SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------
                                    FORM 10-Q
                                   ----------

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED, September 30, 2000

                                       or

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM____ TO ____

                         Commission File number 1-10518

                   INTERCHANGE FINANCIAL SERVICES CORPORATION
             (Exact name of registrant as specified in its charter)

        New Jersey                                                22-2553159
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation  or organization)                              Identification No.)

Park 80 West/Plaza Two, Saddle Brook, NJ                           07663
----------------------------------------                          --------
(Address of principal executive offices)                         (Zip Code)

       Registrant's telephone number, including area code: (201) 703-2265

                                      None
--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report

      Indicate by checkmark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report) and (2) has been subject to such
filing requirements for the past 90 days.    Yes X      No ____

      The number of outstanding shares of the Registrant's common stock, no par
value per share, as of October 31, 2000, was 6,530,498 shares.


<PAGE>

                   INTERCHANGE FINANCIAL SERVICES CORPORATION

                                      INDEX

PART I     FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                       Page No.

<S>                                                                                       <C>
      Item 1 Financial Statements

                  Consolidated Balance Sheets as of September 30, 2000 and
                  December 31, 1999 ....................................................   1

                  Consolidated Statements of Income for the three and nine month
                  periods ended September 30, 2000 and 1999 ............................   2

                  Consolidated Statements of Changes in Stockholders' Equity for
                  the nine months ended September 30, 2000 and 1999 ....................   3

                           Consolidated Statements of Cash Flows for the
                           nine months ended September 30, 2000 and 1999 ...............   4

                           Notes to Consolidated Financial Statements ..................   5

      Item 2      Management's Discussion and Analysis of Financial Condition
                  and Results of Operations ............................................   7

      Item 3      Quantitative and Qualitative Disclosures About Market Risk
                  (Disclosures about quantitative and qualitative market risk
                  are located in Management's Discussion and Analysis of
                  Financial Condition and Results of Operations in the section
                  on Market Risk) ......................................................  17


PART II    OTHER INFORMATION

      Item 1      Legal Proceedings ....................................................  21

      Item 2      Changes in Securities and Use of Proceeds ............................  21

      Item 3      Defaults upon Senior Securities ......................................  21

      Item 4      Submission of Matters to a Vote of Security Holders ..................  21

      Item 5      Other Information ....................................................  21

      Item 6      Exhibits and Reports on Form 8-K .....................................  21

                  Signatures ...........................................................  22
</TABLE>


<PAGE>

Interchange Financial Services Corporation
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
(dollars in thousands)

                                                    September 30,   December 31,
                                                        2000            1999
                                                    -------------   ------------
                                                     (unaudited)

Assets
Cash and due from banks                               $ 20,112       $ 17,669

Securities held to maturity at amortized cost
  (estimated market value of $41,808 and $53,784
  at September 30, 2000 and December 31, 1999,
  respectively)                                         42,169         54,540
                                                      --------       --------
Securities  available for sale at estimated
  market value  (amortized cost of $131,447 and
  $108,399 at September 30, 2000 and December 31,
  1999, respectively)                                  130,867        107,349
                                                      --------       --------
Loans                                                  549,033        511,976
Less:  Allowance for loan losses                         6,085          5,476
                                                      --------       --------
Net loans                                              542,948        506,500
                                                      --------       --------
Premises and equipment, net                             11,193         10,289
Foreclosed real estate                                     250            250
Accrued interest receivable and other assets            10,098          9,528
                                                      --------       --------
Total assets                                          $757,637       $706,125
                                                      ========       ========
Liabilities
Deposits

  Non-interest bearing                                $103,148       $102,392
  Interest bearing                                     548,501        496,600
                                                      --------       --------
Total deposits                                         651,649        598,992
                                                      --------       --------
Securities sold under agreements to repurchase          23,500         16,431
Short-term borrowings                                    3,375         13,975
Long-term borrowings                                    13,000         13,000
Accrued interest payable and other liabilities           6,904          5,451
                                                      --------       --------
Total liabilities                                      698,428        647,849
                                                      --------       --------
Commitments and contingent liabilities

Stockholders' equity:
Common stock, without par value; 15,000,000
  shares authorized;  6,530,498 and 6,728,098
  shares issued and outstanding at September 30,
  2000 and December 31, 1999, respectively               5,397          5,397
Capital surplus                                         21,077         21,244
Retained earnings                                       45,894         41,741
Accumulated other comprehensive loss                      (408)          (675)
                                                      --------       --------
                                                        71,960         67,707
Less:  Treasury stock                                   12,751          9,431
                                                      --------       --------
Total stockholders' equity                              59,209         58,276
                                                      --------       --------
Total liabilities and stockholders' equity            $757,637       $706,125
                                                      ========       ========

--------------------------------------------------------------------------------
See notes to consolidated financial statements.


                                       1
<PAGE>

Interchange Financial Services Corporation
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
(dollars in thousands, except per share data)(unaudited)
<TABLE>
<CAPTION>
                                                                              Three Months Ended              Nine Months Ended
                                                                                 September 30,                   September 30,
                                                                           --------------------------       ------------------------
                                                                             2000             1999             2000           1999
                                                                           ----------      ----------       ---------       --------
<S>                                                                          <C>             <C>             <C>             <C>
Interest income
Interest and fees on loans                                                   $11,478         $10,047         $32,723         $29,405
Interest on federal funds sold                                                   258             129             528             543
Interest and dividends on securities
    Taxable interest income                                                    2,594           2,186           7,212           6,164
    Interest income exempt from federal income taxes                             124             142             448             339
    Dividends                                                                     65              63             190             194
                                                                             -------         -------         -------         -------
Total interest income                                                         14,519          12,567          41,101          36,645
                                                                             -------         -------         -------         -------

Interest expense
Interest on deposits                                                           5,974           4,486          16,002          13,112
Interest on short-term borrowings                                                363             246           1,020             712
Interest on long-term borrowings                                                 209              --             622              --
                                                                             -------         -------         -------         -------
Total interest expense                                                         6,546           4,732          17,644          13,824
                                                                             -------         -------         -------         -------
Net interest income                                                            7,973           7,835          23,457          22,821
Provision for loan losses                                                        150             300             750             900
                                                                             -------         -------         -------         -------
Net interest income after provision
 for loan losses                                                               7,823           7,535          22,707          21,921
                                                                             -------         -------         -------         -------

Noninterest income
Service fees on deposit accounts                                                 617             586           1,765           1,727
Net gain on sale of securities                                                    --               3              97             859
Other                                                                            557           1,015           1,198           1,887
                                                                             -------         -------         -------         -------
Total noninterest income                                                       1,174           1,604           3,060           4,473
                                                                             -------         -------         -------         -------

