STOCK OPTION AGREEMENT

      THIS STOCK OPTION AGREEMENT ("Agreement") dated as of January 27, 1998, is
by and between Interchange Financial Services Corporation, a New Jersey
corporation and registered bank holding company ("Interchange"), and The Jersey
Bank For Savings, a savings bank organized under the laws of New Jersey
("Jersey").

                                   BACKGROUND

1.  Interchange,  Interchange  State Bank ("Bank"),  and Jersey,  as of the date
hereof,  have  executed a definitive  agreement  and plan of merger (the "Merger
Agreement")  pursuant to which  Interchange will acquire Jersey through a merger
of Jersey with and into Bank (the "Merger").

2. As an inducement  to  Interchange  to enter into the Merger  Agreement and in
consideration  for such entry,  Jersey desires to grant to Interchange an option
to  purchase  authorized  but  unissued  shares of common  stock of Jersey in an
amount and on the terms and conditions hereinafter set forth.

                                    AGREEMENT

      In consideration of the foregoing and the mutual covenants and agreements
set forth herein and in the Merger Agreement, Interchange and Jersey, intending
to be legally bound hereby, agree:

1. Grant of Option. Subject to the terms and conditions set forth herein, Jersey
hereby grants to  Interchange  the option to purchase  126,950  shares of common
stock,  $5.00 par value (the "Common  Stock") of Jersey at a price of $18.75 per
share (the "Option  Price"),  on the terms and  conditions set forth herein (the
"Option"),  but in no event shall the number of shares of Common Stock for which
this Option is exercisable  exceed 19.9% of the issued and outstanding shares of
Common  Stock of Jersey after giving  effect to the  conversion  (whether or not
such  conversion has actually  occurred) of the  convertible  preferred stock of
Jersey  into  Common  Stock.  The  Common  Stock  subject  to the  Option  shall
hereinafter be referred to as the "Option Shares".

2. Exercise of Option. This Option shall not be exercisable until the occurrence
of a Triggering Event (as such term is hereinafter  defined).  Upon or after the
occurrence  of a  Triggering  Event  (as  such  term  is  hereinafter  defined),
Interchange  may exercise the Option,  in whole or in part,  at any time or from
time to time.

      The term "Triggering Event" means the occurrence of any of the following
events:

      A person or group (as such terms are defined in the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder) other than Interchange, Jersey or an affiliate of Interchange:

      a. acquires beneficial ownership (as such term is defined in Rule 13d-3 as
promulgated under the Exchange Act) of at least 15% of the then outstanding
shares of Common Stock;

      b. without the prior written consent of Interchange, enters into a letter
of intent or an agreement, whether oral or written, with Jersey pursuant to
which such person or any affiliate of such person would (i) merge or
consolidate, or enter into any similar transaction with Jersey, (ii) acquire all
or a significant

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portion of the assets or liabilities of Jersey, or (iii) acquire beneficial
ownership of securities representing, or the right to acquire beneficial
ownership or to vote securities representing 15% or more of the then outstanding
shares of Common Stock;

      c. without the prior written consent of Interchange, makes a filing with
any bank regulatory authorities or publicly announces a bona fide proposal (a
"Proposal") for (i) any merger, consolidation or acquisition of all or a
significant portion of all the assets or liabilities of Jersey or any other
business combination involving Jersey, or (ii) a transaction involving the
transfer of beneficial ownership of securities representing, or the right to
acquire beneficial ownership or to vote securities representing, 15% or more of
the outstanding shares of Common Stock, and thereafter, if such Proposal has not
been Publicly Withdrawn (as such term is hereinafter defined) at least 15 days
prior to the meeting of stockholders of Jersey called to vote on the Merger and
Jersey's stockholders fail to approve the Merger by the vote required by
applicable law at the meeting of stockholders called for such purpose;

      d. makes a bona fide Proposal and thereafter, but before such Proposal has
been Publicly  Withdrawn,  Jersey willfully takes any action in any manner which
would  materially  interfere  with its  ability  to  consummate  the  Merger  or
materially reduce the value of the transaction to Interchange; or

      e.  which is the  holder of more  than 10% of the  Common  Stock  solicits
proxies in opposition to approval of the Merger.

      The term "Triggering Event" also means the taking of any direct or
indirect action by Jersey or any of its directors, officers or agents to invite,
encourage or solicit any proposal which has as its purpose a tender offer for
shares of Common Stock, a merger, consolidation, plan of exchange, plan of
acquisition or reorganization of Jersey, or a sale of shares of Common Stock or
any significant portion of its assets or liabilities comparable to those set
forth in (a)-(e) above. If more than one of the transactions giving rise to a
Triggering Event under this Section is undertaken or effected, then all such
transactions shall give rise only to one Triggering Event.

