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

                                    FORM 10-K

     [X]     Annual  report  pursuant  to section 13 or 15(d) of the  securities
              exchange act of 1934 for the year ended December 31, 1998
                                                      -----------------
     [ ]     Transition report pursuant to section 13 or 15(d) of the
              securities exchange act of 1934

     Commission file number  1-13157
                             -------

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

                      Delaware                     11-3000874    
                      --------                     ----------    
     (State or other jurisdiction of            (I.R.S. Employer
        incorporation or organization)          Identification No.)

                   303 Merrick Road, Lynbrook, New York 11563
                   ------------------------------------------
                    (Address of principal executive offices)

     Registrant's telephone number, including area code:  (516) 887-7000
                                                          --------------
     Securities registered pursuant to Section 12(b) of the Act:
     Common Stock $.01 par value (Title of each class)
     ---------------------------
     New York Stock Exchange (Name of each exchange on which registered)
     -----------------------
     Securities registered pursuant to Section 12(g) of the Act:   None
                                                                   ----
     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 by check mark if disclosure of delinquent  filers pursuant to Item
     405 of Regulation S-K is not considered  herein, and will not be contained,
     to  the  best  of  the  registrant's  knowledge,  in  definitive  proxy  or
     information  statements  incorporated  by reference in Part III of the Form
     10-K or any amendment to this Form 10-K. ( X )

     The aggregate  market value of voting stock held by  non-affiliates  of the
     registrant  as of March 4,  1999:  Common  stock par value  $.01 per share,
     $449,047,144.  This  figure is based on the  closing  price by the New York
     Stock  Exchange  for a share of the  registrant's  common stock on March 4,
     1999,  which was $56.00 as reported in the Wall Street  Journal on March 5,
     1999.

     The number of shares of the  registrant's  Common Stock  outstanding  as of
     March 15, 1999 was 9,288,963 shares.

     DOCUMENTS  INCORPORATED  BY  REFERENCE:  Portions of the  definitive  Proxy
     Statement for the Annual Meeting of Stockholders to be held on May 11, 1999
     and portions of the 1998 Annual  Report to  Stockholders  are  incorporated
     herein by reference - Parts I, II and III.



<PAGE>  2

<TABLE>
                         FORM 10-K CROSS-REFERENCE INDEX
<CAPTION>

PART I                                                                                Page
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<S>       <C>                                                                          <C>
ITEM  1.  BUSINESS..............................................................        3
ITEM  2.  PROPERTIES............................................................       33
ITEM  3.  LEGAL PROCEEDINGS.....................................................       33
ITEM  4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................       33
ADDITIONAL ITEM.  EXECUTIVE OFFICERS............................................       34

PART II
-------
ITEM  5.  MARKET FOR JSB FINANCIAL INC.'S COMMON EQUITY AND
           RELATED STOCKHOLDERS' MATTERS........................................       35
ITEM  6.  SELECTED FINANCIAL DATA...............................................       35
ITEM  7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
           CONDITION AND RESULTS OF OPERATIONS..................................       35
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
           MARKET RISK..........................................................       35
ITEM  8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...........................       36
ITEM  9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
           ACCOUNTING AND FINANCIAL DISCLOSURE..................................       36

PART III
--------
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.......................       37
ITEM 11.  EXECUTIVE COMPENSATION................................................       37
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
           AND MANAGEMENT.......................................................       37
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................       37

PART IV
-------
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
           ON FORM 8-K..........................................................       38

SIGNATURES......................................................................       41
</TABLE>



<PAGE>  3

                                     PART I

ITEM 1.  BUSINESS
-----------------

                             DESCRIPTION OF BUSINESS

General
-------

JSB Financial,  Inc. ("JSB Financial",  "Company" or the "Holding Company") is a
Delaware corporation.  The Company,  which was incorporated on February 6, 1990,
acquired all of the stock of Jamaica Savings Bank FSB ("Jamaica  Savings" or the
"Bank") upon the Bank's  conversion  from a federally  chartered  mutual savings
bank to a federally  chartered  stock savings bank. The Bank's stock  conversion
was  completed  on June 27, 1990.  The  information  presented in the  financial
statements  and in the Form 10-K reflect the financial  condition and results of
operations of the Company, as consolidated with its wholly owned subsidiary, the
Bank.

In addition to the Company's investment in the Bank, the Company invests in U.S.
Government  and agency  securities  and federal  funds sold  (through the Bank).
Jamaica  Savings  was  organized  in 1866 as a New York ("NY")  state  chartered
mutual  savings  bank.  In 1983,  the Bank  converted  to a federally  chartered
savings bank, retaining the "leeway" investment authority and broader investment
powers  available to a state  chartered  savings bank,  and its Federal  Deposit
Insurance Corporation ("FDIC") insurance.

The Bank's principal  business consists of attracting  deposits from the general
public  and  investing  those  deposits,  together  with  funds  generated  from
operating, investing and financing activities, primarily in first mortgage loans
secured by multi-family  properties,  cooperative  apartment  buildings,  one-to
four-family  residential  real estate and, to a lesser extent,  commercial  real
estate loans,  U.S.  Government  and federal agency  securities,  collateralized
mortgage obligations ("CMOs"), and consumer loans.

Since 1990,  the Company  has  maintained  stock  repurchase  programs  and paid
quarterly cash dividends to stockholders.  During 1998, the Company  repurchased
620,100 shares of its outstanding common stock at an average price of $50.74 per
share,  and paid  total cash  dividends  of $15.7  million,  or $1.60 per common
share.

Market Area and Competition
---------------------------

Market Area. Headquartered in Lynbrook,  NY, the Bank conducts  business from 13
full  service  branch  offices,  10 of which  are  located  in the New York City
borough of Queens,  one in the  borough of  Manhattan  and one each in  suburban
Nassau (the headquarters) and Suffolk counties.

Management considers Jamaica Savings a community-oriented financial institution,
serving  its  market  area with a wide  selection  of loan  products  and retail
financial  services.  Management believes that the Bank's retail branch network,
quality  customer  service,   community  bank  orientation  and  reputation  for
financial  strength are the key attributes that attract and retain customers for
the Bank. The Bank's long term  relationships with its depositors are considered
a valuable resource for the future, as the Bank continues to expand products and
services it offers.

Local Economy.  The  primary  market  area for the Bank is  concentrated  in the
neighborhoods surrounding its thirteen full service offices. Management believes
that its branch offices are primarily  located in communities that can generally
be characterized as stable,  residential  neighborhoods of predominantly  one-to
four-family residences and middle income families.

The favorable  economy of the New York  metropolitan area has benefited the Bank
for the past  several  years.  Unemployment  and real  estate  values  have been
healthy,  as the economy  expanded on a broad base. New York City benefited from
the  resurgence  and  growth in  employment  and  profitability  experienced  by

<PAGE>  4

national securities and investment banking firms, many of which are domiciled in
Manhattan,  as well as the growth and  profitability of other financial  service
companies,  such as money center banks. The strength of the national economy and
of the United States equities  markets  contributed  significantly to the growth
and increased  profitability  of Wall Street  securities and investment  banking
firms.  During 1998,  New York City reported  positive job creation,  a trend of
declining  crime,  lower tax rates and an overall  improved  image as a place to
live and work. Industries such as tourism,  media and professional services have
been viewed as strong.

While the third quarter of 1998 was a volatile period in the financial  markets,
with Wall  Street and  investment  banks in general  initiating  job cuts,  Wall
Street  rebounded  and reached  record highs  during the first  quarter of 1999.
Uncertainty  regarding the duration of the overseas  recessions and their impact
on the  financial  markets are likely to influence the economic  environment  in
which  the  Bank  operates  over  time.  Forecasts  for  1999  and  beyond  vary
significantly.  The  financial  press  has  forecasted  scenarios  ranging  from
moderate growth to a recession.  In general,  a weakness or deterioration in the
economic  conditions within the Bank's primary lending areas generally result in
the  Bank  experiencing   increases  in  non-performing  loans.  Such  increases
generally result in higher  provisions for possible loan losses,  reduced levels
of  interest  earning  assets,  which over time lower the level of net  interest
income and result in higher levels of expense  associated with other real estate
("ORE").

There are numerous  warning  indications  that the strength and direction of the
United States economy is surrounded with uncertainty. The demand for U.S exports
has slowed in a number of  countries.  To respond to signs of a  weakening  U.S.
economy,  during 1998, the Federal Reserve adjusted the discount rate,  reducing
it each time,  which  influenced the direction of market interest rates.  During
1998,  nation wide refinancing  reached record levels, as mortgage rates reached
30-year lows. As a result, loan pricing has been aggressive. The Bank, like most
other financial institutions in the region, experienced growth in mortgage loans
and increased satisfaction and refinancing activity in the portfolio.

Highly Competitive  Industry  and  Geographic  Area. The Bank faces  significant
competition  for mortgage and consumer loan  originations  and in attracting and
retaining deposits.  The New York City metropolitan and Long Island areas have a
high  concentration of financial  institutions,  many of which are significantly
larger and have  greater  financial  resources  than the Bank,  all of which are
competitors of the Bank to varying degrees. The Bank's competition for loans and
deposits comes  principally from savings and loan  associations,  savings banks,
commercial banks,  mortgage banking  companies,  insurance  companies and credit
unions.  The most direct  competition  for deposits has  historically  come from
savings  and loan  associations,  savings  banks,  commercial  banks and  credit
unions.  In addition,  products offered by the securities  industry have created
alternative  investments,  including  money  market  accounts,  mutual funds and
annuities,  available  to the general  public.  The Bank  competes  for deposits
through pricing, service and by offering a variety of deposit accounts and other
services.  Management competes for loans principally through pricing, efficiency
and the quality of its services provided to borrowers,  real estate and mortgage
brokers.   Competition  may  also  increase  as  a  result  of  the  lifting  of
restrictions on interstate operations of financial institutions.

Lending Activities and Risk
---------------------------

General.  The Bank offers a variety  of loans to serve the  credit  needs of the
communities  in which it  operates.  The  Bank's  loan  portfolio  is  comprised
primarily of first mortgage loans secured by:  multi-family  rental  properties;
cooperative apartment buildings;  one-to four-family residences (which is almost
entirely  comprised  of  mortgages  secured by one and two  family  residences);
commercial  property and to a lesser extent,  construction  loans. The Bank also
offers other  consumer  type loans.  (See "Other  Lending",  page 8, herein.) At
December 31, 1998, the loan portfolio was $1.170  billion,  net of allowances of
$5.9 million and unearned fees and  discounts of $2.7  million.  At December 31,
1998, net loans  represented  72.1% of the Company's total assets.  During 1998,
mortgage loans originated for portfolio were $261.2 million,  compared to $205.2
million during 1997. The Bank does not offer any loans that provide for negative

<PAGE>  5

amortization.  (See  "LOAN  PORTFOLIO",  page 24,  herein,  SUMMARY OF LOAN LOSS
EXPERIENCE,  page 30, herein,  and  "Maturities  and  Sensitivities  of Loans to
Changes in Interest Rates",  page 25, herein.)  Management  monitors the economy
and real  estate  market in which the Bank  operates  and may  modify the Bank's
lending policies as it considers appropriate.

Pursuant to the New York City Housing Partnership/HPD Homeownership Program, the
Bank provides funding for two New York construction  projects, one in Queens and
one in  Brooklyn,  New York,  whereby  the Bank holds the first  mortgage on the
premises and obtains personal guarantees from the builders. Advances for each of
these projects are based on executed contracts of sale prior to construction and
construction  progress on a per unit/house basis. These projects are as follows:
(1) East New York Homes in Brooklyn,  NY - In February,  1997,  the Bank entered
into an agreement to finance the construction of 45 2-family houses.  The Bank's
commitment,  as amended,  is for $6.9  million,  with no more than $4.3  million
outstanding at any one time; (2) Bayswater Village in Far Rockaway, Queens, NY -
In  December,   1996,  the  Bank  entered  into  an  agreement  to  finance  the
construction of 16 two-family  houses,  having a total  development cost of $3.5
million,  with no more  than $1.9  million  outstanding  at any one  time.  This
project was  substantially  complete as of December 31, 1998,  with a balance of
$62,000 owed to the Bank and one unit left to close.

In addition, the Bank makes construction loans, which generally have a six-month
term, to one builder who constructs one and two-family houses in low to moderate
income  areas  within the Bank's  market  area.  The loans are approved on a per
building basis and the Bank holds the first mortgage on the premises and obtains
a personal  guarantee from the builder.  At December 31, 1998, all  construction
loans held by the Bank totaled $5.2 million.

The  Bank  continues  to  emphasize   lending  on  multi-family  and  underlying
cooperative  properties.  Lending on these types of properties poses significant
additional  risks to the lender as  compared  with one-to  four-family  mortgage
lending.   These  loans  generally  are  made  to  single  borrowers  or  realty
corporations  controlled by an individual  or group of  individuals  and involve
substantially higher loan balances than one-to four-family  residential mortgage
loans.  Moreover,  the  repayment  of such loans is  typically  dependent on the
successful  operation  of the  property,  which  in turn is  dependent  upon the
expertise  and  ability of the  borrower  to properly  manage and  maintain  the
property.  In addition,  management  recognizes that repayment of commercial and
multi-family  loans is subject to adverse  changes in the real estate  market or
the economy,  to a far greater  extent than is  repayment of one-to  four-family
mortgage loans.

Multi-family,  Underlying  Cooperative and Commercial  Real Estate Lending.  The
Bank originates mortgage loans secured by multi-family  dwellings,  primarily of
50 units or more,  cooperative buildings and income producing properties such as
shopping centers. At December 31, 1998, 60.8% of total gross mortgage loans were
secured by multi-family  rental properties,  26.2% by cooperative  buildings and
6.0% by  commercial  real  estate.  At that date,  the Bank's ten largest  loans
totaled  $116.3  million.  These ten mortgage loans were comprised of: six loans
totaling $72.0 million  secured by  multi-family  rental  properties;  one $11.8
million  mortgage loan secured by the land underlying a luxury  Manhattan hotel;
one $11.1  million  loan  secured by a  commercial  office  building;  one $10.8
million loan secured by a shopping  center and one loan  totaling  $10.6 million
secured by underlying cooperative  buildings;.  At December 31, 1998, the Bank's
largest loan was an $18.5 million  mortgage loan secured by a 684 unit apartment
complex.

The Bank's mortgage loans on income producing  properties are primarily  secured
by properties located within the Bank's market area. Mortgages currently offered
on income producing  properties are underwritten for terms that generally do not
exceed 10 years. Since amortization (if any) on multi-family rental,  underlying
cooperative and commercial  mortgage loans is over significantly  longer periods
than  the  terms  to  maturity,   balloon  payments  are  due  at  maturity.  In
establishing terms for these types of loans, management considers current market
conditions,  competition and the risks associated with the property securing the

<PAGE>  6

loan.  The interest  rates on such loans are linked to the five to ten year U.S.
Treasury  Constant Maturity Index, plus a spread to reflect the term of the loan
and associated credit risk.

In underwriting mortgage loans secured by income producing properties, including
multi-family  rental,  underlying  cooperative and commercial  real estate,  the
Bank's  mortgage  officers  engage  in  detailed  analysis  to  ensure  that the
property's  anticipated cash flow is sufficient to cover operating  expenses and
debt service.  Under the Bank's current policy,  at  origination,  loan-to-value
ratios  generally do not exceed 75% on loans secured by multi-family  rental and
commercial real estate properties and 40% on underlying  cooperatives.  The Bank
requires  that  properties  securing  such loans be appraised by a member of the
Bank's appraisal staff or a qualified independent  appraiser.  The Bank requires
borrowers to obtain title insurance and hazard insurance in an amount sufficient
to cover the mortgage naming the Bank as loss payee. All loans secured by income
producing  property  must be  approved  by two  members of the  Bank's  Mortgage
Committee,  which is comprised of five members of the Board of Directors and the
Chairman of the Board "ex officio",  or one member of the Mortgage Committee and
the senior lending officer.