Noninterest expenses
Salaries and benefits                                                          2,866           2,623           8,317           7,732
Net occupancy                                                                    755             648           2,211           1,978
Furniture and equipment                                                          247             260             795             767
Advertising and promotion                                                        247             259             853             778
Federal Deposit Insurance Corporation assessment                                  33              20              97              60
Other                                                                          1,228           1,261           3,635           3,790
                                                                             -------         -------         -------         -------
Total noninterest expenses                                                     5,376           5,071          15,908          15,105
                                                                             -------         -------         -------         -------

Income before  income taxes                                                    3,621           4,068           9,859          11,289

Income taxes                                                                   1,204           1,363           3,260           3,820
                                                                             -------         -------         -------         -------
Net income                                                                   $ 2,417         $ 2,705         $ 6,599         $ 7,469
                                                                             =======         =======         =======         =======
Basic earnings per common share                                              $  0.37         $  0.38         $  1.01         $  1.04
                                                                             =======         =======         =======         =======
Diluted earnings per common share                                            $  0.37         $  0.38         $  1.01         $  1.04
                                                                             =======         =======         =======         =======
</TABLE>
--------------------------------------------------------------------------------
See notes to consolidated financial statements.


                                       2
<PAGE>

Interchange Financial Services Corporation
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
(dollars in thousands, except share data) (unaudited)

<TABLE>
<CAPTION>
                                                                                           Accumulated
                                                                                              Other
                                                                 Comprehensive Retained   Comprehensive    Common   Capital
                                                                     Income    Earnings       Income        Stock   Surplus
                                                                 ------------- --------   -------------    ------   -------
<S>                                                                  <C>        <C>            <C>         <C>      <C>
Balance at January 1, 1999                                                      $35,482        $1,192      $5,397   $21,256
Comprehensive income
    Net Income                                                       $7,469       7,469
    Other comprehensive income, net of taxes
       Unrealized losses on AFS debt securities                      (1,126)
       Less:  gains on disposition of securities
         (excludes equities)                                            (90)
       Unrealized gains securities transferred from held to
         maturity to available to sale - Acquisition                     23
       Unrealized loss on equity securities                             (18)
       Less: gains on disposition of equity securities                 (428)
                                                                     -------
    Other comprehensive loss                                         (1,639)                   (1,639)
                                                                     -------
Comprehensive income                                                 $5,830
                                                                     =======

Dividends on common stock                                                        (2,567)
Issued 13,869 shares of common stock in connection
    with Executive Compensation Plan                                                                                     62
Exercised 2,954 option shares                                                                                           (14)
Purchased 38,500 shares of common stock
                                                                               --------        ------      ------   -------
 Balance at September 30, 1999                                                   40,384          (447)      5,397    21,304


    Net Income                                                       $2,166       2,166
    Other comprehensive income, net of taxes
       Unrealized losses on AFS debt securities                        (228)
                                                                     ------
    Other comprehensive loss                                           (228)                     (228)
                                                                     ======
Comprehensive income                                                 $1,938
                                                                     ======

Dividends on common stock                                                          (809)
Issued 620 shares of common stock in connection
    with Executive Compensation Plan                                                                                     --
Exercised 4,882 option shares                                                                                           (60)
Purchased 455,860 shares of common stock
                                                                               --------        ------      ------   -------
Balance at December 31, 1999                                                     41,741          (675)      5,397    21,244


    Net Income                                                       $6,599       6,599
    Other comprehensive income, net of taxes
       Unrealized gains on AFS debt securities                          328
       Less:  gains on disposition of securities                        (61)

                                                                     ------
    Other comprehensive income                                          267                       267
                                                                     ------
Comprehensive income                                                 $6,866
                                                                     ======

Dividends on common stock                                                        (2,446)
Issued 11,406 shares of common stock in connection
    with Executive Compensation Plan                                                                                     (6)
Exercised 16,634 option shares                                                                                         (161)
Purchased 225,640 shares of common stock
                                                                               --------        ------      ------   -------
Balance at September 30, 2000                                                   $45,894        $ (408)     $5,397   $21,077
                                                                               ========        ======      ======   =======

<CAPTION>
                                                             Treasury
                                                               Stock     Total
                                                             --------    -----
<S>                <C>                                       <C>        <C>
Balance at January 1, 1999                                   $   (955)  $62,372
Comprehensive income
    Net Income                                                            7,469
    Other comprehensive income, net of taxes
       Unrealized losses on AFS debt securities
       Less:  gains on disposition of securities
         (excludes equities)
       Unrealized gains securities transferred from held to
         maturity to available to sale - Acquisition
       Unrealized loss on equity securities
       Less: gains on disposition of equity securities

    Other comprehensive loss                                             (1,639)

Comprehensive income


Dividends on common stock                                                (2,567)
Issued 13,869 shares of common stock in connection
    with Executive Compensation Plan                              184       246
Exercised 2,954 option shares                                      37        23
Purchased 38,500 shares of common stock                        (5,861)   (5,861)
                                                             ------     -------
 Balance at September 30, 1999                                 (6,595)   60,043


    Net Income                                                            2,166
    Other comprehensive income, net of taxes
       Unrealized losses on AFS debt securities

    Other comprehensive loss                                               (228)

Comprehensive income


Dividends on common stock                                                  (809)
Issued 620 shares of common stock in connection
    with Executive Compensation Plan                               --        --
Exercised 4,882 option shares                                      84        24
Purchased 455,860 shares of common stock                       (2,920)   (2,920)
                                                             --------   -------
Balance at December 31, 1999                                   (9,431)   58,276


    Net Income                                                            6,599
    Other comprehensive income, net of taxes
       Unrealized gains on AFS debt securities
       Less:  gains on disposition of securities


    Other comprehensive income                                              267

Comprehensive income


Dividends on common stock                                                (2,446)
Issued 11,406 shares of common stock in connection
    with Executive Compensation Plan                              196       190
Exercised 16,634 option shares                                    281       120
Purchased 225,640 shares of common stock                       (3,797)   (3,797)
                                                             --------   -------
Balance at September 30, 2000                                $(12,751)  $59,209
                                                             ========   =======
</TABLE>

--------------------------------------------------------------------------------
See notes to consolidated financial statements


                                       3
<PAGE>

Interchange Financial Services Corporation
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
--------------------------------------------------------------------------------
(dollars in thousands) (unaudited)