      The term "significant portion" means 20% of the assets or liabilities of
Jersey.

      "Publicly Withdrawn", for purposes of clauses (c) and (d) above, shall
mean an unconditional bona fide withdrawal of the Proposal coupled with a public
announcement of no further interest in pursuing such Proposal or in acquiring
any controlling influence over Jersey or in soliciting or inducing any other
person (other than Interchange or any affiliate) to do so.

      Notwithstanding the foregoing, the Option may not be exercised at any time
(i) in the absence of any required governmental or regulatory approval or
consent necessary for Jersey to issue the Option Shares or Interchange to
exercise the Option or prior to the expiration or termination of any waiting
period required by law, or (ii) so long as any injunction or other order, decree
or ruling issued by any federal or state court of competent jurisdiction is in
effect which prohibits the sale or delivery of the Option Shares.

      Jersey shall notify Interchange promptly in writing of the occurrence of
any Triggering Event known to it, it being understood that the giving of such
notice by Jersey shall not be a condition to the right of Interchange to
exercise the Option. Jersey will not take any action which would have the effect
of preventing or disabling Jersey from delivering the Option Shares to
Interchange upon exercise of the Option or otherwise performing its obligations
under this Agreement.

      In the event Interchange wishes to exercise the Option, Interchange shall
send a written notice to Jersey (the date of which is hereinafter referred to as
the "Notice Date") specifying the total number

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of Option Shares it wishes to purchase and a place and date for the closing of
such a purchase (a "Closing"); provided, however, that a Closing shall not occur
prior to two days after the later of receipt of any necessary regulatory
approvals and the expiration of any legally required notice or waiting period,
if any.

3. Payment and Delivery of Certificates. At any Closing hereunder (a)
Interchange will make payment to Jersey of the aggregate price for the Option
Shares so purchased by wire transfer of immediately available funds to an
account designated by Jersey, (b) Jersey will deliver to Interchange a stock
certificate or certificates representing the number of Option Shares so
purchased, free and clear of all liens, claims, charges and encumbrances of any
kind or nature whatsoever created by or through Jersey, registered in the name
of Interchange or its designee, in such denominations as were specified by
Interchange in its notice of exercise and, if necessary, bearing a legend as set
forth below and (c) Interchange shall pay any transfer or other taxes required
by reason of the issuance of the Option Shares so purchased.

      If required under applicable federal securities laws, a legend will be
placed on each stock certificate evidencing Option Shares issued pursuant to
this Agreement, which legend will read substantially as follows:

      The shares of stock evidenced by this certificate have not been registered
for sale under the Securities Act of 1933 (the "1933 Act"). These shares may not
be sold, transferred or otherwise disposed of unless a registration statement
with respect to the sale of such shares has been filed under the 1933 Act and
declared effective or, in the opinion of counsel reasonably acceptable to
Jersey, said transfer would be exempt from registration under the provisions of
the 1933 Act and the regulations promulgated thereunder.

No such legend shall be required if a registration statement is filed and
declared effective under Section 4 hereof.

4. Registration Rights. Upon or after the occurrence of a Triggering Event and
upon receipt of a written request from Interchange, Jersey shall, if necessary
for the resale of the Option or the Option Shares by Interchange, prepare and
file a registration statement with the Securities and Exchange Commission
("SEC"), the Federal Deposit Insurance Corporation ("FDIC") and any state
securities bureau, covering the Option and such number of Option Shares as
Interchange shall specify in its request, and Jersey shall use its best efforts
to cause such registration statement to be declared effective in order to permit
the sale or other disposition of the Option and the Option Shares, provided that
Interchange shall in no event have the right to have more than one such
registration statement become effective; for the purposes of the foregoing it
shall not be necessary for the resale of the Option or the Option Shares by
Interchange to register (i) with the SEC unless Jersey is required to file
reports with the SEC under the 1934 Act; (ii) with the FDIC, unless the FDIC
requires such registration and no exemption is available; or (iii) with any
state securities bureau, unless the law of such state requires such registration
and no exemption is available.

