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 FISCAL YEAR ENDED DECEMBER 31, 1998

                                       or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM____ TO ____

                         Commission File number 1-10518

                   INTERCHANGE FINANCIAL SERVICES CORPORATION
             (Exact name of registrant as specified in its charter)

         New Jersey                                     22-2553159  
-------------------------------                     -------------------
(State or other jurisdiction of                     (I.R.S. Employer
incorporation  or organization)                     Identification No.)

Park 80 West/Plaza Two, Saddle Brook, NJ                    07663
-----------------------------------------                 ----------  
(Address of principal executive offices)                  (Zip Code)

       Registrant's telephone number, including area code: (201) 703-2265

           Securities registered pursuant to Section 12(b) of the Act:

                                                     Name of each exchange on
Title of Each Class                                     which registered
---------------------------                         -------------------------
Common Stock (no par value)                          American Stock Exchange

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

           Securities registered pursuant to Section 12(g) of the Act:

                                 Title of Class
                                 --------------
                                      None

     Indicate  by  checkmark  whether the  Registrant  (1) has filed all reports
required to be filed by Sections 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  report) 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 contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Park III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     The number of outstanding  shares of the Registrant's  common stock, no par
value per share, as of March 5, 1999, was as follows:

   Class                                      Number of Outstanding Shares
---------------                               -----------------------------
Common Stock
(No par value)                                         7,210,237

The aggregate market value of Registrant's  voting stock (based upon the closing
trade price on March 5, 1999),  held by  non-affiliates  of the  Registrant  was
approximately $95,534,657

Documents incorporated by reference:

Portions of Registrant's  definitive Proxy Statement for the 1999 Annual Meeting
of Stockholders  are incorporated by reference to Part III of this Annual Report
on Form 10-K.

Portions of Registrant's Annual Report to Shareholders for the fiscal year ended
December  31,  1998 are  incorporated  by  reference  to Parts II and IV of this
Annual Report on Form 10-K.


<PAGE>


                   INTERCHANGE FINANCIAL SERVICES CORPORATION
                             INDEX TO ANNUAL REPORT
                                  ON FORM 10-K

PART 1                                                                     PAGE
Item 1.  Business............................................................. 1
Item 2.  Properties........................................................... 7
Item 3.  Legal Proceedings.................................................... 8
Item 4.  Submission of Matters to a Vote of Security Holders.................. 8
Executive Officers ........................................................... 9

PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder
         Matters............................................................. 10
Item 6.  Selected Consolidated Financial Data...............................  11
Item 7.  Management's Discussion and Analysis of Financial 
            Condition and Resultsof Operations...............................   
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.. ......  13
Item 8.  Financial Statements and Supplementary Data........................  13
Item 9.  Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure........................... 13

PART III

Item 10. Directors and Executive Officers of the Registrant.................  13
Item 11. Executive Compensation.............................................  14
Item 12. Security Ownership of Certain Beneficial Owners
            and Management..................................................  14
Item 13. Certain Relationships and Related Transactions.....................  14

PART IV  

Item 14. Exhibits, Financial Statement Schedules
            and Reports on Form 8-K.........................................  15
Signatures................................................................... 16

<PAGE>

                                     PART I

Item 1.  Business

   General

     Interchange  Financial Services  Corporation (the "Company"),  a New Jersey
business  corporation and registered bank holding company under the Bank Holding
Company  Act of 1956,  as  amended,  acquired  all of the  outstanding  stock of
Interchange  Bank,  (formerly  known as  Interchange  State Bank),  a New Jersey
chartered bank (the "Bank" or "Interchange"), in 1986.

     The  Bank,   established  in  1969,  is  a  full-service   commercial  bank
headquartered in Saddle Brook, New Jersey and is a member of the Federal Reserve
System.  It offers banking  services for individuals and businesses  through its
fifteen banking offices and one  supermarket  mini-branch in Bergen County,  New
Jersey.  In 1998,  the Company  acquired  The Jersey  Bank for Savings  ("Jersey
Bank"),  which maintained two banking offices,  one in Montvale,  New Jersey and
another that was opened in the later part of 1996 in River Edge, New Jersey.  In
addition,  during 1998, the Company opened a full-service branch in Paramus, New
Jersey  adjacent  to a shopping  mall along with a  mini-branch  within a 70,000
square foot supermarket located in the shopping mall.

     In  addition  to the Bank,  the  Company  has  other  wholly  owned  direct
subsidiaries. Clover Leaf Mortgage Company, a New Jersey Corporation established
in 1988 which is not currently engaged in any business activity,  and Washington
Interchange  Corporation,  a New Jersey  Corporation  which was  acquired by the
Company in May 1997 and owns one of the Bank's branch  locations which it leases
to the Bank.

     Subsidiaries   of   Interchange   Bank  include   Clover  Leaf   Investment
Corporation,  established  in 1988 to engage in the  business  of an  investment
company  pursuant  to New  Jersey  law;  Clover  Leaf  Insurance  Agency,  Inc.,
established in 1990 to engage in the sales of tax-deferred annuities, and Clover
Leaf  Management  Realty  Corporation  which was originally  established in 1987
under  the name  Clover  Leaf  Development  Corporation.  In 1998,  the name and
purpose  were  changed in order to  establish  a Real  Estate  Investment  Trust
("REIT")  that could  manage  certain  real  estate  assets of the Company in an
effort to take  advantage of certain tax benefits.  All the Bank's  subsidiaries
are New Jersey  corporations and are 100% owned by the Bank, except for the REIT
which is 99% owned by the Bank.

