UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
    SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended...........................         JUNE 30, 1999
                                       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.: 000-23809


                          FIRST SENTINEL BANCORP, INC.
             (exact name of registrant as specified in its charter)

            DELAWARE                                   22-3566151
(State or other jurisdiction of                 (IRS Employer I.D. No.)
   incorporation or organization)

               1000 WOODBRIDGE CENTER DRIVE, WOODBRIDGE, NJ 07095
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (732) 726-9700

                                 NOT APPLICABLE
       Former Name, Address, and Fiscal year, if changed since last report

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.

Yes   X  No    .
    ----   ----

                      APPLICABLE ONLY TO CORPORATE ISSUERS

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

            Class                          Outstanding at August 9, 1999
---------------------------       ---------------------------------------------
        Common Stock                             42,684,363 shares

<PAGE>

                          FIRST SENTINEL BANCORP, INC.

                               INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
                                                                                             Page #
PART I.   FINANCIAL INFORMATION                                                              ------

<S>       <C>                                                                                 <C>
Item 1.   Financial Statements

          Consolidated Statements of Financial Condition as of June 30, 1999 (unaudited)
          and December 31, 1998 (audited)                                                      3

          Consolidated Statements of Income for the three and six months ended June 30,
          1999 and 1998 (unaudited)                                                            4

          Consolidated Statements of Stockholders' Equity for the six months ended June 30,
          1999 and 1998 (unaudited)                                                            5

          Consolidated Statements of Cash Flows for the six months ended June 30, 1999 and
          1998 (unaudited)                                                                     6

          Notes to Unaudited Consolidated Financial Statements                                 7

Item 2.   Management's Discussion and Analysis of Financial Condition and Results of
          Operations                                                                           9

Item 3.   Quantitative and Qualitative Disclosure About Market Risk                           15

PART II.  OTHER INFORMATION.                                                                  16

          SIGNATURES                                                                          17
</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>
FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES
----------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
                                                                                           June 30,              December 31,
                                                                                             1999                   1998
                                                                                        ---------------        --------------
                                                                                          (unaudited)            (audited)
ASSETS
<S>                                                                                   <C>                      <C>
Cash and due from banks ..........................................................    $    17,050              $    22,831
Federal funds sold ...............................................................           --                     14,800
                                                                                      -----------              -----------
     Total cash and cash equivalents .............................................         17,050                   37,631
Federal Home Loan Bank of New York (FHLB-NY) stock, at cost ......................         12,852                   12,852
Investment securities available for sale .........................................        203,584                  242,197
Mortgage-backed securities available for sale ....................................        668,703                  661,881
Loans receivable, net ............................................................        902,094                  854,697
Interest and dividends receivable ................................................         12,156                   13,556
Premises and equipment, net ......................................................         16,720                   16,481
Excess of cost over fair value of net assets acquired ............................          7,531                    7,956
Other assets .....................................................................         12,346                    7,807
                                                                                      -----------              -----------
     Total assets ................................................................    $ 1,853,036              $ 1,855,058
                                                                                      ===========              ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Deposits .........................................................................    $ 1,253,931              $ 1,268,119
Borrowed funds ...................................................................        288,175                  264,675
Advances by borrowers for taxes and insurance ....................................          8,224                    6,969
Other liabilities ................................................................         14,787                   15,476
                                                                                      -----------              -----------
    Total liabilities ............................................................      1,565,117                1,555,239
                                                                                      -----------              -----------

STOCKHOLDERS' EQUITY
Preferred Stock; authorized 10,000,000 shares; issued and outstanding - none .....            --                       --
Common Stock,  $.01 par value, 85,000,000 shares  authorized
     43,107,075 and 42,684,363 shares issued and outstanding at 6/30/99 and
     43,105,497 and 42,675,397 shares issued and outstanding at 12/31/98 .........            431                      431
Paid-in capital ..................................................................        201,085                  201,105
Retained earnings ................................................................        116,501                  112,601
Accumulated other comprehensive (loss) ...........................................         (9,326)                   2,498
income
Less: Treasury stock .............................................................         (3,591)                  (3,664)
         Unearned Common Stock acquired by the Employee Stock
           Ownership Plan (ESOP) .................................................        (12,615)                 (13,073)
         Unearned Common Stock acquired by the Recognition and
           Retention Plan (RRP) ..................................................         (4,566)                     (79)
                                                                                      -----------              -----------
     Total stockholders' equity ..................................................        287,919                  299,819
                                                                                      -----------              ===========
     Total liabilities and stockholders' equity ..................................    $ 1,853,036              $ 1,855,058
                                                                                      ===========              ===========
</TABLE>

See accompanying notes to the unaudited consolidated financial statements.

                                       3
<PAGE>

<TABLE>
<CAPTION>
FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES
-----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

                                                                                Quarter ended June 30,     Six months ended June 30,
                                                                             ----------------------------  -------------------------
                                                                                  1999          1998          1999         1998
                                                                             -------------   -----------   -----------   -----------
                                                                                      (Unaudited)                (Unaudited)
<S>                                                                         <C>              <C>          <C>            <C>
INTEREST INCOME:
  Loans ..................................................................  $    16,716      $    15,004  $    32,911    $    29,376
  Mortgage-backed securities held to maturity ............................           --            3,542           --          9,598
  Investment securities held to maturity .................................           --            2,786           --          5,297
  Investment and mortgage-backed securities
    available for sale ...................................................       13,766            8,476       27,515         13,442
                                                                            -----------      -----------  -----------    -----------
     Total interest income ...............................................       30,482           29,808       60,426         57,713
                                                                            -----------      -----------  -----------    -----------
INTEREST EXPENSE:
 Deposits:
   NOW and money market demand ...........................................        2,327            2,636        4,609          4,792
   Savings ...............................................................          982              685        1,989          1,820
   Certificates of deposit ...............................................        8,561            9,748       17,397         19,697
                                                                            -----------      -----------  -----------    -----------
     Total interest expense - deposits ...................................       11,870           13,069       23,995         26,309
  Borrowed funds .........................................................        4,040            2,810        7,827          5,900
                                                                            -----------      -----------  -----------    -----------
     Total interest expense ..............................................       15,910           15,879       31,822         32,209
                                                                            -----------      -----------  -----------    -----------
     Net interest income .................................................       14,572           13,929       28,604         25,504
Provision for loan losses ................................................          450              365          900            740
                                                                            -----------      -----------  -----------    -----------
     Net interest income after provision for loan losses .................       14,122           13,564       27,704         24,764
                                                                            -----------      -----------  -----------    -----------
OTHER OPERATING INCOME:
  Fees and service charges ...............................................          592              556        1,233          1,110
  Net gain on sales of loans and securities available for sale ...........          318               42          577            149
  Net gain on sale of deposits ...........................................           --               --           --          1,084
  Other, net .............................................................           93              141          240            298
                                                                            -----------      -----------  -----------    -----------
     Total other operating income ........................................        1,003              739        2,050          2,641
                                                                            -----------      -----------  -----------    -----------
OPERATING EXPENSES:
  Compensation and benefits ..............................................        3,456            3,248        6,801          6,405
  Occupancy ..............................................................          545              511        1,089          1,047
  Equipment ..............................................................          378              493          795            955
  Advertising ............................................................          353              304          603            521
  Federal deposit insurance ..............................................          191              191          388            378
  Amortization of intangibles ............................................          212              212          425            425
  General and administrative .............................................        1,171            1,063        2,264          1,999
                                                                            -----------      -----------  -----------    -----------
     Total operating expenses ............................................        6,306            6,022       12,365         11,730
                                                                            -----------      -----------  -----------    -----------
     Income before income tax expense ....................................        8,819            8,281       17,389         15,675
Income tax expense .......................................................        2,939            3,039        5,898          5,732
                                                                            -----------      -----------  -----------    -----------
     Net income ..........................................................  $     5,880      $     5,242  $    11,491    $     9,943
                                                                            ===========      ===========  ===========    ===========
Basic earnings per share .................................................  $      0.15      $      0.13  $      0.28    $      0.24
                                                                            ===========      ===========  ===========    ===========
Weighted average shares outstanding - Basic ..............................   40,489,683       41,922,455   40,694,868     42,173,415
                                                                            ===========      ===========  ===========    ===========
Diluted earnings per share ...............................................  $      0.14      $      0.12  $      0.28    $      0.23
                                                                            ===========      ===========  ===========    ===========
Weighted average shares outstanding - Diluted ............................   41,549,270       42,711,414   41,628,684     42,999,121
                                                                            ===========      ===========  ===========    ===========
</TABLE>

