<PAGE>

                       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: SEPTEMBER 30, 1997
 
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
 
                          Commission File No.: 0-24862
 
                              IBS FINANCIAL CORP.
     ----------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                           <C>
                 New Jersey                                    22-3301933
-------------------------------------------   -------------------------------------------
        (State or Other Jurisdiction                        (I.R.S. Employer
     of Incorporation or Organization)                   Identification Number)

             1909 East Route 70
          Cherry Hill, New Jersey                                08003
-------------------------------------------   -------------------------------------------
  (Address of Principal Executive Offices)                     (Zip Code)
</TABLE>
 
       Registrant's telephone number, including area code: (609) 424-1000
 
   Securities registered pursuant to Section 12(b) of the Act: Not Applicable
 
          Securities registered pursuant to Section 12(g) of the Act:
 
                      Common Stock (par value $.01 per share)
--------------------------------------------------------------------------------
                                (Title of Class)
 
    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 contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
 
    As of December 5, 1997, the aggregate market value of the 9,032,289 shares
of Common Stock of the Registrant issued and outstanding on such date, which
excludes 1,905,038 shares held by employee benefit plans and by all directors
and officers of the Registrant as a group, was approximately $152.4 million.
This figure is based on the closing trade price of $16.875 per share of the
Registrant's Common Stock on December 5, 1997.
 
    Number of shares of Common Stock outstanding as of December 5, 1997:
10,937,327
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
    Portions of the Annual Report to Stockholders for the fiscal year ended
September 30, 1997 are incorporated into Parts II and IV of the Form 10-K.


<PAGE>
PART I.
ITEM 1. BUSINESS

GENERAL
 
    IBS Financial Corp. (the "Company") is a New Jersey corporation and sole
stockholder of Inter-Boro Savings and Loan Association (the "Association") which
converted to the stock form of organization in October 1994. The only
significant assets of the Company are its investments in the capital stock of
the Association, the Company's loan to an employee stock ownership plan, and
certain U.S. Government Agency securities and interest-bearing deposits.
 
    The Association is a New Jersey chartered stock savings and loan association
which conducts business from ten offices located in Camden, Burlington and
Gloucester Counties, New Jersey. The Association's operations date back to 1890.
The Association's deposits are insured by the Savings Association Insurance Fund
("SAIF") of the Federal Deposit Insurance Corporation ("FDIC") to the maximum
extent permitted by law.
 
    The Company has traditionally offered a variety of savings products to its
retail customers. The Company invests its funds in U.S. Government, U.S.
Government agency and mortgage-backed securities, other short term investments
and has concentrated its lending activities on real estate loans secured by
single (i.e., "one-to-four") family residential properties. In fiscal 1996, the
Company also expanded its investment in commercial real estate loans. The
commercial real estate loans originated are collateralized by small professional
and medical office buildings, commercial retail establishments and religious
organizations in its market area. In addition and to a lesser degree,
construction loans are originated to construct primarily single family
residences. In the past, the Company has also purchased whole residential
mortgage loans and participation interests in commercial real estate projects
located principally in New Jersey.
 
    During fiscal 1996, the Company began emphasizing the origination of single
family residential loans and changed the mix of its origination to include more
commercial real estate loans in the local marketplace. In addition, the Company
continued to reduce its liquid assets by reinvesting the proceeds of maturing
investments into mortgage-backed securities generally with maturities of five
and seven years. This was designed to increase the Company's yield on its loan
portfolio. During fiscal 1996, however, the Company experienced heavy repayments
of higher yielding residential loans and mortgage-backed securities that were
reinvested in lower yielding loan and mortgage-backed securities. As a result,
the Company's net interest margin was pressured, decreasing to 3.44% for the
year ended September 30, 1996 from 3.77% during fiscal 1995.
 
    During fiscal 1997, the Company continued to emphasize the origination of 
single-family residential loans and commercial real estate loans. The Company 
also continued to experience relatively heavy repayments of higher yielding 
residential loans and mortgage-backed securities that were reinvested in 
lower yielding loans and mortgage-backed

<PAGE>


securities. In addition, the Company's net interest-earning assets declined 
by approximately $20 million, principally reflecting the shares repurchased 
during the fiscal year. This resulted in a decrease of 30 basis points in the 
Company's net interest margin to 3.14% for the year ended September 30, 1997.
 
    Financial highlights of the Company include:
 
    - Profitability. Net income totalled $5.8 million, $4.5 million and $9.9
      million for the fiscal years ended September 30, 1997, 1996, and 1995,
      respectively. Net income during fiscal 1996 was impacted by a one-time
      special assessment of $3.7 million ($2.4 million after tax) to
      recapitalize the SAIF. See Note 18 of the Notes to Consolidated Financial
      Statements incorporated by reference in Item 8 hereof. The Company manages
      its net interest margin and maintains relatively low non-interest expense
      levels and high asset quality.
 
    - Asset Quality. Management of the Company believes that high asset quality
      is the key to long-term financial strength. Stringent loan underwriting
      and investment guidelines applied by the Association have resulted in a
      portfolio of high quality loans and investments. At September 30, 1997,
      single-family residential loans comprised 87.9% of the Association's total
      loan portfolio. As of that date, total non-performing loans and troubled
      debt restructurings constituted .46% of total loans and total
      nonperforming assets and troubled debt restructurings were .13% of total
      assets.
 
    - Capital. The Company currently exceeds all minimum regulatory capital
      requirements of the Office of Thrift Supervision ("OTS"). At September 30,
      1997, it had tangible, core, and risk-based capital ratios of 17.24%,
      17.24% and 61.60%, respectively.
 
    - Retail Deposit Base. The Company has ten offices located in Camden,
      Burlington and Gloucester Counties, New Jersey. It provides a full range
      of deposit products and other services to its customers through this
      branch network. At September 30, 1997, 25.5% of the Association's deposit
      base of $567.4 million consisted of core deposits, which include passbook,
      money market and NOW accounts.
 
    The Company as a savings and loan holding company is subject to examination
and regulation by the OTS and the New Jersey Department of Banking (the
"Department"). The Association is also subject to examination and comprehensive
regulation by the Department and by the OTS. The Association is also regulated
by the FDIC, the administrator of the SAIF. The Association is subject to
certain reserve requirements established by the Board of Governors of the
Federal Reserve System ("Federal Reserve Board") and is a member of the Federal
Home Loan Bank ("FHLB") of New York, which is one of the 12 regional banks
comprising the FHLB System.
 
                                       -2-
<PAGE>
LENDING ACTIVITIES
 
    GENERAL.  The Association's lending operations follow the traditional
pattern of primarily emphasizing the origination of single-family residential
loans for portfolio retention and to a lesser degree, the origination of
commercial real estate loans, construction loans on residential properties and
consumer loans, including home equity or improvement loans. In past years, the
Association has also purchased a relatively small amount of participation
interests in commercial real estate loans.
 
    The Association's primary market area consists primarily of Camden County
and Burlington County and, to a significantly lesser extent, Gloucester County
in southern New Jersey. Substantially all of the Association's residential
mortgage loans are secured by properties located in New Jersey.
 
                                       -3-
<PAGE>
    LOAN PORTFOLIO COMPOSITION.  The following table sets forth the composition
of the Association's loan portfolio by type of loan at the dates indicated.
<TABLE>
<CAPTION>
                                                                     September 30,
                         ------------------------------------------------------------------------------------------
                                 1997                   1996                   1995                   1994           
                         ---------------------  ---------------------  ---------------------  ---------------------  
                           Amount        %        Amount        %        Amount        %        Amount        %      
                         ----------  ---------  ----------  ---------  ----------  ---------  ----------  ---------  
<S>                      <C>         <C>        <C>         <C>        <C>         <C>        <C>         <C>        
                                                                 (Dollars in Thousands)
Real estate loans:
  Single-family........  $  184,498      87.85% $  164,717      89.02% $  132,251      93.28% $  131,423      93.46% 
  Commercial...........      24,568      11.70      17,935       9.69       3,985       2.81       3,525       2.51  
  Commercial
   participations......          --         --       1,613        .87       4,563       3.22       4,916       3.50  
  Construction.........         261        .12       1,256        .68       1,889       1.33       2,801       1.99  
Consumer and other
  loans................       3,720       1.77       3,285       1.78       2,741       1.93       2,073       1.47  
                         ----------  ---------  ----------  ---------  ----------  ---------  ----------  ---------  
    Total loans........     213,047     101.44     188,806     102.04     145,429     102.57     144,738     102.93  
 
Less:
  Allowance for loan
   losses..............      (1,064)      (.51)     (1,024)      (.55)       (994)     (0.70)       (530)     (0.38) 
  Loans in process.....         (78)      (.03)     (1,179)      (.64)     (1,672)     (1.18)     (2,618)     (1.86) 
  Deferred loan fees...      (1,897)      (.90)     (1,572)      (.85)       (982)     (0.69)       (972)     (0.69) 
  Unearned interest....          --         --          --         --          --         --          --         --  
                         ----------  ---------  ----------  ---------  ----------  ---------  ----------  ---------  
    Loans receivable,
     net...............  $  210,008     100.00% $  185,031     100.00% $  141,781     100.00% $  140,618     100.00% 
                         ----------  ---------  ----------  ---------  ----------  ---------  ----------  ---------  
                         ----------  ---------  ----------  ---------  ----------  ---------  ----------  ---------  
 
<CAPTION>

                                  1993    
                         ---------------------
                           Amount         %
                         ----------  ---------
<S>                      <C>          <C>
 
Real estate loans:
  Single-family........  $  146,556     93.34%
  Commercial...........       3,742      2.38
  Commercial                        
   participations......       6,286      4.00
  Construction.........       2,004      1.28
Consumer and other                  
   loans...............       2,276      1.44
                         ---------- ---------
    Total loans........     160,864    102.44
Less:                               
  Allowance for loan                
  losses...............      (1,669)    (1.06)
  Loans in process.....      (1,271)    (0.81)
  Deferred loan fees...        (893)    (0.57)
  Unearned interest....          (1)     --
                         ----------  ---------
    Loans receivable,    
     net...............  $  157,030    100.00%
                         ---------  ----------
                         ---------- ---------

</TABLE>
                 
                                       -4-
<PAGE>
    CONTRACTUAL MATURITIES.  The following table sets forth the scheduled
contractual maturities of the Association's loan portfolio at September 30,
1997. Demand loans, loans having no stated schedule of repayments and no stated
maturity and overdraft loans are reported as due in one year or less. The
amounts shown for each period do not take into account loan prepayments and
normal amortization of the Association's loan portfolio.
 
<TABLE>
<CAPTION>
                                                         Real Estate Loans
                                           ---------------------------------------------  Consumer and
                                           Single-Family Commercial(1)    Construction     Other Loans     Total
                                           ------------  --------------  ---------------  -------------  ----------
<S>                                        <C>           <C>             <C>              <C>            <C>
                                                                        (In Thousands)
Amounts due in:
  One year or less.......................   $   16,738     $    1,341       $     261       $   2,557    $   20,897
  After one year through three years.....        4,764         --              --                 184         4,948
  After three years through four years...        8,877         --              --                 246         9,123
  After four years through ten years.....       18,100            212          --                 275        18,587
  After ten years through twenty years...       51,830          5,679          --                 458        57,967
  More than twenty years.................       84,189         17,336          --              --           101,525
                                           ------------       -------           -----          ------    ----------
    Total(2).............................   $  184,498     $   24,568       $     261       $   3,720    $  213,047
                                           ------------       -------           -----          ------    ----------
                                           ------------       -------           -----          ------    ----------
 
Interest rate type for amounts due after
    one year:
  Fixed..................................   $  144,080     $   23,227       $  --           $   1,163    $  168,470
  Adjustable.............................       23,680         --              --              --            23,680
                                           ------------       -------           -----          ------    ----------
    Total................................   $  167,760     $   23,227       $  --           $   1,163    $  192,150
                                           ------------       -------           -----          ------    ----------
                                           ------------       -------           -----          ------    ----------
</TABLE>
 
------------------------
 
(1) Includes commercial participations.
 
(2) Does not include adjustments relating to loans in process, the allowance for
    loan losses, deferred loan fees and unearned interest.
 
                                       -5-
<PAGE>

    Scheduled contractual repayment of loans does not reflect the expected term
of the Association's loan portfolio. The expected average life of loans is
substantially less than their contractual terms because of prepayments and
due-on-sale clauses, which give the Association the right to declare a
conventional loan immediately due and payable in the event, among other things,
that the borrower sells the real property subject to the mortgage and the loan
is not repaid. The average life of mortgage loans tends to increase when current
mortgage loan rates are higher than rates on existing mortgage loans and,
conversely, decrease when rates on existing mortgage loans are lower than
current mortgage loan rates (due to refinancings of adjustable-rate and
fixed-rate loans at lower rates). Under the latter circumstance, the weighted
average yield on loans decreases as higher-yielding loans are repaid or
refinanced at lower rates.
 
    Loan Origination, Purchase and Sales Activity. During fiscal 1996, there was
a net increase of $43.4 million in balances as loan originations and purchases
of $70.2 million exceeded loan repayments and other net deductions of $26.8
million. During fiscal 1997, there was a net increase of $24.2 million as loan
originations and purchases of $48.6 million exceeded loan repayments and other
deductions of $24.4 million. Reflecting the competitive loan origination
environment, loan originations and purchases decreased by $21.6 million from the
prior fiscal year.
 
    One of the Company's long range objectives is to increase loan production
volumes. To accomplish this objective, the Association has hired two loan
solicitors whose compensation is based on a commission for loan production. In
addition, origination points charged to the loan customer were reduced during
fiscal 1995 to be very competitive in the Association's lending area. The
Association also adopted a more aggressive loan pricing posture and initiated a
sales call program during fiscal 1995 that requires periodic and repetitive
calls to area real estate brokers and builders. These programs have helped the
Association increase loan originations compared to fiscal 1995's level.
 
    During the latter part of fiscal 1995 loan production volume began to
increase when compared to earlier in the fiscal year. During fiscal 1996 loan
production volume increased significantly as the Company's initiatives began to
have an impact. In addition, the Company changed the mix of its lending products
to increase the amount of higher rate commercial real estate loans originated.
These commercial real estate loans, many of which were secured by local medical
and professional offices, represented 11.7% of total loan balances at September
30, 1997 compared to 10.6% and 6.0% at September 30, 1996 and 1995,respectively.
Funding for these commercial loan originations was obtained from new borrowings
in the form of FHLB advances.

                                       -6-

<PAGE>

    The following table shows the loan origination, purchase and sale activity 
of the Association during the periods indicated.

<TABLE>
<CAPTION>
                                                                                    Year Ended September 30,
                                                                               ----------------------------------
<S>                                                                            <C>         <C>         <C>
                                                                                  1997        1996        1995
                                                                               ----------  ----------  ----------
                                                                                          (In Thousands)

Gross loans at beginning of period...........................................  $  188,806  $  145,429  $  144,738
                                                                               -----------  ---------  ----------
Loan originations:
  Real estate:
   Single-family.............................................................      38,025      48,836      15,506
   Commercial................................................................       7,845      14,734         220
   Construction..............................................................          --         594          --
                                                                               ----------  ----------  ----------
    Total real estate loans originated.......................................      45,870      64,164      15,726
Consumer and other originations..............................................       2,562       2,389       1,868
                                                                               ----------  ----------  ----------
    Total loans originated for investment....................................      48,432      66,553      17,594
Purchase of whole loans and participations...................................         166       3,643         582
                                                                               ----------  ----------  ----------
    Total originations and purchases of loans................................      48,598      70,196      18,176
                                                                               ----------  ----------  ----------
Deduct:
   Principal loan repayments and prepayments.................................     (23,982)    (22,575)    (16,390)
   Transferred to real estate owned..........................................        (150)        (56)         --
   Loans sold................................................................        (225)     (4,188)         --
   Loans assigned to and funded by Association pension fund..................          --          --      (1,095)
                                                                               ----------  ----------  ----------
    Subtotal.................................................................     (24,357)    (26,819)    (17,485)
                                                                               ----------  ----------  ----------
Net increase in loans........................................................      24,241      43,377         691
                                                                               ----------  ----------  ----------
Gross loans at end of period.................................................  $  213,047  $  188,806  $  145,429
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
</TABLE>
 
    Applications for residential mortgage and consumer loans are taken at all of
the Association's branch offices while applications for commercial real estate
loans are made at the Association's main office. Residential mortgage loan
applications are primarily developed from referrals from real estate brokers and
builders, existing customers and walk-in customers. Commercial real estate loan
applications are obtained primarily from previous borrowers as well as
referrals.
 