Banking Operations

     The Bank  offers a wide  range of  consumer  banking  services,  including:
checking and savings accounts,  money-market accounts,  certificates of deposit,
individual  retirement  accounts,  residential  mortgages,  home equity lines of
credit and other second  mortgage  loans,  home  improvement  loans,  automobile
loans,  personal  loans and overdraft  protection.  The Bank also offers its own
VISA(TM) credit card and several convenience  products including the Interchange
Check Card which lets you access  your  checking  account by using the card when
you make purchases. It can also be used as an

                                       1
<PAGE>

ATM card to perform all the usual transactions.  Interchange Bank-Line(R) allows
customers to perform  basic  banking  transactions  over the  telephone and also
offers Direct Bill Payment.  Direct Bill Payment  allows  customers to pay bills
over the phone  since bill  payments  are  debited  directly  to the  customer's
checking account.The Bank is also in the mutual fund sales market. An Investment
Services  Program is offered through an alliance  between  Interchange  Bank and
Independent  Bankers  Association  of  America  Financial  Services  Corporation
("IBAA"),  under which  mutual funds  offered by IBAA are made  available to the
Bank's customers by Bank employees.  Fifteen automated teller machines (MAC(TM),
Plus(TM),   HONOR(TM),   CIRRUS(TM),   VISA(TM),  NYCE(TM),  and  MasterCard(TM)
networks)  are located at thirteen  of the banking  offices,  two are located at
supermarkets and one at a mini-market.

     The Bank is  engaged  in the  financing  of local  business  and  industry,
providing  credit  facilities  and  related  services  for  smaller  businesses,
typically  those with $1 million to $5 million in annual sales.  Commercial loan
customers of the Bank are businesses ranging from light  manufacturing and local
wholesale and  distribution  companies to  medium-sized  service firms and local
retail  businesses.  Most forms of  commercial  lending are  offered,  including
working capital lines of credit, small business administration loans, term loans
for  fixed  asset  acquisitions,   commercial   mortgages  and  other  forms  of
asset-based financing.

     The Bank has taken advantage of opportunities to purchase packages of loans
and leases.  In 1998, the Bank purchased $4.6 million of residential real estate
loans,  and in 1997, the Bank  purchased  $10.2 million and $9.1 million of auto
leases and residential real estate loans,  respectively.  These loans and leases
were subjected to the Bank's  independent  credit analysis prior to purchase and
were,  in some cases,  purchased  with a limited  buy-back  obligation  or other
financial  assurance  from the  sellers.  In the  Bank's  experience,  there are
significant  opportunities to sell the Bank's other products and services to the
borrowers whose loans are purchased. The Bank believes that purchasing loans and
leases will  continue  to be a  desirable  way to  increase  its  portfolios  as
opportunities arise.

     Deposits of the Bank are insured up to $100,000  per  depositor by the Bank
Insurance Fund administered by the Federal Deposit Insurance Corporation
("FDIC").

Personnel

     The Company had on average 208 full-time-equivalent  employees during 1998.
Its  principal  executive  office is located at Park 80 West/Plaza  Two,  Saddle
Brook,  New Jersey 07663,  telephone  number (201) 703-2265.  As used herein the
term "Company"  includes the Bank and the  subsidiaries of the Bank,  unless the
context otherwise requires.

Market Areas

     The Bank's principal  market for its deposit  gathering  activities  covers
major  portions  of Bergen  County  in the  northeastern  corner  of New  Jersey
adjacent to New York City.  Bergen County has a relatively  large  affluent base
for the Bank's  services.  The principal  service areas of the Bank  represent a
diversified mix of stable residential neighborhoods

                                       2

<PAGE>

with a wide range of per household income levels;  offices,  service  industries
and light  industrial  facilities;  and large  shopping  malls and small  retail
outlets.

     For many years  Interchange Bank has conducted  periodic market research to
keep  aware of market  trends.  Much of this  research  affirmed  that  consumer
financial needs are directly related to identifiable life stages. In response to
these  distinctive  preferences,  the Bank has designed and marketed  "packaged"
products to appeal to these different segments.

     Since there is a preponderance of the population in the age groups of 35-54
and 55+, Interchange has strategically targeted these two life stage segments by
designing and marketing  "packaged" products (Money Maker Account and Prime Time
Account)  which include  deposit,  credit and other  services sold together as a
product unit. We also recognized the needs of "Generation X" with the Money Plus
Account (25-34) and our youngest with the Grow'N Up Savings(R) Passbook Account.
The Bank was among the first to offer such  packaged  financial  products in its
area and management  believes they have been  successful in attracting  deposits
and building a loyal client base.

Competition

     Competition in the banking and financial services industry in the Company's
market  area  is  intense.   The  Bank  competes   actively  with  national  and
state-chartered  commercial  banks and other financial  institutions,  including
savings and loan  associations,  mutual  savings banks,  and credit  unions.  In
addition,  the Bank faces competition from less heavily regulated  entities such
as brokerage  institutions,  money management firms, consumer finance and credit
card companies and various other types of financial services companies.  Many of
these institutions are larger than the Bank, some are better capitalized,  and a
number pursue community banking strategies similar to those of the Bank.

     Management  believes  that  opportunities  continue to exist to satisfy the
deposit and lending demands of small and middle market businesses.  Larger banks
continued to show an appetite  for only the largest  loans,  finding  themselves
ill-equipped to administer smaller loans profitably.  Interchange has the desire
and the ability to give smaller businesses the service they require and deserve.
Interchange  meets this need  through a unique  program  called  Rapid  Response
Banking. The program provides commercial loans up to $100,000 with a streamlined
approval  process  that  borrows   liberally  from  standard   consumer  lending
practices.  Naturally,  in due  course,  many small  businesses  become  midsize
businesses,  with a corresponding  change in their financial  requirements.  But
they do not outgrow  Interchange because of its ability to be responsive to both
constituencies.  To continue serving companies  throughout the various stages of
their evolution,  Interchange  created  Business Class  Banking--a  program that
grows  with  the  customer.  Business  Class  Banking  supports  a  spectrum  of
business-oriented  financial  products with value-added  services.  By designing
progressive  programs to accommodate  the changing needs of growing  businesses,
Interchange is extending the longevity of valuable customer relationships.