See accompanying notes to the unaudited consolidated financial statements

                                       4
<PAGE>
<TABLE>
<CAPTION>
FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES
-----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 (DOLLARS IN THOUSANDS) (UNAUDITED)

                                                                        Accumulated
                                                                           Other                  Common    Common      Total
                                                                          Compre-                 Stock      Stock     Stock-
                                          Common    Paid In   Retained    hensive     Treasury   Acquired  Acquired   holders'
                                          Stock     Capital   Earnings  Income(Loss)   Stock     by ESOP    by RRP     Equity
                                        ---------------------------------------------------------------------------------------
<S>                                         <C>      <C>       <C>            <C>     <C>          <C>       <C>      <C>
Balance at December 31, 1997                $470     $59,348   $101,186       $1,295  ($16,677)    ($546)    ($183)   $144,893
Net proceeds from stock offering ......       --     162,232         --           --        --        --        --     162,232
Adjustment for Mutual Holding Co. .....       --       1,577         --           --        --        --        --       1,577
Purchase of ESOP shares................       --          --         --           --        --   (13,240)       --     (13,240)
Net income for the six months ended
 June 30, 1998 ........................       --          --      9,943           --        --        --        --       9,943
Cash dividends ........................       --          --     (3,155)          --        --        --        --      (3,155)
Net change in unrealized gain/(loss)
   on securities available for sale ...       --          --         --        1,317        --        --        --       1,317
Amortization of RRP ...................       --          --         --           --        --        --        52          52
Principal payments on ESOP loan........       --          74         --           --        --       274        --         348
Exercise of stock options .............        1         384         --           --        --        --        --         385
                                        ---------------------------------------------------------------------------------------
Balance at June 30, 1998                    $471    $223,615   $107,974       $2,612  ($16,677) ($13,512)    ($131)   $304,352
                                        =======================================================================================


Balance at December 31, 1998 ...........    $431    $201,105   $112,601       $2,498   ($3,664) ($13,073)     ($79)   $299,819
Net income for the six months
   ended June 30, 1999 .................      --          --     11,491           --        --        --        --      11,491
Cash dividends .........................      --          --     (4,517)          --        --        --        --      (4,517)
Net change in unrealized gain/(loss)
   on securities available for sale ....      --          --         --      (11,824)       --        --        --     (11,824)
Purchases of treasury stock ............      --          --         --           --    (8,991)       --        --      (8,991)
Exercise of stock options...............      --           6         --           --        --        --        --           6
Exercise of stock options, issued
   from existing treasury stock.........      --          --     (2,418)          --     3,360        --        --         942
Transfer of treasury stock to RRP ......      --          --       (656)          --     5,704        --    (5,048)         --
Amortization of RRP ....................      --          --         --           --        --        --       561         561
Principal payments on ESOP loan ........      --         (26)        --           --        --       458        --         432
                                        ---------------------------------------------------------------------------------------
Balance at June 30, 1999 ...............    $431    $201,085   $116,501      ($9,326)  ($3,591) ($12,615)  ($4,566)   $287,919
                                        =======================================================================================
See accompanying notes to the unaudited consolidated financial statements.
</TABLE>