    The Association's lending policy provides that residential mortgages up to
$350,000 may be approved with the signatures of three designated loan officers
who have been approved by the Chief Executive Officer or the General Loan
Committee. The General Loan Committee has been authorized by the Board to grant
loans up to $1.0 million, with loans in excess of this amount required to be
presented to the full Board for review and 

                                       -7-

<PAGE>

approval. Notwithstanding the foregoing, it has been the practice of the 
Association's management to present all loans which are not single-family 
residential loans to the General Loan Committee and/or the Board of Directors 
for review and approval, and to have the Board of Directors review any loan 
application which would exceed $500,000. Under applicable regulations, the 
maximum amount of loans that the Association may make to any one borrower, 
including related entities, is limited to 15% of unimpaired capital and 
surplus, which amounted to $19.2 million at September 30, 1997. In addition, 
the Association limits lending on any one loan to $5.0 million unless 
approved specifically by Board action. As of September 30, 1997, the 
Association had nine loans outstanding with principal balances in excess of 
$1.0 million.
 
    Historically, the Association has originated substantially all of the loans
retained in its portfolio. Although the Association has not been a seller of
loans in the secondary market, substantially all of the residential real estate
loans originated by the Association have been under terms, conditions and
documentation which permit their sale to the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").

    The Association has not been an active purchaser of loans.  However, the
Association has in the past purchased whole loans on residential properties
located in New Jersey and may do so again if presented with what management
believes is a satisfactory lending opportunity. The Association has also
previously purchased loan participations secured by commercial real estate
located primarily in New Jersey, although the Association has also purchased
participations elsewhere. Such loans were presented to the Association from
contacts primarily at other financial institutions, particularly those which
have previously done business with the Association. At September 30, 1997, all
such loans had been paid off and none of the Association's total loans
receivable consisted of participation interests in loans purchased from other
financial institutions. The Association will also consider the acquisition of an
interest in a commercial real estate loan in its general market area if
presented with what management believes is a satisfactory lending opportunity
which is consistent with the Association's underwriting standards.
 
    SINGLE-FAMILY RESIDENTIAL REAL ESTATE LOANS. Historically, savings
institutions such as the Association have concentrated their lending activities
on the origination of loans secured primarily by first mortgage liens on
existing single-family residences. At September 30, 1997, $184.5 million or
87.9% of the Association's total loan portfolio consisted of single-family
residential real estate loans, substantially all of which are conventional
loans.
 
    The Association historically has and continues to emphasize the origination
of fixed-rate loans with terms of 15 years or 30 years. Although such loans are
originated with the expectation that they will be maintained in portfolio, these
loans are originated only under terms, conditions and documentation which permit
their sale in the secondary market. The Association also makes available
single-family residential adjustable-rate mortgages ("ARMs") which provide for
periodic adjustments to the interest rate, but such loans have 

                                       -8-

<PAGE>

never been as widely accepted in the Association's market area as the 
fixed-rate mortgage loan products. The ARMs currently emphasized by the 
Association have up to 30-year terms and an interest rate which adjusts every 
one or three years in accordance with a designated index. Such loans have a 
2% cap on any increase or decrease in the interest rate per period, and there 
is currently a limit of 6% on the amount that the interest rate can change 
over the life of the loan. The Association has not offered below market or 
"teaser" rates and has not engaged in the practice of using a cap on the loan 
payments, which could allow the loan balance to increase rather than 
decrease, resulting in negative amortization.
 
    At September 30, 1997, approximately $160.8 million or 87.2% of the
single-family residential loans in the Association's loan portfolio consisted of
loans which provide for fixed rates of interest. Although these loans generally
provide for repayments of principal over a fixed period of 15 to 30 years, it is
the Association's experience that because of prepayments and due-on-sale
clauses, such loans generally remain outstanding for a substantially shorter
period of time.
 
    Property appraisals on the real estate and improvements securing the
Association's single-family residential loans are made by independent appraisers
approved by the Association's Board of Directors. Appraisals are performed in
accordance with federal regulations and policies. The Association obtains title
insurance policies on most first mortgage real estate loans originated by it. If
title insurance is not obtained or is unavailable, the Association obtains an
abstract of title and title opinion. Borrowers also must obtain hazard insurance
prior to closing and, when required by the United States Department of Housing
and Urban Development, flood insurance. Borrowers may be required to advance
funds, with each monthly payment or principal and interest, to a loan escrow
account from which the Association makes disbursements for items such as real
estate taxes and mortgage insurance premiums as they become due.
 
    The Association also purchases Federal Housing Administration ("FHA") 
insured, fixed-rate individual whole loans secured by first liens on 
single-family residential properties located in 'low and moderate income' 
defined census tracts in the Association's primary market area. In order to 
promote the program and to make it more affordable for eligible applicants, 
loans are originated at a rate of 1/2 of 1% under the then applicable FNMA 
rate for FHA mortgages, which rate reduction is passed directly on to the 
borrower. Loans are underwritten and documented following standard FHA 
procedures, and are subject to approval by the Association in its sole 
discretion prior to purchase. At September 30, 1997, the Association had 
purchased 21 loans aggregating $855,000.

    COMMERCIAL REAL ESTATE LOANS.  The Association also originates mortgage
loans for the acquisition and refinancing of commercial real estate properties.
At September 30, 1997, $24.6 million or 11.7% of the Association's total loan
portfolio consisted of loans secured by existing commercial real estate
properties. During fiscal 1997, the Association originated five loans
aggregating $7.8 million, which are secured by commercial real estate located in
New Jersey and Pennsylvania, and nine loans aggregating $14.7 million in fiscal
1996.

                                       -9-

<PAGE>

    The majority of the Association's commercial real estate loans are secured
by local medical and professional office facilities and other office buildings,
small retail establishments and synagogues. These types of properties constitute
the majority of the Association's commercial real estate loan portfolio. The
Association's commercial real estate loan portfolio consists primarily of loans
secured by properties located in its primary market area.
 
    Although terms vary, commercial real estate loans generally are amortized
over a period of 15-25 years. The Association's commercial real estate loans
(and loan participations) have a weighted average maturity of 5.9 years at
September 30, 1997. The Association will originate these loans either with fixed
interest rates or with interest rates which adjust in accordance with a
designated index, which generally is negotiated at the time of origination. As
part of the criteria for underwriting commercial real estate loans, the
Association generally imposes a debt coverage ratio (the ratio of net cash from
operations before payment of debt service to debt service) of at least 125%. It
is also the Association's general policy to obtain personal guarantees on its
commercial real estate loans from the principals of the borrower and, when this
cannot be obtained, to impose more stringent loan-to-value, debt service and
other underwriting requirements. At September 30, 1997 the Association's
commercial real estate loan portfolio consisted of nine loans with a principal
balance in excess of $1,000,000.
 
    CONSTRUCTION LOANS.  The Association will also originate loans to construct
primarily single-family residences, and, to a much lesser extent, loans to
acquire and develop real estate for construction of residential properties.
These construction lending activities generally are limited to the Association's
primary market area. At September 30, 1997, the Association had one construction
loan outstanding in the amount of $.3 million or .1% of the Association's total
loan portfolio, of which $.1 million had been disbursed. Construction loans
generally have maturities of 6 to 12 months, with interest payments being made
monthly. Thereafter, the Association will generally provide the permanent
financing arrangements. The loans are made with floating rates of interest based
upon the prime rate plus a margin. The Association also receives fees upon
issuance of the commitment which range from 1% to 3% of the commitment. Loan
proceeds are disbursed in stages after inspections of the project indicate that
such disbursements are for costs already incurred and added to the value of the
project.
 
    Prior to making a commitment to fund a construction loan, the Association
requires an appraisal of the property by independent appraisers approved by the
Board of Directors. The Association uses qualified appraisers on all of its
construction loans. Loan officers of the Association also review and inspect
each project at the commencement of construction. In addition, the project is
inspected by a loan officer of the Association prior to every disbursement of
funds during the term of the construction loan. Such inspection includes a
review for compliance with the construction plan, including materials
specifications.

                                       -10-

<PAGE>

    Construction lending is generally considered to involve a higher level of 
risk as compared to single-family residential lending, due to the 
concentration of principal in a limited number of loans and borrowers and the 
effects of general economic conditions on real estate developers and 
managers. Moreover, a construction loan can involve additional risks because 
of the inherent difficulty in estimating both a property's value at 
completion of the project and the estimated cost (including interest) of the 
project. The nature of these loans is such that they are generally more 
difficult to evaluate and monitor. The Association has attempted to minimize 
the foregoing risks by, among other things, limiting the extent of its 
construction lending generally and by limiting its construction lending to 
residential properties. In addition, the Association has adopted underwriting 
guidelines which impose stringent loan-to-value, debt service and other 
requirements for loans which are believed to involve higher elements of 
credit risk, by limiting the geographic area in which the Association will do 
business and by working with builders with whom it has established 
relationships or which have quality reputations.
 
ASSET QUALITY
 
    When a borrower fails to make a required payment on a loan, the Association
attempts to cure the deficiency by contacting the borrower and seeking the
payment. Late notices are sent and/or personal contacts are made. In most cases,
deficiencies are cured promptly. While the Association generally prefers to work
with borrowers to resolve such problems, when a mortgage loan becomes 90 days
delinquent, the Association institutes foreclosure or other proceedings, as
necessary, to minimize any potential loss.
 
    Loans are placed on non-accrual status when, in the judgment of management,
the probability of collection of interest is deemed to be insufficient to
warrant further accrual. When a loan is placed on non-accrual status, previously
accrued but unpaid interest is deducted from interest income. The Association
does not accrue interest on loans past due 90 days or more.
 
    Real estate acquired by the Association as a result of foreclosure or by
deed-in-lieu of foreclosure is classified as real estate owned until it is sold.
When a property is acquired, it is recorded at the lower of cost or fair value.
Fair value is generally determined through the use of independent appraisals.
Any write-downs resulting at acquisition are charged to the allowance for loan
losses. All costs incurred in maintaining the Association's interest in the
property are capitalized between the date the loan becomes delinquent and the
date of acquisition. After the date of acquisition, all costs incurred in
maintaining the property are expenses and costs incurred for the improvement or
development of such property are capitalized. As of September 30, 1997, the
Association's real estate owned amounted to $.1 million, which was subsequently
sold in October 1997.
 
    Under generally accepted accounting principles, the Association is required
to account for certain loan modifications or restructurings as "troubled debt
restructurings." In general, the modification or restructuring of a debt
constitutes a troubled debt restructuring if the 

                                       -11-

<PAGE>

Association for economic or legal reasons related to the borrower's financial 
difficulties grants a concession to the borrower that the Association would 
not otherwise consider. Debt restructurings or loan modifications for a 
borrower do not necessarily always constitute troubled debt restructurings, 
however, and troubled debt restructurings do not necessarily result in 
non-accrual loans. During the fiscal year ended September 30, 1994, the 
Association participated in the restructuring of a commercial real estate 
loan participation, which was accounted for as a troubled debt restructuring. 
The property securing the loan was 99% leased as of September 30, 1995 and 
the loan had been performing on a timely basis since December 1993. 
Accordingly, the loan was treated as a performing loan at September 30, 1995. 
During fiscal 1996, this loan was sold which generated a gain of $16,000. At 
September 30, 1997, the Association had no troubled debt restructurings.

    NON-PERFORMING ASSETS AND TROUBLED DEBT RESTRUCTURINGS. The following table
sets forth the amounts and categories of the Association's non-performing assets
and troubled debt restructurings at the dates indicated.

<TABLE>
<CAPTION>
                                                                                               September 30,
                                                                                      -------------------------------
<S>                                                                        <C>        <C>        <C>        <C>        <C>
                                                                             1997       1996       1995       1994       1993
                                                                           ---------  ---------  ---------  ---------  ---------
                                                                                          (Dollars In Thousands)

Non-accruing loans:
Single-family residential(1).............................................  $     818  $     827  $     663  $   1,005  $     895
Commercial participations................................................         --         --         --         --      4,583
                                                                              ------     ------     ------    -------    -------
    Total nonperforming loans............................................        818        827        663      1,005      5,478
Real estate owned........................................................        142         --         --        819         --
                                                                              ------     ------     ------    -------    -------
    Total nonperforming assets...........................................  $     960  $     827  $     663  $   1,824  $   5,478
                                                                              ------     ------     ------    -------    -------
                                                                              ------     ------     ------    -------    -------

Troubled debt restructurings.............................................  $      --  $      --  $      --  $   3,261  $      --
                                                                              ------     ------     ------    -------    -------
                                                                              ------     ------     ------    -------    -------

Total nonperforming loans and troubled debt restructurings as a
  percentage of total loans..............................................       0.46%      0.45%      0.47%      3.62%      3.49%
                                                                              ------     ------     ------    -------    -------
                                                                              ------     ------     ------    -------    -------
Total nonperforming assets and troubled debt restructurings as a
  percentage of total assets.............................................       0.13%      0.11%      0.09%      0.77%      0.82%
                                                                              ------     ------     ------    -------    -------
                                                                              ------     ------     ------    -------    -------

</TABLE>

------------------------
(1) Consists of an aggregate of 12, 11, 15, 16 and 16 loans at September 30,
    1997, 1996, 1995, 1994 and 1993, respectively.
 
    The Association's total non-performing assets and troubled debt
restructurings have declined from $5.5 million or .82% of total assets at
September 30, 1993 to $960,000 or .13% of total assets at September 30, 1997.
During the year ended September 1994, total non-performing assets declined by
$3.7 million or 66.7%, as the Association participated in 

                                       -12-

<PAGE>

the troubled debt restructuring of a commercial real estate participation and 
took an additional non-performing commercial real estate loan participation 
into REO after charging $1.3 million of its carrying value against the 
allowance for loan losses. During the year ended September 30, 1995, total 
non-performing assets declined by $1.2 million or 63.7% as the Association 
sold the real estate owned and reduced single-family non-accruing loans. 
During the year ended September 30, 1996, total non-performing assets 
increased by $164,000 or 24.7% reflecting an increase in the amount of 
non-accruing single-family loans. During the year ended September 30, 1997, 
total non-performing assets increased by $133,000 or 16.1% as a result of 
real estate owned.
 
    At September 30, 1997 and 1996, approximately $83,000 and $69,000 in gross
interest income, respectively, would have been recorded in the period then ended
on loans accounted for on a non-accrual and restructured basis if such loans had
been current in accordance with their original terms and had been outstanding
throughout the period or since origination if held for part of the period. For
the years ended September 30, 1997 and 1996, $40,000 and $45,000, respectively,
were included in net income for these same loans prior to the time they were
placed on non-accrual status. The Association had no accruing loans greater than
90 days delinquent.
 