Underlying cooperative loans are first liens on the cooperative building and the
land and are senior to  cooperative  share  loans.  Cooperative  share loans are
secured by the proprietary  leases on the individual units.  Consequently,  when
the amount of an underlying loan is related to the market value of a cooperative
building,   including  the  value  of  the  individual   units,   the  resulting
loan-to-value ratio generally is in the range of 15% to 30%.

Concentrations  of Credit At December 31,  1998,  the largest  concentration  of
loans to any one  borrower  consisted  of six  mortgage  loans with an aggregate
balance of $30.6  million,  of which  five loans  totaling  $22.6  million  were
secured by  multi-family  apartment  buildings and one loan for $8.0 million was
secured by a multi-family apartment building with retail stores.

Management  monitors the loan portfolios on a regular basis in order to identify
trends that may affect  future  collectibility.  Specific  attention is given to
concentrations of credit based on the loan collateral and  concentrations to any
one borrower or category of borrower. (See "Delinquencies and Classified Assets"
and related discussions, pages 26 through 29, herein.)

One-to Four-Family  Lending. The Bank offers  first  mortgage  loans  secured by
one-to  four-family  residences and condominium  units in complexes which are at
least 90% sold and  cooperative  apartment share loans where at least 65% of the
total  cooperative  shares are sold.  While three-to  four-family  mortgages are
offered by the Bank, minimal demand has been experienced.  At December 31, 1998,
one-to four-family  mortgages totaled $75.8 million, of which $69.5 million were
fixed rate mortgage loans and $6.3 million were adjustable rate mortgage ("ARM")
loans. Loan applications are received from existing  customers and are primarily
generated  by  referrals,  branch  offices  and  newspaper  advertising.  One-to
four-family  mortgage loans are generally  underwritten  according to Fannie Mae
and State of New York Mortgage Association ("SONYMA")  guidelines,  except as to
limitations on loan amount.

For a loan secured by one-to four-family  residential real estate,  upon receipt
of a  completed  loan  application,  disclosures  are sent to the  applicant(s).
Income and certain other  information  is verified,  a credit report is ordered,
and,  if  necessary,  additional  financial  information  is  requested.  If the
mortgage  applicant's  credit is verified and  approved,  an appraisal and flood
certification for the property are ordered.  In addition to utilizing the Bank's
appraisal staff, some appraisals on one-to  four-family  properties are prepared
by independent appraisers,  who are approved as qualified by the Bank's Mortgage
Committee.  Appraisals of properties secured by one-to four-family homes must be
approved by at least two senior officers of the Mortgage,  Consumer Loan or Real
Estate  Departments.  It is the Bank's  policy to require  title  insurance  and
hazard  insurance  prior to closing on all real  estate  first  mortgage  loans.
Borrowers  are  generally  required  to  advance  funds on a monthly  basis to a

<PAGE>  7

mortgage escrow account, together with each payment of principal and interest.
Disbursements  are made from escrow accounts for real estate taxes and insurance
premiums.

The Bank offers fixed rate  mortgages and ARMs,  with  interest  rates and other
terms that are competitive with those available in its market area. The interest
rate on ARMs are adjusted based on a spread above an agreed upon index,  such as
a United States Treasury Index. The Bank's ARM loan interest rates are generally
subject to annual rate change limitations of 2.00%, up or down. In addition, ARM
loans  offered by the Bank provide for a lifetime cap on the  adjustment  in the
interest  rate of 6.00% from the initial  rate.  These limits help to reduce the
interest rate sensitivity of such loans during periods with significant  changes
in interest rates.  During periods of rising interest rates, the increase in the
required   monthly  payment  for  ARM  loans  may  increase  the  likelihood  of
delinquencies.  The ARM loans  originated  by the Bank reprice each year, on the
loan's anniversary date and do not provide for negative amortization.

The Bank currently requires that one-to four-family  residential mortgage loans,
excluding cooperative apartment loans, not exceed the lesser of 80% of appraised
value of the property securing the loan or purchase price at origination.  Up to
95%  financing is  available  with the  purchase of private  mortgage  insurance
("PMI"),  provided that the loan  qualifies  for sale in the  secondary  market.
Loans secured by  cooperative  apartments  (cooperative  share loans)  generally
require a down payment  equal to 20% of the  purchase  price and are not offered
with PMI. The Bank offers  one-to  four-family  mortgages  with  various  terms.
Mortgage loans in the Bank's portfolio  ordinarily include due-on-sale  clauses,
which provide the Bank with the contractual  right to deem the loan  immediately
due and  payable  in the event  that the  borrower  transfers  ownership  of the
property  without  the  Bank's  consent.  It is the  Bank's  policy  to  enforce
due-on-sale  provisions  or to require that the interest rate be adjusted to the
current market rate when ownership is transferred.  Management  monitors various
economic  indicators  and  competitive  conditions in its lending area,  and, in
connection  therewith,   may  modify  underwriting   standards  based  on  their
assessments.

During  1998,  the  Bank  originated  for sale and  subsequently  sold,  without
recourse,  $4.8 million of mortgage loans, on which the Bank retained servicing.
The loans sold  include  $4.3 million of mortgages to Fannie Mae and $501,000 to
the SONYMA.  As part of the Bank's agreement with the government  agencies,  the
Bank offers mortgage loans,  for up to 95% of the lower of the purchase price or
appraised value, on single family principal  residences to credit qualified home
buyers.  In  addition,  the borrower  must have not had income  greater than 115
percent of the area family median income as published by the U.S.  Department of
Housing and Urban Development  annually in the report,  "Estimated Median Family
Incomes". The Bank has an agreement with Fannie Mae whereby Fannie Mae purchases
qualifying  mortgages and Federal Housing  Administration  ("FHA") Title I loans
that the Bank  originates.  Loans sold to SONYMA were  originated  pursuant to a
program aimed at assisting first time  homebuyers with low to moderate  incomes.
The Bank plans to originate and sell, without recourse,  other mortgage loans in
the secondary market and retain servicing.  The Bank does not presently have any
recorded servicing assets.

The Bank offers FHA Home Improvement  Loans on owner occupied,  one family homes
in amounts up to $25,000. While no equity is required,  inspections are required
on all loans in excess of $7,500 or if the borrower fails to submit a completion
certificate.  The Bank sells these loans,  without recourse,  to Fannie Mae, and
retains servicing.

<PAGE>  8

Other Lending. The Bank offers a variety of other loan products, including: home
equity;  home  improvement;  deposit account;  student;  personal and automobile
loans. At December 31, 1998, total gross other loans was $22.9 million,  or 1.9%
of total gross  loans.  At  December  31,  1998,  the other loan  portfolio  was
comprised as follows:  property  improvement loans of $10.7 million, or 46.5% of
the other loan portfolio; deposit account loans, which are 100% secured, of $8.2
million,  or 35.6% of the other loan portfolio;  and various consumer type loans
of $3.8  million,  or 16.4% of the other loan  portfolio.  The  remainder of the
other loan  portfolio  was  comprised of student  loans and  overdraft  lines of
credit. Student loans are federally guaranteed to varying degrees.  During 1998,
the Bank sold the $5.1 million student loan portfolio to Sallie Mae, realizing a
pre-tax gain of $64,000.  As part of the sale transaction,  Sallie Mae agreed to
purchase all future student loans  originated by the Bank on which  repayment by
the student has not begun.  This allows the Bank to continue to receive interest
and special  allowances (or rate  subsidies)  while the student is in school and
eliminates  the high cost of servicing the loan once repayment  begins.  Student
loans, which had a balance of $153,000 at December 31, 1998, are carried at fair
value in the aggregate.

The Bank offers fixed rate home equity loans,  which are reported  combined with
property  improvement  loans.  Home  equity  loans  originated  by the  Bank are
disbursed at closing, and range from $10,100, to a maximum of $50,000 on one and
two-family  owner-occupied  residences only. Financing is available up to 75% of
the  property's  appraised  value  less any  outstanding  mortgage  balance.  In
connection  with  originating  these loans,  the Bank  charges fees  incurred to
perfect  the lien on the  property.  At  December  31,  1998,  the Bank had $9.4
million of home equity loans, with interest rates ranging from 5.5% to 12.0%.

Loan Origination and Other Fees.  In addition to interest  earned on loans,  the
Bank  charges  fees  for  originating   loans,   certain  loan  prepayments  and
modifications.  The income  realized  from such fees  varies  with the volume of
loans made or repaid,  the availability of funds, and competitive  conditions in
the lending market.

Investment Activities
---------------------

General.  Federally chartered savings  institutions have the authority to invest
in various types of liquid assets, including United States Treasury obligations,
securities of various agencies of the federal government,  certain  certificates
of deposit of insured  depository  institutions,  certain banker's  acceptances,
repurchase  agreements and federal funds sold. Subject to various  restrictions,
federally  chartered  savings  institutions  may also  invest  their  assets  in
commercial  paper,  investment  grade corporate debt securities and mutual funds
whose  assets  conform to the  investments  that a federally  chartered  savings
institution is authorized to make directly.  At December 31, 1998, the Company's
securities and the other investment portfolio combined,  totaled $301.0 million,
or 18.6% of total assets,  of which $110.0  million were in U.S.  Government and
federal agency securities. (See "INVESTMENT PORTFOLIO", page 23, herein.)

Management formulates the investment policies,  subject to approval by the Board
of Directors.  The Chief Executive Officer, or his designated  alternate,  makes
investment  decisions on a day-to-day basis while the Board of Directors acts in
an advisory  capacity.  The Bank's investments in securities have been primarily
in CMOs and short-term  U.S.  Government and federal agency  securities  with an
average  term to maturity of less than three years at the time of  purchase.  In
response to the low interest rate  environment that has prevailed during most of
the 1990's,  the Bank's  purchases of investment  securities  generally  include
those  maturing  in  one to two  years.  The  Bank's  investment  policy  allows
investment in corporate debt securities rated AA or higher.  The Bank classifies
all securities,  other than marketable equity securities, as "held-to-maturity".
The marketable equity securities portfolio is designated as "available-for-sale"
and  carried  at  estimated   fair  value.   Unrealized   gains  and  losses  on
available-for-sale  securities  are excluded from earnings and reported as a net
amount in a separate component of stockholders'  equity,  until realized.  There
were no  sales of  securities  during  1998.  Activity  in the  held-to-maturity
portfolio included, purchases of $379.0 million and maturities of $514.0 million

<PAGE>  9

of U.S.  Government and federal agency securities and purchases of $57.1 million
and maturities and  amortization  of $65.4 million in the CMO portfolio,  during
1998.

The Company,  excluding  activities of the Bank, invests in U.S.  Government and
federal  agency  securities  and,  through  the Bank,  invests  in money  market
instruments. By investing in short term securities and maintaining funds in cash
and cash equivalents  (investments  with an original maturity of less than three
months),  the  Company is able to meet its  liquidity  needs.  In the past,  the
Company has held mortgage  loans,  which were received in the form of a dividend
from the Bank. As of December 31, 1998, the Company held no mortgage loans.

CMOs are mortgage-backed  bonds secured by the cash flow of a pool of mortgages.
In a CMO, scheduled  principal and interest payments received from borrowers are
separated  into different  payment  streams,  creating  several bonds that repay
invested  capital at different  rates.  A given pool generally  secures  several
different  classes of CMO bonds.  CMOs pay the  bondholder on a schedule that is
different from the mortgage pool as a whole,  and includes fast pay, medium pay,
and  slow pay  bonds  to suit the  needs  of  different  investors.  The  common
arrangements  include: (i) a fast-pay bond with a maturity much shorter than the
total  pool;  (ii) a bond  paying  interest  only  for the  period  that  may be
contingent on how prior CMOs perform,  before payment of principal begins; (iii)
a bond  paying  variable  interest  based  on an  index,  typically  the  London
Interbank  Offered Rate ("LIBOR"),  even though the mortgages  themselves may be
fixed  rate   loans.   CMOs  manage  the   prepayment   risk   associated   with
mortgage-related  securities  by  splitting  the pools of  mortgage  loans  into
different categories of classes.

The Bank  purchases  Planned  Amortization  Class ("PAC")  (also  referred to as
Planned  Principal  Class) bond CMOs.  PACs are  designed  to receive  principal
payments using a predetermined  principal  balance  schedule derived by assuming
two constant  prepayment  rates for the  underlying  mortgage-backed  securities
("MBS").  All of the  Bank's  CMOs are  backed by  Freddie  Mac,  Fannie  Mae or
Government National Mortgage Association ("Ginnie Mae") MBS, which are backed by
whole loans.  Management  believes  these  securities  represent  attractive and
limited risk  alternatives  relative to other  investments.  During the past few
years,  the  availability of CMOs that met the Bank's CMO investment  guidelines
was limited.  At December 31, 1998, $95.8 million,  or 5.9% of total assets, was
invested  in CMOs.  At  December  31,  1998,  the  Bank's CMO  portfolio  had an
estimated  average maturity of twenty-six  months.  (See  "Contractual  Maturity
Distribution", page 23, herein.)

Sources of Funds
----------------

General.  The Bank's  primary  sources  of funds are  deposits.  Cash  flows are
provided from interest and maturities on debt securities and CMOs, principal and
interest  payments on  mortgage  and other  loans.  Deposit  flows and  mortgage
prepayments are greatly  influenced by general  interest rate changes,  economic
conditions and  competition.  During 1998, the Bank took a $50.0 million 10 year
fixed rate advance from the Federal Home Loan Bank of New York ("FHLB-NY"). (See
"BORROWINGS",  page 33, herein and "Liquidity and Capital Resources" included on
page 10 in the 1998 Annual Report to Stockholders.)

Deposits.  The Bank offers  a  variety  of  deposit  accounts  having a range of
interest rates and terms.  The Bank's deposits consist of the following types of
accounts:  passbook/statement  and lease  security;  certificate;  money market;
negotiable order of withdrawal  ("NOW") and non-interest  bearing demand.  As of
December 31, 1998,  passbook/statement  and lease security accounts  represented
48.4%  of the  Bank's  total  deposits.  The  flow  of  deposits  is  influenced
significantly by changes in market interest rates,  general economic  conditions
and competition. The Bank's deposits are obtained primarily from the communities
in which its  branches  are  located.  The Bank does not use  brokers  to obtain
deposits, relying primarily on customer service and long-standing  relationships
with  customers to attract and retain these  deposits.  Certificate  accounts in

<PAGE>  10

excess of $100,000 are not actively  solicited by the Bank nor does the Bank pay
preferential  interest rates on such accounts.  (See Note 16 to the Consolidated
Financial  Statements,  included  on  page  35 in  the  1998  Annual  Report  to
Stockholders.)