                                       5
<PAGE>


<TABLE>
<CAPTION>
FIRST SENTINEL BANCORP, INC. AND SUBSIDIARIES
-------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)                                                            Six Months Ended
                                                                                       June 30,
                                                                              ---------------------------
                                                                                 1999              1998
                                                                              ----------        ---------
Cash flows from operating activities:                                                  (unaudited)
<S>                                                                            <C>              <C>
   Net income ...........................................................      $  11,491        $   9,943
   Adjustments to reconcile net income to net cash provided by
    operating activities:
   Depreciation of premises and equipment ...............................            682              650
   Amortization of excess of cost over fair value of assets acquired ....            425              425
   Amortization of ESOP .................................................            432              348
   Amortization of RRP ..................................................            561               52
   Net accretion of premiums and amortization of discounts ..............           (482)            (744)
   Provision for loan losses ............................................            900              740
   Provision for losses on real estate owned ............................             21               10
   Loans originated for sale ............................................         (7,023)          (5,316)
   Proceeds from sales of mortgage loans available for sale .............          6,999            5,341
   Net gain on sales of assets available for sale or trading ............           (578)            (149)
   Net gain on sales of real estate owned ...............................             --              (47)
   Decrease (increase) in interest and dividends receivable .............          1,400           (1,148)
   (Decrease) increase in other liabilities .............................           (689)             364
   Increase (decrease) in other assets ..................................          1,797             (596)
                                                                               ---------        ---------
         Net cash provided by operating activities ......................         15,936            9,873
                                                                               ---------        ---------
Cash flows from investing activities:
   Proceeds from sales/calls of investment securities available for sale.        101,753            9,281
   Maturities of investment securities ..................................             --           52,010
   Purchases of investment securities available for sale ................        (69,990)        (123,376)
   Purchases of investment securities ...................................             --           (1,880)
   Purchase of FHLB-NY stock ............................................             --             (369)
   Proceeds from sales of mortgage-backed securities available for sale .         72,201           41,453
   Principal payments on mortgage-backed securities .....................        130,341          104,963
   Purchases of mortgage-backed securities available for sale ...........       (219,687)        (179,182)
   Purchases of mortgage-backed securities ..............................             --           (5,541)
   Principal repayments on loans ........................................        137,202          107,046
   Origination of loans .................................................       (174,258)        (169,849)
   Purchases of mortgage loans ..........................................        (12,417)          (9,786)
   Proceeds from sale of real estate owned ..............................          1,252              946
   Purchases of premises and equipment ..................................           (921)          (2,022)
   Proceeds from sales of fixed assets ..................................             --              124
                                                                               ---------        ---------
          Net cash used in investing activities .........................        (34,524)        (176,182)
                                                                               ---------        ---------
Cash flows from financing activities:
   Net proceeds from stock offering and Mutual Holding Co. reorganization             --          163,809
   Purchase of treasury stock ...........................................         (8,991)              --
   Purchase of ESOP shares ..............................................             --          (13,240)
   Stock options exercised ..............................................            948              385
   Cash dividends paid ..................................................         (4,517)          (3,155)
   Net (decrease) increase in deposits ..................................        (14,188)           8,420
   Net increase in borrowed funds .......................................         23,500           16,554
   Net increase in advances by borrowers for taxes and insurance ........          1,255              919
                                                                               ---------        ---------
            Net cash (used in) provided by financing activities .........         (1,993)         173,692
                                                                               ---------        ---------
            Net (decrease) increase in cash and cash equivalents ........        (20,581)           7,383
Cash and cash equivalents at beginning of period ........................         37,631           29,903
                                                                               =========        =========
Cash and cash equivalents at end of period ..............................      $  17,050        $  37,286
                                                                               ---------        ---------
Supplemental disclosures of cash flow information:
 Cash paid during the period for:
       Interest .........................................................      $  31,339        $  31,927
       Income taxes .....................................................          4,619            5,924
   Non cash investing and financing activities for the period:
        Transfer of mortgage-backed securities from Held to Maturity
         to Available for Sale ..........................................             --          181,811
        Transfer of loans to real estate owned ..........................      $   1,242        $   3,021
</TABLE>
See accompanying notes to unaudited consolidated financial statements.

                                       6
<PAGE>



                  FIRST SENTINEL BANCORP, INC. and SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements

(1)  BASIS OF PRESENTATION

The accompanying  unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles ("GAAP") for interim
financial  information and in conformity with the  instructions to Form 10-Q and
Article 10 of Regulation S-X for First Sentinel Bancorp,  Inc. ("First Sentinel"
or the "Company") and its  wholly-owned  subsidiaries,  First Savings Bank, SLA,
("First  Savings"  or  the  "Bank")  Pulse  Investment,  Inc.,  Pulse  Insurance
Services,  Inc.  and  Pulse  Real  Estate,  Inc.,  and the  Bank's  wholly-owned
subsidiaries, FSB Financial Corp., and 1000 Woodbridge Center Drive, Inc.

In the  opinion  of  management,  all  adjustments  (consisting  of only  normal
recurring accruals) necessary to present fairly the financial condition, results
of operations, and changes in cash flows have been made at and for the three and
six months ended June 30, 1999 and 1998. The results of operations for the three
and six months ended June 30, 1999,  are not  necessarily  indicative of results
that may be expected for the entire fiscal year ending December 31, 1999.  These
interim financial statements should be read in conjunction with the December 31,
1998 annual report.

(2)  EARNINGS PER SHARE

Basic  earnings  per share is  calculated  by  dividing  net income by the daily
average  number of common  shares  outstanding  during the period.  Common stock
equivalents are not included in the calculation.

Diluted  earnings per share is computed  similarly to that of basic earnings per
share  except  that the  denominator  is  increased  to  include  the  number of
additional  common  shares  that would have been  outstanding  if all  potential
dilutive common shares were issued utilizing the treasury stock method.

Calculation of Basic and Diluted Earnings Per Share

--------------------------------------------------------
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
                                                   Three Months ended June 30,       Six Months ended June 30,
                                               --------------------------------   ------------------------------
                                                   1999              1998             1999              1998
                                               --------------    --------------    -------------   -------------
<S>                                           <C>               <C>               <C>             <C>
Net income                                    $         5,880   $         5,242   $      11,491   $        9,943
                                               ==============    ==============    =============   =============
Basic weighted-average common shares
     Outstanding                                   40,489,683        41,922,455      40,694,868       42,173,415
Plus: Dilutive stock options and awards             1,059,587           788,959         933,816          825,706
                                               --------------    --------------    -------------   -------------
Diluted weighted-average common
     shares outstanding                            41,549,270        42,711,414      41,628,684       42,999,121
                                               ==============    ==============    =============   =============
Net income per common share:
   Basic                                      $          0.15   $         0.13    $        0.28   $         0.24
                                               ==============    ==============    =============   =============
   Diluted                                    $          0.14   $         0.12    $        0.28   $         0.23
                                               ==============    ==============    =============   =============
</TABLE>

(3)  DIVIDENDS

Based upon current  operating  results,  the Company  declared cash dividends of
$0.055 per share on April 28, 1999,  payable May 28, 1999,  to  stockholders  of
record on May 14, 1999.

                                       7
<PAGE>

(4) COMMITMENTS AND CONTINGENCIES

At June 30, 1999,  the Company had the following  commitments:  (i) to originate
loans of $78.9 million;  (ii) to purchase mortgage loans of $8.1 million;  (iii)
to sell mortgage loans of $400,000;  (iv) to purchase  investment  securities of
$18.4 million,  (v) unused equity lines of credit of $41.0 million;  (vi) unused
commercial lines of credit of $14.4 million;  (vii) unused construction lines of
credit of $38.1 million;  and (viii) letters of credit outstanding totaling $2.9
million. Further, certificates of deposits, which are scheduled to mature and/or
rollover in one year or less, totaled $562.3 million at June 30, 1999.

(5) ALLOWANCE FOR LOAN LOSSES

The following table presents the activity in the allowance for loan losses.

                                               For the six months ended June 30,
                                             -----------------------------------
                                                     1999              1998
                                                 -----------       -----------
                                                   (unaudited)(in thousands)
      Balance at beginning of period               $9,505            $8,454
      Provision charged to operations                 900               740
      Charge offs, net of recoveries                  (79)             (431)
                                                      ----             -----

      Balance at end of period                    $10,326            $8,763
                                                  =======            ======

(6) COMPREHENSIVE (LOSS) INCOME

Total comprehensive  (loss) income,  consisting of net income and the net change
in unrealized  gain/(loss) on securities  available for sale, was ($333,000) and
$11.1 million for the six months ended June 30, 1999 and 1998, respectively.

