EXHIBIT 13

                 Annual Report to Stockholders for Fiscal Year
                             Ended March 31, 1997


<PAGE>











                                         [** LOGO **]

                                WESTWOOD FINANCIAL CORPORATION

                                     ANNUAL REPORT - 1997

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







<PAGE>




                                    WESTWOOD
                              ANNUAL REPORT - 1997

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

TABLE OF CONTENTS
--------------------------------------------------------------------------------



Letter to Stockholders....................................................   1

Corporate Profile and Stock Market Information............................   2

Selected Financial and Other Data.........................................   4

Management's Discussion and Analysis of
  Financial Condition and Results of Operations...........................   5

Independent Auditors' Report............................................   F-1

Consolidated Financial Statements.......................................   F-2

Notes to Consolidated Financial Statements..............................   F-6

Office Locations and Other Corporate Information.........................   12





<PAGE>
               WESTWOOD
[LOGO]         FINANCIAL 
Since 1906     CORPORATION
               -----------------------------------------------------------------








                                                                    June 9, 1997

To Our Stockholders:

        I am pleased to present the First  Annual  Report of Westwood  Financial
Corporation covering the year ended March 31, 1997.

        The financial statements contained in this report include the operations
of Westwood Savings Bank ("Westwood  Savings" or the "Bank") for the full twelve
month  period as well as the  accounts of Westwood  Financial  Corporation  (the
"Corporation"),  which  assumed  ownership of the Bank  effective  June 6, 1996.
Since its inception on that date, the Corporation's  principal business activity
has been ownership of the Bank's common stock.

        Fiscal 1997 earnings were  significantly  impacted by a one-time Savings
Association   Insurance  Fund  ("SAIF")  special   assessment   charged  to  all
SAIF-insured institutions nationwide.  The one benefit from this assessment will
be the significant  reduction in future deposit  premiums  effective  January 1,
1997. In our case, the pre-tax assessment was $454,000,  basically taking all of
our Bank's net  income  for the first six  months of this year.  Reflecting  the
impact of this one-time special assessment,  net income for fiscal 1997 amounted
to $435,000 compared to $552,000 for fiscal 1996.

        We are  well-positioned to meet tomorrow's  challenges and demands.  Our
Board of Directors looks forward to the future with optimism. As we look forward
to the  introduction of new and expansion of existing  facilities,  products and
services,  we remain alert to our  organization's  responsibility to protect and
advance the value of our shareholders' investment as well as the economic growth
of the communities and customers we serve.

        Finally,  we acknowledge and thank those who have made Westwood Savings'
growth and  prosperity a continuing  reality - first,  to our  customers,  whose
confidence  constantly motivates us to provide premium quality services,  to our
employees who take  justified  pride in the unequalled  personal  attention they
provide, and to our Board members and shareholders who, with their participation
and  investment,  provide the capital  that makes our  institution's  growth and
prosperity possible.

        Our Board of Directors and all of our employees  thank you for your past
confidence and we look forward to your continued support of Westwood Savings.

                                           Very truly yours,


                                           /s/William J. Woods
                                           William J. Woods
                                           Chairman of the Board
                                           President & Chief Executive Officer

                                        1

                 700-88 Broadway - Westwood, New Jersey 07675 -
                    Tel. (201) 666-5002 - FAX (201) 666-4265
<PAGE>



BUSINESS OF THE CORPORATION

WESTWOOD FINANCIAL CORPORATION

Westwood Financial  Corporation (the  "Corporation") is a New Jersey corporation
organized  in December  1995,  to  facilitate  the  conversion  of Bergen  North
Financial,  M.H.C. from the mutual to stock form of ownership and to acquire and
hold all of the capital stock of Westwood  Savings Bank (the  "Bank").  Prior to
the  consummation  of the  Conversion  and  Reorganization,  the Mutual  Holding
Company was the majority  stockholder of the Bank and upon  consummation  of the
Conversion and  Reorganization,  the Mutual Holding  Company was merged into the
Bank. The  Corporation  acquired the Bank as a wholly owned  subsidiary upon the
consummation  of the Conversion and  Reorganization  on June 6, 1996.  Since the
inception on that date, the Corporation's  principal  business activity has been
the ownership of the Bank's common stock.

WESTWOOD SAVINGS BANK

Westwood  Savings  Bank is a New Jersey  chartered  stock  savings bank that was
formed as a result of the MHC  Reorganization on December 9, 1993. The Bank is a
community oriented savings institutions offering a variety of financial services
to meet the  needs of the  communities  its  serves.  It is the  Bank's  present
intention  to remain an  independent  community  savings  bank serving the local
needs of northern  Bergen  County,  New Jersey.  The Bank operates from its main
office in Westwood, New Jersey, and one branch office in Haworth, New Jersey.

The Bank is primarily  engaged in the business of  attracting  deposits from the
general public and using those deposits, together with other funds, to originate
mortgage  loans for the purchase or refinance of  residential  properties and to
purchase mortgage-backed and investment securities.

Stock Market Information

On June 6, 1996, the Corporation became a public company and its Common Stock is
currently  traded on the Nasdaq  "Small  Cap" Market  under the  trading  symbol
"WWFC".  The  daily  stock  quotation  for  Westwood  Financial  Corporation  is
published  in The Wall Street  Journal  under the  trading  symbols of "WWFC" or
"WstwdF".

The  following  table  reflects  the per  share  stock  price  trading  range as
published by the Nasdaq "Small Cap" Market  Statistical  Report. The stock price
in the initial offering was $10.00 per share.


                                                         High            Low

First Quarter                 6/30/96                     $11           $10 1/4

Second Quarter                9/30/96                   $13 1/4         $10 1/4

Third Quarter                 12/31/96                  $16 3/4         $13 1/4

Fourth Quarter                3/31/97                   $19 3/4         $15 1/2



                                        2

<PAGE>



The number of  shareholders  of record of common stock as of the record date May
28, 1997 was  approximately  342. This does not reflect the number of persons or
entities who held stock in nominee or "street"  name through  various  brokerage
firms. At March 31, 1997, there were 645,241 shares outstanding.  Quarterly cash
dividends  of $0.05 per share  were paid on July 19,  1996,  October  18,  1996,
January 18, 1997 and April 18, 1997, to the  shareholders of common stock on the
record dates of June 30, 1996,  September 30, 1996,  December 31, 1996 and March
31, 1997, respectively.

The Corporation's ability to pay dividends to shareholders is dependent upon the
earnings from  investments and dividends it receives from the Bank. The Bank may
not  declare or pay a dividend on any of its stock if the effect  thereof  would
cause the Bank's regulatory  capital to be reduced below (1) the amount required
for the liquidation account established in connection with the Bank's conversion
from mutual to stock form, or (2) the regulatory capital requirements imposed by
the FDIC.


                                        3

<PAGE>


<TABLE>
<CAPTION>

SELECTED FINANCIAL AND OTHER DATA
Financial Condition (In Thousands)
========================================================================================================================
At March 31,                                                                                 1996            1997
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>           <C>     
Total Amount of:
  Assets................................                                                    $86,564       $107,981
  Loans receivable, net(1)..............                                                     34,504         40,371
  Mortgage-backed and investment securities
    held to maturity  ..................                                                     39,023         58,631
  Investment securities available                                                             4,422              2
    for sale............................
  Goodwill..............................                                                      1,238          1,132
  Total retained earnings/shareholders'
    equity..............................                                                      6,127          9,950(2)
Summary of Operations (In thousands)
------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,                                                                          1996            1997
------------------------------------------------------------------------------------------------------------------------
Interest and dividend income............                                                     $5,566         $6,648
Interest expense........................                                                      3,314          3,775
  Net interest income...................                                                      2,252          2,873
Provision for loan losses...............                                                         35             52
  Net interest income after
    provision for loan losses...........                                                      2,217          2,821
                                                                                              -----          -----
Total non-interest income...............                                                        108            149
                                                                                              -----          -----
Total non-interest expenses(3)..........                                                      1,476          2,211
                                                                                              -----          -----
Income before income taxes..............                                                        849            759
Provision for income taxes..............                                                        297            324
                                                                                             ------         ------
Net income (loss).......................                                                    $   552        $   435
                                                                                             ======         ======
Other Selected Data
------------------------------------------------------------------------------------------------------------------------
Year Ended March 31,                                                                         1996            1997
------------------------------------------------------------------------------------------------------------------------
Return on average assets................                                                        0.7%           0.5%
Return on average equity................                                                        9.4             4.8
Average equity to average assets........                                                        7.2             9.4
Net interest rate spread................                                                        2.7             2.7
Net interest margin.....................                                                        2.9             3.0
Non-performing assets to total assets(4)                                                        N/A             N/A
Allowance for loan losses to total loans                                                         .5              .5
Non-performing loans to total loans(4)..                                                        N/A             N/A
Non-interest expense to average assets(5)                                                       1.8             2.3
Earnings per share......................                                                         NM           $0.73
Dividends payout ratio..................                                                         NM           27.40%
Book value per share....................                                                         NM          $15.42

</TABLE>

NM - Not meaningful as a result of the Conversion and  Reorganization  completed
June 6, 1996.
-----------------------------
(1)  Net of accrued interest, loan origination fees and valuation allowances.
(2)  Includes  stock  offering  proceeds  of  $3.4  million  related   to  the 
     Conversion and Reorganization on June 6, 1996.
(3)  At March 31, 1997,  includes a non-recurring  expense of $454,000 in regard
     to a one-time  deposit  premium to  recapitalize  the SAIF. 
(4)  During  all  periods  presented,  the Bank did not  have  any  loans  which
     qualified for nonperforming status, and had no real estate owned.
(5)  Non-interest  expense  at or for the years  ended  March 31,  1996 and 1997
     includes amortization of goodwill.

                                        4

<PAGE>



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

        Management's  discussion and analysis of financial condition and results
of operations is intended to assist you in understanding our financial condition
and results of operations.  The  information in this section should also be read
with  our  Consolidated  Financial  Statements  and  Notes  to the  Consolidated
Financial Statements elsewhere in this document.

        Our results of operations depend primarily on net interest income, which
is  determined  by (i) the  difference  between rates of interest we earn on our
interest-earning  assets  and the rates we pay on  interest-bearing  liabilities
(interest rate spread), and (ii) the relative amounts of interest-earning assets
and  interest-bearing  liabilities.  In addition,  our results of operations are
also affected by non-interest  income,  primarily,  income from customer deposit
account service charges and non-interest expense, including, primarily, salaries
and employee  benefits,  federal deposit  insurance  premiums,  office occupancy
expenses  and  other   general  and   administrative   expenses.   We  are  also
significantly   affected  by  general   economic  and  competitive   conditions,
particularly  changes in market interest rates,  government policies and actions
of regulatory authorities, which events are beyond our control.

Asset/Liability Management

        Our assets and  liabilities  may be analyzed by examining  the extent to
which our assets and  liabilities  are interest rate sensitive and by monitoring
the expected effects of interest rate changes on our net portfolio value.

        An asset or liability is interest rate sensitive  within a specific time
period,  if it will  mature or reprice  within that time  period.  If our assets
mature or reprice more quickly or to a greater extent than our liabilities,  our
net  portfolio  value and net  interest  income  would tend to  increase  during
periods of rising interest rates but decrease during periods of falling interest
rates.  Conversely,  if our assets  mature or reprice more slowly or to a lesser
extent than our  liabilities,  our net portfolio  value and net interest  income
would tend to decrease  during  periods of rising  interest  rates but  increase
during periods of falling  interest  rates.  Our policy has been to mitigate the
interest rate risk inherent in the historical  savings  institution  business of
originating  long-term loans funded by short-term  deposits by pursuing  certain
strategies  designed to decrease the  vulnerability  of our earnings to material
and prolonged changes in interest rates.

