<PAGE> 1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
       SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1998

                        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: 0-18126
                        -------

                             FINANCIAL BANCORP, INC.
                             -----------------------
             (Exact name of registrant as specified in its charter)

       Delaware                                      06-1391814
       --------                                      ----------
(State or other jurisdiction of             (I.R.S. Employer identification No.)
incorporation or organization)

               42-25 Queens Boulevard, Long Island City, NY 11104
               ---------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (718) 729-5002
                                 --------------
              (Registrant's telephone number, including area code)

                                 Not Applicable
--------------------------------------------------------------------------------
  (Former name, former address and former fiscal year, if changed last report)

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


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

      Indicate the number of shares  outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

      There were 1,706,660 shares of the Registrant's  common stock  outstanding
as of May 13, 1998.




<PAGE> 2



                             FINANCIAL BANCORP, INC.
                                    Form 10-Q
                                      Index

Part I - Financial Information                                          Page
------------------------------                                          ----

Item 1. Financial Statements

        Consolidated Statements of Financial Condition
        as of March 31, 1998 (Unaudited) and September 30, 1997           3

        Consolidated Statements of Income for the
        Three and Six Months ended March 31, 1998 and 1997 (Unaudited)    4

        Consolidated Statement of Changes in
        Stockholders' Equity for the Six Months
        ended March 31, 1998 (Unaudited)                                  5

        Consolidated Statements of Cash Flows for the
        Six Months ended March 31, 1998 and 1997 (Unaudited)              6-7

        Notes to Consolidated Financial Statements                        8-12

Item 2. Management's Discussion and Analysis of
        Financial Condition and Results of Operations                     13-18

Item 3. Quantitative and Qualitative Disclosures About Market Risk        19

Part II - Other Information
---------------------------

Item 1. Legal Proceedings                                                 20

Item 2. Changes in Securities
           Not applicable.                                                20

Item 3. Defaults Upon Senior Securities
           Not applicable.                                                20

Item 4. Submission of Matters to a Vote of Security
           Holders                                                        20

Item 5. Other Information                                                 21

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

        Signature Page                                                    22

        Exhibits
        Exhibit 11:  Computation of per share earnings
        Exhibit 27:  Financial Data Schedule

Statements  contained  in this form  10-Q  which  are not  historical  facts are
forward-looking  statements,  as that term is defined in the Private  Litigation
Reform Act of 1995.  Such  forward-looking  statements  are  subject to risk and
uncertainties  which could cause actual results to differ  materially from those
projected.  Such risks and  uncertainties  include potential changes in interest
rates, competitive factors in the financial services industry,  general economic
conditions,  the effect of new legislation and other risks detailed in documents
filed by the Company with the  Securities and Exchange  Commission  from time to
time.



<PAGE> 3
<TABLE>
<CAPTION>
                                     
                                              FINANCIAL BANCORP, INC. AND SUBSIDIARIES                                        
                                           CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION                                  
                                        
                                        
                                                                                                March 31,            September 30,
                                                                                                  1998                   1997 
                                                                                          ----------------        -----------------
                                                                                               (Unaudited)                     
                                        
<S>                                                                                          <C>                     <C>  
Assets
------
Cash and amounts due from depository institutions                                            $  4,026,358            $  2,738,392 
Federal funds sold and securities purchased under agreements to resell                         36,000,000              10,650,000
                                                                                          ----------------        ----------------
Total cash and cash equivalents                                                                40,026,358              13,388,392 
                                        
Investment securities available for sale                                                          737,750                 730,750 
Investment securities held to maturity, net; estimated fair value of $26,622,000 and                                    
$69,223,000 at March 31, 1998 and September 30, 1997, respectively                             26,581,892              69,410,103 
Mortgage-backed securities available for sale                                                  24,378,833               9,357,048 
Mortgage-backed securities held to maturity, net; estimated fair value of $34,456,000                                   
and $39,129,000 at March 31, 1998 and September 30, 1997, respectively                         33,959,457              38,521,050  
Loans receivable, net                                                                         172,122,242             153,291,828 
Real estate owned, net                                                                            720,074                 471,417 
Investments in real estate, net                                                                 3,557,341               3,543,453  
Premises and equipment, net                                                                     2,313,808               2,431,570  
Federal Home Loan Bank of New York stock, at cost                                               2,110,400               1,845,000  
Accrued interest receivable, net                                                                1,724,482               2,248,578  
Other assets                                                                                    1,858,274               1,716,727 
                                                                                          ----------------        ----------------
Total assets                                                                                 $310,090,911            $296,955,916  
                                                                                          ================        ================

Liabilities and Stockholders' Equity 
------------------------------------
Deposits                                                                                     $228,616,660            $213,394,282 
Advance payments by borrowers for taxes and insurance                                           1,543,894               1,267,896 
Advances from Federal Home Loan Bank of New York                                                6,000,000               8,000,000 
Securities sold under agreements to repurchase                                                 32,000,000              25,000,000 
Treasury tax and loan account and other short term borrowings                                  11,099,658              20,000,000 
Other liabilities                                                                               2,787,685               2,437,504 
                                                                                          ----------------        ----------------
Total liabilities                                                                             282,047,897             270,099,682 
                                                                                          ----------------        ----------------
                                        
Stockholders' equity                                    
Preferred stock, $0.01 par value, 2,500,000 shares authorized; none issued               
Common stock, $0.01 par value, 6,000,000 shares authorized; 2,185,000 shares issued,     
1,706,666  shares outstanding at March 31, 1998 and 1,709,700 outstanding                 
at September 30, 1997, respectively                                                                21,850                  21,850 
Additional paid-in capital                                                                     20,346,388              20,239,758 
Retained earnings - substantially restricted                                                   15,188,757              14,111,882
Common stock acquried by Employee Stock Ownership Plan (ESOP)                                    (930,638)             (1,011,566)
Common stock acquired by Recognition & Retention Plan (RRP)                                      (282,888)               (317,955)
Unrealized gain on securities available for sale, net of income taxes                              82,032                  91,604
Treasury stock, at cost; 478,334 shares  at March 31, 1998 and 475,300 shares             
at September 30, 1997, respectively                                                            (6,382,487)             (6,279,339)
                                                                                          ----------------        ----------------
Total stockholders' equity                                                                     28,043,014              26,856,234 
                                                                                          ----------------        ----------------
Total liabilities and stockholders' equity                                                   $310,090,911            $296,955,916 
                                                                                          ================        ================
See accompanying notes to consolidated financial statements    
</TABLE>
                                        

<PAGE> 4
<TABLE>
<CAPTION>

                                             FINANCIAL BANCORP, INC. & SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF INCOME
                                                          (Unaudited)