(7) RECENT ACCOUNTING PRONOUNCEMENTS

In October 1998, the FASB issued SFAS No. 134  "Accounting  for  Mortgage-Backed
Securities  Retained after the Securitization of Mortgage Loans Held for Sale by
a  Mortgage  Banking  Enterprise."  This  statement  amends  FASB  Statement  65
"Accounting for Certain Mortgage Banking Activities." It requires 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.  This Statement is effective for the first fiscal quarter beginning
after  December 15, 1998. The adoption of this Statement did not have a material
impact on the financial position or results of operations of the Company.

                                       8
<PAGE>

FIRST SENTINEL BANCORP, INC.

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL.

Statements  contained  in  this  report  that  are  not   historical   fact  are
forward-looking  statements,  as that term is defined in the Private  Securities
Reform  Act of  1995.  Such  statements  may be  characterized  as  management's
intentions,  hopes,  beliefs,  expectations or predictions of the future.  It is
important to note that such forward-looking  statements are subject to risks and
uncertainties  that could cause actual results to differ  materially  from those
projected in such  forward-looking  statements.  Factors that could cause future
results  to vary  materially  from  current  expectations  include,  but are not
limited  to,  changes  in  interest  rates,   competition  by  larger  financial
institutions,  deposit and loan growth, changes in the quality or composition of
the Company's loan and investment portfolios,  changes in accounting principles,
policies or  guidelines,  legislative  and  regulatory  changes,  changes in the
economy generally and changes in business conditions in the New Jersey market.

CONVERSION AND REORGANIZATION

On April 8, 1998,  First  Savings  Bank and its mutual  holding  company,  First
Savings  Bancshares,  MHC,  completed a conversion and  reorganization  into the
stock holding company structure, forming First Sentinel as the new stock holding
company and issuing  shares of First  Sentinel  Common Stock in the process (the
"Conversion and Reorganization").  As part of the Conversion and Reorganization,
the  Company  sold  16,550,374  shares of  Common  Stock in a  Subscription  and
Community Offering, raising gross proceeds of $165.6 million.  Concurrently, the
Company issued 14,820,016 shares of Common Stock in exchange for shares of First
Savings Bank, SLA common stock on a 3.9133-for-1 basis (the "Conversion Exchange
Ratio") in an exchange offering.  All per share and earnings per share data have
been restated to reflect the 3.9133 Conversion Exchange Ratio.

On December 18, 1998, the Company acquired Pulse Bancorp,  Inc. ("Pulse").  Each
share of Pulse was converted into 3.764 shares of the Company's  common stock. A
total of 12,066,298 shares were issued, including 800,000 treasury stock shares,
to complete the  transaction.  The  acquisition has been accounted for under the
pooling-of-interests  method  of  accounting  and  accordingly,   the  Company's
consolidated financial statements include the accounts and activity of Pulse for
all periods presented.

YEAR 2000 COMPLIANCE ISSUES.

The Company has adopted a Year 2000  Compliance Plan and established a Year 2000
Compliance  Committee,  which  includes  members of senior  management  from all
operating areas. The objectives of the plan and the committee are to ensure that
the Company  will be prepared  for the new  millennium.  As  recommended  by the
Federal Financial  Institutions  Examination  Council,  the Year 2000 Compliance
Plan  encompasses  the  following  phases:  Awareness,  Assessment,  Renovation,
Validation and Implementation.  These phases entail the identification of risks,
the development of an action plan, the  performance of adequate  testing and the
completion of certification  that the Company's  processing systems will be Year
2000 Compliant.  As of June 30, 1999, all phases of the plan were  substantially
completed,  although certain procedures remain ongoing.  Progress reports on the
implementation  of the plan are  reviewed by the Board of Directors on a monthly
basis.

An  integral  component  of the  plan  has  been  to  identify  and  assess  the
capabilities  of the  Company's  operating  systems,  as well  as the  operating
systems of third parties upon which the Company's operations are dependent.  The
Company's  primary  operating  software is obtained  from, and maintained by, an
external provider of software.  This software is the Company's primary source of
information  technology  ("IT"),  and is  considered  "mission  critical" to the
Company's Year 2000 compliance.  In August 1998, the vendor provided the Company
with remediated software and written  notification  that the  remediated

                                       9
<PAGE>

software was Year 2000  compliant.  The Company has installed  this software and
performed  detail  tests on both the  software  and  hardware  on various  dates
through April 30, 2001. No material  problems have been encountered  during such
testing. The tests and results used to certify the system as compliant have also
been reviewed by an independent Year 2000 consultant  engaged by the Company for
that purpose.

The Company has also performed minor modifications to the software obtained from
the  vendor.  It is  the  Company's  sole  responsibility  to  ensure  that  any
modifications  to the  software  are Year  2000  compliant.  This  operation  is
currently in  progress.  The Company has retained an  additional  consultant  to
assist in the  documentation  and detailed  review of the  modifications  to the
software.  The  modifications to the software being performed by the Company are
not  considered  mission  critical as the software can process all  transactions
effectively without the modifications.

The Company has substantially completed testing of all other IT systems as well.
These  systems are also provided to the Company by third party  vendors,  all of
whom have  provided  written  assurances to the Company that the systems are, or
are expected to be, Year 2000  compliant  before the  year-end.  The Company has
also  contacted  all other  material  vendors and  suppliers  of non-IT  systems
regarding their Year 2000 state of compliance. The majority of these third party
vendors and suppliers have delivered written assurances to the Company that they
will have all  mission  critical  systems  compliant,  and that there will be no
interruption in service.  The Company has established  internal  guidelines,  by
which time material vendors and suppliers must be compliant, or the Company will
seek  alternate  vendors  and  suppliers.  Based  upon its  current  assessment,
management  believes that the Company's  material third party vendors are taking
the necessary steps to ensure Year 2000 compliance.  There can be no assurances,
however, that such third parties will be compliant by year-end.

In addition,  the Company has contacted  all material  borrowers to assess their
Year  2000  readiness,  and is in the  process  of  finalizing  the  review  and
assessment of their  responses.  The Company has also  incorporated  a Year 2000
readiness review in its loan application process, in order to reduce exposure to
a new  borrower's  failure  to be Year 2000  ready.  Based  upon a review of its
material  borrowers  as of April  1999,  the  Company  does not  anticipate  any
material  losses  resulting  from a  borrower's  lack of  preparedness.  All new
borrowers  since that time have been evaluated for Year 2000  preparation in the
loan review process,  with the exception of those loans purchased by the Company
in  connection  with the  acquisition  of Pulse.  A review of the  former  Pulse
borrowers  for Year 2000  preparedness  is in progress.  Because the majority of
Pulse loans are  secured by real  estate,  management  does not  anticipate  any
material losses on such loans. Despite these measures,  however, there can be no
assurances  that the  Company  will not suffer  any  losses due to a  borrower's
failure to be Year 2000 compliant or that the Company will not have to establish
any reserves for any such potential losses.