Net Portfolio Value

        In order to  measure  our  interest  rate risk,  we use a interest  rate
sensitivity   model   similar  to  that  used  by  the  OTS  for  OTS  regulated
institutions.  We compute our interest  rate risk by which the net present value
of our cash flow from assets,  liabilities  and off balance sheet items (our net
portfolio  value or  "NPV")  would  change  in the  event of a range of  assumed
changes in market interest rates. These computations  estimate the effect on our
NPV from  instantaneous and permanent 1% to 3% increases and decreases in market
interest rates. At March 31, 1997, we estimated that our NPV would decrease 11%,
23%,  and 35% and  increase  11%,  21%,  and 31% in the event of 1%, 2%, and 3%,
increases  and  decreases  in market  rates,  respectively.  These  calculations
indicate that our net portfolio  value could be adversely  affected by increases
in  interest  rates but could be  favorably  affected by  decreases  in interest
rates.  Changes in interest rates also may affect our net interest income, while
increases in rates  expected to decrease  income and decreases in rates expected
to increase income, our interest-bearing liabilities

                                        5

<PAGE>



would be expected to mature or reprice more  quickly  than our  interest-earning
assets.  In  addition,  we would be deemed  to have more than a normal  level of
interest rate risk under applicable regulatory capital requirements.

        While we cannot  predict  future  interest rates or their effects on our
NPV or net interest  income,  we do not expect current  interest rates to have a
material  adverse  effect  on our  NPV or net  interest  income  in the  future.
Computations of prospective  effects of  hypothetical  interest rate changes are
based on numerous  assumptions,  including  relative  levels of market  interest
rates,  prepayments  and  deposit  run- offs and  should  not be relied  upon as
indicative  of  actual  results.  Certain  shortcomings  are  inherent  in  such
computations.  Although certain assets and liabilities may have similar maturity
or periods  of  repricing  they may react at  different  times and in  different
degrees to changes in the market interest  rates.  The interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while rates on other types of assets and  liabilities  may lag
behind changes in market interest rates. Certain assets, such as adjustable rate
mortgages, generally have features which restrict changes in interest rates on a
short  term  basis and over the life of the  asset.  In the event of a change in
interest  rates,   prepayments  and  early   withdrawal   levels  could  deviate
significantly  from  those  assumed  in making  calculations  set  forth  above.
Additionally,  an  increased  credit  risk may  result  as the  ability  of many
borrowers to service  their debt may  decrease in the event of an interest  rate
increase.

Financial Condition

        Our total  consolidated  assets increased by $21.4 million or 24.7% from
$86.6  million  at March 31,  1996 to $108.0  million  at March  31,  1997.  The
increase in assets for the period was  primarily  attributable  to the growth in
our loan  portfolio of $5.8 million which was the result of increase loan demand
in our market area. In addition,  our investment and mortgage-backed  securities
portfolios   held  to  maturity   increased  $13.2  million  and  $6.4  million,
respectively,  which  was  offset  by the  sale of $4.4  million  of  securities
available for resale. Loan growth and investment and mortgage-backed  securities
held for  maturity  were  primarily  funded  from $3.4  million in net  proceeds
received in connection with our stock offering which was completed in June 1996,
increases of $7.5 million in net  deposits and $10.0  million in FHLB  advances.
Our total  liabilities  increased  $17.6  million or 21.9% from $80.4 million at
March 31,  1996 as compared to $98.0  million at March 31,  1997.  Shareholders'
equity increased $3.8 million,  or 62.4%, from $6.1 million at March 31, 1996 to
$9.9 million at March 31, 1997. The net increase in shareholders'  equity is the
result of $3.4 million in net proceeds  from our stock  offering and $435,000 in
net income.

Results Of Operations for the Year Ending March 31, 1997

        Net Income.  Net income  decreased  $117,000 or 21.2% from  $552,000 for
1996 to  $435,000  for  1997.  The  decrease  was  primarily  the  result of the
recognition of the one-time SAIF special  insurance  assessment in the amount of
$291,000  (after  taxes),  which  was  partially  offset by an  increase  in net
interest income of $397,000 (after taxes).

        Net  Interest  Income.  Net  interest  income  is the  most  significant
component of our  operations.  Net  interest  income is the  difference  between
interest we receive on our interest-earning  assets (primarily loans, investment
and  mortgage-backed  securities)  and  interest we pay on our  interest-bearing
liabilities (primarily deposits and borrowed funds). Net interest income depends
on the volume of and rates earned on  interest-earning  assets and the volume of
and rates paid on interest-bearing liabilities.



                                        6

<PAGE>



        The following  table sets forth a summary of average  balances of assets
and liabilities with corresponding  interest income and interest expense as well
as average yield and cost information. Average balances are derived from monthly
balances.  However,  we do not believe the use of month-end  balances has caused
any material  difference in the  information  presented.  There have been no tax
equivalent adjustments made to the yields.

<TABLE>
<CAPTION>

                                                                     Year Ended March 31,
                                -----------------------------------------------------------------------------------------------
                                                   1996                                          1997
                                ------------------------------------------     -----------------------------------------
                                      Average                 Average                Average                Average
                                      Balance    Interest    Yield/Cost              Balance    Interest   Yield/Cost
                                      -------    --------    ----------              -------    --------   ----------
                                                                    (Dollars in Thousands)
<S>                                   <C>          <C>             <C>               <C>          <C>            <C>  

Interest-earning assets:
 Loans receivable...............      $32,958      $2,617           7.94%            $38,503      $3,009          7.82%
 Mortgage-backed securities.....       13,095         848           6.48              16,948       1,147          6.77
 Cash and investment securities(1)     33,006       2,101           6.37              38,988       2,493          6.39
                                       ------       -----                             ------       -----
  Total interest-earning assets.       79,059       5,566           7.04              94,439       6,649          7.04
                                                    -----           ----                           -----          ----
Non-interest-earning assets.....        2,838                                          2,925
                                       ------                                         ------
  Total assets..................      $81,897                                        $97,364
                                       ======                                         ======
Interest-bearing liabilities:
  Borrowings....................            -           -              -               4,167         215          5.16
 Deposit accounts...............       75,714       3,314           4.38             $83,563       3,560          4.26
                                       ------       -----                             ------       -----
  Total interest-bearing liabilities   75,714       3,314           4.38              87,730       3,775          4.30
                                                    -----         ------                           -----        ------
Non-interest bearing liabilities          328                                            487
                                       ------                                         ------
 Total liabilities..............       76,042                                         88,217
Shareholders' equity............        5,855                                          9,147
                                       ------                                         ------
 Total liabilities and shareholders'  $81,897                                        $97,364
                                       ======                                         ======
  equity........................
Net interest income.............                   $2,252                                         $2,874
                                                    =====                                          =====
Interest rate spread(2).........                                    2.66%                                         2.74%
                                                                  ======                                        ======
Net yield on interest-earning assets(3)                             2.85%                                         3.04%
                                                                  ======                                        ======
Ratio of average interest-earning assets
to average interest-bearing liabilities                           104.42%                                       107.65%
                                                                 ======                                        ======
</TABLE>
---------------------------------
(1)  Includes interest-bearing deposits in other financial institutions.
(2)  Interest-rate spread represents the difference between the average yield on
     interest-earning   assets  and  the  average  cost  of  interest-   bearing
     liabilities.
(3)  Net yield on  interest-earning  assets  represents net interest income as a
     percentage of average interest-earning assets.






                                        7

<PAGE>



        The table below sets forth information regarding changes in our interest
income and interest expense for the periods indicated.  For each category of our
interest-earning  assets  and  interest-bearing   liabilities,   information  is
provided on changes  attributable  to (i)  changes in volume  (changes in volume
multiplied by old rate); (ii) changes in rate (changes in rate multiplied by old
volume);  (iii) changes in rate-volume (changes in rate multiplied by the change
in volume). Increases and decreases due to both rate and volume, which cannot be
segregated,  have been allocated proportionately to the change due to volume and
change due to rate.

<TABLE>
<CAPTION>


                                                                Year Ended March 31,
                              ------------------------------------------------------------------------------------
                                          1995     vs.     1996                       1996     vs.     1997
                              -----------------------------------------   ----------------------------------------
                                        Increase (Decrease)                        Increase (Decrease)
                                               Due to                                     Due to
                              -----------------------------------------   ----------------------------------------
                                                     Rate/                                      Rate/
                              Volume      Rate      Volume       Net      Volume      Rate      Volume      Net
                              ------      ----      ------       ---      ------      ----      ------      ---
                                                              (Dollars in Thousands)
<S>                            <C>         <C>          <C>       <C>       <C>        <C>         <C>       <C>  

Interest income:
 Mortgage loan portfolio...    $ 177       $(28)        $ (2)     $ 147     $ 440      $ (40)      $ (7)     $ 343
 Mortgage-backed securities       36         91            5        132       250         38         11        299
 Investment securities/
   FHLB stock..............      490        193           70        753       380          7          1        388
                               -----       ----        -----      -----      ----       ----       ----       ----
  Total change in
    interest income........    $ 703      $ 256       $   73    $ 1,032   $ 1,070      $   5      $   5    $ 1,080
                                ====       ====        =====     ======    ======       ====       ====     ======

Interest expense:
  Deposits.................    $ 434      $ 490        $  92    $ 1,016    $  344     $ (91)       $ (9)     $ 244
  Borrowings...............        0          0            0          0         0          0        215        215
                               -----       ----         ----      -----      ----        ---     ------      -----
   Total change in
     interest expense......    $ 434     $  490        $  92    $ 1,016    $  344     $ (91)    $   206      $ 459
                                ====      =====         ====     ======     =====      =====     ======       ====


NET CHANGE IN NET
  INTEREST INCOME..........    $ 269     $ (256)       $ (19)    $   16    $  726      $  96     $ (201)     $ 621
                                ====     ======        =====      =====     =====       ====     ======       ====
</TABLE>


        Our net interest income  increased  $621,000 or 27.6% to $2.9 million in
1997  compared to $2.3 million in 1996.  The  increase was due  primarily to the
growth of average  interest-earning  assets from $79.0  million in 1996 to $94.4
million in 1997.  The increase in our average  interest-earning  assets of $15.4
million  reflects an increase of $5.5 million in average  loans,  an increase of
$3.8  million in average  mortgage-backed  securities  and an  increase  of $6.0
million  in  average  cash and  investment  securities,  which was  funded by an
increase  of $7.8 in  average  deposit  accounts  and $4.1  million  in  average
borrowings.

        Our  interest  rate spread and net  interest  margin  increased  in 1997
compared  to 1996.  This was due to a decrease in the  interest  cost of average
interest-bearing  liabilities  from 4.38% in 1996 to 4.30% in 1997. The yield on
our average interest-earning assets was 7.04% in 1996 and 1997.

        The decrease in the cost of our average interest-bearing liabilities was
due  primarily to decreases  in the cost of our deposit  accounts  from 4.38% in
1996 to 4.26% in 1997,  offset by  borrowed  money which  increased  to 5.16% in
1997.  The lower costs of deposit  accounts  reflects  our  reduction of deposit
rates to match the  decrease in interest  rates  during 1996 and the increase in
the cost of  borrowings  reflects  the  increase  in average  advances  from the
Federal Home Loan Bank .