                                       3
<PAGE>

     Interchange  Bank  maintains  a  relational  database.  This is a  powerful
technology, designed expressly for the banking industry and generally associated
with only the largest  and most  forward  thinking  companies.  This  technology
greatly enhances the Bank's internal marketing analysis by providing information
about account relationships, their activity and their relative value to the Bank
in great detail.

     Interchange has maintained an ambitious program of primary research to keep
abreast of customer  attitudes and preferences.  Our sales quotas and incentives
for  employees are linked  directly to bank-wide  goals and are used to motivate
employees to sell the "right" products to the "right" customers.

Regulation and Supervision

     Banking is a complex,  highly-regulated  industry. The primary goals of the
bank  regulatory  scheme are to maintain a safe and sound banking  system and to
facilitate  the conduct of  monetary  policy.  In  furtherance  of those  goals,
Congress has created several largely antonomous  regulatory agencies and enacted
myriad  legislation  that governs bank,  bank holding  companies and the banking
industry.  Descriptions and references to the statutes and regulations below are
brief summaries thereof and do not purport to be complete.

The Company

     The Company is a bank holding company under the Bank Holding Company Act of
1956,  as  amended  (the  "Holding  Company  Act"),  and as such,  is subject to
supervision  and  regulation  by the Board of Governors  of the Federal  Reserve
System (the  "Federal  Reserve  "). As a bank  holding  company,  the Company is
required to file an annual report with the Federal  Reserve and such  additional
information as the Federal  Reserve may require  pursuant to the Holding Company
Act and Federal  Regulation Y. The Federal  Reserve may conduct  examinations of
the Company or any of its subsidiaries.

     The Holding  Company Act requires every bank holding  company to obtain the
prior approval of the Federal Reserve before it may acquire all or substantially
all of the  assets of any bank  (although  the  Federal  Reserve  may not assert
jurisdiction  in certain bank mergers that are  regulated  under the Bank Merger
Act),  or  ownership  or control of any voting  shares of any bank if after such
acquisition it would own or control  directly or indirectly  more than 5% of the
voting shares of such bank.

     The  Holding   Company  Act  also  provides  that,   with  certain  limited
exceptions,  a bank holding company many not (i) engage in any activities  other
than those of banking or  managing  or  controlling  banks and other  authorized
subsidiaries  or (ii) own or control  more than five  percent (5%) of the voting
shares of any company that is not a bank,  including any foreign company. A bank
holding  company is  permitted,  however,  to acquire  shares of any company the
activities of which the Federal  Reserve,  after due notice and  opportunity for
hearing,  has  determined  to be so closely  related to banking or  managing  or
controlling  banks as to be a proper incident  thereto.  The Federal Reserve has
issued regulations

                                       4

<PAGE>

setting forth specific  activities that are permissible  under the exception.  A
bank holding company and its  subsidiaries  are also prohibited from engaging in
certain tie-in arrangements in connection with any extension of credit, lease or
sale of property or furnishing of services.

     In approving  acquisitions by bank holding companies of banks and companies
engaged in banking-related activities, the Federal Reserve considers whether the
performance  of any such  activity by an  affiliate  of the holding  company can
reasonably  be  expected  to produce  benefits  to the  public,  such as greater
convenience,  increased  competition or gains in efficiency,  that outweigh such
possible  adverse  effects as undue  concentration  of  resources,  decreased or
unfair competition, conflicts of interest and unsound banking practices.

     Under  certain  circumstances,  prior  approval of the  Federal  Reserve is
required  under the  Holding  Company  Act  before a bank  holding  company  may
purchase or redeem any of its equity securities.

Transactions with Affiliates

     The  provisions  of Section  23A of the  Federal  Reserve  Act and  related
statutes place limits on all insured banks (including the Bank) as to the amount
of loans or  extensions  of  credit  to, or  investment  in,  or  certain  other
transactions  with,  their  parent bank  holding  companies  and certain of such
holding  companies'  subsidiaries  and as to the  amount  of  advances  to third
parties  collateralized  by  the  securities  or  obligations  of  bank  holding
companies or their subsidiaries.  In addition, loans and extensions of credit to
affiliates of the Bank generally must be secured in the prescribed amounts.

Capital Adequacy Guidelines

     The Federal  Reserve  issued  guidelines  establishing  risk-based  capital
requirements  for bank  holding  companies  and  member  banks.  The  guidelines
established  a risk-based  capital  framework  consisting of (1) a definition of
capital and (2) a system for assigning risk weights.  Capital consists of Tier I
capital, which includes common shareholders' equity less certain intangibles and
a  supplementary  component  called  Tier II,  which  includes  a portion of the
allowance  for loan  losses.  Effective  October 1, 1998,  the  Federal  Reserve
adopted an amendment to their risk-based capital guidelines that permits insured
depository  institutions  to  include  in their Tier II capital up to 45% of the
pre-tax net unrealized  gains on certain  available for sale equity  securities.
All assets and off-balance-sheet items are assigned to one of four weighted risk
categories  ranging from 0% to 100%.  Higher  levels of capital are required for
the categories  perceived as representing the greater risks. The Federal Reserve
established a minimum  risk-based capital ratio of 8% (of which at least 4% must
be Tier I). An institution's  risk-based capital ratio is determined by dividing
its  qualifying  capital  by  its  risk-weighted  assets.  The  guidelines  make
regulatory  capital  requirements more sensitive to differences in risk profiles
among  banking  institutions,  take  off-balance  sheet  items  into  account in
assessing  capital  adequacy,  and  minimize  disincentives  to holding  liquid,
low-risk assets.  Banking  organizations are generally  expected to operate with
capital positions well

                                       5

<PAGE>

above the  minimum  rates.  Institutions  with higher  levels of risk,  or which
experience or anticipate  significant  growth, are also expected to operate well
above minimum  capital  standards.  At December 31, 1998 the the Bank  satisfies
these ratios and has been categorized as a well-capitalized institution which in
the regulatory  framework for prompt  corrective action imposes the lowest level
of supervisory restraints.

