UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)      Quarterly Report Pursuant to Section 13 or 15(d) of
   |X|                  the Securities Exchange Act of 1934
                  For the quarterly period ended June 30, 2001
                                        OR
   |_|         Transition Report Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934
                For the transition period from ______ to _______

                          Commission File No.: 0-29826

                           LONG ISLAND FINANCIAL CORP.
             (Exact name of registrant as specified in its charter)

                 Delaware                                 11-3453684
     (State or other jurisdiction of        (I.R.S. Employer Identification No.)
     incorporation or organization)

 One Suffolk Square, Islandia, New York                    11749
(Address of Principal Executive Offices)                 (Zip Code)

                                 (631) 348-0888
              (Registrant's telephone number, including area code)

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

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

The registrant had 1,439,426 shares of Common Stock outstanding as of August 10,
2001.
<PAGE>

                                    Form 10-Q
                           LONG ISLAND FINANCIAL CORP.

                                      INDEX
                                                                           Page
PART I - FINANCIAL INFORMATION                                            Number
                                                                          ------
ITEM 1.  Consolidated Financial Statements - Unaudited
         Consolidated Balance Sheets at June 30, 2001
           and December 31, 2000                                               2
         Consolidated Statements of Earnings for the Three Months
           And Six Months Ended June 30, 2001 and 2000                         3
         Consolidated Statement of Changes in Stockholders' Equity
           for the Six Months Ended June 30, 2001                              4
         Consolidated Statements of Cash Flows for the Six Months
           Ended June 30, 2001 and 2000                                        5
         Notes to Consolidated Financial Statements                            7

ITEM 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                                10

ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk           20

PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings                                                    22
ITEM 2.  Changes in Securities and Use of Proceeds                            22
ITEM 3.  Defaults Upon Senior Securities                                      22
ITEM 4.  Submission of Matters to a Vote of Security Holders                  22
ITEM 5.  Other Information                                                    22
ITEM 6.  Exhibits and Reports on Form 8-K                                     22
         Signatures                                                           23

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


                                       1
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

                           LONG ISLAND FINANCIAL CORP.
                           Consolidated Balance Sheets
                                   (Unaudited)
                        (In thousands, except share data)

                                                         June 30,   December 31,
                                                           2001          2000
                                                         ---------     --------
Assets:
Cash and due from banks .............................    $  12,077       14,652
Interest earning deposits ...........................          242           56
Federal funds sold ..................................       17,000        1,500
                                                         ---------     --------
      Total cash and cash equivalents ...............       29,319       16,208

Securities held-to-maturity (fair value
      of $9,199 and $4,736, respectively) ...........        8,928        4,754
Securities available-for-sale, at fair value ........       91,422      133,562
Securities pledged for repurchase agreements,
      at fair value .................................       43,693       31,106
Loans, net of unearned income and deferred fees .....      156,243      136,725
Less allowance for loan losses ......................        1,869        1,872
                                                         ---------     --------
      Loans, net ....................................      154,374      134,853
Premises and equipment, net .........................        2,209        1,868
Accrued interest receivable .........................        1,888        1,911
Bank owned life insurance ...........................        6,346        6,197
Prepaid expenses and other assets ...................        1,499        2,475
                                                         ---------     --------
      Total assets ..................................    $ 339,678      332,934
                                                         =========     ========

Liabilities and Stockholders' Equity:

Deposits:
    Demand deposits .................................    $  51,744       45,592
    Savings deposits ................................       36,265       32,849
    NOW and money market deposits ...................       52,202       82,003
    Time certificates issued in excess
      of $100,000 ...................................       36,802       35,228
    Other time deposits .............................       87,745       77,517
                                                         ---------     --------
      Total deposits ................................      264,758      273,189

Borrowed funds ......................................       43,000       29,000
Accrued expenses and other liabilities ..............        3,699        3,984
                                                         ---------     --------
      Total liabilities .............................      311,457      306,173
                                                         ---------     --------

Guaranteed preferred beneficial interest in
    junior subordinated debentures ..................        7,500        7,500
                                                         ---------     --------

Stockholders' equity:
    Common stock (par value $.01 per share;
        10,000,000 shares, authorized;
        1,776,326 shares issued; 1,439,426
        and 1,479,426 outstanding, respectively) ....           18           18
    Surplus .........................................       20,185       20,185
    Accumulated surplus .............................        4,653        3,839
    Accumulated other comprehensive income (loss) ...           43       (1,167)
    Treasury stock at cost, (336,900 shares
        in 2001; 296,900 shares in 2000) ............       (4,178)      (3,614)
                                                         ---------     --------
      Total stockholders' equity ....................       20,721       19,261
                                                         ---------     --------
    Total liabilities and stockholders' equity ......    $ 339,678      332,934
                                                         =========     ========

See accompanying notes to consolidated financial statements


                                       2
<PAGE>

                           LONG ISLAND FINANCIAL CORP.
                       Consolidated Statements of Earnings
                                   (Unaudited)
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                       For the Three Months      For the Six Months
                                                           Ended June 30,          Ended June 30,
                                                      ----------------------   -----------------------
                                                         2001         2000        2001         2000
                                                      ----------   ---------   ----------    ---------
<S>                                                   <C>          <C>         <C>           <C>
Interest income:
     Loans ........................................   $    3,193       2,925        6,222        5,633
     Securities ...................................        2,568       2,321        5,323        5,028
     Federal funds sold ...........................          144           4          394           15
     Earning deposits .............................            2           4            6            8
                                                      ----------   ---------   ----------    ---------
            Total interest income .................        5,907       5,254       11,945       10,684
                                                      ----------   ---------   ----------    ---------
Interest expense:
     Savings deposits .............................          280         279          563          545
     NOW and money market deposits ................          325         310          712          650
     Time certificates issued in excess of $100,000          545         314        1,194          557
     Other time deposits ..........................        1,321       1,229        2,614        2,456
     Borrowed funds ...............................          568         604        1,101        1,483
                                                      ----------   ---------   ----------    ---------
         Total interest expense ...................        3,039       2,736        6,184        5,691
                                                      ----------   ---------   ----------    ---------
         Net interest income ......................        2,868       2,518        5,761        4,993
                                                      ----------   ---------   ----------    ---------
Provision for loan losses .........................           --          --           --          150
                                                      ----------   ---------   ----------    ---------
         Net interest income after provision
             for loan losses ......................        2,868       2,518        5,761        4,843
                                                      ----------   ---------   ----------    ---------
Other operating income:
     Service charges on deposit accounts ..........          272         221          531          421
     Net loss on sale of securities ...............           --          --          (53)          --
     Net gain on sale of residential loans ........           89          47          155           99
     Earnings on bank owned life insurance ........           90          81          179          163
     Other ........................................           55          79          124          124
                                                      ----------   ---------   ----------    ---------
         Total other operating income .............          506         428          936          807
                                                      ----------   ---------   ----------    ---------
Other operating expenses:
     Salaries and employee benefits ...............        1,234       1,056        2,398        2,086
     Occupancy expense ............................          197         142          373          276
     Premises and equipment expense ...............          232         200          448          392
     Capital securities ...........................          200          --          399           --
     Other ........................................          745         717        1,485        1,390
                                                      ----------   ---------   ----------    ---------
         Total other operating expenses ...........        2,608       2,115        5,103        4,144
                                                      ----------   ---------   ----------    ---------