                                        8

<PAGE>




        Provision  for Loan Losses.  We recorded a provision  for loan losses of
$52,000 in 1997 compared with $35,000 in 1996. The increase in our loan for loan
losses in 1997 and 1996 reflects the increase in the size of our loan  portfolio
due to internal loan growth.

        Historically,  we have emphasized our loss experience over other factors
in establishing the provision for loan losses.  We review the allowance for loan
losses  in  relation  to:  (i)  the  composition  of our  loan  portfolio,  (ii)
observations of the general  economic  climate and (iii) loan loss  expectations
(identification  of problem  loans and the  establishment  of specific loan loss
allowances on such loans).

        We will  continue  to monitor  our  allowance  for loan  losses and make
future  adjustments  to the  allowance  through the provision for loan losses as
economic conditions dictate. We maintain an allowance for loan losses at a level
that we consider to be adequate to provide for the inherent  risk of loss in our
loan portfolio,  however,  there can be no assurance that future losses will not
exceed estimated amounts or that additional  provisions for loan losses will not
be required in future periods.  In addition,  our determination as to the amount
of our  allowance  for loan  losses is subject to review by the FDIC and the New
Jersey  Department  of Banking (the  "Regulators"),  as part of the  examination
process,  which may result in the establishment of an additional allowance based
upon the judgment of the Regulators after review of the information available at
the time of their examination.

        Non-Interest  Income. Our non-interest  income increased $41,000 in 1997
or 37.9% from  $108,000  for the year ended March 31,  1996 to $149,000  for the
year ended March 31, 1997, primarily due to an increase in ATM fees and personal
and business checking accounts which resulted in increased fee income.

        Non-Interest  Expense. Our non-interest expense increased by $735,000 or
49.8% from $1.48  million for 1996 to $2.21  million for 1997.  The increase was
primarily  attributable  to the one-time  special SAIF  assessment  of $454,000.
Pursuant to the Economic Growth and Paperwork Reduction Act of 1996 (the "Act"),
the FDIC imposed a special  assessment on SAIF members to capitalize the SAIF at
the  designated  reserve  level of 1.25% as of  October  1,  1996.  Based on our
deposits as of March 31, 1995,  the date for measuring the amount of the special
assessment pursuant to the Act, our special assessment was $454,000.  Due to the
recapitalization  of the SAIF, we expect lower premiums for deposit insurance in
future periods.

        Pursuant to the Act,  we will pay,  in  addition  to our normal  deposit
insurance  premium  as  a  member  of  the  SAIF,  an  annual  amount  equal  to
approximately   6.4  basis  points  of  outstanding  SAIF  deposits  toward  the
retirement  of the  Financing  Corporation  Bonds ("Fico  Bonds")  issued in the
1980's to assist in the  recovery of the savings and loan  industry.  Members of
the Bank  Insurance  Fund ("BIF"),  by contrast,  will pay, in addition to their
normal deposit insurance premium,  approximately 1.3 basis points.  Beginning no
later than January 1, 2000, the rate paid to retire the Fico Bonds will be equal
for members of the BIF and the SAIF.  The Act also  provides  for the merging of
the BIF and the  SAIF  by  January  1,  1999  provided  there  are no  financial
institutions  still chartered as savings  associations at that time.  Should the
insurance  funds be merged before  January 1, 2000, the rate paid by all members
of this new fund to retire the Fico Bonds would be equal.

        In addition,  salaries and employee  benefits  increased $48,000 in 1997
compared to 1996 due to our hiring of  additional  staff.  We also  recognized a
$98,000  loss  on the  sale of  mutual  funds  from  our  investment  securities
portfolio held for resale.


                                        9

<PAGE>



        Income Tax  Expense.  Our income tax expense  increased  $27,000 or 9.0%
from  $297,000  for 1996 to  $324,000  for 1997 as a result of a  non-deductible
capital loss of $98,000 from our sale of mutual funds.

Liquidity and Capital Resources

        Our  primary  sources  of funds  are  deposits,  repayment  of loans and
mortgage-backed  securities,  maturities  of  investments  and  interest-bearing
deposits, funds provided from operations and advances from the FHLB of New York.
While  scheduled   repayments  of  loans  and  mortgage-backed   securities  and
maturities of investment  securities are predictable  sources of funds,  deposit
flows and loan  prepayments  are  greatly  influenced  by the  general  level of
interest  rates,  economic  conditions  and  competition.  We use our  liquidity
resources  principally  to fund  existing and future loan  commitments,  to fund
maturing  certificates of deposit and demand deposit  withdrawals,  to invest in
other  interest-earning  assets,  to maintain  liquidity,  and to meet operating
expenses.

        Net cash provided by our operating  activities  for the year ended March
31, 1997 totalled  $730,000 as compared to $494,000 for the year ended March 31,
1996.

        Net cash  used in our  investing  activities  for the year  ended  March
31,1997  totalled  $21.3 an increase of $10.5  million from March 31, 1996.  The
increase was primarily attributable to net loan originations of $3.6 million and
net  proceeds  of  $6.9  from  calls  and   maturities  of  our  investment  and
mortgage-backed  securities  portfolio  held to maturity  and the sales from our
investment securities portfolio held for resale.

        Net cash provided by our financing  activities  for 1997 totalled  $20.8
million.  This was the result of a net  increase in  deposits  of $7.5  million,
$10.0  million in FHLB  advances and $3.4 million in net proceeds from our stock
offering.

        Liquidity  may be adversely  affected by  unexpected  deposit  outflows,
excessive interest rates paid by competitors,  adverse publicity relating to the
savings and loan industry,  and similar matters.  Further, the disparity in Fico
Bond interest payments as described herein could result in us losing deposits to
BIF members that have lower costs of funds and  therefore are able to pay higher
rates of interest on deposits. Management monitors projected liquidity needs and
determines the level  desirable,  based in part on our commitments to make loans
and  management's  assessment  of our  ability to  generate  funds.  We are also
subject to federal and state  regulations  that impose certain  minimum  capital
requirements.

Impact of Inflation and Changing Prices

        Our  consolidated   financial  statements  and  the  accompanying  notes
presented  elsewhere in this  document,  have been prepared in  accordance  with
generally  accepted  accounting  principles,  which require the  measurement  of
financial  position and operating results in terms of historical dollars without
considering the change in the relative  purchasing  power of money over time and
due to inflation.  The impact of inflation is reflected in the increased cost of
our  operations.  As a  result,  interest  rates  have a  greater  impact on our
performance  than do the effects of general levels of inflation.  Interest rates
do not  necessarily  move in the same  direction  or to the same  extent  as the
prices of goods and services.

                                       10

<PAGE>




Recent Accounting Pronouncements

        FASB  Statement on  Accounting  for Transfers and Servicing of Financial
Assets and  Extinguishment  of  Liabilities.  In June 1996, FASB issued SFAS No.
125, which will be effective, on a prospective basis, for fiscal years beginning
after  December  31,  1996.  SFAS No.  125  provides  accounting  and  reporting
standards for transfers and servicing of financial assets and  extinguishment of
liabilities based on consistent application of a  financial-components  approach
that  focuses on  control.  SFAS No. 125 extends  the  "available  for sale" and
"trading" approach of SFAS No. 115 to non-security  financial assets that can be
contractually  prepaid or otherwise settled in such a way that the holder of the
asset  would  not  recover  substantially  all of its  recorded  investment.  In
addition,  SFAS No.  125 amends  SFAS No.  115 to prevent a security  from being
classified as held to maturity if the security can be prepaid or settled in such
a manner that the holder of the security would not recover  substantially all of
its recorded  investment.  The extension of the SFAS No. 115 approach to certain
non-security  financial  assets and the  amendment to SFAS No. 115 are effective
for financial  assets held on or acquired  after  January 1, 1997.  The FASB has
proposed to defer the  effective  date of SFAS No. 125 until January 1, 1998 for
certain transactions  including repurchase agreements,  dollar-roll,  securities
lending and similar  transactions.  FASB 125 will not have a material  effect on
our financial statements.

        FASB  Statement on Earnings Per Share.  In March 1997,  FASB issued SFAS
No. 128,  which will be effective,  for fiscal years and interim  periods ending
after December 15, 1997.  SFAS No. 128 will require an institution to change the
method by which it calculates  earnings per share.  Earlier  application of this
statement is not permitted,  however, pro forma earnings per share amounts using
SFAS No. 128 is permitted.  We do not believe the implementation of SFAS No. 128
will have a material effect upon our earnings per share calculation.

                                       11

<PAGE>


                                                                         F-1
--------------------------------- RDH LOGO -------------------------------------

<TABLE>
<CAPTION>

                            RD HUNTER & COMPANY LLP

<S>                       <C>                            <C>    
One Mack Centre Drive     Certified Public Accountants   Members
Paramus, New Jersey                                      American Institute of
07652-3900                                                 Certified Public Accountants
Tel 201 261-4030                                         New Jersey Society of
Fax 201 261-8588                                           Certified Public Accountants
http://www.rdhunter.com                                  Accounting Firms Associated, Inc.
                                                         Alliott Peirson International
</TABLE>


                          Independent Auditors' Report
                          ----------------------------


Board of Directors and Shareholders of
Westwood Financial Corporation and Subsidiary
700-88 Broadway
Westwood, New Jersey  07675


We have  audited  the  accompanying  consolidated  balance  sheets  of  Westwood
Financial  Corporation  and Subsidiary  (the "Company") as of March 31, 1997 and
1996, and the related consolidated  statements of shareholders'  equity,  income
and cash flows for the years then ended. These consolidated financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of Westwood Financial
Corporation  and Subsidiary at March 31, 1997 and 1996, and the results of their
operations  and their cash flows for the years then ended,  in  conformity  with
generally accepted accounting principles.