     Capital adequacy guidelines focus principally on broad categories of credit
risk although the framework for assigning assets and off-balance  sheet items to
risk  categories  does  incorporate  elements of transfer  risk.  The risk-based
capital  ratio does not,  however,  incorporate  other factors that may affect a
company's  financial   condition,   such  as  overall  interest  rate  exposure,
liquidity,  funding  and  market  risks,  the  quality  and  level of  earnings,
investment or loan  concentrations,  the quality of loans and  investments,  the
effectiveness  of loan and  investment  policies  and  management's  ability  to
monitor and control financial and operating risks.

     In addition  to the  risk-based  guidelines  discussed  above,  the Federal
Reserve requires that a bank holding company and bank which meet the regulator's
highest performance and operational standards and which are not contemplating or
experiencing  significant  growth  maintain  a minimum  leverage  ratio  (Tier I
capital  as a percent of  quarterly  average  adjusted  assets) of 3%. For those
financial  institutions  with higher levels of risk or that are  experiencing or
anticipating significant growth, the minimum leverage ratio will be increased.

     The  Federal  Reserve is vested  with broad  enforcement  powers  over bank
holding  companies  to forestall  activities  that  represent  unsafe or unsound
practices or constitute violations of law. These powers may be exercised through
the issuance of cease and desist orders or other actions. The Federal Reserve is
also empowered to assess civil penalties  against  companies or individuals that
violate the Holding Company Act, to order termination of non-banking  activities
of non-banking  subsidiaries of bank holding  companies and to order termination
of ownership and control of non-banking  subsidiaries by bank holding companies.
Neither the Company nor any of its  affiliates  has ever been the subject of any
such actions by the Federal Reserve.

The Bank

     As a New Jersey  state-chartered bank, the Bank's operations are subject to
various  requirements  and  restrictions  of state law  pertaining,  among other
things, to lending limits, reserves,  interest rates payable on deposits, loans,
investments,  mergers and  acquisitions,  borrowings,  dividends,  locations  of
branch offices and capital adequacy. The Bank is subject to primary supervision,
periodic  examination and regulation by the New Jersey Department of Banking and
Insurance ("NJDBI"). As a member of the Federal Reserve System, the Bank is also
subject to regulation by the Federal Reserve.  If, as a result of an examination
of a bank, the NJDBI determines that the financial condition, capital resources,
asset quality,  earnings prospects,  management,  liquidity, or other aspects of
the bank's  operations are  unsatisfactory or that the bank or its management is
violating or has violated any law or regulation,  various remedies are available
to the NJDBI.  Such  remedies  include the power to enjoin  "unsafe and unsound"
practices, to require affirmative

                                       6

<PAGE>

action to correct any conditions  resulting  from any violation or practice,  to
issue an administrative order that can be judicially  enforced,  to, among other
things,  direct an increase in capital,  to restrict the growth of the Bank,  to
assess civil penalties and to remove officers and directors.  The Bank has never
been the subject of any administrative orders, memoranda of understanding or any
other  regulatory  action by the NJDBI. The Bank also is a member of the Federal
Reserve  System  and  therefore  subject  to  supervisory   examination  by  and
regulations of the Federal Reserve Bank of New York.

     The  Bank's  deposits  are  insured  by the  Bank  Insurance  Fund  ("BIF")
administered  by the FDIC up to a maximum of $100,000  per  depositor.  For this
protection, the Bank pays a quarterly statutory deposit insurance assessment to,
and is subject to the rules and regulations of, the FDIC.

     The Bank's  ability to pay  dividends is subject to certain  statutory  and
regulatory  restrictions.  The New  Jersey  Banking  Act of  1948,  as  amended,
provides  that no  state-chartered  bank may pay a dividend on its capital stock
unless,  following the payment of each such  dividend,  the capital stock of the
bank will be  unimpaired,  and the bank will have a surplus of not less than 50%
of its  capital,  or, if not, the payment of such  dividend  will not reduce the
surplus of the bank.  In  addition,  the payment of  dividends is limited by the
requirement  to meet the  risk-based  capital  guidelines  issued by the Federal
Reserve Board and other regulations.

     The  Deposit  Insurance  Funds Act of 1996  ("Funds  Act")  authorized  the
Financing  Corporation ("FICO") to levy assessments on BIF and SAIF deposits and
stipulated that the BIF rate must equal one-fifth the SAIF rate through year-end
1999,  or  until  the  insurance  funds  are  merged,  whichever  occurs  first.
Thereafter, BIF and SAIF payers will be assessed on a pro-rata basis for FICO.

     FICO  assessment  rates are adjusted  quarterly  to reflect  changes in the
assessment  bases of the  respective  funds based on  quarterly  Call Report and
Thrift  Financial  Report  submissions.  During 1998,  the Bank's BIF FICO rates
ranged  between 1.164 and 1.24 basis points and the SAIF FICO rates were between
5.82 and 6.22 basis points.

     The foregoing is an attempt to summarize some of the relevant  laws,  rules
and regulations governing banks and bank holding companies, but does not purport
to be a complete summary of all applicable laws, rules and regulations governing
banks and bank holding companies.

