SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-QSB


(Mark One)

[X}  QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

     For the quarterly period ended June 30, 1999
                                    -------------

                                       OR

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

     For the transition period from            to           .
                                    ----------    ----------

                           Commission File No. 0-25149


                            Ridgewood Financial, Inc.
--------------------------------------------------------------------------------
        (Exact name of Small Business Issuer as Specified in Its Charter)


         New Jersey                                     22-3616280
--------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation        (I.R.S. Employer
 or Organization)                                   Identification No.)

               55 North Broad Street, Ridgewood, New Jersey 07450
               --------------------------------------------------
                    (Address of Principal Executive Offices)


                                 (201) 445-7887
--------------------------------------------------------------------------------
                 Issuer's Telephone Number, Including Area Code

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

                                 YES   X       NO
                                      ---          ---

Number of shares of Common Stock outstanding as of August 2, 1999: 3,180,000


Transitional Small Business Disclosure Format (check one)

                                 YES           NO   X
                                      ---          ---



<PAGE>

                            RIDGEWOOD FINANCIAL, INC.

                                    Contents
                                    --------

                                                                         Page(s)
                                                                         -------
PART I - FINANCIAL INFORMATION

         Item 1.   Consolidated Financial Statements..........................3

         Item 2.   Management's Discussion and Analysis .....................11

PART II - OTHER INFORMATION

         Item 1.   Legal Proceedings.........................................23

         Item 2.   Changes in Securities and Use of Proceeds.................23

         Item 3.   Defaults upon Senior Securities...........................23

         Item 4.   Submission of Matters to a Vote of Security Holders.......23

         Item 5.   Other Information.........................................23

         Item 6.   Exhibits and Reports on Form 8-K..........................23

         Signatures..........................................................24


<PAGE>


PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                            Ridgewood Financial Inc.
                 Consolidated Statements of Financial Condition
                       June 30, 1999 and December 31, 1998
                        (In Thousands, Except Share Data)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                 June 30,                  December 31,
                                                                   1999                        1998
                                                                   ----                        ----
<S>                                                      <C>                        <C>
Assets:
Cash and due from banks                                   $          6,839           $            2,274
Federal funds sold                                                   4,900                       41,200
                                                            ---------------            -----------------
Cash and cash equivalents                                           11,739                       43,474
Investment securities:
Held to Maturity (fair value of $1,154 and $1,374
  at June 30, 1999 and December 31, 1998, respectively)              1,132                        1,354
Available for Sale                                                  30,944                       16,921
Mortgage-backed securities:
Held to Maturity (fair value of $10,090 and $11,409
  at June 30, 1999 and December 31, 1998, respectively)             10,160                       11,277
Available for Sale                                                  66,036                       88,390
Loans receivable, net                                              137,545                      107,021
Accrued interest receivable                                          1,664                        1,387
Premises and equipment, net                                          6,218                        2,218
Federal Home Loan Bank ("FHLB") stock, at cost                       2,622                        1,949
Other assets                                                         1,002                          742
                                                            ---------------            -----------------
     Total assets                                         $        269,062           $          274,733
                                                            ===============            =================

Liabilities And Stockholders' Equity
Deposits                                                           190,312                      205,529
Borrowed funds                                                      52,331                       32,557
Initial public offering subscriptions payable                            -                       17,809
Advances from borrowers for taxes and insurance                      1,080                          926
Accounts payable and other liabilities                                 428                          490
                                                            ---------------            -----------------
    Total liabilities                                              244,151                      257,311

Stockholders' Equity
Preferred stock, authorized 5,000,000 shares,
  None issued and outstanding                                            -                            -
Common stock, $0.10 Par Value,
  Authorized Shares 10,000,000,
  Issued 3,180,000 in 1999 and none in 1998,
  Outstanding Shares 3,180,000 in 1999
    and none in 1998                                                   318                            -
Additional paid-in capital                                           9,428                            -
Retained earnings                                                   17,151                       17,693
Unallocated common stock owned by
  employee stock ownership plan                                       (915)                           -
Accumulated other comprehensive loss                                (1,071)                        (271)
                                                            ---------------            -----------------
Total stockholders' equity                                          24,911                       17,422
                                                            ---------------            -----------------
     Total Liabilities and Stockholders' Equity           $        269,062           $          274,733
                                                            ===============            =================
</TABLE>

See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
                            Ridgewood Financial, Inc.
                   Consolidated Statements of Income (Expense)
                        (In Thousands, Except Share Data)
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                      Three Months Ended                     Year to Date
                                                                           June 30,                            June 30,
                                                                           --------                            --------
                                                                     1999            1998                1999            1998
                                                                     ----            ----                ----            ----
<S>                                                           <C>              <C>                <C>              <C>
Interest Income:
    Loans receivable                                           $         2,283  $       2,081      $         4,390  $       4,150
    Investment securities                                                   12             55                   27            184
    Mortgage-backed securities                                             166            231                  343            481
    Securities available for sale                                        1,314          1,481                2,772          2,700
    Other                                                                  201            264                  508            512
                                                                 --------------   ------------       --------------   ------------
       Total interest income                                             3,976          4,112                8,040          8,027
                                                                 --------------   ------------       --------------   ------------

Interest Expense:
    Deposits                                                             2,177          2,415                4,468          4,792
    Borrowed funds                                                         576            314                1,033            520
                                                                 --------------   ------------       --------------   ------------
       Total interest expense                                            2,753          2,729                5,501          5,312
                                                                 --------------   ------------       --------------   ------------

       Net interest income                                               1,223          1,383                2,539          2,715

Provision for loan losses                                                   36            129                   72            132
                                                                 --------------   ------------       --------------   ------------
       Net interest income after provision for loan losses               1,187          1,254                2,467          2,583
                                                                 --------------   ------------       --------------   ------------

Noninterest income:
    Fees and service charges                                                39             31                   75             67
    (Loss) gain on sale of securities                                   (1,070)            16               (1,070)            24
    Gain on sale of loans                                                    -              -                    -             21
    Other                                                                    5              6                    6              6
                                                                 --------------   ------------       --------------   ------------
       Total noninterest income                                         (1,026)            53                 (989)           118
                                                                 --------------   ------------       --------------   ------------

Noninterest expenses:
    Salaries and benefits                                                  566            542                1,175          1,036
    Occupancy and equipment                                                295            301                  610            555
    Advertising and promotion                                               18             45                   45             76
    SAIF deposit insurance premium                                          33             30                   63             59
    Other expenses                                                         188            150                  343            243
                                                                 --------------   ------------       --------------   ------------
       Total noninterest expense                                         1,100          1,068                2,236          1,969
                                                                 --------------   ------------       --------------   ------------

       Income (loss) before income taxes (benefit) expense                (939)           239                 (758)           732
    Income taxes (benefit) expense                                        (415)            91                 (415)           245
                                                                 --------------   ------------       --------------   ------------
       Net (loss) income                                       $          (524) $         148      $          (343) $         487
                                                                 ==============   ============       ==============   ============

    (Loss) earnings per common share:
       Basic                                                   $         (0.17) $           -      $         (0.11) $           -
                                                                 ==============   ============       ==============   ============
       Diluted                                                 $         (0.17) $           -      $         (0.11) $           -
                                                                 ==============   ============       ==============   ============

    Weighted average shares outstanding:
       Basic                                                         3,089,872              -            3,113,803              -
       Diluted                                                       3,089,872              -            3,113,803              -
</TABLE>

    See accompanying notes to consolidated financial statements.