                                                    /s/RD Hunter & Company LLP
                                                    ----------------------------
Paramus, New Jersey                                 RD Hunter & Company LLP
May 1, 1997                                         Certified Public Accountants


  Offices in Paramus, New Jersey - Princeton, New Jersey - New York, New York

<PAGE>



                Westwood Financial Corporation and Subsidiary               F-2
                           Consolidated Balance Sheets
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                               1997          1996 
                                                                            ------------  --------
                                                                                  (in thousands)
     Assets
     ------


<S>                                                                         <C>          <C>      
Cash and cash equivalents                                                   $   5,408    $   5,208
                                                                            ---------    ---------


Investments
  Held for resale, at market value                                                  2        4,422
  Held to maturity, at amortized cost (market value of $38,124
   and $25,587 at March 31, 1997 and March 31, 1996, respectively)             38,903       25,742
                                                                            ---------    ---------
      Total investments                                                        38,905       30,164
                                                                            ---------    ---------


Mortgage-backed securities, held to maturity
 (market value of $19,581 and $13,266 at
  March 31, 1997 and March 31, 1996, respectively)                             19,728       13,281
                                                                            ---------    ---------

Loans and interest receivable                                                  40,596       34,715
                                                                            ---------    ---------

Stock in Federal Home Loan Bank, at cost                                          576          440
Accrued interest receivable                                                       852          488
Property and equipment, net                                                       734          750
Prepaid expenses and other assets                                                  50          279
Prepaid corporate taxes                                                             -            1
Goodwill                                                                        1,132        1,238
                                                                            ---------    ---------
     Total other assets                                                         3,344        3,196
                                                                            ---------    ---------
     Total                                                                  $ 107,981    $  86,564
     -----                                                                  =========    =========

     Liabilities and Shareholders' Equity
     ------------------------------------

Liabilities:
  Deposits                                                                  $  87,857    $  80,356
  Loan payable                                                                 10,000         --
  Accrued expenses                                                                 83           82
  Dividends payable                                                                32         --
  Corporate taxes payable                                                          59         --
                                                                            ---------    ---------
     Total liabilities                                                         98,031       80,438
                                                                            ---------    ---------

Shareholders' Equity:
  Common stock $.10 par value 747,500 shares authorized,
   645,241 issued and outstanding at 3/31/97 
   $2 par value 5,000,000 shares authorized,
   380,000 issued and outstanding at 3/31/96                                       65          760
  Additional paid in surplus                                                    3,212        4,413
  Stock bonus plans                                                               (80)        (128)
  Unrealized loss on investments                                                 --            (93)
  Retained earnings                                                             6,753        1,174
                                                                            ---------    ---------
     Total shareholders' equity                                                 9,950        6,126
                                                                            ---------    ---------
     Total                                                                  $ 107,981    $  86,564
     -----                                                                  =========    =========
</TABLE>

             (The accompanying notes are an integral part of these
                       consolidated financial statements)


<PAGE>



                Westwood Financial Corporation and Subsidiary              F-3
                 Consolidated Statements of Shareholders' Equity
                       Years Ended March 31, 1997 and 1996
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                     Unrealized                        
                                                       Additional                      (Loss)                         Total
(in thousands)                               Common      Paid in      Stock Bonus    Recovery on    Retained       Shareholders'
                                             Stock       Surplus         Plans       Investments    Earnings          Equity
                                             -----       -------         -----       -----------    --------          ------
<S>                                       <C>         <C>           <C>              <C>              <C>             <C>    
Balance March 31, 1995                   $      760   $    4,413    $     (176)       $  (109)        $   654         $ 5,542      
                                                                                                                     
Recovery of unrealized loss                                                                                          
 on investments                               - - -        - - -         - - -             16           - - -              16
                                                                                                                     
Release of stock bonus plans                                                                                         
 shares                                       - - -        - - -            48          - - -           - - -              48
                                                                                                                     
                                                                                                                     
Net income                                    - - -        - - -         - - -          - - -             552             552
                                                                                                                     
Cash dividends declared                       - - -        - - -         - - -          - - -             (32)            (32)
                                         ----------   ----------    ----------        -------         -------         -------
Balance March 31, 1996                          760        4,413          (128)           (93)          1,174           6,126
                                                                                                                     
                                                                                                                     
Exchange of Westwood Savings Bank                                                                                    
 stock to Westwood Financial
 Corporation and Subsidiary                    (760)      (4,413)        - - -          - - -           5,273             100
                                                                                                                     
Proceeds from Westwood Financial 
 Corporation and Subsidiary                                                          
 initial public offering                         65        3,263         - - -          - - -           - - -           3,328
                                                                                                                     
Purchase and retirement of
  treasury stock                              - - -          (51)        - - -          - - -           - - -             (51)
                                                                                                                     
Loss realized on sale of 
  investments held for resale                 - - -        - - -         - - -             93           - - -              93
                                                                                                                     
Release of stock bonus plan shares            - - -        - - -            48          - - -           - - -              48
                                                                                                                     
                                                                                                                     
Net income                                    - - -        - - -         - - -          - - -             435             435
                                                                                                                     
Cash dividends declared                       - - -        - - -         - - -          - - -            (129)           (129)
                                          ----------   ----------   ----------        -------         -------         -------
                                                                                                                     
  Balance March 31, 1997                  $      65   $    3,212    $      (80)      $  - - -         $ 6,753         $ 9,950
  ----------------------                  ==========  ==========    ==========        =======         =======         =======
                                                                         
</TABLE>
                                                                         
                                                               
              (The accompanying notes are an integral part of these
                       consolidated financial statements)


<PAGE>



                Westwood Financial Corporation and Subsidiary              F-4
                        Consolidated Statements of Income
                       Years Ended March 31, 1997 and 1996
--------------------------------------------------------------------------------



                                                               1997      1996
                                                               ----      ----
                                                        ( $ in thousands except
                                                        earnings per share data)
Interest and dividend income:
  Loans receivable                                          $ 3,008   $ 2,616
  Mortgage backed securities                                  1,147       849
  Investment securities and other
   interest bearing assets                                    2,463     2,070
  Federal Home Loan Bank stock                                   30        31
                                                             ------    ------

                                                              6,648     5,566
                                                             ------    ------
Interest expense:
  Deposits                                                    3,560     3,314
  Borrowings                                                    215     - - -
                                                             ------   -------
                                                              3,775     3,314
                                                             ------   -------
     Net interest income                                      2,873     2,252

Provision for loan losses                                        52        35
                                                            -------    ------
     Net interest income after
      provision for loan losses                               2,821     2,217
                                                             ------     -----
Non-interest income:
  Late charges                                                    6         7
  Miscellaneous charges and fees                                143       101
                                                             ------    ------
                                                                149       108
                                                             ------     -----
Non-interest expenses:
  General and administrative                                    882       748
  Salaries and employee benefits                                672       624
  Rent and utilities                                            105       104
  SAIF Special assessment                                       454     - - -
  Loss on sale of investments held for resale                    98     - - -
                                                            -------   -------
                                                              2,211     1,476
                                                             ------     -----

     Income before taxes on income                              759       849
                                                            -------    ------
Taxes on income:
  Federal income tax                                            314       272
  NJ Savings Institution tax                                     10        25
                                                           --------   -------
     Total taxes on income                                      324       297
                                                            -------    ------

     Net income                                           $     435 $     552
     ----------                                             =======   =======

     Earnings per share                                   $     .73
     ------------------                                     =======


             (The accompanying notes are an integral part of these
                       consolidated financial statements)


<PAGE>



                Westwood Financial Corporation and Subsidiary              F-5
                      Consolidated Statements of Cash Flows
                       Years Ended March 31, 1997 and 1996
--------------------------------------------------------------------------------

                                                               1997      1996
                                                               ----      ----
Operating activities:
  Net income                                               $    435  $    552
  Adjustments to reconcile net income to
   net cash provided by operating activities:
    Depreciation and amortization                               163       155
    Provision for loan losses                                    52        35
    Stock bonus plans expense                                    48        48
    Loss on sale of investments                                  98       -
     (Increase) decrease in assets:
      Interest receivable                                      (364)      (96)
      Prepaid corporate taxes                                     1         8
      Prepaid expenses                                          229      (223)
     Increase (decrease) in liabilities:
      Interest payable                                            8        46
      Deferred income                                           -         (19)
      Corporate taxes payable                                    59        22
      Accrued expenses                                            1       (34)
                                                            -------    ------
        Net cash provided by operating activities               730       494
                                                            -------    ------

Investing activities:
  Loans made to customers                                   (13,797)   (9,445)
  Principal collected on loans                                7,864     7,129
  Purchase of FHLB stock                                       (136)      (19)
  Purchase of investments                                   (25,609)  (24,376)
  Proceeds from matured/called investments                   10,416    15,986
  Purchases of property and equipment                           (53)      (55)
  Acquisition of goodwill                                        12       -
                                                            -------    ------
        Net cash used in investing activities               (21,303)  (10,780)
                                                            -------   -------

Financing activities:
  Net increase in deposit accounts                            7,493    10,487
  Proceeds from borrowings                                   10,000       -
  Dividends paid                                                (97)      (48)
  Proceeds from public stock offering, net                    3,428       -
  Purchase of treasury stock                                    (51)      -
                                                            -------   -------
        Net cash provided by financing activities            20,773    10,439
                                                            -------   -------

        Increase in cash and cash equivalents                   200       153

Cash and cash equivalents, beginning of year                  5,208     5,055
                                                            -------   -------

        Cash and cash equivalents, end of year             $  5,408  $  5,208
        --------------------------------------               ======    ======

Supplemental disclosures of cash flow information:
--------------------------------------------------

Cash paid for interest                                     $  3,767   $ 3,267
                                                             ======    ======

Cash paid for taxes on income                              $    264  $    267
                                                             ======    ======

             (The accompanying notes are an integral part of these
                       consolidated financial statements)


<PAGE>

                Westwood Financial Corporation and Subsidiary              F-6
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------

Note 1 - Summary of Significant Accounting Policies
         ------------------------------------------

Westwood Financial  Corporation is a holding company whose subsidiary,  Westwood
Savings Bank, has been serving  Northern  Bergen County,  New Jersey since 1906.
The Bank is a full service  financial  institution  which primarily grants first
and second mortgages on one and two family homes to qualified  applicants within
the Northern  Bergen County region  secured by security  liens on the respective
properties.

         A. Principles of Consolidation
            ---------------------------

            The  accompanying  consolidated  financial  statements  include  the
            accounts of Westwood  Financial  Corporation  and  Westwood  Savings
            Bank, a wholly-owned subsidiary of the Corporation.  All significant
            intercompany  balances  and  transactions  have been  eliminated  in
            consolidation.  The  financial  statements at March 31, 1996 are the
            audited financial statements at that date of Westwood Savings Bank.

         B. Organization
            ------------

            The  Corporation  is a New Jersey  stock  corporation  organized  in
            December 1995 to  facilitate  the  conversion of the Bank's  holding
            company (formerly Bergen North Financial, M.H.C.) from the mutual to
            stock form of  ownership  and to acquire and hold all of the capital
            stock of the Bank. In connection with the  conversion,  Bergen North
            Financial,  M.H.C.,  which had owned 58% of the Bank's common stock,
            was merged  with and into the Bank,  and its shares of the Bank were
            canceled.  On June 6, 1996, the Corporation issued 261,488 shares of
            its common stock for all of the remaining  outstanding shares of the
            Bank,  and issued and sold  385,184  shares of its common stock at a
            price of $10.00 per share  which  after  giving  effect to  offering
            expenses of $424,000  resulted in net proceeds of $3,428,000.  Since
            June 6, 1996, the  Corporation  engaged in no  significant  business
            activity other than its ownership of the Bank's common stock.

         C. Use of Estimates
            ----------------

            The  consolidated   financial   statements  have  been  prepared  in
            conformity  with  generally  accepted  accounting   principles.   In
            preparing  the  consolidated  financial  statements,  management  is
            required to make estimates and assumptions  that affect the reported
            amounts  of assets  and  liabilities  as of the date of the  balance
            sheet and revenues and expenses for the period. Actual results could
            differ significantly from these estimates.

            Material estimates that are particularly  susceptible to significant
            change  relates  to the  determination  of the  allowance  for  loan
            losses.




<PAGE>

                Westwood Financial Corporation and Subsidiary              F-7
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------


Note 1 - Summary of Significant Accounting Policies - (continued)
         --------------------------------------------------------

         D. Investments and Mortgage-Backed Securities
            ------------------------------------------

            The Bank adopted  Statement of Financial  Accounting  Standards  No.
            115,   "Accounting  for  Certain  Investments  in  Debt  and  Equity
            Securities" (SFAS 115),  effective March 31, 1994. SFAS 115 requires
            the Bank to classify its  securities  as: (1) held to maturity,  (2)
            available for sale and (3) trading.