The Bank  influences  deposit levels and  composition  through its interest rate
structure.  Management  believes that the relatively low level of interest rates
and the strong performance and growth of the capital markets that have prevailed
are the primary contributors for the continued decline in deposits over the past
several years.  Management  chose to allow deposits to decline,  rather than pay
rates that would  result in a lower net income or  necessitate  modifying of the
Bank's existing investment structure and guidelines. Rates offered on the Bank's
deposit  accounts are  competitive  with those rates offered by other  financial
institutions  in its market area.  While the highest  percentage of deposits has
remained in passbook/statement and lease security accounts, the trend of deposit
shifts has moved away from  passbook/statement  accounts and towards certificate
accounts.  Deposits at December 31, 1998,  increased  by $3.0  million,  or .3%,
compared to deposits at December  31,  1997.  During  1998,  the decrease in the
Bank's  passbook/statement  accounts of $23.8 million, or 4.4%,  represented the
most significant  decrease of any deposit  category offered by the Bank.  During
1998,  money  market  accounts  decreased  by  $14.7  million  or  19.0%,  while
certificate accounts increased by $24.0 million, or 5.9%. (See "DEPOSITS",  page
31, herein.)


Subsidiaries of the Bank
------------------------

General.  At December 31,  1998, the Bank had eighteen  wholly owned  subsidiary
corporations  and a majority owned  subsidiary,  which operated as a real estate
investment   trust  that  was  liquidated  on  January  4,  1999.  Many  of  the
corporations  formed  partnerships that are, or were, active in the ownership or
operation  of real  estate,  ("the Real Estate  Subsidiaries").  At December 31,
1998,  the Bank's net investment in the Real Estate  Subsidiaries  was $785,000,
which included ORE of $277,000.  In addition,  six subsidiary  corporations were
inactive at December 31, 1998.

The subsidiaries were primarily formed in the 1970's, at which time the Bank was
state  regulated,  pursuant to the New York State leeway  investment  authority.
(See "Grandfathered  Savings Bank Authority",  pages 19 through 20, herein.) The
Real Estate  Subsidiaries  were  originally  formed to: (i)  operate  properties
acquired  through  foreclosure  actions,   which  were  primarily  comprised  of
multi-family  apartment  buildings,  until such time as the highest and best use
was  achieved,  at which  time the  property  would be sold;  (ii) take  "equity
interests" in the construction of income producing  properties on which the Bank
made  loans;  or  (iii)  invest  in  commercial  properties  in  which  the Bank
established branch offices.  The aggregate amount of properties held by the Real
Estate  Subsidiaries  has continued to decrease since the early 1990's,  as real
estate has not been purchased or developed since the late 1980's.  However,  the
Bank continues to transfer  properties  acquired through foreclosure to the Real
Estate Subsidiaries to manage, until sold.  Effective June 30, 1997,  management
reclassified all real estate  previously  classified as  held-for-investment  to
held-for-sale.  (See Notes  1(g),  11, 12 and 13 to the  Consolidated  Financial
Statements,  on pages 29, 32 and 33, respectively,  in the 1998 Annual Report to
Stockholders.)

During  the  third  quarter  of  1998,  the  Bank  sold  two of  its  subsidiary
corporations, Pendex Realty Corp. ("Pendex") and Sutdex Realty Corp. ("Sutdex"),
realizing  gains of  $963,000.  Pendex and Sutdex  were equal  partners in D & D
Associates,   a  partnership   which  owned  shares   representing   cooperative
apartments. Prior to the sale, the cooperative apartment shares were transferred
to two other  subsidiaries  of the Bank,  Jascove Corp.  and Avre Corp.,  each a
partner of LeHavre Associates. (See "D & D Associates" and "LeHavre Associates",
on page 12, herein.)

<PAGE>  11

The cyclical  nature of real estate  markets and interest  rates  influence  the
level of financial  risk to property  owners and the Bank,  as  mortgagor.  As a
result of these  cycles,  from time to time,  the Bank has acquired  real estate
through  foreclosure  actions.  The Real Estate  Subsidiaries  have been used to
mitigate  the risk of loss that  generally  accompany  the  acquisition  of real
estate  through  foreclosure  actions.  The Real Estate  Subsidiaries,  with the
backing of the Bank, have the financial  ability to carry properties until their
perceived optimal use and value is achieved, at which time the property is sold.
Management believes that the Real Estate Subsidiaries provide the most efficient
means to monitor,  manage,  maintain and operate significant properties acquired
through foreclosure actions.

The  activities  of  each  of  the  Bank's   subsidiary   corporations  and  the
partnerships they formed are described below. Real Estate Subsidiaries that have
converted properties to cooperative residences have done so under New York State
non-eviction plans.  Non-eviction plans provide that rent-stabilized tenants may
remain  tenants in their units after a building  has been sold to a  cooperative
association.  Due to the  uncertainty  of timing and future  sales  value of the
unsold  cooperative  shares,  for financial  statement  purposes,  unsold shares
acquired as a result of converting these properties,  are carried at zero value.
Gains on the sale of these shares are included in income upon sale. However, for
income tax purposes,  the value of all cooperative  shares,  sold and unsold, in
excess  of the  Bank's  investment  in  the  property  prior  to  conversion  to
cooperative,  was  included  in  taxable  income  at the time of the sale to the
cooperative.  The tax basis of these  cooperative  shares is depreciated for tax
purposes.

Forty-Second & Park Corp. At December 31, 1998,  Forty-Second & Park Corp. owned
cooperative shares  representing 16 units in a six-story  cooperative  apartment
building  containing 57 residential units and 4 professional  offices located in
Forest Hills, Queens, NY. The shares,  relating to the unsold units, are carried
at zero value.  The building was  originally  acquired by obtaining  the deed in
lieu of foreclosure in 1979.  This  building,  which had been poorly  maintained
prior to  acquisition,  was renovated.  In 1982, the property was converted to a
cooperative and sold to Barclay Plaza North Owner's,  Inc. During 1998, one unit
was sold,  resulting in a net gain,  before taxes,  of $80,000.  Rents  received
during 1998, on the unsold apartments  totaled $134,000 and maintenance  charges
paid to the cooperative  association totaled $141,000. For 1998,  Forty-Second &
Park  Corp.  had  net  income  of  $63,000,   after   eliminating   intercompany
transactions.  The Bank's net investment in Forty-Second & Park Corp. was $6,000
at December 31, 1998.

Parkway Associates.  Parkway Associates ("Parkway") is a partnership between two
of the Bank's subsidiary corporations,  Grandcet Realty Corp. and Litneck Realty
Corp.,  each of which has a 50%  partnership  interest.  At December  31,  1998,
Parkway owned shares, representing 69 unsold apartment units plus parking spaces
in a 400 unit  cooperative  garden  apartment  complex  located in Floral  Park,
Queens County, NY. The shares, relating to the unsold units, are carried at zero
value.  The property was  originally  acquired  through  foreclosure in 1979 and
initially operated as a rental property.  In the early 1980's, these apartments,
which had been poorly  maintained,  were substantially  renovated.  In 1989, the
property was  converted to a  cooperative  and sold to Floral Park Owners,  Inc.
During 1998,  four units were sold,  resulting in a net gain,  before taxes,  of
$180,000.  Rents  received  during 1998,  from the unsold  apartments and garage
spaces  totaled  $528,000  and  maintenance  charges  paid  to  the  cooperative
association  and costs for maintenance  employees  totaled  $488,000.  For 1998,
Parkway  Associates had a net operating  income of $154,000,  after  eliminating
intercompany  transactions.  The Bank's net investment in Parkway was $41,000 at
December 31, 1998.

Elmback Associates.  Elmback Associates ("Elmback") is a partnership between two
of the Bank's subsidiary  corporations,  Before Real Estate,  Inc. and Afta Real
Estate,  Inc.,  each of which has a 50%  partnership  interest.  At December 31,
1998, Elmback owned cooperative shares representing 10 unsold apartment units in

<PAGE>  12

a six story cooperative  apartment  building with 61 units,  located in Jamaica,
Queens  County,  NY.  The  property,  originally  acquired  by  deed  in lieu of
foreclosure  in  1980,  was  subsequently  renovated  and  operated  as a rental
property. In 1988, the property was converted to a cooperative and sold to 87-46
Chelsea Owners,  Inc. The shares,  relating to the unsold units,  are carried at
zero value.  During  1998,  3 units were sold  resulting  in a net gain,  before
taxes, of $111,000.  Rents received  during 1998, on the unsold  apartment units
totaled $66,000 essentially  covering the $67,000 of maintenance charges paid to
the cooperative association.

In addition,  as part of a 1994  mortgage  loan workout  between the Bank and an
unrelated  borrower,  Elmback took title to cooperative  shares  representing 57
unsold  cooperative  apartments in an 82 unit cooperative  property,  located in
Brooklyn,  New York.  During  1998,  2 units were sold and  $76,000 of gains was
deferred.  At December 31, 1998, 29 units  remained,  which comprised the entire
$277,000 in ORE.  This property  generated a net loss of $30,000 for 1998.  (See
"Other Real  Estate",  page 29,  herein.)  For 1998 Elmback  Associates  had net
operating income of $31,000, after eliminating  intercompany  transactions.  The
Bank's net investment in Elmback was $310,000 at December 31, 1998.

D & D Associates. During 1998, the Bank sold two of its subsidiary corporations,
Pendex and Sutdex,  realizing  pre-tax  gains of $963,000.  Prior to the sale of
Pendex and Sutdex,  each held a 50%  partnership  interest  in D & D  Associates
("D&D"),  which interests were assigned to Jas Cove Corp.  ("Jas Cove") and Avre
Realty Corp. ("Avre"), each a subsidiary of the Bank.

At December  31,  1998,  D&D owned  shares  representing  31 unsold units in two
six-story  cooperative  apartment  buildings  with 176 units.  These  buildings,
located  in  Jamaica,  Queens  County,  NY,  were  originally  acquired  through
foreclosure  proceedings in 1981. Subsequent to foreclosure,  the buildings were
renovated and operated as rental  properties.  During 1985, one of the buildings
was converted to a cooperative and sold to the Tyler Towers Owners Corp.  During
1988,  the second  building was converted to a cooperative  and sold to the Park
Sanford Owners Corp. The shares,  relating to the unsold  apartment  units,  are
carried at zero value.  During 1998, 4 units were sold,  resulting in a net gain
before  taxes of $68,000.  Rental  income from the  buildings  for 1998  totaled
$190,000  covering the  maintenance  charges of $145,000 paid to the cooperative
associations.  For 1998, D&D  Associates had a net operating  income of $94,000,
after eliminating  intercompany  transactions.  The Bank's net investment in D&D
was $39,000 at December 31, 1998.

Bay Hill Gardens.  Bay Hill Gardens ("Bay Hill") is a partnership between 110-11
72nd Ave.,  Corp. and Yalcrab Real Estate,  Inc.,  two of the Bank's  subsidiary
corporations,  each of which holds a 50% interest.  During 1998, this subsidiary
had no operations.  At December 31, 1998, the Bank had a negative  investment in
Bay Hill of $54,000,  reflecting an accounts payable related to the operation of
the 684 unit  apartment  complex  previously  owned by Bay  Hill,  that was sold
during 1994.

1995  Associates.  1995 Associates is a partnership  between Jamsab Realty Corp.
and Jasthree Inc., two subsidiary  corporations of the Bank,  holding 99% and 1%
interests  in the  partnership,  respectively.  During  1998,  this  partnership
continued  to collect  past due rents and incur  legal  expenses  in  connection
therewith, from tenants of the 18 story commercial building that was sold during
1997. For 1998,  1995 Associates had a net loss,  before taxes of $9,000,  after
eliminating intercompany transactions. At December 31, 1998, the Bank had a zero
investment in this subsidiary.

Lefmet Corp.  Lefmet  Corp.,  a  subsidiary  corporation  of the Bank,  owns and
operates  commercial property consisting of seven stores located in Kew Gardens,
Queens  County,  NY, one of which the Bank occupies as a branch  office.  During
1998, the property generated net income, before federal taxes, of $62,000, after
eliminating intercompany transactions. The Bank's net investment in Lefmet Corp.
was $211,000 at December 31, 1998.

<PAGE>  13

LeHavre  Associates.  LeHavre Associates is a  partnership  between Jas Cove and
Avre,  each a subsidiary  of the Bank.  During 1998,  Jas Cove and Avre received
shares  representing  31 cooperative  apartments  from Pendex and Sutdex,  which
shares  are  carried  at zero cost.  The  Bank's  net  investment  in LeHavre at
December 31, 1998, was zero.

Jade Associates.  Prior to December 1993, Jade  Associates  ("Jade") was a joint
venture  between Sher Park Realty Corp.,  ("Sher Park") a subsidiary of the Bank
and an unrelated general contractor, each with a 50% interest. The joint venture
was  formed to fund,  construct  and  subsequently  sell an 84 unit  condominium
complex in Flushing, New York.

As a result of the  region's  decline in real estate  values in the late 1980's,
the units did not sell,  the property  became  troubled and the Bank  ultimately
attained 100%  ownership of the unsold  units.  Sales of the units are accounted
for under the full cost recovery method.  During 1998, 28 units were sold, which
resulted in the full investment  recovery,  and gains of $299,000 were realized.
At December 31, 1998, the 6 units held-for-sale were carried at zero cost.

Concerned Management Concerned Management is a subsidiary of the Bank, which was
formed in 1979 to manage and  operate  the real  estate  acquired  by the Bank's
other subsidiary  corporations and partnerships.  Concerned  Management operates
from a leased office, located in Flushing, Queens County, NY.

Other Subsidiaries.  Of the Bank's  remaining five  subsidiary  corporations  at
December 31,  1998,  three are nominee  corporations  used in the conduct of the
Bank's business,  one (Jam-Ser Corp.) acts as an agent to sell life insurance as
permitted by New York State law, and one (Tier Inc.),  a real estate  investment
trust,  was liquidated  during the first quarter of 1999 due to a realignment of
operations.

Savings Bank Life Insurance
---------------------------

The Bank is a customer of the Savings Bank Life Insurance  ("SBLI")  Department,
which is a separate  legal mutual entity owned by its  policyholders.  The Bank,
through the SBLI Department offers SBLI to its customers up to the legal maximum
of $50,000 per insured  individual and, as a trustee bank,  offers an additional
$350,000 in group  coverage per insured  under the SBLI  Department's  Financial
Institution  Group Life Insurance policy.  The SBLI Department's  activities are
segregated  from the Bank and  while  they do not  directly  affect  the  Bank's
earnings,  management  believes  that  offering SBLI is beneficial to the Bank's
relationships  with its depositors and the general  public.  The SBLI Department
pays its own  expenses  and  reimburses  the Bank for  expenses  incurred on its
behalf.

New York State  passed  legislation  on June 18,  1998,  which was  subsequently
signed into law,  enabling  the SBLI  Departments  of all Banks  issuing SBLI to
combine with the SBLI Fund to become a single mutual insurance company. Pursuant
to the new law, a plan of conversion  and transfer  describing  the formation of
the new  combined  company must be prepared by the SBLI Fund and is subject to a
75% approval vote by SBLI Issuing Banks. If such approval is obtained,  the plan
will  be  submitted  for  the  approval  of  the  Superintendent  of  Banks  and
Superintendent of Insurance, both of whom urged that the change be made.

Management  is not aware of and cannot  predict the timing or what  changes will
ultimately  occur with respect to the structure of the Bank's SBLI Department or
the SBLI Fund. As such,  the ultimate  effect on the Company of the pending SBLI
conversion and transfer is uncertain at the present time.

<PAGE>  14

Personnel
As of December 31, 1998, the Bank had 305 full-time  employees and 124 part-time
employees. The employees are not represented by a collective bargaining unit and
the Bank considers its relationship with its employees to be good.

Regulation and Supervision 
-------------------------- 

The description of statutory  provisions and  regulations  applicable to savings
institutions  and their  holding  companies  set forth in the Form 10-K does not
purport to be a complete  description of such statutes and regulations and their
effects on the Bank and the Company.