Item 2.  Properties

     The  Company  leases  ten  banking  offices,   one  mini-branch   within  a
supermarket,  one operations/support  facility and one  administrative/executive
facility. It owns five banking offices and leases land on which it owns one bank
building.  The Company  owns land and a building to be used for a future  branch
site.  All of the facilities  are located in Bergen  County,  New Jersey,  which
constitutes the Company's primary market area.

     Net  investment in premises and equipment  totaled $9.9 million at December
31, 1998. Annual rental payments

                                       7

<PAGE>

with respect to the Company's  leased  facilities  was $1.1 million for the year
ended, December 31, 1998.

     In the opinion of  management,  the physical  properties of the Company and
its subsidiaries are suitable and adequate and are being fully utilized.

Item 3.  Legal Proceedings

     In the  ordinary  course of  business,  the  Company is involved in routine
litigation   involving   various  aspects  of  its  business,   none  of  which,
individually  or in the  aggregate,  in the opinion of management  and its legal
counsel,  is  expected  to have a material  adverse  impact on the  consolidated
financial condition, results of operations or liquidity of the Company.

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

     No matters were submitted  during the three months ended December 31, 1998,
to a vote of the Company's  security holders through the solicitation of proxies
or otherwise.

                                       8
<PAGE>

Executive Officers

     The following  table sets forth the names,  ages, and present  positions of
the principal executive officers:

Name                    Age Positions Held with the Company and the Bank
____                    ___ ____________________________________________

ANTHONY S. ABBATE . . .  59 President and Chief Executive Officer
ANTHONY J. LABOZZETTA. . 35 Executive Vice President and Chief Financial Officer
NICHOLAS VERDI . . . . . 50 Senior Vice President--Retail Banking
FRANK R. GIANCOLA . . .  45 Senior Vice President--Operations
PATRICIA  D. ARNOLD . .  40 Senior Vice President--Commercial Lending

Business Experience

     ANTHONY S. ABBATE,  President and Chief Executive Officer of the Bank since
1981;  Senior Vice  President and  Controller  from October 1980;  President and
Chief  Executive  Officer of Home State Bank  1978-1980.  Engaged in the banking
industry since 1959.

     ANTHONY J. LABOZZETTA, Executive Vice President and Chief Financial Officer
since September 1997; Treasurer from 1995. Engaged in the banking industry since
1989.  Formerly  a  senior  manager  with  an  international   accounting  firm,
specializing in the financial services industry.

NICHOLAS  VERDI,  Senior Vice  President - Retail  Banking  since  October 1998.
Engaged in the banking  industry since 1968.  Formerly an Executive  Director of
United Financial  Services from 1997;  Regional  President of Hudson United Bank
from 1994 and Chief Operations Officer of Hudson United Bank from 1985.

     FRANK R. GIANCOLA, Senior Vice President - Operations since September 1997;
Senior Vice President-Retail Banking from 1993; Senior Vice President-Operations
of  the  Bank  from  1984;   Senior   Operations   Officer   from   1982;   Vice
President/Branch  Administrator from 1981. Engaged in the banking industry since
1971.

     PATRICIA D. ARNOLD, Senior Vice President - Commercial Lending since August
1997; First Vice President from 1995;  Department Head Vice President from 1986;
Assistant Vice President from 1985; Commercial Loan Officer-Assistant  Treasurer
from 1983. Engaged in the banking industry since 1981.

     Officers are elected  annually by the Board of  Directors  and serve at the
discretion  of the Board of  Directors.  Management  is not aware of any  family
relationship between any director or executive officer. No executive officer was
selected to his or her position  pursuant to any  arrangement  or  understanding
with any other person.

                                       9
<PAGE>

                                     Part II

Forward Looking Information

     We discuss certain  matters in this report which are not historical  facts,
but which are  "forward  looking  statements"  within the meaning of the Private
Securities  Litigation  Reform Act of 1995. These "forward  looking  statements"
include,  but are not limited to, the adequacy of the allowance for loan losses,
profitability,  interest  rate risk,  market risk,  liquidity  and the year 2000
readiness  disclosure.  The "forward looking  statements" in this report reflect
what we currently  anticipate  will happen in each case.  What actually  happens
could  differ  materially  from what we  currently  anticipate  will happen as a
result of, but not limited  to,  changes in economic  condition,  interest  rate
fluctuations,   levels  of  loan   growth  and   quality   and  the   successful
implementation of its Year 2000 Plan, which includes capital expenditures, costs
of remediation and testing,  the timetable for  implementing the remediation and
testing phases of Year 2000 planning, the possible impact of third parties' Year
2000  issues  on the  Company,  management's  assessment  of  contingencies  and
possible  scenarios in its Year 2000 planning.  We are not promising to make any
public  announcement when we think "forward looking statements" in this document
are no longer accurate,  whether as a result of new  information,  what actually
happens in the future or for any other reason.