         Income before income taxes ...............          766         831        1,594        1,506
                                                      ----------   ---------   ----------    ---------

Income taxes ......................................          264         282          547          505
                                                      ----------   ---------   ----------    ---------

         Net income ...............................   $      502         549        1,047        1,001
                                                      ==========   =========   ==========    =========
Basic Earnings Per Share ..........................   $      .35         .33          .71          .61
                                                      ==========   =========   ==========    =========
Diluted Earnings Per Share ........................   $      .34         .33          .71          .61
                                                      ==========   =========   ==========    =========
Weighted average shares outstanding ...............    1,453,986   1,639,293    1,466,194    1,642,810
                                                      ==========   =========   ==========    =========
Diluted weighted average shares outstanding .......    1,468,786   1,639,293    1,480,610    1,642,810
                                                      ==========   =========   ==========    =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

                           LONG ISLAND FINANCIAL CORP.
            Consolidated Statement of Changes in Stockholders' Equity
                     For the Six Months Ended June 30, 2001
                                   (Unaudited)
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                               Accumulated
                                                                                  Other
                                               Common  Accumulated             Comprehensive  Treasury
                                                Stock    Surplus     Surplus   (Loss)/Income    Stock        Total
                                                -------------------------------------------------------------------
<S>                                             <C>      <C>          <C>         <C>          <C>           <C>
Balance at December 31, 2000 .............      $18      20,185       3,839       (1,167)      (3,614)       19,261

Comprehensive income:
   Net income ............................       --          --       1,047           --           --         1,047
     Other comprehensive income,
       net of tax:
     Unrealized appreciation in available-
       for-sale securities, net of
       reclassification adjustment .......       --          --          --        1,210           --         1,210
                                                                                                            -------

Total comprehensive income ...............       --          --          --           --           --         2,257

Dividends declared on common stock
   ($.08 per common share) ...............       --          --        (233)          --           --          (233)

Common stock repurchased (40,000 shares) .       --          --          --           --         (564)         (564)
                                                -------------------------------------------------------------------

Balance at June 30, 2001 .................      $18      20,185       4,653           43       (4,178)       20,721
                                                ===================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

                           LONG ISLAND FINANCIAL CORP.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                 (In thousands)

                                                           For the Six Months
                                                             Ended June 30,
                                                         ----------------------
                                                           2001          2000
                                                         ---------     --------
Cash flows from operating activities:
  Net income ........................................    $   1,047        1,001
  Adjustments to reconcile net income
    to net cash provided by operating
    activities:
      Provision for loan losses .....................           --          150
      Depreciation and amortization .................          334          376
      Amortization of premiums, net of
        discount accretion ..........................         (733)        (851)
      Net loss on sale of securities ................           53           --
      Loans originated for sale, net of
        proceeds from sales .........................         (110)         282
      Net deferred loan origination fees ............            5           47
      Earnings on bank owned life insurance .........         (179)        (163)
      Deferred income taxes .........................          (10)         (56)
      Changes in other assets and liabilities:
        Accrued interest receivable .................           23          198
        Prepaid expenses and other assets ...........         (285)        (631)
        Accrued expenses and other liabilities ......          162           43
                                                         ---------     --------
    Net cash provided by operating activities .......          307          396
                                                         ---------     --------

Cash flows from investing activities:
  Purchases of securities held-to-maturity,
    available-for-sale ..............................     (812,925)    (344,651)
  Proceeds from the sale of securities
    available-for-sale ..............................       25,470           --
  Proceeds from maturities of securities ............      802,496      389,600
  Principal repayments on securities ................       13,082        3,244
  Loan originations net of principal repayments .....      (19,416)     (12,755)
  Purchase of premises and equipment ................         (675)        (181)
                                                         ---------     --------
    Net cash provided by investing activities .......        8,032       35,257
                                                         ---------     --------

Cash flows from financing activities:
  Net decrease in demand deposit, savings, NOW,
    and money market accounts .......................      (20,233)     (61,492)
  Net increase in certificates of deposit ...........       11,802          549
  Net increase in borrowed funds ....................       14,000        5,016
  Payments for cash dividends .......................         (233)        (261)
  Purchase of common stock ..........................         (564)        (220)
                                                         ---------     --------
    Net cash provided (used) in financing
      activities ....................................        4,772      (56,408)
                                                         ---------     --------

    Net increase (decrease) in cash and
      cash equivalents ..............................       13,111      (20,755)

Cash and cash equivalents at beginning
  of period .........................................       16,208       27,805
                                                         ---------     --------
Cash and cash equivalents at end of period ..........    $  29,319        7,050
                                                         =========     ========

                                                                     (Continued)


                                       5
<PAGE>

                           LONG ISLAND FINANCIAL CORP.
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                 (In thousands)

                                                           For the Six Months
                                                             Ended June 30,
                                                         ----------------------
                                                           2001          2000
                                                         ---------     --------
Supplemental disclosure of cash flow information

Cash paid during the period for:
     Interest .......................................    $   6,118        5,738
                                                         =========     ========

     Income taxes ...................................    $     559        1,080
                                                         =========     ========

See accompanying notes to consolidated financial statements.


                                       6
<PAGE>

                           LONG ISLAND FINANCIAL CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The  accompanying   unaudited  consolidated  financial  statements  include  the
accounts of Long Island  Financial Corp.  (the  "Company") and its  wholly-owned
subsidiaries,  LIF Statutory Trust I, Long Island  Commercial Bank (the "Bank"),
and its subsidiary, Long Island Commercial Capital Corporation.  All significant
inter-company accounts and transactions have been eliminated in consolidation.

The accompanying  unaudited  consolidated  financial  statements included herein
reflect  all  normal  recurring   adjustments  which  are,  in  the  opinion  of
management,  necessary  for a fair  presentation  of the results for the interim
periods presented. The results of operations for the six month period ended June
30, 2001 are not necessarily indicative of the results of operations that may be
expected for the entire fiscal year.  Certain  information and note  disclosures
normally included in financial statements prepared in accordance with accounting
principles  generally  accepted  in the  United  States  of  America  have  been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange  Commission.  Certain  reclassifications  have been made to prior  year
amounts to conform to the current year presentation.

These unaudited  consolidated financial statements should be read in conjunction
with the audited consolidated  financial statements and notes thereto,  included
in the Company's 2000 Annual Report on Form 10-K.

