[PHOTO OMITTED]

[LOGO] MERCHANTS NEW YORK BANCORP

                                                              1999 ANNUAL REPORT

                           Merchants New York Bancorp

<PAGE>

Merchants New York Bancorp

Our core lending business personifies Merchants and the success the Bank has
enjoyed for generations. Growth has continued because we have kept to the policy
on which we were founded--proven over and over again to be the bank for
medium-size and small business with emphasis on middle market banking and
personal service. This includes our unique International Department which
services a myriad of quality importers and exporters, and we are pleased that
our Letters of Credit are accepted around the world.

CONTENTS

    1  Financial Highlights
    2  To Our Stockholders and Friends
    4  Corporate Lending
    8  Selected Financial Data
    9  Management's Discussion and Analysis of Financial Condition and Results
         of Operations
   17  Consolidated Statements of Condition
   18  Consolidated Statements of Income and Comprehensive Income
   19  Consolidated Statements of Changes in Stockholders' Equity
   20  Consolidated Statements of Cash Flows
   21  Notes to Consolidated Financial Statements
   38  Independent Auditors' Report
   39  Average Assets, Liabilities and Stockholders' Equity
  IBC  Board of Directors Counsel -- Paul Meyrowitz

Counsel -- Paul Meyrowitz
           Simon, Meyrowitz & Meyrowitz

Attorneys -- Mark W. Schlussel, Esq.
             Ziechner, Ellman & Krause

          -- Robinson Markel, Esq.
             Rosenman & Colin, LLP

Auditors -- KPMG LLP

Transfer Agent -- American Stock Transfer and Trust Co.

The Company's annual report, on Form 10-K, as filed with the Securities &
Exchange Commission, will be made available to stockholders upon request in
writing, at no cost. If interested, please contact: Karen L. Deitz, Corporate
Secretary, Merchants New York Bancorp, 275 Madison Avenue, New York, NY
10016-1011.

<PAGE>

                           Merchants New York Bancorp

                              FINANCIAL HIGHLIGHTS

Years ended December 31,                                    1999            1998
--------------------------------------------------------------------------------
Financial Condition Data
Total assets                                      $1,395,313,148  $1,289,570,980
Total investment securities                          847,920,025     858,189,656
Net loans                                            427,989,071     353,798,660
Total deposits                                       958,978,208     934,323,292
Total liabilities                                  1,296,105,211   1,176,592,775
Total stockholders' equity                            99,207,937     112,978,205

Selected Operating Data
Total interest income                                 90,284,691      86,267,606
Total interest expense                                39,615,519      40,872,912
Net interest income                                   50,669,172      45,394,694
Net interest income after provision
  for loan losses                                     48,754,172      43,969,694
Income before income taxes                            28,531,672      24,033,672
Income tax expense                                     9,514,730       8,131,509
Net income                                            19,016,942      15,902,163
Net income per average share:
   Basic                                                   $0.99           $0.82
   Diluted                                                 $0.98           $0.81

 [The following tables were depicted as Bar Charts in the printed material]

                            Interest-Earnings Assets
                                  (In dollars)

    '95               '96             '97            '98             '99
    ---               ---             ---            ---             ---
935,111,286     1,038,702,034   1,144,487,841   1,211,168,465   1,354,681,877

                              Net Interest Income
                                  (In dollars)

    '95               '96             '97            '98             '99
    ---               ---             ---            ---             ---
 37,662,203        39,639,789      42,567,113      45,394,694      50,669,172

                                   Net Income
                                  (In dollars)

    '95               '96             '97            '98             '99
    ---               ---             ---            ---             ---
 11,465,430        12,670,771      14,562,158      15,902,163      19,016,942


<PAGE>

To Our Stockholders and Friends:

   [PHOTO OMITTED]
   Spencer B. Witty
Chairman of the Board

      We are again greatly gratified to report to you that Merchants New York
Bancorp achieved still another record year. This was the sixth record year in a
row and represents twenty-nine consecutive quarters of earnings gains which
distinguishes the "Good Old Bank" as a reliable profitmaking institution and
again added to our reputation as one of the nation's strongest and stable
commercial banks.

      For the full year, earnings per share and net income climbed to new highs
with earnings per share increasing 21%, to $0.98 diluted, up from $0.81,
adjusted for the recent stock split. Net income reached an all-time record of
$19,016,942 on record revenues of $96,835,928 versus $15,902,163 on revenues of
$91,715,106 for the prior year.

      Merchants Bank is the principal subsidiary of Merchants New York Bancorp.
We attribute the Bank's sixth consecutive record year primarily to increased
lending business as well as the Bank's investment activities. Merchants Bank
continues to concentrate on lending to the middle market mid-size and small
businesses that drive the national economy. Our average loan portfolio has
increased four years in a row without departure from our prudent credit
criteria. This past year's performance reflects the Bank's ability to keep on
achieving record results, as exemplified by our return on average equity (before
security valuation) of 18.02% and our return on average assets of 1.46%. In
addition, the Bank's excellent efficiency ratio further demonstrates its
time-tested controls and diligent management of assets and liabilities.

      Our broadened line of loan products, especially those offered by our new
asset-based lending subsidiary, was of great help in supporting our
eager-to-lend loan philosophy. The subsidiary successfully completed its first
year of operation and provided secured loans on accounts receivable, inventory,
machinery and equipment.

      At the completion of the year, the Bank's risk-based capital ratio was
16.1% which is twice as high as the regulatory requirement and sets the Bank
again in the coveted Blue Ribbon class and Five Stars by the Bank rating
services.

      Consistent with our tradition of sharing our growth with our stockholders,
on October 1, 1999, we again split our stock two for one, the third time since
1995 and also increased our dividend by 25% on an annual basis, the 47th
increase in payout since 1950.

      On December 28, 1999, we paid our 266th consecutive quarterly cash
dividend, a streak that began with the inception of dividends in 1932. Our
dividend has never been skipped or cut. We believe this payout record is
unmatched and unrivaled among all commercial banks in the United States.

      We recently established a Dividend Reinvestment Plan. This provides
shareholders with the opportunity to automatically reinvest their cash dividends
in additional Merchants New York Bancorp common stock, as well as the option to
make additional cash investments. Participation in the plan is free and there
are no administrative fees or broker commissions.


                                       2
<PAGE>

      We were deeply saddened by the passing of Isidore Karten, a long-time
Director and ardent supporter of our Company.

      We were pleased to appoint Marcia Toledano, a bright, well connected,
young business woman to our Board. We are confident she will be of great help to
our future growth.

      While we take pride in our electronic capabilities, during the course of
the year, we upgraded our computer data processing systems to provide even
faster and better service and will soon be offering the latest technology in
banking to our customers.

      "The Good Old Bank" is on a very sound footing with excellent fundamentals
to continue achieving increases in its earnings stream and we profoundly believe
that ultimately the good earnings performance and value will be recognized and
rewarded.

      Our Bank relies on many individuals as we feel the "people" resource is of
prime importance to our success. We sincerely wish to thank our stockholders for
their loyalty and support, our Board of Directors for their wise counsel and
valuable assistance, and, very importantly, express our appreciation to our
professional team of officers and our fine staff who have earned us the
reputation of being both a competent and friendly Bank.

      The Bank's businesses are lending and investing. We make loans to
qualified U.S.-based borrowers and invest only in the highest quality of top
American issuers. We have no foreign exposure whatsoever. We have a debt-free,
uniquely solid balance sheet. It is noted that recently Congress repealed the
Depression Era restrictions on banking. The new law now permits affiliations
among the banking, securities and insurance industries. While it encourages
competition, it offers both opportunities and challenges and has made our
franchise even more valuable. As always, our motto remains: "At the Good Old
Bank the Depositor's Safety Comes First--Earnings Will Inevitably Follow."

/s/ Spencer B. Witty
---------------------
Spencer B. Witty
Chairman of the Board

/s/ James G. Lawrence
---------------------
James G. Lawrence
President and Chief Executive Officer

           [PHOTO OMITTED]
          James G. Lawrence
President and Chief Executive Officer


                                       3
<PAGE>

CORPORATE LENDING

Middle Market encompasses many industries including textiles, apparel and furs,
home furnishings, real estate, business and professional services and the
diamond and jewelery business.

Officers of Corporate Lending Divisions I & II
[PHOTO OMITTED]
(standing, left to right): John V. Buoniconti, Asst. Cashier; Paul A. Gotta,
Asst. Cashier; Joseph J. Wynne, V.P.; Paul L. Hamner, Asst. Cashier; Eugene P.
Schreiner, Asst. Cashier; Mitchell Kreiner, V.P.; Joseph J. Nicolosi, V.P.;
Brian T. Schiffino, V.P.; Leonard Katcher, V.P.; (seated, left to right):
Pamela G. Patterson, Asst. Cashier; John J. Cronin, A.V.P.; Patricia A. Miller,
V.P.; Donald F. Ritchie, V.P.; Salvatore J. Chiarelli, V.P.; Noreen Suarez,
Asst. Cashier


Corporate Lending Administration
[PHOTO OMITTED]
(standing, left to right): Andrew S. Baron, V.P.; James K. Moore, V.P.; Kenneth
J. Satchwill, V.P.; Brian M. Cardew, V.P.; Lester Nadel, V.P.; (seated, left to
right): Leonard S. Levine, Senior V.P.; Janet L. Markel, Senior V.P.; Stephen A.
Barrow, Executive V.P.; James G. Lawrence, President and Chief Executive Officer

      Our core lending business personifies Merchants and the success the Bank
has enjoyed for generations. Growth has continued because we have kept to the
policy on which we were founded--proven over and over again to be the bank for
medium-size and small business with emphasis on middle market banking and
personal service. This includes our unique International Department which
services a myriad of quality importers and exporters, and we are pleased that
our Letters of Credit are accepted around the world.

      A bank's earnings from its lending operations depends not only on
satisfied customers, but also on interest rates, and the "art" of forecasting
the direction, magnitude, and timing of rate changes. We try, and we usually
succeed, to earn a favorable spread. Our liquidity, lending standards and
relationships continue to be vital to our financial well-being and sustained
earnings power. We make what we believe to be are prudent loans, and, we do not
venture into the more speculative, higher-risk areas where the promise of higher
returns can sometimes cloud fundamental judgment. It is the Lending Officer who
plays a continuing role in assuring a profitable loan portfolio for the Bank and
we are justifiably proud of our lending staff.

      Our loans are to customers whose sales range from $1 million to $200
million a year. We have been called a community bank because in a number of
respects we may be likened to a small-town bank. The fact that we are located in
Manhattan, in the city known as the world's financial capital, home to global
megabanks, makes this characterization all the more distinctive. As we know,
there have been many bank mergers and even more bank acquisitions in recent
years. As a consequence, many business owners, having dealt with small or
medium-sized banks for years, are confused about where to go for money or
advice. Their longtime lender has linked up with another institution many times
the size, and the familiar faces are no longer there to serve them, all of which
gives our bank additional opportunities. Brand names are not built solely by
advertising and promotion and we believe we have a unique name in banking's
"Middle Market." Brand names are built by living up to your promises, through
repeat daily performance against a standard of excellence. We constantly think
of how the customer is using our


                                       4
<PAGE>

products and position ourselves as a trusted advisor and lender of funds. Just
as important, we have the size and expertise to handle our larger customers'
needs and we've also got the same caring people with real names and faces to
handle smaller needs, and we value each of our relationships. At Merchants,
small business owners can go directly to one lending officer to get counsel or
information on an array of topics. They are not shunted from one person to
another, nor do they have to deal with strangers or relatively inexperienced
personnel. We have good communication at all levels of the lending process and
our clientele include third and fourth-generation customers of businesses to
whom we originally loaned money.

      Our credo is: "The better you understand a client's business, the better
the banker you will be for them. The numbers are important, but it is the people
that pay you back." Bank customers want a lender who knows them and knows their
business. We respond quickly, we give individualized attention and we have no
bureaucracy with which to burden our clients or prospects, and senior management
of the Bank participates in the lending process on a regular basis.

Diamond and Jewelry Industry
Corporate Lending Division III
[PHOTO OMITTED]
(standing, left to right): Gloria R. Trujillo, Asst. Cashier, Elliot Reiner,
V.P.; Michael D. Altman, Senior V.P.; Gerald H. Attanasio, V.P.; Joseph Radice,
A.V.P.; Joseph I. Edelman, V.P.; (seated, left to right): Stephen A. Barrow,
Executive V.P.; James G. Lawrence, President and Chief Executive Officer

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

                                  INVESTMENTS

      Investments play an important role in contributing to our earnings stream.
The Investment Committee's objective, with the support of the Asset and
Liability Committee, is to balance our earning assets with our deposit
liabilities and to provide funds for our loan growth.

      Seasonally, as loans increase, the investment portfolio is engineered to
decrease. Conversely, when loans are paid off, investments are increased to keep
income flowing to our bottom line.

      We invest mostly in obligations of the U.S. government agencies which
amortize their bonds monthly giving us a steady cash flow, and in the highest
quality municipal bonds to shelter taxes.

      Merchants Bank is very unique. The composition of our assets sets us apart
from most banks. Our loan portfolio mostly floats with the prime rate and the
steady cash flow form our investments affords us the opportunity to reinvest at
higher levels if rates continue to rise. Contrary to most banks, historically,
we do even better as interest rates rise. This augurs well for the months ahead.

[PHOTO OMITTED]
(left to right): Spencer B. Witty, Chairman of the Board and Chairman of the
Investment Committee; Eric W. Gould, Executive Vice President and Treasurer

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

      Our business continues to come from referrals from satisfied customers,
accountants, attorneys and investment bankers. Our ambition is not to become the
largest bank, but rather to continue to grow as the strongest and safest while
we expand our valuable customer base. This includes a cross section of the
"Middle Market" and encompasses many industries, including textiles, apparel and
furs, home furnishings, real estate, business and professional services and the
diamond and jewelry business.

Merchants New York Commercial Corp.
[PHOTOS OMITTED]
(left to right): Joseph M. Triscoli, V.P.; Irwin Schwartz, President and Chief
Executive Officer; Alexander Rodetis, Jr., Executive V.P.

      In the latter part of 1998, we took a strategic step to broaden the scope
of our traditional commercial lending services to middle market companies with
the formation of Merchants New York Commercial Corp., our Asset-Based Lending
subsidiary, which provides accounts receivable and inventory financing and
machinery and equipment loans, as well as letter of credit facilities to new and
existing corporate borrowers. Typically, Asset-Based Lending provides revolving
loans to manufacturing, wholesale, distribution and service companies with high
working capital investment needs and these loans are based on the level of a
company's working capital assets, primarily accounts receivable and inventory.