<TABLE>
<CAPTION>
                                                                                   2000        1999
                                                                                 --------    --------
<S>                                                                              <C>         <C>
Cash flows from operating activities
Net income                                                                       $  6,599    $  7,469
Non-cash items included in earnings
    Depreciation and amortization                                                   1,022       1,135
    Amortization of securities premiums                                               261         572
    Accretion of securities discounts                                                (211)       (128)
    Amortization of premiums in connection with acquisition                           234         234
    Provision for loan losses                                                         750         900
    Net gain on sale of securities                                                    (97)       (859)
    Net gain on sale of loans                                                         (62)         --
    Net gain on sale of foreclosed real estate                                         --         (36)
    Net loss on disposal of fixed assets                                               --           2
Decrease (increase) in operating assets
    Accrued interest receivable                                                       (37)        254
    Other                                                                          (1,152)        114
Incease (decrease) in operating liabilities
    Accrued interest payable                                                          633        (155)
    Other                                                                             820       1,253
                                                                                 --------    --------
Cash provided by operating activities                                               8,760      10,755
                                                                                 --------    --------
Cash flows from investing activities
(Payments for) proceeds from
    Net originations of loans                                                     (24,949)    (18,179)
    Purchase of loans                                                             (13,544)    (14,688)
    Maturities of term federal funds                                                   --       5,000
    Sale of loans                                                                   1,357          --
    Purchase of securities available for sale                                     (47,980)    (53,900)
    Maturities of securities available for sale                                     7,293      11,624
    Sale of securities available for sale                                          17,697      26,193
    Sale of foreclosed real estate                                                     --         120
    Purchase of investment securities held to maturity                            (11,900)    (17,058)
    Maturities of investment securities held to maturity                           22,259      15,091
    Sale of securities held to maturity                                             2,002       2,003
    Purchase of fixed assets                                                       (1,745)       (910)
    Sale of fixed assets                                                               --           3
                                                                                 --------    --------
Cash used in investing activities                                                 (49,510)    (44,701)
                                                                                 --------    --------
Cash flows from financing activities
Proceeds from (payments for)
    Deposits more than withdrawals                                                 52,657       3,765
    Securities sold under agreements to repurchase and other borrowings            10,444      24,775
    Retirement of securities sold under agreements to repurchase and other
       borrowings                                                                 (13,975)    (14,118)
    Dividends                                                                      (2,446)     (2,567)
    Common stock issued                                                               190         246
    Treasury stock                                                                 (3,797)     (5,861)
    Exercise of option shares from Treasury                                           120          23
                                                                                 --------    --------
Cash provided by financing activities                                              43,193       6,263
                                                                                 --------    --------

Increase (decrease) in cash and cash equivalents                                    2,443     (27,683)
Cash and cash equivalents, beginning of year                                       17,669      43,284
                                                                                 ========    ========
Cash and cash equivalents, end of period                                         $ 20,112    $ 15,601
                                                                                 ========    ========

Supplemental disclosure of cash flow information:
Cash paid for:
       Interest                                                                  $ 17,011    $ 13,979
       Income taxes                                                                 3,310       2,540

Supplemental disclosure of non-cash investing activities:
       (Increase) decrease - market valuation of securities available for sale   $   (470)   $  2,574
       Loans transferred to foreclosed real estate
                                                                                       --         250
</TABLE>

--------------------------------------------------------------------------------
See notes to consolidated financial statements


                                       4
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2000
                                   (Unaudited)

1. Basis of Presentation

      The accompanying  unaudited  consolidated financial statements include the
accounts of  Interchange  Financial  Services  Corporation  and its wholly owned
subsidiaries  (the  "Company")  including  its principal  operating  subsidiary,
Interchange  Bank  (the  "Bank"),  and have been  prepared  in  conformity  with
generally  accepted  accounting  principles and in accordance with the rules and
regulations of the Securities  and Exchange  Commission.  Pursuant to such rules
and  regulations  certain  information  or  footnotes  necessary  for a complete
presentation  of financial  condition,  results of operations  and cash flows in
conformity with generally accepted accounting  principles have been condensed or
omitted.  These consolidated  financial statements should be read in conjunction
with the  financial  statements  and  schedules  thereto  included in the annual
report on Form 10-K of the Company for the year ended December 31, 1999.

      The consolidated financial data for the three and nine month periods ended
September  30,  2000  and  1999,  are  unaudited  but  reflect  all  adjustments
consisting  of only normal  recurring  adjustments  which are, in the opinion of
management,  considered  necessary  for a fair  presentation  of  the  financial
condition  and results of  operations  for the interim  periods.  The results of
operations for interim periods are not  necessarily  indicative of results to be
expected for any other period or the full year.

2. Earnings Per Common Share

      Basic  earnings per common share is computed by dividing net income by the
weighted average number of shares of common stock outstanding.  Diluted earnings
per common  share is similar to the  computation  of basic  earnings  per common
share  except  that the  denominator  is  increased  to  include  the  number of
additional  common  shares  that would  have been  outstanding  if the  dilutive
potential common shares had been issued.

3. Legal Proceedings

      The Company is a party to routine litigation  involving various aspects of
its business, none of which, in the opinion of management and its legal counsel,
is  expected to have a material  adverse  impact on the  consolidated  financial
condition, results of operations or liquidity of the Company.


                                       5
<PAGE>

4. New Accounting Pronouncement

      In June 1998,  the  Financial  Accounting  Standards  Board (FASB)  issued
Statement of  Financial  Accounting  Standards  (SFAS) No. 133,  Accounting  for
Derivative  Instruments,  and Hedging  Activities,  which is  effective  for all
fiscal years beginning after June 15, 1999. SFAS 133 establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments  embedded in other contracts and for hedging activities.  Under SFAS
133,  certain  contracts that were not formerly  considered  derivatives may now
meet the  definition  of a  derivative.  The  Company  intends to adopt SFAS 133
effective  January 1, 2001.  Management does not expect the adoption of SFAS 133
to have a significant  impact on the financial position or results of operations
of the  Company  because  the  Company  does  not  have  significant  derivative
activity.


                                       6
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF

                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      The  following  discussion  is an analysis of the  consolidated  financial
condition  and results of operations of the Company for the three and nine month
periods  ended  September 30, 2000 and 1999,  and should be read in  conjunction
with the consolidated  financial statements and notes thereto included in Item 1
hereof.