Item 5.  Market for the Registrant's Common Stock
         and Related Stockholder Matters

     The Company's  common stock is traded on the American  Stock Exchange under
the symbol "ISB." At March 5, 1999, there were approximately  1,326 shareholders
of record.  A portion of the Company's  common stock is held in "street name" by
nominees for the  beneficial  owners,  so the actual number of  shareholders  is
probably  higher.  A cash  dividend of $0.083,  $0.09 and $0.10 was paid on each
common  share   outstanding  in  each  quarter  during  1996,   1997  and  1998,
respectively.  The following table sets forth,  for the periods  indicated,  the
reported high and low sales prices by quarter:


                                                 High               Low
                                            ------------      ------------
1996

       First quarter (1)(2)(3)                $ 9.42            $ 8.41
       Second quarter (2)(3)                    9.17              8.55
       Third quarter (2) (3)                    9.83              8.33
       Fourth quarter (2)(3)                    8.34              9.50

1997

       First quarter (2)(3)                  $ 14.67            $10.61
       Second quarter (3)                      17.58             11.92
       Third quarter (3)                       16.67             14.67
       Fourth quarter (3)                      21.58             14.75

1998

       First quarter (3)                     $ 21.25            $18.17
       Second quarter                          23.25             19.25
       Third quarter                           20.88             15.31
       Fourth quarter                          17.75             14.06

The last  reported  sales price of common stock on March 5, 1999 was $16.875 per
share
--------------------------------------------------------------------------------
(1)    On February  22,  1996,  the Company  declared a 5% Stock  Dividend to be
       distributed  on April  19,  1996 to  shareholders  of record on March 20,
       1996.  The high and low sales  prices  and the cash  dividends  have been
       restated to reflect the effects of the stock dividend.

(2)    On February  27, 1997,  the Company  declared a 3 for 2 Stock Split to be
       distributed  on April  17,  1997 to  shareholders  of record on March 20,
       1997.  The high and low sales  prices  and the cash  dividends  have been
       restated to reflect the effects of the stock split.

(3)    On February  26, 1998,  the Company  declared a 3 for 2 Stock Split to be
       distributed  on April  17,  1998 to  shareholders  of record on March 20,
       1998.  The high and low sales  prices  and the cash  dividends  have been
       restated to reflect the effects of the stock split.

                                       10

<PAGE>

     The Company intends, subject to it's financial results, contractual, legal,
and regulatory  restrictions,  and other factors that its Board of Directors may
deem  relevant,  to declare  and pay a  quarterly  cash  dividend on it's common
stock.  The principal  source of the funds to pay any dividends on the Company's
common  stock  would be a  dividend  from the Bank.  Certain  federal  and state
regulators  impose  restrictions  on the  payment  of  dividends  by banks.  See
"Business - Supervision and Regulation" for a discussion of these restrictions.

Item 6. Selected Consolidated Financial Data

     The  following  selected  financial  data are  derived  from the  Company's
audited  Consolidated  Financial  Statements.  The  information  set forth below
should be read in conjunction with the Consolidated Financial Statements and the
Notes thereto and "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations." The Consolidated  Statements of Financial  Condition
as of December 31, 1998 and 1997, and the Consolidated  Statements of of Income,
Changes  in  Stockholders'  Equity  and Cash  Flows for each of the years in the
three-year  period ended  December 31, 1998 and the report thereon of Deloitte &
Touche LLP are included on pages 28 through 47 of the Company's Annual Report to
Shareholders for the year ended, December 31, 1998, which pages are incorporated
herein by reference.

                                       11

<PAGE>
Item 6.  Selected Consolidated Financial Data
<TABLE>
<CAPTION>
                                                                            Y e a r s E n d e d D e c e m b e r 31,
                                                                -------------------------------------------------------------
                                                                   1998     1997          1996          1995          1994
                                                                ---------  ---------   ---------     ---------   ------------
<S>                                                             <C>        <C>         <C>           <C>         <C>              
Summary Earnings (in thousands)
  Interest income                                                $48,820    $45,310     $41,379        $40,765         $35,621
  Interest expense                                                19,864     18,566      16,983         17,208          12,449
                                                                ---------  ---------   ---------    ----------      ----------
   Net interest income                                            28,956     26,744      24,396         23,557          23,172
  Provision for loan losses                                          951      1,653         747          1,239             984
                                                                 --------  ---------  ----------    ----------      ----------
   Net interest income after provision for loan losses            28,005     25,091      23,649         22,318          22,188
  Non-interest income                                              4,928      4,774       4,248          4,579           3,659
  Non-interest expenses                                           19,416     17,655      17,492         16,703          16,666
                                                                 --------  ---------  ----------    ----------       ----------
   Income before cumulative effect of change in
   accounting principle and income taxes                          13,517     12,210      10,405         10,194           9,181
  Income taxes                                                     4,908      4,285       3,654          3,511           3,220
                                                                 --------  ---------  ----------     -----------      ---------
      Net income                                                 $ 8,609    $ 7,925     $ 6,751        $ 6,683         $ 5,961
                                                                 ========  =========  ==========     ===========      =========

Per Share Data
    Before deducting acquisition costs
      Basic earnings per common share                              $1.32      $1.11       $0.95          $0.93           $0.82
      Diluted earnings per common share                             1.31       1.10        0.94           0.92            0.82
    After deducting acquisition costs
      Basic earnings per common share                               1.20       1.11        0.95           0.93            0.82
      Diluted earnings per common share                             1.19       1.10        0.94           0.92            0.82
    Cash dividends declared                                         0.40       0.36        0.33           0.31            0.29
    Book value-end of year                                          8.66       7.86        7.02           6.43            5.29
    Tangible book value-end of year                                 8.56       7.71        6.80           6.16            5.28
    Weighted average shares outstanding (in thousands)
      Basic                                                        7,189      7,132       7,124          7,113           7,107
      Diluted                                                      7,237      7,222       7,190          7,157           7,130

Balance Sheet Data-end of year (in thousands)

    Total assets                                                $685,364   $625,050    $572,512       $548,220        $530,042
    Securities held to maturity and securties available for sale 149,930    135,997     143,339        163,736         168,224
    Loans                                                        478,717    438,273     384,060        337,570         314,829
    Allowance for loan losses                                      5,645      5,231       3,968          3,926           4,079
    Total deposits                                               598,732    540,765     491,637        487,224         469,799
    Securities sold under agreements to repurchase and            18,548     13,028      10,904         11,702             407
    short-term borrowings
    Long-term borrowings                                               -      9,879       9,983              -           5,000
    Total stockholders' equity                                    62,372     56,130      50,048         45,781          39,990