      Our wholly owned subsidiary meets an objective of Merchants long-term
business growth plan by offering this value-added service to our middle market
and smaller corporate borrowers, thereby expanding the Bank's loan portfolio and
earnings potential.


                                       5
<PAGE>

"THE GOOD OLD BANK"

[LOGO] MERCHANTS NEW YORK BANCORP

BRANCH LOCATIONS

[PHOTO OMITTED]
Raymond F. Tornabene
Assistant Vice President
and Branch Manager

[PHOTO OMITTED]
1040 Sixth Avenue


[PHOTO OMITTED]
Simeon Kovacic
Vice President and Branch Manager

[PHOTO OMITTED]
295 Fifth Avenue


[PHOTO OMITTED]
Dennis J. Sheridan
Vice President and Branch Manager

[PHOTO OMITTED]
275 Madison Avenue


[PHOTO OMITTED]
Lawrence I. Kohn
Vice President and Branch Manager

[PHOTO OMITTED]
93 Canal Street


[PHOTO OMITTED]
Joseph R. Criscione
Senior Vice President and Branch Manager

[PHOTO OMITTED]
434 Broadway
<PAGE>

Carrying on a Tradition of Reliability

BRANCH ADMINISTRATION
[PHOTO OMITTED]
Eugene J. Venier
Senior Vice President and Division Head


[PHOTO OMITTED]
William J. Cardew
Vice Chairman and
Chief Operating Officer


[PHOTO OMITTED]
John U. Doekker
Vice President and Branch Manager

[PHOTO OMITTED]
62 West 47th Street


[PHOTO OMITTED]
Michael S. Hassani
Vice President and Branch Manager

[PHOTO OMITTED]
145 Fifth Avenue

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

                               STAFF DEPARTMENTS

                                [PHOTO OMITTED]
                                M. Nasette Aranda
                         Vice President and Comptroller

                                [PHOTO OMITTED]
                                 Karen Deitz
                             Corporate Secretary and
                       Director of Stockholder Relations

                                [PHOTO OMITTED]
                              Rosemarie A. Calabro
                              Senior Vice President
                                 Bank Operations

                                [PHOTO OMITTED]
                               Mary J. Scarpelli
                           Vice President and Auditor

                                [PHOTO OMITTED]
                                T. John Santoro
                           Vice President Real Estate
                           & Administrative Services

                                [PHOTO OMITTED]
                               Joseph M. Cestone
                             Senior Vice President
                            International Operations

                                [PHOTO OMITTED]
                                Ruth T. Aimetti
                                 Vice President
                                Human Resources

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

<PAGE>

                           Merchants New York Bancorp

                            SELECTED FINANCIAL DATA

This consolidated selected financial information for the Company is not intended
to be complete and is qualified in its entirety by more detailed financial
information and the financial statements contained elsewhere herein.

<TABLE>
<CAPTION>
For the years ended
December 31,                             1999           1998         1997          1996           1995          1994          1993
----------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>            <C>          <C>           <C>            <C>          <C>            <C>
(Dollars in thousands,
except per share amounts)
Interest income                   $    90,285    $    86,268  $    82,820   $    73,095    $    69,569  $     61,345   $    60,301
Net interest income                    50,669         45,395       42,567        39,640         37,662        36,238        35,280
Provision for loan losses               1,915          1,425        1,700         2,580          2,080         1,850         9,785
Net income                             19,017         15,902       14,562        12,671         11,465        10,709         7,884
Earnings per share (1 and 4):
   Basic                                 0.99           0.82         0.75          0.64           0.58          0.54          0.40
   Diluted                               0.98           0.81         0.73          0.63           0.57          0.54          0.39
Cash dividends declared
   per share (1)                         0.45           0.40         0.38          0.33           0.28          0.23          0.20
Total assets                        1,395,313      1,289,571    1,235,742     1,137,799      1,027,191     1,001,386     1,006,348
Book value per share (1):
   Without security valuation            5.56           5.33         5.03          4.84           4.54          4.24          3.92
   With security valuation (2)           5.19           5.80         5.49          5.21           5.03          3.92            --
Financial Ratios:
Return on average assets                 1.46%          1.27%        1.23%         1.21%          1.19%         1.10%         0.78%
Return on average equity
   excluding security valuation         18.02          15.67        14.91         13.45          13.01         13.22         10.36
Return on average equity
   including security valuation (2)     17.32          14.34        13.82         12.53          12.59         13.30         10.36
Average equity to
   average assets (2)                    8.41           8.85         8.90          9.66           9.43          8.35          7.54
Dividend payout ratio                   45.61          48.96        50.35         51.10          47.71         41.74         50.38
Net charge-offs to
   average loans                         0.19          (0.11)        0.35          1.23           0.65          0.96          2.34
Allowance for loan losses
   to total loans                        2.08           2.20         1.86          1.89           2.39          2.31          2.46
Non-performing loans to
   allowance for loan losses             4.70           1.83         2.58         19.74          33.45         21.19         26.39
Risk-Based Capital Ratio: (3)
   Tier I                               14.88          16.94        18.61         20.41          21.61         19.81         18.59
   Total                                16.13          18.19        19.80         21.62          22.86         21.06         19.84
</TABLE>

(1)   Based upon retroactive adjustments for 2-for-1 stock splits paid October
      2, 1995, October 7, 1997 and October 1, 1999.

(2)   Per SFAS No. 115, effective in 1994, a valuation account for unrealized
      gains (losses) on investments available for sale are included in equity.

(3)   The Federal Reserve Board capital guidelines for bank holding companies
      require minimum risk-based ratios of Tier 1 and total capital to
      risk-weighted assets to be 4.0% and 8.0%, respectively, and a minimum
      leveraged-based ratio of Tier 1 capital to total average quarterly assets
      generally of at least 3.0%. The ratios above were calculated using the
      guidelines in effect at each reporting date.

(4)   Per SFAS No. 128, effective in 1997, the earnings per share calculation
      and disclosure have been revised. EPS on this schedule has been
      retroactively revised to conform to this change.


                                       8
<PAGE>

                           Merchants New York Bancorp

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

Comparison of the Years Ended December 31, 1999 and 1998

Overview

Net income in 1999 increased by 19.6% to $19.0 million, compared with 1998's
earnings of $15.9 million. Net income per diluted share continued to increase,
up $0.17 to $0.98 per share versus $0.81 per share in 1998.

Interest Income

Interest income generated in 1999 was $90.3 million, up $4 million, or 4.7%,
from the 1998 total of $86.3 million.

The Bank's primary component of interest income in 1999 was contributed by the
investment portfolio, with $54.7 million versus $53.6 million in 1998. The
increase in investment income was a result of the growth of the investment
portfolio which averaged $815.8 million, up $19.4 million, or 2.4%, from $796.4
million in 1998. The non-tax adjusted interest return for the investment
portfolio decreased to 6.70% from 6.73% in 1998, due to the lower interest rate
environment.

Interest income on loans in 1999 increased to $34.9 million, up $3.1 million
when compared to $31.8 million in 1998. The average balance on loans in 1999 was
$402.5 million, an increase of $52.2 million, or 14.9%, from $350.3 million in
1998. The establishment in late 1998 of Merchants New York Commercial Corp., the
Asset-Based Lending subsidiary, was a major contributor to the increase in
average loans, although all segments of the loan portfolio benefited from the
increased efforts of our lending personnel.

The additional funding to support the growth of the investment and loan
portfolios was achieved through increased deposits, repurchase agreements, FHLB
advances, and other short-term borrowings. On average, approximately $15.8
million per month of principal repayments received from mortgage-backed
securities were reinvested in both the investment and loan portfolios.

In maximizing cash management, the average Federal funds sold decreased to $13.4
million from $16.2 million in 1998. Interest income on Federal funds sold
contributed $658,000 to interest income, a reduction of $185,000 from the
$843,000 earned in 1998.

Interest Expense

Total interest expense decreased to $39.6 million, a reduction of $1.3 million
from $40.9 million in 1998. The decrease was the result of a decline in the
average cost for interest-bearing liabilities to 4.46%, a reduction of 36 basis
points from 4.82% in 1998.

Interest expense on deposits, the highest contributor to interest expense,
decreased to $26.2 million in 1999, a reduction of $2.4 million from $28.6
million in 1998. The average deposits in 1999 were $635.5 million, an increase
of $3.5 million from $632.0 million in the prior year. Average certificates of
deposits balances decreased to $385.9 million in 1999 from $416.3 million in
1998, with the average rate paid decreasing approximately 51 basis points to
4.76% in 1999 from 5.27% in 1998.

Interest expense on repurchase agreements decreased to $9.0 million, a reduction
of $400,000, when compared to $9.4 million for the same period in 1998. The
decrease was the result of lower interest rates offset by an increase in the
average balance for repurchase agreements of $4.2 million to $170.5 million from
$166.3 million in 1998.


                                       9
<PAGE>

                         Merchants New York Bancorp

Interest expense on FHLB term advances increased to $3.8 million, up $1.8
million from $2.0 million in 1998. The increase was primarily the result of
higher volume as the average balance for 1999 on FHLB term advances increased to
$69.1 million, up $33.2 million from $35.9 million for the same period in 1998.

Other short-term borrowings, consisting of Federal funds purchased and US
Treasury demand notes, averaged $12.2 million in 1999, a decrease of $2.3
million versus $14.5 million in 1998. Interest expense from other short-term
borrowings decreased to $610,000, a reduction of $192,000 when compared to
$802,000 in 1998.

ANALYSIS OF NET INTEREST EARNINGS

<TABLE>
<CAPTION>
                                                1999                               1998                         1997
-------------------------------------------------------------------------------------------------------------------------------
                                                          Average                        Average                        Average
                                   Average                 Yield/      Average             Yield/    Average             Yield/
                                   Balance    Interest      Rate       Balance   Interest  Rate      Balance   Interest    Rate
-------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>           <C>           <C>      <C>         <C>        <C>    <C>         <C>         <C>
(Dollars in thousands)

Interest-Earning Assets

Federal funds sold              $   13,356    $   658       4.93%    $   16,184  $   843    5.21%  $    8,373  $   460     5.49%

Investment securities

   (book value):

     Taxable                       730,124     50,074        6.86       712,214   48,911    6.87      684,916   48,226     7.04

     Tax-exempt*                    85,669      4,576        5.34        84,152    4,648    5.52       71,135    4,332     6.09
-------------------------------------------------------------------------------------------------------------------------------
       Total                       815,793     54,650        6.70       796,366   53,559    6.73      756,051   52,558     6.95

Loans (net of
   unearned discounts)             402,456     34,883        8.67       350,272   31,767    9.07      325,298   29,771     9.15

Other                                1,839         94        4.26         1,548       99    6.40          531       31     5.84
-------------------------------------------------------------------------------------------------------------------------------
       Total                    $1,233,444    $90,285        7.32%   $1,164,370  $86,268    7.41%  $1,090,253  $82,820     7.60%
-------------------------------------------------------------------------------------------------------------------------------
Interest-Bearing Liabilities

NOW                             $   48,896    $   945        1.93%   $   44,609  $ 1,000    2.24%  $   41,904  $   951     2.27%

Savings accounts                    27,757        827        2.98        25,476      758    2.98       24,277      724     2.98

Money market accounts              173,011      6,040        3.49       145,660    4,924    3.38      141,671    4,774     3.37

Time certificates
   of deposit                      385,873     18,377        4.76       416,286   21,928    5.27      416,221   22,687     5.45

Securities sold under
   repurchase agreements           170,548      9,039        5.30       166,315    9,424    5.67      166,294    9,680     5.82

FHLB term advances                  69,096      3,778        5.47        35,890    2,037    5.68        7,452      437     5.86

Other short-term borrowings         12,183        610        5.00        14,544      802    5.51       18,229    1,000     5.49
-------------------------------------------------------------------------------------------------------------------------------
       Total                    $  887,364    $39,616        4.46%   $  848,780  $40,873    4.82%  $  816,048  $40,253     4.93%
-------------------------------------------------------------------------------------------------------------------------------
Net interest-
   earning assets                  346,080                              315,590                       274,205
===============================================================================================================================
Net yield on interest-
   earning assets               $1,233,444    $50,669        4.11%   $1,164,370  $45,395    3.90%  $1,090,253  $42,567     3.90%
===============================================================================================================================
</TABLE>

Non accrual loans are included in Interest-Earning Assets.

*Yields are not computed on a tax equivalent basis.


                                       10
<PAGE>

                         Merchants New York Bancorp

Net Interest Income

The Bank's primary source of earnings is net interest income. This is the amount
by which interest income on interest-earning assets exceeds interest expense on
interest-bearing liabilities. Net interest income increased to $50.7 million in
1999 from $45.4 million in 1998. Net interest income is a function of several
factors including changes in volume, mix of earning assets, funding sources and
market interest rates. While management policies influence these factors, they
are also influenced by external forces including customer needs and demands,
competition, the economic policies of the Federal government and monetary
policies of the Federal Reserve Board.

The following table provides further analysis of the increase in net interest
income during 1999, 1998 and 1997 and indicates that the increases were
primarily due to higher volume of interest-earning assets and lower interest
expense on deposits and borrowed funds. The changes in interest income and
interest expense have been allocated to rate and volume changes in proportion to
the absolute dollar amounts of the change in each.

CHANGES IN INTEREST INCOME AND EXPENSE

<TABLE>
<CAPTION>
                                                        1999 Compared to 1998             1998 Compared to 1997
                                                         Increase (Decrease)               Increase (Decrease)
-------------------------------------------------------------------------------------------------------------------
                                                     Volume       Rate      Change     Volume     Rate      Change
-------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>        <C>        <C>        <C>        <C>        <C>
(In thousands)
Interest Income
Loans (net of unearned discounts)                    $ 4,571    $(1,455)   $ 3,116    $ 2,267    $  (271)   $ 1,996
Investment securities (book value):
   Taxable                                             1,228        (65)     1,163      1,891     (1,206)       685
   Tax-exempt                                             83       (155)       (72)       745       (429)       316
-------------------------------------------------------------------------------------------------------------------
     Total investments                                 1,311       (220)     1,091      2,636     (1,635)     1,001
Other interest income                                   (124)       (66)      (190)       472        (22)       450
-------------------------------------------------------------------------------------------------------------------
     Total interest income                             5,758     (1,741)     4,017      5,375     (1,928)     3,447
-------------------------------------------------------------------------------------------------------------------
Interest Expense
Savings and time deposits:
   NOW                                                    91       (146)       (55)        61        (12)        49
   Savings accounts                                       68          1         69         36         (2)        34
   Money market accounts                                 950        167      1,117        149          1        150
   Time certificates of deposit                       (1,536)    (2,015)    (3,551)         4       (762)      (758)
-------------------------------------------------------------------------------------------------------------------
     Total                                              (427)    (1,993)    (2,420)       250       (775)      (525)
-------------------------------------------------------------------------------------------------------------------
Borrowings:
   Securities sold under
     repurchase agreements                               235       (620)      (385)         1       (257)      (256)
   FHLB term advances                                  1,818        (77)     1,741      1,614        (14)     1,600
   Other short-term borrowings                          (115)       (78)      (193)      (233)        33       (200)
-------------------------------------------------------------------------------------------------------------------
     Total interest expense                            1,511     (2,768)    (1,257)     1,632     (1,013)       619
-------------------------------------------------------------------------------------------------------------------
     Net interest income                             $ 4,247    $ 1,027    $ 5,274    $ 3,743    $  (915)   $ 2,828
===================================================================================================================
</TABLE>


                                       11
<PAGE>

                         Merchants New York Bancorp

Other Income,  Other Expenses,  Provision for Loan Losses and Taxes

Other income increased by $1.1 million to $6.5 million in 1999 when compared to
$5.4 million in 1998. This was primarily the result of an increase in fee income
of $618,000, of which approximately 42% was attributable to Merchants New York
Commercial Corp., the new Asset-Based Lending subsidiary. In addition,
International Department fees increased $339,000 from higher volume of
processing letters of credits and the balance was from increases in other
service fees and charges.