Forward Looking Information

      In addition to discussing historical information, certain matters included
in or incorporated into this report relate to the financial  condition,  results
of operations  and business of the Company which are not historical  facts,  but
which are  "forward  looking  statements"  within  the  meaning  of the  Private
Securities   Litigation  Reform  Act  of  1995.  When  used  herein,  the  words
"anticipate,"   "believe,"   "estimate,"  "expect,"  "will"  and  other  similar
expressions are generally intended to identify such forward looking  statements.
These forward looking  statements  include,  but are not limited to,  statements
about the operations of the Company and the adequacy of the Company's  allowance
for future  losses  associated  with the loan  portfolio.  The  forward  looking
statements in this report involve certain  assumptions,  known and unknown risks
and  uncertainties,  many of which are beyond the  control  of the  Company  and
reflect what we currently  anticipate  will happen in each case.  What  actually
happens could differ  materially  from what we currently  anticipate will happen
due to a variety of factors,  including, among others, (i) increased competitive
pressures among financial services companies;  (ii) changes in the interest rate
environment; (iii) general economic conditions, internationally,  nationally, or
in the State of New Jersey;  and (iv) legislation or regulatory  requirements or
changes  adversely  affecting  the business of the Company.  Readers  should not
place  undue  expectations  on any  "forward  looking  statements."  We are  not
promising  to make any public  announcement  when we consider  "forward  looking
statements" in this document are no longer accurate,  whether as a result of new
information, what actually happens in the future or for any other reason.


                                       7
<PAGE>

          THREE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999

Earnings Summary

      For the third  quarter of 2000,  the Company  reported  net income of $2.4
million or $0.37  diluted  earnings  per common  share,  as  compared  with $2.7
million or $0.38 diluted  earnings per common share for the same period in 1999.
The earnings  comparisons were impacted by two  non-recurring  items in the 1999
period:  a gain of $416  thousand  from  the  sale of the  Bank's  VISA(TM)  and
merchant  credit  card  portfolios  and a gain of $365  thousand  from the early
pay-off of commercial loans purchased at a discount from face value.  During the
third quarter of 2000, the Company  recognized  $197 thousand of income from the
early pay-off of commercial  loans  purchased at a discount.  Further,  the 2000
quarterly  earnings were impacted by costs  associated with the Bank's expansion
programs,  which  programs  were not in place during the third  quarter of 1999.
These  costs were  related  to the  start-up  and  operation  of the  following:
Interchange Capital Company,  LLC ("ICC"),  the Bank's equipment lease financing
subsidiary;  a new branch in Waldwick,  New Jersey;  and  Interchange  Bank-Line
Center,  an inbound and  outbound  call  center.  These  expansion  programs are
strategies designed to enhance the Company's franchise value in its market area.

                              RESULTS OF OPERATIONS

Net Interest Income

      Net  interest  income  is the most  significant  source  of the  Company's
operating  income.  Net interest income on a tax equivalent basis increased $155
thousand to $8.0 million for the quarter ended September 30, 2000 as compared to
the same quarter of 1999.  The increase in net interest  income is due to higher
levels of interest earning assets,  particularly  loans and leases. The earnings
benefit associated with the growth in loans was offset, in part, by a decline in
the net interest margin ("margin").

      For the  quarter  ended  September  30,  2000,  average  loans and  leases
increased $45.9 million or 9.1% over the same period in 1999, which  contributed
to the growth in average  earning  assets of $61.6 million or 9.2%. The loan and
lease growth was funded largely by deposit liabilities, which grew $54.9 million
or 9.0%,  on  average,  for the third  quarter of 2000 as  compared  to the same
period in 1999.  Furthermore,  a portion  of the  growth in  earning  assets was
funded by borrowings,  which increased,  on average, $18.9 million or 104.8% for
the third quarter of 2000 as compared to the same period in 1999.  The growth in
borrowings was


                                       8
<PAGE>

predominately  in securities sold under agreements to repurchase with the Bank's
retail customers. Higher market interest rates and a shift in the composition of
interest  bearing  liabilities  resulted  in a 72 basis  points  increase in the
Company's  cost of funds to 3.69% for the third  quarter of 2000 as  compared to
the same period in 1999. The higher funding cost was principally responsible for
the decline in the margin. The margin was 4.38% for the third quarter of 2000 as
compared to 4.69% for the same quarter in 1999.

Non-interest Income

      For the quarter ended September 30, 2000,  non-interest income amounted to
$1.2  million,  a decrease  of $430  thousand  or 26.8% as  compared to the same
period in 1999. The quarterly  comparison was largely  affected by non-recurring
items in the 1999 period:  net gains on the sale of the  Company's  VISA(TM) and
merchant  portfolios  of $416 thousand and a $365 thousand gain arising from the
early  pay-off of  commercial  loans  purchased  at a discount.  During the same
period in 2000, a gain of $197  thousand  was  recorded on the early  pay-off of
commercial  loans  purchased  at a discount and income was  recognized  from the
settlement of an insurance  claim for flood  damages  amounting to $53 thousand.
Adjusting  for the  non-recurring  items during these two periods,  non-interest
income  increased  $101  thousand  or 12.3%.  A $31  thousand  or 5.3% growth in
service fees on deposit accounts contributed to the increase.

Non-interest Expenses

      For the quarter ended September 30, 2000,  non-interest  expenses amounted
to $5.4  million,  an increase of $305  thousand or 6.0% as compared to the same
period in 1999.  This  increase  was due mostly to the Bank's  expansion  of its
operations,  which  included,  but was not limited to, ICC,  the  Company's  new
Bank-Line  Center,  a fully staffed in-bound and out-bound call center and a new
branch in Waldwick, New Jersey. Expenses necessary to operate ICC, the Bank-line
Center  and the new  branch  during  the  third  quarter  of  2000  amounted  to
approximately  $282 thousand and were comprised mostly of salaries and benefits.
Excluding the operating expenses  associated with the bank's expansion programs;
non-interest  expenses  increased  $23  thousand or 0.5% as compared to the same
period in 1999.

Income Taxes

      Income tax  expense as a  percentage  of pre-tax  income was 33.3% for the
three months ended  September  30, 2000 as compared to 33.5% for the same period
in 1999.


                                       9
<PAGE>

           NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999

Earnings Summary

      For the first nine months of 2000, the Company reported net income of $6.6
million or $1.01  diluted  earnings  per common  share,  as  compared  with $7.5
million or $1.04 diluted  earnings per common share for the same period in 1999.
The earnings  comparisons were mainly impacted by three  non-recurring  items in
the 1999 period; net gains on the sale of securities of $859 thousand;  gains of
$416  thousand  from the sale of the Bank's  VISA(TM) and  merchant  credit card
portfolios;  and $670  thousand of income from the early  pay-off of  commercial
loans purchased at a discount from face value.  During the first  nine-months of
2000, the Company  recognized  $217 thousand of income from the early pay-off of
commercial  loans  purchased  at a discount.  Further,  the 2000  earnings  were
impacted by costs associated with the Bank's expansion programs,  which programs
were not in place  during the same period in 1999.  These costs were  related to
the start-up and operation of the following:  ICC; a new branch in Waldwick, New
Jersey;  and the  Bank-Line  Center.  These  expansion  programs are  strategies
designed to enhance the Company's franchise value in its market area.