                                                                    Three Months Ended                     Six Months Ended
                                                              -----------------------------        ------------------------------
                                                                         March 31,                           March 31,
                                                              -----------------------------        -----------------------------
                                                                 1998              1997               1998              1997
                                                              -----------       -----------        -----------       -----------

<S>                                                           <C>               <C>                <C>               <C>       
Interest income:
   Loans                                                      $3,241,584        $2,966,415         $6,441,668        $5,865,708
   Mortgage-backed securities                                  1,062,123           970,279          2,045,859         1,925,788
   Investments and other interest-earning assets                 753,142           850,692          1,804,688         1,892,574
   Federal funds sold and securities purchased
        under agreements to resell                               337,927            21,389            420,881            37,178
                                                              ----------        ----------         ----------         ---------
               Total interest income                           5,394,776         4,808,775         10,713,096         9,721,248
                                                              ----------        ----------         ----------         ---------
Interest expense:
   Deposits                                                    2,256,226         1,964,254          4,452,414         3,955,468
   Borrowings                                                    713,828           365,570          1,319,822           842,335
                                                              ----------        ----------         ----------         ---------
               Total interest expense                          2,970,054         2,329,824          5,772,236         4,787,803
                                                              ----------        ----------         ----------         ---------

Net interest income                                            2,424,722         2,478,951          4,940,860         4,933,445
Provision for loan losses                                         85,120            96,000            194,770           195,600
                                                              ----------        ----------         ----------         ---------
Net interest income after provision for loan losses            2,339,602         2,382,951          4,746,090         4,737,845 
                                                              ----------        ----------         ----------         ---------
Non-interest income (loss):
   Fees and service charges                                      204,819           136,075            354,453           267,355
   Gain on sale of securities available for sale                  94,462                 0             94,462            26,353
   Gain (loss) from real estate operations                        10,043            26,081             23,867            (1,972)
   Miscellaneous                                                  23,124             8,761             42,366            19,390
                                                              ----------        ----------         ----------         ---------
               Total non-interest income                         332,448           170,917            515,148           311,126
                                                              ----------        ----------         ----------         ---------

Non-interest expenses:
   Salaries and employee benefits                                643,841         1,003,416          1,349,191         1,745,463
   Net occupancy expense of premises                             120,702           138,217            242,831           270,728
   Equipment                                                     177,394           160,999            346,774           311,345
   Advertising                                                    21,849             6,465             60,716            16,052
   Loss from real estate owned                                    15,424           (10,071)            31,846             8,313
   Federal insurance premium                                      30,886            30,456             61,289           112,228
   Miscellaneous                                                 349,573           329,966            622,675           580,009
                                                              ----------        ----------         ----------         ---------
      Total non-interest expenses                              1,359,669         1,659,448          2,715,322         3,044,138
                                                              ----------        ----------         ----------         ---------

Income before income taxes                                     1,312,381           894,420          2,545,916         2,004,833
Income taxes                                                     574,559           314,894          1,108,541           831,868
                                                              ----------        ----------         ----------         ---------

Net income                                                      $737,822          $579,526         $1,437,375        $1,172,965
                                                              ==========        ==========         ==========        ==========

   Basic earnings per share                                        $0.46             $0.35              $0.89             $0.71
                                                              ==========        ==========         ==========        ==========
   Diluted earnings per share                                      $0.44             $0.35              $0.85             $0.70
                                                              ==========        ==========         ==========        ==========

See accompanying notes to consolidated financial statements.
</TABLE>




<PAGE> 5

<TABLE>
<CAPTION>

                                                     Financial Bancorp. Inc.                     
                                                        And Subsidiaries                      
                                 Consolidated Statements of Changes in Stockholders' Equity  
                                                           (Unaudited)                         

                                                                                                                       
                                                       Retained      Common     Common    Unrealized Gain  
                                         Additional   Earnings -     Stock      Stock      on Securities  
                                Common    Paid-in   Substantially  Acquired   Acquired  Available For Sale, Treasury   
                                Stock     Capital    Restricted    By ESOP     By RRP   Net of Income Taxes  Stock        Total
                              ---------- ----------- -------------  --------  --------  ------------------- --------      -----
                                                                       
<S>                             <C>      <C>          <C>         <C>          <C>             <C>        <C>           <C> 
Balance at September 30, 1997   $21,850  $20,239,758  $14,111,882 ($1,011,566) ($317,955)      $91,604    ($6,279,339)  $26,856,234
                                                                                                                        
Net Income for the six months                                             
ended March 31, 1998               -          -         1,437,375       -           -             -            -          1,437,375
                                                                                                                       
Purchase of 5,000 shares of
 treasury stock                    -          -             -           -           -             -          (129,375)     (129,375)
                                                                                                                        
Amortization relating to
allocation of ESOP stock
and earned portion of
RRP stock                          -         114,298        -          80,928     35,067          -            -            230,293
                                                                                                                        
Adjustment to valuation reserve
on securities available for sale   -          -             -           -           -           (9,572)        -             (9,572)
                                                                                                                        
Stock issued upon exercise of
 options                           -          (7,668)       -           -           -             -            26,227        18,559
                                                                                                                        
Cash dividends paid on common
 stock                             -          -          (360,500)      -           -             -            -           (360,500)
                                -------  ------------ ------------  ---------- ----------      --------   ------------  ------------
Balance at March 31, 1998       $21,850  $20,346,388  $15,188,757   ($930,638) ($282,888)      $82,032    ($6,382,487)  $28,043,014
                                =======  ============ ============  ========== ==========      ========   ============  ============
</TABLE>



See accompanying notes to consolidated financial statements.
   

<PAGE> 6
<TABLE>
<CAPTION>

                                                         FINANCIAL BANCORP, INC.                                                 
                                                            AND SUBSIDIARIES                                                        
                                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                               (UNAUDITED)
                                                        
                                                                                       SIX MONTHS ENDED   
                                                                                ---------------------------
                                                                                           MARCH 31, 
                                                                                ---------------------------
                                                                                    1998            1997
                                                                                -------------    ----------
                                                        
                                                        
                                                 
<S>                                                                              <C>             <C>       
Cash flow from operating activities:   
Net income                                                                       $1,437,375      $1,172,965
Adjustments to reconcile net income to net cash                                                 
provided by operating activities                                                        
Loss (Gain) on sale of real estate owned                                              3,512           5,411
(Gain) on sale of securities available for sale                                     (94,462)        (26,353)
Net amortization of premiums and accretion                                                      
of discounts on investment securities                                              (116,789)        (99,291)
Net amortization of premiums and accretion                                                      
of discounts on mortgage-backed securities                                           37,635          17,270
Accretion of deferred loan fees and discounts                                       (68,781)        (57,253)
Depreciation and amortization                                                       141,687         146,132
Provision for loan losses                                                           194,770         195,600
Cost of ESOP and RRP                                                                230,293         196,512
Deferred income taxes                                                                     0          (7,492)
Decrease (increase) in accrued interest receivable, net                             524,096         (47,370)
Decrease (increase) in refundable income taxes                                      119,582        (212,598)
(Increase) in other assets                                                         (253,608)       (183,987)
Increase (decrease) in other liabilities                                            350,181        (833,322)
                                                                              --------------    ------------
Net cash provided by operating activities                                         2,505,491         266,224
                                                                              --------------    ------------
                                                        