      In connection with such filing, Jersey shall use its best efforts to cause
to be delivered to Interchange such certificates, opinions, accountant's letters
and other documents as Interchange shall reasonably request and as are
customarily provided in connection with registrations of securities under the
Securities Act of 1933, as amended. All expenses incurred by Jersey in complying
with the provisions of this Section 4, including without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for Jersey and blue sky fees and expenses shall be paid by Jersey.
Underwriting discounts and commissions to brokers and dealers relating to the
Option Shares, fees and disbursements of counsel to Interchange and any other
expenses incurred by Interchange in connection with such registration shall be
borne by Interchange. In connection with such filing, Jersey shall indemnify and
hold harmless Interchange against any losses, claims, damages or liabilities,
joint or several, to which Interchange may

<PAGE>

become subject, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any preliminary or
final registration statement or any amendment or supplement thereto, or arise
out of a material fact required to be stated therein or necessary to make the
statements therein not misleading; and Jersey will reimburse Interchange for any
reasonable legal or other expense reasonably incurred by Interchange in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that Jersey will not be liable in any
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such preliminary or final registration statement or
such amendment or supplement thereto in reliance upon and in conformity with
written information furnished by or on behalf of Interchange specifically for
use in the preparation thereof. Interchange will indemnify and hold harmless
Jersey to the same extent as set forth in the immediately preceding sentence but
only with reference to written information specifically furnished by or on
behalf of Interchange for use in the preparation of such preliminary or final
registration statement or such amendment or supplement thereto; and Interchange
will reimburse Jersey for any legal or other expense reasonably incurred by
Jersey in connection with investigating or defending any such loss, claim,
damage, liability or action.

5. Required Repurchase of Shares. Upon or after the occurrence of a Triggering
Event described in Section 2(b) of this Agreement, then in lieu of a written
request from Interchange under Section 4 hereof, Interchange may request in
writing that Jersey repurchase the Option Shares. Promptly upon receipt of such
request Jersey shall repurchase the Option Shares from Interchange at the price
per Option Share equal to the highest of the following: (i) the highest price
paid for any share of Common Stock in a Triggering Event, (ii) the highest price
per share proposed to be paid for or realized by the shareholders in any
Triggering Event, including any Proposal, (iii) the highest price to be paid for
Jersey in any Proposal divided by the number of shares of Common Stock of Jersey
outstanding at the time the Proposal is made (but not including the Option
Shares), or (iv) the average of the highest bid price per share quoted by a
market maker of Common Stock (after selecting from among the market makers the
highest price per share for the Common Stock quoted for that day) during the
first ten days immediately following the Triggering Event.

6. Adjustment Upon Changes in Capitalization. In the event of any change in the
Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, conversions, exchanges of shares or the like,
then the number and kind of Option Shares and the Option Price shall be
appropriately adjusted.

      In the event any capital reorganization or reclassification of the Common
Stock, or any consolidation, merger or similar transaction of Jersey with
another entity, or in the event any sale of all or substantially all of the
assets of Jersey shall be effected in such a way that the holders of Common
Stock shall be entitled to receive stock, securities or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
(in form reasonably satisfactory to the holder hereof) shall be made whereby the
holder hereof shall thereafter have the right to purchase and receive upon the
basis and upon the terms and conditions specified herein and in lieu of the
Common Stock immediately theretofore purchasable and receivable upon exercise of
the rights represented by this Option, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for the number
of shares of Common Stock immediately theretofore purchasable and receivable
upon exercise of the rights represented by this Option had such reorganization,
reclassification, consolidation, merger or sale not taken place; provided,
however, that if such transaction results in the holders of Common Stock
receiving only cash, the holder hereof shall be paid the difference between the
Option Price and such cash consideration without the need to exercise the
Option.

<PAGE>

7. Filings and Consents. Each of Interchange and Jersey will use its best
efforts to make all filings with, and to obtain consents of, all third parties
and governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement.

      Exercise of the Option herein provided shall be subject to compliance with
all applicable laws including, in the event Interchange is the holder hereof,
approval of the Board of Governors of the Federal Reserve System and Jersey
agrees to cooperate with and furnish to the holder hereof such information and
documents as may be reasonably required to secure such approvals.

8. Representations and Warranties of Jersey. Jersey hereby represents and
warrants to Interchange as follows:

a. Due Authorization. Jersey has full corporate power and authority to execute,
deliver and perform this Agreement and all corporate action necessary for
execution, delivery and performance of this Agreement has been duly taken by
Jersey.

b. Authorized Shares. Jersey has taken and, as long as the Option is
outstanding, will take all necessary corporate action to authorize and reserve
for issuance all shares of Common Stock that may be issued pursuant to any
exercise of the Option.

c. No Conflicts. Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby (assuming all appropriate
regulatory approvals) will violate or result in any violation or default of or
be in conflict with or constitute a default under any term of the certificate of
incorporation or by-laws of Jersey or any material agreement, instrument,
judgment, decree, statute, rule or order applicable to Jersey.

9. Representations and Warranties of Interchange. Interchange hereby represents
and warrants to Jersey as follows:

a. Due Authorization. Interchange has full corporate power and authority to
execute, deliver and perform this Agreement and all corporate action necessary
for execution, delivery and performance of this Agreement has been duly taken by
Interchange.

b. No Conflicts. Neither the execution and delivery of this Agreement nor
consummation of the transactions contemplated hereby (assuming all appropriate
regulatory approvals) will violate or result in any violation or default of or
be in conflict with or constitute a default under any term of the certificate of
incorporation or by-laws of Interchange or a material default under any term of
any agreement, instrument, judgment, decree, statute, rule or order applicable
to Interchange.