    ALLOWANCE FOR LOAN LOSSES.  An allowance for loan losses is maintained at a
level that management considers adequate to provide for potential losses based
upon an evaluation of known and inherent risks in the loan portfolio. Allowances
for loan losses are based on estimated net realizable value. Management's
periodic evaluation is based upon examination of the portfolio, past loss
experience, current economic conditions, the results of the most recent
regulatory examinations, and other relevant factors. While management uses the
best information available to make such evaluations, future adjustments to the
allowance may be necessary if economic conditions differ substantially from the
assumptions used in making the evaluations.



                                       -13-
<PAGE>

    The following table summarizes changes in the allowance for loan losses 
and other selected statistics for the periods presented.

<TABLE>

<CAPTION>
                                                                        Year Ended September 30,
                                                       ----------------------------------------------------------
<S>                                                    <C>         <C>         <C>         <C>         <C>
                                                          1997        1996        1995        1994        1993
                                                       ----------  ----------  ----------  ----------  ----------
                                                                         (Dollars in Thousands)

Average loans, net...................................  $  197,308  $  159,628  $  138,619  $  147,691  $  177,364
                                                       ----------  ----------  ----------  ----------  ----------
                                                       ----------  ----------  ----------  ----------  ----------
Allowance for loan losses, beginning of year.........  $    1,024  $      994  $      530  $    1,669  $    1,238
Charged-off loans(1).................................          --          --          --      (1,319)         --
Recoveries on loans previously charged off...........          --          --         434          --          --
Provision for loan losses............................          40          30          30         180         431
                                                       ----------  ----------  ----------  ----------  ----------
Allowance for loan losses, end of period.............  $    1,064  $    1,024  $      994  $      530  $    1,669
                                                       ----------  ----------  ----------  ----------  ----------
                                                       ----------  ----------  ----------  ----------  ----------
Net loans charged-off to average loans, net..........          --%         --%         --%       0.89%         --%
                                                       ----------  ----------  ----------  ----------  ----------
                                                       ----------  ----------  ----------  ----------  ----------
Allowance for loan losses to total loans.............         .51%       0.55%       0.70%       0.38%       1.06%
                                                       ----------  ----------  ----------  ----------  ----------
                                                       ----------  ----------  ----------  ----------  ----------
Allowance for loan losses to nonperforming loans.....       130.1%      123.8%     149.91%      52.71%      30.51%
                                                       ----------  ----------  ----------  ----------  ----------
                                                       ----------  ----------  ----------  ----------  ----------
Allowance for loan losses to nonperforming loans and
  troubled debt restructurings.......................       130.1%      123.8%     149.91%      12.41%      30.51%
                                                       ----------  ----------  ----------  ----------  ----------
                                                       ----------  ----------  ----------  ----------  ----------
</TABLE>
 
------------------------
(1) Comprised entirely of commercial participations.
 
    During the year ended September 30, 1994, the Association took a 
non-performing commercial participation into REO after charging off $1.3 
million of its carrying value against the allowance for loan losses. In 
addition, during the period, the Association participated in the troubled 
debt restructuring of a commercial real estate participation. Primarily as a 
result of such actions, during the year ended September 30, 1994, total 
non-performing assets declined by $3.7 million or 66.7%, to $1.8 million. Due 
to the relatively low level of non-performing assets in the Association's 
portfolio in fiscal 1995, 1996 and 1997, the ratio of such allowance to total 
non-performing loans increased during such period, from 30.5% at September 
30, 1993 to 149.9% at September 30, 1995, 123.8% at September 30, 1996 and 
130.1% at September 30, 1997. The Association believes that its allowance is 
adequate based upon its actual loss experience, which has historically been 
low due to its conservative underwriting and primary reliance on single 
family residential loans.

                                     -14-

<PAGE>

    The following table presents the allocation of the allowance for loan 
losses to the total amount of loans in each category listed at the dated 
indicated.

<TABLE>
<CAPTION>

                                                                       September 30,
                       ----------------------------------------------------------------------------------------------------
                                1997                    1996                     1995                      1994            
                       ----------------------  ----------------------  ------------------------  ------------------------  
                                  % of Loans              % of Loans                % of Loans                % of Loans
                                    in Each                 in Each                   in Each                   in Each
                                   Category                Category                  Category                  Category
                                      to                      to                        to                        to
                        Amount    Total Loans   Amount    Total Loans    Amount     Total Loans    Amount     Total Loans  
                       ---------  -----------  ---------  -----------  -----------  -----------  -----------  -----------  

<S>                    <C>        <C>          <C>        <C>          <C>          <C>          <C>          <C>          

                                                                   (Dollars in Thousands)


Real estate:
 Single-family.......  $     750       87.85%  $     724       89.02%   $     699        93.28%   $     236        93.46%  
 Commercial
  participations.....         --          --          16        0.87          252         3.22          250         3.50   
 Commercial..........        300       11.70         274        9.69           40         2.81           41         2.51   
 Construction........          2         .09           1        0.12            2         0.28            2         0.30   
Consumer and other...         12         .36           9        0.30            1         0.41            1         0.23   
                       ---------  -----------  ---------  -----------       -----   -----------       -----   -----------  
    Total............  $   1,064      100.00%  $   1,024      100.00%   $     994       100.00%   $     530       100.00%  
                       ---------  -----------  ---------  -----------       -----   -----------       -----   -----------  
                       ---------  -----------  ---------  -----------       -----   -----------       -----   -----------  

<CAPTION>
                              1993   
                       ---------------------
                                  % OF LOANS
                                    IN EACH
                                   CATEGORY
                                      TO
                        Amount    TOTAL LOANS
                       ---------  -----------
<S>                    <C>        <C>
 
Real estate:
 Single-family.......  $     246     93.33%
 Commercial                     
  participations.....      1,358      4.00
 Commercial..........          7      2.38
 Construction........         57      0.29
Consumer and other...          1        --
                       --------------------
    Total............  $   1,669    100.00%
                       --------------------
                       --------------------
</TABLE>
 
                                     -15-


<PAGE>

INVESTMENT ACTIVITIES
 
    GENERAL. The Association's investment activities are managed by the Chief 
Executive Officer with the assistance of other senior officers designated by 
the Board of Directors. These activities are conducted in accordance with a 
written investment policy which is reviewed and approved by the Board of 
Directors at least annually. The Association's Asset Liability Management 
Committee ("ALCO") has been designated to work with management and the Board 
to implement and achieve the investment plan goals and to report at least 
quarterly to the Board in conjunction with its review of the Association's 
overall GAP and interest rate risk position. As reflected in its investment 
policy, the Association's investment objective is to maintain a balance of 
high quality and diversified investments with a minimum of credit risk. 
Accordingly, the Association seeks a competitive return from its investments, 
but the rate of return is only one consideration which is weighed against the 
Association's other goals and objectives of liquidity and operating in a 
manner deemed by the Board to reflect safety and soundness.
 
    The Association has authority to invest in various types of assets.  The 
Association's investment officers are authorized by the Board to: purchase or 
sell U.S. Government securities and securities issued by agencies thereof; 
purchase, sell or trade any securities qualifying as eligible liquidity; 
purchase or sell bonds, securities and money market investments under 
repurchase or reverse repurchase agreements; purchase mortgage-related and 
asset-backed securities; purchase whole loans and participations in the 
secondary mortgage market; invest in financial institution certificates of 
deposit, Federal and term funds, bankers' acceptances and other authorized 
investments; invest in various corporate securities and bonds that have at 
least an "AA" rating by two nationally recognized debt rating services; and 
invest in various mutual funds and certain equity issues as authorized by the 
Board. The Board does not permit investments in highly speculative securities.
 
    The Association's investments and mortgage-backed securities are 
classified as either "held to maturity" or "available for sale." The 
investments and mortgage-backed securities classified as held to maturity are 
based upon the Association's intent and ability to hold such investments to 
maturity at the time of investment in accordance with generally accepted 
accounting principles. These investment securities and mortgage-backed 
securities are carried at amortized cost, with any discount or premium 
amortized to maturity. The investments and mortgage-backed securities 
classified as available for sale are based upon the Association's intent that 
such securities will be held for an indefinite period of time and may be sold 
in response to market changes. These assets are carried at their estimated 
fair value, which management has determined to be market value.
 
    In accordance with a Financial Accounting Standards Board ("FASB") 
pronouncement issued in 1995, the Association transferred certain securities 
with an aggregate amortized cost of $199,401 from the classification of held 
to maturity to available for sale in December 1995. See Notes 2, 4 and 5 of 
the Notes to Consolidated Financial Statements in Item 8 hereof incorporated 
herein by reference.

                                     -16-

<PAGE>

    INVESTMENT SECURITIES. The following table sets forth certain information 
relating to the Association's investment securities held to maturity 
portfolio at the dates indicated.

<TABLE>

<CAPTION>
                                                                       September 30,
                                 ----------------------------------------------------------------------------------------
                                             1997                          1996                          1995
                                 ----------------------------  ----------------------------  ----------------------------
                                 Carrying Value  Market Value  Carrying Value  Market Value  Carrying Value  Market Value
                                 --------------  ------------  --------------  ------------  --------------  ------------
                                                                        (In Thousands)
<S>                              <C>             <C>           <C>             <C>           <C>             <C>

U.S. Treasury securities.......    $       --         $   --         $   --         $   --    $     49,977    $   50,252
Obligations of U.S. government
  corporations and agencies....        25,000         25,000         26,366         26,378         114,994       115,275
Term deposits in FHLB..........         2,859          2,859            346            346          76,374        76,374
                                      -------    ------------       -------    ------------  --------------  ------------
    Total......................    $   27,859     $   27,859     $   26,712     $   26,724    $    241,345    $  241,901
                                      -------    ------------       -------    ------------  --------------  ------------
                                      -------    ------------       -------    ------------  --------------  ------------
</TABLE>
 
    The Association had no investment securities available for sale at 
September 30, 1997.

    At September 30, 1997, all of the Association's investment securities 
were due in one year or less. The weighted average yield on a fully tax 
equivalent basis for the held to maturity portfolio at September 30, 1997 was 
5.6%.
 
    The decrease in investment securities at September 30, 1996 when compared 
to September 30, 1995 reflects the Association's plan to reduce its liquid 
assets. At September 30, 1996 and 1997, the Association did not have 
investments in the debt and/or equity securities of any issuer other than the 
U.S. Government and U.S. Government agencies and corporations.
 
    MORTGAGE-BACKED SECURITIES PORTFOLIO. The Association maintains a 
portfolio of mortgage-backed securities as a means of investing in 
housing-related mortgage instruments without the costs associated with 
originating mortgage loans for portfolio retention and with limited credit 
risk of default which arises in holding a portfolio of loans to maturity. 
Mortgage-related securities (which also are known as mortgage participation 
certificates or pass-through certificates) represent a participation interest 
in a pool of single-family or multi-family mortgages, the principal and 
interest payments on which are passed from the mortgage originators, through 
intermediaries (generally U.S. Government agencies and government sponsored 
enterprises) that pool and repackage the participation interests in the form 
of securities, to investors such as the Association. Such U.S. Government 
agencies and government sponsored enterprises, which guarantee the payment of 
principal and interest to investors, primarily include the FHLMC, the FNMA 
and the GNMA.
 
    The FHLMC is a public corporation chartered by the U.S. Government and 
owned by the 12 Federal Home Loan Banks and federally-insured savings 
institutions. The FHLMC issues participation certificates backed principally 
by conventional mortgage loans. The FHLMC guarantees the timely payment of 
interest and the ultimate return of principal. The FNMA is a private 
corporation chartered by the U.S. Congress with a mandate to

                                       -17-

<PAGE>

establish a secondary market for conventional mortgage loans. The FNMA 
guarantees the timely payment of principal and interest on FNMA securities. 
FHLMC and FNMA securities are not backed by the full faith and credit of the 
United States, but because the FHLMC and FNMA are U.S. Government-sponsored 
enterprises, these securities are considered to be among the highest quality 
investments with minimal credit risks. The GNMA is a government agency within 
the Department of Housing and Urban Development which is intended to help 
finance government-assisted housing programs. GNMA securities are backed by 
FHA-insured and VA-guaranteed loans, and the timely payment of principal and 
interest on GNMA securities are guaranteed by the GNMA and backed by the full 
faith and credit of the U.S. Government. Because the FHLMC, the FNMA and the 
GNMA were established to provide support for low- and middle-income housing, 
there are limits to the maximum size of loans that qualify for these 
programs. For example, the FNMA and the FHLMC currently limit their loans 
secured by a single-family, owner-occupied residence to $214,600. To 
accommodate larger-sized loans, and loans that, for other reasons, do not 
conform to the agency programs, a number of private institutions have 
established their own home-loan origination and securitization programs.
 
    Mortgage-backed securities typically are issued with stated principal 
amounts, and the securities are backed by pools of mortgages that have loans 
with interest rates that are within a range and have varying maturities. The 
underlying pool of mortgages, i.e., fixed rate or adjustable rate, as well as 
prepayment risk, are passed on to the certificate holder. The life of a 
mortgage-backed pass-through security thus approximates the life of the 
underlying mortgages.
 
    Mortgage-backed securities generally yield less than the loans which
underlie such securities because of their payment guarantees or credit
enhancements which offer nominal credit risk. In addition, mortgage-backed
securities are more liquid than individual mortgage loans. Mortgage-backed
securities issued or guaranteed by FNMA or FHLMC (except interest-only
securities or the residual interests in collateralized mortgage obligations) are
weighted at no more than 20.0% for risk-based capital purposes, compared to a
weight of 50.0% to 100.0% for residential loans. See "Regulation--The
Association--Capital Requirements."

                                     -18-

<PAGE>

    The following table sets forth the composition of the Association's 
mortgage-backed securities portfolio which includes both securities available 
for sale and held at maturity at the dates indicated.

<TABLE>

<CAPTION>
                                                                             September 30,
                                                       ----------------------------------------------------------
                                                          1997        1996        1995        1994        1993
                                                       ----------  ----------  ----------  ----------  ----------
                                                                             (In Thousands)
<S>                                                    <C>         <C>         <C>         <C>         <C>

FNMA.................................................  $   44,694  $   41,468  $   17,280  $       --      $   --
GNMA.................................................     111,661     131,632     142,054     105,482     128,427
FHLMC................................................     306,270     278,435     151,549      76,344       4,724
Private..............................................         674         726         870       1,065       1,526
                                                       ----------  ----------  ----------  ----------  ----------
 Total mortgage-backed securities(1).................  $  463,299  $  452,261  $  311,753  $  182,891  $  134,677
                                                       ----------  ----------  ----------  ----------  ----------
                                                       ----------  ----------  ----------  ----------  ----------

</TABLE>
 
------------------------
(1) Includes FNMA, GNMA and FHLMC securities held for sale at September 30, 1997
    of $8,744, $13,239 and $111,937, respectively, or an aggregate of $133,920.

    The following table sets forth the purchases and principal repayments of 
the Association's mortgage-backed securities for the periods indicated.