Other expenses in 1999 were $26.8 million, an increase of $1.4 million from
$25.4 million in 1998. This stemmed principally from an increase of $897,000 in
salaries, primarily, for Merchants New York Commercial Corp., which did not
exist until the end of 1998, and a $637,000 increase in benefits.

The provision for loan losses is based on maintaining an allowance for loan
losses to cover all non-accrual and high-risk loans. The provision for loan
losses increased $490,000 to $1.9 million in 1999 compared to $1.4 million in
1998. The increase in the provision reflects management's actions in assessing
the level of adequacy in the allowance of loan losses. The allowance for loan
losses totaled $9.1 million and $8.0 million as of December 31, 1999 and 1998,
respectively. The Bank's level of allowance follows industry standards, with the
provision rising and falling to reflect the status of the loan portfolio risk.
The level of allowance for loan losses is evaluated by management quarterly and
is based on several factors in addition to non-accrual, doubtful and substandard
loans including: charged-off loans totaling $1.2 million and $232,000 in 1999
and 1998, respectively; recoveries totaling $452,000 and $605,000 in 1999 and
1998, respectively; changes in levels and characteristics of total outstanding
loans of $437.1 million and $361.8 million in 1999 and 1998, respectively. For
further discussion of the allowance, refer to Notes 1 and 5 of the Financial
Statements.

The provision for income taxes increased $1.4 million in 1999 to $9.5 million
versus $8.1 million in 1998. The increase was primarily due to an increase in
income before taxes of $4.5 million.

Liquidity

Liquidity measures the Bank's ability to satisfy current and future obligations
and commitments as they become due. Funds to meet liquidity needs are raised
through the sale or maturity of an asset or through increased deposits or
borrowings.

For the year ended December 31, 1999, average cash and short-term investments
totaled $55 million, versus $59 million in 1998, accounting for 4.2% and 4.7% of
the Bank's total average assets, respectively. Through principal repayments and
redemptions, the investment portfolio generated $214 million in 1999 and $231
million in 1998 for reinvestment and/or liquidity. Furthermore, $22 million in
1999 and $19 million in 1998 were the result of investment sales to take
advantage of interest rate arbitrage. Also, having 97% of the loan portfolio
priced to float with the prime rate allows immediate adjustments upon an
interest rate change, which impacts the interest rate gap.

On the liability side, the primary source of funds available to meet liquidity
needs is the Bank's core deposit base. The Bank continues to retain a
substantial proportion of its average deposits in the form of
noninterest-bearing funds, with $278 million, or 30%, in 1999 and $255 million,
or 29%, in 1998. The average balance of total deposits increased $26 million to
$913 million in 1999, from $887 million in 1998, of which $22 million came from
noninterest-bearing deposits. Interest-bearing liabilities are priced
competitively, with a slight premium paid for time certificates of deposit, $538
million, or 83%, of which are in the 0 to 3 month maturity range and $91
million, or 14%, are in the 3 to 12 month range. While we include savings
accounts and NOW accounts in the 0 to 3 months category on the Interest Rate
Sensitivity Gap table, the actual repricing on these is at our discretion.
Taking this into consideration, the reflected liability sensitivity of


                                       12
<PAGE>

                         Merchants New York Bancorp

$202 million would be mitigated by $80 million of combined NOW and savings
accounts balances included there and which would not change at the same rate as
other interest-bearing deposits. As a balance between assets and deposit
liabilities, the average investment portfolio of $823 million in 1999 and $811
million in 1998, can be used as collateral for repurchase agreements, of which
an average of $171 million in 1999 and $166 million in 1998 was utilized.

INTEREST RATE SENSITIVITY GAP ANALYSIS

As of December 31, 1999
(In thousands)

<TABLE>
<CAPTION>
                                                Less Than        3 to 12       1 to 5       Over
Interest-Earning Assets                         3 Months         Months         Years      5 Years        Total
-----------------------------------------------------------------------------------------------------------------
<S>                                             <C>           <C>             <C>         <C>          <C>
Federal funds sold                              $  50,000     $      --       $     --    $     --     $   50,000
Securities available for sale*                     68,493        86,469        313,251     194,502        662,715
Securities held to maturity*                        7,478        27,673         96,357      66,480        197,988
Loans                                             422,440         4,686          6,219       3,752        437,097
Other                                               6,881            --             --          --          6,881
-----------------------------------------------------------------------------------------------------------------
Total interest-earning assets                   $ 555,292     $ 118,828       $415,827    $264,734     $1,354,681
=================================================================================================================
Interest-Bearing Liabilities
Interest-bearing deposits                       $ 537,527     $  91,374       $ 17,696 $        81     $  646,678
Securities sold under
   repurchase agreements                          135,000        40,000         10,000          --        185,000
FHLB term advances                                 65,000        40,000             --          --        105,000
Other short-term borrowings                        20,048            --             --          --         20,048
-----------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities              $ 757,575     $ 171,374       $ 27,696    $     81     $  956,726
=================================================================================================================
Net interest rate sensitivity gap                (202,283)      (52,546)       388,131     264,653        397,955
Cumulative gap position                          (202,283)     (254,829)       133,302     397,955             --
Cumulative gap/total earning assets:
At December 31, 1999                               (14.93)%      (18.81)%         9.84%      29.38%
At December 31, 1998                               (16.64)%      (19.16)%        13.60%      28.83%
</TABLE>

----------
*     Adjusted for weighted average maturity dates and prepayments for mortgage
      back securities. All securities are disclosed at book value.

Market Risk Management

Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates/prices such as interest rates, foreign currency exchange
rates, commodity prices and equity prices. The Bank's primary market risk
exposure is interest rate risk, with foreign exchange, commodity and equity
price risk not arising in the ordinary course of business. The ongoing
monitoring and management of this risk is an important component of the Bank's
asset/liability process which is governed by policies, established by its Board
of Directors, that are reviewed and approved annually. The Board of Directors
delegates responsibility for carrying out the asset/liability management
policies to the Asset/Liability Committee (ALCO). In this capacity, ALCO
develops guidelines and strategies impacting the Bank's asset/liability
management related activities based upon estimated market risk sensitivity,
policy limit and overall market interest rate levels/trends.

The objectives of the Bank's interest rate risk management activities are to
define an acceptable level of risk based on the Bank's business focus, capital
and liquidity requirements and to manage interest rate risk and maintain net
interest margins in changing rate environments. Management seeks to reduce the
vulnerability


                                       13
<PAGE>

                         Merchants New York Bancorp

of the Bank's operating results to changes in interest rates and to manage the
ratio of interest rate sensitive assets to interest rate sensitive liabilities
within specified maturities or repricing periods. The Bank does not currently
engage in trading activities or use off balance sheet derivative instruments to
control interest rate risk. The Board of Directors has authorized management to
use derivatives if management deems it beneficial to the Bank.

Even with the Bank's active role in managing interest rate risk, the potential
for changing interest rates is an uncertainty that could have an adverse effect
on the earnings of the Bank. When interest-bearing liabilities mature or reprice
more quickly than interest-earning assets in a given period, a significant
increase in market interest rates could adversely affect net interest income.
Conversely, in a falling interest rate environment, these same interest-bearing
liabilities reprice more quickly than earning assets, and in most circumstances
produce a beneficial effect on our net interest income.

In managing the Bank's asset/liability position, management attempts to minimize
interest rate risk while enhancing net interest margins. Management continues to
believe that the increased net interest income resulting from a mismatch in
maturity of the Bank's asset and liability portfolio can, during periods of
declining or stable interest rates and periods in which there is a substantial
positive difference between long and short-term interest rates, provide high
enough returns to justify the increased exposure to sudden and unexpected
increases in interest rates. During 1999, the Bank continued to utilize
short-term borrowings to fund the purchase of longer-term mortgage-backed
securities. As a result, the Bank's results of operations and net portfolio
values remain vulnerable to increases in interest rates and to fluctuations in
the difference between long and short-term interest rates.

Consistent with its asset/liability management philosophy, the Bank has taken
several steps to manage its interest rate risk. First, the Bank's loan portfolio
of $437 million consists of virtually all adjustable rate loans. Second, a
majority of the Bank's securities are U.S. Government and Agency mortgage-backed
securities, with $735 million, or 87%, of the total securities have expected
weighted average maturities of approximately four years or less. Third, the Bank
has a significant amount of deposits which are non-interest bearing or are only
minimally sensitive to interest rate fluctuations, including $278 million in
average demand deposits and $250 million in average money market, NOW and
savings accounts.

One approach used by management to quantify interest rate risk is the net
portfolio value (NPV) analysis. In essence, this approach calculates the
difference between the present value of the liabilities and the present value of
expected cash flows from assets and off balance sheet contracts. The following
table sets forth, as of December 31, 1999, an analysis of the Bank's interest
rate risk as measured by the estimated changes in NPV resulting from
instantaneous and sustained parallel shifts in the yield curve (_+200 basis
points measured in 100 basis point increments). For comparative purposes, the
table also shows the estimated percentage increase (decrease) in NPV at December
31, 1998.


                                       14
<PAGE>

                         Merchants New York Bancorp

NET PORTFOLIO VALUE ANALYSIS FOR INTEREST RATE RISK

<TABLE>
<CAPTION>
                                                    At December 31, 1999
                             -----------------------------------------------------
Change in Interest Rates     Estimated NPV    Estimated Increase (Decrease) in NPV*       Percent Increase
                                              ------------------------------------       (Decrease) in NPV at
(Basis points)                      Amount            Amount          Percent             December 31, 1998
-------------------------------------------------------------------------------------------------------------
<S>                                <C>               <C>                <C>                  <C>
(Dollars in thousands)
+200                               $119,471          (51,431)           (30)%                (23)%
+100                                145,809          (25,093)           (15)%                 (9)%
--                                  170,902               --             --                   --
-100                                188,941           18,039             11%                   2%
-200                                191,503           20,601             12%                   1%
</TABLE>

----------
*     Pretax

Certain assumptions are employed in preparing the preceding table. These
assumptions relate to interest rates, loan prepayment rates, deposit decay rate
and the market values of certain assets under the various interest rate
scenarios. It was also assumed that delinquency rates will not change as a
result of changes in interest rates, although there can be no assurance that
this will be the case. Even if the interest rates change in the designated
amounts, there can be no assurance that the Bank's assets and liabilities would
perform as set forth above. In addition, a change in U.S. Treasury rates in the
designated amounts accompanied by a change in the slope of the Treasury yield
curve would cause significantly different changes to the NPV than indicated in
the chart.

Capital

The capital base of a company is a significant measure of the strength of a
financial institution. The Company has seen a steady capital growth over the
past several years, with our risk-based ratios, as shown below, in excess of the
required "Well Capitalized" level of 10%. The Company was also in excess of the
required leverage ratio of 3%, with 7.54% and 7.91% for the years ended December
31, 1999 and 1998, respectively.

The primary source of capital growth is through retention of earnings. Retained
profits increased to $95.0 million at December 31, 1999 as compared to $86.3
million as of December 31, 1998, resulting from retention of our net profit,
after paying cash dividends to shareholders. The Company's Board of Directors
declared and paid a dividend of $0.10 per share each of the first and second
quarters of 1999, with an increase to $0.125 per share for the third and fourth
quarters. The fourth quarter marked the Company's 266th consecutive dividend
payment. We believe that cash dividends are an important component of
shareholder value and that at current level of performance, dividend payments
will continue into the future. Overall, stockholders' equity increased by $8.7
million of retained earnings and was reduced by a $6.3 million purchase of our
stocks through the buyback program. In addition, the effect of the one day
market valuation of our available for sale securities was a reduction (net of
tax effect) of $7.1 million. The market valuation of the securities reflects
only one point in time and can only be realized upon their sale. With our strong
liquidity and excellent basic capital strength, we only sell securities for
strategic business reasons.

                                                    December 31,   December 31,
                                        Required            1999           1998
-------------------------------------------------------------------------------

Tier I Risk-Based Capital Ratio             4.00%          14.88%         16.94%
Total Risk-Based Capital Ratio              8.00           16.13          18.19
Leverage Ratio                              3.00            7.54           7.91


                                       15
<PAGE>

The Year 2000 ("Y2K") Issue

The Company's computer systems and business processes successfully handled the
date change from December 31, 1999 to January 1, 2000. The company is not aware
of any significant Y2K problems encountered internally or with third parties
with which it interfaces. Based on operations since January 1, 2000, the Company
does not expect any significant impact to its ongoing business as a result of
the Y2K issue. However, it is possible that the full impact of Y2K has not been
fully recognized and no assurances can be given that Y2K problems will not
emerge.

Ongoing assessment and evaluation will continue throughout the first quarter of
this year. Total cost of the Y2K readiness project remained at approximately
$400,000, which were expensed as incurred through 1999.

Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

This report contains forward-looking statements within the meaning of The
Private Securities Litigation Reform Act of 1995. Such statements are not
historical facts and include expressions about our confidence and strategies and
our expectations about new and existing programs and products, relationships,
opportunities, technology and market conditions. These statements may be
identified by such forward-looking terminology as "except," "believe,"
"anticipate," or by expressions of confidence such as "continuing" or "strong,"
or similar statements or variations of such terms. Such forward-looking
statements involve certain risks and uncertainties. These include, but are not
limited to; expected cost, savings not being realized or not being realized
within the expected time frame; income or revenues being lower than expected or
operating costs higher; competitive pressures in the banking or financial
services industries increasing significantly; business disruption related to
program implementation or methodologies; weakening of general economic
conditions nationally or in New York; changes in legal and regulatory barriers
and structures; and unanticipated occurrences delaying planned programs or
initiatives or increasing their costs or decreasing their benefits. The Company
assumes no obligation for updating any such forward-looking statements at any
time.