10. Specific Performance. The parties hereto acknowledge that damages would be
an inadequate remedy for a breach of this Agreement and that the obligations of
the parties hereto shall be specifically enforceable. Notwithstanding the
foregoing, Interchange shall have the right to seek money damages against Jersey
for a breach of this Agreement, except that any damage award shall be subject to
the provisions of Section 7.3(d) of the Merger Agreement.

11. Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and supersedes all other
prior agreements and understandings, both written and oral, among the parties or
any of them with respect to the subject matter hereof.

<PAGE>

12. Assignment or Transfer. Interchange may not sell, assign or otherwise
transfer its rights and obligations hereunder, in whole or in part, to any
person or group of persons other than to an affiliate of Interchange, except
upon or after the occurrence of a Triggering Event. Interchange represents that
it is acquiring the Option for Interchange's own account and not with a view to
or for sale in connection with any distribution of the Option or the Option
Shares. Interchange shall have the right to assign this Agreement to any party
it selects after the occurrence of a Triggering Event.

13. Amendment of Agreement. By mutual consent of the parties hereto, this
Agreement may be amended in writing at any time, for the purpose of facilitating
performance hereunder or to comply with any applicable regulation of any
governmental authority or any applicable order of any court or for any other
purpose.

14. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.

15. Notices. All notices, requests, consents and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given when delivered personally, by express service, cable, telegram or telex,
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties as follows:

                  If to Interchange:

                           Interchange Financial Services Corporation
                           Park 80 West, Plaza Two
                           Saddle Brook, New Jersey 07662
                           Attn.: Anthony S. Abbate, President and CEO

                  With a copy to:

                           Norris, McLaughlin & Marcus, P.A.
                           721 Route 202-206
                           P.O. Box 1018
                           Somerville, New Jersey 08876
                           Attn.: Peter D. Hutcheon, Esq.

                  If to Jersey:

                           The Jersey Bank For Savings
                           208 South Kinderkamack Road
                           Montvale, New Jersey 07645-0333
                           Attn.: Clyde Britt, President and CEO

                  With a copy to:

                           Beattie Padovano
                           50 Chestnut Ridge Road
                           P.O. Box 244
                           Montvale, New Jersey 07645-0244
                           Attn: Adolph A. Romei, Esq.

<PAGE>

                           Sills, Cummis, Zuckerman, Radin, Tischman,
                              Epstein & Gross, P.A.
                           One Riverfront Plaza
                           Newark, New Jersey 07102-5400
                           Attn: Victor H. Boyajian, Esq.

or to such other address as the person to whom notice is to be given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).

16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.

17. Captions. The captions in the Agreement are inserted for convenience and
reference purposes, and shall not limit or otherwise affect any of the terms or
provisions hereof.

18. Waivers and Extensions. The parties hereto may, by mutual consent, extend
the time for performance of any of the obligations or acts of either party
hereto. Each party may waive (i) compliance with any of the covenants of the
other party contained in this Agreement and/or (ii) the other party's
performance of any of its obligations set forth in this Agreement.

19. Parties in Interest. This Agreement shall be binding upon and inure solely
to the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement, except as provided
in Section 10 permitting Interchange to assign its rights and obligations
hereunder.

20. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.



<PAGE>

21. Termination. This Agreement shall terminate and be of no further force or
effect upon the earlier to occur of either the termination of the Merger
Agreement as provided therein or the consummation of the transaction
contemplated by the Merger Agreement; provided, however, that if termination of
the Merger Agreement occurs after the occurrence of a Triggering Event (as
defined in Section 2 hereof), this Agreement shall terminate 18 months following
the date of the termination of the Merger Agreement.

22. Expenses. Except as more particularly provided in Section 4 hereof with
respect to certain expenses in connection with the registration of the Option or
the Option Shares, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.

      IN WITNESS WHEREOF, each of the parties hereto, pursuant to resolutions
adopted by its Board of Directors has caused this Agreement to be executed by
its duly authorized officer all as of the day and year first above written.

                                               THE JERSEY BANK FOR SAVINGS

                                               By: /s/ Clyde Britt
                                                  ------------------------------
                                                    Clyde Britt,
                                                    President & CEO


                                               INTERCHANGE FINANCIAL SERVICES
                                               CORPORATION

                                               By: /s/ Anthony S. Abbate
                                                  ------------------------------
                                                    Anthony S. Abbate,
                                                    President & CEO