                                       4
<PAGE>
                            Ridgewood Financial, Inc.
                      Consolidated Statements of Cash Flows
                     For the Six Months Ended June 30, 1999
                                 (In Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                  June 30,
                                                                                  --------
                                                                              1999        1998
                                                                              ----        ----
<S>                                                                      <C>         <C>
Cash flows from Operating Activities:
    Net (loss) income                                                     $      (343)$       487
    Adjustments to reconcile net income to net cash provided
    by operating activities:
    Depreciation                                                                  109         100
    Amortization of loan fees                                                    (104)        (60)
    Premiums and discounts on mortgage-backed and
      investment securities                                                     1,827         416
    Proceeds from loan sales                                                        -         771
    Gain on sale of loans                                                           -         (21)
    Gain on sale of securities available for sale                                   -         (24)
    Provision for loan losses                                                      72         132
    Allocation of employee stock ownership shares                                  48           -
    Deferred income tax expense (benefit)                                          44        (118)
    (Increase) decrease in accrued interest receivable                           (277)        223
    Decrease in other assets, net                                                 143         215
    Decrease in initial public offering subscriptions payable                 (17,809)          -
    Increase in other liabilities                                                 (62)       (299)
                                                                            ----------  ----------
       Net cash provided by operating activities                              (16,352)      1,822
                                                                            ----------  ----------

Cash flows from investing activities:
    Net (increase) decrease in first mortgage loans                           (15,858)      1,803
    Purchase of 1st mortgage loans                                            (15,180)          -
    Net decrease (increase) in consumer loans                                     510        (787)
    Purchases of mortgage-backed securities available for sale                      -     (46,600)
    Principal collected on mortgage-backed securities                          22,167      11,669
    Purchases of investment securities available for sale                     (15,771)     (1,470)
    Proceeds from sales of securities available for sale                            -       7,022
    Maturities and calls of investment securities held to maturity                  -       6,976
    Maturities and calls of investment securities available for sale                -       9,700
    Principal collected on investment securities                                  201         175
    Purchases of premises and equipment                                        (4,109)        (37)
    Purchases of FHLB Stock                                                      (673)          -
    Proceeds from collection of loan fees                                          36           -
                                                                            ----------  ----------
      Net cash used in investing activities                                   (28,677)    (11,549)
                                                                            ----------  ----------

Cash flows from financing activities:
    Net (decrease) increase in passbook, NOW and money market
      accounts                                                                 (1,702)      5,010
    Net decrease in certificates of deposit                                   (13,515)       (297)
    Proceeds from borrowed funds                                               19,774      18,190
    Repayment of borrowed funds                                                     -      (9,040)
    Net proceeds from initial public offering                                   9,751           -
    Purchase of employee stock ownership plan stock                              (968)          -
    Capitalization of mutual holding company                                     (200)          -
    Net increase (decrease) in advances from
      borrowers for taxes and insurance                                           154          (6)
                                                                            ----------  ----------
      Net cash (used in) provided by financing activities                      13,294      13,857
                                                                            ----------  ----------
      Net (decrease) increase in cash and cash equivalents                    (31,735)      4,130
Cash and cash equivalents at beginning of period                               43,474      15,398
                                                                            ----------  ----------
Cash and cash equivalents at end of period                                $    11,739 $    19,528
                                                                            ==========  ==========

Supplemental disclosures of cash flow information
Cash payments for:
     Interest on deposits and borrowed funds                              $     5,532 $     5,344
     Income taxes                                                                  48         370
Non-cash transactions - writedown of securities                                 1,070           -

</TABLE>

    See accompanying notes to consolidated financial statements.

                                        5
<PAGE>


                            RIDGEWOOD FINANCIAL, INC.
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

(1)      Basis of Presentation

The accompanying  unaudited  consolidated  financial statements were prepared in
accordance  with  instructions  for Form 10-QSB and therefore do not include all
disclosures necessary for a complete presentation of the consolidated  financial
statements in conformity with generally accepted accounting principles. However,
all adjustments which are, in the opinion of management,  necessary for the fair
presentation of the interim  financial  statements have been included.  All such
adjustments are of a normal recurring  nature.  The  consolidated  statements of
income are not  necessarily  indicative of results which may be expected for the
entire year.

Certain information and footnote  disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting  principles
have been  condensed  or omitted  pursuant to the rules and  regulations  of the
Securities  and  Exchange  Commission.  It is  suggested  that  these  condensed
unaudited  financial  statement be read in conjunction  with the Form 10-KSB for
the year ended December 31, 1998.

(2)      Conversion and Reorganization

On June 22, 1998, the Board of Directors of Ridgewood Savings Bank of New Jersey
(the Bank) adopted a Plan of  Conversion to convert from a New Jersey  chartered
mutual  savings bank to a New Jersey  chartered  stock savings bank. The Bank is
now a wholly-owned  subsidiary of Ridgewood  Financial,  Inc. (the  Company),  a
holding company formed by the Bank.

The Company is a savings bank holding company that was incorporated in July 1998
under the laws of the State of New Jersey for the  purpose of  acquiring  all of
the issued and outstanding  common stock of the Bank. This acquisition  occurred
in January 1999, at the time the Bank simultaneously  converted from a mutual to
a stock  institution  and  sold  all of its  outstanding  capital  stock  to the
Company.  The Company  made its  initial  public  offering  of common  stock and
provided additional shares of common stock to Ridgewood Financial, MHC, a mutual
holding company that holds 53% of the outstanding shares of the Company. Because
the  reorganization  and conversion was not completed  until January 7, 1999, at
December 31, 1998, the Company had no assets, liabilities or equity.

The reorganization and conversion,  including the initial public offering of the
common stock of the Company,  was completed on January 7, 1999, resulting in the
issuance of 3,180,000 shares of common stock,  $0.10 par value per share, of the
Company of which 1,494,600  shares (47%) were sold at a purchase price per share
of $7.00 and  1,685,400  shares (53%) were issued to Ridgewood  Financial,  MHC,
resulting in gross proceeds of $10.5 million.  Total expenses were approximately
$700,000 resulting in net proceeds of $9.8 million.