                          PRICE RANGE OF THE COMPANY'S
                                  COMMON STOCK

The Company's common stock is traded on the over-the-counter NASDAQ National
market. The Company's symbol is "MBNY." The high and low bid prices for each
quarterly period during the past two years, adjusted for the 2-for-1 stock split
were as follows:

PRICE RANGE OF COMMON STOCK

                                             1999                   1998
                                    --------------------------------------------
                                       HIGH       LOW         HIGH        LOW
--------------------------------------------------------------------------------
First Quarter                       $ 17 3/16   $16 1/2    $21 15/16    $15 1/2
Second Quarter                        17 3/8     16 3/4     21 5/8       18 7/16
Third Quarter                         18 1/2     16 7/8     18 15/16     15 1/2
Fourth Quarter                        17 7/16    17 1/16    18 31/32     15 3/8

On February 1, 2000, the closing bid and asked prices reported for the common
stock were $16 1/2 and $16 9/16, respectively. These quotations reflect
inter-dealer prices without retail mark up, mark down or commission and may not
represent actual transactions.


                                       16
<PAGE>

                           Merchants New York Bancorp

                      CONSOLIDATED STATEMENTS OF CONDITION

<TABLE>
<CAPTION>
December 31,                                                                   1999               1998
------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                <C>
Assets
Cash and due from banks                                             $    32,940,883    $    38,435,946
Federal funds sold                                                       50,000,000          5,000,000
Investment securities:
   Available for sale at market value                                   649,931,593        660,026,352
   Held to maturity (market value $195,169,226 in 1999
     and $203,429,134 in 1998)                                          197,988,432        198,163,304
------------------------------------------------------------------------------------------------------
       Total investment securities                                      847,920,025        858,189,656
------------------------------------------------------------------------------------------------------
Loans (net of unearned discounts of $57,304 and $46,100
   in 1999 and 1998, respectively)                                      437,097,287        361,763,395
   Less allowance for loan losses                                         9,108,216          7,964,735
------------------------------------------------------------------------------------------------------
       Total loans, net                                                 427,989,071        353,798,660
------------------------------------------------------------------------------------------------------
Bank premises and equipment                                               5,992,660          6,708,796
Customers' liability on acceptances                                      12,134,217         13,241,093
Other assets                                                             18,336,292         14,196,829
------------------------------------------------------------------------------------------------------
       Total assets                                                 $ 1,395,313,148    $ 1,289,570,980
======================================================================================================

Liabilities and Stockholders' Equity
Liabilities
   Deposits:
     Demand (noninterest-bearing)                                   $   312,300,580    $   282,044,272
     NOW                                                                 51,214,572         46,444,839
     Savings                                                             28,865,561         26,177,229
     Money market                                                       191,972,362        162,788,408
     Time                                                               374,625,133        416,868,544
------------------------------------------------------------------------------------------------------
       Total deposits                                                   958,978,208        934,323,292
------------------------------------------------------------------------------------------------------
Securities sold under repurchase agreements                             185,000,000        160,000,000
FHLB term advances                                                      105,000,000         45,000,000
Acceptances outstanding                                                  12,134,217         13,241,093
Other short-term borrowings                                              20,047,500          4,282,319
Other liabilities                                                        14,945,286         19,746,071
------------------------------------------------------------------------------------------------------
       Total liabilities                                              1,296,105,211      1,176,592,775
------------------------------------------------------------------------------------------------------
Stockholders' Equity
   Capital stock -- $.001 par value; 40,000,000
     authorized shares, 19,978,664 shares issued in 1999 and 1998            19,978             19,978
   Surplus                                                               23,879,363         23,879,363
   Undivided profits                                                     95,012,110         86,304,445
   Treasury stock at cost (856,160 shares in 1999
     and 481,014 shares in 1998)                                        (12,570,633)        (6,301,081)
   Accumulated other comprehensive income, net of tax:
     Unrealized (depreciation) appreciation
       on securities available for sale                                  (7,132,881)         9,075,500
   Commitments and contingent liabilities                                      --                 --
------------------------------------------------------------------------------------------------------
       Total stockholders' equity                                        99,207,937        112,978,205
------------------------------------------------------------------------------------------------------
       Total liabilities and stockholders' equity                   $ 1,395,313,148    $ 1,289,570,980
======================================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       17
<PAGE>

                         Merchants New York Bancorp

                        CONSOLIDATED STATEMENTS OF INCOME
                            AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
Years ended December 31,                                           1999            1998           1997
------------------------------------------------------------------------------------------------------
<S>                                                        <C>             <C>            <C>
Interest and dividend income:
   Interest on loans                                       $ 34,883,106    $ 31,766,991   $ 29,771,225
   Interest and dividends on investment securities:
     U.S. Government obligations                             37,951,726      44,874,158     47,631,337
     Other investments                                       16,697,404       8,685,750      4,926,841
   Other interest income                                        752,455         940,707        491,166
------------------------------------------------------------------------------------------------------
     Total interest and dividend income                      90,284,691      86,267,606     82,820,569
------------------------------------------------------------------------------------------------------
Interest expense:
   Interest on deposits                                      26,189,209      28,610,080     29,135,924
   Interest on securities sold under
     repurchase agreements                                    9,038,566       9,424,498      9,680,285
   Interest on FHLB term advances                             3,777,683       2,036,801        436,690
   Other interest expense                                       610,061         801,533      1,000,557
------------------------------------------------------------------------------------------------------
     Total interest expense                                  39,615,519      40,872,912     40,253,456
------------------------------------------------------------------------------------------------------
     Net interest income                                     50,669,172      45,394,694     42,567,113
Provision for loan losses                                     1,915,000       1,425,000      1,700,000
------------------------------------------------------------------------------------------------------
     Net interest income after provision for loan losses     48,754,172      43,969,694     40,867,113
------------------------------------------------------------------------------------------------------
Other income:
   Service fees                                               1,396,204       1,278,458      1,310,426
   International department fees                              3,185,013       2,845,865      2,721,033
   Investment securities gains on sales                          93,381          61,272         21,901
   Other                                                      1,876,639       1,261,905      1,129,255
------------------------------------------------------------------------------------------------------
     Total other income                                       6,551,237       5,447,500      5,182,615
------------------------------------------------------------------------------------------------------
Other expenses:
   Salaries                                                  12,256,604      11,359,160     10,855,196
   Employee benefits                                          3,761,551       3,124,212      2,949,066
   Occupancy                                                  2,697,545       2,603,722      2,589,996
   Equipment and data processing                              1,907,681       1,823,525      1,710,850
   Other                                                      6,150,356       6,472,903      6,227,854
------------------------------------------------------------------------------------------------------
     Total other expenses                                    26,773,737      25,383,522     24,332,962
------------------------------------------------------------------------------------------------------
Income before income taxes                                   28,531,672      24,033,672     21,716,766
Income tax expense                                            9,514,730       8,131,509      7,154,608
------------------------------------------------------------------------------------------------------
     Net income                                            $ 19,016,942    $ 15,902,163   $ 14,562,158
------------------------------------------------------------------------------------------------------
Earnings per share, basic                                         $0.99           $0.82          $0.75
Earnings per share, diluted                                       $0.98           $0.81          $0.73
======================================================================================================

Comprehensive income:
   Net income                                              $ 19,016,942    $ 15,902,163   $ 14,562,158
   Other comprehensive income, net of tax:
   Unrealized (depreciation) appreciation
     on securities available for sale during the period     (16,208,381)        131,688      1,525,576
   Less: reclassification adjustment for
     gains included in net income                                60,698          37,276         11,590
------------------------------------------------------------------------------------------------------
       Total comprehensive income                          $  2,747,863    $ 15,996,575   $ 16,076,144
======================================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       18
<PAGE>

                         Merchants New York Bancorp

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Years ended December 31,                                          1999             1998             1997
--------------------------------------------------------------------------------------------------------
<S>                                                      <C>              <C>              <C>
Capital stock:
   Balance at beginning of year                          $      19,978    $      19,978    $      19,971
   Shares issued through exercise of Employee Stock
     Options: 14,210 shares                                         --               --                7
--------------------------------------------------------------------------------------------------------
   Balance at end of year                                       19,978           19,978           19,978
========================================================================================================
Surplus:
   Balance at beginning of year                             23,879,363       23,879,363       23,734,646
   Excess over par value on shares issued through the
     exercise of Employee Stock Options                             --               --          144,717
--------------------------------------------------------------------------------------------------------
   Balance at end of year                                   23,879,363       23,879,363       23,879,363
========================================================================================================
Undivided profits:
   Balance at beginning of year                             86,304,445       80,016,764       72,915,689
   Net income                                               19,016,942       15,902,163       14,562,158
   Cash dividends paid                                      (8,674,559)      (7,784,505)      (7,332,066)
   Common stock issued from treasury stock                  (1,634,718)      (1,829,977)        (129,017)
--------------------------------------------------------------------------------------------------------
   Balance at end of year                                   95,012,110       86,304,445       80,016,764
========================================================================================================
Treasury stock:
   Balance at beginning of year                             (6,301,081)      (6,665,520)        (552,910)
   Repurchase of 498,200, 168,086 and 613,300
     shares of common stock in 1999, 1998
     and 1997, respectively                                 (8,541,056)      (3,066,508)      (6,492,331)
   Issuance of 123,054, 322,170 and 49,762 shares of
     common stock in 1999, 1998 and 1997, respectively       2,271,504        3,430,947          379,721
--------------------------------------------------------------------------------------------------------
   Balance at end of year                                  (12,570,633)      (6,301,081)      (6,665,520)
========================================================================================================
Accumulated other comprehensive income:
Net unrealized (depreciation) appreciation on
   securities available for sale, net of tax effect:
   Balance at beginning of year                              9,075,500        8,943,812        7,418,236
   Changes during the year                                 (16,208,381)         131,688        1,525,576
--------------------------------------------------------------------------------------------------------
   Balance at end of year                                   (7,132,881)       9,075,500        8,943,812
========================================================================================================
Stockholders' equity:

   Balance at beginning of year                            112,978,205      106,194,397      103,535,632
   Changes during the year, net                            (13,770,268)       6,783,808        2,658,765
--------------------------------------------------------------------------------------------------------
   Balance at end of year                                $  99,207,937    $ 112,978,205    $ 106,194,397
========================================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       19
<PAGE>

                           Merchants New York Bancorp

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Years ended December 31,                                           1999             1998             1997
---------------------------------------------------------------------------------------------------------
<S>                                                       <C>              <C>              <C>
Operating activities:
   Net income                                             $  19,016,942    $  15,902,163    $  14,562,158
---------------------------------------------------------------------------------------------------------
   Adjustments  to  reconcile  net  income  to net
     cash  provided  by  operating activities:
       Depreciation                                           1,087,864        1,171,559        1,043,804
       Amortization of premium, net of discounts              4,752,285        7,571,911        6,009,043
       Provision for loan losses                              1,915,000        1,425,000        1,700,000
       Gains on sales                                           (93,381)         (61,272)         (21,901)
       Increase (decrease) in unearned discounts                 11,203          (47,668)          37,737
       Decrease (increase) in other assets                    1,396,589         (536,718)        (476,836)
       Increase in other liabilities                            575,951          820,837        2,303,806
---------------------------------------------------------------------------------------------------------
       Net cash provided by operating activities             28,662,453       26,245,812       25,157,811
---------------------------------------------------------------------------------------------------------
Investing activities:
   Net (increase) decrease in Federal funds sold            (45,000,000)      62,000,000      (41,000,000)
   Proceeds from redemptions of securities
     available for sale                                     164,087,779      177,378,297      121,563,684
   Proceeds from sales of securities available for sale      22,015,000       18,927,089       10,175,000
   Purchase of securities available for sale               (224,133,088)    (350,346,260)    (149,596,774)
   Proceeds from redemptions of
     securities held to maturity                             50,377,145       53,949,290       34,826,437
   Purchase of securities held to maturity                  (33,971,564)      (8,653,389)     (50,687,265)
   Net increase in customer loans                           (76,116,614)     (29,535,428)     (35,914,547)
   Net increase in bank premises and equipment                 (257,442)        (828,321)      (1,099,699)
---------------------------------------------------------------------------------------------------------
       Net cash used in investing activities               (142,998,784)     (77,108,722)    (111,733,164)
---------------------------------------------------------------------------------------------------------
Financing activities:
   Net increase in demand deposits, NOW,
     savings and money market accounts                       66,898,327       32,524,865       15,871,574
   Net (decrease) increase in certificates of deposit       (42,243,411)      (2,288,498)      12,521,941
   Net increase in securities sold under
     repurchase agreements                                   25,000,000               --       40,000,000
   Net increase in FHLB advances                             60,000,000       25,000,000       20,000,000
   Net increase (decrease) in other
     short-term borrowings                                   15,765,181       (7,897,404)       4,980,684
   Proceeds from issuance of common stock                       636,786        1,600,970          395,428
   Purchase of treasury stock                                (8,541,056)      (3,066,508)      (6,492,331)
   Dividends paid                                            (8,674,559)      (7,784,505)      (7,332,066)
---------------------------------------------------------------------------------------------------------
       Net cash provided by financing activities            108,841,268       38,088,920       79,945,230
---------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents                    (5,495,063)     (12,773,990)      (6,630,123)
Cash and cash equivalents at beginning of the year           38,435,946       51,209,936       57,840,059
---------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of the year              $  32,940,883    $  38,435,946    $  51,209,936
=========================================================================================================
Supplemental disclosure of cash flow information:
       Interest paid                                      $  40,758,464    $  41,071,132    $  38,923,995
       Taxes paid                                             9,299,614        8,395,784        7,358,778
=========================================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       20
<PAGE>

                           Merchants New York Bancorp

                             NOTES TO CONSOLIDATED
                              FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial reporting and accounting policies of Merchants New York Bancorp
(the "Company") conform to generally accepted accounting principles. The
following is a summary of the significant accounting policies.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, The Merchants Bank of New York (the "Bank"), and
the Bank's wholly-owned subsidiaries, MBNY Holdings Corporation and its
subsidiary, Merchants Capital Corporation and Merchants New York Commercial
Corporation. The Company is a bank holding company, organized under the laws of
the state of Delaware. On July 1, 1993, the Company acquired all of the
outstanding capital stock of the Bank. All material intercompany accounts and
transactions have been eliminated in consolidation.