2. REORGANIZATION

At a special  meeting on  December  8, 1998,  the  stockholders  of Long  Island
Commercial  Bank approved a Plan of Acquisition  dated as of September 15, 1998,
which subsequently  became effective January 28, 1999, and as a result of which:
(i) the Bank became a wholly-owned  subsidiary of Long Island Financial Corp., a
Delaware  corporation;  and (ii) all of the  outstanding  shares  of the  Bank's
common stock were  converted,  subject to dissenter's  rights,  on a one-for-one
basis,  into  outstanding  shares of the common  stock of Long Island  Financial
Corp.  No  stockholder   asserted   dissenter's   rights.  This  transaction  is
hereinafter referred to as the "Reorganization."

The  Reorganization  created a bank holding  company  structure  which  provides
greater operating flexibility by allowing the Company to conduct a broader range
of business  activities  and permits  the Board of  Directors  of the Company to
determine  whether  to  conduct  such  activities  in the  Bank  or in  separate
subsidiaries of the Company.  Finally,  the reorganization will permit expansion
into a broader range of financial  services and other business  activities  that
are not currently permitted to the Bank as a New York state-chartered commercial
bank. Such  activities  include,  among others,  operating  non-bank  depository
institutions  or  engaging  in  financial  and  investment   advisory  services,
securities brokerage and management consulting activities.


                                       7
<PAGE>

3. SECURITIES

The following table sets forth certain information  regarding amortized cost and
estimated fair values of the securities  held-to-maturity and available-for-sale
as of the dates indicated:

                                            June 30, 2001      December 31, 2000
                                          ------------------   -----------------
                                         Amortized    Fair    Amortized   Fair
                                            Cost      Value     Cost      Value
                                          --------   -------   -------   -------
                                                       (In thousands)
Held-to-maturity:
Mortgage-backed securities:
   CMO ................................   $     47        47       263       254
Corporate debt ........................      8,881     9,152     4,491     4,482
                                          --------   -------   -------   -------
     Total held-to-maturity ...........   $  8,928     9,199     4,754     4,736
                                          ========   =======   =======   =======

Available-for-sale:
U.S. Government and Agency Obligations    $ 38,677    38,525   117,364   115,945
Mortgage-backed securities:
   GNMA ...............................     85,009    85,132    36,559    35,963
   FNMA ...............................      4,235     4,311       969       982
   FHLMC ..............................        632       644     5,279     5,303
Municipal obligations .................      1,168     1,177     1,167     1,149
                                          --------   -------   -------   -------
    Total debt securities .............    129,721   129,789   161,338   159,342

Equity securities - FHLB stock ........      5,326     5,326     5,326     5,326
                                          --------   -------   -------   -------
    Total securities available-for-sale   $135,047   135,115   166,664   164,668
                                          ========   =======   =======   =======

4. LOANS, NET

Loans, net, are summarized as follows:

                                         June 30, 2001        December 31, 2000
                                       ------------------     -----------------
                                                (Dollars in thousands)

Commercial and industrial loans ...    $ 41,262      26.1%    $ 39,468     28.7%
Commercial real estate loans ......     103,561      65.4       93,875     68.2
Automobile loans ..................      11,268       7.1        2,693      1.9
Consumer loans ....................       1,455       0.9          985      0.7
Residential real estate loans
  held-for-sale ...................         821       0.5          711      0.5
                                       --------     -----     --------    -----
                                        158,367     100.0      137,732    100.0
Less:
  Unearned income .................       1,507                    395
  Deferred fees, net ..............         617                    612
  Allowance for loan losses .......       1,869                  1,872
                                       --------               --------
                                       $154,374               $134,853
                                       ========               ========


                                       8
<PAGE>

5. GUARANTEED PREFERRED BENEFICIAL INTEREST IN JUNIOR SUBORDINATED DEBENTURES

On September 7, 2000, LIF Statutory Trust I, a wholly-owned  finance  subsidiary
of the  Company,  issued $7.5  million  aggregate  liquidation  amount of 10.60%
Capital Securities due September 7, 2030, referred to as Capital Securities. The
Company has fully and  unconditionally  guaranteed the Capital  Securities along
with all  obligations of LIF Statutory  Trust I under the trust  agreement.  LIF
Statutory  Trust I was formed for the  exclusive  purpose of issuing the Capital
Securities and common  securities and using the proceeds to acquire an aggregate
principal  amount of $7.7 million of the Company's  10.60%  Junior  Subordinated
Debentures   due  September  7,  2030  referred  to  as  the  Company's   Junior
Subordinated Debentures.  The Junior Subordinated Debentures can repay, in whole
or in part, at the Company's  option on or after  September 7, 2010 at declining
premiums to maturity.  Proceeds  totaling  approximately  $7.2 million are being
used for general corporate purposes including the repurchase of common stock.

The balance  outstanding on the Capital  Securities was $7.5 million at June 30,
2001.  The costs  associated  with the  Capital  Securities  issuance  have been
capitalized  and are being  amortized using the interest method over a period of
thirty years.  Distributions on the Capital Securities are payable semi-annually
beginning  March 7, 2001 and are  reflected in the  Consolidated  Statements  of
Earnings as a  component  of  non-interest  expense  under the caption  "Capital
securities."

6. RECENT DEVELOPMENTS

On May 23,  2001 the Board of  Directors  of the  Company  declared a  quarterly
dividend of eight cents ($0.08) per common share.  The dividend was paid on July
2, 2001, to shareholders of record as of June 22, 2001.

On May 24, 2000,  the Company  announced  an  extension of the stock  repurchase
program which  enables the Company to repurchase an additional  75,000 shares of
it's outstanding common stock.  Repurchases will continue to be made in the open
market,  from  time to time,  depending  on market  conditions  and  subject  to
compliance with applicable  securities laws. As of June 30, 2001, 336,900 shares
had been repurchased by the Company at an aggregate cost of $4.2 million.


                                       9
<PAGE>

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

General

The principal business of Long Island Financial Corp.  currently consists of the
operation of a wholly-owned subsidiary, Long Island Commercial Bank. Long Island
Commercial Bank is a New York state-chartered  commercial bank, founded in 1989,
which  is  engaged  in  commercial  banking  in  Islandia,  New  York,  and  the
surrounding  communities of Suffolk and Nassau counties. The Bank offers a broad
range of  commercial  and  consumer  banking  services,  including  loans to and
deposit accounts for small and medium-sized businesses,  professionals, high net
worth  individuals  and  consumers.  The  Bank  is an  independent  local  bank,
emphasizing personal attention and responsiveness to the needs of its customers.