Cash flows from investing activities:                                                   
Purchases of investment securities available for sale                                     0      (4,938,672)
Purchases of investment securities  held to maturity                            (16,145,000)     (8,840,000)
Proceeds from sales of investment securities available for sale                           0       2,947,031
Proceeds from maturities and calls of investment securities held to maturity     59,090,000      16,000,000
Purchases of mortgage-backed securities available for sale                      (21,719,234)     (5,046,497)
Proceeds from sale of mortgage-backed securities available for sale               3,797,846               0
Purchase of mortgage-backed securities held to maturity                            (376,553)              0
Proceeds from principal repayments on                                                   
mortgage-backed securities                                                        7,870,483       4,924,319
Purchases of mortgage loans                                                     (10,337,077)              0
Loan originations, net of repayments                                             (8,994,840)     (6,945,777)
Additions to premises and equipment                                                 (17,813)       (158,686)
Proceeds from sale of and insurance recoveries                                                  
on real estate owned                                                                123,345         276,499
Purchase of Federal Home Loan Bank of N.Y. stock                                   (265,400)        (95,100)
Net (increase) decrease in investments in real estate                               (20,000)          7,000
                                                                              --------------    ------------
Net cash provided by (used in) investing activities                              13,005,757      (1,869,883)
                                                                              --------------    ------------
                                                        
</TABLE>
                            
                                                        
See accompanying notes to consolidated financial statements.       




<PAGE> 7
<TABLE>
<CAPTION>
                                          Financial Bancorp, Inc.                                     
                                             And Subsidiaries                                                        
                           Consolidated Statements of Cash Flows (Continued)        
                                              (Unaudited)                                                     
                                                        
                                                                                  Six Months Ended
                                                                        -----------------------------------
                                                                                      March 31, 
                                                                        -----------------------------------
                                                                             1998                 1997
                                                                        ---------------      --------------
                                                        

<S>                                                                     <C>                     <C>       
Cash flows from financing activities:      
Net increase in deposits                                                $15,222,378             $3,296,021
Repayments of FHLB of NY advances                                        (2,000,000)            (1,725,000)
Proceeds from reverse repurchase agreements                               7,000,000              5,000,000
Repayments of reverse repurchase agreements                                       0            (14,046,000)
Net (decrease) increase in treasury tax                                                 
account borrowings                                                       (8,900,342)            10,119,030
Increase in advance payments by                                                 
borrowers for taxes and insurance                                           275,998                218,964
Dividends paid                                                             (360,500)              (298,750)
Reissuance of treasury stock                                                 18,559                 38,365
Purchase of treasury stock                                                 (129,375)              (663,938)
                                                                        ------------         --------------
Net cash provided by financing activities                                11,126,718              1,938,692
                                                                        ------------         --------------
                                                        
                                                        
Net increase  in cash and cash equivalents                               26,637,966                335,033
Cash and cash equivalents - beginning                                    13,388,392              5,102,223
                                                                        ------------         --------------
Cash and cash equivalents - ending                                      $40,026,358             $5,437,256
                                                                        ============         ==============
Supplemental schedule of noncash investing and                                                  
financing activities:                                                   
Loans transferred to real estate owned                                     $375,514                     $0
                                                                        ============         ==============
Loans to facilitate sale of real estate owned                                    $0                $96,000
                                                                        ============         ==============
                                                        
Unrealized loss on securities available for sale                           ($17,093)              ($71,851)
Deferred income taxes                                                         7,521                 31,615
                                                                        ------------         --------------
                                                                            ($9,572)              ($40,236)
                                                                        ============         ==============
Supplemental disclosures of cash flow information:                                                      
Cash paid (net of refunds received) during the year for:                                                        
Federal, state and city income taxes                                       $988,859             $1,051,957
                                                                        ============         ==============
Interest paid on deposits and borrowed funds                             $5,672,147             $4,790,337
                                                                        ============         ==============
</TABLE>

                   
                                       
See accompanying notes to consolidated financial statements.
                 


<PAGE> 8

                    FINANCIAL BANCORP, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


BASIS OF PRESENTATION
The  accompanying   unaudited  consolidated  financial  statements  include  the
accounts of Financial  Bancorp,  Inc. (the  "registrant" or the "Company"),  its
wholly owned  subsidiaries,  and Financial  Federal  Savings Bank (the "Bank") a
federally  chartered  stock savings bank and 842 Manhattan  Avenue Corp.,  which
manages  real  property,  and  the  Bank's  wholly  owned  subsidiaries,  Finfed
Development  Corp., which participates in a joint venture for the development of
land and sale of lots,  Finfed  Funding  Ltd.,  which  serves as a  conduit  for
funding  investments in Finfed Development Corp., and F.S. Agency Inc., which is
engaged in the sale of  annuities.  All  significant  intercompany  accounts and
transactions have been eliminated in consolidation.

Certain information and footnote  disclosures  required under generally accepted
accounting  principles  have  been  condensed  or  omitted  from  the  following
consolidated  financial  statements pursuant to the rules and regulations of the
Securities and Exchange  Commission.  The Company  believes that the disclosures
presented  are  adequate  to  assure  that  the  information  presented  is  not
misleading  in  any  material  respect.  It  is  suggested  that  the  following
consolidated  financial  statements  be read in  conjunction  with the  year-end
consolidated financial statements and notes thereto included in the registrant's
Annual Report on Form 10-K for the year ended September 30, 1997.

The results of operations  for the three and six months ended March 31, 1998 are
not  necessarily  indicative  of the results that may be expected for the entire
fiscal year.

Certain  amounts  for the three and six months  ended  March 31,  1997 have been
reclassified to conform with the current period's presentation.

RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997,  the  Financial  Accounting  Standards  Board (the "FASB")  issued
Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  130,  "Reporting
Comprehensive  Income." SFAS No. 130 requires that all items that are components
of "comprehensive income" be reported in a financial statement that is displayed
with the same prominence as other financial statements.  Comprehensive income is
defined as the "change in equity [net assets] of a business  enterprise during a
period  from  transactions  and other  events and  circumstances  form  nonowner
sources.  It  includes  all  changes  in  equity  during a period  except  those
resulting from  investments by owners and  distributions  to owners."  Companies
will be required to (a) classify  items of other  comprehensive  income by their
nature in the financial  statements and (b) display the  accumulated  balance of
other  comprehensive  income  separately  from retained  earnings and additional
paid-in capital in the equity section of a statement of financial position. SFAS
No. 130  is  effective for  fiscal  years  beginning after December 15, 1997 and
requires reclassification  of prior  periods  presented.  As the requirements of
SFAS No. 130  are disclosure-related, its



<PAGE> 9


implementation will  have  no  impact  on  the  Company's financial condition or
results of operations.

In June 1997,  the FASB issued SFAS No. 131,  "Disclosures  About Segments of an
Enterprise  and Related  Information"  ("SFAS No.  131").  SFAS No. 131 requires
disclosures  for each segment that are similar to those  required  under current
standards  with the addition of quarterly  disclosure  requirements  and a finer
partitioning  of geographic  data by country,  as opposed to broader  geographic
regions as permitted  under  current  standards.  SFAS No. 131 is effective  for
fiscal  years beginning  after  December  15,  1997  with  earlier   application
permitted.  As the  requirements  of SFAS No.  131 are  disclosure-related,  its
implementation  will have no  impact on the  Company's  financial  condition  or
results of operations.

The forgoing  does not  constitute a  comprehensive  summary of all  anticipated
material changes of developments affecting the manner in which the Company keeps
its books and records and performs its financial accounting responsibilities. It
is intended only as a summary of some of the recent  pronouncements  made by the
FASB which are of particular interest to financial institutions.

EARNINGS PER SHARE
Basic EPS is computed by dividing net income by the weighted  average  number of
common  shares  outstanding  for the period.  Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted  into common stock.  Earnings per share data for the
three and six months ended March 31, 1997 has been restated as the result of the
implementation of SFAS No. 128, "Earnings per Share."

INVESTMENT SECURITIES
The following  table sets forth certain  information  regarding the carrying and
estimated  fair value of the Company's  investment  securities at March 31, 1998
and September 30, 1997, respectively.

<TABLE>
<CAPTION>

                                                            March 31, 1998                September 30, 1997
                                                     -----------------------------   -----------------------------

                                                       Carrying          Fair          Carrying          Fair
                                                         Value           Value           Value           Value
                                                     -------------   -------------   -------------   -------------
                                                                            (in thousands)
<S>                                                          <C>             <C>             <C>             <C> 
Investment Securities:

Available for sale
    FNMA preferred stock                                     $701            $738            $701            $731
    Add:  Unrealized gain                                      37               -              30               -
                                                     -------------   -------------   -------------   -------------
       Total investment securities available for sale        $738            $738            $731            $731
                                                     =============   =============   =============   =============
Held to maturity
    U.S. Government and agency obligations                $23,694         $23,734         $69,410         $69,223
    Corporate debt securities                               2,888           2,888               -               -
                                                     -------------   -------------   -------------   -------------
       Total investment securities held to maturity       $26,582         $26,622         $69,410         $69,223
                                                     =============   =============   =============   =============

</TABLE>


<PAGE> 10


MORTGAGE-BACKED SECURITIES
The following  table sets forth certain  information  regarding the carrying and
estimated  fair value of the  Company's  mortgage-backed  security  portfolio at
March 31, 1998 and September 30, 1997, respectively.

<TABLE>
<CAPTION>

                                                            March 31, 1998                September 30, 1997
                                                    ------------------------------  ------------------------------

                                                      Carrying           Fair         Carrying           Fair
                                                        Value            Value          Value            Value
                                                    -------------    -------------  -------------    -------------
                                                                            (in thousands)
<S>                                                   <C>              <C>             <C>              <C>   
Mortgage-backed securities:
Aailable for sale
    FHLMC certificates                                $13,040          $13,096         $4,422           $4,510
    FNMA certificates                                  11,229           11,283          4,801            4,847
    Add:  Unrealized gain                                 110                -            134                -
                                                    ----------      -----------    -----------      -----------
    Total mortgage-backed securities                  $24,379          $24,379         $9,357           $9,357
     available for sale                             ==========      ===========    ===========      ===========

Held to maturity
    GNMA certificates                                 $20,366          $20,689        $23,335          $23,752
    FHLMC certificates                                  9,680            9,850         11,299           11,480
    FNMA certificates                                   2,035            2,039          1,988            1,998
    Other pass-through certificates                     1,878            1,878          1,899            1,899
                                                    ----------      -----------    -----------      -----------
     Total mortgage-backed securities                 $33,959          $34,456        $38,521          $39,129
       held to maturity                             ==========      ===========    ===========      ===========

</TABLE>




<PAGE> 11


LOANS RECEIVABLE, NET
The following  table sets forth the  composition of the Company's loan portfolio
at March 31, 1998 and September 30, 1997, respectively.

<TABLE>
<CAPTION>

                                                           March 31,                    September 30,
                                                             1998                            1997
                                                    -----------------------        ------------------------
                                                                         (in thousands)
<S>                                                               <C>                            <C>     
Real estate mortgages:
          One- to four-family                                     $140,933                       $126,440
          Equity and second mortgages                                2,742                          2,637
          Multi-family                                              14,141                         11,779
          Commercial                                                15,287                         13,217
                                                    -----------------------        ------------------------
                                                                   173,103                        154,073
                                                    -----------------------        ------------------------

Construction                                                           275                            574
                                                    -----------------------        ------------------------

Consumer:
          Loans on deposit accounts                                    218                            176
          Home improvement                                               2                              4
          Guaranteed student loans                                     238                            214
          Personal                                                      21                             23
                                                    -----------------------        ------------------------
                                                                       479                            417

Commercial, including lines of credit                                   78                             77
                                                    -----------------------        ------------------------

          Total loans                                              173,935                        155,141
                                                    -----------------------        ------------------------

Less:  Loans in process                                                 57                            201
         Allowance for loan losses                                   1,616                          1,405
         Deferred loan fees and discounts                              140                            243
                                                    -----------------------        ------------------------
                                                                     1,813                          1,849
                                                    -----------------------        ------------------------

          Total loans receivable, net                             $172,122                       $153,292
                                                    =======================        ========================
</TABLE>



<PAGE> 12


ADVANCES FROM FEDERAL HOME LOAN BANK OF NEW YORK ("FHLB")
As a member  of the FHLB,  the Bank has an  available  overnight  line of credit
subject to the terms and conditions of the lender's overnight advance program in
the amount of $29,657,700 at March 31, 1998. The following  table sets forth the
composition  of the Bank's FHLB  advances as of March 31, 1998 and September 30,
1997, respectively.