General. The Company, as a unitary savings and loan holding company, is required
to  file  certain  reports  with,  and  otherwise  comply  with  the  rules  and
regulations of the Office of Thrift  Supervision  ("OTS") under the Home Owners'
Loan Act, as amended (the "HOLA") and as a publicly held company,  is subject to
the periodic  disclosure  and other  requirements  under the federal  securities
laws. In addition, the activities of savings institutions, such as the Bank, are
governed by the HOLA and the Federal Deposit Insurance Act ("FDI Act").  Certain
regulatory  requirements  applicable to the Bank and the Company are referred to
below or elsewhere herein.

The Bank is subject to extensive regulation,  examination and supervision by the
OTS, as its primary federal regulator, and the FDIC, as the deposit insurer. The
Bank is a member of the  FHLB-NY  and its  deposit  accounts  are  insured up to
applicable  limits by the Bank Insurance  Fund ("BIF")  managed by the FDIC. The
Bank must file reports with the OTS and the FDIC  concerning  its activities and
financial  condition  in addition to  obtaining  regulatory  approvals  prior to
entering into certain  transactions  such as mergers with, or  acquisitions  of,
other savings  institutions.  The OTS and the FDIC conduct periodic examinations
to test  the  Bank's  compliance  with  various  regulatory  requirements.  This
regulation and supervision  establishes a comprehensive  framework of activities
in which an institution can engage and is intended  primarily for the protection
of the insurance fund and  depositors.  The regulatory  structure also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement  activities and examination  policies,  including  policies with
respect to the  classification  of assets and the establishment of adequate loan
loss  reserves  for  regulatory   purposes.   Any  change  in  such   regulatory
requirements  and policies,  whether by the OTS, the FDIC or the Congress  could
have a material  adverse impact on the Company,  the Bank and their  operations.
Certain of the regulatory requirements applicable to the Bank and to the Company
are referred to below or elsewhere herein.

Holding Company Regulations. The Company is a nondiversified unitary savings and
loan holding  company  within the meaning of the HOLA. As a unitary  savings and
loan holding  company,  the Company  generally is not restricted  under existing
laws as to the types of business  activities  in which it may  engage,  provided
that the Bank continues to be a qualified thrift lender ("QTL"). (See "Qualified
Thrift Lender  Test",  pages 17 through 18,  herein.)  Upon any  non-supervisory
acquisition by the Company of another  savings  institution or savings bank that
meets the QTL test and is deemed to be a  savings  institution  by the OTS,  the
Company  would  become a  multiple  savings  and loan  holding  company  (if the
acquired  institution is held as a separate  subsidiary) and would be subject to
extensive  limitations  on the types of  business  activities  in which it could
engage.  The HOLA limits the  activities of a multiple  savings and loan holding
company and its  non-insured  institution  subsidiaries  primarily to activities
permissible for bank holding companies under Section 4(c)(8) of the Bank Holding
Company  Act  ("BHC  Act"),  subject  to the  prior  approval  of the  OTS,  and
activities authorized by OTS regulation.

The HOLA prohibits a savings and loan holding  company,  directly or indirectly,
or through one or more  subsidiaries,  from acquiring more than 5% of the voting
stock of another savings  institution or holding company thereof,  without prior
written  approval of the OTS; or acquiring or retaining  control of a depository

<PAGE>  15

institution  that is not  insured by the FDIC.  In  evaluating  applications  by
holding  companies to acquire  savings  institutions,  the OTS must consider the
financial  and  managerial  resources  and future  prospects  of the company and
institution involved, the effect of the acquisition on the risk to the insurance
funds, the convenience and needs of the community and competitive factors.

The OTS is  prohibited  from  approving any  acquisition  that would result in a
multiple savings and loan holding company  controlling  savings  institutions in
more than one state,  subject to two exceptions:  (i) the approval of interstate
supervisory  acquisitions  by savings and loan  holding  companies  and (ii) the
acquisition  of a savings  institution in another state if the laws of the state
of the target savings  institution  specifically  permit such acquisitions.  The
states  vary in the  extent to which they  permit  interstate  savings  and loan
holding company acquisitions.

Although savings and loan holding  companies are not subject to specific capital
requirements  or  specific  restrictions  on the payment of  dividends  or other
capital  distributions,  the HOLA does prescribe such restrictions on subsidiary
savings  institutions,  as described below. The Bank must notify the OTS 30 days
before declaring any dividend to the Company. In addition,  the financial impact
of a holding company on its subsidiary institution is a matter that is evaluated
by the OTS and  the OTS has  authority  to  order  cessation  of  activities  or
divestiture of subsidiaries  deemed to pose a threat to the safety and soundness
of the institution.

Federal Savings Institution Regulation
--------------------------------------

Capital  Requirements.  The OTS capital regulations require savings institutions
to meet three capital standards:  a 1.5% tangible capital ratio; a 3.0% leverage
(core) capital ratio;  and an 8.0% risk-based  capital ratio.  In addition,  the
prompt  corrective  action  standards  discussed below  establish,  in effect, a
minimum 2% tangible  capital ratio,  a 4% leverage  (core) capital ratio (3% for
institutions receiving the highest rating on the CAMEL financial rating system),
and together with the risk-based capital standard itself, a 4% Tier I risk based
capital  standard.  Core  capital  is  defined  as common  stockholders'  equity
(including retained earnings),  certain noncumulative  perpetual preferred stock
and  related   surplus  and  minority   interests  in  the  equity  accounts  of
consolidated  subsidiaries,   less  intangibles  other  than  certain  purchased
mortgage  servicing  rights and credit card  relationships.  The OTS regulations
also require that, in meeting the leverage (core) ratio, tangible and risk-based
capital  standards,  institutions must generally deduct investments in and loans
to  subsidiaries  engaged in activities not  permissible for a national bank and
investments in equity securities.

The  risk-based   capital  standard  for  savings   institutions   requires  the
maintenance of Tier I (core) and total capital (which is defined as core capital
and supplementary  capital) to risk-weighted  assets of 4% and 8%, respectively.
In determining the amount of risk-weighted assets, all assets, including certain
off-balance  sheet assets,  are  multiplied  by a risk-weight  of 0% to 100%, as
assigned  by the OTS  capital  regulation  based on the risks OTS  believes  are
inherent  in the type of asset.  The  components  of Tier I (core)  capital  are
equivalent to those discussed earlier.  The components of supplementary  capital
currently include  cumulative  preferred stock,  long-term  perpetual  preferred
stock,  mandatory  convertible  securities,  subordinated  debt and intermediate
preferred  stock and the  allowance  for loan and  lease  losses,  limited  to a
maximum of 1.25% of risk-weighted  assets.  Overall, the amount of supplementary
capital included as part of total capital cannot exceed 100% of core capital.

The  capital  regulations  also  incorporate  an interest  rate risk  component.
Savings institutions with "above normal" interest rate risk exposure are subject
to a deduction from total capital for purposes of calculating  their  risk-based
capital requirements.  For the present time, the OTS has deferred implementation
of the interest rate risk component.  At December 31, 1998, the Bank met each of
its capital  requirements.  A table  presenting the Bank's  capital  position at
December  31,  1998  is  presented  in  Note  26 to the  Consolidated  Financial
Statements,  on  page 42 in the  1998  Annual  Report  to  Stockholders,  and is
incorporated herein by reference.

<PAGE>  16

<TABLE>

A  reconciliation  between the Bank's  regulatory  capital  and GAAP  capital at
December 31, 1998 is presented below:


                                                                                                 Tangible Capital
                                                                                                 ----------------
                                                                                                  (In thousands)
<CAPTION>

             <S>                                                                                    <C>
             GAAP capital-originally reported to regulatory authorities
              and on the Bank's consolidated financial statements                                   $320,994

             Add:
             Minority interest in includable consolidated subsidiary                                     161

             Less:
             Regulatory capital adjustments:
              Investments in Non-includable Subsidiaries                                               3,920
              Adjustment for net unrealized gains, net of tax                                         40,871
                                                                                                    --------
              Regulatory Capital                                                                    $276,364
                                                                                                    ========
</TABLE>



Prompt  Corrective  Regulatory  Action.  Under the OTS prompt  corrective action
regulations, ("PCA Regulations") the OTS is required to take certain supervisory
actions  against  undercapitalized  institutions,  the severity of which depends
upon the institution's degree of undercapitalization.

<TABLE>
The PCA  Regulations  define  five  capital  categories  and provide the minimum
numerical  requirements,   subject  to  certain  exceptions,  for  each  capital
category, as detailed below.
<CAPTION>

                                 Total Risk-            Tier I            Leverage         Tangible Capital
Capital Category                 Based Ratio            (Core)             Ratio            to Assets Ratio   
----------------               ----------------     ---------------     -------------      -----------------
<S>                              <C>                 <C>                 <C>                  <C>      
Well capitalized                 10% or above        6% or above         5% or above            N/A
Adequately capitalized            8% or above        4% or above         4% or above(1)         N/A
Undercapitalized                 Less than 8%        Less than 4%        Less than 4%(1)        N/A
Significantly undercapitalized   Less than 6%        Less than 3%        Less than 3%           N/A
Critically undercapitalized         N/A                N/A                 N/A                2% or less

<FN>
(1) 3% for institutions with the highest examination rating.
</FN>
</TABLE>

Well  capitalized  institutions  must meet or exceed each of the ratios shown in
the  table and may not be  subject  to any  order,  written  agreement,  capital
directive, or prompt corrective action directive to meet and maintain a specific
capital  level.  Institutions  failing  to meet any one of the  minimum  capital
requirements will be considered undercapitalized, significantly undercapitalized
or  critically   undercapitalized,   depending  on  the  institution's   capital
condition.  An institution's  capital category is determined on the basis of its
most recent Call Report,  Thrift  Financial  Report,  or Report of  Examination.
Subject to narrow  exception,  the  banking  regulator  is required to appoint a
receiver or  conservator  for an  institution  that is identified as "critically
undercapitalized".  The regulation also provides that a capital restoration plan
must be filed  with the OTS  within  45 days of the date a  savings  institution
receives notice that it is "undercapitalized",  "significantly undercapitalized"
or "critically  undercapitalized".  Compliance with such plan must be guaranteed
by any parent  holding  company.  In addition,  numerous  mandatory  supervisory

<PAGE>  17

actions become  immediately  applicable to the institution,  including,  but not
limited to, increased monitoring by regulators,  restrictions on growth, capital
distributions  and  expansion.  The OTS may also  take  any one of a  number  of
discretionary supervisory actions, including the issuance of a capital directive
and the replacement of senior executive officers and directors.

Insurance  of Deposit  Accounts.  Deposits  of the Bank are  insured by the BIF,
which is administered by the FDIC. The FDIC currently imposes an assessment rate
schedule from 0 to 27 basis points.  Pursuant to the Deposit Insurance Funds Act
of 1996  (the  "Funds  Act"),  the  obligations  for  payment  of the  Financing
Corporation  ("FICO")  bonds is spread  across all BIF and  Savings  Association
Insurance Fund ("SAIF")  members.  Effective  January 1, 1997, BIF deposits have
been assessed for the FICO  obligation of 1.3 basis points,  while SAIF deposits
are assessed  6.48 basis  points.  Full  pro-rata  sharing of the FICO  payments
between BIF and SAIF members will occur on the earlier of January 1, 2000 or the
date the BIF and SAIF are merged.  The Funds Act provided  that the BIF and SAIF
be merged on January 1, 1999, provided no savings  associations  existed at that
time. (See "Thrift Rechartering Legislation", below.)

The Bank paid  $142,000 in FDIC  insurance  premiums  during 1998.  BIF and SAIF
members will continue to pay  assessments,  as described above, to fund the FICO
obligation. Management cannot predict the level of FDIC insurance assessments on
an on-going basis, whether the savings association charter will be eliminated or
whether the BIF and SAIF will eventually be merged.

Under the FDI Act,  insurance of deposits may be  terminated  by the FDIC upon a
finding that the institution has engaged in unsafe or unsound  practices,  is in
an unsafe or unsound  condition  to  continue  operations  or has  violated  any
applicable law, regulation,  rule, order or condition imposed by the FDIC or the
OTS.  Management  of the  Bank  does  not  know of any  practice,  condition  or
violation that might lead to termination of the Bank's deposit insurance.

Thrift Rechartering  Legislation.  Legislation enacted in 1996 provided that the
BIF and SAIF were to have merged on January 1, 1999 if there were no more saving
associations as of that date. Various proposals to eliminate the federal savings
association charter,  create a uniform financial  institutions charter,  abolish
the OTS and  restrict  savings and loan  holding  company  activities  have been
introduced in Congress.  The Bank is unable to predict whether such  legislation
will be enacted or the extent to which the legislation would restrict or disrupt
its operations.

Loans to One Borrower.  Under the HOLA,  as amended,  savings  institutions  are
subject to the national bank limits on loans to one borrower. Generally, savings
institutions may not make a loan to a single or related group of borrowers in an
amount  greater than 15% of its  unimpaired  capital and surplus.  An additional
amount may be lent, equal to 10% of unimpaired capital and surplus, if such loan
is secured by readily marketable collateral, which is defined to include certain
financial  instruments  and  bullion.  At  December  31,  1998,  the Bank was in
compliance  with  this  limitation,  with  the  highest  aggregate  loans to one
borrower of $30.6  million,  or 9.5% of the Bank's  capital.  The Company,  as a
unitary  savings  and loan  holding  company,  is not subject to the loan to one
borrower limitation, nor did the Company have any mortgage loans at December 31,
1998. Management reviews the loans to one borrower limit at the time the loan is
made,  however,  subsequent  changes in the Bank's  capital  position  may cause
credit  concentrations  to exceed 15% of the Bank's capital.  The Bank carefully
monitors the creditworthiness of borrowers with high concentrations of credit as
well as the properties that secure these loans.

Qualified Thrift Lender Test. The HOLA requires  savings  institutions to meet a
QTL test.  Under the QTL test, a savings  institution is required to maintain at
least 65% of its portfolio  assets  (defined as total assets,  less:  intangible
assets  including  goodwill;  property used by the institution in conducting its

<PAGE>  18

business and  specified  liquid  assets up to 20% of total assets) in "qualified
thrift investments"  (primarily  residential  mortgages and related investments,
including certain MBS) on a monthly basis in 9 out of every 12 months.

A savings  institution  that fails the QTL test is subject to certain  operating
restrictions  and may be required to convert to a bank  charter.  As of December
31, 1998,  the Bank  maintained  96.3% of portfolio  assets in qualified  thrift
investments and, therefore, met the QTL test.