                              RESULTS OF OPERATIONS

Net Interest Income

      Net interest  income on a tax equivalent  basis increased $678 thousand to
$23.6  million for the nine months ended  September  30, 2000 as compared to the
same period in 1999. The increase in net interest income is due to higher levels
of interest earning assets,  particularly loans and leases. The earnings benefit
associated with the growth in loans was offset, in part, by a decline in the net
interest margin ("margin").

      For the nine months ended  September  30, 2000,  average  loans and leases
increased $41.8 million or 8.5% over the same period in 1999, which  facilitated
a growth in average  earning assets of $51.2 million or 7.8%. The loan and lease
growth was funded  largely by deposit  liabilities,  which grew $41.9 million or
7.0%,  on  average,  for the first nine  months of 2000 as  compared to the same
period in 1999.  Furthermore,  a portion  of the  growth in  earning  assets was
funded by borrowings,  which increased,  on average, $19.5 million or 112.1% for
the first nine months of 2000 as compared to the same period in 1999. The growth
in  borrowings  was   predominately  in  securities  sold  under  agreements  to
repurchase with the Bank's retail


                                       10
<PAGE>

customers.  Higher  market  interest  rates  and a shift in the  composition  of
interest  bearing  liabilities  resulted  in a 68 basis  points  increase in the
Company's  cost of funds to 3.67% for the first nine  months of 2000 as compared
to the same period in 1999. The higher funding cost was principally  responsible
for the decline in the margin. The margin was 4.45% for the first nine months of
2000 as compared to 4.66% for the same period in 1999.

Non-interest Income

      For the nine months ended September 30, 2000, non-interest income amounted
to $3.1 million, a decrease of $1.4 million or 31.6% compared to the same period
in 1999.  The  decrease was  primarily  due to three  non-recurring  items which
occurred  during the 1999 period:  net gains on the sale of  securities  of $859
thousand,  the  recognition of $670 thousand of income  resulting from the early
pay-off of commercial  loans purchased at a discount and a gain of $416 thousand
associated  with the sale of the  Company's  VISA(TM) and  merchant  portfolios.
During  the 2000  year to date  period,  net  gains  on the  sale of  securities
amounted to $97 thousand and the Company  recorded  gains of $217  thousand from
the early pay-off of commercial loans purchased at a discount. In addition,  $53
thousand of income was recorded from the settlement of a flood insurance  claim.
Adjusting  for the  non-recurring  items during these two periods,  non-interest
income  increased $165 thousand or 6.5%. The increase  primarily is attributable
to lease  syndication  fees of $61  thousand,  and growth in fee income from the
sale of mutual funds and annuities of $92 thousand.

Non-interest Expenses

      For the nine  months  ended  September  30,  2000,  non-interest  expenses
amounted to $15.9  million,  an increase of $803 thousand or 5.3% as compared to
the same period in 1999. This increase was due mostly to the Bank's expansion of
its  operations,  which  included,  but was not limited to, ICC,  the  Bank-Line
Center, and a new branch in Waldwick, New Jersey.  Expenses necessary to operate
ICC,  the  Bank-Line  Center and the new branch  during the first nine months of
2000  amounted to  approximately  $776  thousand  and were  comprised  mostly of
salaries and benefits. During the 2000 period there were two non-recurring items
which affected the earnings comparison with the same period in 1999: the Company
paid $118 thousand for a legal settlement relating to the interpretation of past
rental  adjustments  on a branch  office.  This expense was offset in the second
quarter of 2000 by a credit of $165  thousand  arising from an  adjustment to an
actuarial  assumption  related to the outside  directors  retirement plan. After
adjusting  for the costs  and  operating  expenses  associated  with the


                                       11
<PAGE>

Bank's  expansion  programs,  the legal  settlement  and the  adjustment  to the
outside directors retirement plan,  non-interest expenses increased $74 thousand
or 0.5% as compared to the same period in 1999.

Income Taxes

      Income tax  expense as a  percentage  of pre-tax  income was 33.1% for the
nine months ended September 30, 2000 as compared to 33.8% for the same period in
1999.  The  improvement  was largely due to increased  investment  in tax exempt
municipal securities and loans.

                               FINANCIAL CONDITION

      At September 30, 2000, the Company's total assets were $757.6 million,  an
increase of $51.5  million or 7.3% from $706.1  million at  December  31,  1999.
Loans and leases,  which grew $37.1  million or 7.2% for  September  30, 2000 as
compared to December 31, 1999, comprised most of the increase. In addition,  the
investment  portfolio  grew $11.1  million  or 6.9% for  September  30,  2000 as
compared to December 31, 1999.  The asset growth was funded  principally  by the
growth in deposit liabilities, which occurred mostly in time deposits.

Cash and Cash Equivalents

      At September 30, 2000, cash and cash equivalents increased $2.4 million as
compared  to  December  31,  1999.  This is  largely  the  result  of  financing
activities (reflecting principally deposit growth less repayments of borrowings)
and  operating  activities  (reflecting  net income and changes in other assets)
generating  cash more rapidly than the investing  activities  (funding loans and
investment  growth)  can utilize  it.  This can be seen more  completely  on the
accompanying unaudited Statements of Cash Flows.

Securities Portfolio

      Under Statement of Financial  Accounting Standards No. 115 "Accounting for
Certain  Investments in Debt and Equity  Securities" ("SFAS 115"), each security
is classified as either trading, available for sale ("AFS"), or held to maturity
("HTM").  The  Company  has no  securities  held in a trading  account.  The AFS
securities are recorded at their fair value.  The after-tax  difference  between
amortized  cost and fair value of AFS  securities  is recorded  as  "accumulated
other  comprehensive  loss" in the equity section of the balance sheet.  The tax
impact of such


                                       12
<PAGE>

adjustment  is  recorded  as an  adjustment  to the amount of the  deferred  tax
liability.  The HTM securities are carried at cost adjusted for the amortization
of premiums and accretion of discounts, which are recognized as an adjustment to
income.  Under SFAS No.  115,  Accounting  for Certain  Investments  in Debt and
Equity Securities, HTM securities, with some exceptions, may only be sold within
three months of maturity.

      The Company uses its  securities  portfolio to ensure  liquidity  for cash
flow requirements,  to manage interest rate risk, to provide a source of income,
to ensure collateral is available for pledging  requirements and to manage asset
quality  diversification.  At September 30, 2000,  investment securities totaled
$173.0  million and  represented  22.8% of total  assets,  as compared to $161.9
million and 22.9%, respectively,  at December 31, 1999. AFS securities comprised
75.6% of the total  securities  portfolio at  September  30, 2000 as compared to
66.3% at December 31, 1999.