            Securities  held  to  maturity   consist  of  debt  securities  that
            management  intends  to, and the Bank has the ability to, hold until
            maturity.   Such  securities  are  stated  at  cost,   adjusted  for
            amortization of premium and accretion of discount.

            Securities  available for sale consist of debt and equity securities
            that are not  intended to be held to  maturity  and are not held for
            trading.  Securities  available for sale are reported at fair value,
            with  unrealized  gains and losses  credited or charged,  net of tax
            effect,  directly to stockholders' equity. Realized gains and losses
            on  securities  available  for sale  are  determined  on a  specific
            identification basis.

            The Bank has not classified any of its securities as trading.

         E. Loans Receivable
            ----------------

            Loans are  stated at their  principal  amounts  outstanding,  net of
            unearned  income and loan  origination  fees and costs.  Interest on
            loans is accrued  and  credited  to  interest  income  based on loan
            principal  amounts  outstanding at appropriate  interest rates. Loan
            origination  fees and  certain  direct  loan  origination  costs are
            deferred and  recognized  over the life of the loan as an adjustment
            to the loan's yield.  When  management  believes there is sufficient
            doubt as to the ultimate collectibility of interest on any loan, the
            accrual of  applicable  interest  is  discontinued.  Any  subsequent
            payments  are  credited to income as  received.  Other loan fees are
            recorded as earned and included in non-interest income.

            Statement of Financial  Accounting Standards No. 114, "Accounting by
            Creditors  for  Impairment  of a Loan," (SFAS No. 114) as amended by
            Statement of Financial  Accounting Standards No. 118, "Accounting by
            Creditors  for  Impairment  of  a  Loan-  Income   Recognition   and
            Disclosures," (SFAS No. 118) were adopted  prospectively by the Bank
            on January 1, 1995.  SFAS No. 114 defines an impaired loan as a loan
            for which it is  probable  based on  current  information,  that the
            lender will not collect all amounts due under the contractual  terms
            of the loan  agreement.  The  Bank has  defined  the  population  of
            impaired loans to be all non-accrual loans.  Commercial and mortgage
            impaired  loans are  individually  assessed to  determine  that each
            loan's  carrying  value is not in  excess  of the fair  value of the
            related  collateral or the present value of the expected future cash
            flows.  There were no impaired loans at March 31, 1997 as defined by
            SFAS 114 and SFAS 118.



<PAGE>

                Westwood Financial Corporation and Subsidiary              F-8
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------

Note 1  - Summary of Significant Accounting Policies: (continued)
          -------------------------------------------------------

         F. Provision for Loan Losses
            -------------------------

            The allowance for loan losses is established through a provision for
            loan losses charged to income.  Losses on loans are charged  against
            the  allowance  when  management   believes  the  collectibility  of
            principal is unlikely.  Subsequent recoveries,  if any, are credited
            to the  allowance.  The  allowance  for loan  losses  is based  upon
            factors  such  as  individual  loan   characteristics,   changes  in
            composition  and volume of the loan portfolio,  economic  conditions
            and other factors that may warrant  recognition  in  maintaining  an
            allowance  at a level  sufficient  to  provide  for  estimated  loan
            losses.  Management  believes  that the allowance for loan losses is
            adequate.  While management uses available  information to recognize
            losses on loans,  future additions to the allowance may be necessary
            based on changes in economic  conditions,  particularly  in Northern
            New Jersey. In addition, various regulatory agencies, as an integral
            part of their examination  process,  periodically  review the Bank's
            allowance  for loan  losses.  Such  agencies may require the Bank to
            recognize additions to the allowance based on their judgements about
            information available to them at the time of their examination.

         G. Property and Equipment
            ----------------------

            Property  and  equipment   are  stated  at  cost  less   accumulated
            depreciation and amortization. Depreciation and amortization charges
            are computed  using the  straight-line  method,  over the  estimated
            useful  lives of the  assets.  The  estimated  useful  lives  are as
            follows:

                  Classification                         Life (Years)
                  --------------                         ------------

              Building and building improvements             39
              Office property and equipment                5 to 10
              Leasehold improvements                         10

            The Company adopted SFAS No. 121,  "Accounting for the Impairment of
            Long-Lived  Assets and for Long-Lived  Assets to be Disposed of," in
            fiscal year 1997. This statement  requires  impairment  losses to be
            recorded on long-lived  assets used in operations when indicators of
            impairment  are present.  Impairment  would be  considered  when the
            undiscounted  cash flows  estimated  to be generated by those assets
            are less than the assets'  carrying amount.  Implementation  of this
            statement had no effect on the consolidated financial statements.





<PAGE>

                Westwood Financial Corporation and Subsidiary              F-9
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------




Note 1  - Summary of Significant Accounting Policies: (continued)
          -------------------------------------------------------

         H. Goodwill
            --------

            Goodwill,  which  represents the excess of the cost of acquiring the
            Haworth,  New Jersey branch over the fair value of the net assets at
            the date of acquisition,  is being amortized using the straight line
            method over 15 years. The asset is evaluated  annually for potential
            impairment.

         I. Interest Rate Risk
            ------------------

            The Company is engaged principally in providing first mortgage loans
            to  individuals.  At March 31, 1997,  the Company's  assets  consist
            primarily of assets that earned  interest at fixed  interest  rates.
            Those assets were funded primarily with short-term  liabilities that
            have interest rates that vary with market rates over time.

            The shorter duration of the interest-sensitive liabilities indicates
            that the  Company is exposed to  interest  rate risk  because,  in a
            rising rate  environment,  liabilities  will be repricing  faster at
            high interest rates,  thereby reducing the market value of long-term
            assets and net interest income.

         J. Statement of Cash Flows
            -----------------------

            For  purposes of  reporting  cash flows,  cash and cash  equivalents
            include  cash  on  hand,   amounts  due  from  banks  with  original
            maturities  of  three  months  or  less,  and  Federal  funds  sold.
            Generally, Federal funds sold are for a one-day period.

         K. Income Taxes
            ------------

            The Company  accounts for income taxes in accordance  with Statement
            of Financial  Accounting  Standards No. 109,  "Accounting for Income
            Taxes" (SFAS No. 109).  Under the asset and liability method of SFAS
            No. 109,  deferred tax assets and liabilities are recognized for the
            estimated  future  tax  consequences   attributable  to  differences
            between the financial  statement carrying amounts of existing assets
            and liabilities and their respective tax bases.  Deferred tax assets
            and  liabilities  are measured using enacted tax rates in effect for
            the year in which those  temporary  differences  are  expected to be
            recovered or settled. Under SFAS No. 109, the effect on deferred tax
            assets and  liabilities  of a change in tax rates is  recognized  in
            income in the period that includes the enactment date.




<PAGE>

               Westwood Financial Corporation and Subsidiary               F-10
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------


Note 1  - Summary of Significant Accounting Policies: (continued)
          -------------------------------------------------------

         L. Earnings per Share
            ------------------

            Earnings  per share  amounts  for the year end  March  31,  1997 are
            determined by dividing net income by the calculated weighted average
            number  of  shares of common  stock  and  common  stock  equivalents
            outstanding.  Stock options are regarded as common stock equivalents
            computed using the Treasury Stock method, however, they did not have
            a material effect on primary and fully diluted earnings per share.

            Earnings per share data is not  presented for the year end March 31,
            1996 due to the  conversion  and  reorganization  effective  June 6,
            1996, and such information would not be meaningful.

Note 2  - Cash and Cash Equivalents:
          -------------------------

          Cash and cash equivalents consist of the following at March 31:

                                                     1997         1996
                                                     ----         ----
          Noninterest bearing:
            Cash on hand                          $  1,475      $   330
            Fleet Bank                                  19           36
            Core States Bank                            31           50
            Westwood Savings Bank                        5           -
                                                    ------       ------
                                                     1,530          416
                                                     -----        -----
          Interest bearing:
            Federal Reserve Bank                     1,751        1,236
            F.H.L.B. - Demand                          327          256
            F.H.L.B. - Overnight                       700          300
            First USA                                1,000        3,000
            Bogota Savings Bank                        100           -
                                                     -----       ------
                                                     3,878        4,792
                                                     -----       ------
                 Total                             $ 5,408      $ 5,208
                 -----                               =====        =====



<PAGE>

               Westwood Financial Corporation and Subsidiary              F-11
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------

Note 3  -  Loans Receivable and Interest Receivable:
           ----------------------------------------

                                 March 31, 1997
                                 --------------

          Loans receivable and interest receivable consist of the following:

                                                                      Loans
                                                                    Receivable
                                                                    ----------
                                                                  (in thousands)


          Conventional direct reduction mortgages                    $ 29,215
          Second mortgages                                              6,592
          Mortgage loan participation                                     436
          V.A. Direct Reduction Mortgages                                  12
          Account loans                                                   971
          Property improvement loans                                    1,062
          Home equity lines of credit                                   1,708
          Student loans                                                   113
          Automobile loans                                                300
          Personal loans                                                  189
          Construction loans                                               68
          NOW credit reserve loans                                          1
                                                                     --------
                                                                       40,667

          Add, interest receivable                                        225

          Less, Deferred loan origination
                fees (see Note 4)                                         (78)


                Valuation allowance relating
                 to loan losses (see Note 5)                             (218)
                                                                     --------


               Total                                                 $ 40,596
               -----                                                 ========

          The following table sets forth the maturity of loans  receivable as of
March 31, 1997:

                                                                 (In Thousands)
                                                                 --------------

          Maturity of one year or less                               $  3,534
          Maturity of over one through two years                        1,148
          Maturity of over two through three years                      1,796
          Maturity of over three through five years                     5,988
          Maturity of over five through ten years                       8,029
          Maturity of over ten years                                   20,172
                                                                       ------

               Total                                                 $ 40,667
               -----                                                   ======




<PAGE>

               Westwood Financial Corporation and Subsidiary              F-12
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------



Note 3  - Loans Receivable and Interest Receivable: - (continued)
          ----------------------------------------               

                                 March 31, 1996
                                 --------------

          Loans receivable and interest receivable consist of the following:


                                                                     Loans
                                                                   Receivable
                                                                   ----------
                                                                (in thousands)


          Conventional direct reduction mortgages                   $ 26,578
          Second mortgages                                             4,782
          Mortgage loan participation                                    439
          F.H.A. Direct Reduction Mortgages                                9
          V.A. Direct Reduction Mortgages                                 13
          Account loans                                                  489
          Property improvement loans                                     830
          Home equity lines of credit                                  1,075
          Student loans                                                   87
          Automobile loans                                               356
          Personal loans                                                 180
                                                                    --------
                                                                      34,838

          Add, interest receivable                                       211

          Less, Deferred loan origination
                fees (see Note 4)                                       (165)


                Valuation allowance relating
                 to loan losses (see Note 5)                            (169)
                                                                    --------


               Total                                                $ 34,715
               -----                                                  ======





<PAGE>

               Westwood Financial Corporation and Subsidiary              F-13
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------



Note 4 -  Deferred Income:
          ---------------
                                                               March 31,
                                                               ---------
                                                          1997         1996
                                                          ----         ----
                                                          (in thousands)

          Deferred income deducted from loans
            receivable in Note 3 (above) consists
            of the following:

             Deferred loan fees                        $     54      $   125
             Modification origination fees                   24           40
                                                          -----        -----

                  Total                                 $    78      $   165
                  -----                                   =====        =====


Note 5  - Valuation Allowance:
          -------------------

          The valuation allowance  pertaining to loan losses deducted from loans
          receivable in Note 3 (above) consists of the following:

                                                               March 31,
                                                               ---------
                                                           1997         1996
                                                           ----         ----
                                                            (in thousands)

          Balance, beginning of period                   $   169      $   134

            Add, provision charged to income                  52           35

            Less, losses charged against
                    allowance                                (3)          -
                                                          -----        ----

          Balance, end of period                         $   218      $   169
          ----------------------                           =====        =====





<PAGE>

               Westwood Financial Corporation and Subsidiary              F-14
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------

Note 6  - Investments and Accrued Interest:
        -----------------------------------
<TABLE>
<CAPTION>

                                                    March 31, 1997
                                                    --------------
                                                                 Gross        Gross
                          Interest     Face       Amortized    Unrealized  Unrealized      Market     Accrued
                Maturity    Rate       Amount        Cost         Gains      Losses        Value     Interest
                --------    ----       ------        ----         -----      ------        -----     --------

  ($ in thousands)
<S>           <C>          <C>       <C>           <C>           <C>         <C>          <C>        <C>     
1.   Investments held for resale:

Asset Manage-
 ment Fund
 Adjustable
 Rate
 Mortgages         N/A     6.144%    $     2       $     2       $     -     $      -     $     2    $      -
                 =====     =====     =======        ======         =====       ======     =======    ========

2.   Investments held to maturity:


Federal Home               5.04%
 Loan Bank                  to
 Notes           Various   8.31%     $ 15,500      $15,497       $     -     $   (282)    $15,215    $    259


Federal Home    04/21/97   5.47%
 Loan Bank         to        to
 Term Deposits  05/19/97   5.51%        1,000        1,000             -            -       1,000           1


US Treasury
 Note           01/15/99   6.375%         500          497             3            -         500           6


Federal National           5.3%
 Mortgage Assoc.            to
 Bonds           Various   8.0%         8,000        8,000             -         (122)      7,878         154


Westwood Board
 of Education
 Bond           06/15/00   5.35%          400          409             2            -         411           6


Student Loan
 Marketing
 Association
 Bonds          07/25/00   6.445%          500         500             -           (6)        494          6


Federal Home
 Loan Mortgage  02/02/99   5.7%
 Corporation       to       to
 Bonds          11/20/06   8.04%        13,000      13,000            -          (374)     12,626        311
                                        ------      ------       ------         -----      ------   --------


                   Total               $38,900     $8,903        $    5       $  (784)    $38,124    $   743
                   -----               =======     ======        ======        ======     =======    =======

</TABLE>

<PAGE>



               Westwood Financial Corporation and Subsidiary              F-15
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------


Note 6  - Investments and Accrued Interest: - (continued)
          --------------------------------               
<TABLE>
<CAPTION>

                                                   March 31, 1996
                                                   --------------
                                                                         Gross       Gross                                   
                                 Interest     Face       Amortized    Unrealized  Unrealized      Market     Accrued
                       Maturity    Rate       Amount        Cost         Gains      Losses        Value     Interest
                       --------    ----       ------        ----         -----      ------        -----     --------
   ($ in thousands)
<S>                  <C>          <C>       <C>           <C>           <C>         <C>          <C>        <C>     
1.   Investments held for resale:
                    
Asset Manage-        
 ment Fund           
 Adjustable          
 Rate                
 Mortgages              N/A       5.944%    $   3,500    $   3,500     $      -    $   (14)     $  3,486    $    18
                    
Overland Express
 Variable Rate       
                     
 Government Fund        N/A       4.786%        1,015        1,015            -        (79)          936          4 
                                              -------      -------       ------      -----        ------     ------
                     
                                            $   4,515    $   4,515      $     -     $  (93)      $ 4,422    $    22
                                              =======        =====       ======      =====        ======     ======
                     
2.   Investments held to maturity:
                     
Federal Home                      5.04%
 Loan Bank                         to
 Notes                 Various    8.31%     $  13,000     $ 12,997      $     -     $  (89)      $12,908    $   196
                     
                     
Federal Home         04/08/96     5.13%
 Loan Bank               to        to
 Term Deposits       04/22/96     5.66%         2,000        2,000            -          -         2,000         18
                     
                     
US Treasury          
 Note                01/15/99     6.375%          500          496           10          -           506          6
                     
                     
Federal National
 Mortgage Assoc.
 Bonds                 Various    8.0%          6,500        6,500            -        (52)        6,448        121
                     
                     
First USA Bank       
 Certificate of
 Deposit              03/21/97    5.85%           750          750            -          -           750          1
                     
                     
Student Loan         
 Marketing            10/14/99    6.445%
 Association             and       to
 Bonds                03/25/00    7.82%         1,000        1,000            4          -         1,004         24
                     
                     
Federal Home         
 Loan Mortgage        02/02/99    5.7%
 Corporation             to        to
 Bonds                02/27/06    7.584%        2,000        1,999            -        (28)        1,971         16
                                             --------      -------     --------    -------       -------     ------
                     
                         Total              $  25,750     $ 25,742      $    14     $ (169)      $25,587    $   382
                         -----               ========      =======       ======      =====       =======     ======
</TABLE>
                     
              
<PAGE>

               Westwood Financial Corporation and Subsidiary              F-16
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------



Note 6  - Investments and Accrued Interest:  (continued)
          --------------------------------

          Investments  held to maturity are  scheduled  to mature  contractually
within the following periods as of March 31, 1997:
<TABLE>
<CAPTION>

                                                                                          (In Thousands)
                                                                                          --------------
                                                                                       Amortized     Market
                                                                                        Cost         Value
                                                                                        ----         -----

<S>                                                                                    <C>          <C>      
          Maturity of one year or less                                                 $   1,000    $   1,000
          Maturity of more than one year through five years                               15,905       15,760
          Maturity of more than five years through ten years                              17,998       17,514
          Maturity of more than ten years                                                  4,000        3,850
                                                                                          ------       ------


               Total                                                                    $ 38,903     $ 38,124
               -----                                                                      ======       ======
</TABLE>

Note 7 -  Mortgage-backed Securities and Accrued Interest:
          -----------------------------------------------
<TABLE>
<CAPTION>


                                                   March 31, 1997
                                                   --------------
                                                                  Gross       Gross
                          Interest     Face       Amortized    Unrealized  Unrealized     Market       Accrued
                Maturity    Rate       Amount        Cost        Gains       Losses       Value        Interest
                --------    ----       ------        ----        -----       ------       -----        --------

   ($ in thousands)
<S>               <C>         <C>   <C>          <C>         <C>            <C>         <C>             <C>  
Investments held to maturity:

Federal National
 Mortgage Assoc   1/1/99      6.5%
 Participating      to         to
 Certificates     3/1/26      7.5%  $  5,029     $  3,227    $     -        $  (80)     $  3,147        $  19

Federal Home
 Loan Mortgage
 Corporation      4/1/96      5.0%
 Participating     to          to
 Certificates     1/1/02     8.75%    14,498        5,256          -          (119)        5,137           29

Federal Home
 Loan Mortgage
 Corporation      4/1/17
 Participating     to
 Certificates     9/1/22      ARM      3,184          684         12            -           696             8

</TABLE>



<PAGE>

               Westwood Financial Corporation and Subsidiary              F-17
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------



Note 7 -  Mortgage-backed Securities and Accrued Interest: (continued)
          -----------------------------------------------
<TABLE>
<CAPTION>

                                                        March 31, 1997
                                                        --------------
                                                                       Gross       Gross
                               Interest     Face       Amortized    Unrealized  Unrealized     Market       Accrued
                     Maturity    Rate       Amount        Cost         Gains      Losses       Value        Interest
                     --------    ----       ------        ----         -----      ------       -----        --------

  ($ in thousands)
<S>                   <C>       <C>        <C>          <C>           <C>         <C>         <C>            <C>
Investments held to maturity:

Government National
 Mortgage Assoc
 Participating
 Certificate          5/15/01        8%            9            9          -           -              9          -

Government National  11/20/22      5.0%
 Mortgage               to          to
 Association          3/20/27    7.125%       10,040        9,208           27         -          9,235           44

Federal National
 Mortgage Assoc        1/1/17
 Participating          to
 Certificates         11/1/22      ARM         2,129        1,344           13          -         1,357            8
                                              ------       ------        -----       -----       ------         ----

                     Total                  $ 34,889     $ 19,728      $    52     $ (199)     $ 19,581       $  108
                     -----                    ======       ======        =====       ====        ======         ====
</TABLE>


Mortgage-backed   securities   held  to  maturity   are   scheduled   to  mature
contractually within the following periods as of March 31, 1997:
<TABLE>
<CAPTION>

                                                                     (In Thousands)
                                                                     --------------
                                                                  Amortized   Market
                                                                    Cost      Value
                                                                    ----      -----

<S>                                                             <C>         <C>      
          Maturity of one year or less                          $     394   $     393
          Maturity of more than one year through five years         6,244       6,101
          Maturity of more than five years through ten years          -           -
          Maturity of more than ten years                          13,090      13,087
                                                                   ------      ------

               Total                                             $ 19,728    $ 19,581
               -----                                               ======      ======
</TABLE>




<PAGE>



               Westwood Financial Corporation and Subsidiary              F-18
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------


Note 7 -  Mortgage-backed Securities and Accrued Interest:- (continued)
          -----------------------------------------------
<TABLE>
<CAPTION>

                                                             March 31, 1996
                                                             --------------
                                                                            Gross       Gross
                                    Interest     Face       Amortized    Unrealized  Unrealized     Market       Accrued
                          Maturity    Rate       Amount        Cost         Gains      Losses       Value        Interest
                          --------    ----       ------        ----         -----      ------       -----        --------

  ($ in thousands)
<S>                      <C>        <C>    <C>          <C>         <C>             <C>        <C>            <C>    
Investments held to maturity:

Federal National
 Mortgage
 Association               1/1/99    6.5%
 Participating               to        to
 Certificates              3/1/26    7.5%   $  4,015     $  2,597   $     -         $  (41)    $  2,556        $  15

Federal Home
 Loan Mortgage
 Corporation               4/1/96     5%
 Participating                to      to
 Certificates              1/1/02    8.75%    14,763        6,527         -            (55)       6,472           36


Federal Home
 Loan Mortgage
 Corporation               4/1/17
 Participating                to
 Certificates              9/1/22    ARM       4,696          853           19         -            872           10


Government National
 Mortgage
 Association
 Participating
 Certificates              5/15/01    8%          11           11            1         -             12          -


Government National
 Mortgage                 11/20/22    to
 Association              10/24/24   7.25%     2,015        1,661           47        -           1,708           10

Federal National
 Mortgage
 Association               1/1/17
 Participating               to
 Certificates             11/1/22     ARM      2,129        1,632           14         -          1,646           10
                                              ------       ------         ----       ------      ------         ----

                          Total            $  27,629    $  13,281      $    81    $   (96)    $  13,266      $    81
                          -----               ======       ======        =====      =====        ======        =====
</TABLE>





<PAGE>


               Westwood Financial Corporation and Subsidiary              F-19
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------


Note 8  - Property and Equipment:
          ----------------------

          Office property and equipment consist of the following at March 31:

                                                       1997         1996
                                                       ----         ----
                                                        (in thousands)
          Land                                       $   165       $  165
          Building and building improvements             370          363
          Furniture, fixtures
           and equipment                                 403          357
          Leasehold improvements                         158          158
                                                       -----        -----
                                                       1,096        1,043
          Less, accumulated depreciation
           and amortization                              362          293
                                                       -----        -----


             Total                                   $   734     $    750
             -----                                     =====       ======

          Depreciation expense was $69,726 and $60,012 for the years ended March
          31, 1997 and 1996, respectively.