Limitations on Capital  Distributions.  OTS regulations  impose limitations upon
all  capital  distributions  by savings  institutions,  such as cash  dividends,
payments to repurchase or otherwise acquire its shares, payments to stockholders
of another  institution  in a cash-out  merger and other  distributions  charged
against  capital.  The rule establishes  three tiers of institutions,  which are
based primarily on an  institution's  capital level. An institution that exceeds
all fully phased-in  capital  requirements  before and after a proposed  capital
distribution  ("Tier 1 Bank") and has not been  advised by the OTS that it is in
need of more than normal  supervision,  could,  after  prior  notice but without
obtaining approval of the OTS, make capital distributions during a calendar year
equal to the greater of (i) 100% of its net earnings to date during the calendar
year plus the amount that would reduce by one-half its "surplus  capital  ratio"
(the  excess  capital  over its fully  phased-in  capital  requirements)  at the
beginning  of the  calendar  year or (ii) 75% of its net income for the previous
four  quarters.   Any  additional  capital  distributions  would  require  prior
regulatory  approval.  In the event a bank's  capital falls below its regulatory
requirements  or is  notified  by the OTS that it is in need of more than normal
supervision,  an institution's  ability to make capital  distributions  could be
restricted.  Effective April 1, 1999, the OTS's capital distribution  regulation
will change. Under the new regulation,  an application to and the prior approval
of the OTS  will be  required  prior  to any  capital  distribution  only if the
institution does not meet the criteria for "expedited treatment" of applications
under OTS  regulations  (i.e.,  generally,  examination  ratings  in the two top
categories.),  the total capital  distributions for the calendar year exceed net
income for that year plus the amount of  retained  net income for the  preceding
two years, the institution would be undercapitalized  following the distribution
or the  distribution  would  otherwise be contrary to a statute,  regulation  or
agreement with the OTS. If an application is not required,  the institution must
still provide prior notice to the OTS of the capital distribution.  In addition,
the OTS could prohibit a proposed capital distribution by any institution, which
would  otherwise be permitted by  regulation,  if the OTS  determines  that such
distribution  would  constitute an unsafe or unsound  practice.  At December 31,
1998, the Bank was a Tier 1 Bank, the highest rating.

Liquidity.   Information   regarding   liquidity  is  included  in  Management's
Discussion and Analysis of Financial  Condition and Results of Operations  under
the caption "Liquidity and Capital  Resources",  included on page 10 in the 1998
Annual Report to Stockholders.

Assessments. Savings institutions are required to pay assessments to the OTS, to
fund  the  operations  of the  OTS.  The  general  assessments,  to be paid on a
semiannual basis, is computed based upon the savings institution's total assets,
including  consolidated  subsidiaries,  as reported in the institution's  latest
quarterly Thrift  Financial  Report.  The Bank's total  assessments for the year
ended December 31, 1998, were $266,000.

Branching.  OTS regulations permit nationwide  branching by federally  chartered
savings  institutions  to the extent  allowed by federal  statute.  This permits
federal   savings   institutions  to  establish   interstate   networks  and  to
geographically  diversify their loan  portfolios and lines of business.  The OTS
authority  preempts any state law  purporting  to regulate  branching by federal
savings institutions.

Transactions   with  Related   Parties.   The  Bank's  authority  to  engage  in
transactions  with  related  parties or  "affiliates"  (e.g.,  any company  that
controls or is under common  control with an  institution),  or to make loans to
certain  insiders,  is limited by Section 23A and 23B of the Federal Reserve Act
("FRA").  Section 23A limits the aggregate amount of covered  transactions  with
any  individual  affiliate  to 10% of the  capital  and  surplus of the  savings
institution. The aggregate amount of transactions with all affiliates is limited
to 20% of the savings  institution's  capital and surplus.  Certain transactions

<PAGE>  19

with  affiliates  are required to be secured by collateral in an amount and of a
type  described  in Section  23A,  and the  purchase of low quality  assets from
affiliates   is  generally   prohibited.   Section  23B  provides  that  certain
transactions  with affiliates,  including loans and asset purchases,  must be on
terms  and  under   circumstances,   including   credit   standards,   that  are
substantially  the same or at least as  favorable to the  institution,  as those
prevailing  at  the  time  for  comparable   transactions   with   nonaffiliated
individuals  or  entities.  In the  absence  of  comparable  transactions,  such
transactions  may only occur under  terms and  circumstances,  including  credit
standards,   that  in  good  faith  would  be  offered  to  or  would  apply  to
non-affiliated  individuals or entities.  In addition,  savings institutions are
prohibited  from lending to any affiliate that is engaged in activities that are
not  permissible  for bank  holding  companies  under  Section  4(c) of the Bank
Holding  Company  Act.  Further,  no  savings  institution  may  invest  in  the
securities of any affiliate other than a subsidiary.

The Bank's authority to extend credit to executive  officers,  directors and 10%
shareholders  (referred  to as  "insiders"),  as well as entities  such  persons
control,  is governed by Sections  22(g) and 22(h) of the FRA and  Regulation  O
thereunder.  Among  other  things,  such loans are  required to be made on terms
substantially  the same as those offered to unaffiliated  individuals and do not
involve more than the normal risk of repayment.  Recent  legislation  created an
exception for loans made pursuant to a benefit or  compensation  program that is
widely  available  to all  employees  of  the  institution  and  does  not  give
preference to insiders over other employees. Regulation O also places individual
and aggregate limits on the amount of loans the Bank may make to insiders based,
in part, on the Bank's  capital  position and requires  certain  board  approval
procedures to be followed.

Enforcement.  Under the FDI Act, the OTS has primary enforcement  responsibility
over savings  institutions  and has the authority to bring  actions  against the
institution and all  "institution-affiliated  parties",  including stockholders,
and any  attorneys,  appraisers  and  accountants  who  knowingly or  recklessly
participate  in wrongful  action likely to have an adverse  effect on an insured
institution.  Formal enforcement action may range from the issuance of a capital
directive, or cease and desist orders; the removal of officers and/or directors;
appointment of a receiver or conservator;  or termination of deposit  insurance.
Civil penalties cover a wide range of violations and an amount up to $25,000 per
day, or possibly $1 million per day in especially egregious cases. Under the FDI
Act,  the  FDIC  has the  authority  to  recommend  to the  Director  of the OTS
enforcement action to be taken with respect to a particular savings institution.
If action is not taken by the Director of the OTS,  then the FDIC has  authority
to take such action under certain  circumstances.  Federal law also  establishes
criminal penalties for certain violations.

Standards for Safety and Soundness.  The federal  banking  agencies have adopted
Interagency   Guidelines   Prescribing   Standards   for  Safety  and  Soundness
("Guidelines")  and a final rule to  implement  safety and  soundness  standards
required  under the FDI Act. The  Guidelines  set forth the safety and soundness
standards that the federal banking agencies use to identify and address problems
at  insured  depository   institutions  before  capital  becomes  impaired.  The
standards set forth in the Guidelines  address internal controls and information
systems;  internal  audit  system;  credit  underwriting;   loan  documentation;
interest rate risk exposure; asset growth; and compensation,  fees and benefits.
If the appropriate  federal banking agency  determines that an institution fails
to meet any standard  prescribed by the  Guidelines,  the agency may require the
institution  to submit to the agency an  acceptable  plan to achieve  compliance
with the Guidelines, as required by the FDI Act.

Grandfathered Savings Bank Authority.  Until 1983, the Bank was a New York state
chartered  savings bank with investment  powers conferred by New York State law.
The Bank retained such power when it converted to a federally  chartered savings
bank. The HOLA and OTS  regulations  empower the Bank to exercise all the powers
that its predecessor state chartered savings bank possessed under New York State
law, whether or not such powers had been exercised,  subject to the authority of
the OTS and FDIC to limit such powers for safety and  soundness  reasons.  These
powers,  which were preserved in the FIRREA,  are in addition to powers the Bank

<PAGE>  20

possesses as a federally  chartered savings bank. Where a "grandfathered"  power
overlaps with a power  authorized  under federal law, the Bank may act under the
more favorable authority.

The  grandfathered  powers  include the  authority to invest in various types of
investment  securities,  including corporate bonds and stock, and in real estate
development.  In addition,  the Bank has grandfathered  authority to make leeway
investments,   which  include,  subject  to  certain  specific  exceptions,  any
investment  not  otherwise  authorized  by the New York State Banking Law at the
time of the Bank's charter conversion,  provided that any single investment does
not exceed 1% of the Bank's assets and that all such  investments  do not exceed
5% of its assets. At December 31, 1998, the Bank's capital investments, computed
for regulatory purposes, retained under the leeway provisions were $3.9 million,
or .2% of the Bank's assets.  These powers allow the Bank to pursue  diversified
acquisition opportunities and provide the Bank with flexibility in restructuring
its  assets.   The  Bank  intends  to  continue  to  utilize   these  powers  as
opportunities  arise and as permitted under  applicable  rules and  regulations.
(See "Thrift Rechartering Legislation", page 17, herein.)

Federal  Home Loan Bank  System.  The Bank is a member of the FHLB System  which
consists of twelve  (12)  regional  FHLBs.  The FHLB  provides a central  credit
facility,  primarily  for  member  institutions.  The  Bank,  as a member of the
FHLB-NY,  is required to acquire and hold shares of capital stock in the FHLB-NY
in an  amount  at least  equal to 1% of the  aggregate  principal  amount of its
unpaid  residential  mortgage loans and similar  obligations at the beginning of
each  year,  or 1/20 of its  advances  (borrowings)  from the  FHLB-NY,  if any,
whichever is greater. The Bank was in compliance with this requirement,  with an
investment in FHLB-NY stock at December 31, 1998 of $8.9 million.

On December 8, 1998, the Bank borrowed $50.0 million from the FHLB-NY at a fixed
rate of 5.62% for ten years.  Interest  expense on FHLB-NY advances for the year
ended  December 31, 1998 was $185,000.  Prior to 1998, the Bank had not borrowed
funds for its direct  activities  since 1984.  Pursuant to a blanket  collateral
agreement  with the FHLB-NY,  advances are secured by qualifying  mortgage loans
owned  by the  Bank  in an  amount  at  least  equal  to  110%  of the  advances
outstanding.  Should management so decide,  additional  advances may be taken in
the future. (See "Liquidity and Capital  Resources",  included on page 10 in the
1998 Annual Report to Stockholders.)

The FHLBs are required to provide funds for the resolution of insolvent  thrifts
and to contribute funds for affordable housing programs. These requirements have
limited the  FHLB-NY's  ability to pay dividends to their members and could also
result in the FHLBs imposing higher interest rates on advances to their members.
Further,  there can be no assurance  that the impact of FIRREA on the FHLBs will
not also cause a decrease  in the value of the  FHLB-NY  stock held by the Bank.
For the years ended December 31, 1998, 1997 and 1996, dividends from the FHLB-NY
to the Bank were $634,000, $496,000 and $438,000 respectively.

Federal Reserve System.  The Federal Reserve Board ("FRB")  regulations  require
savings  institutions to maintain  non-interest  earning  reserves against their
transaction  accounts  (primarily NOW and regular  checking  accounts).  The FRB
regulations  generally  require that  reserves be maintained  against  aggregate
transaction  accounts as follows: for accounts aggregating $46.5 million or less
(subject to adjustment by the FRB) a reserve requirement of 3%; and for accounts
greater than $46.5  million,  a reserve  requirement  of $1.25  million plus 10%
(subject to  adjustment  by the FRB between 8% and 14%)  against that portion of
total transaction accounts in excess of $46.5 million. The first $4.9 million of
otherwise  reservable balances (subject to adjustments by the FRB) were exempted
from the reserve requirements.  During 1998, the Bank was in compliance with the
foregoing  requirements  and expects to continue to remain in  compliance in the
future.

The balances maintained to meet the reserve  requirements imposed by the FRB may
be used to  satisfy  liquidity  requirements  which may be  imposed  by the OTS.
Because required reserves must be maintained in the form of either vault cash, a
non-interest  bearing  account  at a Federal  Reserve  Bank,  or a  pass-through
account as  defined by the FRB,  the  effect of the  reserve  requirement  is to
reduce  the  Bank's  interest  earning  assets.  FHLB  System  members  are also

<PAGE>  21

authorized  to  borrow  from the  Federal  Reserve  "discount  window",  but FRB
regulations  require  institutions to exhaust all FHLB sources before  borrowing
from a Federal Reserve Bank.

Taxation
--------

General.  The following discussion  of tax matters is intended only as a summary
and  does  not  purport  to be a  comprehensive  description  of the  tax  rules
applicable  to the  Company.  The Company was  audited by the  Internal  Revenue
Service for taxable  years 1990  through  1993 and by New York State for taxable
years 1994 through 1996. The Bank was audited by New York City for taxable years
1991 through 1993.

Federal.  The Company  is  subject  to the  rules  of  federal  income  taxation
applicable to  corporations.  The Company  computes  taxable  income,  using the
accrual  method of  accounting,  on a consolidated  basis.  The current  maximum
federal corporate tax rate for all income, including capital gains, is 35%.

State and Local Taxation.  The  Company is  subject  to New York  State  ("NYS")
Franchise Tax on Banking  Corporations and the Bank to the New York City ("NYC")
Banking Corporation Tax.

The NYS and NYC taxes on  banking  corporations  are each  imposed  in an annual
amount  equal to the  greater  of;  (1) 9% of the  Bank's  "Entire  Net  Income"
allocable  to NYS (and to NYC for  purposes  of the City tax) during the taxable
year, or (2) the applicable  alternative minimum tax. The applicable alternative
minimum tax is  generally  the greater of (1) a  percentage  of the value of the
Bank's  assets  allocable  to NYS (and to NYC for the  City  tax)  with  certain
modifications, (2) 3% of the Bank's "Alternative Entire Net Income" allocable to
NYS (and to NYC for the City tax) or (3) A minimum tax at applicable rates.

For  purposes  of the NYS and NYC taxes on  banking  corporations,  "Entire  Net
Income" is similar to federal taxable income,  subject to certain  modifications
(including the fact that net operating  losses cannot be carried back or carried
forward), and "Alternative Entire Net Income" is similar to "Entire Net Income",
subject to certain further modifications.

Bad Debt  Reserves.  Under the Federal law that existed prior to 1996,  the Bank
was generally allowed a special bad debt deduction in determining income for tax
purposes.  The  deduction  was  based  on  either  an  experience  formula  or a
percentage  of  taxable  income  before  such  deduction   ("reserve   method").
Legislation was enacted in August 1996 which repealed the reserve method for tax
purposes, and required Banks to recapture,  (i.e. take into taxable income) over
a six year  period,  the excess of the balance of their bad debt  reserves as of
December 31, 1995 (other than supplemental  reserves,  discussed below) over the
balance of such  reserves as of December 31, 1987.  The Bank neither had nor has
any excess reserves that would require  recapture  pursuant to this legislation.
The last tax year that the Bank used the  reserve  method in  computing  its bad
debt  deduction  for tax  purposes  was  1995,  and has  since  used the  direct
charge-off method to compute its bad debt deduction.

Pursuant to Statement of Financial  Accounting  Standards Statement No. 109, the
Bank is generally  not  required to provide  deferred  taxes for the  difference
between  book and tax bad debt  expense  taken in years  prior  to, or ending at
December  31,  1987,  the base year  reserves.  The base year  reserves of $85.1
million and  supplemental  reserve  are frozen,  not  forgiven.  These  reserves
continue to be segregated as they are subject to recapture penalty if one of the
following occurs:  (a) the Bank's retained earnings  represented by this reserve
are used for purposes  other than to absorb  losses on loans,  including  excess
dividends or  distributions  in liquidation;  (b) the Bank redeems its stock; or
(c) the Bank fails to meet the Internal  Revenue Code definition for a qualified
thrift.  Management  does not  presently  anticipate  an event that would  cause
recapture of the aforementioned reserves. However, future changes in the Federal
tax law could further affect the status of the base year reserve.  (See Notes 14
and 18 to the Consolidated Financial Statements, included on pages 33 through 34
and page 36, respectively, in the 1998 Annual Report to Stockholders.)


<PAGE>  22

New York  State  and the City of New York  adopted  legislation  to  reform  the
franchise taxation of thrift reserves for loan losses.  The legislation  applies
to taxable years beginning after December 31, 1995. The legislation, among other
things,  retains the reserve method for bad debt deductions.  The New York State
and the City of New York bad debt  deduction  are no  longer  predicated  on the
Federal deduction.