Financial Condition

The Company's total assets were $339.7 million as of June 30, 2001,  compared to
$332.9 million at December 31, 2000.  The increase in cash and cash  equivalents
of $13.1 million,  or 80.9%,  was  attributable to the increase in federal funds
sold of $15.5  million,  from a balance of $1.5  million at December 31, 2000 to
$17.0 million at June 30, 2001. Loans, net,  increased $19.5 million,  or 14.5%,
from $134.9  million at December 31, 2000,  to $154.4  million at June 30, 2001,
reflecting  increases in the  automobile  loan and  commercial  real estate loan
portfolio.  Securities  available-for-sale and securities pledged for repurchase
agreements  decreased an aggregate of $29.6 million or 17.9% as a portion of the
proceeds of the  maturing  short-term  U.S.  Government  and agency  obligations
purchased  in  December  2000  were  used  to pay  maturing  seasonal  municipal
deposits.  Prepaid expenses and other assets  decreased $1.0 million,  or 39.4%,
from $2.5  million at  December  31,  2000,  to $1.5  million at June 30,  2001,
primarily due to the decrease in the deferred tax asset directly  related to the
decrease in the comprehensive loss on securities available-for-sale.

Total deposits decreased $8.4 million,  or 3.1%, from $273.2 million at December
31, 2000 to $264.8 million at June 30, 2001,  primarily reflecting a decrease in
NOW and money market deposits.  The decrease in NOW and money market deposits of
$29.8  million,  or 36.3%,  from $82.0  million at  December  31,  2000 to $52.2
million at June 30, 2001, is  attributable  to the timing of seasonal  municipal
deposits  which  were not on  deposit  at June 30,  2001.  The  effects of those
declines were offset in part by a $10.2 million, or 13.2% increase in other time
deposits.  In addition,  savings deposits increased $3.5 million, or 10.4%, from
$32.8  million at December 31, 2000 to $36.3 million at June 30, 2001 and demand
deposits increased $6.2 million to $51.7 million at June 30, 2001.

Total  stockholders'  equity increased $1.5 million to $20.7 million at June 30,
2001 primarily due to a $1.2 million decrease in accumulated other comprehensive
loss on securities available-for-sale and net income of $1.0 million for the six
months ended June 30, 2001.  Offsetting these events were dividends  declared of
$233,000 and $564,000 employed to repurchase 40,000 shares of common stock.

Analysis of Net Interest Income

Net interest income represents the difference between income on interest-earning
assets and expense on interest-bearing  liabilities. Net interest income depends
upon the volume of interest-earning assets and interest-bearing  liabilities and
the interest rates earned or paid on them.


                                       10
<PAGE>

The  following  tables set forth certain  information  relating to the Company's
consolidated average balance sheets and its consolidated  statements of earnings
for the three months and six months ended June 30, 2001,  and 2000,  and reflect
the   average   yield  on   interest-earning   assets   and   average   cost  of
interest-bearing  liabilities  for the periods  indicated.  Dividing  annualized
income  or  expense,  by the  average  balance  of  interest-earning  assets  or
interest-bearing  liabilities,  respectively,  derives  such  yields  and costs.
Average  balances are derived from average daily balances.  Average balances and
yields include non-accrual loans although they are not material.

<TABLE>
<CAPTION>
                                                               Three Months Ended June 30,
                                              -----------------------------------------------------------
                                              ------------2001-----------        ----------2000----------
                                                                   Average                        Average
                                              Average               Yield/       Average            Yield/
                                              Balance     Interest   Cost        Balance   Interest  Cost
                                              -------     --------   ----        -------   --------  ----
<S>                                           <C>         <C>         <C>       <C>         <C>      <C>
Interest earning assets:                                          (Dollars in thousands)
     Federal funds sold and
       interest-earning deposits ..........   $ 12,881    $    146    4.53%     $    512    $    8   6.25%
     Securities net(1) ....................    170,895       2,556    5.98       145,048     2,309   6.37
     Municipal obligations(2) .............      1,168          17    5.82         1,167        17   5.83
     Loans, net(3) ........................    148,979       3,193    8.57       129,630     2,925   9.03
                                              --------    --------    ----      --------    ------   ----
         Total interest-earning assets ....    333,923       5,912    7.08       276,357     5,259   7.61
Non-interest-earning assets ...............     25,162                            18,520
                                              --------                          --------
Total assets ..............................   $359,085                          $294,877
                                              ========                          ========

Interest-bearing liabilities:
     Savings deposits .....................   $ 36,862    $    280    3.04      $ 30,214    $  279   3.69
     NOW and money market deposits ........     66,790         325    1.95        52,767       310   2.35
     Certificates of deposit ..............    131,464       1,866    5.68       103,625     1,543   5.96
                                              --------    --------    ----      --------    ------   ----
         Total interest-bearing deposits ..    235,116       2,471    4.20       186,606     2,132   4.57
     Borrowed funds .......................     45,088         568    5.04        46,610       604   5.18
                                              --------    --------    ----      --------    ------   ----
         Total interest-bearing liabilities    280,204       3,039    4.34       233,216     2,736   4.69
Other non-interest bearing liabilities ....     58,737                            43,554
                                              --------                          --------
Total liabilities .........................    338,941                           276,770
Stockholders' Equity ......................     20,144                            18,107
                                              --------                          --------
Total liabilities and
     stockholders' equity .................   $359,085                          $294,877
                                              ========                          ========
Net interest income/
     interest rate spread(4) ..............               $  2,873    2.74%                 $2,523   2.92%
                                                          ========    ====                  ======   ====
Net interest margin(5) ....................                           3.44%                          3.65%
                                                                      ====                           ====
Ratio of interest-earning assets to
     interest-bearing liabilities .........                           1.19x                          1.18x
                                                                      ====                           ====
</TABLE>

----------
(1)   Securities, net, excludes municipal obligations. Unrealized appreciation /
      depreciation on available-for-sale securities are recorded in non-interest
      earning assets.

(2)   Interest  income and yields are  presented on a fully  taxable  equivalent
      basis.

(3)   Amount is net of  residential  real estate loans  held-for-sale,  deferred
      loan fees and allowance for loan losses but includes non-performing loans.

(4)   Interest  rate  spread  represents  the  difference  between  the yield on
      interest-earning assets and the cost of interest-bearing  liabilities.

(5)   Net interest  margin  represents  net interest  income  divided by average
      interest-earning assets.