The Bank's principal business consists of attracting deposits from the general
public and employing these deposits by originating commercial loans. Together
with these funds and funds from ongoing operations and borrowings, the Bank also
invests in U.S. Government and agency obligations and other investment
securities. The Bank, which is the wholly-owned subsidiary of the Company,
operates as a commercial bank.

In preparing the consolidated financial statements, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Investment Securities

Securities are classified as available for sale or held to maturity. The Bank
does not maintain a trading account. Securities for which the Bank has the
ability and intent to hold to maturity are so classified. All other securities
are classified as available for sale.

Securities classified as held to maturity are carried at cost adjusted for
amortization of premium or accretion of discount. Securities classified as
available for sale are reported at estimated current market prices with the
difference between market value and amortized cost reflected in the equity
section of the statement of condition as an unrealized gain or loss, net of
applicable taxes, until such time as they are sold. Premiums and discounts are
amortized or accreted to interest income on a level yield basis, over the
expected term of the debt security. Realized gains and losses on sales of
securities are determined based on the amortized cost of the specific securities
sold. Unrealized losses on securities would be charged to earnings if management
determines that the decline in the market value of a security was other than
temporary. Actual gains and losses from the sales of securities are computed on
a specific identified basis and are included in other income.

Loans

Loans are reported at principal amount outstanding, net of unearned discounts.
Interest on loans is accrued to income monthly based on outstanding principal
balances. When management considers the collection of previously accrued but
unpaid interest to be doubtful, such interest is reversed by charging interest
income in the current period. Interest payments received on non-accrual loans,
including impaired loans under Statement of Financial Accounting Standards,
("SFAS") No. 114, "Accounting by Creditors for Impairment of a Loan," are
recognized as interest income unless future collections are doubtful. A loan
remains on non-accrual status until the factors that indicated doubtful
collectibility no longer exist or until a loan is determined to be uncollectible
and is charged off against the allowance for loan losses.

Allowance for Loan Losses

The allowance for loan losses is increased by a provision charged to operations
and decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Bank's historical
loan loss experience, a review of non-performing loans and related collateral
values, an estimate of the possibility of loss in view of industry
concentrations and other portfolio risk characteristics, the present financial
condition of borrowers and current economic conditions. While management uses
the best


                                       21
<PAGE>

                           Merchants New York Bancorp

information available to estimate loan losses, future adjustments to the
allowance may be necessary based on changes in economic conditions, further
information obtained regarding known problem loans, the identification of
additional problem loans and other factors. In management's judgement, the
allowance for loan losses is adequate to absorb probable losses in the existing
portfolio.

SFAS No. 114, as amended by SFAS No. 118, addresses the accounting for impaired
loans. A loan is considered impaired when, based on current information and
events, it is probable that a creditor will be unable to collect principal or
interest due according to the contractual terms of the loan. Impaired loans are
measured and reported based on one of three methods: the present value of the
expected future cash flows discounted at the loan's effective interest rate; the
loan's observable market price; or the fair value of the collateral if the loan
is collateral dependent. If the measure is less than the impaired loan's
recorded investment, an impairment loss is recognized as part of the allowance
for loan losses.

Bank Premises and Equipment

Bank premises and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed on the straight-line method over the shorter of the
estimated useful lives of the related assets or the lease term. Maintenance and
repair costs are expensed as incurred.

Income Taxes

The Bank utilizes the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred income taxes are recognized for
the tax consequences of temporary differences by applying enacted statutory tax
rates applicable to future years to differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities. The
realization of deferred tax assets are assessed and a valuation allowance
provided for the portion of the asset that is unlikely to be realized.

Earnings Per Share

Under SFAS No. 128, the Company is required to present both basic and diluted
earnings per share ("EPS"). Basic EPS is computed by dividing income available
to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if contracts to issue common stock (such as the Company's stock
options) were exercised, which would result in the issuance of common stock that
then would share in the earnings of the Company.

The weighted average number of shares of common stock used in the computation of
basic earnings per share for the years ended December 31, 1999, 1998 and 1997
were 19,292,940 shares, 19,423,062 shares and 19,587,826 shares, respectively.
The weighted average number of shares of common stock, used in the computation
of diluted earnings per share for the years ended December 31, 1999, 1998 and
1997 were 19,428,251 shares, 19,714,962 shares and 19,914,380 shares,
respectively.

On August 17, 1999, the Company's Board of Directors declared a 2-for-1 stock
split for all shares, with an effective date of October 1, 1999. All shares and
per share amounts in prior years have been restated in these financial
statements to reflect the split.

Stock Options

The Company accounts for stock options in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." Accordingly, compensation expense is recognized only if the fair
value of the underlying stock at the grant date exceeds the exercise price of
the option. SFAS No. 123, "Accounting for Stock-Based Compensation," encourages
entities to recognize the fair value of all stock-based awards on the date of
grant as an expense over the vesting period. Alternatively, SFAS No. 123 allows
entities to continue to apply the provisions of APB No. 25 and provide pro forma
disclosure of net income and net income per share as if the fair value based
method defined in SFAS No. 123 had been applied to employee stock options
granted in 1995 and later years.


                                       22
<PAGE>

                           Merchants New York Bancorp

Reclassifications

Certain reclassifications have been made to the 1998 and 1997 financial
statements to conform to the 1999 presentation.

NOTE 2 -- CASH AND DUE FROM BANKS

The Bank is required to maintain average reserves on deposit with the Federal
Reserve Bank of New York against outstanding domestic deposit liabilities. The
reserves maintained, which are reported in cash and due from banks, were
approximately $8.4 million and $12.5 million at December 31, 1999 and 1998,
respectively. Average required reserves during 1999 and 1998 were approximately
$8.4 million and $12.4 million, respectively. Average balances (in the form of
noninterest-bearing deposits with banks) of approximately $4.7 million and $5.9
million were maintained as compensating balances for services provided by
correspondent banks for the years ended December 31, 1999 and 1998,
respectively.

NOTE 3 -- SECURITIES AVAILABLE FOR SALE

The book values and estimated market values for investment securities available
for sale at December 31, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                       Gross         Gross       Estimated
                                          Book    Unrealized    Unrealized          Market
1999                                     Value         Gains        Losses           Value
------------------------------------------------------------------------------------------
<S>                                   <C>          <C>           <C>              <C>
(In thousands)
U.S. Government obligations(1)        $190,828     $  3,160      $ (3,911)        $190,077
U.S. Agency obligations (2)            246,006        1,852        (2,209)         245,649
Obligations of State and
   Political subdivisions               27,729          165        (1,178)          26,716
Collateralized mortgage obligations    127,105           65        (6,727)         120,443
Other securities                        71,047           --        (4,000)          67,047
------------------------------------------------------------------------------------------
Total                                 $662,715     $  5,242      $(18,025)        $649,932
==========================================================================================

<CAPTION>
                                                       Gross         Gross       Estimated
                                          Book    Unrealized    Unrealized          Market
1999                                     Value         Gains        Losses           Value
------------------------------------------------------------------------------------------
<S>                                   <C>          <C>            <C>             <C>
(In thousands)
U.S. Government obligations(1)        $205,802     $  8,131       $   (70)        $213,863
U.S. Agency obligations (2)            278,491        5,561           (49)         284,003
Obligations of State and
   Political subdivisions               28,435        1,052          (141)          29,346
Collateralized mortgage obligations    110,500           10           (61)         110,449
Other securities                        22,346           19            --           22,365
------------------------------------------------------------------------------------------
Total                                 $645,574     $ 14,773       $  (321)        $660,026
==========================================================================================
</TABLE>

(1)   U.S. Government obligations include U.S. Treasury Notes and Government
      National Mortgage Association (GNMA) mortgage-backed securities.

(2)   U.S. Agency obligations consist of mortgage-backed securities, including
      Federal National Mortgage Association (FNMA) and Federal Home Loan
      Mortgage Corporation (FHLMC) securities.

Proceeds from sales of available-for-sale investment securities were $22.0
million, $18.9 million and $10.2 million with gross gains of $93,000, $61,000
and $22,000 during 1999, 1998 and 1997, respectively.

The combined unrealized gains and (losses) before taxes on available-for-sale
securities was $(12.8) million, with $5.7 million in taxes at December 31, 1999
compared to $14.5 million, with $5.4 million in taxes at December 31, 1998.
Changes in unrealized holding gains and losses resulted in an after-tax increase
(decrease) in stockholders' equity of $(16.2) million, $132,000 and $1.5 million
during fiscal 1999, 1998 and 1997, respectively. These gains and losses will
continue to fluctuate based on changes in the portfolio and market conditions.


                                       23
<PAGE>

                           Merchants New York Bancorp

The amortized cost and estimated market value of the Bank's available-for-sale
investment securities at December 31, 1999 and 1998 are presented in the
following table, based upon their maturity dates. The aging of mortgage-backed
U.S. Agency securities is based on their weighted average maturities. The
expected maturities can differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without penalties.

<TABLE>
<CAPTION>
                                                         1999                              1998
                                               ---------------------------------------------------------------
                                                       Estimated    Average               Estimated    Average
                                                Book      Market   Weighted        Book      Market   Weighted
                                               Value       Value     Yield*       Value       Value     Yield*
--------------------------------------------------------------------------------------------------------------
<S>                                         <C>         <C>            <C>     <C>         <C>            <C>
(Dollars in thousands)
Due in one year or less                     $283,906    $284,864       7.83%   $215,751    $224,650       7.81%
Due after one year through five years        304,682     297,711       7.32     363,450     368,388       7.49
Due after five years through ten years        23,315      22,045       6.15      23,521      23,721       6.33
Due after ten years                           50,812      45,312       6.32      42,852      43,267       6.24
--------------------------------------------------------------------------------------------------------------
Total                                       $662,715    $649,932       7.09%   $645,574    $660,026       7.52%
==============================================================================================================
</TABLE>

*     Average weighted yield not tax adjusted.

Available-for-sale investment securities with a market value of $287.7 million
at December 31, 1999 and $175.3 million at December 31, 1998 were pledged to
secure securities sold under repurchase agreements and for other purposes
required or permitted by law.

NOTE 4 -- INVESTMENT SECURITIES HELD TO MATURITY

The book values and estimated market values of investment securities held to
maturity at December 31, 1999 and 1998 are listed below.

<TABLE>
<CAPTION>
                                                       Gross         Gross   Estimated
                                          Book    Unrealized    Unrealized      Market
1999                                     Value         Gains        Losses       Value
--------------------------------------------------------------------------------------
<S>                                   <C>            <C>           <C>        <C>
(In thousands)
U.S. Government obligations (1)       $ 55,921       $  894        $(1,324)   $ 55,491
U.S. Agency obligations (2)             58,715          725           (885)     58,555
Obligations of State and
   Political subdivisions               59,491          524         (1,540)     58,475
Other                                   23,861           --         (1,213)     22,648
--------------------------------------------------------------------------------------
Total                                 $197,988       $2,143        $(4,962)   $195,169
======================================================================================

<CAPTION>
                                                       Gross         Gross   Estimated
                                          Book    Unrealized    Unrealized      Market
1999                                     Value         Gains        Losses       Value
--------------------------------------------------------------------------------------
<S>                                  <C>             <C>             <C>     <C>
(In thousands)
U.S. Government obligations (1)      $  42,889       $1,322          $  --   $  44,211
U.S. Agency obligations (2)             66,613        1,542             --      68,155
Obligations of State and
   Political subdivisions               59,813        2,442            (11)     62,244
Other                                   28,848           --            (29)     28,819
--------------------------------------------------------------------------------------
Total                                 $198,163       $5,306           $(40)   $203,429
======================================================================================
</TABLE>

(1)   U.S. Government obligations includes U.S. Treasury Notes and fixed rate
      GNMA mortgage-backed securities.

(2)   U.S. Agency obligations consists of fixed rate mortgage-backed securities,
      including FNMA and FHLMC securities.


                                       24
<PAGE>

                           Merchants New York Bancorp

The amortized cost and estimated market value of the Bank's securities held to
maturity at December 31, 1999 and 1998 are presented in the following table
based upon their maturity dates. The aging of mortgage-backed U.S. Agency
securities is based on their weighted average maturities. The expected
maturities can differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without penalties.

<TABLE>
<CAPTION>
                                                        1999                                 1998
                                           --------------------------------------------------------------------
                                                        Estimated   Average                Estimated    Average
                                               Book      Market     Weighted       Book      Market    Weighted
                                              Value       Value      Yield*       Value      Value      Yield*
---------------------------------------------------------------------------------------------------------------
<S>                                         <C>         <C>            <C>      <C>         <C>            <C>
(Dollars in thousands)
Due in one year or less                     $ 64,221    $ 64,895       8.21%    $ 16,997    $ 17,303       7.05%
Due after one year through five years         88,585      86,334       6.91      142,883     146,136       7.58
Due after five years through ten years        19,696      19,730       5.09       17,045      17,974       5.08
Due after ten years                           25,486      24,210       4.95       21,238      22,016       4.99
---------------------------------------------------------------------------------------------------------------
Total                                       $197,988    $195,169       7.28%    $198,163    $203,429       7.22%
===============================================================================================================
</TABLE>

*     Average weighted yield not tax adjusted.

Held to maturity investment securities with a book value of $96.8 million and
$71.6 million at December 31, 1999 and 1998, respectively, were pledged to
secure securities sold under repurchase agreements and for other purposes
required or permitted by law.

Note 5 -- LOANS

Loans at December 31, 1999 and 1998 are comprised of the following:

                                                        1999               1998
-------------------------------------------------------------------------------
(In thousands)
Commercial loans                                   $ 417,509          $ 339,982
Mortgage loans                                        17,499             19,307
Installment loans                                      2,146              2,520
-------------------------------------------------------------------------------
                                                     437,154            361,809
Unearned discounts                                       (57)               (46)
-------------------------------------------------------------------------------
                                                     437,097            361,763
Allowance for loan losses                             (9,108)            (7,965)
-------------------------------------------------------------------------------
Total, net                                         $ 427,989          $ 353,798
===============================================================================

The changes in the allowance for loan losses for 1999, 1998 and 1997 are
summarized as follows:

                                               1999          1998          1997
-------------------------------------------------------------------------------
(In thousands)
Balance at beginning of year                $ 7,965       $ 6,167       $ 5,617
Provision for loan losses                     1,915         1,425         1,700
Charge-offs                                  (1,224)         (232)       (1,469)
Recoveries                                      452           605           319
-------------------------------------------------------------------------------
Balance at end of year                      $ 9,108       $ 7,965       $ 6,167
===============================================================================


                                       25
<PAGE>

                           Merchants New York Bancorp

Information concerning impaired loans as defined by SFAS Nos. 114 and 118 is
presented below:

For the years ended December 31,                                  1999      1998
--------------------------------------------------------------------------------
(In thousands)
Recorded investment in impaired loans at year end:
   Non-accrual loans                                              $428      $146
   Restructured loans*                                             292        --
================================================================================
Average recorded investment in impaired loans                     $456      $153
================================================================================
*     Included in non-accrual loan.