Approximately  half of the net proceeds were paid directly by the Company to the
Bank in return for 100,000 shares of common stock, $2.00 par value per share, of
the Bank (100% of the issued and  outstanding  shares of the Bank). In addition,
$200,000 was provided to Ridgewood Financial, MHC by the Bank. The remaining net
proceeds were retained by the Company.

Concurrent with the conversion and  reorganization,  the Company  established an
Employee Stock Ownership Plan (ESOP) for the benefit of employees. The ESOP will
purchase 8% of the number of shares sold in the  offering,  in the open  market,
using a loan  from  the  Company.

                                       6
<PAGE>


In addition,  a stock option plan will be submitted for stockholders'  approval.
If implemented,  up to 10% of the number of shares sold in the offering would be
reserved for issuance through exercise of options for common stock.

As part of the conversion,  5,000,000  shares of preferred stock at no par value
were  authorized;  however,  none were issued.  Included in the Bank's financial
statements  at December  31,  1998 was $17.8  million of  subscriptions  payable
related to the offering.

Upon a complete liquidation of the Bank after the conversion,  the Company, as a
holder of the Bank's common stock would be entitled to any assets remaining upon
a liquidation of the Bank.  Each depositor  would not have a claim in the assets
of the  Bank.  However,  upon  a  complete  liquidation  of the  MHC  after  the
conversion, each depositor would have a claim up to the pro rata value of his or
her  accounts,  in the  assets  of the MHC  remaining  after  the  claims of the
creditors of the MHC are satisfied.  Depositors who have  liquidation  rights in
the Bank  immediately  prior to the conversion will continue to have such rights
in the MHC after the conversion for so long as they maintain deposit accounts in
the Bank after the conversion.

Costs incurred that were directly  associated  with the conversion were deferred
as of December 31, 1998 and were  deducted  from the proceeds of the shares sold
in the conversion in January 1999.

(3)      Earnings Per Common Share

Basic income per common share is computed by dividing net income by the weighted
average number of shares outstanding during each period.

Diluted net income per common  share is  computed by dividing  net income by the
weighted  average  number of shares  outstanding,  as  adjusted  for the assumed
exercise of options for common stock, using the treasury stock method.

                                       7

<PAGE>


(4)      Investment Securities

The  following is a summary of  maturities  of the  investment  securities as of
June 30, 1999 and December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
                                                   June 30, 1999                                      December 31, 1998
                                    -----------------------------------------------     --------------------------------------------
                                                     (Unaudited)
                                      Securities held          Securities available        Securities held      Securities available
                                         to Maturity                for sale                   to Maturity            for sale
                                    ----------------------     --------------------     ---------------------   --------------------
                                     Amortized     Fair        Amortized     Fair       Amortized      Fair      Amortized    Fair
                                       Cost        Value          Cost       Value         Cost        Value       Cost       Value
                                    ----------    --------     ---------  ---------     ---------    --------    ---------  --------
<S>                                <C>           <C>         <C>           <C>         <C>            <C>        <C>        <C>
Amounts maturing in:

Equity Securities                     $     --          --            8         26      $     --          --           8         30
One year or less                            44          44           --         --            58          58           -         --
After one year through five years           --          --        3,242      3,167            43          43       3,243      3,243
After five years through ten years         536         553        3,225      3,089           659         675         718        721
After ten years                            552         557       26,030     24,662           594         598      12,769     12,927
                                      --------       -----      -------     ------      --------      ------      ------    -------
                                      $  1,132       1,154       32,505     30,944      $  1,354       1,374      16,738     16,921
                                      ========       =====       ======     ======      ========      ======      ======    =======
</TABLE>

                                       8
<PAGE>


Expected  maturities will differ from contractual  maturities  because borrowers
may have  the  right  to call or  prepay  obligations  with or  without  call or
prepayment penalties.

(5)     Mortgage-backed Securities

The following is a summary of maturities of the  mortgaged-backed  securities as
of June 30, 1999 and December 31, 1998 (in thousands):

<TABLE>
<CAPTION>

                                                     June 30, 1999                                   December 31, 1998
                                      ---------------------------------------------     ------------------------------------------
                                                      (Unaudited)
                                          Securities held      Securities available       Securities held    Securities available
                                            to Maturity             for sale                to Maturity            for sale
                                      ----------------------   --------------------     -------------------  ---------------------
                                      Amortized      Fair      Amortized    Fair        Amortized    Fair    Amortized     Fair
                                         Cost        Value       Cost      Value          Cost      Value      Cost        Value
                                      ----------   ---------   ---------  --------      ---------  --------  ---------    --------
<S>                                  <C>         <C>           <C>        <C>         <C>         <C>       <C>         <C>

Amounts maturing in:
One year or less                        $    --          --         49         49       $    --         --       709         708
After one year through five years           945         929      3,090      3,059            --         --     3,882       3,900
After five years through ten years          582         568     17,418     17,322         1,223      1,247    18,693      18,664
After ten years                           8,633       8,593     45,593     45,606        10,054     10,162    65,713      65,118
                                        -------      ------    -------     ------       -------     ------    ------      ------
                                        $10,160      10,090     66,150     66,036       $11,277     11,409    88,997      88,390
                                        =======      ======     ======     ======       =======     ======    ======      ======
</TABLE>

                                       9

<PAGE>
(6)     Borrowed Funds

Borrowed funds at June 30, 1999 and December 31, 1998 are summarized as follows
(in thousands):

                                June 30, 1999           December 31, 1998
                              ------------------     -----------------------
                                 (unaudited)
Advances from the FHLB         $          52,331      $               32,557
                              ==================     =======================

Pursuant to  collateral  agreements  with the FHLB,  advances are secured by all
stock in the FHLB and  qualifying  first mortgage  loans.  Advances  at June 30,
1999 have maturity dates as follows: (in thousands)

                          June 30, 1999            Weighted Average Rate
                       -------------------         ---------------------
                                         (unaudited)
              1999     $            6,600                   5.22%
              2000                  2,650                   5.81
              2001                  2,000                   5.70
              2002                  4,200                   5.32
              2003                  5,500                   4.83
              2004                  3,000                   5.27
              2005                  2,000                   5.99
              2006                    531                   6.76
              2008                 16,000                   5.42
              2009                  9,850                   6.03
                       ------------------
                       $           52,331                   5.50%
                       ==================          ====================

(7)     Comprehensive (loss) income

Total comprehensive  income for the three-month and six-month periods ended June
30 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                       Three Months Ended       Six Months Ended
                                                             June 30,               June 30
                                                       -------------------     -------------------
                                                        1999         1998        1999       1998
                                                       ------       ------     -------     -------
<S>                                                 <C>             <C>       <C>         <C>
Net (loss) income                                    $  (524)        $ 148     $  (343)    $ 487
Change in unrealized gain on securities
 available for sale, net of taxes                       (600)         (546)       (800)     (330)
                                                      ------          ----      ------      ----
Comprehensive (loss) income                          $(1,124)        $(398)    $(1,143)    $ 157
                                                      ======          ====      ======      ====
</TABLE>
(8)      Recent accounting pronouncements

In June 1998, the FASB issued  Statement of Financial  Accounting  Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities"  ("Statement
No. 133").  This statement  establishes  accounting and reporting  standards for
derivative instruments, and for hedging activities. Statement No. 133 supersedes
the  disclosure  requirements  in Statements  No. 80, 105 and 119.  Statement of
Financial  Accounting  Standards  No. 137  deferred the  effective  date of this
statement  to fiscal  years  beginning  after June 15,  2000.  The  adoption  of
Statement  No. 133 is not  expected to have a material  impact on the  financial
position or results of the Company.