Delaware Taxation. As a Delaware holding company not earning income in Delaware,
the Company is exempted  from Delaware  corporate  income tax but is required to
file an annual  report with and pay an annual  franchise  tax of $150,000 to the
State of Delaware.



                                STATISTICAL DATA

The detailed  statistical  data which  follows is presented in  accordance  with
Guide 3, prescribed by the SEC. This data should be read in conjunction with the
Consolidated Financial Statements and Notes thereto and Management's  Discussion
and Analysis of Financial Condition and Results of Operations, which is included
in the 1998 Annual Report to Stockholders as Exhibit 13.01.

I.       Distribution of Assets, Liabilities and Stockholders' Equity:  Interest
           Rates and Interest Differential

A, B. See page 14 of the Company's 1998 Annual Report to Stockholders  (portions
of which are filed  herewith as Exhibit  13.01)  presents  the  distribution  of
assets,  liabilities and stockholders' equity and interest  differential,  under
the caption "Average Balance Sheet" and is incorporated herein by reference.

C.    Interest Differential

      See page 15 of the Company's 1998 Annual Report to Stockholders  (portions
of  which  are  included  herewith  as  Exhibit  13.01)  presents  the  interest
differential under the caption "Rate/Volume Analysis" and is incorporated herein
by reference.

      Interest Rate Sensitivity Analysis

      See  pages  11  through  13  of  the  Company's   1998  Annual  Report  to
Stockholders  (portions of which are filed herewith as Exhibit  13.01)  presents
the  interest  rate  sensitivity  analysis,  under the  caption  "Interest  Rate
Sensitivity Analysis" and is incorporated herein by reference.



<PAGE>  23


                              INVESTMENT PORTFOLIO

<TABLE>
A.           The following  table sets forth certain  information  regarding the
             Company's investment portfolio at the dates indicated:
<CAPTION>
                                                                                       At December 31,                 
                                                                       -------------------------------------------                 
                                                                          1998             1997              1996
                                                                          ----             ----              ----
                                                                                       (In Thousands)
           <S>                                                          <C>             <C>               <C>  
           Securities Available-for-Sale:
           ------------------------------
             Marketable equity securities, at fair value                $ 83,592        $ 62,243          $ 51,021
                                                                        ========        =========         ========

           Securities Held-to-Maturity:
           ----------------------------
             U.S Government and federal agency securities               $109,996        $244,903          $299,645

             CMOs, net                                                    95,790         104,040           155,272

             MBS:
               Ginnie Mae, net                                             2,464           3,640             4,999
               Fannie Mae, net                                                53             106               152
               Freddie Mac, net                                              154             278               441
                                                                        --------        --------          --------
                     Total MBS                                             2,671           4,024             5,592
                                                                        --------        --------          --------

                     Total Securities Held-to-Maturity                  $208,457        $352,967          $460,509
                                                                        ========        ========          ========

           Other investments:
           ------------------
             FHLB-NY stock (investment required by law)                 $  8,892        $  7,615          $  6,829
             Other stock                                                      30              30                30
                                                                        --------        --------          --------
               Total other investments                                  $  8,922        $  7,645          $  6,859
                                                                        ========        ========          ========
</TABLE>

Contractual Maturity Distribution
---------------------------------

The table below sets forth certain  information  regarding  the carrying  value,
weighted   average   yields  and   maturities   of  the   Company's   securities
held-to-maturity at December 31, 1998. The table does not reflect prepayments or
scheduled amortization on CMOs or MBS. For MBS, the maturities indicated are the
dates the final payments are due. For CMOs,  the  maturities  reflect the "final
payment  dates",  which as defined by the issuer,  represent  the latest date by
which the CMO will be retired. The assumptions used by the issuer in calculating
the final payment dates are highly  conservative,  and the actual retirement may
occur earlier than its final payment date. The estimated actual average maturity
on the entire CMO  portfolio at December  31, 1998 was  twenty-six  months.  For
principal reduction on these securities,  for the years ended December 31, 1998,
1997 and 1996:  See the  "Consolidated  Statements  of Cash Flows",  included on
pages 25 and 26 in the 1998 Annual Report to Stockholders.
<TABLE>
                                                                          At December 31, 1998                             
                                                                          --------------------                             

                                     One Year or Less     Over 1 to 5 Years      Over 5 to 10 Years        After 10 years 
                                   -------------------   -------------------    --------------------    ---------------------
                                               Weighted              Weighted              Weighted                 Weighted
                                  Carrying     Average    Carrying    Average    Carrying   Average     Carrying     Average
                                    Value       Yield      Value      Yield        Value     Yield        Value       Yield    
                                  ----------   ---------  --------  ---------    --------  --------    ----------  ----------
                                                                            (Dollars in Thousands)
<CAPTION>
 
<S>                               <C>           <C>       <C>          <C>       <C>          <C>       <C>           <C>           
Federal agency                    $100,000       5.03%    $       -        -% $         -        -%     $      -         -%
U.S. Government                      9,996       6.25             -        -            -        -             -         -
CMOs                                     -          -         4,401     5.75       81,013     6.17        10,376      6.00
MBS                                     17      12.25           463    10.50          717     9.00         1,474      9.94
                                  --------      -----     ---------    -----     --------     ----      --------      ----
     Total                        $110,013       5.14%    $   4,864     6.20%    $ 81,730     6.19%     $ 11,850      6.49%
                                  ========                =========              ========               ========

</TABLE>

<PAGE>  24


                                 LOAN PORTFOLIO

<TABLE>
A. The following table sets forth the composition of the mortgage and other loan
portfolios in dollar amounts:

<CAPTION>


                                                                         At December 31, 
                                                                         --------------- 

                                                1998            1997              1996              1995             1994
                                                ----            ----              ----              ----             ----
                                                                        (In Thousands)
<S>  <C>                                    <C>               <C>               <C>               <C>              <C>
Mortgage loans:
  Multi-family                              $   702,914       $  563,205        $  433,224        $  344,337       $  294,003
  Underlying cooperative                        302,494          267,942           262,221           263,972          251,580
  One- to four-family                            75,773           73,757            76,848            82,391           86,531
  Commercial                                     69,001           71,839            61,829            55,662           58,070
  Construction                                    5,176            3,067             1,836             1,492            2,518
                                             ----------       ----------        ----------        ----------       ----------
     Total mortgage loans                     1,155,358          979,810           835,958           747,854          692,702
                                             ----------       ----------        ----------        ----------       ----------

Other loans:
  Student                                           153            5,213             6,204             7,466            9,656
  Loans secured by deposit accounts               8,166            8,189             8,328             8,489            9,167
  Property improvement                           10,652           10,744             8,775             9,165            6,762
  Consumer                                        3,754            4,775             4,350             4,092            1,821
  Overdraft loans                                   202              227               237               220              224
                                             ----------       ----------        ----------        ----------       ----------
     Total other loans                           22,927           29,148            27,894            29,432           27,630
                                             ----------       ----------        ----------        ----------       ----------

     Total loans receivable                   1,178,285        1,008,958           863,852           777,286          720,332
                                             ----------       ----------        ----------        ----------       ----------

Less:
  Unearned discounts, premiums
    and deferred loan fees, net                   2,702            3,333             3,751             4,344            4,952
  Allowance for possible loan losses              5,924            5,880             5,327             4,697            4,085
                                             ----------       ----------        ----------        ----------      -----------

     Loans receivable, net                   $1,169,659       $  999,745        $  854,774        $  768,245      $  711,295
                                             ==========       ==========        ==========        ==========      ==========
</TABLE>

<PAGE>  25


B.  Maturities and Sensitivities of Loans to Changes in Interest Rates

     The following table shows the  contractual  maturity of the loan portfolios
     at December 31, 1998. The table does not reflect prepayments,  or scheduled
     principal   amortization  or  repricing  of  adjustable  rate  loans.  (For
     principal  reduction on loans,  for the years ended December 31, 1998, 1997
     and 1996:  See the  "Consolidated  Statements  of Cash Flows",  included on
     pages 25 and 26 in the 1998 Annual Report to Stockholders.)

<TABLE>
                                                                                             Other
                                                    Mortgage Loans                           Loans           Total  
                            ----------------------------------------------------------      -------         -------
                                                                    (In Thousands)  

                                          Under-       One-to
                              Multi-      lying-        Four-      Commer-   Construct-
                              Family      Co-op        Family       cial        tion         Other 
                              ------      -----        ------       ----        ----         ----- 

<CAPTION>
<S>                         <C>          <C>          <C>         <C>         <C>          <C>            <C> 
  Amounts due:
    Within 1 Year           $ 25,249     $  7,788     $  6,514    $  4,848    $  5,176     $  8,849       $    58,424
                            --------     --------     --------    --------    --------     --------       -----------
  After 1 Year:
    1 to 2 years              39,594       22,750           38       1,764           -        1,435            65,581
    2 to 3 years              41,634       20,410          456       4,561           -        1,576            68,637
    3 to 5 years             102,158       54,414        1,050      13,283           -        3,301           174,206
    5 to 10 years            430,796      162,670       21,481      40,990           -        7,766           663,703
    10 to 20 years            63,216       34,462       19,187       3,555           -            -           120,420
    Over 20 years                267            -       27,047           -           -            -            27,314
                            --------     --------     --------    --------    --------     --------        ---------- 
  Total due after 1 year     677,665      294,706       69,259      64,153           -       14,078         1,119,861
                            --------     --------     --------    --------    --------     --------        ----------
      Total amounts due     $702,914     $302,494     $ 75,773    $ 69,001    $  5,176     $ 22,927        $1,178,285
                            ========     ========     ========    ========    ========     ========        ----------
  Less:
    Unearned discounts,
     premiums and deferred
     loan fees, net                                                                                             2,702
    Allowance for possible
     loan losses                                                                                                5,924
                                                                                                           ----------
  Loans receivable, net                                                                                    $1,169,659
                                                                                                           ==========
</TABLE>

<TABLE>
The  following  table sets forth at December 31, 1998,  the dollar amount of all
loans due after  December  31, 1999 and whether  such loans have fixed  interest
rates or adjustable interest rates.
<CAPTION>

                                               Fixed         Adjustable       Total
                                               -----         ----------       -----
                                                           (In Thousands)
<S>   <C>                                    <C>            <C>            <C>
 Mortgage loans:
      Multi-family                           $  677,665     $        -     $  677,665
      Underlying cooperative                    294,706              -        294,706
      One-to four-family                         62,955          6,304         69,259
      Commercial                                 64,153              -         64,153
      Construction                                    -              -              -
 Other loans:
      Student                                       153              -            153
      Loans secured by deposit accounts               -              -              -
      Property improvement                       10,554              -         10,554
      Consumer                                    3,371              -          3,371
      Overdraft loans                                 -              -              -            
                                             ----------     ----------     ----------
        Total loans receivable               $1,113,557     $    6,304     $1,119,861
                                             ==========     ==========     ==========
</TABLE>


<PAGE>  26


C.       Delinquencies and Classified Assets
         -----------------------------------
        Delinquent loans are reviewed by management  monthly and by the Board of
Directors  quarterly.  When a borrower  fails to make a scheduled  loan payment,
efforts are made to have the  borrower  cure the  delinquency.  The  borrower is
notified of the delinquency in writing and by telephone by the Bank's collection
staff. For mortgage loans, under certain circumstances, a site inspection of the
property is required.  Most  delinquencies are cured within 90 days and no legal
action is taken. If a mortgage  delinquency exceeds 90 days, the Bank institutes
measures to enforce its remedies, including commencing a foreclosure action. For
delinquent  FHA and Veterans  Administration  ("VA")  mortgage  loans,  the Bank
follows  notification  and  foreclosure  procedures  prescribed  by FHA  and VA.
Property  acquired by the Bank as a result of a  foreclosure  is  classified  as
"Other Real Estate".  For uninsured  non-mortgage  loans,  delinquent  loans are
charged  off  after  120 days  and are  referred  to the  Bank's  attorneys  for
collection.

<TABLE>
     At December 31, 1998, 1997 and 1996,  delinquencies  in the loan portfolios
were as follows:
<CAPTION>

                                           61-90 Days                      90 Days and Over
                                      Number         Principal         Number          Principal
                                       of             balance           of              balance
                                      loans          of loans          loans           of loans
                                      -----          --------          -----           --------
                                                          (Dollars in Thousands)

<S>                                     <C>   <C>     <C>              <C>    <C>      <C> 
At December 31, 1998
--------------------
     Delinquent loans:
      Guaranteed(1)                     11            $   212            10            $   233
       Non-guaranteed                    5                 63             5                216
                                      ----            -------          ----            -------
                                        16            $   275            15            $   449
                                      ====            =======          ====            =======
     Ratio of delinquent
      loans to total loans                    .02%                             .04%
                                             ====                              ===

At December 31, 1997
--------------------
     Delinquent loans:
      Guaranteed(1)                     48            $  221            82             $   500
      Non-guaranteed                     5                10             5              12,769(2)
                                       ---            ------           ---             -------
                                        53            $  231            87             $13,269
                                       ===            ======           ===             =======
     Ratio of delinquent
      loans to total loans                    .02%                            1.32%
                                              ===                             ====

At December 31, 1996
--------------------
     Delinquent loans:
      Guaranteed(1)                     78            $  390           144             $   692
      Non-guaranteed                     9                20            15              13,459(2)
                                       ---            ------           ---             -------
                                        87            $  410           159             $14,151
                                       ===            ======           ===             =======
     Ratio of delinquent
      loans to total loans                    .05%                            1.64%
                                              ===                             ====
<FN>

(1)  Loans which are FHA, VA or New York State Higher Education Services Corporation guaranteed.

(2)  Includes the $12,754,000 underlying cooperative mortgage loan, which was satisfied during
      the second quarter of 1998.
</FN>
</TABLE>

<PAGE>  27


<TABLE>
The following table sets forth information regarding  non-accrual,  restructured
and impaired  loans and loans which are 90 days or more  delinquent but on which
the Bank is accruing interest at the dates indicated.
<CAPTION>

                                                                            At December 31,               
                                                                            ---------------               

                                               1998             1997          1996          1995          1994
                                               ----             ----         -----          ----          ----
                                                                        (Dollars in Thousands)
<S>                                         <C>              <C>            <C>            <C>            <C>
Mortgage loans:
---------------
 One-to four-family, multi-family
  and commercial real estate loans:
   Non-accrual loans (1)                    $     213        $12,754        $12,754        $20,903        $  500   
                                            ---------        -------        -------        -------        ------
Accruing loans 90 or more days overdue:
 Conventional mortgages                             -              -            686            311           322
 FHA and VA mortgages (2)                         233            335            361            557           581
                                            ---------        -------        -------        -------        ------
      Total                                       233            335          1,047            868           903
                                            ---------        -------        -------        -------        ------

Other loans:
------------
  Non-accrual loans                                 -              -              -              -             -
  Accruing 90 or more days overdue:
    Student loans                                   -            165            331            194           379
    Consumer loans                                  3             15             19             13             7  
                                            ---------        -------        -------        -------        ------
      Total                                         3            180            350            207           386
                                            ---------        -------        -------        -------        ------

Total non-performing loans:
  Non-accrual                                     213         12,754         12,754         20,903           500
  Accruing 90 days or more overdue                236            515          1,397          1,075         1,289
                                            ---------        -------        -------        -------        ------
      Total                                 $     449        $13,269        $14,151        $21,978        $1,789
                                            =========        =======        =======        =======        ======

Non-accrual loans to total loans                  .02%          1.26%          1.48%          2.69%          .07%
Accruing loans 90 or more days overdue
  to total loans                                  .02            .06            .16            .14           .18
Non-performing loans to total loans               .04           1.32           1.64           1.78(3)        .25

At December 31:
---------------
Restructured loans                          $   1,842        $ 1,840       $  1,874        $ 1,663        $1,828

For the years ended December 31:
--------------------------------
Income forfeited due to
 restructured loans                         $      73        $    62       $     62        $    62        $    6

Income unrecorded due to
 non-accrual/impaired loans                 $     509            $ 1,180   $  1,180        $   226        $  150

<FN>
(1) See "Financial Condition",  included on pages 8 through 9 in the 1998 Annual
Report to  Stockholders.