<TABLE>
<CAPTION>

                                                                    March 31,                September 30,
                                                                       1998                      1997
                                                                ------------------        -------------------
                                                                               (in thousands)
<S>                                                                        <C>                        <C>   
FHLB advances:
          Fixed rate:
               5.597% due December 1997                                        $0                     $2,000
               5.670% due December 1998                                     6,000                      6,000
                                                                ------------------        -------------------
                       Total fixed rate                                     6,000                      8,000
                                                                ------------------        -------------------

          Overnight line of credit                                              -                         -
                                                                ------------------        -------------------

Total FHLB advances                                                        $6,000                     $8,000
                                                                ==================        ===================
</TABLE>

SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Securities   sold  under   agreements  to   repurchase   consist  of  borrowings
collateralized by mortgage-backed and investment securities. The following table
sets  forth  the  composition  of the  Company's  borrowings  collateralized  by
securities  sold  under  agreements  to  repurchase  as of  March  31,  1998 and
September 30, 1997, respectively.

<TABLE>
<CAPTION>

                                                                March 31,         September 30,
                                                                  1998                1997
                                                            ---------------    -----------------
                                                                      (in thousands)
<S>                                                                <C>                  <C>   
Securities sold under agreements to repurchase:
     5.291% due December 2001, callable December 1997                   $0               $5,000
     5.813% due May 2002, callable May 1998                         10,000               10,000
     5.620% due August 2002, callable August 1999                   10,000               10,000
     5.963% due November 2004, callable October 2002                 5,000                    -
     5.930% due December 2004, callable December 2002                7,000                    -
                                                            ---------------    -----------------
Total securities sold under agreements to repurchase               $32,000              $25,000
                                                            ===============    =================
</TABLE>


<PAGE> 13

Item 2.

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

GENERAL

The Company is the holding company for the Bank,  which converted to a federally
chartered  stock  savings  association  on August  17,  1994 and to a  federally
chartered stock savings bank on October 20, 1994. The Bank is  headquartered  in
Long Island City,  New York and operates  five full  service  branches,  four in
Queens  and  one  in  Brooklyn.  Deposits  of the  Bank  are  insured  up to the
applicable limits of the Federal Deposit  Insurance  Corporation  ("FDIC").  The
Bank is subject to  regulation by the Office of Thrift  Supervision  ("OTS") and
the FDIC.  The  Company is listed on The Nasdaq  Stock  Market  under the symbol
"FIBC".

The Company's  results of operations  are generally  dependent on the Bank.  The
Bank's sources of earnings  primarily  consist of net interest income,  which is
the  difference  between the income  earned on interest  earning  assets and the
expenses paid on interest  bearing  liabilities.  The results of operations  are
also affected,  to a lesser extent, by non-interest  income, which includes loan
servicing  fees and  charges,  and  other  miscellaneous  income.  In  addition,
operations are impacted by non-interest  expenses such as employee  salaries and
benefits,  office  occupancy,  data  processing  and federal  deposit  insurance
premiums.

The  Bank  is  primarily  engaged  in  the  origination  of  one-to-four  family
residential  mortgage  loans,  multi-family  and commercial real estate mortgage
loans,   and  to  a  lesser  extent   residential   construction   loans.  As  a
community-oriented  institution,  the Bank is  generally  engaged in  attracting
retail deposits from the areas surrounding its branch offices. In addition,  the
Bank may borrow funds from the FHLB or through  reverse  repurchase  agreements.
These funds are then generally concentrated in lending activities throughout the
New York City metropolitan area.

FINANCIAL CONDITION

As  of  March  31,  1998,  the  Company's  total  assets  were  $310.1  million,
representing  a $13.1  million,  or 4.4%,  increase  from  $297.0  million at of
September 30, 1997.  Loans receivable  increased by $18.8 million,  or 12.3%, to
$172.1  million at March 31, 1998,  from $153.3  million at September  30, 1997.
Mortgage-backed securities,  inclusive of available for sale, increased by $10.4
million,  or 21.7%,  to $58.3  million at March 31,  1998 from $47.9  million at
September  30,  1997.  The  increase  in the above  assets was offset by a $17.5
million, or 21.7%, decrease in investment securities, inclusive of available for
sale and federal  funds sold,  to $63.3  million at March 31,  1998,  from $80.8
million at September 30, 1997.  This overall  decrease in investment  securities
and  federal  funds sold is a direct  result of the Bank's  callable  investment
securities held to maturity  portfolio  experiencing $59.1 million in investment
securities  being called since  September 30, 1997 due to the  flattening of the
yield  curve.  The Bank has been  redeploying  the  proceeds of such  investment
securities into  adjustable-rate  mortgage loans  and other adjustable-rate loan
related assets with shorter durations and positive


<PAGE> 14


convexity.  Asset  growth was funded by a $15.2  million,  or 7.1%,  increase in
deposits to $228.6  million at March 31, 1998,  from $213.4 million at September
30, 1997. Furthermore,  securities sold under agreements to repurchase increased
by $7.0  million,  or 28.0%,  to $32.0  million  at March 31,  1998,  from $25.0
million at September 30, 1997,  while  advances from the FHLB  decreased by $2.0
million,  or 25.0%,  to $6.0  million,  at March 31,  1998,  as compared to $8.0
million at  September  30, 1997.  The  treasury tax and loan account  borrowings
decreased by $8.9 million,  or 44.5%,  to $11.1 million at March 31, 1998,  from
$20.0 million at September 30, 1997.  In the  aggregate,  borrowings as of March
31, 1998  totalled  $49.1  million,  a reduction  of $3.9 million from the $53.0
million  outstanding at September 30, 1997. The increase in deposits enabled the
Bank to reduce  borrowings  and to fund new loan  originations  and to  purchase
adjustable rate mortgages and mortgage-backed securities.

Total  stockholders'  equity was $28.0 million at March 31, 1998,  reflecting  a
$1.2 million,  or 4.4%,  increase from $26.8 million at September 30, 1997.  The
increase in stockholders' equity was the result of earnings, partially offset by
the payment of the Company's  quarterly  cash  dividend.  At March 31, 1998, the
Company  had,   exclusive  of  shares   repurchased,   1,706,666  common  shares
outstanding.  During the six months ended March 31, 1998, the Company's tangible
and stated book value per share of common  stock  increased  by $0.73 and $0.72,
respectively,  to $16.36 and $16.43,  from $15.63 and $15.71,  respectively,  at
September 30, 1997.