The Company  expects that  customers  may desire to withdraw  funds in the weeks
preceding  the  century  date  change.   In  order  to  address  that  potential
consequence,  the Company  expects to have  additional  liquid assets  available
toward  year-end.  The Company is  significantly  in excess of the OTS liquidity
requirements,  and  anticipates  remaining so throughout  1999.  Management  has
developed a detailed  Liquidity  Plan that includes  procedures  for  addressing
liquidity  needs in the final weeks of 1999.  The Liquidity  Plan is expected to
reduce interest-earning assets and net interest income for that period. Any such
reduction, however, is expected to be immaterial to the results of operations or
financial condition of the Company.

Management  has  also  developed  a  Contingency  Plan  that  incorporates  both
remediation and business  continuity  plans. The remediation  contingency  plans
focus  on  implementing  oversight  mechanisms  to  ensure  that  the  Company's
Compliance  Plan  achieves  its  intended  results of  renovating,  testing  and
implementing  necessary changes to all mission critical systems prior to January
1, 2000.  The business  continuity  plans set forth the  necessary  policies and
procedures  to  follow  in  the  event  that  critical  business  functions  are
interrupted or impaired due to internal  system or third party  failures.  These
plans are an enhancement of the Company's  existing  Disaster Recovery Plan, and
combined,  are intended to help ensure the continuity of operations in the event
of a loss of critical resources. Testing of the Contingency Plan is in progress,
and is expected to continue through September 30, 1999.

                                       10
<PAGE>

While the Company has not determined the final cost of compliance,  it currently
anticipates such cost to be immaterial to the results of operations or financial
condition  of the  Company.  The costs  specifically  attributable  to Year 2000
compliance are the  engagement of the two  consultants  discussed  above and the
hiring of temporary help to address the additional  workload created by the Year
2000  compliance  process.  In  addition,  the Company has  initiated a Customer
Awareness Campaign to educate consumers on Year 2000 issues,  which has incurred
certain expenses. To date, the Company has expensed $92,000 for each of 1998 and
the first six months of 1999. A total expense of $250,000 is budgeted for 1999.

Management  believes that it is taking all reasonable and  appropriate  steps to
prepare for the Year 2000, and believes that its efforts are on schedule. Due to
the general  uncertainty  inherent  with Year 2000 issues,  and the inability to
control  external  parties  or  circumstances  upon  which  the  Company  may be
dependent,  however,  there can be no  assurances  that the Company  will not be
adversely affected by the century date change.  Such adverse impact could result
from  failures of the Company's  internal  systems,  failures of material  third
party  vendors or  failures  of material  borrowers.  The Company  could also be
subjected  to  litigation  from  customers,  borrowers  or vendors due to either
internal or external Year 2000 failures. All disclosure concerning the Year 2000
date change should be considered  "Year 2000 Readiness  Disclosure"  pursuant to
the  Year  2000  Information  and  Readiness   Disclosure  Act.  The  Year  2000
information  provided  herein should be read in  conjunction  with the Year 2000
Information  and Readiness  Disclosure Act which,  among other things,  mandates
that certain Year 2000 readiness disclosures may not be used in litigation.

ASSETS.  Total  assets  remained  relatively  stable at $1.9 billion at June 30,
1999, reflecting a decrease of $2.0 million, or 0.1% from December 31, 1998. The
change in assets  consisted  primarily  of  increases  in loans  receivable  and
mortgage-backed  securities  ("MBS")  available for sale, offset by decreases in
investment  securities  available  for sale and federal  funds  sold.  Net loans
increased  $47.4 million,  or 5.6%, to $902.1 million as of June 30, 1999,  from
$854.7  million at December  31, 1998.  The  increase was due  primarily to loan
originations  exceeding loan amortization,  prepayments and sales. Mortgage loan
originations  for the six months ended June 30, 1999 were $174.3 million,  which
represented  a 2.6%  increase  over  originations  of  $169.8  million  for  the
comparable   1998  period.   Single-family   fixed-rate   first   mortgage  loan
originations  totaled 36% of  production,  while  adjustable-rate  single-family
first mortgage loans accounted for 22% of total  originations  for the first six
months of 1999. Also during the first six months of 1999, commercial real estate
and  multi-family  loan  originations  totaled  $29.5  million,  or 17% of total
originations,  while construction  lending totaled $16.3 million, or 10%. During
the same period,  consumer loan  originations,  including  home equity loans and
credit  lines,  totaled $23.0  million.  Repayment of principal on loans totaled
$137.2  million for the six months  ended June 30,  1999,  as compared to $105.0
million for the same period in 1998.  Management has emphasized the  origination
of loans in an  effort  to  increase  loans as a  percentage  of  assets.  While
management  intends to continue to actively seek to originate  loans, the future
levels of loan  originations and repayments will be significantly  influenced by
external interest rates and other economic factors outside of the control of the
Company.

MBS available for sale  increased $6.8 million,  or 1.03%,  to $668.7 million at
June 30,  1999,  from $661.9  million at December  31,  1998.  The  increase was
primarily  due to  purchases of $219.7  million  exceeding  sales and  principal
repayments of $72.2 million and $130.3 million,  respectively.  There was also a
market value adjustment of ($11.8 million) reflecting the change in the value of
the MBS portfolio as interest rates rose in  anticipation of a change in Federal
Reserve  monetary  policy,  which  widened  spread  and  affected  MBS  pricing.
Management  expects  the market  value to recover  and has the  ability to carry
these securities through various interest rate scenarios.

Investment  securities  available for sale decreased $38.6 million, or 15.9%, to
$203.6 million as of June 30, 1999 from $242.2 million at December 31, 1998. For
the six months ended June 30,  1999,  sales and calls of  investment  securities
available  for sale  totaled  $101.8  million,  while  purchases  totaled  $70.0
million.  Calls of investment securities available for sale were concentrated in
the  portfolio  obtained  through  the Pulse  acquisition.  Federal  funds  sold
decreased  $14.8  million from December 31, 1998 as these funds were deployed in
other areas. Other assets increased $4.5 million,  or 58.1%, to $12.3 million at
June 30,

                                       11
<PAGE>

1999,  compared  with $7.8  million at  December  31,  1998.  The  increase  was
primarily  due to the increased  deferred tax benefit  caused by the decrease in
the market value of the securities available for sale portfolios.