<TABLE>

<CAPTION>
                                                                                    Year Ended September 30,
                                                                               ----------------------------------
                                                                                  1997        1996        1995
                                                                               ----------  ----------  ----------
                                                                                         (In Thousands)
<S>                                                                            <C>         <C>         <C>

Beginning balance............................................................  $  452,261  $  311,753  $  182,891
                                                                               ----------  ----------  ----------
Mortgage-backed securities purchased.........................................      80,077     217,687     164,236
Principal repayments.........................................................     (70,135)    (78,778)    (35,710)
Unrealized gain, net of tax..................................................       1,000       1,509          --
Deferred discounts, net......................................................          96          90         336
                                                                               ----------  ----------  ----------
Net change...................................................................      11,038     140,508     128,862
                                                                               ----------  ----------  ----------
Ending balance...............................................................  $  463,299  $  452,261  $  311,753
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
</TABLE>

    At September 30, 1997, the weighted average contractual maturity of all 
of the Association's mortgage-backed securities was in excess of 9.0 years 
and the weighted average yield on the mortgage-backed securities portfolio 
was 7.0%. The actual maturity of a mortgage-backed security is less than its 
stated maturity due to prepayments of the underlying mortgages. Prepayments 
that are faster than anticipated may shorten the life of the security and 
adversely affect its yield to maturity. The yield is based upon the interest 
income and the amortization of any premium or discount related to the 
mortgage-backed security. Although prepayments of underlying mortgages depend 
on many factors, including the type of mortgages, the coupon rate, the age of 
mortgages, the geographical location of the underlying real estate 
collateralizing the mortgages and general levels of market interest rates, 
the difference between the interest rates on the underlying mortgages and the

                                     -19-

<PAGE>

prevailing mortgage interest rates generally is the most significant 
determinant of the rate of prepayments. During periods of falling mortgage 
interest rates, if the coupon rate of the underlying mortgages exceeds the 
prevailing market interest rates offered for mortgage loans, refinancing 
generally increases and accelerates the prepayment of the underlying 
mortgages and the related security. Under such circumstances, the Association 
may be subject to reinvestment risk because to the extent that the 
Association's mortgage-backed securities amortize or prepay faster than 
anticipated, the Association may not be able to reinvest the proceeds of such 
repayments and prepayments at a comparable rate. The declining yields earned 
during recent periods is a direct response to falling interest rates and 
accelerated prepayments. At September 30, 1997, of the $463.3 million of 
mortgage-backed securities, an aggregate of $411.5 million were secured by 
fixed-rate mortgage loans and an aggregate of $51.8 million were secured by 
adjustable-rate mortgage loans.
 
    In February 1992, the OTS adopted a policy statement which states, among 
other things, that mortgage derivative products (including CMOs and CMO 
residuals and stripped mortgage-backed securities) which possess average life 
or price volatility in excess of a benchmark fixed-rate 30-year 
mortgage-backed pass-through security are "high-risk mortgage 
securities," are not suitable investments for depository institutions, must 
be carried in the institution's trading account or as assets held for sale, 
and must be marked to market on a regular basis. The Association has no "high 
risk" mortgage securities at September 30, 1997 and has no present intention 
to alter materially its investment policies and practices.
 
SOURCES OF FUNDS
 
    GENERAL. The Association's principal source of funds for use in lending 
and for other general business purposes has traditionally come from deposits 
obtained through the Association's branch offices. The Association also 
derives funds from amortization and prepayments of outstanding loans and 
mortgage-backed securities and from maturing investment securities. The 
Association also borrows from the FHLB of New York. The Association had $34.3 
million of FHLB borrowings outstanding at September 30, 1997. Loan repayments 
are a relatively stable source of funds, while deposits inflows and outflows 
are significantly influenced by general interest rates and money market 
conditions. During the year ended September 30, 1997, the Company's Board of 
Directors provided management with the authority to borrow up to $150 million 
from the Federal Home Loan Bank of New York.
 
    DEPOSITS. The Association's current deposit products include passbook 
accounts, negotiable order of withdrawal (NOW) accounts, money market deposit 
accounts, demand deposit accounts and certificates of deposit ranging in 
terms from seven days to seven years. The Association's deposit products also 
include Individual Retirement Account ("IRA") and Keogh certificates and 
passbook accounts.
 
    The Association's deposits are obtained primarily from residents in its 
primary market area of Camden, Burlington and Gloucester Counties in Southern 
New Jersey. The

                                       -20-

<PAGE>

Association to a lesser extent obtains deposits from other locations in the 
Greater Philadelphia metropolitan area. The Association attracts deposit 
accounts by offering a wide variety of accounts, competitive interest rates, 
and convenient branch office locations and service hours. The Association 
primarily utilizes print media to attract new customers and savings deposits. 
The Association has never utilized the services of deposit brokers and had no 
brokered deposits at September 30, 1997. During fiscal 1995, the Association 
acquired three automated teller machines, two of which are located at branch 
offices in Camden County and one at a Burlington County branch office. The 
Association is affiliated with the MAC-Registered Trademark- ATM System. In 
October 1996, the Association increased its branch network from 8 offices to 
10 offices. These new offices, which are full service branches equipped with 
automated teller machines, are located in Gloucester Township and Voorhees 
Township, Camden County, New Jersey. Of the Associations 10 offices, five are 
currently equipped with automated teller machines.
 
    The Association has been competitive in the types of accounts and in 
interest rates it has offered on its deposit products but does not 
necessarily seek to match the highest rates paid by competing institutions. 
With the significant decline in interest rates paid on deposit products, the 
Association in recent years has experienced disintermediation of deposits 
into competing investment products. However, the disintermediation 
experienced has been consistent with the Association's strategy of 
controlling growth.


                                       -21-
<PAGE>

The following table shows the distribution of, and certain other information 
relating to, the Association's deposits by type of deposit as of the dates 
indicated.

<TABLE>
<CAPTION>
                                                                                      September 30,
                                                        -------------------------------------------------------------------------
                                                                 1997                     1996                      1995
                                                        -----------------------  -----------------------  -----------------------
                                                          Amount      Percent      Amount      Percent      Amount      Percent  
                                                        ----------  -----------  ----------  -----------  ----------  -----------
                                                                                  (Dollars in Thousands)
<S>                                                     <C>         <C>          <C>         <C>          <C>         <C>        
Passbook and club accounts............................  $   57,638        10.2%  $   59,323        10.4%  $   62,950        11.1%
Money market..........................................      63,248        11.2       70,023        12.2       74,933        13.3 
Certificate of deposit................................     422,505        74.3      417,773        73.1      403,736        71.4 
NOW accounts..........................................      23,570         4.2       23,886         4.2       22,909         4.1 
Accrued interest......................................         414          .1          361          .1          382          .1 
                                                        ----------       -----   ----------       -----   ----------        ----- 
  Total deposits at end of period.....................  $  567,375       100.0%  $  571,366       100.0%  $  564,910       100.0%
                                                        ----------       -----   ----------       -----   ----------       ----- 
                                                        ----------       -----   ----------       -----   ----------       ----- 
</TABLE>
                                     -22-

<PAGE>

    The following table presents, by various interest rate categories, the 
amount of certificates of deposit at September 30, 1997 and 1996, and the 
amounts at September 30, 1997 which mature during the periods indicated.
 
<TABLE>
<CAPTION>
                                                                                    Amounts at September 30, 1997
                                                       September 30,                       Maturing Within
                 Certificates of                   ----------------------  ------------------------------------------------
                     Deposit                          1997        1996     One Year    Two Years   Three Years  Thereafter
-------------------------------------------------  ----------  ----------  ---------  -----------  -----------  -----------
                                                                          (Dollars in Thousands)
<S>                                                <C>         <C>         <C>        <C>          <C>          <C>
                2.00% to 4.00%                     $    7,007  $    8,522  $   1,895   $   1,234    $   1,227    $   2,651
                4.01% to 6.00%                        367,448     337,123    252,595      78,173       17,412       19,268
                6.01% to 8.00%                         46,292      70,155     24,622      10,513        3,506        7,651
                8.01% to 10.0%                          1,758       1,973        582       1,138           38         --
                                                   ----------  ----------  ---------  -----------  -----------  -----------
                   Total certificate accounts      $  422,505  $  417,773  $ 279,694   $  91,058    $  22,183    $  29,570
                                                   ----------  ----------  ---------  -----------  -----------  -----------
                                                   ----------  ----------  ---------  -----------  -----------  -----------
</TABLE>

                                     -23-

<PAGE>

    The following table presents the average balance of each deposit type and 
the average rate paid on each deposit type for the periods indicated.

<TABLE>
<CAPTION>
                                      September 30,
                ---------------------------------------------------------------
                       1997               1996                    1995
                -------------------   -------------------   -----------------
                           Average               Average               Average 
                 Average     Rate     Average      Rate     Average      Rate  
                 Balance     Paid     Balance      Paid     Balance      Paid  
                --------   --------   -------   ---------   -------   ---------
                                       (Dollars in Thousands)
<S>             <C>        <C>        <C>       <C>         <C>       <C>
Passbook and
  club
  accounts....  $ 57,891     2.74%    $ 60,561   2.84%      $ 67,810    2.94%
Money
  market......    67,770     2.82       72,798   2.90         83,482    3.09
Certificates
  of deposit..   419,513     5.46      415,447   5.41        394,704    5.06
NOW accounts..    24,517     1.80       24,020   1.92         23,742    2.07
                --------              ---------             --------             
 Total
  deposits....  $569,691     4.72     $572,826   4.67       $569,738    4.39
                --------              ---------             --------
                --------              ---------             --------             
</TABLE>
 


    The following table sets forth the Association's net savings flows during
the periods indicated.

<TABLE>
<CAPTION>
                                                                                    Year Ended September 30,
                                                                               ----------------------------------
                                                                                  1997        1996        1995
                                                                               ----------  ----------  ----------
                                                                                         (In Thousands)
<S>                                                                            <C>         <C>         <C>
Beginning balance............................................................  $  571,366  $  564,910  $  603,080
                                                                               ----------  ----------  ----------
Decrease before interest credited............................................     (27,165)    (16,562)    (59,836)
Interest credited............................................................      23,174      23,018      21,666
                                                                               ----------  ----------  ----------
Net savings increase (decrease)..............................................      (3,991)      6,456     (38,170)
                                                                               ----------  ----------  ----------
Ending balance...............................................................  $  567,375  $  571,366  $  564,910
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
</TABLE>

    The following table sets forth maturities of the Association's certificates
of deposit of $100,000 or more at September 30, 1997 by time remaining to
maturity.

<TABLE>
<CAPTION>
                                                                                                       Amounts in
                                                                                                        Thousands
                                                                                                       -----------
<S>                                                                                                    <C>
Three months or less.................................................................................   $  14,719
Over three months through six months.................................................................       4,908
Over six months through 12 months....................................................................       9,010
Over 12 months.......................................................................................      19,478
                                                                                                       -----------
Total................................................................................................   $  48,115
                                                                                                       -----------
                                                                                                       -----------
</TABLE>

                                     -24-
<PAGE>

SUBSIDIARIES

    The Company has two wholly-owned subsidiaries, the Association and its 
wholly owned subsidiary, IBS Delaware Investment Corp. ("IBSD"), and IBSF 
Investment Corp., a New Jersey-chartered investment company formed in 1996, 
which ceased operations at September 30, 1997.

    In December 1996, the Association established IBSD solely to manage 
certain of the investments of the Association. At September 30, 1997, IBSD 
had total assets of approximately $180 million comprised principally of 
mortgage-backed securities.

COMPETITION

    The Association faces significant competition for real estate loans, 
principally from mortgage banking companies, other savings institutions, 
commercial banks and credit unions. Factors which affect competition 
generally include the general and local economic conditions, current interest 
rate levels and volatility in the mortgage markets. The Association also 
faces significant competition in attracting deposits. Its most direct 
competition for deposits has historically come from commercial banks and 
other savings institutions located in its market area. The Association faces 
additional significant competition for investors' funds from other 
non-depository institutions, including mutual funds and brokerage firms. The 
Association competes for deposits principally by offering depositors a 
variety of deposit programs, convenient branch locations, hours and other 
services. The Association does not rely upon any individual group or entity 
for a material portion of its deposits.

    Federal legislation in recent years has eliminated many of the 
distinctions between commercial banks and savings institutions and holding 
companies and allowed bank holding companies to acquire savings institutions. 
Such legislation has generally resulted in an increase in the competition 
encountered by savings institutions and has resulted in a decrease in both 
the number of savings institutions and the aggregate size of the savings 
industry.

REGULATION

    THE COMPANY. The Company is a registered savings and loan holding company 
and is subject to OTS regulations, examinations, supervision and reporting 
requirements. As a subsidiary of a savings and loan holding company, the 
Association is subject to certain restrictions in its dealings with the 
Company and affiliates thereof. The Company is also subject to regulation by 
the Department pursuant to the New Jersey Savings and Loan Act (the "Act").
                                       
                                     -25-

<PAGE>

    The Company was also previously a bank holding company regulated by the 
Federal Reserve Board. The Company was required to become a bank holding 
company by virtue of the Association having failed to comply with the QTL 
test as of July 1993 and being unable to re-qualify as a "qualified thrift 
lender" as of July 1994. The Association re-qualified as a qualified thrift 
lender in August 1995, and the Company is no longer a bank holding company. 
See "--The Association Qualified Thrift Lender Test."
 
    FEDERAL ACTIVITIES RESTRICTIONS.  There are generally no restrictions on 
the activities of a savings and loan holding company which holds only one 
subsidiary savings association. However, if the Director of the OTS 
determines that there is reasonable cause to believe that the continuation by 
a savings and loan holding company of an activity constitutes a serious risk 
to the financial safety, soundness or stability of its subsidiary savings 
association, the Director may impose such restrictions as deemed necessary to 
address such risk, including limiting (i) payment of dividends by the savings 
association; (ii) transactions between the savings association and its 
affiliates; and (iii) any activities of the savings association that might 
create a serious risk that the liabilities of the holding company and its 
affiliates may be imposed on the savings association. As was the case with 
the Company, notwithstanding the above rules as to permissible business 
activities of unitary savings and loan holding companies, a savings and loan 
holding company is required to register as a bank holding company within one 
year of the failure of the QTL test by its subsidiary insured institution. 
Under such circumstances, the holding company becomes subject to all of the 
provisions of the BHCA and other statutes applicable to bank holding 
companies, in the same manner and to the same extent as if the company were a 
bank holding company.
 
    If the Company were to acquire control of another savings association, 
other than through merger or other business combination with the Association, 
the Company would thereupon become a multiple savings and loan holding 
company. Except where such acquisition is pursuant to the authority to 
approve emergency thrift acquisitions and where each subsidiary savings 
association meets the QTL test, as set forth below, the activities of the 
Company and any of its subsidiaries (other than the Association or other 
subsidiary savings associations) would thereafter be subject to further 
restrictions. Among other things, no multiple savings and loan holding 
company or subsidiary thereof which is not a savings association shall 
commence or continue for a limited period of time after becoming a multiple 
savings and loan holding company or subsidiary thereof any business activity, 
other than: (i) furnishing or performing management services for a subsidiary 
savings association; (ii) conducting an insurance agency or escrow business; 
(iii) holding, managing, or liquidating assets owned by or acquired from a 
subsidiary savings association; (iv) holding or managing properties used or 
occupied by a subsidiary savings association; (v) acting as trustee under 
deeds of trust; (vi) those activities authorized by regulation as of March 5, 
1987 to be engaged in by multiple savings and loan holding companies; or 
(vii) unless the Director of the OTS by regulation prohibits or limits such 
activities for savings and loan holding companies, those activities 
authorized by the Federal Reserve Board as permissible for bank holding 
companies. The activities described in (i) through (vi) above may only be 
engaged in after giving the OTS prior notice and being informed that the OTS 
does not
                                       
                                     -26-

<PAGE>

object to such activities. In addition, the activities described in (vii) 
above also must be approved by the Director of the OTS prior to being engaged 
in by a multiple savings and loan holding company.
 
    LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.  Transactions between 
savings associations and any affiliate are governed by Sections 23A and 23B 
of the Federal Reserve Act and OTS regulations. An affiliate of a savings 
association is any company or entity which controls, is controlled by or is 
under common control with the savings association. In a holding company 
context, the parent holding company of a savings association (such as the 
Company) and any companies which are controlled by such parent holding 
company are affiliates of the savings association. Generally, such provisions 
(i) limit the extent to which the savings association or its subsidiaries may 
engage in "covered transactions" with any one affiliate to an amount equal to 
10% of such association's capital stock and surplus, and contain an aggregate 
limit on all such transactions with all affiliates to an amount equal to 20% 
of such capital stock and surplus and (ii) require that all such transactions 
be on terms substantially the same, or at least as favorable, to the 
association or subsidiary as those provided to a non-affiliate. The term 
"covered transaction" includes the making of loans, purchase of assets, 
issuance of a guarantee and other similar transactions. In addition to the 
restrictions imposed by such provisions, no savings association may (i) loan 
or otherwise extend credit to an affiliate, except for any affiliate which 
engages only in activities which are permissible for bank holding companies, 
or (ii) purchase or invest in any stocks, bonds, debentures, notes or similar 
obligations of any affiliate, except for affiliates which are subsidiaries of 
the savings association.
 
    In addition, Sections 22(h) and (g) of the Federal Reserve Act place 
restrictions on loans to executive officers, directors and principal 
stockholders. Under Section 22(h), loans to a director, an executive officer 
and to a greater than 10% stockholder of a savings institution (a "principal 
stockholder"), and certain affiliated interests of either, may not exceed, 
together with all other outstanding loans to such person and affiliated 
interests, the savings institution's loans to one borrower limit (generally 
equal to 15% of the institution's unimpaired capital and surplus). Section 
22(h) also requires that loans to directors, executive officers and principal 
stockholders be made on terms substantially the same as offered in comparable 
transactions to other persons and also requires prior board approval for 
certain loans. In addition, the aggregate amount of extensions of credit by a 
savings institution to all insiders cannot exceed the institution's 
unimpaired capital and surplus. Furthermore, Section 22(g) places additional 
restrictions on loans to executive officers. At September 30, 1997, the 
Association was in compliance with the above restrictions.
 
    RESTRICTIONS ON ACQUISITIONS.  Except under limited circumstances, 
savings and loan holding companies are prohibited from acquiring, without 
prior approval of the Director of the OTS, (i) control of any other savings 
association or savings and loan holding company or substantially all the 
assets thereof or (ii) more than 5% of the voting shares of a savings 
association or holding company thereof which is not a subsidiary. Except with 
the prior approval of the Director of the OTS, no director or officer of a 
savings and loan holding
                                       
                                     -27-

<PAGE>

company or person owning or controlling by proxy or otherwise more than 25% 
of such company's stock, may acquire control of any savings association, 
other than a subsidiary savings association, or of any other savings and loan 
holding company.
 
    The Director of the OTS may only approve acquisitions resulting in the 
formation of a multiple savings and loan holding company which controls 
savings associations in more than one state if (i) the multiple savings and 
loan holding company involved controls a savings association which operated a 
home or branch office located in the state of the association to be acquired 
as of March 5, 1987; (ii) the acquiror is authorized to acquire control of 
the savings association pursuant to the emergency acquisition provisions of 
the Federal Deposit Insurance Act ("FDIA"), or (iii) the statutes of the 
state in which the association to be acquired is located specifically permit 
institutions to be acquired by the state-chartered associations or savings 
and loan holding companies located in the state where the acquiring entity is 
located (or by a holding company that controls such state-chartered savings 
associations).
 
    Under the Bank Holding Company Act of 1956, the FRB is authorized to 
approve an application by a bank holding company to acquire control of a 
savings association. In addition, a bank holding company that controls a 
savings association may merge or consolidate the assets and liabilities of 
the savings association with, or transfer assets and liabilities to, any 
subsidiary bank which is a member of the Bank Insurance Fund ("BIF") with the 
approval of the appropriate federal banking agency and the Federal Reserve 
Board. As a result of these provisions, there have been a number of 
acquisitions of savings associations by bank holding companies in recent 
years.
 
    Under New Jersey law, if the Company wishes to acquire another savings 
institution, savings institution holding company, or substantially all the 
assets of a savings institution, it must file an application under the 
Banking Act and have it approved by the Commissioner. Legislation enacted in 
New Jersey permits insured institutions or savings and loan holding companies 
located in New Jersey to acquire or be acquired by insured institutions or 
holding companies on either a regional or national basis upon the occurrence 
of certain triggering conditions which are determined by the Commissioner. 
The acquiror must be located in a state which has reciprocal legislation in 
effect on substantially the same terms and conditions as stated in the New 
Jersey legislation. This law explicitly prohibits interstate branching.
 
    THE ASSOCIATION.  The OTS and the Department have extensive regulatory 
authority over the operations of New Jersey chartered savings associations. 
As part of this authority, savings associations are required to file periodic 
reports with the OTS and the Department and are subject to periodic 
examinations by the OTS and the Department. The investment and lending 
authority of savings associations are prescribed by federal and New Jersey 
laws and regulations and they are prohibited from engaging in any activities 
not permitted by such laws and regulations. Such regulation and supervision 
is primarily intended for the protection of depositors.
                                       
                                     -28-

<PAGE>

    For a discussion of the limitations on the aggregate amount of loans that 
a savings association can make to any one borrower, including related 
entities, see "Business of the Association--Lending Activities--Loan 
Origination, Purchase and Sales Activity."
 
    The OTS' enforcement authority over all savings associations and their 
holding companies includes, among other things, the ability to assess civil 
money penalties, to issue cease and desist or removal orders and to initiate 
injunctive actions. In general, these enforcement actions may be initiated 
for violations of laws and regulations and unsafe or unsound practices. Other 
actions or inactions may provide the basis for enforcement action, including 
misleading or untimely reports filed with the OTS.
 
    INSURANCE OF ACCOUNTS.  The deposits of the Association are insured up to 
$100,000 per insured member (as defined by law and regulation) by the SAIF 
administered by the FDIC and are backed by the full faith and credit of the 
United States Government. As insurer, the FDIC is authorized to conduct 
examinations of, and to require reporting by, FDIC-insured institutions. It 
also may prohibit any FDIC-insured institution from engaging in any activity 
the FDIC determines by regulation or order to pose a serious threat to the 
FDIC. The FDIC also has the authority to initiate enforcement actions against 
savings associations, after giving the OTS an opportunity to take such action.
 
    Under current FDIC regulations, SAIF-insured institutions are assigned to 
one of three capital groups which are based solely on the level of an 
institution's capital-- "well capitalized," "adequately capitalized," and 
"undercapitalized" --which are defined in the same manner as the regulations 
establishing the prompt corrective action system under Section 38 of the 
FDIA. These three groups are then divided into three subgroups which reflect 
varying levels of supervisory concern, from those which are considered to be 
healthy to those which are considered to be of substantial supervisory 
concern. The matrix so created results in nine assessment risk 
classifications, with rates ranging prior to September 30, 1996 from .23% for 
well capitalized, healthy institutions to .31% for undercapitalized 
institutions with substantial supervisory concerns. The insurance premiums 
for the Association for the first semi-annual period in calendar 1996 
was .23%.
 
    The deposits of the Bank are currently insured by the SAIF.  Both the 
SAIF and the BIF are required by law to attain and thereafter maintain a 
reserve ratio of 1.25% of insured deposits. The BIF has achieved a fully 
funded status, and therefore as discussed below, in fiscal 1996 the FDIC 
substantially reduced the average deposit insurance premium paid by 
BIF-insured banks to a level approximately 75% below the average premium then 
paid by savings institutions.
 
    On November 14, 1995, the FDIC approved a final rule regarding deposit 
insurance premiums. The final rule reduced deposit insurance premiums for BIF 
member institutions to zero basis points (subject to a $2,000 minimum) for 
institutions in the lowest risk category, while holding deposit insurance 
premiums for SAIF members at their then current
                                       
                                     -29-

<PAGE>

levels (23 basis points for institutions in the lowest risk category). The 
reduction was effective with respect to the semi-annual premium assessment 
beginning January 1, 1996.
 
    On September 30, 1996, President Clinton signed into law legislation 
which eliminated the premium differential between SAIF-insured institutions 
and BIF-insured institutions by recapitalizing the SAIF's reserves to the 
required ratio. The legislation required all SAIF member institutions pay a 
one-time special assessment to recapitalize the SAIF, with the aggregate 
amount sufficient to bring the reserve ratio in the SAIF to 1.25% of insured 
deposits. The legislation also provides for the merger of the BIF and the 
SAIF, with such merger being conditioned upon the prior elimination of the 
thrift charter.
 
    Implementing FDIC regulations imposed a one-time special assessment of 
65.7 basis points of SAIF-assessable deposits as of March 31, 1995, which was 
accrued as an expense on September 30, 1996. The Association's one-time 
pre-tax special assessment amounted to $3.7 million, or $2.4 million after 
tax. The payment of such special assessment, net of tax, had the effect of 
immediately reducing the Association's capital by $2.4 million. Nevertheless, 
management does not believe that this one-time special assessment had a 
material adverse effect on the Company's consolidated financial condition.
 
    In the fourth quarter of 1996, the FDIC lowered the assessment rates for 
SAIF members to reduce the disparity in the assessment rates paid by BIF and 
SAIF members. Beginning October 1, 1996, effective SAIF rates generally range 
from zero basis points, except that during the fourth quarter of 1996, the 
rates for SAIF members ranged from 18 to 27 basis points in order to include 
assessments paid to the Financing Corporation ("FICO"). From 1997 through 
1999, SAIF members will pay 6.4 basis points to fund the FICO, while BIF 
member institutions will pay about 1.3 basis points. The Association's 
insurance premiums, which had amounted to 23 basis points, were thus reduced 
to 6.4 basis points effective January 1, 1997.
 
    The FDIC may terminate the deposit insurance of any insured depository 
institution, including the Association, if it determines after a hearing that 
the institution has engaged or is engaging in unsafe or unsound practices, is 
in an unsafe or unsound condition to continue operations, or has violated any 
applicable law, regulation, order or any condition imposed by an agreement 
with the FDIC. It also may suspend deposit insurance temporarily during the 
hearing process for the permanent termination of insurance, if the 
institution has no tangible capital. If insurance of accounts is terminated, 
the accounts at the institution at the time of the termination, less 
subsequent withdrawals, shall continue to be insured for a period of six 
months to two years, as determined by the FDIC. Management is aware of no 
existing circumstances which could result in termination of the Association's 
deposit insurance.
 
    CAPITAL REQUIREMENTS.  Federally insured savings associations are 
required to maintain minimum levels of regulatory capital. The OTS has 
established capital standards applicable to all savings associations. These 
standards generally must be as stringent as the comparable
                                       
                                     -30-

<PAGE>

capital requirements imposed on national banks. The OTS also is authorized to 
impose capital requirements in excess of these standards on individual 
associations on a case-by-case basis.
 
    Current OTS capital standards require savings associations to satisfy 
three different capital requirements. Under these standards, savings 
associations must maintain "tangible" capital equal to at least 1.5% of 
adjusted total assets, "core" capital equal to at least 3.0% of adjusted 
total assets and "total" capital (a combination of core and "supplementary" 
capital) equal to at least 8.0% of "risk-weighted" assets. For purposes of 
the regulation, core capital generally consists of common stockholders' 
equity (including retained earnings), noncumulative perpetual preferred stock 
and related surplus, minority interests in the equity accounts of fully 
consolidated subsidiaries, certain nonwithdrawable accounts and pledged 
deposits, and "qualifying supervisory goodwill." Tangible capital is given 
the same definition as core capital but does not include qualifying 
supervisory goodwill and is reduced by the amount of all the savings 
association's intangible assets, with only a limited exception for purchased 
mortgage servicing rights. The Association had no goodwill or other 
intangible assets at September 30, 1997. Both core and tangible capital are 
further reduced by an amount equal to a savings association's debt and equity 
investments in subsidiaries engaged in activities not permissible to national 
banks (other than subsidiaries engaged in activities undertaken as agent for 
customers or in mortgage banking activities and subsidiary depository 
institutions or their holding companies). These adjustments do not affect the 
Association's regulatory capital.
 
    In determining compliance with the risk-based capital requirement, a 
savings association is allowed to include both core capital and supplementary 
capital in its total capital, provided that the amount of supplementary 
capital included does not exceed the savings association's core capital. 
Supplementary capital generally consists of hybrid capital instruments; 
perpetual preferred stock which is not eligible to be included as core 
capital; subordinated debt and intermediate-term preferred stock; and general 
allowances for loan losses up to a maximum of 1.25% of risk-weighted assets. 
In determining the required amount of risk-based capital, total assets, 
including certain off-balance sheet items, are multiplied by a risk weight 
based on the risks inherent in the type of assets. The risk weights assigned 
by the OTS for principal categories of assets are (i) 0% for cash and 
securities issued by the U.S. Government or unconditionally backed by the 
full faith and credit of the U.S. Government; (ii) 20% for securities (other 
than equity securities) issued by U.S. Government-sponsored agencies and 
mortgage-backed securities issued by, or fully guaranteed as to principal and 
interest by, the FNMA or the FHLMC, except for those classes with residual 
characteristics or stripped mortgage-related securities; (iii) 50% for 
prudently underwritten permanent one- to four-family first lien mortgage 
loans not more than 90 days delinquent and having a loan-to-value ratio of 
not more than 80% at origination unless insured to such ratio by an insurer 
approved by the FNMA or the FHLMC, qualifying residential bridge loans made 
directly for the construction of one- to four-family residences and 
qualifying multi-family residential loans; and (iv) 100% for all other loans 
and investments, including consumer loans, commercial loans, and one- to
                                       
                                     -31-

<PAGE>

four-family residential real estate loans more than 90 days delinquent, and 
for repossessed assets.
 
    In August 1993, the OTS adopted a final rule incorporating an 
interest-rate risk component into the risk-based capital regulation. Under 
the rule, an institution with a greater than "normal" level of interest rate 
risk will be subject to a deduction of its interest rate risk component from 
total capital for purposes of calculating its risk-based capital. As a 
result, such an institution will be required to maintain additional capital 
in order to comply with the risk-based capital requirement. An institution 
with a greater than "normal" interest rate risk is defined as an institution 
that would suffer a loss of net portfolio value exceeding 2.0% of the 
estimated economic value of its assets in the event of a 200 basis point 
increase or decrease (with certain minor exceptions) in interest rates. The 
interest rate risk component will be calculated, on a quarterly basis, as 
one-half of the difference between an institution's measured interest rate 
risk and 2.0%, multiplied by the economic value of its assets. The rule also 
authorizes the Director of the OTS, or his designee, to waive or defer an 
institution's interest rate risk component on a case-by-case basis. The final 
rule was originally effective as of January 1, 1994, subject however to a two 
quarter "lag" time between the reporting date of the data used to calculate 
an institution's interest rate risk and the effective date of each quarter's 
interest rate risk component. However, in October 1994 the Director of the 
OTS indicated that it would waive the capital deductions for institutions 
with a greater than "normal" risk until the OTS published an appeals process. 
On August 21, 1995, the OTS released Thrift Bulletin 67 which established (i) 
an appeals process to handle "requests for adjustments" to the interest rate 
risk component and (ii) a process by which "well-capitalized" institutions 
may obtain authorization to use their own interest rate risk model to 
determine their interest rate risk component. The Director of the OTS 
indicated, concurrent with the release of Thrift Bulletin 67, that the OTS 
will continue to delay the implementation of the capital deduction for 
interest rate risk pending the testing of the appeals process set forth in 
Thrift Bulletin 67.
 
    Effective November 28, 1994, the OTS revised its interim policy issued in 
August 1993 under which savings institutions computed their regulatory 
capital in accordance with SFAS No. 115, "Accounting for Certain Investments 
in Debt and Equity Securities." Under the revised OTS policy, savings 
institutions must value securities available for sale at amortized cost for 
regulatory capital purposes. This means that in computing regulatory capital, 
savings institutions should add back any unrealized losses and deduct any 
unrealized gains, net of income taxes, on debt securities reported as a 
separate component of GAAP capital.
 
