              ======


     Net rental expense included in occupancy expense in the consolidated
     statements of income amounted to $344,000, $342,000 and $418,000 for
     the years ended December 31, 1998, 1997 and 1996, respectively.

     The Company has entered into a contract to receive data processing
     services through October 4, 2002.  Future payments under this contract
     are expected to total $624,000 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.

                                                     December 31,
                                                  ------------------
     (Dollars in thousands)                           1998     1997
                                                      ----     ----
     Financial instruments whose contract
      amounts represent credit risk                                 
      (contract or notional amount):

          Commitments to extend fixed rate credit  $  7,493  $ 1,530
          Commitments to extend variable rate
           credit                                    52,116   25,153
          Commercial letters of credit                2,899    1,520
          Unused lines of credit                     48,248    8,615
                                                   --------  -------
                                                   $110,756  $36,818
                                                   ========  =======

     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.

     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.

     17.  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, 1998 and 1997 are as follows:

                                                  December 31, 
                                      -------------------------------------
     (Dollars in thousands)                  1998              1997
                                       ----------------- -----------------
                                               Estimated          Estimated
                                       Carrying   Fair   Carrying    Fair
                                        Amount   Value    Amount    Value
                                        ------   -----    ------    -----
     Financial assets:
        Cash and amounts due from 
          depository institutions    $  7,090  $  7,090 $  6,767 $  6,767
        Debt and equity securities, 
          available for sale           68,312    68,312   19,093   19,093
        Mortgage-backed securities,
          available for sale          248,035   248,035  290,044  290,044
        Loans receivable, net         366,458   370,499  332,509  337,539
        FHLBNY stock                   10,315    10,315   10,260   10,260

     Financial liabilities:
        Deposits                     $443,705   443,692 $443,878 $443,671
        Borrowed funds                206,681   208,639  160,300  159,913


     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, multi-family and non-residential mortgage, commercial and
     industrial loans, and consumer loans.  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 have 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-
     bearing 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 rate currently offered for borrowings of
     similar type and maturity.

     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.


     18.  REGULATORY MATTERS
          ------------------
     The Bank is required to maintain reserve balances, which are in the
     form of vault cash and non-interest-bearing balances with the Federal
     Reserve Bank, based principally upon transaction-type deposits.  The
     average amount of required reserves for 1998 was $3.7 million compared
     to $3.0 million for 1997.

     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, 1998, 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, 1998 and 1997, 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
                               ----------------------------  --------------
     (Dollars in thousands)    Amount Ratio  Amount  Ratio   Amount   Ratio
                               ------ -----  ------  -----   ------   ----
     December 31, 1998:
      Tangible capital       $56,927  7.95%  $10,743  1.50%
      Tier 1 (core) capital   56,927  7.95    28,648  4.00  $35,810   5.00%
      Risk-based capital:
        Tier 1                56,927  13.08   17,412  4.00   26,118   6.00
        Total                 59,706  13.72   34,824  8.00   43,530  10.00

     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


     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 a FICO
     assessment of 6.4 cents per $100 of deposits.  In addition, pursuant
     to the recapitalization provision of the BIF/SAIF Act, during 1996,
     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.

     19.  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 $6,758,000 and $3,839,000 at December 31, 1998 and
     1997, respectively, and do not involve more than normal risks of
     repayment.  During the year ended December 31, 1998, new loans of
     $6,215,000 were made to related parties and principal repayments of
     $3,296,000 were received.


     20.  PARENT COMPANY FINANCIAL INFORMATION
          ------------------------------------

     The following are the financial statements for Statewide Financial
     Corp., Parent Company Only, as of December 31, 1998 and 1997, and for
     the years ended December 31, 1998, 1997 and 1996, 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)                1998    1997
                                           ----    ----
     Assets:
        Cash                            $   553  $     3 
        Due from ESOP trust                 106      106 
        Due from subsidiary               2,098    3,612 
        Investment in subsidiary         57,583   61,352 
        Other assets                        237       -  
                                        -------  ------- 
          Total Assets                  $60,577  $65,073 
                                        =======  ======= 
     Liabilities:
        Accrued expenses                $    78  $   166 
                                        -------  ------- 
     Shareholders' equity:
        Paid in capital                  32,904   39,533 
        Unallocated ESOP shares          (2,856)  (3,280)
        Unearned RRP shares              (1,282)  (1,755)
        Treasury stock                      (44)    (119)
        Retained earnings                31,777   30,528 
                                        -------  ------- 
          Total shareholders' equity     60,499   64,907 
                                        -------  ------- 
               Total liabilities and
               shareholders' equity     $60,577  $65,073 
                                        =======  ======= 