In October 1998, the FASB issued Statement of Financial Accounting Standards No.
134 "Accounting for Mortgage-Backed Securities Retained after the Securitization
of Mortgage Loans Held for Sale by a Mortgage  Banking  Enterprise"  ("Statement
No. 134").  This statement  amends FASB Statement No. 65 "Accounting for Certain
Mortgage  Banking  Activities",  to  require  that after the  securitization  of
mortgage loans held for sale, an entity engaged in mortgage  banking  activities
classify the resulting  mortgage-backed  securities or other retained  interests
based on its ability and intent to sell or hold those investments. Statement No.
134 is effective January 1, 1999. The adoption of this statement is not expected
to have a material impact on the financial  position or results of operations of
the Company.

                                       10
<PAGE>
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


GENERAL

         The Bank's  results of operations  are  primarily  dependent on its net
interest income,  which is the difference  between the interest income earned on
assets,  primarily loans,  mortgage-backed  securities,  investments,  and other
interest earning assets less the interest expense on its liabilities,  primarily
deposits and borrowings.  Net interest income may be affected  significantly  by
general economic and competitive conditions,  particularly those with respect to
market interest rates,  and policies of regulatory  agencies.  Furthermore,  the
Bank's lending  activity is  concentrated in loans secured by real estate in the
Bank's  market area and therefore  the Bank's  operations  are affected by local
market conditions. The results of operations are also influenced by non-interest
income,  including  securities  gains  and  losses,  the  level of  non-interest
expenses,  such as  employees'  salaries and  benefits,  occupancy and equipment
costs, non-interest income such as loan related fees and fees on deposit related
services, and the Bank's provision for loan losses.


COMPARISON OF FINANCIAL CONDITION
AT JUNE 30, 1999 AND DECEMBER 31, 1998


         Total assets  decreased  by $5.7  million or 2.1% to $269.1  million at
June 30, 1999 from $274.7  million at  December  31,  1998.  This  decrease  was
primarily  due to reduction in initial  public  offering  subscriptions  payable
totaling  $17.8  million  due to  acquisition  of  stock  for  stockholders  and
refunding of oversubscriptions.  As a result, federal funds sold decreased $36.3
million to $4.9  million at June 30,  1999 from $41.2  million at  December  31,
1998. Available for sale  mortgage-backed  securities decreased by $22.4 million
to $66.0  million at June 30,  1999 from $88.4  million at  December  31,  1998,
offset by an increase  in  available  for sale  investment  securities  of $14.0
million to $30.9  million at June 30, 1999 from $16.9  million at  December  31,
1998. During this period, the Bank's security purchases were concentrated in tax
exempt  securities  during the period  rather than  mortgage-backed  securities.
Loans  receivable  increased $30.5 million due to the Bank's ability to increase
mortgage loan  originations  resulting  from higher levels of loan  refinancings
during a lower  interest rate  environment.  In addition,  the Bank  completed a
purchase  of $15.2  million  in  residential  mortgage  loans  during the second
quarter.  Further,  premises and equipment  increased  $4.0 million or 180.3% to
$6.2 million at June 30, 1999 from $2.2  million at December  31,  1998,  as the
Bank  completed  the  purchase of a building  for $4.0  million,  to serve as an
additional branch office and to house administrative  operations.  Refurbishment
costs for this purpose are estimated to be an additional $2.3 million.

                                       11
<PAGE>



         The  Bank's  deposits,  decreased  by $15.2  million  or 7.4% to $190.3
million at June 30,  1999,  as deposits  were  withdrawn  for  purchases  of the
initial public offering as well as in response to the Bank's pricing  strategies
designed to lower cost of funds.  Borrowings increased $19.8 million or 60.7% to
$52.3  million at June 30, 1999 from $32.6  million at December  31, 1998 as the
Bank used borrowings in conjunction with deposit pricing  strategies to generate
additional  income as part of its  leveraging  strategy.  In  addition,  initial
public offering subscriptions payable decreased $17.8 million due to acquisition
of stock for  stockholders  and  refunding of  oversubscriptions  related to the
stock offering.

         Total equity  increased  $7.5 million to $24.9 million at June 30, 1999
primarily due to the  completion of the initial  public  offering which provided
net  proceeds  of $9.7  million,  offset by a net loss of  $343,000  for the six
months  ended  June 30,  1999,  as well as  $800,000  of  unrealized  losses  on
securities  available  for  sale,  net of  taxes,  and  unearned  ESOP  stock of
$915,000.



COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS
ENDED JUNE 30, 1999 AND JUNE 30, 1998


         Net Income. Net income decreased $830,000 to a net loss of $343,000 for
the six months ended June 30, 1999 as compared to net income of $487,000 for the
six months ended June 30, 1998. Net income was lower  primarily due to a loss of
$1.1  million  recognized  on the sale of  available  for sale  mortgage  backed
securities.  Continued high prepayment  volume along with the increased  premium
amortization  required  thereby,  have  resulted in  below-market  yields on the
Bank's CMO portfolio. Due to the low yields on these securities,  and based upon
the high level of  prepayments,  the Bank  decided to  liquidate  the entire CMO
portfolio  with  the  proceeds  to  be  reinvested  in  assets  which  are  less
susceptible to prepayment  risk. The sale of the CMO portfolio  occurred in July
1999 but the Bank recognized a writedown of the securities in June 1999 when the
Bank made the  decision  to sell the CMO  portfolio.  Such writedown is included
in loss on sale of securities in the income statement. In addition,  there was a
decrease of $176,000 in net interest  income as a result of an increase in total
interest expense of $189,000,  slightly offset by an increase in interest income
of $13,000. Further, there was a decrease in loan loss provisions of $60,000 for
the six months  ended June 30,  1999,  as  compared to the same period for 1998.
Non-interest  income declined $1.1 million  primarily due to the loss recognized
in  the  investment  portfolio.  Non-interest  expense  increased  $267,000,  to
$2,236,000 from $1,969,000 for the same period to period comparison.