                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                                Six Months Ended June 30,
                                              -----------------------------------------------------------
                                              ------------2001-----------        ----------2000----------
                                                                   Average                        Average
                                              Average               Yield/       Average            Yield/
                                              Balance     Interest   Cost        Balance   Interest  Cost
                                              -------     --------   ----        -------   --------  ----
<S>                                           <C>         <C>         <C>       <C>         <C>      <C>
Interest earning assets: ..................                     (Dollars in thousands)
     Federal funds sold and
         interest-earning deposits ........   $ 15,859    $    400    5.04%     $    729    $    23   6.31%
     Securities net(1) ....................    170,696       5,299    6.21       160,789      5,004   6.22
     Municipal obligations(2) .............      1,168          34    5.82         1,167         34   5.83
     Loans, net(3) ........................    142,685       6,222    8.72       126,100      5,633   8.93
                                              --------    --------    ----      --------    -------   ----
         Total interest-earning assets ....    330,408      11,955    7.24       288,785     10,694   7.41
Non-interest-earning assets ...............     23,988                            17,985
                                              --------                          --------
Total assets ..............................   $354,396                          $306,770
                                              ========                          ========

Interest-bearing liabilities:
     Savings deposits .....................   $ 35,557    $    563    3.17      $ 29,774    $   545   3.66
     NOW and money market deposits ........     68,805         712    2.07        56,924        650   2.28
     Certificates of deposit ..............    128,599       3,808    5.92       103,556      3,013   5.82
                                              --------    --------    ----      --------    -------   ----
         Total interest-bearing deposits ..    232,961       5,083    4.36       190,254      4,208   4.42
     Borrowed funds .......................     43,654       1,101    5.04        56,507      1,483   5.25
                                              --------    --------    ----      --------    -------   ----
         Total interest-bearing liabilities    276,615       6,184    4.47       246,761      5,691   4.61
Other non-interest bearing liabilities ....     57,827                            41,930
                                              --------                          --------
Total liabilities .........................    334,442                           288,691
Stockholders' Equity ......................     19,954                            18,079
                                              --------                          --------
Total liabilities and
     stockholders' equity .................   $354,396                          $306,770
                                              ========                          ========
Net interest income/
     interest rate spread(4) ..............               $  5,771    2.77%                $ 5,003   2.80%
                                                          ========    ====                 =======   ====

Net interest margin(5) ....................                           3.49%                          3.46%
                                                                      ====                           ====
Ratio of interest-earning assets to
     interest-bearing liabilities .........                           1.19x                          1.17x
                                                                      ====                           ====
</TABLE>

----------
(1)   Securities, net, excludes municipal obligations. Unrealized appreciation /
      depreciation on available-for-sale securities are recorded in non-interest
      earning assets.

(2)   Interest  income and yields are  presented on a fully  taxable  equivalent
      basis.

(3)   Amount is net of  residential  real estate loans  held-for-sale,  deferred
      loan fees and allowance for loan losses but includes non-performing loans.

(4)   Interest  rate  spread  represents  the  difference  between  the yield on
      interest-earning assets and the cost of interest-bearing liabilities.

(5)   Net interest  margin  represents  net interest  income  divided by average
      interest-earning assets.


                                       12
<PAGE>

Comparison of Operating Results for the Three Months Ended June 30, 2001 and
2000

General

The Company  reported net income of $502,000,  or diluted  earnings per share of
$.34 for the  quarter  ended June 30,  2001,  compared to  $549,000,  or diluted
earnings  per share of $.33 for the prior year  period.  The increase in diluted
earnings  per share  was  primarily  attributable  to a 10.4%  reduction  in the
diluted weighted average number of shares outstanding  combined with an increase
in net interest  income after  provision for loan losses of $350,000,  or 13.9%.
Offsetting those positive trends was an increase in other operating  expenses of
$493,000, or 23.3%.

Interest Income

Interest income, on a fully taxable  equivalent basis,  increased  $653,000,  or
12.4 %, from $5.3  million for the three  months  ended June 30,  2000,  to $5.9
million for the three months ended June 30, 2001. The increase was  attributable
to an increase in the average balance of total interest-earning  assets of $57.5
million, or 20.8%, from $276.4 million for the three months ended June 30, 2000,
to $333.9 million for the three months ended June 30, 2001. The average  balance
of federal funds sold and interest earning  deposits  increased from $512,000 at
June 30,  2000,  to $12.9  million  at June 30,  2001.  The  average  balance of
securities,  net, (exclusive of municipal  obligations) increased $25.8 million,
or 17.8%,  but sustained a 39 basis point decrease in the average yield to 5.98%
for the three months ended June 30, 2001,  compared to 6.37% for the 2000 period
as a result of declining  market interest  rates.  The average balance of loans,
net, increased $19.4 million,  or 14.9% from $129.6 million for the three months
ended June 30, 2000, to $149.0 million for the 2001 period. The average yield on
loans receivable, net, decreased 46 basis points from 9.03% for the 2000 period,
to 8.57%  for the  three  months  ended  June 30,  2001 as a result of the lower
interest rate environment.

Interest Expense

Interest expense increased  $303,000,  or 11.1%, from $2.7 million for the three
months ended June 30, 2000,  to $3.0 million for the three months ended June 30,
2001,  primarily as a result of a $47.0 million or 20.1% increase in the average
balance of total  interest-bearing  liabilities from $233.2 million for the 2000
period to $280.2 million for the three months ended June 30, 2001. The increased
interest  expense  resulted from an increase of $48.5  million,  or 26.0% in the
average balance of deposits.  The average rate paid on interest bearing deposits
decreased  37 basis points from 4.57% paid for the 2000 period to 4.20% paid for
the three months ended June 30, 2001.  The average  balance of savings  deposits
increased by $6.6 million,  or 22.0%,  and the average  balance of NOW and money
market deposits increased by $14.0 million,  or 26.6% from period to period. The
average balance of  certificates of deposit  increased $27.9 million from $103.6
million at June 30, 2000 to $131.5 million at June 30, 2001. The average cost of
borrowed  funds  decreased 14 basis  points from 5.18% for the 2000  period,  to
5.04% for the three months ended June 30, 2001.


                                       13
<PAGE>

Net Interest Income

Net interest income on a fully taxable  equivalent  basis increased by $350,000,
or 13.9%,  from $2.5 million for the three  months ended June 30, 2000,  to $2.9
million for the three  months  ended June 30,  2001.  The average  cost of total
interest-bearing liabilities for the period decreased 35 basis points from 4.69%
in the 2000  period  to 4.34% in the 2001  period.  The  average  yield on total
interest-earning  assets for the period  decreased 53 basis points from 7.61% in
the 2000  period  to 7.08% in the 2001  period.  The net  interest  rate  spread
decreased by 18 basis points from 2.92% in the 2000 period, to 2.74% in the 2001
period.

Provision for Loan Losses

The Company  made no  provision  for loan losses for the three months ended June
30,  2001 or 2000.  The  absence of a  provision  for loan  losses for the three
months ended June 30, 2001 reflects  management's  qualitative and  quantitative
assessment of the loan  portfolio,  net charge-offs and collection of delinquent
loans.  The allowance for loan losses  amounted to $1.9 million at both June 30,
2001 and December 31, 2000.  The  allowance  for loan losses as a percentage  of
loans was 1.20% and 1.37% at June 30, 2001 and 2000, respectively.

The  determination of the amount of the allowance for loan losses is based on an
analysis of the loan portfolio and reflects an amount,  which,  in  management's
judgment  is  adequate  to provide  for  probable  loan  losses in the  existing
portfolio.  This  analysis  considers,  among  other  things,  present and known
inherent  risks in the  portfolio,  adverse  situations  which,  may  affect the
borrower's  ability  to  repay,  overall  portfolio  quality,  and  current  and
prospective economic conditions.  While management uses available information to
provide for loan  losses,  future  additions to the  allowance  may be necessary
based on  changes  in  economic  conditions.  In  addition,  various  regulatory
agencies,  as an integral part of the examination  process,  periodically review
the Company's  allowance for loan losses.  Such agencies may require the Company
to recognize additions to the allowance based upon their judgment of information
available to them at the time of their examination.