LIABILITIES.  Deposits decreased $14.2 million, or 1.1%, to $1.3 billion at June
30, 1999.  The Company  continued to experience  deposit  outflows at the former
Pulse  branches.  The outflow was  concentrated  primarily  in  certificates  of
deposit  at the former  Pulse  branches,  as opposed to the  balance of the core
deposit base, as management lowered the rates on higher-costing  certificates of
deposit.  The Company  continues  to focus on a reduction in the  dependence  on
certificates of deposit as its primary funding source.  Borrowed funds increased
$23.5 million,  or 8.9%, to $288.2 million at June 30, 1999, from $264.7 million
at December 31, 1998.  The increased  borrowed funds were used primarily to fund
loan  originations  and to purchase  MBS  available  for sale,  and, to a lesser
degree, mitigate deposit outflows. Advances by borrowers for taxes and insurance
increased $1.3 million,  or 18.0%,  to $8.2 million at June 30, 1999,  from $7.0
million at December 31, 1998,  primarily due to the increase in the  residential
loan portfolio.  Other liabilities decreased $689,000, or 4.5%, to $14.8 million
at June 30, 1999,  from $15.5  million at December 31,  1998,  primarily  due to
decreases in income taxes payable and various other accrual accounts.

CAPITAL. The Company's stockholders' equity decreased $11.9 million, or 4.0%, to
$287.9  million at June 30, 1999,  from $299.8 million at December 31, 1998. The
primary  reasons  for the  decrease  were the net  change in  accumulated  other
comprehensive  income (loss) on the unrealized loss on securities  available for
sale of $11.8 million, the purchase of $3.3 million of treasury stock during the
first six months of 1999 and the $5.7  million  purchase of common stock to fund
unearned  stock awards granted under the Company's  1998  Stock-Based  Incentive
Plan. Cash dividends of $4.5 million further contributed to the decrease.  These
decreases  were  partially  offset by net  income of $11.5  million  for the six
months ended June 30, 1999.

The Office of Thrift  Supervision  ("OTS")  requires  that the Bank meet minimum
tangible,  core and risk-based capital requirements.  At June 30, 1999, the Bank
exceeded all regulatory capital requirements, as follows:

<TABLE>
<CAPTION>
                                Required                   Actual
                          ----------------------    ----------------------         Excess of Actual
                                        % of                      % of             over Regulatory
                            Amount     Assets         Amount     Assets             Requirements
                          ----------- ----------    ----------- ----------     -----------------------
                                              (Dollars in thousands) (Unaudited)
<S>                          <C>          <C>         <C>          <C>                <C>
Tangible Capital             $27,600      1.50%       $228,624     12.43%             $201,024
Core Capital                  55,199      3.00%        228,624     12.43%              173,425
Risk-based Capital            58,537      8.00%        237,784     32.50%              179,247
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES.  The Company's  primary  sources  of  funds are
deposits;   proceeds  from   principal  and  interest   payments  on  loans  and
mortgage-backed  securities;  sales of  loans,  mortgage-backed  securities  and
investments available for sale; maturities or calls of investment securities and
short-term investments;  and, to an increasing extent, advances from the FHLB-NY
and other borrowed funds.  While maturities and scheduled  amortization of loans
and mortgage-backed  securities are a predictable source of funds,  deposit cash
flows and mortgage prepayments are greatly influenced by general interest rates,
competition, and economic conditions.

The most  significant  source of funds  for the  first  six  months of 1999 were
principal  repayment  and  prepayment of loans and  mortgage-backed  securities,
totaling  $137.2 million and $130.3  million,  respectively.  Other  significant
sources of funds for the six months ended June 30, 1999, were sales and calls of
investment  securities  available  for sale of $101.8  million  and sales of MBS
available for sale totaling  $72.2  million,  and borrowed  funds totaling $23.5
million.

The primary investing activities of the Company for the first six months of 1999
were the  purchases of  mortgage-backed  securities  available for sale totaling
$219.7 million,  origination of loans totaling $174.3 million, and the purchases
of  investment  securities  available  for sale totaling  $70.0  million.  Other

                                       12
<PAGE>

significant  uses of funds during the six months ended June 30, 1999, were $12.4
million in purchases of mortgage loans,  $14.2 million in decreased deposits and
$9.0 million for the repurchase of common stock.

The Bank is required to maintain an average  daily  balance of liquid  assets as
defined by OTS  regulations.  This ratio is based upon a percentage  of deposits
and short-term  borrowings.  The required  minimum ratio is currently 4.00%. The
Bank's  liquidity  ratio at June 30, 1999,  was 48.4% and assets  qualifying for
liquidity purposes totaled $614.5 million.

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

RESULTS OF OPERATIONS.  Earnings  for  the three and six  months  ended June 30,
1999, totaled $5.9 million and $11.5 million,  respectively,  with basic/diluted
earnings  per  share  of  $0.15/$0.14  and   $0.28/$0.28,   respectively.   This
represented  an  increase  of  $638,000  and $1.5  million,  or 12.2% and 15.6%,
respectively,  over  the net  income  of  $5.2  million  and  $9.9  million,  or
$0.13/$0.12 and $0.24/$0.23 basic/diluted earnings per share, respectively,  for
the  comparable  1998  periods.  Earnings for the six months ended June 30, 1998
were  augmented  by a  $687,000  after  tax,  non-recurring  gain on the sale of
deposits.  The 1999 increase in net income,  exclusive of the 1998 non-recurring
gain, was $2.2 million.  The increase in net income in 1999 was partially due to
earnings on the net proceeds from the Company's Conversion and Reorganization in
1998.  The proceeds  raised in the  Conversion  and  Reorganization  allowed the
Company to increase  interest-earning assets without a corresponding increase in
interest bearing liabilities.

INTEREST INCOME.  Interest  income  for the three and six months  ended June 30,
1999,  increased by $674,000 and $2.7 million,  or 2.3% and 4.7%,  respectively,
from the same periods in 1998. Interest on loans increased $1.7 million and $3.5
million,  or 11.4% and 12.0%,  respectively,  to total  $16.7  million and $32.9
million for the three and six months ended June 30,  1999,  as compared to $15.0
million  and  $29.4  million  for the same  period  in 1998.  The  increase  was
primarily due to loan originations exceeding principal repayments and sales. The
average  balance of the loan  portfolio  for the six month period ended June 30,
1999 increased to $899.5 million from $750.2 million for 1998, while the average
yield on the  portfolio  decreased  to 7.32% for the six  months  ended June 30,
1999, from 7.83% for the same period in 1998. The decrease in interest rates has
affected the yield on the  portfolio as the rates on principal  repayments  have
exceeded the rates on new loans. In addition,  the decrease in interest rates in
the early part of 1999  negatively  affected the repricing of ARM loans as these
loans reprice based on external indices.