Selected Performance Ratios
    Before deducting acquisition costs
      Return on average total assets                               1.44 %      1.33 %      1.22 %         1.26 %          1.19 %
      Return on average total stockholders' equity                16.05       14.95       14.09          15.53           15.34
    After deducting acquisition costs
      Return on average total assets                               1.31        1.33        1.22           1.26            1.19
      Return on average total stockholders' equity                14.53       14.95       14.09          15.53           15.34
    Dividend payout ratio                                         32.81       30.08       32.19          29.82           32.51
    Average total stockholders' equity to average total assets     9.00        8.89        8.68           8.11            7.76
    Net yield on interest earning assets (taxable equivalent)      4.62        4.78        4.75           4.74            4.95
    Efficiency ratio (1)                                          53.59       56.47       60.02          59.38           60.19
    Non-interest expenses to average assets                        2.95        2.96        3.17           3.15            3.33
    Non-interest income to average assets                          0.75        0.80        0.77           0.86            0.73

Asset Quality Ratios-end of year

    Nonaccrual loans to total loans                                0.25 %      0.35 %      0.66 %         0.74 %          1.96 %
    Nonperforming assets to total assets                           0.26        0.33        0.67           0.95            1.43
    Allowance for loan losses to nonaccrual loans                471.20      345.51      157.02         156.35           66.04
    Allowance for loan losses to total loans                       1.18        1.19        1.03           1.16            1.30
    Net charge-offs to average loans for the year                  0.12        0.10        0.20           0.44            0.34

Liquidity and Capital Ratios

    Average loans to average deposits                             81.06 %     78.09 %      72.19 %        67.14 %         65.20 %
    Total stockholders' equity to total assets                     9.10        8.98         8.74           8.35            7.54
    Tier I capital to risk-weighted assets                        13.80       13.19        13.79          13.92           13.43
    Total capital to risk-weighted assets                         15.12       14.44        15.04          15.17           14.68
    Tier I leverage ratio                                          9.08        8.79         8.65           8.16            7.83
</TABLE>
--------------------------------------------------------------------------------
(1)   The  efficiency  ratio is  calculated by dividing  non-interest  expenses,
      excluding  merger-related  charges,  amortization  of intangibles  and net
      expense  of  foreclosed  real  estate by net  interest  income (on a fully
      taxable  equivalent  basis) and  non-interest  income,  excluding gains on
      sales of loans, securities, loan servicing and a branch location.

                                       12
<PAGE>


Item 7. Management's  Discussion and Analysis of Financial  Condition Results 
          of Operations

     The information contained in the section entitled "Management's  Discussion
and  Analysis of  Financial  Condition  and Results of  Operations"  on pages 14
through 27 of the Company's 1998 Annual Report to Shareholders  filed as Exhibit
13, is incorporated herein by reference.

Item 7A.  Quantitative and Qualitative Disclosure about Market Risk

     The  information  regarding  the  market  risk of the  Company's  financial
instruments,  contained in  "Management's  Discussion  and Analysis of Financial
Condition and Results of  Operations"  on page 23 of the  Company's  1998 Annual
Report to Shareholders filed as Exhibit 13 is incorporated herein by reference.

Item 8.  Financial Statements and Supplemental Data

     The  financial  statements  required  by  this  Item  are  included  in the
Company's  1998 Annual Report to  Shareholders  on pages 28 through 47, filed as
Exhibit 13, and incorporated herein by reference.

                                                            Page of Annual
                                                               Report to
                                                             Stockholders
                                                          -------------------
Report of Independent Public Accountants                           28
Interchange Financial Services Corporation and Subsidiaries
     Consolidated Balance Sheets                                   29
     Consolidated Statements of Income                             30
     Consolidated Statements of Changes in Stockholders' Equity    31
     Consolidated Statements of Cash Flows                         32
     Notes to Consolidated Financial Statements (Notes 1 - 21)   33 - 47

     No supplementary data is included in this report as it is inapplicable, not
required,  or the information is included elsewhere in the financial  statements
or notes thereto.

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

          Not applicable

                                    PART III

Item 10.  Directors and Executive Officers

         a.  Directors

         The information  contained in the section  entitled  "Directors" in the
         Company's  definitive  Proxy  Statement for its 1999 Annual  Meeting of
         Stockholders,  to be filed not later  than 120 days  after the close of
         the  Company's  fiscal  year,  is  incorporated  herein by reference in
         response to this item.

         b.  Executive Officers

         Information  required by this item is  contained in Part I of this Form
         10-K in the section entitled "Executive Officers."

         c.  Compliance with Section 16(a)

         Information  contained in the section entitled  "Section 16 Compliance"
         in the Company's definitive Proxy

                                       13

<PAGE>


         Statement for its 1999 Annual Meeting of Stockholders, to be filed
         not later than 120 days after the close of the  Company's  fiscal
         year,  is  incorporated  herein by reference in response to this item.

Item 11.  Executive Compensation

     Information  contained in the section entitled "Executive  Compensation" in
the  Company's  definitive  Proxy  Statement  for its  1999  Annual  Meeting  of
Stockholders,  to be  filed  not  later  than 120 days  after  the  close of the
Company's  fiscal year, is incorporated  herein by reference in response to this
item.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

     The  information  contained in the section  entitled  "Amount and Nature of
Beneficial  Ownership" in the Company's  definitive Proxy Statement for its 1999
Annual  Meeting of  Stockholders,  to be filed not later than 120 days after the
close of the  Company's  fiscal  year,  is  incorporated  herein by reference in
response to this item.