Non-performing  loans totaled $3.0 million, or 1.70% of total loans at March 31,
1998,  as compared to $2.8  million,  or 1.83% of total loans at  September  30,
1997. At March 31, 1998,  non-performing  assets totalled $7.0 million, or 2.27%
of total  assets,  as  compared  to $6.7  million,  or 2.25% of total  assets at
September  30, 1997.  The  Company's  allowance  for loan losses  totalled  $1.6
million at March 31, 1998, which represents a ratio of allowance for loan losses
to non-performing  assets and to total loans of 22.93% and 0.93%,  respectively,
as compared to 21.07% and 0.91%, respectively, at September 30, 1997.


ANALYSIS OF OPERATIONS

COMPARISON OF THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1998 AND 1997

Net income for the three  months  ended March 31,  1998  totalled  $737,822,  or
diluted  earnings per share of $0.44, as compared to net income of $579,526,  or
diluted  earnings per share of $0.35, for the three months ended March 31, 1997.
The $158,296 or 27.3% increase was primarily  attributable a $161,531,  or 94.5%
increase  in  non-interest  income,  and a  $299,779  decrease  in  non-interest
expense,  offset in part by a $54,229  decrease  in net  interest  income  and a
$259,665  increase in income  taxes.  For the six month  period  ended March 31,
1998,  net  income  increased  $264,410,  or 22.5%,  to  $1,437,375,  or diluted
earnings per share of $0.85,  from $1,172,965,  or diluted earnings per share of
$0.70, for the same period in 1997.

The return on average  assets  equalled  0.96% and 0.95% for the quarter and the
six months  ended March 31, 1998,  respectively,  as compared to 0.88% and 0.89%
for the  quarter  and the six months  ended March 31,  1997,  respectively.  The
Company's return on average equity


<PAGE> 15


equalled  10.62% and 10.47% for the quarter and six months ended March 31, 1998,
respectively,  compared  with 8.92% and 9.06% for the quarter and the six months
ended March 31, 1997, respectively.

Net interest income  decreased  $54,229,  or 2.2%, to $2,424,722 for the quarter
ended March 31, 1998,  from $2,478,951 for the quarter ended March 31, 1997. For
the six month period ended March 31, 1998, net interest income increased $7,415,
or 0.2%,  to  $4,940,860,  from  $4,933,445  for the same  period  in 1997.  The
decrease in net  interest  income for the  quarter  ended  March 31,  1998,  was
primarily  due to continued  leveraging  of the balance  sheet,  utilization  of
borrowings and deposit growth to fund mortgage loan  originations  and purchases
of investment securities and mortgage-backed securities with lower yields, which
were caused by the  declining  rate  environment  and overall  flattening of the
yield curve.

As a result,  for the quarter  ended March 31,  1998,  average  interest-earning
assets  were  $290.6  million,  which  represents  a $40.9  million,  or a 16.3%
increase,  from $250.7  million,  for the same period in 1997.  The  increase in
average  interest-earning  assets  was  offset  by a $35.3  million,  or a 15.7%
increase  in average  interest-bearing  liabilities  to $259.5  million  for the
quarter  ended March 31,  1998,  from $224.2  million for the same  quarter last
year. For the six months ended March 31, 1998, average  interest-earning  assets
increased by $32.3 million, or 12.8%, to $285.1 million, from $252.8 million for
the same period last year. The increase in average  interest-earning  assets was
offset  by a $28.3  million,  or 12.5%,  increase  in  average  interest-bearing
liabilities  to $255.7  million  for the six months  ended  March 31,  1998,  as
compared to $227.4  million for the same six month  period in 1997.  The average
yield on interest-earning assets was 7.40% for the quarter ended March 31, 1998,
as compared to 7.67% for the quarter ended March 31, 1997,  and the average cost
of interest-bearing  liabilities was 4.64% for the quarter ended March 31, 1998,
as  compared to 4.21% for the quarter  ended March 31,  1997.  For the six month
period ended March 31, 1998,  the average yield on  interest-earning  assets was
7.52%, as compared to 7.69% for the same period in 1997, and the average cost of
interest-bearing liabilities was 4.53%, as compared to 4.22% for the same period
in 1997.

The Company's net interest margin decreased by 63 basis points to 3.33%, for the
quarter  ended March 31, 1998,  as compared to 3.96% for the quarter ended March
31, 1997. For the six month period ended March 31, 1998, the net interest margin
decreased by 43 basis points to 3.47%,  as compared to 3.90% for the same period
in 1997. The net interest  spread  decreased 70 basis points and 48 basis points
to 2.76% and 2.99%,  for the  quarter and the six months  ended March 31,  1998,
respectively,  as  compared  with 3.46% and 3.47% for the same  periods in 1997,
respectively.  The  significant  decrease in the net interest margin and the net
interest  spread  reflects  the  effects of a  flattening  yield curve which has
decreased the yields on the Bank's assets and simultaneously increased the costs
associated with the leveraging the balance sheet and deposit growth. The overall
flattening  of the  yield  curve  has  also  contributed  to  $59.1  million  of
investment  securities  being called for the six month  period  ending March 31,
1998, as compared to $16.0 million of investment securities being called for the
six month period ending March 31, 1997.

The Company's provision for loan losses for the quarter and the six months ended
March 31,


<PAGE> 16

1998  increased  by $10,180  and $830  respectively,  to $85,120  and  $194,770,
respectively.  The  provisions for loan  losses  reflects  management's on-going
effort to maintain adequate allowances.

Non-interest  income, for the quarter ended March 31, 1998,  increased $161,531,
or 94.5%,  to $332,448,  as compared to $170,917 for the quarter ended March 31,
1997.  For the six month  period  ended  March  31,  1998,  non-interest  income
increased $204,022, or 65.6%, to $515,148 from $311,126 for the six month period
ended March 31,  1997.  The  $161,531  increase in  non-interest  income for the
quarter ended March 31, 1998, is  attributable  to a $68,744  increase in income
realized from  additional  service fee income from  increased  amounts of demand
deposit  accounts and automated  teller machine (ATM) related service fees and a
$94,462 increase in the gain on sale of mortgage-backed securities available for
sale from zero for the same period in 1997.  For the six months ending March 31,
1998,  non-interest  income  increased  primarily  due to the reasons  mentioned
above, in addition to a decrease in provisions for losses on investments in real
estate, in which a subsidiary of the bank has a one-third interest.