As of December 31, 1998,  the Company had  classified  the entire balance of all
MBS and investment  securities as available for sale. It is anticipated that all
MBS and investment  security  purchases will be classified as available for sale
for the  foreseeable  future.  Such  classification  is also the  reason for the
significant increase in the investments and MBS available for sale category. The
average  balance of the available for sale  portfolios  totaled $918.7  million,
with an annualized  yield of 5.99% for the six months ended June 30, 1999, while
the combined available for sale and held to maturity portfolios' average balance
was $859.7  million with an  annualized  yield of 6.59% for the six months ended
June 30, 1998. The decrease in interest rates  significantly  affected the yield
on the  portfolio.  Rates on  investment  securities  available  for  sale  were
negatively  affected  as higher  yielding  investments  were called and rates on
replacement  securities  were lower than the rates on the  securities  that were
called,  although more call protection was added to the portfolio.  The yield on
the MBS available  for sale  portfolio  was also  negatively  affected as higher
yielding  instruments prepaid. Due to market interest rates, new purchases had a
lower  yield  than  the   components  of  the  portfolio  in  1998.   Growth  in
interest-earning  assets is expected to continue.  Yields on the portfolio  will
continue to be affected by market interest rates.

INTEREST EXPENSE.  Interest  expense  increased $31,000 to $15.9 million for the
three months ended June 30, 1999,  compared to $15.9 million for the same period
in 1998.  For the six months ended June 30,  1999,  interest  expense  decreased
$387,000 to $31.8  million,  compared to $32.2 million for the  comparable  1998
period. Interest expense on deposits decreased $1.2 million and $2.3 million, or
9.2% and 8.8%,  respectively,  to $11.8  million and $24.0 million for the three
and six months  ended June 30,  1999,  as  compared  to $13.1  million and $26.3
million for the same periods in 1998.  Management  continued to

                                       13
<PAGE>

concentrate  its efforts on increasing the level of core accounts and decreasing
certificate  accounts as a percentage of overall  deposits.  The increase in the
average balance of NOW and money market demand accounts, along with the increase
in the average balance of non-interest bearing deposits, reflects this strategy.
The average  balance of these core accounts  totaled  $512.5 million for the six
months ended June 30, 1999, as compared to $468.8 million for the same period in
1998.  The average  interest  cost on deposits for the six months ended June 30,
1999 was 3.94% as compared to 4.41% for the same period in 1998.  The  decreased
cost was partially  attributable to the sale of higher rate deposits in a branch
that was sold in the first quarter of 1998. The decrease in the average  balance
of  certificates  of deposit to $702.6 million for the six months ended June 30,
1999,  from $725.2  million for the same period in 1998 was due primarily to the
sale of the branch discussed above and by management's reduction in the interest
rates offered to certificate  customers.  The average cost of certificates  over
the six-month  period ended June 30, 1999, was 4.95%,  as compared to 5.43% over
the same period in 1998.  Management  will continue to offer  certificate  rates
that are competitive, but lower than certain area competition. This strategy may
continue to cause a limited outflow of funds. Interest on borrowed funds for the
three and six months  ended  June 30,  1999,  increased  $1.2  million  and $1.9
million,  or 43.8% and 32.7%,  respectively,  to $4.0 million and $7.8  million,
compared to $2.8  million and $5.9  million for the same  respective  periods in
1998.  The increase in the average  balance of borrowed funds for the six months
ended June 30, 1999, to $292.2 million,  from $194.5 million was attributable to
management's  continuing  strategy  to  fund  the  purchase  of  investment  and
mortgage-backed securities through the use of borrowed funds, where accretive to
earnings,  and to  mitigate  the  deposit  outflow  of  certificates  of deposit
accounts.  This strategy is expected to continue and  borrowings can be expected
to continue to increase as a percentage  of total  liabilities.  Offsetting  the
increase in the average balance of borrowed funds was the reduced  interest cost
to 5.36% for the six months ended June 30, 1999,  from 6.06% for the same period
in 1998.

NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES. Net interest income before
provision  for loan losses  increased  $643,000  and $3.1  million,  or 4.6% and
12.2%,  respectively,  to $14.6  million and $28.6 million for the three and six
months ended June 30, 1999,  compared to $13.9 million and $25.5 million for the
same periods in 1998. The increase was due to the changes in interest income and
interest expense described above. The net interest margin decreased to 3.29% and
3.15% for the three and six months ended June 30, 1999, from 3.39% and 3.17% for
the same periods in 1998, as market rates increased  significantly in the second
quarter of 1999. The interest rate spread decreased  slightly to 2.67% and 2.42%
for the three and six months ended June 30,  1999,  from 2.70% and 2.53% for the
same periods in 1998.  The decrease was  primarily  attributable  to  increasing
market interest rates, a flattening yield curve and an increase in the volume of
prepayments.

PROVISION FOR LOAN LOSSES.  The  provision for loan losses for the three and six
months ended June 30, 1999, increased $85,000 and $160,000,  or 23.3% and 21.6%,
respectively,  to $450,000 and  $900,000,  compared to $365,000 and $740,000 for
the same periods in 1998.  The increase in the provision was due to the increase
in the balance of the loan portfolio and a shift in its  composition.  Net loans
increased $47.4 million for the six months ended June 30, 1999, and the balances
of construction and commercial real estate loans also increased. In management's
opinion, the allowance for loan losses, totaling $10.3 million at June 30, 1999,
is  adequate  to cover  losses  inherent  in the  portfolio.  The  amount of the
provision is based on  management's  evaluation of any risk inherent in the loan
portfolio.  Management  will  continue to review the need for  additions  to its
allowance for loan losses based upon its quarterly review of the loan portfolio,
the level of delinquencies, and general market and economic conditions.

The following  table sets forth ratios  regarding  nonaccrual  loans,  and loans
which are 90 days or more  delinquent,  but on which  the  Company  is  accruing
interest at the dates indicated.  The Company discontinues  accruing interest on
delinquent loans when collection of interest is considered  doubtful,  generally
90 days or more  delinquent,  and when, or combined with,  loan-to-value  ratios
exceed  55%, at which time all accrued  but  uncollected  interest is  reversed.
Total foreclosed real estate ("REO"), net, totaled $1.4 million at June 30, 1999
and consisted of 11  properties.  The largest  individual  property,  carried at
$654,000,  was under contract for sale at June 30, 1999. Management continues to
pursue the sale of REO properties in an expedient manner.