Note 9 -  Deposits:
          --------

          Deposits,  which include demand and savings accounts,  certificates of
          deposit, and individual  retirement accounts are classified as follows
          at March 31:

                                                    1997             1996
                                             --------------    ----------------
          Balances by Interest Rate            Amount   %        Amount    %
                                                   ($ in thousands)
          Demand accounts (1.5 to 3.0%)      $ 13,111   15      $ 12,631   16
          Savings accounts (2.53 to 3.1%)      17,817   20        17,459   21
                                               ------  ---        ------  ---

                                               30,928   35        30,090   37
                                               ------  ---        ------  ---

          Certificates and Individual
           Retirement Accounts:
             3.02 to 4.14%                        537    1           759    1
             4.15 to 5.5%                      27,754   32        32,243   40
             5.55 to 7.0%                      28,514   32        16,682   21
             7.10 to 7.82%                        -     -            466    1
                                            --------- ----       -------  ---

                                               56,805   65        50,150   63
                                               ------  ---        ------  ---

          Accrued interest                        124   -            116   -
                                              ------- ----       ------- ----

             Total                           $ 87,857  100      $ 80,356  100
             -----                             ======  ===        ======  ===

          Included in deposits as of March 31, 1997 and 1996 were $3,011,000 and
          $3,037,000,   respectively,   of  individual   deposits  greater  than
          $100,000.


<PAGE>

               Westwood Financial Corporation and Subsidiary              F-20
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------



Note 10 - Time Deposits:
          -------------

          While frequently renewed at maturity rather than paid out, certificate
          amounts are  scheduled to mature  contractually  within the  following
          periods as of March 31, 1997:


                                                          (In Thousands)

          Maturity  of one year or less                       $ 50,151 
          Maturity of more than one year                         5,676 
          Maturity of more than two years                          506
          Maturity of more than three years 
            through five  years                                    472  
          Maturity of more than five years through
            ten years                                                -
          Maturity of more than 10 years                             -
                                                               -------
               Total                                          $ 56,805
               -----                                           =======

Note 11 - Loans Payable
          -------------

                                                            Balance at March 31:
                                                            --------------------

                                                               1997      1996
                                                               ----      ----
                                                               (in thousands)   
          Federal Home Loan Bank of New York
          $10,000,000 advance dated November 25, 1996
          due  November 25, 1998 with  interest at 5.96%
          paid  monthly, secured by qualifying one to 
          four family first lien mortgages held by
          the Company.                                      $  10,000   $ - - -
                                                             ========   ========


Note 12 - Commitments and Contingencies:

          Operating Leases:

          Effective  June 1,  1991 the Bank  entered  into a ten year  lease for
          office space.  This lease calls for minimum rents of $50,700 the first
          year escalating to $93,660 in the final year of the lease. The Bank is
          also liable for its  proportionate  share of property taxes as well as
          certain Merchant Association dues.




<PAGE>



               Westwood Financial Corporation and Subsidiary               F-21
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------



Note 12 - Commitments and Contingencies: - (continued)
          -----------------------------

          Operating Leases:
          -----------------


          The future minimum rental payments are as follows at March 31, 1997:

                                                      ($ in thousands)
                                                      ----------------

                           1998                            $  80
                           1999                               84
                           2000                               89
                           2001                               93
                           Thereafter                         16
                                                             ---

                           Total                           $ 362
                           -----                             ===

          Rental  expense under  operating  leases for the years ended March 31,
          1997 and 1996 was $91,728 and $89,902, respectively.

          Financial Instruments with Off-Balance Sheet Risk
          -------------------------------------------------


          In the ordinary  course of the business of meeting the financial needs
          of its customers,  the Bank is party to various financial  instruments
          which are properly not  reflected in the financial  statements.  These
          financial  instruments  include unused portions of lines of credit and
          commitments to extend various types of credit.


          These instruments involve, to varying degrees, elements of credit risk
          in excess of the amounts recognized in the financial  statements.  The
          Bank seeks to limit any  exposure of credit loss by applying  the same
          credit  underwriting  standards it uses for  on-balance  sheet lending
          facilities.  The  following  table  provides  a summary  of  financial
          instruments with off-balance sheet risk at March 31, 1997.
<TABLE>
<CAPTION>

                                                                            Contract
                                                                             Amount
                                                                             ------
                                                                      ($ in thousands)

<S>                                                                         <C>    
          Commitments under unused lines of credit                          $ 2,127
          Outstanding loan commitments                                        1,052
                                                                              -----

               Total financial instruments with off-balance sheet risk      $ 3,179
               -------------------------------------------------------      =======
</TABLE>

          Litigation
          ----------


          In the normal  course of business,  the Bank may be a party to various
          legal  proceedings  and  claims.  In the  opinion of  management,  the
          financial  position or results of  operations  of the Bank will not be
          materially  affected  by the  outcome  of such legal  proceedings  and
          claims.



<PAGE>
               Westwood Financial Corporation and Subsidiary              F-22
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------

Note 13 - Federal Income Taxes:
          --------------------

          The Small  Business Job Protection Act of 1996 (1996 Act) repealed the
          "percentage of income method" for accounting for the provision for bad
          debts. The Bank has used this method  consistently in developing their
          bad debt  provision and reserve for income tax purposes  through March
          31, 1996.  The 1996 Act requires the Bank to recapture any addition to
          this  reserve  made  subsequent  to 1987.  The Bank has  approximately
          $392,000  of post 1987  reserves  for  which no  deferred  income  tax
          liability, approximately $145,000, has be recognized.
<TABLE>
<CAPTION>

                                                                           Years Ended March 31,
                                                                           ---------------------
                                                                           1997              1996
                                                                    ----------------- -----------------
                    ($ in thousands)                                  Amount      %     Amount      %
                                                                    --------    -----  -------    ---


<S>                                                                     <C>     <C>        <C>    <C>  
          Computed statutory federal tax expense                        $ 258   34.0%      $ 289  34.0%
                                                                          ---   ----         ---  ----


          Changes in tax expense resulting from:

          Benefit of state income tax deduction                           (4)    (.5)         (9) (1.0)
          Bad debt deductions                                              -       -         (25) (2.9)
          Dividend income exclusion                                       (7)    (.9)         (7) (0.9)
          Other                                                           34     4.4          24   2.8
          Non-deductible capital loss                                     33     4.3           -     -
                                                                        -----   ----        ----   ---
                                                                          56     7.3         (17) (2.0)
                                                                        -----   ----        ----  ----

            Federal income tax expense                                $  314    41.3%      $ 272  32.0%
            --------------------------                                  =====   ====         ===  ====
</TABLE>

Note 14 - Capital Adequacy:
          ----------------

          A  reconciliation   of   shareholders'   equity  as  reported  in  the
          accompanying   financial   statements  in  accordance  with  generally
          accepted  accounting  principles  (GAAP)  to the three  components  of
          regulatory  capital  required by the  Financial  Institutions  Reform,
          Recovery,  and  Enforcement  Act  (FIRREA) of 1989 is as follows as of
          March 31 (in thousands):
<TABLE>
<CAPTION>

                                                                           1997                                1996
                                                        --------------------------------------  -----------------------------------
                                                                             Tier 1    Risk-                       Tier 1   Risk-
                                                            GAAP   Leverage  or Core   Based     GAAP   Leverage  or Core   Based
                                                          Capital  Capital   Capital  Capital   Capital Capital   Capital  Capital
                                                          -------  -------   -------  -------   ---------------   -------  -------
<S>                                                      <C>       <C>      <C>      <C>       <C>        <C>      <C>      <C>    
          Net worth reported for financial
           statement purposes:                           $ 8,385   $ 8,385  $ 8,385  $ 8,385   $ 6,126    $ 6,126  $ 6,126  $ 6,126
                                                           =====                                 =====


          Adjustments to arrive at regulatory capital:
            Non-allowable capital                                     (160)     (160)    (160)               (112)    (112)    (112)
            Non-allowable assets                                    (1,132)   (1,132)  (1,132)             (1,238)  (1,238)  (1,238)
            General loan valuation allowance                             -        -       218                  -        -       169
                                                                     -----    -----     -----               -----    -----    -----
               Computed regulatory capital                           7,093     7,093    7,311               4,776    4,776    4,945
               Minimum capital requirement                           3,124     1,531    3,063               2,520    1,320    2,639
                                                                     -----     -----    -----               -----    -----    -----
                                                                                            
                                                                                            
            Regulatory capital-excess                              $ 3,969   $ 5,562  $ 4,248             $ 2,256  $ 3,456  $ 2,306
            -------------------------                                =====     =====    =====               =====    =====    =====
</TABLE>                                


<PAGE>



               Westwood Financial Corporation and Subsidiary              F-23
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------



Note 15 -  Treasury Stock:
           --------------

          On January 10, 1997, the Company  completed a "Modified Dutch Auction"
          self-tender  offering which commenced on November 25, 1996. A total of
          1,431 shares were  purchased at a price of $15.00 per share plus costs
          of the  offering of $31,000 and held as treasury  stock.  The Board of
          Directors approved the retirement of the shares held as treasury stock
          which  resulted  in a  reduction  of  additional  paid in  capital  of
          $51,000.


Note 16 - Interest on Deposits:
          --------------------

          Interest  expense on  customer  deposits is  summarized  as follows at
March 31:

                                                         1997          1996
                                                      ----------    ----------
                                                        (in thousands)
          Interest expense on:
            Certificates of deposit and
             other time deposits                      $  2,920      $  2,693
            Savings accounts                               416           387
            NOW accounts                                   230           238
                                                        ------        ------
                                                         3,566         3,318
            Less, penalties for early
             withdrawal                                     (6)           (4)
                                                        ------        ------

                Total                                 $  3,560      $  3,314
                -----                                   ======        ======

Note 17 - Loan Commitments:
          ----------------

          The Bank had  open  loan  commitments  at March  31,  1997 and 1996 of
          $1,052,000 and $1,073,000,  respectively.  All loan commitments expire
          thirty to sixty days from the date issued.  These  commitments,  which
          are not reflected in the accompanying financial statements, are broken
          down by interest rate as follows:

                                                          Years Ended March 31,
                      Rate                                  1997          1996
                   ----------                            ------------  --------
                                                            (in thousands)
                    6.5 - 6.9                           $     22      $   430
                    7.0 - 7.4                                405          378
                    7.5 - 8.0                                273          -
                    8.1 - 8.5                                110          265
                    8.6 - 9.0                                230          -
                    9.1 -10.0                                 12          -
                                                           -----        -----

                                                         $ 1,052      $ 1,073
                                                           =====        =====



<PAGE>



               Westwood Financial Corporation and Subsidiary              F-24
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------




Note 18 - Loans to Related Parties:
          ------------------------

          The  Bank  has  had,  and  expects  to  have  in the  future,  banking
          transactions  conducted  in  the  ordinary  course  of  business  with
          directors,  executive  officers and their affiliates on the same terms
          as those prevailing for comparable  transactions with other borrowers.
          These loans  amounted to $371,824  and  $257,366 at March 31, 1997 and
          1996,  respectively,  and do not  involve  more than  normal  risks of
          repayment.  At March 31, 1997 and 1996,  these loans  represented 3.7%
          and 4.2%, respectively, of shareholders' equity.