(2) These loans,  including the past due loans, do not present any significant
collection risk to the Bank as they are guaranteed and therefore are presented
separately.

(3) Does not include an $8.2 million mortgage loan that was current on a cash
basis, but on non-accrual status, as payments were received through the
bankruptcy court.
</FN>
</TABLE>


<PAGE>  28

Impaired  Mortgage  Loans.  At  December  31,  1998,  the Bank had one  impaired
mortgage  loan  with  a  $213,000  balance  and  a  $27,000  specific  valuation
allowance.  The  Bank  had a net  investment  in this  loan of  $186,000,  which
comprised  total  non-accrual  loans at December 31, 1998. At December 31, 1997,
the Bank had one impaired  mortgage  loan,  secured by a  cooperative  apartment
building,  with a balance of $12.8 million and no related  valuation  allowance.
This loan comprised the total balance of non-accrual loans at December 31, 1997.

If all  non-accrual  loans had been performing in accordance with their original
terms,  the Company would have recorded  interest  income,  with respect to such
loans,  of $509,000,  $1.2 million and $1.2 million for the years ended December
31,  1998,  1997 and 1996,  respectively.  This  compares  to $397,000 of actual
payments  recorded for 1998, no interest  income was recognized  with respect to
such loans for 1997 and 1996.

On May 28,  1998,  the  $12.8  million  underlying  cooperative  mortgage  loan,
discussed above, was satisfied.  Upon  satisfaction,  $4.3 million of previously
unrecorded  prior years' interest and legal fees, as well as late charges,  were
recovered and included in non-interest  income.  The average balance of impaired
loans for calendar 1998, 1997 and 1996 was $5.5 million, $12.8 million and $12.8
million, respectively.

At  December  31,  1998  and  1997,  loans   restructured  in  a  troubled  debt
restructure,  all of which are performing in accordance  with their  contractual
terms and therefore not considered  impaired,  were  $1,842,000 and  $1,840,000,
respectively. Interest forfeited attributable to restructured loans was $73,000,
$62,000  and  $62,000  for the years ended  December  31,  1998,  1997 and 1996,
respectively.

Classified Assets.  Federal  regulations provide for the classification of loans
and other assets such as debt and equity securities  considered by the OTS to be
of lesser quality as  "substandard",  "doubtful" or "loss"  assets.  An asset is
considered  "substandard"  if it is  inadequately  protected  by the current net
worth and paying capacity of the obligor or of the collateral  pledged,  if any.
Substandard assets include those characterized by the distinct  possibility that
the insured  institution  will  sustain  some loss if the  deficiencies  are not
corrected.  Assets classified as "doubtful" have all of the weaknesses  inherent
in those  classified  "substandard",  with  the  added  characteristic  that the
weaknesses  present make  "collection or  liquidation in full",  on the basis of
currently  existing facts,  conditions,  and values,  "highly  questionable  and
improbable".  Assets  classified as "loss" are those considered  "uncollectable"
and  of  such  little  value  that  their  continuance  as  assets  without  the
establishment  of a specific  loss  reserve is not  warranted.  Pursuant  to OTS
rules, the Bank recently discontinued classifying assets as "special mention" if
such assets possessed  weakness but do not expose the Bank to sufficient risk to
warrant  classification in one of the aforementioned  categories.  However,  the
Bank still  maintains a "special  mention"  category  under its  internal  asset
review system.

When an insured institution classifies problem assets as either "substandard" or
"doubtful", it is required to establish general allowances for loan losses in an
amount  deemed  prudent  by  management.   General  allowances   represent  loss
allowances which have been established to recognize the inherent risk associated
with lending activities,  but which, unlike specific  allowances,  have not been
allocated to particular problem assets. When an insured  institution  classifies
problem assets as "loss",  it is required to establish a specific  allowance for
losses equal to 100% of the amount of the asset so  classified  or to charge off
such amount. An insured institution's  determination as to the classification of
its assets and the amount of its  valuation  allowances  is subject to review by
the OTS which can order the establishment of additional general or specific loss
allowances.  In connection with the filing of its periodic reports with the OTS,
the Bank  regularly  reviews the problem  loans in its  portfolio  to  determine
whether  any  loans  require   classification   in  accordance  with  applicable
regulations.

Allowances  for  Possible  Loan and Other  Credit  Losses.  The  allowances  for
possible loan and other credit losses are established  through  provisions made,
based on  management's  evaluation of the risk inherent in its asset  portfolios
and changes in the nature and volume of investment  activity.  Such  evaluation,
which  includes  a review of all assets  for which  full  collection  may not be

<PAGE>  29

reasonably assured,  considers among other matters,  the estimated fair value of
the underlying collateral,  economic conditions,  historical loss experience and
other  factors  that  warrant  recognition  in  providing  for  adequate  credit
allowances.  (For a more complete  discussion of the Bank's  problem  assets see
"Asset Quality and Allowances",  included on page 9 in the 1998 Annual Report to
Stockholders.)

The OTS, in conjunction with other federal banking agencies,  has an interagency
policy  statement  on the  allowance  for  loan and  lease  losses.  The  policy
statement   provides   guidance   for   financial   institutions   on  both  the
responsibilities  of management for the assessment and establishment of adequate
allowances and guidance for banking agency  examiners to use in determining  the
adequacy  of general  valuation  allowances.  Generally,  the  policy  statement
requires that:  institutions  have  effective  systems and controls to identify,
monitor and address  asset  quality  problems;  have  analyzed  all  significant
factors that affect the  collectibility of the portfolio in a reasonable manner;
and have established  acceptable  allowance  evaluation  processes that meet the
objectives set forth in the policy statement.

Potential Problem Loans and Other Assets and Subsequent  Developments Management
has not identified any material  potential  problem loans or other asset,  other
than previously discussed and presented in the accompanying tables.

Other Real Estate ORE represents real estate  properties owned by the Bank, or a
subsidiary company, as a result of foreclosure or by obtaining a deed in lieu of
foreclosure. ORE is recorded at the lower of the net unpaid indebtedness, or the
property's  net  fair  value at the time of  acquisition.  Subsequent  valuation
adjustments are made if the net fair value decreases below the carrying  amount.
Gains, if any, on the sale of ORE are deferred under the cost recovery method.

At December 31, 1998,  ORE carried at $277,000 was  comprised of 29  cooperative
apartments  located within an 84 unit cooperative  apartment building located in
Brooklyn,  New  York.  The  units  were  acquired  during  1994,  as  part  of a
restructuring  agreement  for the  underlying  cooperative  loan. As part of the
agreement,  the Bank extended the mortgage loan for an additional  five years at
7.25%, made an additional five year building  improvement/liquidity  loan to the
cooperative and, through a subsidiary  corporation,  received cooperative shares
representing 57 apartments. As a result of the restructuring,  $1.6 million (the
Bank's   proportionate   share  of  property   ownership)  of  the   cooperative
association's  $2.4  million  indebtedness  to the  Bank was  reclassified  from
mortgage loans to ORE on the Company's  consolidated  financial  statements.  At
December 31, 1998, the total  indebtedness  related to this property reported in
mortgage loans,  including the building  improvement loan, was $1.3 million.  At
December 31, 1998, 29 units remained unsold and were rented.  As of December 31,
1998,  there were deferred  gains of $453,000 on the 28 units that were sold, as
sales of ORE are accounted  under the cost  recovery  method.  During 1998,  ORE
operations   generated   pre-tax  losses  of  $33,000,   of  which  $30,000  was
attributable  to the property  discussed  above.  There were no loss  provisions
established against ORE during the year ended December 31, 1998.


<PAGE>  30
<TABLE>

                         SUMMARY OF LOAN LOSS EXPERIENCE

Activity in the  allowance  for loan losses for the mortgage  loan  portfolio is
summarized as follows, for the years ended December 31:
<CAPTION>

Mortgage Portfolio Loan Loss Allowance:                        1998         1997         1996         1995          1994 
--------------------------------------                         ----         ----         ----         ----          -----
                                                                                     (Dollars in Thousands)

<S>                                                           <C>          <C>          <C>          <C>           <C>   
Balance at beginning of period                                $5,741       $5,176       $4,575       $3,976        $4,000
Provision for loan losses                                          -          600          600          600           600
Loans charged-off                                                  -          (35)           -           (1)         (624)
Recoveries of loans previously charged off                         -            -            1            -             -
                                                              ------       ------       ------       ------        ------      
  Balance at end of period                                    $5,741       $5,741       $5,176       $4,575        $3,976
                                                              ======       ======       ======       ======        ======

Ratios:

Net charge-offs to average mortgages                               -     %      -    %       -    %       -   %       .10%

Allowance for loan losses to
 net mortgage loans at December 31:                              .50%         .59%         .63%         .62%          .58%

Allowance for loan losses to mortgage
 loans delinquent 90 days or more at December 31:              12.87x       43.86%       37.50%        5.27x         4.40x

</TABLE>


<TABLE>
Activity  in the  allowance  for loan  losses  for the other loan  portfolio  is
summarized as follows, for the years ended December 31:
<CAPTION>

Other Loan Portfolio Loss Allowance:                            1998         1997         1996         1995          1994 
-----------------------------------                             ----         ----         ----         ----          -----
                                                                                   (Dollars in Thousands)
<S>                                                            <C>         <C>          <C>          <C>           <C>   
Balance at beginning of period                                 $  139      $  151       $  122       $  109        $  136
Provision for loan losses                                          51          48           40           36             8
Loans charged off                                                 (25)        (72)         (33)         (43)          (40)
Recoveries of loans previously charged off                         18          12           22           20             5
                                                               ------      ------       ------       ------        ------
  Balance at end of period                                     $  183      $  139       $  151       $  122        $  109
                                                               ======      ======       ======       ======        ======

Ratios:

Net charge-offs to average other loans                            .03%        .21%         .04%         .08%          .13%

Allowance for loan losses to
 net other loans at December 31:                                  .80%        .48%         .54%         .42%          .40%

Allowance for loan losses to other
 loans delinquent 90 days or more at December 31:               61.00x      77.22%       43.14%       58.94%        28.24%

</TABLE>



<PAGE>  31


                                    DEPOSITS

<TABLE>

Deposit balances are summarized as follows at December 31:
<CAPTION>

                                    1998                        1997                            1996
                                    ----                        ----                            ----

                            Stated                     Stated                         Stated
                             rate        Amount         rate           Amount          rate             Amount
                             ----        ------         ----           ------          ----             ------

                                                        (Dollars in Thousands) 

<S>                      <C>         <C>            <C>            <C>                <C>            <C>
Balance by interest rate:
   Demand                    -  %    $   47,152         -  %       $    33,662            - %        $    1,940
   NOW                      1.24         37,005        2.47             35,401           2.47            36,256
   Money market             2.32         62,747        2.96             77,477           2.96            89,081
   Passbook/statement       2.22        522,671        2.71            546,447           2.71           582,808
   Lease  security          2.22         21,031        2.71             18,683           2.71            17,143

   Certificates:         4.07- 5.00     200,635     4.67- 5.00          44,646        4.14- 5.00        174,155
                         5.01- 6.00     213,121     5.01- 6.00         343,864        5.01- 6.00        187,890
                         6.01- 6.82      19,804     6.01- 6.82          21,023        6.01- 6.82         25,120
                                     ----------                     ----------                       ----------
                                        433,560                        409,533                          387,165
                                     ----------                     ----------                       ----------
Total deposits                       $1,124,166                     $1,121,203                       $1,144,393
                                     ==========                     ==========                       ==========

Time certificates in
 excess of $100,000                  $   48,517                     $   41,551                       $   32,676
                                     ==========                     ==========                       ==========

</TABLE>


<TABLE>
The following  table sets forth the maturity of certificate  accounts in amounts
 of $100,000 or more at December 31:
<CAPTION>

                                                       1998
                                                       ----
                                                  (In Thousands)

     <S>                                              <C>    
     Three months or less                             $20,893
     Over three months through six months              11,384
     Over six months through twelve months             10,347
     Over twelve months                                 5,893
                                                      -------
                                                      $48,517
                                                      =======
</TABLE>


<PAGE>  32

<TABLE>

The following  table sets forth certain of the Bank's average  interest  bearing
deposit  categories and the related  average  interest rates for the years ended
December 31:
<CAPTION>

                                       1998                          1997                      1996
                                       ----                          ----                      ----
                                                             (Dollars in Thousands)

                               Amount       Rate              Amount      Rate           Amount       Rate
                               ------       ----              ------      ----           ------       ----

<S>                        <C>              <C>           <C>             <C>          <C>            <C>  
Passbook/statement         $  536,617       2.45%         $  561,975      2.70%        $  598,929     2.72%
Lease security                 19,661       2.42              18,075      2.72             16,662     2.73%
Certificates                  421,359       5.21             397,832      5.22            383,215     5.16
Money Market                   75,475       2.77              83,731      3.04             91,597     3.08
NOW                            34,918       2.10              35,934      2.45             36,338     2.47
                           ----------                     ----------                   ----------
                           $1,088,030       3.52%         $1,097,547      3.63%        $1,126,741     3.57%
                           ==========                     ==========                   ==========
</TABLE>

The FDIC, an agency of the U.S. Government,  insures each depositor's savings up
to $100,000 through the BIF.


<TABLE>

Financial Highlights
<CAPTION>

For the Years Ended December 31:                              1998          1997        1996
-------------------------------                               ----          ----        ----
<S>                                                           <C>          <C>          <C>  
Return on average assets                                       2.84%        2.42%        1.74%
Return on average equity                                      11.86        10.64         8.05
Dividend payout ratio(1)                                      35.32        37.23        47.24
Average equity to average assets                              23.97        22.72        21.65
Equity to total assets                                        23.59        23.94        22.12
Interest rate spread                                           4.08         3.88         3.90
Net interest margin                                            4.97         4.73         4.68
Non-interest expense to
 average assets                                                1.76         1.79         1.80
Non-performing loans to total loans(2)                          .04         1.32         1.64
Non-performing assets to total assets(2)                        .04          .90          .98
Efficiency ratio(3)                                           35.10        38.27        40.40
Ratio of net interest income to
 non-interest expense                                          2.63x        2.47x        2.44x
Average interest earning assets to
 average interest bearing liabilities                          1.33x        1.31x        1.28x

<FN>

(1) Dividend payout ratio is calculated by dividing dividends declared per share
by net income per share.

(2) See also "Asset  Composition  and Strategy",  included on page 9 in the 1998
Annual Report to Stockholders.

(3) Efficiency ratio is calculated by dividing non-interest expense, excluding
ORE expense/(income), by net interest income plus loan fees and service charges.
</FN>
</TABLE>

<PAGE>  33




                                   BORROWINGS

On December 8, 1998, the Bank borrowed $50.0 million from the FHLB-NY at a fixed
rate of 5.62% for ten years.  Interest  expense on FHLB-NY advances for the year
ended  December 31, 1998 was $185,000.  Prior to 1998, the Bank had not borrowed
funds for its direct  activities  since 1984.  Pursuant to a blanket  collateral
agreement  with the FHLB-NY,  advances are secured by qualifying  mortgage loans
owned  by the  Bank  in an  amount  at  least  equal  to  110%  of the  advances
outstanding.