      The following  table presents the amortized  cost of these  securities and
their  estimated  market  values as of September 30, 2000 and December 31, 1999:
(dollars in thousands)

<TABLE>
<CAPTION>
                                                     ---------------------------------------------------
                                                                       September 30, 2000
                                                     ---------------------------------------------------
                                                                   Gross          Gross        Estimated
                                                     Amortized   Unrealized     Unrealized       Market
                                                       Cost        Gains          Losses         Value
                                                     ---------   ----------     -------------  ---------
<S>                                                  <C>           <C>           <C>           <C>
Securities held to maturity
    Mortgage-backed securities                       $ 13,748      $     41      $    167      $ 13,622
    Obligations of U.S. agencies                       15,149            45            25        15,169
    Obligations of states & political subdivisions     12,806            36           294        12,548
    Other debt securities                                 466             3            --           469
                                                     --------      --------      --------      --------
                                                       42,169           125           486        41,808
                                                     --------      --------      --------      --------
Securities available for sale
    Obligations of U.S. Treasury                        1,995             7            --         2,002
    Mortgage-backed securities                         78,350           198           765        77,783
    Obligations of U.S. agencies                       35,899           164            54        36,009
    Obligations of states & political subdivisions     10,607            24           161        10,470
    Other debt securities                                 641             7            --           648
    Equity securities                                   3,955            --            --         3,955
                                                     --------      --------      --------      --------
                                                      131,447           400           980       130,867
                                                     --------      --------      --------      --------

      Total securities                               $173,616      $    525      $  1,466      $172,675
                                                     ========      ========      ========      ========
</TABLE>


                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                     ---------------------------------------------------
                                                                       December 31, 1999
                                                     ---------------------------------------------------
                                                                   Gross          Gross        Estimated
                                                     Amortized   Unrealized     Unrealized       Market
                                                       Cost        Gains          Losses         Value
                                                     ---------   ----------     -------------  ---------
<S>                                                  <C>           <C>           <C>           <C>
Securities held to maturity
    Obligations of U.S. Treasury                     $  9,997      $      5      $      8      $  9,994
    Mortgage-backed securities                         20,232            60           289        20,003
    Obligations of U.S. agencies                        7,992             8            51         7,949
    Obligations of states & political subdivisions     16,195            --           481        15,714
    Other debt securities                                 124            --            --           124
                                                     --------      --------      --------      --------
                                                       54,540            73           829        53,784
                                                     --------      --------      --------      --------

Securities available for sale
    Obligations of U.S. Treasury                        6,016            87            --         6,103
    Mortgage-backed securities                         68,331           104           982        67,453
    Obligations of U.S. agencies                       27,141            51           112        27,080
    Obligations of states & political subdivisions      3,139            --           198         2,941
    Equity securities                                   3,772            --            --         3,772
                                                     --------      --------      --------      --------
                                                      108,399           242         1,292       107,349
                                                     --------      --------      --------      --------
      Total securities                               $162,939      $    315      $  2,121      $161,133
                                                     ========      ========      ========      ========
</TABLE>

      At September 30, 2000, the  contractual  maturities of securities  held to
maturity  and  securities  available  for  sale  are  as  follows:  (dollars  in
thousands)

<TABLE>
<CAPTION>
                                              Securities                   Securities
                                           Held to Maturity            Available for Sale
                                       -----------------------      ------------------------
                                        Amortized       Market      Amortized        Market
                                          Cost           Value         Cost           Value
                                       -----------------------      ------------------------
<S>                                    <C>            <C>           <C>             <C>
Within 1 year                          $ 10,208       $ 10,188      $ 12,794        $ 12,742
After 1 but within 5 years               14,802         14,759        77,391          77,153
After 5 but within 10 years               5,400          5,398        13,260          13,004
After 10 years                           11,759         11,463        24,047          24,013
Equity securities                            --             --         3,955           3,955
                                       --------       --------      --------        --------
                      Total            $ 42,169       $ 41,808      $131,447        $130,867
                                       ========       ========      ========        ========
</TABLE>

      During the first quarter of 2000,  the Company sold certain AFS securities
in an  effort to  improve  the  risk/reward  characteristics  of the  securities
portfolio. AFS securities with a book value of $17.6 million were sold. Gains of
$126  thousand  and losses of $31 thousand  were  recognized  from the sale.  In
addition, one HTM security with a book value of $2.0 million was sold. A gain of
$2 thousand  was  recognized  from the sale.  The HTM  security  had a remaining
maturity of less than two months,  therefore,  it is  considered as a "maturity"
for purposes of


                                       14
<PAGE>

classification  of  securities  under  SFAS  No.  115,  Accounting  for  Certain
Investments in Debt and Equity  Securities.  There were no security sales during
the second and third quarters of 2000.

Loans and Leases

      Total loans and leases  amounted to $549.0  million and $512.0  million at
September 30, 2000 and December 31, 1999, respectively, representing an increase
of $37.1  million or 7.2% as  compared  to  December  31,  1999.  The growth was
predominately in commercial mortgage loans and lease financing,  which increased
$14.6 million and $14.3 million,  respectively.  During the first nine months of
2000,  the Company  purchased $5.3 million and $8.2 million of loans and leases,
respectively.  These assets were subjected to the Company's  independent  credit
analysis  prior to  purchase.  Opportunistic  purchases  of loans and leases are
currently  a  desirable  way for the  Company  to  augment  its loan  and  lease
originations.  For the first nine months of 2000,  the Company  syndicated  $1.1
million in  commercial  equipment  leases and collected  $61,000 in  syndication
fees.

      The  following  table  reflects  the  composition  of the loan  and  lease
portfolio:

                                                  -------------    ------------
                                                  September 30,    December 31,
                                                      2000             1999
                                                  -------------    ------------

Amount of loans by type (dollars in thousands)
  Real estate-mortgage
      Commercial                                     $180,946        $166,354
      1-4 family residential
            First liens                               111,729         110,269
            Junior liens                               11,843           9,829
            Home equity                               143,820         144,747
  Commercial and financial                             68,137          63,684
  Real estate-construction                              3,767           4,008
  Installment                                           5,086           3,703
  Lease financing                                      23,705           9,382
                                                     --------        --------
            Total                                    $549,033        $511,976
                                                     ========        ========


                                       15
<PAGE>

Deposits

      At September 30, 2000,  total deposits  increased $52.7 million or 8.8% to
$651.6  million  from  $599.0  million  at  December  31,  1999.  The growth was
principally in time  deposits,  which grew $47.4 million or 29.2% as a result of
promotional campaigns.  In addition,  money market savings grew $20.5 million or
41.6%.  A decline in  interest  bearing  demand and  savings  accounts  of $12.2
million  and  $3.8  million,   respectively,   served  to  offset  some  of  the
aforementioned  growth in time deposits and money market  savings.  At September
30, 2000, time deposits  comprised 30.5% of all deposits as compared to 27.1% at
December 31, 1999.