                                       12
<PAGE>



         Net Interest  Income.  Net interest  income  before  provision for loan
losses  decreased  by $176,000 or 6.5% to $2.5  million for the six months ended
June 30, 1999.  The decrease was primarily due to a decline in the average yield
on interest  earning assets (on a tax equivalent  basis) of 33 basis points from
7.05% for the six months  ended June 30, 1998 to 6.72% for the same period ended
1999,  offset by a decrease of 22 basis  points in the average  cost of interest
bearing  liabilities  to  4.75%  from  4.97%  for  the  same  period  to  period
comparison.

         The Bank's  interest rate spread,  which is the difference  between the
yield on average  interest  earning  assets  less the cost of  interest  bearing
liabilities,  declined to 1.97 % for the six months  ended June 30,  1999,  from
2.08 % for the six months ended June 30, 1998. This was primarily  attributed to
higher  prepayments  on  mortgage  backed   securities,   specifically  the  CMO
portfolio,   which  required   increased  premium   amortization   resulting  in
below-market  yields on these  securities.  Coupled with higher  prepayments  on
loans receivable, these proceeds were reinvested in lower yielding assets due to
the general decline of market interest rates for these instruments. In addition,
competitive  pressure on the  pricing of loans and  deposits  has  resulted in a
smaller  interest  rate spread.  Competitive  pressure in the future may further
reduce the spread between asset yields and the cost of funds.

         Interest Income.  Interest income on a tax equivalent basis,  increased
to $8.3 million for the six months  ended June 30,  1999,  from $8.0 million for
the six months  ended June 30,  1998.  The  increase  was due to higher  average
balances in loans  receivable  and  available for sale  securities,  offset by a
decrease  in the  average  balance  of  securities  held to  maturity  and other
interest-earning  assets.  The average  balance of  securities  held to maturity
declined  $7.9 million to $11.9  million for the six months ended June 30, 1999,
from $19.8  million  for the same six months in 1998.  This  decline  was due to
higher prepayments of held to maturity mortgage-backed  securities, and the lack
of any  additions  to this  classification.  The average  balance of  securities
available for sale increased  $20.8 million to $105.7 million for the six months
ended June 30,  1999,  from $84.9  million for the same prior period of one year
ago. The increase in available for sale securities was due to  classification of
reinvested  funds as available for sale.  The average yield of interest  earning
assets (on a tax equivalent basis) decreased from 7.05% for the six months ended
June  30,  1998,  to 6.72%  for the six  months  ended  June  30,  1999,  due to
prepayment  of  higher  coupon   mortgage-backed   securities   and  loans  with
reinvestment  of proceeds  into lower coupon  instruments  during a low interest
rate environment with a flat yield curve.

         Interest on loans receivable increased by $240,000 or 5.8 % for the six
months  ended June 30, 1999 as compared to the same period of one year ago.  The
increase was due to a $10.9 million or 10.4% increase in the average  balance of
loans  receivable  resulting  from  originations  of  new  loans  in  excess  of
prepayments  and  amortization  as well as the  purchase  of  $15.2  million  in
residential  mortgage  loans.  The increase in the average  balance of loans was
offset by a decline in the average  yield of 27 basis  points from 7.87% for the
six months  ended June 30, 1998 to 7.60% for the six months ended June 30, 1999.
The decrease in the average yield was due to lower  interest rates on originated
loans  during the 1999  period and the  prepayment/amortization  of higher  rate
loans.

                                       13
<PAGE>

         Interest expense.  Interest expense increased  $189,000 or 3.6% to $5.5
million for the six months ended June 30, 1999,  as compared to $5.3 million for
the same period last year.  The increase was due to a $19.9 million  increase in
the  average  balance of  interest  bearing  liabilities  partially  offset by a
decrease of 22 basis points in the average cost of interest bearing liabilities.
Interest expense on borrowed funds increased  $513,000 mainly due to an increase
in the average  balance of $20.5  million from $18.0  million for the six months
ended June 30,  1998  compared  to $38.5  million for the same period this year,
offset by a decrease in the average  cost of 36 basis points from 5.77% to 5.41%
for the same periods.  Interest expense on time deposits  decreased $366,000 due
to a decline in the  average  balances of time  deposits  of $4.5  million and a
decrease  in the  average  cost of 29  basis  points.  Interest  expense  on DDA
accounts  increased  $16,000 due to an  increase in the average  balance of $2.3
million. Interest expense on savings deposits increased $19,000 as a result of a
$1.1 million increase in the average balances to $29.2 million for the six month
period  ended June 30, 1999 from $28.0  million for the six month  period  ended
June 30, 1998 as well as an increase of 4 basis  points in the average cost from
3.16% to 3.20% for the same periods.

         Provision  for loan losses.  The  provision  for loan losses  decreased
$60,000,  to $72,000  for the six months  ended June 30,  1999,  as  compared to
$132,000 for the six months ended June 30, 1998. The provision thereby increases
the allowance for loan losses to $894,000 at June 30, 1999. The decrease was due
to the decision in the prior  comparable  period to raise the allowance for loan
losses with a charge of $126,000,  primarily as a result of management's  review
of the risk  inherent in the loan  portfolio,  based in part on a comparison  of
loss  experience  at the  Bank,  loss  experience  and  reserve  levels  at peer
institutions, and the changing proportion of commercial real estate and consumer
loans relative to single family mortgages in the overall loan portfolio.

         Non-interest income. Non-interest income decreased by $1.1 million to a
net loss of $989,000 for the six months ended June 30, 1999,  from  $118,000 for
the six months ended June 30, 1998.  This was primarily due to  recognition of a
net loss of


                                       14
<PAGE>

$1.1 million in the available for sale  securities  portfolio for the six months
ended June 30, 1999 as compared to a gains of $45,000 on the sale of  securities
and loans for same six month period of one year ago. High prepayments along with
the required increase in premium amortization resulted in below market yields on
the Bank's CMO securities.  Due to the low yields on these  securities and based
upon the high level of prepayments, the Bank decided to liquidate the entire CMO
portfolio.  The  proceeds  are  to  be  reinvested  in  assets  which  are  less
susceptible to prepayment  risk. The sale of the CMO portfolio  occurred in July
1999 but the Bank recognized a writedown of the securities in June 1999 when the
Bank made the decision to sell the CMO portfolio.

         Non-interest  expenses.  Non-interest expenses increased by $267,000 to
$2.2  million for the six months  ended June 30, 1999 from $2.0  million for the
same period ended June 30, 1998.  The increase was primarily due to increases of
$139,000 in salaries and benefits resulting from an increase in staff, increases
in  medical  insurance  rates,  as well as normal  salary  and merit  increases.
Occupancy  and equipment  expenses  increased  $55,000  mostly  attributable  to
increases in computer  service expense of $58,000  resulting from an increase in
account  volumes  and  including  $5,000 in year 2000  compliance  costs.  Other
non-interest  expense increased by $100,000 to $343,000 for the six months ended
June 30,  1999,  from  $243,000  for the six months  ended June 30,  1998.  This
increase was mainly due to a $57,800  increase in  professional  fees  resulting
from the mutual holding company reorganization. In addition, appraisal and other
loan  underwriting  expenses  increased  $23,500  due  to an  increase  in  loan
origination  volume,  and  seminar  expenses  were  $5,000  higher  due to costs
associated with staff training and education.