ITEM 2.  PROPERTIES
         ----------
The Bank  conducts its  business  through 13  full-service  branch  offices,  10
located in the borough of Queens,  one in the borough of Manhattan  and one each
in Nassau and Suffolk  counties.  The Company  believes that the Bank's  current
facilities are adequate to meet the present and immediately foreseeable needs of
the Bank and the  Company.  (See  Notes 9 and 19 to the  Consolidated  Financial
Statements, included on pages 32 and 36, respectively, in the 1998 Annual Report
to Stockholders.)

ITEM 3.  LEGAL PROCEEDINGS
         -----------------
The Bank is a defendant in several lawsuits arising out of the normal conduct of
business.  In the opinion of management,  after consultation with legal counsel,
the ultimate outcome of these matters is not expected to have a material adverse
effect on the results of  operations,  business  operations or the  consolidated
financial condition of the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------
None.



<PAGE>  34


ADDITIONAL ITEM.  EXECUTIVE OFFICERS
                  ------------------
<TABLE>
The  following  table  sets  forth  certain  information  with  respect  to each
executive officer of the Company who is not also a director of the Company.  The
Board of Directors appoints or reaffirms the appointment of all of the Company's
Executive  Officers each May. The term of each Executive  Officer of the Company
is  generally  one  year,  or  until  a  respective  successor  is  elected  (or
appointed).
<CAPTION>

                                Age at                  Position held
Name                       December 31, 1998           with the Company   
----                       -----------------           ----------------   
<S>                              <C>                   <C>                     
John F. Bennett                  64                    Senior Vice President
Jack Connors                     49                    Senior Vice President
John Conroy                      52                    Senior Vice President
Bernice Glaz                     57                    Senior Vice President
Lawrence J. Kane                 45                    Executive Vice President
Thomas R. Lehmann                48                    Executive Vice President - Chief Financial Officer
Joseph J. Hennessy               56                    Asst. Treasurer/Comptroller
</TABLE>

<TABLE>
The  following  table  sets  forth  certain  information  with  respect  to each
executive officer of the Bank who is not a director of the Bank.
<CAPTION>

                                Age at                  Position held
Name                       December 31, 1998            with the Bank     
----                       -----------------            -------------     
<S>                              <C>                    <C>                     
John F. Bennett                  64                     Senior Vice President
Jack Connors                     49                     Senior Vice President
John Conroy                      52                     Senior Vice President
Bernice Glaz                     57                     Senior Vice President
Lawrence J. Kane                 45                     Executive Vice President
Thomas R. Lehmann                48                     Executive Vice President - Chief Financial Officer and
                                                        Treasurer/Comptroller
</TABLE>






<PAGE>  35


                                     PART II

ITEM 5.  MARKET FOR JSB FINANCIAL INC.'S COMMON EQUITY AND RELATED
           STOCKHOLDERS' MATTERS
         ---------------------------------------------------------

JSB Financial,  Inc. common stock is traded on the New York Stock Exchange under
the symbol "JSB". Prior to August 7, 1997, the Company's common stock was traded
on the Nasdaq National Market under the symbol "JSBF".

Information  regarding JSB  Financial,  Inc.  common stock and its price for the
1998 calendar year appears on page 7 of the 1998 Annual Report to  Stockholders,
portions  of which  are filed  herewith  as  Exhibit  13.01,  under the  caption
"Quarterly Results" and is incorporated herein by reference.

As  of  February  18,  1999,  JSB  Financial,   Inc.  had  approximately   2,044
shareholders of record,  not including the number of persons or entities holding
stock in nominee or street name through various brokers and banks.

During 1998, the Company  declared four cash dividends  totaling $1.60 per share
on its common stock.  Although the Company cannot guarantee  dividend  payments,
management  expects to continue to pay cash  dividends,  provided  that dividend
payments  are in  the  best  interest  of the  Company's  stockholders.  Certain
restrictions  exist  regarding  the amount of  dividends  that the  Company  may
declare and pay. (See Note 18 to the Consolidated Financial Statements, included
on page 36 in the 1998  Annual  Report  to  Stockholders.)  Dividends  were paid
during calendar 1998 to stockholders as follows:
<TABLE>

     Declaration Date               Record Date               Payment Date              Dividend Per Share
     -----------------------------------------------------------------------------------------------------
<CAPTION>
     <S>                            <C>                       <C>                           <C> 
     January 6, 1998                February 4, 1998          February 18, 1998             $.40
     April 14, 1998                 May 6, 1998               May 20, 1998                  $.40
     July 20, 1998                  August 5, 1998            August 19, 1998               $.40
     October 13, 1998               November 4, 1998          November 18, 1998             $.40
</TABLE>

ITEM 6.  SELECTED FINANCIAL DATA
         -----------------------
Selected financial data appears on pages 5 and 6, under the captions  "Financial
Highlights" and "Selected Financial Data",  respectively,  of the Company's 1998
Annual Report to Stockholders, and is incorporated herein by reference.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
          AND RESULTS OF OPERATIONS
         -----------------------------------------------------------
See pages 8 through 21, of the  Company's  1998 Annual  Report to  Stockholders,
portions of which are filed herewith as Exhibit 13.01.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
          ----------------------------------------------------------
Information regarding quantitative and qualitative disclosures about market risk
appears  on  pages  11  through  13 of  the  Company's  1998  Annual  Report  to
Stockholders,  under the caption  "Interest  Rate  Sensitivity  Analysis" and is
incorporated herein by reference.



<PAGE>  36


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         -------------------------------------------
See pages 22 through 44, of the Company's  1998 Annual  Report to  Stockholders,
portions of which are filed herewith as Exhibit 13.01.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 
           AND FINANCIAL DISCLOSURES
         ------------------------------------------------------------
None.



<PAGE>  37


                                    PART III

Certain information required by Part III is omitted from this Report in that the
Registrant  has filed a definitive  proxy  statement  pursuant to Regulation 14A
(the  "Proxy   Statement"),   and  certain   information   included  therein  is
incorporated  herein by reference.  Only those  sections of the Proxy  Statement
which  specifically  address  the items set forth  herein  are  incorporated  by
reference.  Such  incorporation  does not include the Report of the Compensation
Committee or the Stock  Performance  Graph and information  pertaining  thereto,
included in the Proxy Statement.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
          -----------------------------------------------

Information  presented under the caption  "Information  With Respect to Nominees
and Continuing  Directors" on pages 4 and 5 in the Company's Proxy Statement for
its Annual Meeting of  Stockholders  to be held on May 11, 1999, is incorporated
herein by  reference.  Information  concerning  Executive  Officers  who are not
Directors of the Company is contained  herein on page 34, as an Additional  Item
in Part I, under the caption  Executive  Officers,  pursuant to paragraph (b) of
Item 401 of Regulation S-K in reliance on Instruction G.

ITEM 11.  EXECUTIVE COMPENSATION
          ----------------------
Information included under the captions "Directors' Compensation" and "Executive
Compensation"  on pages 8 through 11 (excluding  the Report of the  Compensation
Committee on pages 9 and 10) in the  Company's  Proxy  Statement  for its Annual
Meeting of Stockholders  to be held on May 11, 1999, is  incorporated  herein by
reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          --------------------------------------------------------------
Information   included  under  the  captions  "Security   Ownership  of  Certain
Beneficial  Owners" and "Stock  Ownership of Management" on pages 3 and 7 in the
Company's  Proxy  Statement for its Annual Meeting of Stockholders to be held on
May 11, 1999, is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------
Information  included  under  the  captions   "Indebtedness  of  Management  and
Transactions  with Certain  Related  Persons" on page 17 in the Company's  Proxy
Statement for its Annual Meeting of  Stockholders to be held on May 11, 1999, is
incorporated herein by reference.



<PAGE>  38


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
          ---------------------------------------------------------------
(a) 1.  Financial Statements

        The  following  Consolidated  Financial  Statements  of the  Company its
subsidiary,  Jamaica  Savings Bank FSB,  and the  independent  auditors'  report
thereon, which are included on pages 22 through 44, of the Company's 1998 Annual
Report to Stockholders, are filed herewith.

        -  Consolidated  Statements of Financial  Condition at December 31, 1998
            and 1997
        -  Consolidated  Statements of Operations  for each of the years in the
            three year period ended December 31, 1998
        -  Consolidated  Statements of Changes in Stockholders' Equity for each
            of the years in the three year period ended December 31, 1998
        -  Consolidated  Statements  of Cash  Flows for each of the years in the
            three year period ended December 31, 1998
        -  Notes to the Consolidated Financial Statements
        -  Independent Auditors' Report

     The  remaining   information   appearing  in  the  1998  Annual  Report  to
Stockholders  is not  deemed  to be  filed  as part of this  report,  except  as
expressly provided herein.

      2. Financial Statement Schedules

        Financial  Statement  Schedules  have been omitted  because they are not
applicable or the required  information is shown in the  Consolidated  Financial
Statements or Notes thereto.

(b) Reports on Form 8-K filed during the last quarter of 1998:  None

(c) Exhibits Required by Securities and Exchange Commission Regulation S-K:

<TABLE>
Exhibit No.  Description
-----------  -----------
<CAPTION>
 <S>         <C>                                                                              <C>
  3.01       Articles of Incorporation                                                        (1)
  3.02       Bylaws (Amended and Restated)                                                    (2)
  4.01       Stock Certificate of JSB Financial, Inc.                                         (1)

             Employment Agreement between the Company and:
 10.01       Park T. Adikes                                                                   (3)
 10.02       Edward P. Henson                                                                 (3)
 10.05       Joanne Corrigan                                                                  (3)

 10.06       Supplemental  Employment  Agreement  entered into on July 9, 1996
              between the Company and:
             Park T. Adikes                                                                   (4)
             Edward P. Henson                                                                 (4)
             Joanne Corrigan                                                                  (4)


<FN>
                                                                                       Continued
</FN>
</TABLE>



<PAGE>  39

<TABLE>
Exhibit No.  Description
-----------  -----------
<CAPTION>
 <S>           <C>                                                                            <C> 
               Employment Agreement between the Bank and:
 10.07         Park T. Adikes                                                                 (3)
 10.08         Edward P. Henson                                                               (3)
 10.10         Joanne Corrigan                                                                (3)
 10.11         John F. Bennett                                                                (3)
 10.12         Jack Connors                                                                   (5)
 10.13         John J. Conroy                                                                 (5)
 10.14         Bernice Glaz                                                                   (5)
 10.15         Thomas R. Lehmann                                                              (5)
 10.16         Lawrence J. Kane                                                               (2)


 10.18         Supplemental Employment Agreement entered into on July 9, 1996
                between the Bank and:
               Park T. Adikes                                                                 (4)
               Edward P. Henson                                                               (4)
               Joanne Corrigan                                                                (4)
               John F. Bennett                                                                (4)
               Jack Connors                                                                   (4)
               John J. Conroy                                                                 (4)
               Bernice Glaz                                                                   (4)
               Thomas R. Lehmann                                                              (4)
               Lawrence J. Kane                                                               (4)


               Special Termination  Agreements between the Bank, guaranteed
                by the Company and:
 10.19         Teresa DiRe-Covello                                                            (3)
 10.20         Joseph J. Hennessy                                                             (3)
 10.21         Philip Pepe                                                                    (6)

 10.22         Supplemental  Special Termination  Agreements entered into on
                July 9, 1996 between the Bank and:
               Teresa DiRe-Covello                                                            (4)
               Joseph J. Hennessy                                                             (4)
               Philip Pepe                                                                    (4)


<FN>
                                                                                       Continued
</FN>
</TABLE>



<PAGE>  40

<TABLE>
Exhibit No.    Description
-----------    -----------
<CAPTION>
 <S>           <C>                                                                           <C>
 10.23         Jamaica Savings Bank FSB Benefit Restoration Plan
                    (Amended and Restated)                                                    (7)
 10.24         JSB Financial, Inc. 1990 Incentive Stock Option Plan
                    (Amended and Restated)                                                    (8)
 10.25         JSB Financial, Inc. 1990 Stock Option Plan
                    For Outside Directors (Amended and Restated)                              (8)
 10.26         Jamaica Savings Bank FSB Employee Severance
                    Compensation Plan                                                         (1)
 10.27         Jamaica Savings Bank FSB Outside Directors' Consultation
                    and Retirement Plan                                                       (9)
 10.28         Incentive Savings Plan of Jamaica Savings Bank FSB                             (9)
 10.29         The JSB Financial, Inc. 1996 Stock Option Plan                                (10)
 11.01         Statement regarding computation of per share earnings, filed herewith          
 13.01         Portions of the 1998 Annual Report to Stockholders, filed herewith
 23.01         Consent of KPMG LLP, filed herewith
 27.00         Financial Data Schedule for the Period Ended December 31, 1998,
                    filed herewith
 99.01         Form 11-K for calendar year 1998 for the Incentive Savings Plan of
                    Jamaica Savings Bank FSB                                                 (11)


<FN>

(1)  Incorporated herein by reference to Exhibits filed with the Registration Statement on Form S-1, Registration No. 33-33821.
(2)  Incorporated herein by reference to Exhibits filed with the Form 10-K for the year ended December 31, 1997.
(3)  Incorporated herein by reference to Exhibits filed with the Form 10-K for the Year Ended December 31, 1990.
(4)  Incorporated herein by reference to Exhibits filed with the Form 10-K for the Year Ended December 31, 1996.
(5)  Incorporated herein by reference to Exhibits filed with the Form 10-Q for the Quarter Ended June 30, 1995.
(6)  Incorporated herein by reference to Exhibits filed with the Form 10-K for the year ended December 31, 1993.
(7)  Incorporated herein by reference to Exhibits filed with the Form 10-K for the Year Ended December 31, 1994.
(8)  Incorporated herein by reference to Exhibits filed with the Form 10-K for the Year Ended December 31, 1992.
(9)  Incorporated herein by reference to Exhibits filed with the Pre-Effective Amendment No.1 to Form S-1,
         Registration No. 33-33821, filed on April 2, 1990.
(10) Incorporated herein by reference to Appendix A (pages 21 through 33) of the Proxy Statement, dated March 29, 1996.
(11) To be filed.
</FN>
</TABLE>


<PAGE>  41


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

    JSB Financial, Inc.    
    -------------------    
       (Registrant)



/s/  Park T. Adikes                     3/26/99
------------------------------          -------
     Park T. Adikes
     Chairman of the Board and
     Chief Executive Officer


<TABLE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated:
<CAPTION>

<S>                            <C>             <C>                                <C>
/s/  Park T. Adikes            3/26/99         /s/ Thomas R. Lehmann              3/26/99
-----------------------------  -------         ---------------------------------  -------
     Park T. Adikes                                Thomas R. Lehmann
     Chief Executive Officer                       Chief Financial Officer
     Chairman of the Board                         (Principal Accounting Officer)  
     (Director)





/s/  Joseph C. Cantwell        3/26/99         /s/  Cynthia Gibbons               3/26/99
-----------------------------  -------         ---------------------------------  -------
     Joseph C. Cantwell                             Cynthia Gibbons
     Director                                       Director



/s/  James E. Gibbons, Jr.     3/26/99         /s/  Edward P. Henson              3/26/99
-----------------------------  -------         ---------------------------------  -------
     James E. Gibbons, Jr.                          Edward P. Henson
     Director                                       President and Director



/s/  Richard W. Meyer          3/26/99
-----------------------------  -------
     Richard W. Meyer
     Director

</TABLE>