The Bank's impaired loans are only those identified as in a non-accrual status
for 90 days or more. Impaired is defined as "when, based on current information
and events, it is probable that a creditor will be unable to collect all amounts
due according to the contractual terms of the loan agreement." The amount of
interest income recognized on impaired loans was $57,000 for 1999 and $3,000 for
1998. The impact on interest income relating to impaired loans for both years is
not material. The allowance for loan losses contains an additional amount deemed
necessary to maintain it at levels considered adequate by management. It is the
Bank's policy to keep loans on non-accrual status until the principal and
interest is current or they are charged off.

Loans to officers and directors of the Bank or for the benefit of corporations
in which they have a beneficial interest are made in the ordinary course of
business and on substantially the same terms as those prevailing at the time for
comparable transactions with members of the general public, including interest
rates and collateral. Such loans did not involve more than the normal risk of
collectibility or present other unfavorable features. The following schedule
sets forth information with respect to such loans:

<TABLE>
<CAPTION>
                                                   Balance at                                           Balance at
                                                    Beginning                             Amounts           End of
                                  Borrower            of Year          Additions        Collected             Year
------------------------------------------------------------------------------------------------------------------
<S>                          <C>                      <C>                <C>              <C>              <C>
(In thousands)
1999                         Directors (4)            $12,333            $ 6,802          $11,072          $ 8,063
1998                         Directors (6)            $14,785            $11,266          $13,718          $12,333
1997                         Directors (8)            $10,952            $14,307          $10,474          $14,785
</TABLE>

There were no charge-offs of loans made to officers and directors in any of the
years in the three-year period ended December 31, 1999. Loans at December 31,
1999 bear interest rates of 6.88% to 8.75% and are partially secured. The
maturities applicable to outstanding loans at December 31, 1999 are $2.7 million
due within 90 days, which included $1.4 million in letters of credit, $0.7
million due in 120 days, $4.0 million due within one year and mortgages totaling
$0.7 million due in 2007, 2008 and 2009.


                                       26
<PAGE>

                           Merchants New York Bancorp

The following is a summary of the major  industry  concentrations  of the Bank's
commercial loan portfolio as of December 31, 1999:

         Wholesale jewelry                                        20%
         Jewelry manufacturing                                    11
         Miscellaneous manufacturing                               8
         Apparel & furs                                            7
         Non-durable goods                                         7
         Real Estate                                               7
         Home furnishings                                          5
         Textiles                                                  5
         Miscellaneous wholesalers                                 4
         Business & professional services                          4
         Private households                                        4
         Miscellaneous retail                                      4
         Non-depository institutions                               3
         Construction                                              2
         All others                                                9
         -----------------------------------------------------------
         Total                                                   100%
         ===========================================================

Substantially all of the Bank's loans are to borrowers located in the New York
metropolitan area.

Note 6 -- BANK PREMISES AND EQUIPMENT

Bank premises and equipment at December 31, 1999 and 1998 are comprised of the
following:

                                                            1999           1998
-------------------------------------------------------------------------------
(In thousands)
Bank premises and leasehold improvements                $ 10,734       $  9,418
Equipment                                                  4,663          5,730
-------------------------------------------------------------------------------
                                                          15,397         15,148
Accumulated depreciation                                  (9,404)        (8,439)
-------------------------------------------------------------------------------
Total, net                                              $  5,993       $  6,709
===============================================================================

Note 7 -- DEPOSITS

The following table sets forth the average deposits and average rates paid for
each of the most recent two fiscal years for the classifications of deposits
listed:

Years ended December 31,                 1999    Rate %          1998    Rate %
-------------------------------------------------------------------------------
(Dollars in thousands)
Deposits:

   Demand                            $277,710        --      $255,239       --
   NOW                                 48,896      1.93%       44,609     2.24%
   Savings                             27,757      2.98        25,476     2.98
   Money market                       173,011      3.49       145,660     3.38
   Time                               385,873      4.76       416,286     5.27
-------------------------------------------------------------------------------
Total                                $913,247                $887,270
===============================================================================


                                       27
<PAGE>

                           Merchants New York Bancorp

Note 8 -- SECURITIES SOLD UNDER REPURCHASE AGREEMENTS AND
          OTHER SHORT-TERM BORROWINGS

The Bank enters into sales of U.S. Agency, GNMA and Treasury securities under
repurchase agreements. Repurchase agreements are treated as financing
arrangements and the obligations to repurchase securities sold are reflected as
a liability on the consolidated statements of condition. The carrying value of
the investment securities underlying the agreements remain in the asset account.
All of the repurchase agreements were agreements to repurchase substantially
identical securities. The investment securities underlying the agreements were
transferred to the dealers who arranged the transactions. The dealer may have
sold, loaned or otherwise disposed of such securities to other parties in the
normal course of its operations, and has agreed to resell to the Bank
substantially identical securities at the maturities of the agreements.
Information concerning securities sold under repurchase agreements is presented
below:

<TABLE>
<CAPTION>
                                                                     Accrued     Fair Value    Weighted
                                                                    Interest  of Collateral     Average
                                                         Amount   Payable(1)  Securities(2)        Rate
-------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>          <C>             <C>
(Dollars in thousands)
Securities Sold Under Repurchase Agreements            $185,000       $2,736       $207,741        5.73%
-------------------------------------------------------------------------------------------------------
</TABLE>
(1)   Included in Other liabilities in the Consolidated Statements of Condition.

(2)   Represents the fair value of the mortgage-backed securities which were
      transferred to the counterparty, including accrued interest receivable of
      $1.2 million. These securities consist of available-for-sale securities
      and held-to-maturity securities with book values of $131.7 million and $61
      million, respectively.

Federal Home Loan Bank and U.S. Treasury Demand Notes

As a member of the Federal Home Loan Bank (FHLB), the Bank can have outstanding
FHLB advances of up to 20 times of the Bank's purchased FHLB stock or
approximately $210 million at December 31, 1999, in a combination of term
advances and overnight funds. The Bank's unused FHLB borrowing capacity was
approximately $115 million at December 31, 1999. Borrowings are secured by the
Bank's investment in FHLB stock and by a blanket security agreement. This
agreement requires the Bank to maintain as collateral qualifying assets (U.S.
Agency mortgage-backed securities) not otherwise pledged.

The U.S. Treasury, from time-to-time, issues demand notes, which make funds
available on a short-term basis (generally less than 30 days) to qualifying
institutions, at interest rates slightly lower than Federal Funds rates. The
Bank must keep an equivalent amount of qualifying securities as collateral at
The Federal Reserve Bank, based on the Bank's approved borrowing limit.

<TABLE>
<CAPTION>
                                                           1999                          1998
                                                   ---------------------------------------------------
                                                                Weighted                    Weighted
                                                   Amount     Average Rate       Amount   Average Rate
------------------------------------------------------------------------------------------------------
<S>                                              <C>              <C>           <C>             <C>
(Dollars in thousands)
Federal Home Loan advances                       $105,000         6.33%         $45,000         5.44%
U.S. Treasury demand notes                         20,000         4.75%           4,031         4.23%
Other                                                  48           --              251           --
------------------------------------------------------------------------------------------------------
Total other short-term borrowings                $125,048                       $49,282
======================================================================================================
</TABLE>

Note 9 -- INCOME TAXES

The components of income tax expense (benefit) for the years ended December 31,
1999, 1998 and 1997 are as follows:

                                             1999           1998           1997
--------------------------------------------------------------------------------
(In thousands)
Current:
   Federal                                $ 9,285        $ 7,540        $ 6,104
   State and local                            315            630          1,148
--------------------------------------------------------------------------------
     Total current                          9,600          8,170          7,252
--------------------------------------------------------------------------------
Deferred:
   Federal                                    (85)          (104)           (59)
   State and local                             --             66            (38)
--------------------------------------------------------------------------------
     Total deferred                           (85)           (38)           (97)
--------------------------------------------------------------------------------
     Total tax expense                    $ 9,515        $ 8,132        $ 7,155
================================================================================


                                       28
<PAGE>

                           Merchants New York Bancorp

The following is a reconciliation between the "expected" Federal income tax
computed at the statutory rate and actual tax expense reflected in the financial
statements.

<TABLE>
<CAPTION>
                                                  1999                      1998                     1997
----------------------------------------------------------------------------------------------------------------
                                                        % of                      % of                      % of
                                                      Pretax                    Pretax                    Pretax
                                           Amount     Income         Amount     Income        Amount      Income
----------------------------------------------------------------------------------------------------------------
<S>                                       <C>             <C>       <C>           <C>        <C>            <C>
(Dollars in thousands)
Federal income tax computed
   at statutory rate                      $ 9,986         35.0%     $ 8,412       35.0%      $ 7,601        35.0%
State and city income taxes, net
   of Federal income tax benefit              205          0.7          452        1.9           721         3.3
Federal income tax benefit
   resulting from interest
   on tax-exempt obligations               (1,471)        (5.2)      (1,510)      (6.3)       (1,416)       (6.5)
Other                                         795          2.8          778        3.2           249         1.1
----------------------------------------------------------------------------------------------------------------
Total tax/effective rate                  $ 9,515         33.3%     $ 8,132       33.8%      $ 7,155        32.9%
================================================================================================================
</TABLE>

The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities are presented below:

                                                               1999        1998
-------------------------------------------------------------------------------
(In thousands)
Deferred tax assets:
Allowance for possible loan losses                          $ 3,188     $ 2,788
Unrealized loss on investments available for sale             5,650          --
Other                                                           290         249
-------------------------------------------------------------------------------
Total gross deferred tax assets                               9,128       3,037
Less: valuation reserve                                       3,188       2,788
-------------------------------------------------------------------------------
Net deferred tax asset                                        5,940         249
-------------------------------------------------------------------------------
Deferred tax liabilities:
Depreciation                                                     --         (33)
Unamortized bond premium                                         --         (12)
Unrealized gain on investments available for sale                --      (5,377)
-------------------------------------------------------------------------------
Total gross deferred tax liabilities                             --      (5,422)
-------------------------------------------------------------------------------
   Net deferred tax assets (liabilities)                    $ 5,940     $(5,173)
===============================================================================

Given the subjective nature of recoverability of the deferred tax asset, a 100%
valuation allowance for the deferred tax asset related to the allowance for loan
losses was established relative to this item in 1999 and 1998.

Note 10 -- EMPLOYEE BENEFIT PLAN

Pension Plan

The Bank's retirement plan (the "Plan") covers all employees who have attained
the age of 21 and have completed one year of service with the Bank.

In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." The new statement revises the
required disclosures for employee benefit plans, but does not change the
measurement or recognition of such plans. SFAS No. 132 standardizes certain
disclosures, requires additional information about changes in the benefit
obligations and about changes in the fair value of plan assets to facilitate
analysis, and eliminates certain disclosures that were not deemed useful.


                                       29
<PAGE>

                           Merchants New York Bancorp

The changes in benefit obligations for 1999 and 1998 are summarized as follows:

                                                            1999           1998
-------------------------------------------------------------------------------
(In thousands)
Benefit obligation at beginning of year                 $ 11,048       $ 10,600
Service cost                                                 428            451
Interest cost                                                795            752
Actuarial (gain)/loss                                       (150)          (391)
Benefits paid                                               (481)          (364)
-------------------------------------------------------------------------------
Benefit obligations at end of year                      $ 11,640       $ 11,048
===============================================================================

The changes in fair value of plan assets for 1999 and 1998 are summarized as
follows:

                                                            1999           1998
-------------------------------------------------------------------------------
(In thousands)
Fair value of plan assets at beginning of year           $ 10,662      $ 10,090
Actual return on plan assets                                  265           298
Employer contribution                                         550           638
Benefits paid                                                (481)         (364)
-------------------------------------------------------------------------------
Fair value of plan assets at end of year                 $ 10,996      $ 10,662
===============================================================================

The following table sets forth the Plan's funded status and amounts recognized
at December 31, 1999 and 1998:

                                                            1999           1998
-------------------------------------------------------------------------------
(In thousands)
Funded status                                           $  (644)        $  (386)
Unrecognized transition obligation                       (1,096)         (1,187)
Unrecognized prior service cost                             (22)            (24)
Unrecognized net loss                                     2,440           2,041
-------------------------------------------------------------------------------
Prepaid pension asset                                   $   678         $   444
===============================================================================

Net periodic Pension costs for the years ended December 31, 1999, 1998 and 1997
are comprised of the following:

                                                      1999      1998      1997
-------------------------------------------------------------------------------
(Dollars in thousands)
Service cost                                         $ 428     $ 451     $ 451
Interest cost                                          795       752       679
Expected return on market-related value of assets     (856)     (776)     (710)
Amortization of:
   Unrecognized net obligations                        (91)      (91)      (91)
   Unrecognized net loss                                41        60        53
   Unrecognized prior service cost                      (2)       (2)       (2)
-------------------------------------------------------------------------------
Net cost                                             $ 315     $ 394     $ 380
===============================================================================
Weighted average actuarial assumptions:
   Discount rate                                      7.50%     7.50%     7.50%
   Salary increases                                   4.00%     4.00%     4.00%
   Expected long-term rate of return                  8.00%     8.00%     8.00%


                                       30
<PAGE>

                           Merchants New York Bancorp

The Bank adopted a non-qualified Directors retirement plan, effective February
1997. The projected benefit obligations at December 31, 1999 and 1998 were
approximately $1.9 million and $1.7 million, computed with a 7% discount rate.
An expense of $449,000, $460,000 and $280,000 has been recognized for the Plan
in the years ended December 31, 1999, 1998 and 1997, respectively.

In addition, the Bank provides a supplemental retirement contract for key senior
executives, with a projected benefit obligation of about $6.3 million and $5.4
million as of December 31, 1999 and 1998, respectively. These benefits are
partially covered through insurance policies with current values of $2.3
million. An additional pension expense of $800,000, $240,000 and $180,000 was
recognized in the years ended December 31, 1999, 1998 and 1997, respectively.
These retirement benefits are in addition to those offered by the Plan and those
for the Bank's Board of Directors members.

401(k) Savings Plan

Effective January 1, 1997, the Bank implemented a defined contribution plan that
is intended to qualify under Section 401(k) of the Internal Revenue Code.
Contributions began on May 1, 1997. The 401(k) plan covers substantially all
employees, who have been employed six months by the Bank. In 1999, an employee
may contribute up to 15% of their salary, not to exceed $10,000. The Bank has
elected not to match the employees' contribution.