         Income  Taxes.  The Bank has an income tax benefit of $415,000  for the
six months ended June 30, 1999 as compared to income tax expense of $245,000 for
the comparable  prior year period.  The benefit for the current period is due to
the loss  recognized in the available for sale securities as discussed above and
an increase in levels of tax exempt securities.



COMPARISON  OF  OPERATING  RESULTS FOR THE THREE  MONTHS ENDED JUNE 30, 1999 AND
JUNE 30, 1998


         Net Income. Net income decreased $672,000 due to a net loss of $524,000
for the three  months  ended June 30, 1999 as compared to net income of $148,000
for the three months ended June 30, 1998. Net income was lower  primarily due to
a loss of $1.1 million  recognized  on the sale of available  for sale  mortgage
backed  securities.  Continued high  prepayment  volume along with the increased
premium amortization  required thereby,  have resulted in below-market yields on
the Bank's CMO portfolio.

                                       15
<PAGE>

Due to the low  yields on these  securities,  and based  upon the high  level of
prepayments,  the Bank decided to liquidate  the entire CMO  portfolio  with the
proceeds to be  reinvested  in assets which are less  susceptible  to prepayment
risk.  The  sale  of the  CMO  portfolio  occurred  in July  1999  but the  Bank
recognized  a writedown  of the  securities  in June 1999 when the Bank made the
decision to sell the CMO  portfolio.  Such writedown is included in loss on sale
of  securities  in the income  statement.  In addition,  there was a decrease of
$160,000 in net interest  income for the three months ended June 30, 1999,  as a
result of a decline in  interest  income of  $136,000  and an  increase in total
interest  expense  of  $24,000.  Further,  there  was a  decrease  in loan  loss
provisions  of $93,000 for the three months ended June 30, 1999,  as compared to
the same period for 1998.  Non-interest  income declined $1.1 million  primarily
due to the loss  recognized in the investment  portfolio.  Non-interest  expense
increased  $32,000 to $1,100,000 from $1,068,000 for the same three month period
to period comparison.

         Net Interest  Income.  Net interest  income  before  provision for loan
losses decreased by $160,000 or 11.6% to $1.2 million for the three months ended
June 30, 1999.  The decrease was primarily due to a decline in the average yield
on interest  earning assets (on a tax equivalent  basis) of 47 basis points from
7.02% for the period  ended  June 30,  1998 to 6.55% for the same  period  ended
1999,  offset by a decrease of 32 basis  points in the average  cost of interest
bearing  liabilities  to  4.69%  from  5.01%  for  the  same  period  to  period
comparison.

         The Bank's  interest rate spread,  which is the difference  between the
yield on average  interest  earning  assets  less the cost of  interest  bearing
liabilities,  declined to 1.86 % for the three months ended June 30, 1999,  from
2.01 % for the same three month period in 1998. This was primarily attributed to
higher  prepayments  on  mortgage  backed   securities,   specifically  the  CMO
portfolio,   which  required   increased  premium   amortization   resulting  in
below-market  yields on those  securities.  During the same period,  albeit to a
lesser extent,  higher prepayments on loans receivable  resulted in the proceeds
reinvested  in lower  yielding  assets  due to the  general  decline  of  market
interest rates for these instruments.  In addition,  competitive pressure on the
pricing of loans and deposits has  resulted in a smaller  interest  rate spread.
Competitive  pressure in the future may further  reduce the spread between asset
yields and the cost of funds.

         Interest  Income.  Interest  income  decreased  to $4.0 million for the
three months  ended June 30, 1999,  from $4.1 million for the three months ended
June 30, 1998.  The decrease was primarily  attributed to a decline of 131 basis
points on the average  yield of  securities  available  for sale and to a lesser
extent,  a decline of 52 basis points on the average yield of loans  receivable.
For the  three  months  ended  June 30,  1999 the  average  yield of  securities
available for sale decreased 131 basis points, to 5.25%,  from 6.56%,  offset by
an increase in the average balance from $90.6 million for the three months ended
June 30, 1998, to $103.9  million for the same three months ended June 30, 1999.
The decline in yield was mainly attributable to the high prepayments experienced
in  the  CMO  sector  of  the  portfolio,   along  with  the  increased  premium


                                       16
<PAGE>

amortization  required  thereby,  resulting  in  below-market  yields on the CMO
portfolio.  During the three month period ended June 30, 1999, the average yield
of loans  receivable  decreased to 7.45%,  from 7.97% for the three months ended
June 30, 1998,  offset by an increase in the average  balance to $122.9  million
from $104.8 million. The decrease in securities held to maturity of $9.6 million
was due to higher  prepayments of held to maturity  mortgage-backed  securities.
The increase in  available  for sale  securities  was due to  classification  of
reinvested funds as available for sale.

         Interest  on loans  receivable  increased  by $202,000 or 9.7 % for the
three months ended June 30, 1999 as compared to the same period of one year ago.
The  increase  was due to an $18.1  million  or 17.3%  increase  in the  average
balance of loans receivable  resulting from  originations of new loans in excess
of  prepayments  and  amortization  as well as the purchase of $15.2  million in
residential mortgage loans, offset by a decline in the average yield of 52 basis
points  from 7.97% for the three  months  ended  June 30,  1998 to 7.45% for the
three month period ended June 30,  1999.  The decrease in the average  yield was
due to lower interest  rates on originated  loans during the 1999 period and the
prepayment/amortization of higher rate loans.

         Interest  expense.   Interest  expense  increased  $24,000  or  1%,  to
$2,753,000  for the three months ended June 30, 1999,  as compared to $2,729,000
for the same period last year. The increase was due to a $17.0 million  increase
in the average balance of interest  bearing  liabilities  partially  offset by a
decrease of 32 basis points in the average cost of interest bearing liabilities.
Interest expense on borrowed funds increased  $262,000 mainly due to an increase
in the average  balance of $20.8 million from $22.1 million for the period ended
June 30, 1998 compared to $43.0 million for the same period this year, offset by
a decrease  in the average  cost of 31 basis  points from 5.69% to 5.38% for the
same  periods.  Interest  expense on time deposits  decreased  $248,000 due to a
decline in the average  balances of time deposits of $6.9 million and a decrease
in the  average  cost of 42  basis  points.  Interest  expense  on DDA  accounts
increased  $4,000 due to an  increase in the  average  balance of $1.7  million.
Interest expense on savings deposits increased $5,000 as a result of an increase
in the  average  balances of $1.1  million to $29.4  million for the three month
period  ended June 30, 1999 from $28.3  million for the three month period ended
June 30,  1998,  slightly  offset by a decrease of 5 basis points in the average
cost from 3.19% to 3.14% for the same periods.