Item 13.  Certain Relationships and Related Transactions

     The  information  contained  in the  section  entitled  "Transactions  with
Management"  in the  Company's  definitive  Proxy  Statement for its 1999 Annual
Meeting of Stockholders,  to be filed not later than 120 days after the close of
the Company's  fiscal year, is  incorporated  herein by reference in response to
this item.

                                       14
<PAGE>


                                     PART IV

Item 14.  Exhibits, Financial Statements and Schedules and Reports on Form 8-K

          (a) The following documents are filed as part of this Report:

              1. Financial  Statements:  The Financial  Statements  listed under
                 Item 8 to this Report are set forth at pages 28 through 32, and
                 the Notes to Consolidated Financial Statements are set forth at
                 pages 33 through 47, of the Annual Report to  Shareholders  for
                 1998 (See Exhibit 13 under paragraph (a)3 of this Item 14).

              2. Financial Statement  Schedules:  All required schedules for the
                 Company  and  its  subsidiaries   have  been  included  in  the
                 Consolidated Financial Statements or related Notes thereto.

              3. Exhibits:  Exhibits followed by a parenthetical reference are 
                 incorporated by reference herein from the document described
                 in such parenthetical reference.

                 Exhibit        3(a) Certificate of Incorporation of Registrant,
                                as amended (Incorporated by reference to Exhibit
                                3  to  Form   S-4,   filed   April   27,   1998,
                                Registration Statement No. 333-50065)

                 Exhibit        3(b)  Bylaws  of  registrant   (Incorporated  by
                                reference  to  Exhibit  3(b) to Form S-2,  filed
                                July  22,  1992,   Registration   Statement  No.
                                33-49840)

                 Exhibit        10(a)  Agreement  for  legal  services   between
                                Andora, Palmisano & Geaney and Registrant, dated
                                April 23, 1998

             (1)                Exhibit 10(b) Stock Option and Incentive Plan of
                                1997  (Incorporated by reference to Exhibit 4(c)
                                to  Form  S-8,   filed   September   30,   1997,
                                Registration Statement No. 33-82530)

             (1)                Exhibit  10(c)  Directors'   Retirement  Program
                                (Incorporated  by reference to Exhibit  10(i)(3)
                                to Annual  Report on Form 10-K for  fiscal  year
                                ended December 31, 1994)

             (1)                Exhibit 10(d) Executives'  Supplemental  Pension
                                Plan   (Incorporated  by  reference  to  Exhibit
                                10(i)(4)  to  Annual  Report  on Form  10-K  for
                                fiscal year ended December 31, 1994)

               * Exhibit 11     Statement regarding Computation of per share 
                                earnings

               * Exhibit 13     Portion of the Annual Report to Shareholders
                                for the year ended December 31, 1998

               * Exhibit 21     Subsidiaries of Registrant

               * Exhibit 23     Independent Auditors' Consent of Deloitte & 
                                Touche LLP

               * Exhibit 27     Financial Data Schedule

          (b) Reports on Form 8-K during the quarter ended December 31,1998:

                 The Company  filed a Current  Report on Form 8-K on December 3,
                 1998.  Item 5 of the referenced  Current  Report  contained the
                 Company's   Year  2000  Readiness   Disclosure.   No  financial
                 statements were filed with the Report.

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

(1)  Pursuant to Item 14(a) - 3 of Form 10-K, this exhibit represents management
     contract or  compensatory  plan or  arrangement  required to be filed as an
     exhibit to this Form 10-K pursuant to Item 14(c) of this item.

*    Filed herewith

                                       15
<PAGE>

                                   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.

                                   Interchange Financial Services Corporation

By: /s/ Anthony S. Abbate                  By: /s/ Anthony Labozzetta
    -------------------------------------      ----------------------------
    Anthony S. Abbate                          Anthony Labozzetta
    President and Chief Executive Officer      Executive Vice President
                                               and Chief Financial Officer
    (principal executive officer)              (principal financial and 
                                                accounting officer)

March 11, 1999

     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 Company
and in the capacities and on the dates indicated:

/s/Anthony S. Abbate                      /s/James E. Healey
-------------------------------------     -----------------------------------
Anthony S. Abbate      March 11, 1999     James E. Healey      March 11, 1999
   Director                                 Director
   President and Chief Executive Officer

/s/Anthony D. Andora                      /s/Anthony Labozzetta
--------------------------------------    -----------------------------------
Anthony D. Andora      March 11, 1999     Anthony Labozzetta   March 11, 1999
   Director                                 Executive Vice President and
   Chairman of the Board                    Chief Financial Officer

/s/Donald L. Correll                      /s/Nicholas R. Marcalus
--------------------------------------    -----------------------------------
Donald L. Correll      March 11, 1999     Nicholas R. Marcalus March 11, 1999
   Director                                 Director

/s/Anthony R. Coscia                      /s/Eleanore S. Nissley
--------------------------------------    -----------------------------------
Anthony R. Coscia      March 11, 1999     Eleanore S. Nissley  March 11, 1999
   Director                                 Director

/s/John J. Eccleston                      /s/Jeremiah F. O'Connor
--------------------------------------    -----------------------------------
John J. Eccleston      March 11, 1999     Jeremiah F. O'Connor March 11, 1999
   Director                                 Director

/s/David R. Ficca                         /s/Robert P. Rittereiser
--------------------------------------    -----------------------------------
David R. Ficca         March 11, 1999     Robert P. Rittereiser  March 11, 1999
   Director                                 Director

/s/Richard A. Gilsenan                    /s/Benjamin Rosenzweig
--------------------------------------    -----------------------------------
Richard A. Gilsenan    March 11, 1999     Benjamin Rosenzweig   March 11, 1999
   Director                                 Director

                                       16
<PAGE>