    At September 30, 1997, the Association exceeded all of its regulatory 
capital requirements, with tangible, core and risk-based capital ratios of 
17.24%, 17.24% and 61.60%, respectively. The following table sets forth the 
Association's compliance with each of the above-described capital 
requirements as of September 30, 1997.
                                       
                                     -32-


<PAGE>
    The following is a reconciliation of the Association's equity determined in
accordance with GAAP to regulatory tangible, core, and risk-based capital at
September 30, 1997.

                                             Tangible      Core      Risk-Based
                                             Capital     Capital(1)  Capital(2)
                                            ----------  -----------  -----------
                                                      (In Thousands)

GAAP equity...............................  $ 127,180   $  127,180   $ 127,180
Unrealized gain on available for sale 
  securities, net of tax..................     (1,631)      (1,631)     (1,631)
Goodwill..................................    --            --         --
Assets required to be deducted............    --            --         --
General valuation allowances(3)...........    --            --           1,064
                                            ----------  -----------   --------
Total regulatory capital..................    125,549      125,549     126,613
Minimum required regulatory capital(4)....     10,976       21,953      16,529
                                            ----------  -----------   --------
Excess regulatory capital.................  $ 114,573   $  103,596   $ 110,084
                                            ----------  -----------   --------
                                            ----------  -----------   --------
Regulatory capital as a percentage........      17.24%       17.24%      61.60%
Minimum capital required as a 
  percentage(4)..........................        1.50%        3.00%       8.00%
                                            ----------  -----------   --------
Regulatory capital as a percentage in
  excess of requirements..................      15.74%       14.24%      53.60%
                                            ----------  -----------   --------
                                            ----------  -----------   --------

------------------------
 
(1) Does not reflect the 4.0% requirement to be met in order for an institution
    to be "adequately capitalized" under the prompt corrective action
    regulations.
 
(2) Does not reflect the interest-rate risk component in the risk-based capital
    requirement, the effective date of which has been postponed as discussed
    above.
 
(3) General valuation allowances are only used in the calculation of risk-based
    capital. Such allowances are limited to 1.25% of risk-weighted assets.
 
(4) Tangible and core capital are computed as a percentage of adjusted total
    assets of $732.5 million. Risk-based capital is computed as a percentage of
    adjusted risk-weighted assets of $206.8 million.
 
    Any savings institution that fails any of the capital requirements is
subject to possible enforcement actions by the OTS or the FDIC. Such actions
could include a capital directive, a cease and desist order, civil money
penalties, the establishment of restrictions on the institution's operations,
termination of federal deposit insurance and the appointment of a conservator or
receiver. The OTS' capital regulation provides that such actions, 

                                 -33-
<PAGE>

through enforcement proceedings or otherwise, could require one or more of a 
variety of corrective actions.
 
    LIQUIDITY REQUIREMENTS.  All savings associations are required to maintain
an average daily balance of liquid assets equal to a certain percentage of the
sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings associations. At September 30, 1997, the required minimum
liquid asset ratio was 5%. The Association has consistently exceeded such
regulatory liquidity requirement and, at September 30, 1997, had a liquidity
ratio of 43.1%, which included mortgage-backed securities maturing within five
years. The short-term liquidity ratio was 8.4% as of such date.
 
    ACCOUNTING REQUIREMENTS.  Applicable OTS accounting regulations and
reporting requirements apply the following standards: (i) regulatory reports
will incorporate GAAP when GAAP is used by federal banking agencies; (ii)
savings association transactions, financial condition and regulatory capital
must be reported and disclosed in accordance with OTS regulatory reporting
requirements that will be at least as stringent as for national banks; and (iii)
the Director of the OTS may prescribe regulatory reporting requirements more
stringent than GAAP whenever the Director determines that such requirements are
necessary to ensure the safe and sound reporting and operation of savings
associations.

    The accounting principles for depository institutions are currently
undergoing review to determine whether the historical cost model or market-based
measure of valuation is the appropriate measure for reporting the assets of such
institutions in their financial statements. Such proposal is controversial
because any change in applicable accounting principles which requires depository
institutions to carry mortgage-backed securities and mortgage loans at fair
market value could result in substantial losses to such institutions and
increased volatility in their liquidity and operations. Currently, it cannot be
predicted whether there may be any changes in the accounting principles for
depository institutions in this regard beyond those imposed by SFAS No. 115 or
when any such changes might become effective.
 
    QUALIFIED THRIFT LENDER TEST.  All savings institutions are required to meet
a QTL test to avoid certain restrictions on their operations. Under Section 2303
of the Economic Growth and Regulatory Paperwork Reduction Act of 1996, a savings
institution can comply with the QTL test by either qualifying as a domestic
building and loan association as defined in Section 7701(a)(19) of the Internal
Revenue Code of 1986, as amended ("Code") or meeting the second prong of the QTL
test set forth in Section 10(m) of the HOLA. A savings association that does not
meet the QTL Test must either convert to a bank charter or comply with the
following restrictions on its operations: (i) the association may not engage in
any new activity or make any new investment, directly or indirectly, unless such
activity or investment is permissible for a national bank; (ii) the branching
powers of the association shall be restricted to those of a national bank; (iii)
the association shall not be eligible to obtain any advances from its FHLB; and
(iv) payment of dividends by the 

                                 -34-
<PAGE>


association shall be subject to the rules regarding payment of dividends by a 
national bank. Upon the expiration of three years from the date the 
association ceases to be a QTL, it must cease any activity and not retain any 
investment not permissible for a national bank and immediately repay any 
outstanding FHLB advances (subject to safety and soundness considerations). 
To date, these restrictions have not limited the Association's operations in 
any manner.
 
    Currently, the prong of the QTL test that is not based on the Code requires
that 65% of an association's "portfolio assets" (as defined) consist of certain
housing and consumer-related assets on a monthly average basis in nine out of
every 12 months. Assets that qualify without limit for inclusion as part of the
65% requirement are loans made to purchase, refinance, construct, improve or
repair domestic residential housing and manufactured housing, home equity loans;
mortgage-backed securities (where the mortgages are secured by domestic
residential housing or manufactured housing); stock issued by the FHLB of New
York; and direct or indirect obligations of the FDIC. In addition, the following
assets, among others, may be included in meeting the test subject to an overall
limit of 20% of the savings association's portfolio assets: 50% of residential
mortgage loans originated and sold within 90 days of origination; 100% of
consumer and educational loans (limited to 10% of total portfolio assets); and
stock issued by the FHLMC or the FNMA. Portfolio assets consist of total assets
minus the sum of (i) goodwill and other intangible assets, (ii) property used by
the savings association to conduct its business, and (iii) liquid assets up to
20% of the association's total assets. At September 30, 1997, the qualified
thrift investments of the Association were approximately 113.0% of its portfolio
assets.
 
    Under OTS regulations which govern the conduct of savings and loan holding
companies, any savings and loan holding company is required to register as a
bank holding company within one year of the failure of the QTL Test by its
subsidiary insured institution. Under such circumstances, the holding company
would become subject to all of the provisions of the BHCA and other statutes
applicable to bank holding companies, in the same manner and to the same extent
as if the company were a bank holding company. The Association ceased to be a
qualified thrift lender in July 1993, but then re-qualified as a qualified
thrift lender in August 1995. Because the Association did not re-qualify as a
QTL by July 1994, which was one year from the date of its failure of the QTL
test, in connection with the conversion and the acquisition of all of the
Association's capital stock by the Company, the Company applied to, and received
approval from, the Board of Governors of the Federal Reserve System to become a
bank holding company. This was in addition to the Association's status as a
savings and loan holding company.
 
    During the last half of fiscal 1994, the Board of Directors authorized the
Association to initiate a "tiered" or laddered investment strategy pursuant to
which it anticipated investing approximately $400.0 million in mortgage-backed
securities and U.S. Government securities with varying maturities and, with
respect to longer-term investments, in mortgage loans. See "Business-General."
Based upon such investment program, the Association as of August 1995 had
maintained monthly averages of QTIs equal to at least 92.21% of 

                               -35-
<PAGE>

portfolio assets for at least nine months over a twelve month period, and had 
thereby re-qualified as a "qualified thrift lender." The Company 
de-registered as a bank holding company in December 1996.
 
    Restrictions on Capital Distributions. OTS regulations govern capital
distributions by savings associations, which include cash dividends, stock
redemptions or repurchases, cash-out mergers, interest payments on certain
convertible debt and other transactions charged to the capital account of a
savings association to make capital distributions. Generally, the regulation
creates a safe harbor for specified levels of capital distributions from
associations meeting at least their minimum capital requirements, so long as
such associations notify the OTS and receive no objection to the distribution
from the OTS. Savings institutions and distributions that do not qualify for the
safe harbor are required to obtain prior OTS approval before making any capital
distributions.
 
    Generally, a savings association that before and after the proposed
distribution meets or exceed its fully phased-in capital requirements (a Tier 1
association) may make capital distributions during any calendar year equal to
the higher of (i) 100% of net income for the calendar year-to-date plus 50% of
its "surplus capital ratio" at the beginning of the calendar year or (ii) 75% of
net income over the most recent four-quarter period. The "surplus capital ratio"
is defined to mean the percentage by which the association's ratio of total
capital to assets exceeds its tangible, core or risk-based capital requirement.
Failure to meet minimum capital requirements will result in further restrictions
on capital distributions, including possible prohibition without explicit OTS
approval. See "--Capital Requirements."
 
    In order to make distributions under these safe harbors, Tier 1 and Tier 2
associations must submit 30 days written notice to the OTS prior to making the
distribution. The OTS may object to the distribution during that 30-day period
based on safety and soundness concerns. In addition, a Tier 1 association deemed
to be in need of more than normal supervision by the OTS may be downgraded to a
Tier 2 or Tier 3 association as a result of such a determination. The
Association currently is a Tier 1 institution for purposes of the regulation
dealing with capital distributions.
 
    OTS regulations also prohibit the Association from declaring or paying any
dividends or from repurchasing any of its stock if, as a result, the regulatory
(or total) capital of the Association would be reduced below the amount required
to be maintained for the liquidation account established by it for certain
depositors in connection with its conversion from mutual to stock form.
 
    On December 5, 1994, the OTS published a notice of proposed rulemaking to
amend its capital distribution regulation. Under the proposal, institutions
would be permitted to only make capital distributions that would not result in
their capital being reduced below the level required to remain "adequately
capitalized." Because the Association is a subsidiary of a holding company, the
proposal would require the Association to provide notice to the OTS of its
intent to make a capital distribution. The Association does not 

                                -36-
<PAGE>

believe that the proposal will adversely affect its ability to make capital 
distributions if it is adopted substantially as proposed.
 
    FEDERAL HOME LOAN BANK SYSTEM.  The Association is a member of the FHLB of
New York, which is one of 12 regional FHLBs that administers the home financing
credit function of savings associations. Each FHLB serves as a reserve or
central bank for its members within its assigned region. It is funded primarily
from proceeds derived from the sale of consolidated obligations of the FHLB
System. It makes loans to members (i.e., advances) in accordance with policies
and procedures established by the Board of Directors of the FHLB. At September
30, 1997, the Association had $34.3 million in FHLB advances.
 
    As a member, the Association is required to purchase and maintain stock in
the FHLB of New York in an amount equal to at least 1% of its aggregate unpaid
residential mortgage loans, home purchase contracts or similar obligations at
the beginning of each year. At September 30, 1997, the Association had $6.1
million in FHLB stock, which was in compliance with this requirement.
 
    The FHLBs are required to provide funds for the resolution of troubled 
savings associations and to contribute to affordable housing programs through 
direct loans or interest subsidies on advances targeted for community 
investment and low- and moderate-income housing projects. These contributions 
have adversely affected the level of FHLB dividends paid and could continue 
to do so in the future. These contributions also could have an adverse effect 
on the value of FHLB stock in the future. For the years ended September 30, 
1997 and 1996, dividends paid by the FHLB of New York to the Association 
totalled approximately $353,000 and $277,000, respectively.
 
    FEDERAL RESERVE SYSTEM.  The Federal Reserve Board requires all depository
institutions to maintain reserves against their transaction accounts (primarily
NOW and Super NOW checking accounts) and non-personal time deposits. As of
September 30, 1997, no reserves were required to be maintained on the first $4.4
million of transaction accounts, reserves of 3% were required to be maintained
against the next $44.9 million of net transaction accounts (with such dollar
amounts subject to adjustment by the FRB), and a reserve of 10% (which is
subject to adjustment by the FRB to a level between 8% and 14%) against all
remaining net transaction accounts. At September 30, 1997, the Association was
in compliance with applicable requirements. However, because required reserves
must be maintained in the form of vault cash or a non interest-bearing account
at a Federal Reserve Association, the effect of this reserve requirement is to
reduce an institution's earning assets.
 
    NEW JERSEY LAW.  The Commissioner regulates the Association's internal
business procedures as well as it deposits, lending and investment activities.
The Commissioner must approve changes to the Association's Certificate of
Incorporation, establishment or relocation of branch offices, mergers and the
issuance of additional stock. In addition, the Commissioner conducts periodic
examinations of the Association. Certain of the areas regulated by the
Commissioner are not subject to similar regulation by the FDIC.

                                 -37-
<PAGE>

    Recent federal and state legislative developments have reduced distinctions
between commercial banks and SAIF-insured savings institutions in New Jersey
with respect to lending and investment authority as well as interest rate
limitations. As federal law has expanded the authority of federally chartered
savings institutions to engage in activities previously reserved for commercial
banks, New Jersey legislation and regulations ("parity legislation") have given
New Jersey chartered savings institutions, such as the Association, the powers
of federally chartered savings institutions.
 
FEDERAL AND STATE TAXATION
 
    GENERAL. The Company and the Association are subject to the corporate tax 
provisions of the Code, as well as certain additional provisions of the Code 
which apply to thrift and other types of financial institutions. 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 and the Association.
 
    FISCAL YEAR.  The Company and the Association and its subsidiaries file a
consolidated federal income tax return on a September 30 fiscal year end basis,
beginning with the fiscal year ended September 30, 1995.
 
    METHOD OF ACCOUNTING.  The Association maintains its books and records for
federal income tax purposes using the accrual method of accounting. The accrual
method of accounting generally requires that items of income be recognized when
all events have occurred that establish the right to receive the income and the
amount of income can be determined with reasonable accuracy, and that items of
expense be deducted at the later of (i) the time when all events have occurred
that establish the liability to pay the expense and the amount of such liability
can be determined with reasonable accuracy or (ii) the time when economic
performance with respect to the item of expense has occurred.
 
    BAD DEBT RESERVES.  Savings associations, such as the Association, which
meet certain definitional tests primarily relating to their assets and the
nature of their businesses, are permitted to establish a reserve for bad debts
and to make annual additions to the reserve. These additions may, within
specified formula limits, be deducted in arriving at the institution's taxable
income.
 
    In August 1996, legislation was enacted that repeals the reserve method 
of accounting (including the percentage of taxable income method) previously 
used by many savings associations to calculate their bad debt reserve for 
federal income tax purposes. As a result, the Association must recapture that 
portion of its reserve which exceeds the amount that could have been taken 
under the experience method for post-1987 tax years. As the Company has 
previously provided deferred taxes on this amount, no additional financial 
statement tax expense should result from this new legislation. The recapture 
amount may be suspended for two years if the Association meets certain 
residential lending origination requirements.
 
                          -38-
<PAGE>

    DISTRIBUTIONS.  If the Association were to distribute cash or property to
its sole stockholder having a total fair market value in excess of its
accumulated tax-paid earnings and profits, or were to distribute cash or
property to its stockholder in redemption of its stock, the Association would
generally be required to recognize as income an amount which, when reduced by
the amount of federal income tax that would be attributable to the inclusion of
such amount in income, is equal to the lesser of: (i) the amount of the
distribution or (ii) the sum of (a) the amount of the accumulated bad debt
reserve of the Association with respect to qualifying real property loans (to
the extent that additions to such reserve exceed the additions that would be
permitted under the experience method) and (b) the amount of the Association's
supplemental bad debt reserve.
 