Non-interest  expenses  decreased by $299,779,  or 18.1%,  to $1,359,669 for the
quarter  ended  March 31,  1998,  from  $1,659,448  for the same period in 1997.
During  the six  month  period  ended  March  31,  1998,  non-interest  expenses
increased by $328,816,  or 10.8%,  to  $2,715,322,  from  $3,044,138 for the six
month  period  ended  March 31,  1997.  For the quarter  ended  March 31,  1998,
salaries and employee benefits decreased by $359,575, or 35.8%, to $643,841 from
$1,003,416 for the same period in 1997. For the six months ended March 31, 1998,
salaries and employee benefits  decreased by $396,272,  or 22.7%, to $1,349,191,
from  $1,745,463  for the six months  ended  March 31,  1997.  The  decrease  in
salaries and  employee  benefits is primarily  attributable  to a  non-recurring
charge of  $268,000  for the  retirement  of a senior  officer in the March 1997
quarter.  In  addition  the  Company  has  aggressively  reduced  certain  costs
associated with the Bank's staffing,  overtime pay,  pension,  medical and bonus
plans,  which are offset in part by costs  associated  with the  Company's  ESOP
Plan.

For the quarter ended March 31, 1998,  occupancy expense decreased by $17,515 to
$120,702 from  $138,217 for the same period last year.  For the six months ended
March 31,  1998,  occupancy  expense  decreased  by $27,897,  to  $242,831  from
$270,728  for the same  period in 1997.  The  decrease in  occupancy  expense is
primarily  attributable to the additional  rental income collected on Bank owned
properties.  Equipment  expense for the  quarter and six months  ended March 31,
1998, increased by $16,395 and $35,429  respectively,  to $177,394 and $346,774,
respectively,  from $160,999 and $311,345,  respectively for the same periods in
1997.  The  increase in  equipment  expense for the quarter and six months ended
March 31, 1998,  represents  costs  associated  with the Bank's data  processing
servicer.  Advertising  expense,  for the quarter and six months ended March 31,
1998,  increased by $15,384 and $44,664,  respectively,  to $21,849 and $60,716,
respectively.  The increase in advertising expense is primarily  attributable to
costs  associated  with an increase in loan and deposit  marketing  efforts,  in
addition to the Bank's 50th anniversary and related gift campaigns.  The Company
has been very successful in controlling  operating expenses, as evidenced by the
efficiency  ratios of 50.48% and 50.05%, for the quarter and  six  months  ended
March 31,  1998,  respectively,  as  compared to 53.41% and 53.02% for  the same
periods in 1997.



<PAGE> 17


For the quarter ended March 31, 1998,  income tax expense  increased by $259,665
to $574,559 as compared to $314,894 for the same quarter in 1997, as a result of
an increase in income  before  taxes.  For the six month  period ended March 31,
1998,  income tax expense  increased  by $276,673 to  $1,108,541  as compared to
$831,868  for the same  period in 1997,  as a result of the  increase  in income
before taxes.

LIQUIDITY AND CAPITAL RESOURCES

The Bank is required to maintain an average  daily  balance of specified  liquid
assets (as defined in the  regulations)  equal to a monthly  average of not less
than the specified  percentage  of its net  withdrawable  deposit  accounts plus
short-term borrowings. This liquidity requirement was 5% for fiscal 1997, but is
subject to change from time to time by the OTS to any amount within the range of
4% to 10%  depending  upon economic  conditions  and the savings flows of member
institutions. In 1997, OTS regulations also required each savings institution to
maintain an average daily balance of short-term  liquid assets of at least 1% of
the total of its net withdrawable deposit accounts and borrowings payable in one
year or less.  Monetary  penalties  may be  imposed  for  failure  to meet these
liquidity  requirements.  The OTS has recently lowered the liquidity requirement
from 5% to 4% and  eliminated  the 1% short term liquid asset  requirement.  The
Bank's  liquidity  ratio for March  31,  1998 was  24.50%,  which  exceeded  the
applicable  requirements.  The Bank has never been subject to monetary penalties
for failure to meet its liquidity requirements.

The primary  investment  activities of the Bank are the  origination of mortgage
loans and the purchase of investment securities and mortgage-backed  securities.
The Company's primary sources of funds are the Bank's deposit accounts, proceeds
from  principal  and interest  payments on loans and  investments,  advances and
overnight  borrowings from the FHLB, as well as reverse  repurchase  agreements.
While maturities and scheduled amortization of loans, mortgage-backed securities
and  investment  securities  are  predictable  sources of funds,  deposit flows,
mortgage  prepayments and callable investment  securities are greatly influenced
by market interest rates, general economic conditions and competition within the
financial industry.

At March 31,  1998,  the Bank had  outstanding  loan  commitments  to  originate
mortgage  loans of  $10.2  million.  Management  anticipates  that it will  have
sufficient  funds  available and  borrowing  capability to meet its current loan
originations and loan purchase commitments.  Certificates of deposit,  which are
scheduled  to mature in  one-year  or less from March 31,  1998  totalled  $79.2
million,  of which  $17.5  million  represent  "Silver  Certificate  of Deposit"
accounts,  which allow one withdrawal of principal per quarter  without an early
withdrawal penalty for direct deposit customers 62 years of age or older.

Although the OTS capital regulations require savings institutions to meet a 1.5%
tangible  capital ratio and a 3.0% leverage  (core)  capital  ratio,  the prompt
corrective  action standards also establish,  in effect, a minimum 2.0% tangible
capital standard and a 4.0% leverage (core) capital ratio (3.0% for institutions
receiving the highest rating on the CAMEL financial  institution rating system).
The Bank's tangible capital and core capital totalled $20.9 million,  or 6.8% at
March 31, 1998, in excess of the regulatory requirements.  The Bank's risk-based
capital ratio as of March 31, 1998, was $22.1 million,  or 17.6%, also in excess
of the regulatory capital

<PAGE> 18


requirement of 8.0%.

YEAR 2000 COMPLIANCE

As the year 2000 approaches, a critical business issue has emerged regarding how
existing  application  software  programs and operating  systems can accommodate
this date value. In brief,  many existing  application  software products in the
marketplace  were designed to only  accommodate a two digit date position  which
represents  the year (e.g.,  '95 is stored on the system and represents the year
1995).  The Company,  through a series of phases,  has identified the process of
implementing  a program  designed to ensure that all software used in connection
with the  Company's  business  will manage and  manipulate  data  involving  the
transition from 1999 to 2000 without  functional or data abnormality and without
inaccurate results related to such data. To the extent the Company's systems are
not fully year 2000 compliant,  there can be no assurance that potential systems
interruptions to update software would not have a material adverse effect on the
Company's business. The Company has completed both the Organizational  Awareness
Phase and  Assessment  Phase.  The  Company has  drafted a  compliance  plan and
established  a steering  committee.  In the  Assessment  Phase,  the Company has
performed a complete  inventory  of internal  business  hardware and software as
well as an inventory of environmental  systems and critical vendor applications.
Critical  applications and a risk assessment in the event of non-compliance have
been defined and the Company has  identified  resources  needed to implement the
Year 2000  Plan.  The  Company is now in the  Renovation  Phase  which  involves
implementing  required  system  hardware  and software  upgrades  and  obtaining
various  vendor  certifications.  As such,  the Company  anticipates  that costs
associated to complete its Year 2000 Plan will not exceed $400,000.  The Company
anticipates that substantially all of the costs will consists of newly purchased
hardware  and will not  materially  affect the  Company's  operating  results or
financial condition.