         Provision  for loan losses.  The  provision  for loan losses  decreased
$93,000,  to $36,000 for the three months  ended June 30,  1999,  as compared to
$129,000  for the three  months  ended  June 30,  1998.  The  provision  thereby
increases  the  allowance  for loan  losses to $894,000  at June 30,  1999.  The
decrease  was due to the  decision in the prior  comparable  period to raise the
allowance  for loan losses with a charge of  $126,000,  primarily as a result of
management's review of the risk inherent in the loan portfolio, based in part on
a comparison of loss  experience at the Bank, loss experience and reserve levels
at peer institutions,  and the changing proportion of commercial real

                                       17
<PAGE>

estate and consumer  loans  relative to single  family  mortgages in the overall
loan portfolio.

         Non-interest income. Non-interest income decreased by $1.1 million to a
net loss of  $1,026,000  for the three months ended June 30, 1999,  from $53,000
for the three months ended June 30, 1998.  This was primarily due to recognition
of a net loss of $1.1 million in the available for sale securities for the three
months  ended June 30, 1999 as compared to a gain of $16,000 for the  comparable
prior year period.  High prepayments along with the required increase in premium
amortization  resulted in below market yields on the Bank's CMO securities.  Due
to the low  yields  on  these  securities  and  based  upon  the  high  level of
prepayments,  the Bank  decided  to  liquidate  the entire  CMO  portfolio.  The
proceeds are to be reinvested in assets which are less susceptible to prepayment
risk.  The  sale  of the  CMO  portfolio  occurred  in July  1999  but the  Bank
recognized  a writedown  of the  securities  in June 1999 when the Bank made the
decision to sell the CMO portfolio.

         Non-interest  expenses.  Non-interest  expenses increased by $32,000 to
$1,100,000 for the three months ended June 30, 1999 from $1,068,000 for the same
three month period ended 1998.  The increase was  primarily  due to increases of
$24,000 in salaries and benefits resulting from an increase in staff,  increases
in  medical  insurance  rates,  as well as normal  salary  and merit  increases.
Occupancy and equipment expenses decreased $6,000 and other non-interest expense
increased by $38,000 to $188,000 for the three months ended June 30, 1999,  from
$150,000 for the three months  ended June 30, 1998.  This  increase was due to a
$20,400 increase in professional  fees resulting from the mutual holding company
reorganization.  In addition,  appraisal  and other loan  underwriting  expenses
increased $18,400 due to an increase in loan origination volume.

         Income  Taxes.  The Bank has an income tax benefit of $415,000  for the
three  months  ended June 30,  1999 as compared to income tax expense of $91,000
for the comparable prior year period.  The benefit for the current period is due
to the loss  recognized in the available for sale  securities as discussed above
and an increase in levels of tax exempt securities.



                                       18
<PAGE>
Liquidity and Capital Resources

         The Bank's  primary  sources of funds are deposits,  wholesale  funding
from the Federal Home Loan Bank,  principal and interest  payments on loans, and
securities,  and to a lesser  extent,  proceeds  from  the sale of loans  and/or
securities.  While maturities and scheduled amortization of loans and securities
provide an indication of the timing of the receipt of funds, changes in interest
rates,   economic  conditions,   and  competition  strongly  influence  mortgage
prepayment rates and deposit flows, reducing the predictability of the timing of
sources of funds.

         The primary  investing  activities of the Bank are the  origination  of
one-to-four-family  residential and, to a lesser extent,  commercial real estate
and  multi-family  mortgage  loans,  and the  purchase  of  mortgage-backed  and
mortgage-related and debt securities.  During the six months ended June 30, 1999
and June 30,  1998,  the Bank's  disbursements  for loan  originations  and loan
purchases totaled $ 47.2 million and $10.2 million,  respectively.  Purchases of
mortgage-backed, mortgage-related and debt securities totaled $15.8 million, and
$48.1  million  for the six  months  ended  June 30,  1999  and  June  30,  1998
respectively.  In addition,  purchases of premises  and  equipment  totaled $4.1
million for the six months ended June 30, 1999  compared to $37,000 for the same
period in 1998, as the Bank  completed the purchase of a building to serve as an
additional  branch  office  and  to  house  administrative   operations.   These
activities  were funded  primarily by principal  repayments  and  prepayments on
loans,   mortgage-backed  and  mortgage-related   securities,  debt  securities,
borrowings,  and  proceeds  from the  initial  public  offering.  Proceeds  from
principal collected on mortgage-backed  securities totaled $22.2 million for the
six months  ended June 30, 1999 as  compared  to $11.7  million for the same six
months in 1998.  The Bank  experienced a net decrease in total deposits of $15.2
million for the six months  ended June 30, 1999  compared to an increase of $4.7
million for the six months ended June 30, 1998, as deposits  were  withdrawn for
purchases of the initial public offering and pricing strategies were designed to
lower cost of funds.  Deposit flows are affected by the level of market interest
rates, as well as the interest rates and products  offered by local  competitors
and the Bank and other factors.

         The Bank  closely  monitors  its  liquidity  position on a daily basis.
Excess  short-term  liquidity is invested in overnight  federal funds sold. On a
longer term basis, the Bank invests in various lending products, mortgage-backed
and mortgage-related and investment  securities.  The Bank may borrow funds from
the Federal Home Loan Bank subject to certain limitations. Based on the level of
qualifying  collateral available to secure advances at June 30, 1999, the Bank's
borrowing limit from the Federal Home Loan Bank was approximately $79.7 million,
with unused  borrowing  capacity of $59.9 million at that date. Other sources of
liquidity include borrowings under repurchase  agreements and sales of available
for sale securities.

                                       19
<PAGE>

         The Bank's  most  liquid  assets are cash and cash  equivalents,  which
include interest-bearing deposits and short-term highly liquid investments (such
as federal funds sold) with  original  maturities of less than three months that
are readily  convertible  to known amounts of cash. The level of these assets is
dependent on the Bank's operating, financing and investing activities during any
given period.  At June 30, 1999 and December 31, 1998, cash and cash equivalents
totaled $11.7 million and $43.5  million,  respectively,  which amounted to 4.3%
and 15.8% of total assets at those dates.

         Loan commitments  totaled $17.7 million at June 30, 1999,  comprised of
$7.1  million  in  one-  to-  four-family  loan  commitments,  $1.5  million  in
construction loan commitments, $8.8 million in home equity loan commitments, and
$338,000 in checking  line of credit loan  commitments.  Management  of the Bank
anticipates  that it will have  sufficient  funds  available to meet its current
loan commitments.