The following table sets forth information regarding non-accrual loans and loans
delinquent 90 days or more and still accruing  interest at the dates  indicated.
It is the  Company's  general  policy to  discontinue  accruing  interest on all
loans,  which  are  past-due  more  than 90  days or  when,  in the  opinion  of
management,  such suspension is warranted.  When a loan is placed on non-accrual
status,  the Company ceases the accrual of interest owed and previously  accrued
interest is charged against  interest  income.  Loans are generally  returned to
accrual  status when  principal  and interest  payments  are  current,  there is
reasonable  assurance that the loan will be fully  collectable  and a consistent
record of performance has been demonstrated.


                                       14
<PAGE>

                                                         June 30,   December 31,
                                                           2001         2000
                                                         --------   ------------
                                                             (In thousands)
Non-accrual loans:
     Commercial and industrial loans ................    $   328          384
     Consumer loans .................................         31           32
                                                            ----          ---
         Total non-accrual loans ....................        359          416

     Loans contractually past due 90 days or
     more, other than non-accruing ..................         --           --
                                                            ----          ---

         Total non-performing loans .................    $   359          416
                                                            ----          ---

Allowance for loan losses as a percentage
     of loans(1) ....................................       1.20%        1.37%
Allowance for loan losses as a percentage
     of total non-performing loans ..................     520.61%       450.0%
Non-performing loans as a percentage of loans(1) ....        .23%         .30%

----------
(1)   Loans include loans, net, excluding the allowance for loan losses.

Other Operating Income

Other operating  income increased  $78,000,  or 18.2%, to $506,000 for the three
months  ended June 30,  2001.  Service  charges on  deposit  accounts  increased
$51,000,  or 23.1%,  reflecting  overall  growth in the depositor  base, and the
introduction of new and electronic banking services. Included in other operating
income  was a $42,000,  or 89.4%,  increase  in net gain on sale of  residential
loans  as  a  result  of  an  overall  increase  in  residential  mortgage  loan
production.

Other Operating Expense

Other operating expenses increased $493,000, or 23.3%, from $2.1 million for the
three  months  ended June 30,  2000,  to $2.6 million for the three months ended
June 30,  2001.  Increases  in salaries  and  employee  benefits,  premises  and
equipment  expense,  and other  expense for the three months ended June 30, 2001
are a result of the Bank's  planned  branch  expansion and included  $200,000 of
expense related to the $7.5 million of Capital securities issued in September of
2000.

Income Taxes

Income taxes  decreased  $18,000,  or 6.4%,  from  $282,000 for the three months
ended June 30, 2000,  to $264,000 for the three months ended June 30, 2001, as a
result of the decrease in income before income taxes. The effective tax rate for
the three months  ended June 30, 2001 was 34.5%  compared to 33.9% for the three
months ended June 30, 2000.


                                       15
<PAGE>

Comparison of Operating Results for the Six Months Ended June 30, 2001 and 2000

General

The Company reported net income of $1.05 million,  or diluted earnings per share
of $.71 for the six months ended June 30, 2001,  compared to $1.00  million,  or
diluted  earnings of $.61 per share for the prior year  period.  The increase in
net income was  primarily  attributable  to an increase in net  interest  income
after provision for loan losses of $918,000,  or 19.0%, which was offset in part
by increases in other operating expenses of $959,000, or 23.1%.

Interest Income

Interest income, on a fully taxable equivalent basis, increased $1.3 million, or
11.8 %, from $10.7  million  for the six months  ended June 30,  2000,  to $12.0
million for the six months ended June 30, 2001. The increase was attributable to
an  increase in the average  balance of total  interest-earning  assets of $41.6
million,  or 14.4%,  from $288.8 million for the six months ended June 30, 2000,
to $330.4 million for the six months ended June 30, 2001. The average balance of
securities, net, (exclusive of municipal obligations) increased $9.9 million, or
6.2%,  but sustained a 1 basis point  decrease in the average yield to 6.21% for
the six months ended June 30, 2001,  compared to 6.22% for the 2000 period.  The
average balance of loans,  net,  increased  $16.6 million,  or 13.2% from $126.1
million for the six months ended June 30, 2000,  to $142.7  million for the 2001
period.  The average yield on loans receivable,  net,  decreased 21 basis points
from 8.93% for the 2000 period, to 8.72% for the six months ended June 30, 2001.
The average yield on  interest-earning  assets  decreased from 7.41% for the six
months ended June 30, 2000, to 7.24% for the six months ended June 30, 2001 as a
result of decreased market interest rates.

Interest Expense

Interest  expense  increased  $493,000,  or 8.7%,  from $5.7 million for the six
months  ended June 30,  2000,  to $6.2 million for the six months ended June 30,
2000,  primarily as a result of a $29.8 million or 12.1% increase in the average
balance of total  interest-bearing  liabilities from $246.8 million for the 2000
period to $276.6  million for the six months ended June 30, 2001.  The increased
interest  expense  resulted from an increase of $42.7  million,  or 22.4% in the
average balance of deposits. The average rate paid on interest-bearing  deposits
decreased  6 basis  points from 4.42% paid for the 2000 period to 4.36% paid for
the six month  period  ended  June 30,  2001.  The  average  balance  of savings
deposits increased by $5.8 million, or 19.4%, and the average balance of NOW and
money  market  deposits  increased  by $11.9  million,  or 20.9% from  period to
period.  The average balance of certificates of deposit increased $25.0 million.
The average cost of borrowed funds  decreased 21 basis points from 5.25% for the
2000  period,  to 5.04% for the six  months  ended June 30,  2001,  due to lower
market interest rates.

Net Interest Income

Net interest income on a fully taxable  equivalent  basis increased by $768,000,
or 15.4%,  from $5.0  million for the six months  ended June 30,  2000,  to $5.8
million  for the six  months  ended June 30,  2001.  The  average  cost of total
interest-bearing liabilities for the period decreased 14 basis points from 4.61%
in  the  2000  period  to  4.47%  in the  2001  period.  The  average  yield  on
interest-earning  assets for the period  decreased 17 basis points from 7.41% in
the 2000  period  to 7.24% in the 2000


                                       16
<PAGE>

period.  The net interest rate spread  decreased by 3 basis points from 2.80% in
the 2000 period, to 2.77% in the 2001 period.

Provision for Loan Losses

The Company made no provision  for loan losses for the six months ended June 30,
2001 as  compared  to  $150,000  for the six  months  ended June 30,  2000.  The
provision  for loan  losses  is  based on  analysis  of the loan  portfolio  and
reflects an amount,  which in  management's  judgment is adequate to provide for
probable loan losses in the existing portfolio.