Stock Option Plan

The Employees Stock Option Plan of The Merchants Bank of New York (the "Option
Plan") is set up as an incentive for performance and to encourage the continued
employment of existing key employees. The Company reserves common stock for the
future exercise of the options granted. The options expire ten years after the
date of grant and are exercisable after one year.

The shares of stock authorized for the Option Plan to be granted as stock
options were 180,000 shares in 1986, 750,000 shares in 1987 and 800,000 shares
in 1993. There were 46,500 shares granted in 1998 and no shares were granted in
1999. The basis used to establish the exercise price for the options granted
under the Option Plan was the price of the Company's stock on NASDAQon the date
of issue of the options.

The Company implemented SFAS No. 123 during 1996. As discussed in Note 1, the
Company applies APB Opinion No. 25 and the related interpretations in accounting
for the Option Plan and, accordingly, no compensation cost has been recognized
for the Option Plan. The adoption of SFAS No. 123 would not have had a material
impact on the Bank's results of operations for 1999, 1998 and 1997.

The following chart summarizes information concerning options outstanding and
exercisable at December 31, 1999:

                                          Options Outstanding and Exercisable
                                          -------------------------------------
                                          Number of Shares       Remaining Life
Exercise price                                 Outstanding           (in years)
-------------------------------------------------------------------------------
  $ 4.94                                            90,896                    2
  $ 5.44                                            55,200                    2
  $16.38                                            10,000                    9
  $17.94                                            34,750                    9
-------------------------------------------------------------------------------
Total                                              190,846
===============================================================================


                                       31
<PAGE>

                           Merchants New York Bancorp

The following table presents the total options granted and outstanding to be
exercised:

                                            Shares Subject      Weighted Average
                                                 to Option        Exercise Price
--------------------------------------------------------------------------------

Outstanding at December 31, 1996                   669,252
Granted                                                 --
Exercised                                          (78,182)               $ 5.06
Forfeited                                               --                    --
--------------------------------------------------------------------------------
Outstanding at December 31, 1997                   591,070
Granted                                             46,500                $17.60
Exercised                                         (322,170)               $ 4.97
Forfeited                                               --                    --
--------------------------------------------------------------------------------
Outstanding at December 31, 1998                   315,400
Granted                                                 --
Exercised                                         (123,054)               $ 5.17
Forfeited                                           (1,500)               $17.94
--------------------------------------------------------------------------------
Outstanding at December 31, 1999                   190,846                $ 8.05
================================================================================

Note 11 -- STOCKHOLDERS' EQUITY

Regulatory Capital Requirements

FDIC regulations require banks to maintain a minimum leverage ratio of Tier 1
capital to total adjusted assets of 3.0% and minimum ratios of Tier 1 and total
capital to risk weighted assets of 4.0% and 8.0%, respectively.

The FDIC is required to take certain supervisory actions with respect to an
under capitalized bank. These actions could have a direct material effect on a
bank's financial statements. The regulations establish a framework for the
classification of banks into five categories: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and critically
undercapitalized. Generally, a bank is considered well capitalized if it has a
leverage 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%.

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 judgements by the FDIC about capital components, risk
weightings and other factors.

Management believes that as of December 31, 1999, the Bank meets all capital
adequacy requirements to which it is subject. Furthermore, the most recent FDIC
notification categorized the Bank as a well capitalized institution. 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 capital amounts and ratios as of
December 31, 1999 and 1998, compared to the FDIC minimum capital adequacy
requirements and the FDIC requirements for classification as a well capitalized
institution:

<TABLE>
<CAPTION>
                                                                   FDIC Requirements
                                            ----------------------------------------------------------------
                                                                    Minimum Capital      For Classification
                                                Actual                 Adequacy          As Well Capitalized
                                            ----------------------------------------------------------------
                                            Amount     Ratio      Amount     Ratio       Amount     Ratio
------------------------------------------------------------------------------------------------------------
<S>                                       <C>           <C>      <C>           <C>      <C>          <C>
(Dollars in thousands)
December 31, 1999
Leverage Capital                          $103,937       7.5%    $41,354       3.0%     $68,924       5.0%
Risk-Based Capital:
   Tier 1                                  103,937      14.9      27,940       4.0       41,910       6.0
   Total                                   112,670      16.1      55,881       8.0       69,851      10.0

December 31, 1998
Leverage Capital                          $103,545       7.9%    $39,271       3.0%     $65,452       5.0%
Risk-Based Capital:
   Tier 1                                  103,545      16.9      24,450       4.0       36,675       6.0
   Total                                   111,186      18.2      48,900       8.0       61,125      10.0
</TABLE>


                                       32
<PAGE>

                           Merchants New York Bancorp

Treasury Stock

On August 19, 1997, the Board authorized the repurchase of up to 5% of the
Bank's common stock, or 1,000,000 shares. This authorization is in addition to
the Board approving up to 5%, or approximately 1,000,000 shares, in 1996. The
Company has purchased 498,200 shares during 1999, with 168,086 shares having
been purchased in 1998. There were 123,054 shares and 322,170 shares reissued
from treasury stock for shares purchased through the stock option plan in 1999
and 1998, respectively.

Dividends

Dividends paid to common stockholders in 1999 totaled $8.7 million, or $0.45 per
share, a 13% increase over 1998. These dividends represented a 46% payout of net
income for 1999.

NOTE 12 -- COMPREHENSIVE INCOME

SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the
reporting and display of comprehensive income (and its components) in financial
statements. Comprehensive income represents net income and certain amounts
reported directly in equity, such as the net unrealized gain or loss of
available-for-sale securities. Below are the before tax and tax benefit
(expense) amounts of the accumulated other comprehensive income applicable for
the years December 31, 1999, 1998 and 1997.

As of December 31,                                  1999       1998        1997
-------------------------------------------------------------------------------
(In thousands)
Unrealized (depreciation) appreciation         $(12,783)   $ 14,452    $ 14,302
Tax benefit (expense)                             5,650      (5,377)     (5,358)
Net of tax amount                                (7,133)      9,075       8,944

NOTE 13 -- COMMITMENTS AND CONTINGENT LIABILITIES

In the normal course of business, there are various commitments and contingent
liabilities, which are properly not recorded on the balance sheet. Management
does not anticipate that losses, if any, as a result of these commitments and
contingent transactions would materially affect the liquidity, operating results
or financial condition of the Bank.

Unused variable rate loan commitments were approximately $14.8 million and $11.4
million for the years ended 1999 and 1998, respectively. These commitments, of
which about 35% will mature in less than one year, are agreements to lend up to
a certain amount to a customer as long as the conditions established in the
contract are met. Commitments generally have fixed expiration dates or
termination clauses and may require payment of a fee. The total commitments do
not necessarily represent future cash requirements because some of the
commitments are expected to expire without being drawn upon. The Bank evaluates
each customer's credit worthiness on a case-by-case basis. The amount of
collateral obtained if deemed necessary by the bank upon extension of credit is
based on management's risk evaluation of the borrower. Collateral held, if any,
may include cash, U.S. Treasury and other marketable securities, accounts
receivable, inventory and property, plant and equipment.

The Bank also issues conditional commitments to guarantee the performance of a
customer to a third party. The credit risk involved in issuing letters of credit
is essentially the same as that in extending loan facilities to customers. For
commercial letters of credit, approximately 95% will expire in less than one
year, usually in 60 to 90 days. Standby letters of credit are approximately 80%
collateralized with cash, cash equivalents or marketable securities. Likewise,
95% of these standby letters of credit will expire within one year, with the
balance generally within two years. About 60% are automatically renewable for
one year. The Bank also purchases and sells foreign currency as an accommodation
for customers. It is not traded for speculative purposes. The Bank's credit risk
for foreign currency would arise from the possibility of a significant downward
change in a country's currency and the failure of a counter party to perform.


                                       33
<PAGE>

                           Merchants New York Bancorp

Outstanding letters of credit, standby letters of credit, letters of guarantee
and foreign exchange contracts and their balances at December 31, 1999 and 1998
are:

                                                            1999            1998
--------------------------------------------------------------------------------
(In thousands)
Standby letters of credit                                $28,410         $65,278
Commercial letters of credit                              36,791          38,279
Steamship and air guarantees                               1,127           1,995
Foreign exchange:
   Forward contracts purchased                               242              --
   Forward contracts sold                                    242              --
   Spot transactions                                          86             332

The Bank contracted an additional lease for a new lending division at 275
Madison Avenue. The lease is effective until the year 2004.

As of December 31, 1999, the Bank was obligated under seven operating leases for
premises. Rental expense under the seven leases aggregated $1.50 million for
1999, $1.30 million for 1998 and $1.35 million for 1997. The minimum annual rent
under such leases for each of the years ending December 31, 2000 through the
year 2004 and thereafter is as follows (in thousands):

                  2000                                    $ 1,550
                  2001                                      1,637
                  2002                                      1,757
                  2003                                      1,809
                  2004                                      1,734
                  Thereafter                               22,782
                  -----------------------------------------------
                  Total                                   $31,269
                  ===============================================

There are various claims pending against the Bank. In the opinion of management,
after discussion with counsel, liabilities, if any, arising from such claims
will not have a material effect on the Bank's liquidity, operating results or
financial condition.

NOTE 14 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

The following is a summary of the carrying values and estimated fair value of
the Company's financial instruments:

<TABLE>
<CAPTION>
                                                               1999                                1998
                                                    ---------------------------------------------------------------
                                                     Carrying        Estimated           Carrying        Estimated
As of December 31,                                      Value        Fair Value             Value        Fair Value
-------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>               <C>              <C>
(In thousands)
Financial assets:
   Cash and due from banks                          $ 32,941         $ 32,941          $ 38,436         $ 38,436
   Federal funds sold                                 50,000           50,000             5,000            5,000
   Securities available for sale                     649,932          649,932           660,026          660,026
   Securities held to maturity                       197,988          195,169           198,163          203,429
   Loans, net of allowance                           427,989          427,989           353,799          353,799

Financial liabilities:
   Demand, NOW, savings and
     money market deposits                           584,353          584,353           517,454          517,454
   Time deposits                                     374,625          374,751           416,869          417,095
   Repurchase agreements                             185,000          185,000           160,000          160,000
   FHLB term advances                                105,000          105,000            45,000           45,000
   Other short-term borrowings                        20,048           20,048             4,282            4,282
</TABLE>

SFAS No. 107 requires disclosures about the fair values of financial instruments
for which it is practicable to estimate fair value. Fair value is defined in
SFAS No. 107 as the amount at which a financial instrument


                                       34
<PAGE>

                           Merchants New York Bancorp

could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. Quoted market prices are used to estimate fair
values when those prices are available. However, active markets do not exist for
many types of financial instruments. Consequently, fair value for these
instruments must be estimated by management using techniques such as discounted
cash flow analysis and comparison to similar instruments. These estimates are
highly subjective and require judgements regarding significant matters such as
the amount and timing of future cash flows and the selection of discount rates
that appropriately reflect market and credit risks. Changes in these judgments
often have a material impact on the fair value estimates. In addition, since
these estimates are made as of a specific point in time, they are susceptible to
material near-term changes. Fair values disclosed in accordance with SFAS No.
107 do not reflect any premium or discount that could result from the sale of a
large volume of a particular financial instrument, nor do they reflect possible
tax ramifications or estimated transaction cost.

The following is a description of the principal valuation methods used by the
Company to estimate the fair value of its financial instruments.

Securities Available for Sale and Investment Securities

The fair value of securities available for sale and investment securities are
based on quoted market prices.

Loans

Substantially all loans include: (i) variable rate loans, where interest rate
changes are consistent with changes in the prime rate; and (ii) working capital
notes with maturities of less than six months. Accordingly, after consideration
of the allowance for loan loss, net loans are considered to have a fair value
equivalent to their carrying value.

Deposit Liabilities

In accordance with SFAS No. 107, the fair value of deposit liabilities with no
stated maturity (demand, NOW, savings and money market accounts) which are
payable on demand are equal to the carrying amounts. The fair values of time
deposits represent contractual cash flows discounted using interest rates
currently offered on deposits with similar characteristics and remaining
maturities.

As required by SFAS No. 107, these estimated fair values do not include the
intangible value of core deposit relationships which comprise a significant
portion of the Company's deposit base. Management believes that the Company's
core deposit relationships provide a relatively stable, low-cost funding source
which has a substantial intangible value separate from the deposit balances.

Other Financial Assets and Liabilities

Cash and due from banks, Federal funds sold, repurchase agreements, FHLB term
advances, and other short-term borrowings have fair values which approximate the
respective carrying values. These instruments are payable on demand or have
short-term maturities and present relatively low credit risk and interest rate
risk.

NOTE 15 -- RECENT ACCOUNTING PRONOUNCEMENTS

Accounting for Derivative Instruments and Hedge Activities

In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards for derivatives and hedging activities. It requires that all
derivatives be included as assets or liabilities in the balance sheet and that
such instruments be carried at fair market value through adjustments to either
other comprehensive income or current earnings or both, as appropriate. In June
1999, FASB issued SFAS No. 137 which deferred the effective date of SFAS No. 133
to fiscal years beginning after June 15, 2000. Management does not anticipate
that the adoption of this standard will have a material impact on the Company's
consolidated financial statement.

Accounting for the Disclosure about Segments of an Enterprise and Related
Information In June 1997, FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." Among other things, SFAS No. 131
requires public companies to report (i) certain financial and descriptive
information about their reportable operating segments (as defined), and (ii)
certain enterprise-wide financial information about products and services,
geographic areas and major customers. The required segment financial disclosures
include a measure of profit or loss, certain specific revenue and expense items,
and total assets in annual and interim financial statements. Management believes
that the Bank operates under one segment as defined by SFAS No. 131, and
additional disclosure is not required.