         Certificates  of deposit which are scheduled to mature in less than one
year from June 30, 1999 totaled $103.5  million.  Based upon past experience and
the Bank's  current  pricing  strategy,  management  believes that a significant
portion of such deposits will remain with the Bank.

         At June 30,  1999,  the Bank  exceeded  all of its  regulatory  capital
requirements  with a  leverage  capital  level  of  $22.0  million,  or 8.49% of
adjusted assets,  which is above the required level of $10.6 million, or 4.0% of
adjusted  assets  and total  risk-based  capital of $22.9  million,  or 21.0% of
adjusted assets, which is above the required level of $8.8 million, or 8.0%.

         The liquidity of a banking institution  reflects its ability to provide
funds to meet loan requests,  to accommodate possible outflows in deposits,  and
to take  advantage  of  interest  rate  market  opportunities.  Funding  of loan
requests,  providing for  liability  outflows,  and  management of interest rate
fluctuations  require  continuous  analysis in order to match the  maturities of
specific  categories of short term loans and investments  with specific types of
deposits and borrowings.  Savings bank liquidity is normally considered in terms
of the nature and mix of the banking institution's sources and uses of funds.

         Management  is not aware of any trends,  events or  uncertainties  that
will have or are  reasonably  likely  to have a  material  effect on the  Bank's
liquidity,  capital  or  operations  nor is  management  aware  of  any  current
recommendation by regulatory authorities,  which if implemented, would have such
an effect.


                                       20
<PAGE>
Year 2000 Evaluation

Rapid and accurate data processing is essential to the Bank's  operations.  Many
computer  programs  that can only  distinguish  the final two digits of the year
entered (a common  programming  practice  in prior  years) are  expected to read
entries for the year 2000 as the year 1900 or as zero and incorrectly attempt to
compute  payment,  interest,  delinquency  and  other  data.  The  Bank has been
evaluating both information  technology  (computer systems) and  non-information
technology  systems  (e.g.,  vault  timers,  electronic  door lock and  heating,
ventilation  and air  conditioning  controls).  The Bank has examined all of its
non-information  technology  systems and has either received  certifications  of
year  2000  compliance  for  systems  controlled  by third  party  providers  or
determined  that the systems  should not be impacted by the year 2000.  The Bank
expects  to further  test the  systems  it  controls  and  receive  third  party
certification,  where appropriate, that they will continue to function. The Bank
does not expect any  material  costs to address its  non-information  technology
systems and has not had any material costs to date. The Bank has determined that
the information  technology  systems it uses have  substantially  more year 2000
risk than the non-information technology systems it uses. The Bank has evaluated
its information  technology  systems risk in three areas: (1) our own computers,
(2) computers of others used by our  borrowers,  and (3) computers of others who
provide us with data  processing.  The bank is currently  in its  implementation
stage,  which includes  incorporating  all necessary changes to become year 2000
compliant.

Our own computers.  We expect to spend  approximately  $200,000 through December
31, 1999 to upgrade our computer  system.  At June 30, 1999, all such costs have
been  capitalized and the Bank does not expect to incur any additional  material
costs.

Computers  of  others  used  by our  borrowers.  We have  evaluated  most of our
borrowers and do not believe that the year 2000 problem should,  on an aggregate
basis,  impact their  ability to make payments to the Bank. We believe that most
of our  residential  borrowers  are not  dependent on their home  computers  for
income and that none of our  commercial  borrowers are so large that a year 2000
problem  would  render  them  unable to collect  revenue  or rent and,  in turn,
continue to make loan payments to the Bank.  As a result,  we have not contacted
residential  borrowers  concerning  this issue and do not consider this issue in
our  residential  loan  underwriting   process.  We  have  been  contacting  our
commercial borrowers with loans of $250,000 or more and we have been considering
this issue during  commercial  loan  underwriting.  At June 30, 1999 these loans
constituted $5.9 million or 78.7% of our $7.5 million commercial loan portfolio.
We do not expect any material costs to address this risk area.

                                       21
<PAGE>
Computers of others who provide us with data  processing.  Between November 1998
and February  1999,  the Bank performed year 2000 testing with its primary third
party service provider.  Testing consisted of placing the Bank's computer system
in a year 2000  environment and conducting  typical banking  transactions  using
critical 21st century dates,  e.g.,  December 31, 1999, January 1, 2000, January
3,  2000,  February  29,  2000,  and March 1,  2000  (the year is a leap  year).
Interface  testing between the Bank and the Federal  Reserves  "Fedline"  system
also took place in the fourth quarter of 1998. These testing programs were fully
successful,  and the Bank  management has every reason to believe that core data
processing  systems will function  properly in the year 2000.  However,  delays,
mistakes or failures could have a significant impact on our financial  condition
and results of operations.

Contingency  Plan.  The Bank  has  developed  a  comprehensive  Contingency  and
Business  Resumption  Plan in accordance  with FFIEC  guidelines.  This plan was
approved by the Board in July 1999.  While Bank  management  fully expects to be
operational in a year 2000  environment,  the  contingency  plan will guide Bank
operations  in the event that one or more of our  computer  core systems are not
functioning.   The  activities   addressed  in  the  plan  include   remediation
contingency  planning  intended to mitigate any risks associated with unforeseen
system  glitches,  system  failure,  increased  demands for cash,  or  processes
outside  the  Bank's  control.  The  remainder  of 1999 will be used to  further
validate the plan.

The  Bank  continues  to focus  on  public  awareness  by  providing  customers,
shareholders,  and  employees  with timely  information  on the Bank's  state of
preparedness  for the  year  2000.  These  efforts  include  employee  awareness
meetings,  talking  points for bank  staff,  customer  brochures,  and a special
section on the bank's website.

                                       22
<PAGE>



                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

                  Not applicable.

Item 2.  Changes in Securities and Use of Proceeds

                  Not applicable.

Item 3.  Defaults Upon Senior Securities

                  Not applicable.

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

                  Not applicable.

Item 5.  Other Information

                  Not applicable.

Item 6.  Exhibits and Reports on Form 8-K

         (a)      None.

         (b)      No  reports on Form 8-K were filed  during the  quarter  ended
                  June 30, 1999.


                                       23
<PAGE>

                                   SIGNATURES


         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                   RIDGEWOOD FINANCIAL, INC.



Date: August 13, 1999              By:  /s/ Susan E. Naruk
                                        ----------------------------------------
                                        Susan E. Naruk
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)
                                        (Duly Authorized Officer)



Date: August 13, 1999              By:  /s/ John Scognamiglio
                                        ----------------------------------------
                                        John Scognamiglio
                                        Senior Vice President and
                                        Chief Financial Officer
                                        (Principal Financial Officer and Chief
                                        Accounting Officer)

                                       24