Note 19 - Employee Benefit Plan:
          ---------------------

          As of January 1, 1994 the bank adopted a financial  institution thrift
          plan  pursuant  to IRS  Section  401(K).  Employees  of the  bank  may
          participate  in the  401(K)  plan  whereby  they  may  elect  to  make
          contributions  pursuant to a salary reduction agreement upon meeting a
          length  of  service   requirement.   The  bank  matched  the  employee
          contribution at a rate of 25% of up to 4% of the employees  salary. As
          of January 1, 1996 the bank began  matching the employee  contribution
          at a  rate  of 50% of up to 4% of the  employees  salary.  The  bank's
          contributions  to the plan for the years ended March 31, 1997 and 1996
          were $7,214 and $5,011, respectively.

Note 20 - Stock Bonus Plans:
          -----------------

          Effective  December 9, 1993, in connection with the  reorganization of
          Westwood  Savings Bank, the Bank  established  three  Management Stock
          Bonus Plans  ("MSBPs") to reward certain key  directors,  officers and
          employees with  proprietary  interest in the Bank as compensation  for
          future  professional  service.  The Bank contributed  24,000 shares of
          common stock to the Plans, and  accordingly,  recorded no proceeds for
          the issuance of the common stock. Shares are granted at the discretion
          of a committee  appointed  by the Board of  Directors  and vested at a
          rate of 20% per year over 5 years.  The Bank will record  compensation
          expense and equity as individual  employees vest in allocated  shares.
          After the conversion of Westwood Financial Corporation and Subsidiary,
          the 24,000 shares were  exchanged for 39,216  shares.  As of March 31,
          1997  and  1996  the  Plan  had  granted  39,216  and  24,000  shares,
          respectively,  to employees of which 26,235 and 9,989 shares have been
          vested  as of March  31,  1997 and  1996,  respectively.  Compensation
          expense  recorded for the MSBP's shares totaled  $48,000 for the years
          ended March 31, 1997 and 1996.  The  expense is being  recognized  pro
          rata  over  a  sixty   month   period   starting   from  the  date  of
          reorganization (December 9, 1993) for financial statement purposes.



<PAGE>



               Westwood Financial Corporation and Subsidiary              F-25
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------




Note 21 - Stock Option Plan:
          -----------------

          In  December  1995,  in  connection  with the 1993 option  plans,  the
          remaining   options  (8,003  shares)  were  granted  to  officers  and
          directors  at an  exercise  price  of  $13.25  per  share.  After  the
          conversion  of Westwood  Financial  Corporation  and  Subsidiary,  the
          exercise  price was adjusted to $8.11.  No options  granted under 1993
          option plans have been exercised as of March 31, 1997.


          Financial  Accounting  Standards Board (FASB)  Statement on Accounting
          for Stock-Based  Compensation - In October 1995, FASB issued Statement
          of Financial  Accounting  Standards  (SFAS) No. 123,  "Accounting  for
          Stock  Based  Compensation."  SFAS No. 123 defines a "fair value based
          method"  of   accounting   for  an  employee   stock  option   whereby
          compensation  cost is measured at the grant date based on the value of
          the award and is recognized over the service  period.  FASB encourages
          all entities to continue the use of the "intrinsic value based method"
          prescribed by  Accounting  Principles  Board  ("APB")  Opinion No. 25.
          Under the  intrinsic  value  based  method,  compensation  cost is the
          excess of the  market  price of the  stock at the grant  date over the
          amount an employee must pay to acquire the stock.  However, most stock
          option plans have no  intrinsic  value at the grant date and, as such,
          no compensation  cost is recognized under APB Opinion No. 25. Entities
          electing to continue  use of the  accounting  treatment of APB Opinion
          No. 25 must make  certain pro forma  disclosures  as if the fair value
          based method had been applied. The accounting requirements of SFAS No.
          123 are  effective  for  transactions  entered  into in  fiscal  years
          beginning after December 15, 1995. Pro forma  disclosures must include
          the effects of all awards granted in fiscal years  beginning  December
          15, 1994. The Bank  anticipates to continue using the "intrinsic value
          based method" as  prescribed  by APB Opinion No. 25. Had  compensation
          cost for the Company's stock option plans been determined based on the
          fair value at the dates of the awards  under  those  plans  consistent
          with the  method of SFAS No.  123,  the  effect on the  Company's  net
          income and  income  per share  would be  immaterial  to the  financial
          statements.


<PAGE>



               Westwood Financial Corporation and Subsidiary              F-26
                 Notes to the Consolidated Financial Statements
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------


Note 22 - Fair Value of Financial Instruments
          -----------------------------------

          Statement  of Financial  Accounting  Standards  No. 107,  "Disclosures
          about  Fair  Value of  Financial  Instruments"  (SFAS  107),  requires
          disclosure  of fair value  information  about  financial  instruments,
          whether  or not  recognized  in the  balance  sheet,  for  which it is
          practicable  to  estimate  that  value.  The fair value of a financial
          instrument is defined as the amount at which the  instrument  could be
          exchanged in a current transaction between willing parties, other than
          in a forced or liquidation  sale. SFAS 107 excludes certain  financial
          instruments  and all  non-financial  instruments  from its  disclosure
          requirements.  Accordingly, the aggregate fair value amounts presented
          do not represent the underlying value of the Bank.

          Fair value  estimates  are made at a  specific  point in time based on
          relevant  market  information  and  information  about  the  financial
          instrument. In cases where the quoted market prices are not available,
          fair  values  are  based on  estimates  using  present  value or other
          valuation  techniques.  These  estimates do not reflect any premium or
          discount  that could  result  from  offering  for sale at one time the
          entire holdings of a particular financial instrument. Those techniques
          are  significantly  affected by the  assumptions  used,  including the
          discount  rate  and  estimated   future  cash  flows,  and  judgements
          regarding expected loss experience,  current economic conditions, risk
          characteristics  of various  financial  instruments and other factors.
          These estimates  involve  uncertainties  and are subjective in nature,
          and  therefore  cannot  be  determined  with  precision.   Changes  in
          assumptions could significantly affect the estimates.

          Fair value  estimates  are  determined  for on and off  balance  sheet
          financial  instruments,  without  attempting  to estimate the value of
          anticipated  future business,  and the value of assets and liabilities
          that  are  not  considered  financial  instruments.  Tax  implications
          related to the  realization of the unrealized  gains and losses have a
          significant   effect  on  fair  value  estimates  and  have  not  been
          considered in any of the estimates.

          The  following  methods  and  assumptions  were  used  by the  Bank in
          estimating its fair value disclosures for financial instruments.

          Cash and cash equivalents and accrued interest receivable:

          The fair  value for cash and cash  equivalents  and  accrued  interest
          receivable are equal to the carrying amounts reported in the financial
          statements.

          Securities:

          The fair  values for  securities  are based on quoted  market  prices,
          where  available.  If quoted  market  prices are not  available,  fair
          values are based on quoted market prices of comparable instruments.



<PAGE>


               Westwood Financial Corporation and Subsidiary              F-27
                  Notes to the Consolidated Financial Statement
                             March 31, 1997 and 1996
--------------------------------------------------------------------------------



Note 22 - Fair Value of Financial Instruments (continued)
          -----------------------------------

          Loans:
          -----

          The fair  values of loans are  estimated  by  discounting  future cash
          flows,  using  interest rates  currently  being offered for loans with
          similar terms to borrowers of similar credit quality.

          Deposits:
          --------

          The  fair  value of  demand  and  savings  deposits  are  equal to the
          carrying   amounts   reported  in  the   financial   statements.   For
          certificates  of  deposit,  fair  value is  estimated  using the rates
          currently offered for deposits of similar maturities.

          Commitments to extend credit:
          ----------------------------

          These  off-balance  sheet  instruments  are comprised of unfunded loan
          commitments  which  are  generally  priced  at  market  at the time of
          funding,  therefore,  the fair values of these items are substantially
          similar to the related notional amounts.


          The carrying values and estimated fair values of the Bank's  financial
          instruments are as follows:
<TABLE>
<CAPTION>
                                            (In Thousands)       (In Thousands)
                                            March 31, 1997       March 31, 1996
                                          ------------------  --------------------
                                          Carrying Estimated  Carrying  Estimated
                                           Amount  Fair Value   Amount  Fair Value
                                           ------  ----------   ------  ----------
Financial assets:
<S>                                        <C>       <C>       <C>       <C>    
  Cash and cash equivalents                $ 5,408   $ 5,408   $ 5,208   $ 5,208
  Securities available for sale                  2         2     4,422     4,422
  Securities held to maturity               59,207    58,281    39,463    39,293
  Loans                                     40,666    40,137    34,838    35,098
  Accrued interest receivable                1,077     1,077       699       699


Financial liabilities:
  Deposits                                  87,733    84,961    80,240    80,243
  Accrued interest payable                     124       124       116       116
  Loan payable - FHLB                       10,000    10,000

</TABLE>

<PAGE>



      
                         WESTWOOD FINANCIAL CORPORATION
<TABLE>
<CAPTION>

Directors                                  Officers
---------                                  --------
<S>                                        <C>
William J. Woods*                          William J. Woods
Chairman of the Board                      Chief Executive Officer and
                                           President
Joanne Miller*
Vice President                             Joanne Miller
                                           Vice President and
Paul F. Becker*                            Secretary
Consultant to Quinn Funeral Service
                                           George E. Niemczyk
John M. Caruso*                            Vice President/Controller
Home Restoration and Repair Company

William J. Durgin*
New York Life Insurance Agent

Sidney J. Hagan*
Retired construction official

* Also serves as Director of
  Westwood Savings Bank.

                         WESTWOOD SAVINGS BANK OFFICERS

William J. Woods                           Margaret Flood
Chairman of the Board                      Asst. Vice President/Branch Manager - Westwood

Joanne Miller                              Lynne Kopp
President                                  Asst. Vice President/Branch Manager - Haworth

Robert L. Pierson                          Catherine Solimando
Vice President                             Secretary

George E. Niemczyk
Vice President/Controller


Corporate Counsel                          Special Counsel
-----------------                          ---------------

Harry Randall, Jr.                         Malizia, Spidi, Sloane, & Fisch, P.C.
Randall, Randall, & Stevens                One Franklin Square
287 Kinderkamack Road                      1301 K Street, N.W.  Suite 700E
Westwood, NJ 07675                         Washington, DC 20005

Auditor                                    Transfer Agent and Registrar
-------                                    ----------------------------

RD Hunter and Company, LLP                 Registrar and Transfer Company
One Mack Center Drive                      10 Commerce Drive
Paramus, NJ 07652                          Cranford, NJ 07016

</TABLE>

The Corporation's Annual Report for the Year Ended March 31, 1997 filed with the
Securities and Exchange  Commision on Form 10- KSB without exhibits is available
without charge upon written request.  For a copy of the Form 10-KSB or any other
investor  information,  please write the Secretary of the  Corporation at 700-88
Broadway, Westwood, New Jersey 07675. The Annual Meeting of Stockholders will be
held on July 15, 1997 at 4:00 PM at the main office of Westwood Savings Bank.


                                       12


<PAGE>




                               WESTWOOD FINANCIAL
                                  CORPORATION



                     

                             WESTWOOD SAVINGS BANK


          700-88 Broadway                                   139 Terrace Street
         Westwood, NJ 07675                                 Haworth, NJ 07641
           (201) 666-5002                                     (201) 387-6777


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