     PARENT COMPANY ONLY - STATEMENTS OF INCOME

                                         For the Years Ended
                                             December 31,
                                         -------------------
     (Dollars in thousands)              1998    1997    1996
                                         ----    ----    ----
     Other income                       $  287  $  326  $  396 
     Expenses                              216      -        9 
                                        ------  ------  ------ 
        Income before taxes                 71     326     387 
                                        ------  ------  ------ 
     Income taxes                           25     118     140 
                                        ------  ------  ------ 
        Net income before equity in 
         earnings of subsidiary             46     208     247 
     Equity in earnings of subsidiary    3,484   5,379   2,925 
                                        ------  ------  ------ 
          Net income                    $3,530  $5,587  $3,172 
                                        ======  ======  ====== 


     PARENT COMPANY ONLY - STATEMENTS OF CASH FLOWS

                                                For the Years Ended
                                                   December 31,
                                                -------------------
     (Dollars in thousands)                    1998    1997     1996
                                               ----    ----     ----
     Cash flows from operating activities:
     Net income                               $3,530   $5,587  $3,172 
      Adjustments to reconcile net income
       to net cash provided from operating
       activities:
      Equity in earnings of subsidiary        (3,484)  (5,379) (2,925)
      Allocation of ESOP shares                  424      423     529 
      Changes in assets and liabilities:
       Decrease in due from subsidiary         1,514    2,655   1,843 
       (Increase) in due from ESOP trust          -        -     (106)
       (Increase) decrease in other assets      (237)      85     122 
       (Decrease) increase in accrued taxes      (88)     131     (39)
                                              ------   ------  ------ 
          Net cash provided from operating
           activities                          1,659    3,502   2,596 
                                              ------   ------  ------ 
     Cash flows from investing activities:
      Return of investment from subsidiary     8,000    6,000  13,350 
      Investment in subsidiary                  (162)    (160) (8,195)
                                              ------   ------  ------ 
          Net cash provided from investing
           activities                          7,838    5,840   5,155 
                                              ------   ------  ------ 
     Cash flows from financing activities:
      Proceeds from issuance of common stock      69       -       -  
      Repurchase of common stock              (7,096)  (7,780) (6,594)
      Dividends paid                          (1,920)  (1,804)   (912)
                                              ------   ------  ------ 
          Net cash from financing activities  (8,947)  (9,584) (7,506)
                                              ------   ------  ------ 
          Net change in cash and cash
           equivalents                           550     (242)    245 
     Cash and cash equivalents at beginning
      of period                                    3      245      -  
                                              ------   ------  ------ 
     Cash and cash equivalents at end of
      period                                  $  553   $    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 24, 1999            By:   /s/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
     /s/VICTOR M. RICHEL       Executive Officer       March 15, 1999
     -------------------
        Victor M. Richel

                               Senior Vice President
     /s/BERNARD F. LENIHAN     and Chief Financial
     ---------------------     Officer                 March 15, 1999
        Bernard F. Lenihan


     /s/MARIA F. RAMIREZ       Director                March 15, 1999
     -------------------
        Maria F. Ramirez


     /s/WALTER G. SCOTT        Director                March 15, 1999
     ------------------
        Walter G. Scott


     /s/THOMAS J. SHARKEY, SR. Director                March 15, 1999
     -------------------------
        Thomas J. Sharkey, Sr.


     /s/STEPHEN R. TILTON      Director                March 15, 1999
     --------------------
        Stephen R. Tilton
         

     /s/THOMAS V. WHELAN       Director                March 15, 1999
     -------------------
        Thomas V. Whelan


                                INDEX TO EXHIBITS

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

           21                 Subsidiaries of the Registrant

           23                 Consent of KPMG LLP

           27                 Financial Data Schedule