Nonperforming Assets

      Nonperforming assets are comprised of nonaccrual loans, restructured loans
and foreclosed real estate. At September 30, 2000, nonperforming assets amounted
to $1.4  million,  a decrease  of $224  thousand  or 14.1% from $1.6  million at
December 31, 1999.  Nonperforming  assets at September 30, 2000 decreased by $43
thousand  or 3.3%  from  $1.3  million  at  September  30,  1999.  The  ratio of
nonperforming  assets to total loans and  foreclosed  real estate  decreased  to
0.25% at  September  30,  2000 from  0.31% and 0.26% at  December  31,  1999 and
September 30, 1999, respectively.

Provision for Loan Losses and Loan Loss Experience

      The provision for loan losses represents management's determination of the
amount  necessary  to bring  the  allowance  for  loan  losses  to a level  that
management  considers  adequate to reflect the risk of future losses inherent in
the Company's loan portfolio. In its evaluation of the adequacy of the allowance
for loan losses, management considers past loan loss experience,  changes in the
composition of performing and  nonperforming  loans,  the condition of borrowers
facing  financial  pressure,  the  relationship  of  the  current  level  of the
allowance  to the  credit  portfolio  and to  nonperforming  loans and  existing
economic  conditions.  However,  the process of determining  the adequacy of the
allowance  is  necessarily   judgmental  and  subject  to  changes  in  external
conditions.  Accordingly,  the Company cannot assure you that existing levels of
the allowance will ultimately prove adequate to cover actual loan losses.

      The allowance for loan losses was $6.1 million at September 30, 2000,  and
$5.5  million  at  December  31,  1999,   representing   546.7%  and  409.6%  of
nonperforming  loans at those dates,  respectively.  In the first nine months of
2000 and 1999,  the  Company's  provision  for loan losses was $750 thousand and
$900 thousand, respectively.


                                       16
<PAGE>

Market Risk

      The Company's  primary source of market risk exposure  arises from changes
in market  interest  rates  ("interest  rate  risk").  The  Company's  financial
performance is largely  dependent upon its ability to manage interest rate risk.
Interest  rate risk can be defined as the exposure of the Company's net interest
income to adverse  movements in interest  rates.  Although  the Company  manages
other  risks,  as in credit and  liquidity  risk,  in the  normal  course of its
business,  management  considers  interest rate risk to be its most  significant
market  risk and  could  potentially  have the  largest  material  effect on the
Company's  financial  condition.  The primary  objective of the  asset/liability
management  process is to measure the effect of changing  interest  rates on net
interest  income and market value and adjust the balance sheet (if necessary) to
minimize the inherent risk and maximize income. The Company's exposure to market
risk  and   interest   rate  risk  is  reviewed  on  a  regular   basis  by  the
Asset/Liability Committee of the Board of Directors. Tools used by management to
evaluate  risk include an  asset/liability  simulation  model.  At September 30,
2000,  the  Company  simulated  the  effects  on net  interest  income  given an
instantaneous  and  parallel  shift in the yield  curve of 200  basis  points in
either direction. Based on the simulation, the results did not materially change
from  December 31, 1999.  At September  30, 2000,  the Company was within policy
limits  established by the Board of Directors for changes in net interest income
and future economic value.

      The  Company  does not have any  material  exposure  to  foreign  currency
exchange rate risk or commodity  price risk.  The Company did not enter into any
market rate sensitive  instruments for trading purposes nor did it engage in any
hedging transactions utilizing derivative financial instruments during the first
nine months of 2000.

      The Company is, however, a party to financial instruments with off-balance
sheet risk in the normal course of business to meet the  financing  needs of its
customers.  These  instruments,  which include  commitments to extend credit and
standby  letters of credit,  involve to varying  degrees  elements of credit and
interest  rate risk in  excess  of the  amount  recognized  in the  consolidated
statement of condition. Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any  condition  established  in the
contract.  Commitments  generally  have fixed  expiration  dates and may require
collateral from the borrower if deemed necessary by the Company. Standby letters
of  credit  are  conditional  commitments  issued by the Bank to  guarantee  the
performance  of a customer to a third party up to a  stipulated  amount and with
specified terms and conditions. Commitments to extend credit and standby letters
of credit are not recorded on the Company's consolidated balance sheet until the
instrument is exercised.


                                       17
<PAGE>

 Capital Adequacy

      The  Company is subject to capital  adequacy  requirements  imposed by the
Board of Governors of the Federal  Reserve System (the "Federal  Reserve").  The
Federal Reserve has adopted risk-based  capital  requirements for assessing bank
holding company and bank capital  adequacy.  These standards  define capital and
establish  minimum  capital  requirements  in relation to assets and off-balance
sheet  exposure,  adjusted for credit risk.  The  risk-based  capital  standards
currently in effect are designed to make regulatory  capital  requirements  more
sensitive to  differences  in risk  profiles  among bank holding  companies  and
banks, to account for off-balance  sheet exposure and to minimize  disincentives
for holding liquid assets.  Assets and  off-balance  sheet items are assigned to
broad  risk  categories,  each  with  appropriate  relative  risk  weights.  The
resulting   capital   ratios   represent   capital  as  a  percentage  of  total
risk-weighted assets and off-balance sheet items.

      The  Company's and the Bank's  capital  amounts and ratios are as follows:
(dollars in thousands)

<TABLE>
<CAPTION>
                                                                                                    To Be Well
                                                                                                 Capitalized Under
                                                                              For Capital        Prompt Corrective
                                                            Actual          Adequacy Purposes    Action Provisions
                                                       ---------------      -----------------    -----------------
                                                        Amount   Ratio      Amount     Ratio      Amount    Ratio
                                                       --------  -----      -------   -------    --------  -------
<S>                                                      <C>     <C>         <C>        <C>       <C>       <C>
As of September 30, 2000:
  Total Capital (to Risk Weighted Assets):
     The Company                                        $65,667  12.90%     $40,734     8.00%         N/A      N/A
     The Bank                                            65,177  12.77       40,828     8.00      $51,035   10.00%
  Tier 1 Capital (to Risk Weighted Assets):
     The Company                                         59,582  11.70       20,367     4.00          N/A      N/A
     The Bank                                            59,092  11.58       20,414     4.00       30,621     6.00
  Tier 1 Capital (to Average Assets):
     The Company                                         59,582   7.75       23,068     3.00          N/A      N/A
     The Bank                                            59,092   7.69       23,066     3.00       38,444     5.00