Other Operating Income

Other operating  income  increased  $129,000,  or 16.0%, to $936,000 for the six
month period ended June 30, 2001.  Service charges on deposit accounts increased
$110,000,  or 26.1%,  reflecting an overall  increase in the Bank's  deposit fee
structure,  growth  in the  depositor  base,  and  the  introduction  of new and
electronic  banking  services.  Net gain on sale of residential  loans increased
$56,000 or 56.6% as a result of overall  increase in  residential  mortgage loan
production.  Slightly  lower  market  interest  rates  have  resulted  in steady
residential  lending volume.  Offsetting these events,  the Company engaged in a
securities  transaction  resulting in a loss of $53,000.  Contingent upon market
conditions,  the Company  periodically  evaluates  repositioning  the securities
portfolio to improve future net interest income and net income.

Other Operating Expense

Other operating expenses increased $959,000, or 23.1%, from $4.1 million for the
six months ended June 30, 2000, to $5.1 million in the six months ended June 30,
2001.  Increases  in salaries  and employee  benefits,  premises  and  equipment
expense,  and other  expense for the six months ended June 30, 2001 are a result
of the Bank's branch expansion plan and included  $399,000 of expense related to
the $7.5 million of Capital securities issued September of 2000.

Income Taxes

Income taxes increased $42,000,  or 8.3%, from $505,000 for the six months ended
June 30, 2000, to $547,000 for the six months ended June 30, 2001.  The increase
is attributable to the increase in income before income taxes. The effective tax
rate for the six months ended June 30, 2001 was 34.3%, compared to 33.5% for the
six months ended June 30, 2000.

Recent Accounting Pronouncements

In June 2000, the Financial  Accounting  Standards Board (FASB) issued Statement
of  Financial  Accounting  Standards  (SFAS) No.  138,  "Accounting  for Certain
Derivative  Instruments  and Certain  Hedging  Activities - an amendment of FASB
Statement  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities." This statement supercedes and amends certain paragraphs of SFAS No.
133. The  effective  date for SFAS No. 138 is for fiscal years  beginning  after
June 15, 2000.  SFAS Nos. 138 and 133 apply to  quarterly  and annual  financial
statements.  There was no impact on the Company's financial condition or results
of operations upon adoption of SFAS Nos. 138 and 133.


                                       17
<PAGE>

In September  2000, the FASB issued SFAS No. 140,  "Accounting for Transfers and
Servicing  of  Financial  Assets  and   Extinguishments  of  Liabilities."  This
Statement  supercedes and replaces SFAS No. 125,  "Accounting  for Transfers and
Servicing of Financial Assets and  Extinguishments of Liabilities," and rescinds
SFAS No. 127,  "Deferral of the  Effective  Date of Certain  Provisions  of FASB
Statement No. 125.".  SFAS No. 140 provides  accounting and reporting  standards
for securitization  transactions  involving financial assets, sales of financial
assets such as receivables,  collateralized  borrowing arrangements,  securities
lending   transactions,   repurchase   agreements,   loan  participations,   and
extinguishments of liabilities.  Certain provisions of this Statement  including
relevant  disclosures  are effective for fiscal years ending after  December 31,
2000. The remaining  provision are effective for transfer  transactions  entered
into after March 31, 2001.  SFAS No. 140 does not require  restatement  of prior
periods.  The  implementation  of SFAS No.  140 does not have an  impact  on our
financial statements.

In July 2001, the FASB issued SFAS No. 141,  "Business  Combinations,"  and SFAS
No. 142,  "Goodwill and Other  Intangible  Assets." These Statements will change
the accounting for business  combinations and goodwill in two ways.  First, SFAS
No. 114 requires that the purchase method of accounting be used for all business
combinations  initiated  after June 30, 2001.  Second,  SFAS No. 142 changes the
accounting  for  goodwill,   including   goodwill   recorded  in  past  business
combinations.  The previous accounting  principles  governing goodwill generated
from a business  combination  will  cease upon  adoption  of SFAS No.  142.  The
adoption  of SFAS Nos.  141 and 142 will not  materially  effect  the  Company's
statements of financial  condition and results of operations.  SFAS Nos. 141 and
142 will become effective on July 1, 2001 and January 1, 2002, respectively, for
the Company.

Liquidity

Liquidity management for the Company requires that funds be available to pay all
deposit  withdrawal and maturing  financial  obligations and meet credit funding
requirements  promptly and fully in accordance with their terms. For most banks,
including the Bank,  maturing assets provide only a limited portion of the funds
required to pay maturing liabilities over a very short time frame. Liquid assets
and the  acquisition  of additional  liabilities,  making  liability  management
integral to liquidity  management in the short term,  provide the balance of the
funds required.

The primary  investing  activities of the Company are the purchase of securities
available-for-sale  and the origination of loans.  During each of the six months
ended June 30, 2001, and 2000, the Company's purchases of securities  classified
available-for-sale  totaled  $808.5  million and $389.6  million,  respectively.
During the six months ended June 30, 2001, the Company's purchases of securities
classified  held-to-maturity  totaled $4.4 million.  Loan  originations,  net of
principal  repayments on loans, totaled $19.4 million and $12.8 million, for the
six months  ended June 30, 2001,  and 2000,  respectively.  Primarily  deposits,
borrowings and principal  repayments  and maturities on securities  funded those
activities.

The Company maintains levels of liquidity that it considers adequate to meet its
current  needs.  The  Company's  principal  sources  of  cash  include  incoming
deposits, the repayment of loans and conversion of investment  securities.  When
cash  requirements  increase  faster  than  cash is  generated,  either  through
increased loan demand or withdrawal of deposited  funds, the Company can arrange
for the sale of loans or liquidate  available-for-sale  securities.  It can also
access its lines of credit,


                                       18
<PAGE>

totaling $6.5 million, with unaffiliated financial institutions which, enable it
to borrow  federal  funds on an unsecured  basis.  In addition,  the Company has
available  lines of credit  with the  Federal  Home Loan Bank of New York (FHLB)
equal to 8.3% of the  Company's  assets  at June 30,  2001,  which  enable it to
borrow funds on a secured basis. The Company could also engage in other forms of
borrowings, including reverse repurchase agreements.

At June 30, 2001,  the Company's  primary  borrowings  consisted of  convertible
advances from the FHLB. The  convertible  feature of these  advances  allows the
FHLB,  at a  specified  call date and  quarterly  thereafter,  to convert  these
advances into replacement funding for the same or lesser principal amount, based
on any advance then offered by the FHLB, at then current  market  rates.  If the
FHLB  elects to convert  these  advances,  the Bank may repay any portion of the
advances  without  penalty.  These  convertible  advances are secured by various
mortgage-backed  and callable agency securities.  At June 30, 2001,  convertible
advances outstanding were as follows:

                         Interest                Call                Contractual
  Amount                   Rate                  Date                 Maturity
  ------                   ----                  ----                 --------
$14,000,000               5.49%               02/19/2003             02/19/2008
$15,000,000               4.59%               01/21/2002             01/21/2009
$14,000,000               4.97%               01/19/2004             01/19/2011

Management  of the Company has set minimum  liquidity  level of 10% as a target.
The average of the  Company's  liquid  assets (cash and due from banks,  federal
funds sold,  interest  earning  deposits with other financial  institutions  and
investment securities available-for-sale, less securities pledged as collateral)
as a  percentage  of average  assets of the Company  during the six months ended
June 30, 2001, was 25.5%.