                                       35
<PAGE>

                           Merchants New York Bancorp

NOTE 16 -- PARENT COMPANY ONLY FINANCIAL INFORMATION

CONDENSED STATEMENTS OF CONDITION

December 31,                                                  1999         1998
-------------------------------------------------------------------------------
(In thousands)
Assets:
   Cash                                                  $       8    $      38
   Investment in subsidiary                                 99,925      113,040
-------------------------------------------------------------------------------
     Total assets                                        $  99,933    $ 113,078
===============================================================================
Liabilities:
     Total liabilities                                         725          100
Stockholders' equity:
     Total stockholders' equity                             99,208      112,978
-------------------------------------------------------------------------------
     Total liabilities and stockholders' equity          $  99,933    $ 113,078
===============================================================================

CONDENSED STATEMENTS OF INCOME

Years ended December 31,                                      1999         1998
-------------------------------------------------------------------------------
(In thousands)
Income:
   Dividends received from subsidiary                    $  15,925    $   8,984
   Equity in undistributed net income of subsidiary          3,092        6,918
   Management fees                                             793          508
-------------------------------------------------------------------------------
     Total income                                           19,810       16,410
-------------------------------------------------------------------------------
Expenses:
     Expenses                                                  793          508
-------------------------------------------------------------------------------
     Net income                                          $  19,017    $  15,902
===============================================================================

CONDENSED STATEMENTS OF CASH FLOWS

Years ended December 31,                                      1999         1998
-------------------------------------------------------------------------------
(In thousands)
Operating activities:
   Net income                                            $  19,017    $  15,902
Adjustments to reconcile net income to net
 cash provided by operating activities:
   Increase in other liabilities                               625          100
   Equity in undistributed net income of subsidiary         (3,092)      (6,918)
-------------------------------------------------------------------------------
     Net cash provided by operating activities              16,550        9,084
-------------------------------------------------------------------------------
Financing activities:
   Proceeds from issuance of common stock                      636        1,601
   Purchases of treasury stock                              (8,541)      (3,066)
   Dividends paid                                           (8,675)      (7,784)
-------------------------------------------------------------------------------
   Net cash used in financing activities                   (16,580)      (9,249)
-------------------------------------------------------------------------------
Net decrease in cash and cash equivalents                      (30)        (165)
Cash and cash equivalents at beginning of the year              38          203
-------------------------------------------------------------------------------
Cash and cash equivalents at end of the year             $       8    $      38
===============================================================================


                                       36
<PAGE>

                           Merchants New York Bancorp

The Merchants Bank of New York (the "Bank") became the wholly-owned subsidiary
of Merchants New York Bancorp Inc, (the "Company"), a Delaware holding company
on July 1, 1993. Each Bank stockholder became a stockholder of the Company,
which has authorized 40,000,000 shares of stock at a par value of $.001 per
share. Of the authorized shares, 19,978,664 shares have been issued as of
December 31, 1999 and 1998.

The earnings of the Bank are recognized by the Company using the equity method
of accounting. Accordingly, earnings of the Bank are recorded as increases in
the Company's investment in the Bank, with any dividends reducing this
investment.

NOTE 17 -- SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected quarterly financial data is presented below for the years ended
December 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                           First           Second            Third           Fourth
1999                                     Quarter          Quarter          Quarter          Quarter            Total
--------------------------------------------------------------------------------------------------------------------
<S>                                      <C>              <C>              <C>              <C>              <C>
(In thousands, except per share amounts)
Interest income                          $21,055          $21,626          $23,095          $24,509          $90,285
Net interest income                       11,733           12,584           13,064           13,288           50,669
Provision for loan losses                    200              400              615              700            1,915
Income before income tax                   6,400            7,487            7,964            6,681           28,532
Net income                                 4,210            4,963            5,501            4,343           19,017
Earnings per share, basic                   0.21             0.26             0.29             0.23             0.99
Earnings per share, diluted                 0.21             0.26             0.29             0.23             0.98

<CAPTION>
                                           First           Second            Third           Fourth
1999                                     Quarter          Quarter          Quarter          Quarter            Total
--------------------------------------------------------------------------------------------------------------------
<S>                                      <C>              <C>              <C>              <C>              <C>
(In thousands, except per share amounts)
Interest income                          $20,578          $20,643          $22,327          $22,720          $86,268
Net interest income                       11,078           10,815           11,506           11,996           45,395
Provision for loan losses                    400              200              150              675            1,425
Income before income tax                   5,730            6,319            7,175            4,810           24,034
Net income                                 3,687            4,226            4,748            3,241           15,902
Earnings per share, basic                   0.19             0.22             0.25             0.17             0.82
Earnings per share, diluted                 0.19             0.22             0.24             0.17             0.81
</TABLE>


                                       37
<PAGE>

                           Merchants New York Bancorp

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Merchants New York Bancorp:

We have audited the accompanying consolidated statements of condition of
Merchants New York Bancorp and subsidiary (the "Bank") as of December 31, 1999
and 1998, and the related statements of income and comprehensive income, changes
in stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1999. These consolidated financial statements are the
responsibility of the Bank'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 consolidated 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 Merchants New York
Bancorp and subsidiary as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999 in conformity with generally accepted accounting
principles.

KPMG LLP

New York, New York
January  24,   2000


                                       38
<PAGE>

                           Merchants New York Bancorp

                         AVERAGE ASSETS, LIABILITIES AND
                              STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                1999                      1998                     1997
-----------------------------------------------------------------------------------------------------------------
                                           Average                   Average                  Average
                                           Balance           %       Balance           %      Balance           %
-----------------------------------------------------------------------------------------------------------------
<S>                                     <C>              <C>      <C>              <C>     <C>              <C>
(Dollars in thousands)
Assets
Cash and due from banks                 $   41,334        3.16%   $   42,860        3.42%  $   49,587        4.19%
Federal funds sold                          13,356        1.02        16,184        1.29        8,373        0.71
Investment securities*:
   Available for sale                      617,410       47.26       602,383       48.11      590,342       49.88
   Held to maturity                        205,121       15.70       209,079       16.70      178,830       15.11
-----------------------------------------------------------------------------------------------------------------
Total                                      822,531       62.96       811,462       64.81      769,172       64.99
Loans (net of unearned discounts)          402,456          --       350,272          --      325,298          --
Less allowance for loan losses               8,351          --         6,954          --        6,247          --
-----------------------------------------------------------------------------------------------------------------
Total loans, net                           394,105       30.17       343,318       27.42      319,051       26.96
Bank premises and equipment                  6,386        0.49         6,795        0.55        6,897        0.58
Customers' liability on acceptances         14,871        1.14        16,737        1.34       15,588        1.32
Other assets                                13,841        1.06        14,638        1.17       14,812        1.25
-----------------------------------------------------------------------------------------------------------------
     Total assets                       $1,306,424         100%   $1,251,994         100%  $1,183,480         100%
=================================================================================================================
Liabilities and Stockholders' Equity
Deposits:
   Demand                               $  277,710       21.27%   $  255,239       20.39%  $  227,744       19.24%
   NOW                                      48,896        3.74        44,609        3.56       41,904        3.54
   Savings                                  27,757        2.12        25,476        2.03       24,277        2.05
   Money market                            173,011       13.24       145,660       11.63      141,671       11.97
   Time                                    385,873       29.54       416,286       33.25      416,221       35.17
-----------------------------------------------------------------------------------------------------------------
     Total deposits                        913,247          --       887,270          --      851,817          --
Securities sold under
   repurchase agreements                   170,548       13.05       166,315       13.28      166,294       14.05
FHLB term advance                           69,096        5.29        35,890        2.87        7,452        0.63
Acceptances outstanding                     14,871        1.14        16,737        1.34       15,588        1.32
Other short-term borrowings                 12,183        0.93        14,544        1.16       18,229        1.54
Other liabilities                           16,664        1.27        20,378        1.63       18,712        1.58
-----------------------------------------------------------------------------------------------------------------
     Total liabilities                   1,196,609          --     1,141,134          --    1,078,092          --
Stockholders' Equity
Capital stock                                   13          --            10          --            6          --
Surplus                                     23,887        1.83        23,897        1.91       23,829        2.01
Undivided profits                           91,076        6.97        84,050        6.71       77,394        6.54
Less: Treasury stock                         9,433        0.72         6,498        0.51        3,548        0.29
Net unrealized appreciation on
   securities available for sale, net        4,272        0.33         9,401        0.75        7,707        0.65
-----------------------------------------------------------------------------------------------------------------
     Total stockholders' equity            109,815          --       110,860          --      105,388          --
-----------------------------------------------------------------------------------------------------------------
     Total liabilities and
       stockholders' equity             $1,306,424         100%   $1,251,994         100%  $1,183,480         100%
=================================================================================================================
</TABLE>

*     The averages for available-for-sale securities are disclosed at estimated
      market value, with securities held to maturity at book value.


                                       39
<PAGE>

                         THE MERCHANTS BANK OF NEW YORK

LENDING DIVISION
Chief Credit Officer
Stephen A. Barrow
Executive Vice President

Division Heads
Leonard S. Levine
Janet L. Markel
Senior Vice Presidents

Group Managers
Michael D. Altman
Senior Vice President

Gerald H. Attanasio
Andrew S. Baron
Brian M. Cardew
James K. Moore
Lester Nadel
Kenneth J. Satchwill
Vice Presidents

Vice Presidents
Salvatore J. Chiarelli
Joseph I. Edelman
Leonard Katcher
Mitchell Kreiner
Patricia A. Miller
Joseph J. Nicolosi
Elliot Reiner
Donald F. Ritchie
Brian T. Schiffino
Joseph J. Wynne

Assistant Vice Presidents
John J. Cronin
Joseph Radice

Assistant Cashiers
John V. Buoniconti
Paul A. Gotta
Paul L. Hamner
Pamela G. Patterson
Eugene P. Schreiner
Noreen Suarez
Gloria R. Trujillo

INTERNATIONAL DIVISION
Senior Vice President and
Division Head
Joseph M. Cestone

Vice President
Mary Jane G. Lerias

Assistant Vice President
Babulal P. Kapadia

Assistant Cashier
Esteban A. Espiritu

HUMAN RESOURCES
Vice President and
Department Head
Ruth T. Aimetti

CORPORATE SECRETARY
Karen L. Deitz

TREASURER
Executive Vice President
Eric W. Gould

COMPTROLLER
Vice President and
Department Head
M. Nasette Aranda

Assistant Vice Presidents and
Assistant Comptrollers
Joanna Robinson
Perrie H. Mc Cloud

Assistant Comptroller
Richard A. Francia

AUDIT
Vice President and
Department Head
Mary J. Scarpelli

Assistant Auditors
Allan W. Trowbridge, CISA
Rolando Tubungbanua

BANK OPERATIONS
Senior Vice President and Division Head
Rosemarie A. Calabro

Vice President
Thomas J. Stackhouse

Assistant Vice Presidents
Philip S. Cameron
Kenneth Renga, AAP
Patricia A. Revell

Assistant Cashiers
Debra J. Lott
Inmaculada C. Marquez

REAL ESTATE & ADMINISTRATIVE SERVICES
Vice President
T. John Santoro

BRANCH DIVISION
Senior Vice President and Division Head
Eugene J. Venier

Assistant Vice President
Harry Woods

275 MADISON AVENUE
Vice President and
Branch Manager
Dennis J. Sheridan

Assistant Vice Presidents
James T. Kung
M. Carolina Nolasco

Assistant Cashier
Kenrick Clarke

295 FIFTH AVENUE
Vice President and
Branch Manager
Simeon Kovacic

Assistant Vice Presidents
Barbara Green
William A. Matos

Assistant Cashier
Hetty A. Johnson

145 FIFTH AVENUE
Vice President and
Branch Manager
Michael S. Hassani

Assistant Cashier
Amelita L. Antonio

62 WEST 47TH STREET
Vice President and
Branch Manager
John U. Doekker

Vice President
Ralph Salvaggio

Assistant Vice President
David S. Kaplan

Assistant Cashiers
Peter G. Balram
Emilie Llerena
Frances Nardella

434 BROADWAY
Senior Vice President and
Branch Manager
Joseph R. Criscione

Assistant Vice Presidents
Fontaine Firenze
Ronald Mattioli
Elaine P. Sacks

1040 SIXTH AVENUE
Assistant Vice President
and Branch Manager
Raymond F. Tornabene

Assistant Vice President
Javier R. Carrera

93 CANAL STREET
Vice President and
Branch Manager
Lawrence I. Kohn

Assistant Vice President
Orlando Acevedo
<PAGE>

                           MERCHANTS NEW YORK BANCORP
                                       AND
                         THE MERCHANTS BANK OF NEW YORK

                                Spencer B. Witty
                              Chairman of the Board

                                James G. Lawrence
                      President and Chief Executive Officer

Rudolf  H. Hertz*              William J. Cardew       Charles I. Silberman*
Vice Chairman                  Vice Chairman and          Vice Chairman
                             Chief Operating Officer

                                  Eric W. Gould
                     Executive Vice President and Treasurer

                                M. Nasette Aranda
                         Vice President and Comptroller

                                 Karen L. Deitz
                               Corporate Secretary

                               Board of Directors

Charles J. Baum                             President, Baum Bros. Imports, Inc.,
                                               importers of porcelain dinnerware

William J. Cardew                      Vice Chairman and Chief Operating Officer

Eric W. Gould                             Executive Vice President and Treasurer

Rudolf  H. Hertz*                                     Vice Chairman of the Board

James G. Lawrence                          President and Chief Executive Officer

Robinson Markel       Attorney -- member of the law firm of Rosenman & Colin LLP

Paul Meyrowitz                      Attorney -- senior member of the law firm of
                                                    Simon, Meyrowitz & Meyrowitz

Alan Mirken           President -- Aaron Publishing Group, Inc., book publishers

Mitchell J. Nelson                     Attorney -- of counsel to the law firm of
                                 Salans, Hertzfeld, Heilbrunn, Christy & Viener;
                                              President, Atlas Real Estate Funds

Leonard Schlussel                           President, Wellbilt Equipment Corp.,
                                                        builders of restaurants;
                                            Partner, Keybro Enterprises, finance

Charles I. Silberman                        President and Chairman of the Board,
                     S. Parker Hardware Mfg. Corp., importer and manufacturer of
                        builders' hardware; Vice Chairman of the Holding Company

Marcia Toledano      Senior Vice President of the co-managing general partner of
                         990 AvAmerica Associates LP, real estate owner/operator

Spencer B. Witty           Chairman of the Board of the Bank and Holding Company

*  Officer of Bancorp.

                             SUBSIDIARIES

                              MERCHANTS             MERCHANTS NEW YORK
MBNY HOLDINGS                 CAPITAL CORP.         COMMERCIAL CORP.

Spencer B. Witty              Spencer B. Witty      Irwin Schwartz
Chairman                      Chairman              President and
                                                    Chief Executive Officer
William J. Cardew             William J. Cardew
President                     Vice Chairman
                                                    Alexander Rodetis, Jr.
Eric W. Gould                 Eric W. Gould         Executive Vice President
Executive Vice President      President
and Treasurer                                       Joseph M. Triscoli
                                                    Vice President
<PAGE>

                                [PHOTO OMITTED]

                       [LOGO] MERCHANTS NEW YORK BANCORP

                               275 Madison Avenue

                                295 Fifth Avenue
                                145 Fifth Avenue
                               1040 Sixth Avenue
                              62 West 47th Street
                                  434 Broadway
                                93 Canal Street

                               New York, New York