                                       14
<PAGE>

<TABLE>
<CAPTION>
 (dollars in thousands)                                 June 30,      Mar. 31,    Dec. 31,   Sept. 30,    June 30,
                                                          1999          1999       1998         1998        1998
                                                        --------    ---------    --------    --------     -------
<S>                                                       <C>        <C>          <C>         <C>           <C>
Non-accrual mortgage loans .........................     $2,537     $3,112       $2,648       $2,429       $2,327
Non-accrual other loans ............................         82         94           92           93          118
                                                        --------    -------     --------     --------    --------
 Total non-accrual loans ...........................      2,619      3,206        2,740        2,522        2,445
Loans 90 days or more delinquent and
 still accruing ....................................        224        127        1,525        1,292        1,246
Restructured loans..................................          -          -            -        2,081        2,089
                                                        --------    -------     --------     --------    --------
Total non-performing loans .........................      2,843      3,333        4,265        5,895        5,780
Total foreclosed real estate, net of related
 allowance..........................................      1,422      1,516        1,453        2,356        3,624
                                                        ========    =======     ========     ========    ========
Total non-performing assets ........................     $4,265     $4,849       $5,718       $8,251       $9,404
                                                        ========    =======     ========     ========    ========
Non-performing loans to loans receivable, net ......       0.32%      0.38%        0.50%        0.71%        0.74%
Non-performing assets to total assets ..............       0.23%      0.26%        0.31%        0.46%        0.53%
</TABLE>

OTHER OPERATING INCOME. Other operating income increased $264,000,  or 35.7%, to
$1.0 million for the three months ended June 30, 1999,  compared to $739,000 for
the same period in 1998.  The  increase is primarily  due to increased  gains on
sales of loans and securities during the quarter.  For the six months ended June
30, 1999, other operating  income totaled $2.1 million,  a decrease of $591,000,
or 22.4%  from the same  period  in 1998.  Fees and  service  charges  increased
$123,000,  or 11.1%,  to $1.2  million for the six months  ended June 30,  1999,
compared to $1.1 million for the same period in 1998 as management  continued to
target, as a priority,  growth in non-interest income accounts and the growth in
fees and service charges.  Also, as a part of the conversion of the former Pulse
accounts,  service  charges  were  waived  for a  three-month  period  ending in
September of 1999. The increase in net gain on sales of loans and securities was
primarily  due to sales of MBS.  During  the six  months  ended  June 30,  1999,
management  disposed of numerous  MBS whose  principal  balance had been reduced
significantly due to paydowns,  accompanied by  adjustable-rate  MBS whose price
performance  target  had  been  attained.  The net  gain  on  sale  of  deposits
represented  the gain resulting from the sale of the Eatontown  branch office to
another financial institution in February, 1998.

OPERATING  EXPENSES.  Operating expenses for the three and six months ended June
30, 1999, increased $284,000 and $635,000,  or 4.7% and 5.4%,  respectively,  to
$6.3 million and $12.4  million,  compared to $6.0 million and $11.7 million for
the same  periods  in 1998.  The  increase  in  compensation  and  benefits  was
primarily  due to:  the  expenses  associated  with the  Bank's  Employee  Stock
Ownership  Plan  and  the  Company's  1998   Stock-Based   Incentive  Plan;  the
compensation cost associated with the opening of two branch offices;  and a cost
of living salary  increase in the first quarter of 1999.  These  increases  were
partially mitigated by First Savings offering a voluntary  retirement  incentive
that reduced payroll  beginning in the first quarter of 1999.  Equipment expense
for the three and six months ended June 30, 1999, totaled $378,000 and $795,000,
a decrease of $115,000 and $160,000,  or 23.3% and 16.8%,  respectively,  due to
expenses  incurred  in 1998 for the  opening of a new  office  and new  computer
equipment  purchased by the former  Pulse Bank.  Advertising  expense  increased
$49,000 and $82,000, or 16.1% and 15.7%, respectively,  to $353,000 and $603,000
for the three and six months  ended June 30,  1999,  compared  to  $304,000  and
$521,000  for the same  period in 1998,  as the  Company  continued  to  solicit
additional loan volumes and direct mail promotions for the new branch  openings.
General and administrative  expenses  increased $108,000 and $265,000,  or 10.2%
and 13.3%, respectively,  to $1.2 million and $2.3 million for the three and six
months ended June 30, 1999,  and was primarily  related to expenses  incurred in
conjunction with operating as a full stock company,  including  franchise taxes,
and also expenses  related to the conversion of the data systems from the former
Pulse data center to the Company's in-house systems.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

There  have  been  no  material  changes  to  information   required   regarding
quantitative and qualitative  disclosures  about market risk from the end of the
preceding  fiscal  year  to  the  date  of the  most  recent  interim  financial
statements (June 30, 1999).

                                       15
<PAGE>



                           PART II. OTHER INFORMATION

Item 1.  LEGAL  PROCEEDINGS.
         There are  various  claims  and  lawsuits  in which the  Registrant  is
         periodically  involved incidental to the Registrant's  business. In the
         opinion of  management,  no material  loss is expected from any of such
         pending claims and lawsuits.

Item 2.  CHANGES IN SECURITIES.
         None.

Item 3.  DEFAULTS UPON SENIOR SECURITIES.
         Not applicable.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
         The results of the Annual  Meeting of  Stockholders,  held on April 29,
         1999, were  previously  reported in the Form 10-Q for the quarter ended
         March 31, 1999,  filed with the Securities  and Exchange  Commission on
         May 12, 1999.

Item 5.  OTHER INFORMATION.
         None.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K.
         a.) Exhibits
<TABLE>
<CAPTION>
          ---------------------------------------------------------------------------------------------
               Exhibit
               Number                                Description                           Reference
          ---------------------------------------------------------------------------------------------
                 <S>         <C>                                                             <C>
                 3.1         Certificate of Incorporation of First Sentinel Bancorp,           *
                             Inc.
                 3.2         Bylaws of First Sentinel Bancorp, Inc.                            *
                  4          Stock certificate of First Sentinel Bancorp, Inc.                 *
                 11          Statement re: Computation of Ratios                             page 7
                 27          Financial Data Schedule                                        attached
          ---------------------------------------------------------------------------------------------
</TABLE>
          b.) Reports on Form 8 - K
              None

* - Incorporated  herein by reference  into this document from the  Registration
Statement  on Form S-1 and  exhibits  thereto of First  Sentinel  Bancorp,  Inc.
(formerly First Source Bancorp, Inc.), and any amendments or supplements thereto
filed with the SEC on December  19,  1997 and  amended on February 9, 1998,  SEC
File No. 333-42757.

                                       16

<PAGE>

                                   SIGNATURES

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


                          FIRST SENTINEL BANCORP, INC.




Date:  August 13, 1999            By:   \s\ John P. Mulkerin
                                        --------------------
                                            John P. Mulkerin
                                            President and Chief Executive
                                            Officer


Date:  August 13, 1999            By:   \s\ Christopher Martin
                                        ----------------------
                                            Christopher Martin
                                            Executive Vice President and Chief
                                            Operating and Financial Officer and
                                            Corporate Secretary