<PAGE> 19



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Bank does not purchase derivative  financial  instruments or other financial
instruments  for  trading  purposes.  Further,  the Bank is not  subject  to any
foreign currency exchange rate risk,  commodity price risk or equity price risk.
The Bank is,  however,  subject to  interest  rate risk to the  extent  that its
interest-bearing  liabilities reprice or mature more or less frequently than its
interest-earning  assets.  The Bank's interest rate risk  management  policy has
been  structured  to monitor and maintain  the Bank's  interest  sensitivity  to
within the Board  prescribed  limits while  attempting  to maximize net interest
income.  In  connection  with  its  interest  rate  risk  management   strategy,
management has emphasized the  origination of  shorter-term  fixed-rate  one- to
four- family and mixed-use  mortgage  loans and the purchase of  adjustable-rate
mortgage loans, or mortgage-backed  securities,  along with limiting  investment
purchases to securities with a final maturity or which reprice within five years
or less.  However,  there  can be no  assurances  that the Bank  will be able to
originate adjustable rate loans or acquire mortgage-backed securities with terms
and  characteristics  which  conform  with the  Bank's  underwriting  standards,
investment  criteria or interest rate risk policies.  This strategy is necessary
to reduce the Bank's  exposure to interest  rate risk.  On the  liability  side,
management closely monitors the pricing of its deposit products,  and has made a
conscious effort to extend deposit maturities,  and secure fixed-rate borrowings
when market conditions are favorable.

The actual duration of mortgage loans,  mortgage-backed  securities and callable
investment  securities  can be  significantly  impacted  by changes in  mortgage
prepayment and market interest rates. Mortgage prepayment rates will vary due to
a number of  factors,  including  the  regional  economy  in the area  where the
underlying mortgages were originated,  seasonal factors,  demographic  variables
and  the  assumability  of  the  underlying  mortgages.   However,  the  largest
determinants  of  prepayment  rates are  prevailing  interest  rates and related
mortgage   refinancing   opportunities.   Management   monitors   interest  rate
sensitivity  so that  adjustments  in the asset and  liability  mix, when deemed
appropriate, can be made on a timely basis.

At March 31, 1998,  $116.0  million,  or 39.2%,  of the Bank's  interest-earning
assets were in adjustable-rate loans and mortgage-backed  securities or floating
rate investments.  The Bank's loan portfolio  totalled $173.9 million,  of which
$69.7 million, or 40.1%, were adjustable-rate loans and $104.2 million, or 59.9%
were  fixed-rate  loans.  At March  31,  1998,  the  mortgage-backed  securities
held-to-maturity  portfolio  totalled $34.0  million,  of which $18.9 million or
55.6% of the mortgage-backed portfolio were adjustable rate securities and $15.1
million or 44.4% were  fixed-rate  securities.  The  mortgage-backed  securities
portfolio classified as available-for-sale totalled $24.4 million, of which 100%
were adjustable-rate securities. During the six months ended March 31, 1998, the
Bank purchased  approximately  $21.7 million of adjustable-rate  mortgage-backed
securities and $10.3 million of adjustable-rate mortgage loans.


<PAGE> 20

                              FINANCIAL BANCORP, INC.


Part II.    OTHER INFORMATION

Item 1.     Legal Proceedings
               The Company is not presently  engaged in any legal proceeding of
               a material nature.

Item 2.     Changes in Securities
               Not applicable.

Item 3.     Defaults Upon Senior Securities
               Not applicable.

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

            The Company held its Annual Meeting of  Shareholders  on January 22,
            1998.  At the said  meeting  1,709,700  shares of Common  Stock were
            eligible to vote, of which  1,507,458  shares were present in person
            or by proxy.  The  following  matters  were voted upon at the Annual
            Meeting  and the number of  affirmative  votes,  negative  votes and
            abstentions with respect to the matters are as follows:

            1. At the Annual Meeting,  two directors were elected for three year
            terms. The nominees were Dominick L. Segrete and Frank S. Latawiec.

                                    FOR               WITHHELD
                                    ---               --------

            Dominick L. Segrete     1,495,188         12,270

            Frank S. Latawiec       1,489,288         18,170

            The names of each of the  directors  whose term of office  continued
            after the Annual Meeting and their  respective term  expirations are
            as follows:

                  Peter S. Russo          2000
                  Richard J. Hickey       1999
                  Raymond M. Calamari     1999

            2. The  appointment of Radics & Co., LLC as independent  auditors of
            Financial  Bancorp,  Inc. for the fiscal year ending  September  30,
            1998, was ratified and approved in all respects.


            FOR         AGAINST           ABSTAIN
            ---         -------           -------

            1,494,708   9,500             3,250




<PAGE> 21



Item 5.     Other information

            On  September  4,  1997,  the  Company  announced  that its Board of
            Directors  authorized its sixth common stock repurchase program. The
            Company is authorized to purchase up to 170,970 or 10% of its common
            stock   outstanding,   from  time  to  time,   through   open-market
            transactions,  subject to the  availability  of stock,  during a two
            year period.  Since September 4, 1997, the Company repurchased 5,000
            shares at an average price of $25.875.

            On April 29, 1998, the Company  declared its regular  quarterly cash
            dividend for the quarter  ended March 31, 1998, of $0.125 per share,
            payable on May 27, 1998 to stockholders of record on May 12, 1998.

Item 6.     (A) Exhibits

            Exhibit 3.1  Certificate of Incorporation of Financial Bancorp, 
                         Inc. *
            Exhibit 3.2  Bylaws of Financial Bancorp, Inc. *
            Exhibit 11   Earnings Per Share
            Exhibit 27   Financial Data Schedule


            (B) Reports on Form 8-K
                None

      -------------------------------------------
      *     Incorporated herein by reference into this document from Exhibits to
            Form S-1, Registration  Statement and amendments thereto,  initially
            filed on March 18, 1994, Registration No. 33-76664


<PAGE> 22




                                   SIGNATURES


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



                                       Financial Bancorp, Inc.
                                       (Registrant)





Date: May 14, 1998           By:   /s/ Frank S. Latawiec
                                   -------------------------
                                   Frank S. Latawiec
                                   President and Chief
                                   Executive Officer




Date: May 14, 1998           By:   /s/ P. James O'Gorman
                                   -------------------------
                                   P. James O'Gorman
                                   Executive Vice President and
                                   Chief Financial Officer