Capital Resources

The Bank is subject to the risk based  capital  guidelines  administered  by the
banking  regulatory  agencies.  The  guidelines  currently  require all banks to
maintain  a minimum  ratio of total risk  based  capital to total risk  weighted
assets of 8%, including a minimum ratio of Tier 1 capital to total risk weighted
assets of 4% and a Tier 1 capital to average  adjusted  assets of 4%. Failure to
meet minimum capital  requirements can initiate certain mandatory,  and possibly
additional discretionary actions by regulators,  that, if undertaken, could have
a direct material effect on the Bank's financial statements.  As of December 31,
2000,  the  most  recent   notification  from  the  federal  banking  regulators
categorized  the Bank as well  capitalized  under the  regulatory  framework for
prompt corrective action.

In  accordance  with the  requirements  of FDIC and the New York  State  Banking
Department, the Bank must meet certain measures of capital adequacy with respect
to leverage and risk-based capital. As of June 30, 2001, the Bank exceeded those
requirements  with a  leverage  capital  ratio,  risk-based  capital  ratio  and
total-risk based capital ratio of 6.67%, 12.47%, and 13.44%, respectively.


                                       19
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The principal objective of the Company's interest rate management is to evaluate
the interest rate risk inherent in certain balance sheet accounts, determine the
level of risk  appropriate  given the  Company's  business  strategy,  operating
environment,  capital and liquidity requirements and performance objectives, and
manage the risk consistent  with guidelines  approved by the Board of Directors.
Through such  management,  the Company seeks to reduce the  vulnerability  of it
operations to changes in interest  rates.  The Board has directed the Investment
Committee to review the  Company's  interest  rate risk  position on a quarterly
basis.

Funds  management  is the  process by which the Company  seeks to  maximize  the
profit  potential  which is derived from the spread  between the rates earned on
interest-earning  assets  and the  rates  paid on  interest-bearing  liabilities
through  the  management  of  various  balance  sheet  components.  It  involves
virtually every aspect of the Company's management and decision-making  process.
Accordingly,  the Company's  results of operations  and financial  condition are
largely  dependent on the movements in the market interest rates and its ability
to manage its assets and liabilities in response to such movements.

At June 30, 2001,  75.2% of the Company's  gross loans had  adjustable  interest
rates and its loan portfolio had an average  weighted  maturity of 9.2 years. At
such date, $13.4 million,  or 9.33%, of the Company's  securities had adjustable
interest rates, and its securities  portfolio had a weighted average maturity of
5.0 years.  At June 30, 2001, the Company had $68.6 million of  certificates  of
deposit with  maturities  of one year or less and $36.8 million of deposits over
$100,000, which tend to be less stable sources of funding, when compared to core
deposits,  and  which  represented  41.1%  of  the  Company's   interest-bearing
liabilities.   In   a   rising   interest   rate   environment   the   Company's
interest-bearing  liabilities may adjust upwardly more rapidly than the yield on
its  adjustable-rate  loans.  Thus,  due to the Company's  level of shorter term
certificates  of deposit,  the Company's cost of funds may increase at a greater
rate in a  rising  rate  environment  than if it had a  greater  amount  of core
deposits  which,  in turn,  may  adversely  affect net  interest  income and net
income.

The Company's  interest rate sensitivity is monitored by management  through the
use of a quarterly  interest  rate risk analysis  model which  evaluates (i) the
potential  change in the net interest  income over the  succeeding  four quarter
periods and (ii) the potential change in the fair market value of equity, of the
Company  ("Net  Economic   Value  of  Equity"),   which  would  result  from  an
instantaneous  and sustained  interest rate change of zero and plus or minus 200
basis points in 100 basis point increments.


                                       20
<PAGE>

At June 30,  2001,  the effect of  instantaneous  and  sustained  interest  rate
changes on the  Company's Net Interest  Income and Net Economic  Value of Equity
are as follows:

                      Potential Change in             Potential Change in
   Change in          Net Interest Income        Net Economic Value of Equity
 Interest Rates      ----------------------      ----------------------------
 in Basis Points     $ Change      % Change      $ Change            % Change
 ---------------     --------      --------      ---------           --------
                                  (Dollars in thousands)

      200            $    20         1.35%       $(3,851)            (17.43)%
      100                177          .15         (1,934)             (8.75)
    Static                --           --             --                 --
     (100)            (2,367)      (18.00)         1,220               5.52
     (200)            (2,698)      (20.51)         2,575              11.65


                                       21
<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

      The Company's  Annual Meeting of Stockholders  was held on April 25, 2001,
      and the  following  individuals  were elected as  Directors  for a term of
      three years each:

                                   Vote        Votes                    Broker
                                    For       Withheld   Abstentions   Non-Votes
                                    ---       --------   -----------   ---------
      Donald Del Duca            1,295,850     4,427          --          --
      Gordon A. Lenz             1,296,050     4,227          --          --
      Thomas F. Roberts, III     1,295,250     5,027          --          --
      Alfred Romito              1,296,050     4,227          --          --

      The term of the following  Directors  continued  after the Annual Meeting:
      Harvey Auerbach,  John L. Ciarelli,  Esq., Perry B. Duryea,  Jr., Frank J.
      Esposito,  Waldemar  Fernandez,  Roy M. Kern,  Sr.,  Douglas C.  Manditch,
      Werner S. Neuberger, Sally Ann Slacke, John C. Tsunis, Esq.

      The amendment to the Company's  1998 Stock Option Plan was ratified at the
      Company's  Annual Meeting of Stockholders on April 25, 2001 with 1,205,930
      votes for the amendment, 3,032 votes withheld and 91,316 votes against.

Item 5. Other Information

      Not applicable.

Item 6. Exhibits and Reports on Form 8-K

      a. Exhibits

         11.0 Statement Re: Computation of Per Share Earnings

      b. Reports on Form 8K

         None


                                       22
<PAGE>

                                   SIGNATURES

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

                                       LONG ISLAND FINANCIAL CORP.
                                       (Registrant)

Date: August 13, 2001                  By: /s/ Douglas C. Manditch
                                           -------------------------------------
                                           Douglas C. Manditch
                                           President and Chief Executive Officer

Date: August 13, 2001                  By: /s/ Thomas Buonaiuto
                                           -------------------------------------
                                           Thomas Buonaiuto
                                           Vice President and Treasurer


                                       23