    MINIMUM TAX.  The Code imposes an alternative minimum tax at a rate of 20%
on a base of regular taxable income plus certain tax preferences ("alternative
minimum taxable income" or "AMTI"). The alternative minimum tax is payable to
the extent such AMTI is in excess of an exemption amount. The Code provides that
an item of tax preference is the excess of the bad debt deduction allowable for
a taxable year pursuant to the percentage of taxable income method over the
amount allowable under the experience method. Other items of tax preference that
constitute AMTI include (a) tax exempt interest on newly-issued (generally,
issued on or after August 8, 1986) private activity bonds other than certain
qualified bonds and (b) 75% of the excess (if any) of (i) adjusted current
earnings as defined in the Code, over (ii) AMTI (determined without regard to
this preference and prior to reduction by net operating losses). Net operating
losses can offset no more than 90% of AMTI. Certain payments of alternative
minimum tax may be used as credits against regular tax liabilities in future
years.
 
    AUDIT BY IRS.  The Association's federal income tax returns for taxable
years through December 31, 1994 have been closed for the purpose of examination
by the Internal Revenue Service.
 
    STATE TAXATION.  The Company and its non-thrift subsidiaries that are
engaged in business in New Jersey are subject to the state's Corporate Business
Tax Act which imposes a "franchise tax" at the rate of 9% on the Company's and
its non-thrift subsidiaries' taxable income, before net operating loss
deductions and special deductions, as calculated for federal income tax
purposes. The Association is taxed at the rate of 3% on its taxable income,
before net operating loss deductions and special deductions for federal income
tax purposes. 

                                -39-
<PAGE>

Item 2. Properties

    The following table sets forth certain information with respect to the
Association's branch offices and operations center at September 30, 1997.


                                                     Net Book
                                                     Value of     Amount of
Description/Address                    Leased/Owned  Property     Deposits
-------------------------------------  ------------  ---------  -------------
                                                    (In Thousands)
Main Office:
------------
Route 70 and Springdale Road               Owned      $   387   $    148,653
Cherry Hill, New Jersey 08003                   

Branch Offices:
---------------
Kings Highway and Chapel Avenue          Leased(1)          5         46,756
Cherry Hill, New Jersey 08034                     

Centrum Shopping Center                  Leased(2)          5         35,656
219Y Haddonfield Berlin Road
Cherry Hill, New Jersey 08034                     

400 White Horse Pike                       Owned          338        163,071
Laurel Springs, New Jersey 08021                

Route 73 and Brick Road                  Leased(3)          9         27,004
Marlton, New Jersey 08053                         

Pleasant Valley Ave. and                   Owned          201         51,134
  Fellowship Road
Mount Laurel, New Jersey 08054                  

Hurffville--Crosskeys Road and             Owned            7         32,804
  Altair Drive
Washington Township, New Jersey 08012           

Route 70 and Hartford Road                 Owned          272         56,702
Medford, New Jersey 08055                       

1651 Blackwood-Clementon Road              Owned           668         2,754
Gloucester Township, New Jersey 08012           

1 Lucas Lane                               Owned           412         2,427
Voorhees, New Jersey 08043                      

Operations Center:
------------------
1909 E. Marlton Pike                       Owned          4,145      --
Cherry Hill, New Jersey 08003                   
                                                     -----------  ----------
                                                     $    6,449   $  566,961(4)
                                                     -----------  ----------
                                                     -----------  ----------

------------------------
 
(1) Ten year lease expires May 31, 2000 with no lease renewal options.
 
(2) Five year lease expires May 31, 1998 with two, five-year renewal options
    thereafter.
 
(3) Five year lease expires March 31, 1998 with no lease renewal options.
 
(4) Does not include accrued interest of $414. 

                                -40-
<PAGE>

Item 3. Legal Proceedings.
 
    There are no material legal proceedings to which the Company or any
subsidiary is a party or to which any of their property is subject, except as
described below.
 
    On November 12, 1996, the Company filed suit in the United States 
District Court for the District of New Jersey against Lawrence B. 
Seidman, Richard Whitman and other members of the "IBS Financial Corp. 
Committee to Maximize Shareholder Value." The Company's complaint alleged 
that the Committee had failed to disclose all the information required by the 
federal securities laws and the Company's Certificate of Incorporation in the 
materials the Committee had submitted in connection with the nomination of 
Ernest Beier, Jr., for election as a director of the Company, and in the 
Committee's Schedule 13D filings with the Securities and Exchange Commission. 
The Company sought a declaratory judgment that the Committee's filings were 
incomplete and inadequate, that the Company's Board could reject the 
nomination of Mr. Beier, and that the Company need not, at that time, provide 
a shareholder list to the Committee. The complaint also asked for an 
injunction against further violations of the securities laws by Messrs. 
Seidman and Whitman and the other members of their group. Some members of the 
Committee counterclaimed, challenging the action of the Company's Board, in 
July 1996, reducing the number of directors from seven to six.
 
    A mere six days after the Company's lawsuit was filed, Mr. Seidman's group
amended its Schedule 13D to disclose for the first time an 18 month old
agreement involving 96,025 shares of the Company's Common Stock. The amended
Schedule 13D also corrected some, but not all, of the deficiencies noted in the
Company's lawsuit. For example, certain members of the Committee are limited
liability companies or limited partnerships; the Committee did not disclose, in
its amended Schedule 13D, the names of the investors in those limited liability
entities nor did it attach the limited partnership and operating agreements.
 
    After a preliminary litigation conference, Mr. Seidman's group further
amended its Schedule 13D to disclose publicly for the first time various limited
partnership and operating agreements, to disclose for the first time the
identities of the persons or entities who had invested in the four members of
the group formed directly or indirectly by Mr. Seidman, and to disclose for the
first time the identities of five individuals who had entered into agreements
with Mr. Seidman regarding the voting of their shares.
 
    As a result of the expedited discovery conducted by the Company and the 
amended Schedule 13Ds filed by the Seidman group, the Company discovered that 
Seidcal Associates, L.L.C. ("Seidcal") owns 71.4% of Seidman and Associates, 
L.L.C. ("SAL") and 75.0% of Seidman and Associates II, L.L.C. ("SAL II") (SAL 
and SAL II are members of the Committee). The Company also discovered that 
Charisma Partners, L.P. ("Partners") owns 54.5% of Federal Holdings L.L.C. 
("Holdings") (Holdings is a member of the Committee), that 8th Floor Realty 
Corp. ("Realty Corp.") is the sole general partner of Partners, and that 

                                -41-
<PAGE>

Kevin Moore is a Vice President of Realty Corp., the organizer of Holdings 
and the Administrative Manager of Holdings. To date, however, no information 
regarding the members of Seidcal, the directors and other executive officers 
of Realty Corp., or the business, source of funds or controlling persons of 
Seidcal, Partners or Realty Corp. has been publicly disclosed by the Seidman 
group.
 
    On January 23, 1997, the District Court ruled that the Schedule 13D
amendments filed by Mr. Seidman's group after the litigation was commenced
mooted the Company's claims regarding the deficient disclosures initially
provided by Mr. Seidman's group and that the amended Schedule 13Ds were
adequate. Because the judge noted that "(a)n amendment which cures a violation
of the Exchange Act moots a claim that arises from the failure to file a proper
Schedule 13D," the Court did not find it necessary to rule expressly that the
prior Schedule 13Ds violated the securities laws. The District Court also held
that the Company did not meet its burden of proof in demonstrating (1) Seidcal's
control over SAL and SAL II, (2) the control of Partners, Realty Corp. and Kevin
Moore over Holdings, (3) that Seidcal, Partners and Realty Corp. had arranged
for financing, or (4) that Seidcal, Partners and Realty Corp. were
"participants" in the Seidman's group's proxy solicitation. In addition, because
the nominating materials were similar to those received by the Company the prior
year and because the Court believed the Company was not prejudiced by the
failure of the Seidman group to provide proper disclosures in a timely manner,
the Court declined to enforce the disclosure requirements in the Company's
Certificate of Incorporation and held that the Company could not reject the
defendants' nominations as deficient or untimely and that the defendants could
receive a stockholder list. Furthermore, the court set aside the July 1996
reduction in Board size, even though the decision to reduce the size of the
Board was made several months prior to the submission of nominees by the Seidman
group (the reduction in Board size was first disclosed to the Seidman group in
October 1996).
 
    The Company believes that the Seidman group's disclosure are still 
inadequate, particularly since the group's Schedule 13Ds fail to provide any 
disclosures regarding Seidcal and Partners. Although Seidcal and Partners 
each owns more than 50% of one or more of the limited liability companies 
formed by Mr. Seidman, and although Seidcal and Partners each has the 
contractual right to make certain decisions for those companies, the Seidman 
group has argued that they are not "control persons", and has refused to make 
complete disclosures about them. The Company also believes that the Company's 
Board properly rejected the nomination of Mr. Beier, and reasonably and 
properly decided to reduce the Board's size. For these reasons, on January 
31, 1997, the Company appealed the District Court's decision to the United 
States Court of Appeals for the Third Circuit, and the Company requested that 
the Third Circuit hear the appeal on an expedited basis. On February 7, 1997, 
Mr. Seidman's group opposed the request for an expedited appeal.
 
    On February 28, 1997, the United States Court of Appeals for the Third
Circuit granted the Company's motion for an expedited appeal, over the objection
of the Seidman 
 
                                -42-
<PAGE>

group. The appeal was argued on May 23, 1997. To date, the Third Circuit has 
not issued a decision on the appeal. 

    While the appeal was pending, Mr. Seidman asked the Superior Court of New 
Jersey, Chancery Division, Passaic County, to set the annual meeting date. On 
February 24, 1997, the Passaic County Court orally directed that the Annual 
Meeting be held on April 18, 1997. The Court stayed that order after the 
Court of Appeals granted the Company's motion for an expedited appeal. On May 
30, 1997, the Passaic County judge ordered that the Company's annual meeting 
of stockholders be held on August 4, 1997, on the assumption that the Third 
Circuit decision would be received in June. On June 27, 1997, the Passaic 
County judge re-affirmed his order, and the annual meeting was held on August 
4, 1997.

    At the August 4, 1997 annual stockholders' meeting, the Company's
nominees--Messrs. Auchter and Abramowitz--received a majority of the votes cast
at the meeting as set forth in Item 4 below. Mr. Seidman, however, has filed yet
another lawsuit, seeking to overturn the election.
 
    The Company's Employee Stock Ownership Plan ("ESOP"), like the ESOPs of many
other companies, provides for "mirror" or "proportional" voting of shares not
yet allocated to the accounts of employee-participants. The ESOP trustees
ordinarily vote the unallocated shares "in the same proportion for and against
proposals" as the employee-participants choose to vote their allocated shares,
unless the trustees determine that compliance with applicable law, the fiduciary
duties of the trustees or an Employer ESOP Voting Policy requires the shares to
be voted in a different manner. All but a handful of the employee-participants
in the ESOP directed the trustees to vote the "allocated" stock for the
Company's slate of candidates for election as directors at the August 4, 1997
meeting. The trustees then carefully considered their fiduciary duties under
applicable law and the provisions of the Employer ESOP Voting Policy, and the
trustees voted the ESOP's unallocated stock essentially in the same proportion,
for and against, as the employee-participants had directed them to vote the
allocated stock.
 
    In a complaint filed in mid-August in the Superior Court of New Jersey,
Chancery Division, Passaic County, Mr. Seidman challenged the "proportional"
voting of the unallocated shares. Apparently believing that Messrs. Ochman,
Auchter and Borden were still trustees of the ESOP on August 4 (they were not),
Mr. Seidman sued them, Mr. Abramowitz and the Company. He later dismissed his
claims against Mr. Abramowitz.
 
    On August 19, 1997, a Passaic County judge issued an ex parte order
temporarily restraining the Company "from installing Thomas Auchter and Arthur
Abramowitz as New Members of The Board of Directors...."
 
    Defendants removed Mr.Seidman's "ESOP" action to the United States District
Court for the District of New Jersey, and filed an Answer. The Company believes
that the ESOP trustees acted properly and that Mr. Seidman's complaint is
meritless.

                                -43-
<PAGE>
 
    On September 19, 1997, the ESOP's trustees (Mr. Borden, Mr. Gleason and Mr.
Stiles) filed a complaint in the United States District Court for the District
of New Jersey, naming Mr. Seidman as a defendant, and seeking a declaration that
the "proportional" voting provision of the ESOP is lawful and that the trustees
acted properly when they voted the unallocated shares in accordance with the
directions of the ESOP employee-participants. Mr. Seidman has answered the
trustees' complaint.
 
    The trustees' lawsuit has been assigned to the same federal judge as Mr.
Seidman's "ESOP" lawsuit. Formal discovery has yet to begin; no trial has been
set.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
    At the Annual Meeting of Stockholders held on August 4, 1997, the
stockholders of the Company elected the Company's nominees for director and
ratified the appointment of the Company's independent auditors, as set forth
below. The number of shares present at the Annual Meeting in person or by proxy
was 9,379,558. The matters voted upon together with the applicable voting
results were as follows:

                                               For      Withhold
                                            ---------  -----------

1.  Election of Directors
      Thomas J. Auchter...................  4,911,642     115,941
      Arthur J. Abramowitz................  4,922,437     105,146
      Ernest Beier, Jr....................  4,340,093      11,882
      Richard Whitman.....................  4,340,030      11,945
 
                                               For       Against      Abstain
                                            ---------  -----------   ---------
 
2.   Ratification of appointment
     of Deloitte & Touche L.L.P..........   9,217,498      43,042      118,918
 
    The other directors of the Company whose terms continued after the Annual
Meeting are John A. Borden, Paul W. Gleason, Francis X. Lorbecki, Jr., Joseph M.
Ochman, Sr. and Albert D. Stiles, Jr. As discussed under Item 3 above, following
the Annual Meeting, Mr. Seidman filed additional litigation with regard to the
election of Messrs. Auchter and Abramowitz.



                                 -44-
<PAGE>

PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
    Shares of the Company's common stock are traded nationally under the symbol
"IBSF" on the Nasdaq National Market. See also Note 20 of the Notes to
Consolidated Financial Statements in Item 8 hereof incorporated herein by
reference.
 
    At November 30, 1997, the Company had approximately 2,100 stockholders of
record.
 
ITEM 6. SELECTED FINANCIAL DATA.
 
    The information required herein is incorporated by reference from page 5 of
the Registrant's 1997 Annual Report.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS.
 
    The information required herein is incorporated by reference from pages 6 to
21 of the Registrant's 1997 Annual Report.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
    The information required herein is incorporated by reference from pages 10
to 13 of the Registrant's 1997 Annual Report.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
    The information required herein is incorporated by reference from pages 22
to 48 of the Registrant's 1997 Annual Report.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE.
 
    Not applicable.
 
                                       -45-

<PAGE>
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
 
    The following tables present information concerning the director of the
Company, including tenure as a director of the Company's subsidiary, Inter-Boro
Savings and Loan Association.

    DIRECTORS WHOSE TERMS EXPIRE IN 1998
 
<TABLE>
<CAPTION>
                                                                  Principal Occupation
                                                                         During             Director
                     Name                          Age(1)         the Past Five Years         Since
----------------------------------------------  -------------  --------------------------  -----------
 
<S>                                             <C>            <C>                         <C>
John A. Borden                                       79        Director; engaged in real      1966
                                                               estate related activities
                                                               since 1937 and independent
                                                               real estate appraiser
                                                               since 1953.
 