As of December 31, 1999:
  Total Capital (to Risk Weighted Assets):
     The Company                                        $64,209  13.91%     $36,925     8.00%         N/A      N/A
     The Bank                                            64,877  14.01       37,054     8.00      $46,318    10.00%
  Tier 1 Capital (to Risk Weighted Assets):
     The Company                                         58,733  12.72       18,463     4.00          N/A      N/A
     The Bank                                            59,401  12.82       18,527     4.00       27,791     6.00
  Tier 1 Capital (to Average Assets):
     The Company                                         58,733   8.32       21,167     3.00          N/A      N/A
     The Bank                                            59,401   8.45       21,080     3.00       35,133     5.00
</TABLE>


                                       18
<PAGE>

Liquidity

      Liquidity  is the  ability to  provide  sufficient  resources  to meet all
financial obligations and finance prospective business opportunities.  Liquidity
levels over any given period of time are a product of the  Company's  operating,
financing  and investing  activities.  The extent of such  activities  are often
shaped by external  factors  such as  competition  for  deposits  and demand for
loans.

      Financing for the Company's  loans and  investments  is derived  primarily
from  deposits,  along  with  interest  and  principal  payments  on  loans  and
investments.  At September 30, 2000, total deposits  amounted to $651.6 million,
an increase of $52.7 million or 8.8% from  December 31, 1999.  In addition,  the
Company  supplemented the more traditional  funding sources with borrowings from
the Federal Home Loan Bank of New York ("FHLB") and with  securities  sold under
agreements to  repurchase  ("REPOS").  At September 30, 2000,  advances from the
FHLB and REPOS  amounted to $16.4 million and $23.5  million,  respectively,  as
compared to $27.0 million and $16.4 million, respectively, at December 31, 1999.
The  decrease in advances  from the FHLB was due to the  repayment  of overnight
borrowings resulting from the growth in deposit liabilities.

      In  2000,  despite  heightened  competition  for  loans,  loan  and  lease
production continued to be the Company's principal investing activity.  The loan
and lease  portfolio  at  September  30,  2000  amounted to $549.0  million,  an
increase of $37.1 million or 7.2% from $512.0 million at December 31, 1999.

      The  Company's  most liquid assets are cash and due from banks and federal
funds sold.  At September 30, 2000,  the total of such assets  amounted to $20.1
million  or 2.7% of total  assets,  compared  to $17.7  million or 2.5% of total
assets at  year-end  1999.  The  increase in cash and cash  equivalents  was due
largely to the deposit growth.

      Another significant  liquidity source is the Company's AFS securities.  At
September 30, 2000, AFS securities  amounted to $130.9 million or 75.6% of total
securities,  compared to $107.3 million or 66.3% of total securities at year-end
1999.

      In addition to the  aforementioned  sources of liquidity,  the Company has
available various other sources of liquidity,  including federal funds purchased
from other banks and the Federal Reserve  discount  window.  The Bank also has a
$67.5 million line of credit available through its membership in the FHLB.

      Management  believes that the Company's sources of funds are sufficient to
meet its funding requirements.


                                       19
<PAGE>

New Accounting Pronouncement

      In June 1998,  the  Financial  Accounting  Standards  Board (FASB)  issued
Statement of  Financial  Accounting  Standards  (SFAS) No. 133,  Accounting  for
Derivative  Instruments,  and Hedging  Activities,  which is  effective  for all
fiscal years beginning after June 15, 1999. SFAS 133 establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments  embedded in other contracts and for hedging activities.  Under SFAS
133,  certain  contracts that were not formerly  considered  derivatives may now
meet the  definition  of a  derivative.  The  Company  intends to adopt SFAS 133
effective  January 1, 2001.  Management does not expect the adoption of SFAS 133
to have a significant  impact on the financial position or results of operations
of the  Company  because  the  Company  does  not  have  significant  derivative
activity.


                                       20
<PAGE>

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings

      Reference  is  made  to  Note 3 of the  Company's  Consolidated  Financial
      Statements of this Form 10-Q.

Item 2. Changes in Securities and Use of Proceeds

      None

Item 3. Defaults upon Senior Securities

      None

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

      None

Item 5. Other Information

      None

Item 6. Exhibits and Reports on Form 8-K

      (a)   The following exhibits are furnished herewith:

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

            11    Statement re: computation of per share earnings

            27    Financial Data Schedule

      (b)   Reports on Form 8-K
            None filed for the quarter ended September 30, 2000


                                       21
<PAGE>

                                   SIGNATURES

            Pursuant to the  requirements  of the Securities and Exchange Act of
            1934, the Registrant has duly caused this report to be signed on its
            behalf by the undersigned thereunto duly authorized.

Interchange Financial Services Corporation

By: /s/ Anthony Labozzetta
    ------------------------------------------
        Anthony Labozzetta
        Executive Vice President & CFO
        (Duly Authorized Officer and Principal
        Financial and Accounting Officer)

Dated: November 14, 2000


                                       22
<PAGE>

Exhibit 11. Computation Re: Earnings Per Share
            (dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
                            ---------------------------------------------------  ---------------------------------------------------
                                              Three Months Ended,                                  Nine Months Ended,
                            ---------------------------------------------------  ---------------------------------------------------
                                September 30, 2000         September 30, 1999        September 30, 2000         September 30, 1999
                            -------------------------  ------------------------  -------------------------  ------------------------
                                     Weighted   Per            Weighted   Per             Weighted   Per            Weighted    Per
                                      Average  Share            Average  Share             Average  Share            Average   Share
                            Income    Shares   Amount  Income   Shares   Amount  Income    Shares   Amount  Income   Shares   Amount
                            ------   --------  ------  ------  --------  ------  ------   --------  ------  ------  --------  ------

<S>                         <C>        <C>     <C>     <C>        <C>     <C>    <C>        <C>     <C>     <C>       <C>      <C>
Basic Earnings per
   Common Share
Income available to
   common shareholders      $2,417     6,527   $0.37   $2,705     7,043   $0.38  $6,599     6,544   $1.01   $7,469    7,148    $1.04
                                               =====                      =====                     =====                      =====

Effect of Dilutive Shares
Options issued to
   management                             16                         39                        18                       35
                                       -----                      -----                     -----                     ----

Diluted Earnings per
   Common Share             $2,417     6,543   $0.37   $2,705     7,082   $0.38   $6,599    6,562   $1.01   $7,469    7,183    $1.04
                            ======     =====   =====   ======     =====   =====   ======    =====   =====   ======    =====    =====
</TABLE>