Joseph M. Ochman, Sr.                                66        Chairman of the Board of       1971
                                                               the Association since 1976
                                                               and of the Company since
                                                               1994; President and Chief
                                                               Executive Officer of the
                                                               Association since 1971 and
                                                               of the Company since 1994.
</TABLE>
 
    DIRECTOR WHOSE TERM EXPIRES IN 1999
 
<TABLE>
<CAPTION>
                                                                  Principal Occupation
                                                                         During             Director
                     Name                          Age(1)         the Past Five Years         Since
----------------------------------------------  -------------  --------------------------  -----------
 
<S>                                             <C>            <C>                         <C>
Paul W. Gleason                                      78        Director; currently            1976
                                                               retired. Formerly Chairman
                                                               of the Board and principal
                                                               stockholder of Formigli
                                                               Corporation, a concrete
                                                               business, Berlin, New
                                                               Jersey.
</TABLE>
 
                                       -46-

<PAGE>

    DIRECTORS WHOSE TERMS EXPIRE IN 2000
 
<TABLE>
<CAPTION>
                                                                  Principal Occupation
                                                                         During             Director
                     Name                          Age(1)         the Past Five Years         Since
----------------------------------------------  -------------  --------------------------  -----------
 
<S>                                             <C>            <C>                         <C>
Francis X. Lorbecki, Jr.                             75        Director; currently            1968
                                                               retired. Formerly Senior
                                                               Vice President and loan
                                                               officer of the Association
                                                               until 1981.
 
Albert D. Stiles, Jr.                                70        Director; founder and          1977
                                                               owner of Wills and Stiles,
                                                               Inc., an electrical
                                                               contractor, Medford, New
                                                               Jersey; self-employed
                                                               builder and developer of
                                                               residential and commercial
                                                               properties in the South
                                                               Jersey area.
</TABLE>
 
    DIRECTOR WHOSE TERM EXPIRE IN 2001
 
<TABLE>
<CAPTION>
                                                                  Principal Occupation
                                                                         During             Director
                     Name                          Age(1)         the Past Five Years         Since
----------------------------------------------  -------------  --------------------------  -----------
 
<S>                                             <C>            <C>                         <C>
Thomas J. Auchter                                    71        Director; President of         1967
                                                               Investment 2010, a private 
                                                               investment company, since 
                                                               1991. Formerly Director of 
                                                               Finance and Treasurer, 
                                                               Delaware River Port 
                                                               Authority, Camden, New 
                                                               Jersey, from 1960 to 1991.
</TABLE>
 
------------------------
 
(1) As of September 30, 1997. 

                                        -47-

<PAGE>

EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
 
    Set forth below is information with respect to the principal occupations
during the last five years for the five executive officers of the Company and
the Association who do not serve as directors.
 
    Richard G. Sharp. Mr. Sharp has served as Executive Vice President and Chief
Financial Officer of the Association since 1984 and of the Company since 1994,
and has been employed in various capacities at the Association since 1972. Mr.
Sharp is a past President of the Philadelphia Chapter of the Financial Managers
Society and a past District Director of the Financial Managers Society's
national organization. Mr. Sharp is currently a member of the Pennsylvania
Institute of Certified Public Accountants, the American Institute of Certified
Public Accountants and the Financial Managers Society. Mr. Sharp is 63 years old
as of September 30, 1997.
 
    Matthew J. Kennedy. Mr. Kennedy has served as Executive Vice President and
Treasurer of the Company and the Association since April 1996 and prior thereto
as Senior Vice President and Assistant Treasurer since September 1995. He joined
the Association in February 1995 as a Vice President. Mr. Kennedy was previously
employed by Valley Federal Savings and Loan Association, Easton, Pennsylvania,
where he served as Executive Vice President and Chief Financial Officer from
1985 to November 1993. Mr. Kennedy is 53 years old as of September 30, 1997.
 
    Anthony C. Chigounis. Mr. Chigounis has served as Senior Vice President,
Operations and Administration of the Association since 1984, and has been
employed in various capacities at the Association since 1971. Mr. Chigounis has
been active in a number of civic organizations, including the United Way of both
Burlington and Camden County, New Jersey. Mr. Chigounis served as President of
the Camden County Council of Boy Scouts of America and is currently a member of
the Executive Council. Mr. Chigounis is 60 years old as of September 30, 1997.
 
    Andrew A. Cosenza. Mr. Cosenza has served as Senior Vice President, Savings
Officer of the Association since 1984, and has been employed in various
capacities at the Association since 1970. Mr. Cosenza is a member and past
Director of the Philadelphia Chapter of the Financial Managers Society, and a
member of the Delaware Valley Chapter of the Institute for Financial Education.
Mr. Cosenza has also been affiliated with the United Way of Camden County since
1980. Mr. Cosenza is 55 years old as of September 30, 1997.
 
    Lorraine H. O'Hara. Ms. O'Hara has served as Senior Vice President and
Assistant Secretary of the Association since 1987, and has served in various
capacities at the Association since 1966. Ms. O'Hara is a member and past
President of the Philadelphia Chapter of the Financial Managers Society and is a
member of the New Jersey State League Human Resource Committee and the South
Jersey Human Resources Group. Ms. O'Hara 

                                       -48-

<PAGE>

has also been active in several United Way annual campaigns. Ms. O'Hara is 72 
years old as of September 30, 1997.

ITEM 11. EXECUTIVE COMPENSATION.
 
SUMMARY COMPENSATION TABLE
 
    The following table sets forth a summary of certain information concerning
the compensation paid by the Company and the Association for services rendered
in all capacities during the three years ended September 30, 1996 to the
President and Chief Executive Officer of the Company and the Association and
each other executive officer of the Company and its subsidiaries whose total
compensation during the fiscal year exceeded $100,000.
 
<TABLE>
<CAPTION>
                                               Annual Compensation                   Long Term Compensation
                                     ---------------------------------------  ------------------------------------
                                                                                      Awards             Payouts
                                                                              ------------------------   --------
       Name and           Fiscal                              Other Annual       Stock       Number of     LTIP       All Other
  Principal Position       Year      Salary(1)   Bonus(2)   Compensation(3)    Grants(4)    Options(5)    Payouts   Compensation
----------------------  -----------  ----------  ---------  ----------------  ------------  -----------  ---------  -------------
 
<S>                     <C>          <C>         <C>        <C>               <C>           <C>          <C>        <C>
Joseph M. Ochman, Sr.         1997   $  548,000  $      --     $       --      $        --          --          --      $606,679(6)
President and Chief           1996      523,882         --             --               --          --          --       311,338
Executive Officer             1995      482,750     90,000             --        1,204,506     367,157          --        86,896
 
Richard G. Sharp              1997   $  121,680  $      --     $       --      $        --          --          --      $ 60,223(6)
Executive Vice                1996      119,060         --             --               --          --          --        65,682
President and CFO             1995      113,295     18,000             --          481,794     147,969          --        10,676
 
Matthew J. Kennedy
Executive Vice                1997   $  106,808  $      --     $       --      $        --       6,900          --      $ 49,231
President and                 1996       93,493         --             --               --       2,300          --            --
Treasurer                     1995       55,408      4,000             --               --      25,300          --            --
</TABLE>
 
------------------------
 
(1) Includes $0, $16,000 and $62,500 accrued on behalf of Mr. Ochman pursuant to
    a deferred compensation plan in fiscal 1997, 1996 and 1995, respectively.
 
(2) The Company did not pay its senior executive officers a bonus for fiscal
    1997 or 1996.
 
(3) Does not include amounts attributable to miscellaneous benefits received by
    the named executive officers. In the opinion of management of the
    Association, the costs to the Association of providing such benefits to each
    named executive officer during the year ended September 30, 1997 did not
    exceed the lesser of $50,000 or 10% of the total of annual salary and bonus
    reported for the individual.
 
(4) Represents the grant of 146,863 and 58,744 shares of restricted Common Stock
    to Messrs. Ochman and Sharp, respectively, pursuant to the Company's
    Recognition Plan, which were deemed to have had the indicated value at the
    date of grant. The restricted Common Stock awarded to Messrs. Ochman and
    Sharp which had not yet vested as of September 30, 1997 had a fair market
    value of $1.5 million and $601,000 at September 30, 1997, respectively,
    based on the $17.063 per share closing market 

                                       -49-

<PAGE>

    price on such date. The awards vest 20% each year beginning January 19, 
    1996, and dividends are paid on the restricted shares.
 
(5) Consists of stock options granted pursuant to the Company's 1995 Stock
    Option Plan which are exercisable at the rate of 20% each year beginning
    January 19, 1996.
 
(6) Includes $9,510 in premiums paid on certain life insurance policies,
    $535,521 of stock units allocated to Mr. Ochman's account under the
    Company's Excess Benefit Plan, and $1,900 for fees paid for service as
    trustee of the Association's pension plan to Mr. Ochman in fiscal 1997. 
    Also includes $60,223, $60,223 and $49,231 for 4,112 shares, 4,112 shares 
    and 3,361 shares allocated on behalf of Messrs. Ochman, Sharp and Kennedy, 
    respectively, in fiscal 1997 under the Company's ESOP.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
    The Compensation Review Committee of the Board of Directors recommends
compensation for the Association's employees, which is then ratified by the full
Board of Directors. During the fiscal year ended September 30, 1997, the members
of the Committee were Messrs. Borden (Chairman), Gleason and Stiles. During
fiscal 1997, no member of the Compensation Review Committee was a former or
current full-time officer or employee of the Company or the Association.

                                       -50-
<PAGE>

STOCK OPTIONS
 
    The following table sets forth, with respect to each executive officer 
named in the Summary Compensation Table, information with respect to stock 
options granted during fiscal 1997.

<TABLE>
<CAPTION>

                                                                               Potential Realizable Value at     Alternative To (f)
                                                                               Assumed Annual Rates of Stock       And (g): Grant
                                           Individual Grants                 Price Appreciation for Option Term       Date Value
                        ---------------------------------------------------  ----------------------------------  ------------------
                                    Percent of Total                                                                 Grant Date
                         Options     Options Granted   Exercise  Expiration       5% ($)           10% ($)         Percent Value $
      Name              Granted(1)   to Employees(2)   Price(3)     Date           (f)               (g)                (h)
----------------------  ----------  ----------------   --------  ----------  ----------------  ----------------  ------------------
<S>                     <C>         <C>                <C>       <C>         <C>               <C>               <C>
Joseph M. Ochman, Sr..      --             --             --         --            --                --                  -- 
Richard G. Sharp......      --             --             --         --            --                --                  -- 
Matthew J. Kennedy....     6,900           63%          $15.00     3/21/07      $65,067(4)       $171,879(4)            N/A 
</TABLE>
 
------------------------
(1) None of the indicated awards were accompanied by stock appreciation rights.
 
(2) Percentage of options granted to all employees and directors during fiscal
    1997.
 
(3) The exercise price was based on the market price of the Common Stock on the
    date of the grant.
 
(4) Assumes compounded rates of return for the remaining option life and future
    stock prices of $24.43 and $38.91 per share at 5% and 10%, respectively.
 
    The following table discloses certain information regarding the options held
at September 30, 1997 by the Chief Executive Officer and each other named
executive officer.
 
<TABLE>
<CAPTION>
                                                                        Number of Options at        Value of Options at     
                                                                         September 30, 1997          September 30, 1997     
                                              Shares                 --------------------------  -------------------------- 
                                             Acquired      Value     
                 Name                       on Exercise   Realized   Exercisable  Unexercisable  Exercisable  Unexercisable
------------------------------------------  -----------  ----------  -----------  -------------  -----------  -------------
<S>                                         <C>          <C>         <C>          <C>            <C>          <C>
Joseph M. Ochman, Sr......................      58,885   $  432,315      87,968        220,294    $ 779,484    $ 1,952,025
Richard G. Sharp..........................      --           --          59,188         88,781      524,465        786,688
Matthew J. Kennedy........................      --           --          10,580         23,920       60,729        137,301
</TABLE>
 
------------------------
(1) Based on a per share market price of $17.063 at September 30, 1997.

                                       -51-

<PAGE>

DIRECTORS' FEES
 
    Directors of the Company received an annual fee of $2,400 from the Company
during fiscal 1997. Directors of the Association are paid a monthly fee for
attendance at each Board of Directors' meeting. The amount of the fee was $1,325
during fiscal 1997. Two paid absences are permitted. For service on the
Executive Committee, which generally meets once a month, directors received fees
of $575 per meeting attended in fiscal 1997. For service on the General Loan
Committee, which generally meets twice each month, directors received fees of
$500 per meeting attended in fiscal 1997. For all other meetings of committees,
which meet as needed, directors received fees of $475 per meeting attended
during fiscal 1997. Those directors who serve as trustees of the Association's
Retirement Plan receive a fee, which amounted to $475 per quarter during fiscal
1997. The Chairman of the Board of Directors does not receive any fees for
service as Chairman.

EMPLOYMENT AGREEMENTS
 
    The Company and the Association (the "Employers") during October 1994
entered into employment agreements with each of Messrs. Ochman, Sharp,
Chigounis, Cosenza and Ms. O'Hara. The Employers agreed to employ Messrs. Ochman
and Sharp for a term of three years and the other officers for a term of two
years, in each case in their current respective positions. The agreements with
Messrs. Chigounis and Cosenza and Ms. O'Hara expired in October 1996, and the
agreement with Mr. Sharp expired in October 1997. On April 22, 1996, Mr.
Ochman's joint agreement with both the Company and the Association was replaced
by two separate three-year employment agreements--one with the Company and one
with the Association. The compensation and expenses of Mr. Ochman (the
"Executive") are paid by the Company and the Association in the same proportion
as the time and services actually expended by the Executive on behalf of each
respective Employer. The term of Mr. Ochman's employment agreements with the
Company and the Association shall be extended each year for a successive
additional one-year period upon approval of the respective Board of Directors
unless Mr. Ochman elects, not less than 30 days prior to the annual anniversary
date, not to extend the employment term.
 
    The Executive's employment agreements are terminable with or without cause
by the respective Employer(s). The Executive has no right to compensation or
other benefits pursuant to the employment agreement for any period after
voluntary termination or termination by the respective Employer(s) for cause,
disability, retirement or death, provided, however, that (i) in the event that
(a) the Executive terminates his employment because of failure of the respective
Employer(s) to comply with any material provision of the employment agreement or
the respective Employer(s) change the Executive's title or duties, or (b) the
employment agreement is terminated by the respective Employer(s) other than for
cause, disability, retirement or death or by the Executive as a result of
certain adverse actions which are taken with respect to the Executive's
employment following a Change in Control of the Company, as defined, the
Executive will be entitled to a cash severance amount equal to three times the
Executive's base salary, and (ii) Mr. Ochman's

                                       -52-

<PAGE>

employment agreements provide for certain death, disability and medical 
benefits as set forth below. In addition, Mr. Ochman will be entitled to a 
continuation of benefits similar to those he is receiving at the time of such 
termination for the remaining term of the agreement or until he obtains 
full-time employment with another employer.
 
    A Change in Control is generally defined in the employment agreements to
include any change in control of the Company required to be reported under the
federal securities laws, as well as (i) the acquisition by any person of 25% or
more of the Company's outstanding voting securities and (ii) a change in a
majority of the directors of the Company during any two-year period without the
approval of at least two-thirds of the persons who were directors of the Company
at the beginning of such period.
 
    The employment agreement with the Association provides that if the payments
and benefits to be provided thereunder or otherwise upon termination of
employment are deemed to constitute a "parachute payment" within the meaning of
Section 280G of the Code, then such payments and benefits payable thereunder
shall be reduced, in the manner determined by the Executive, by the amount, if
any, which is the minimum necessary to result in no portion of the payments and
benefits being non-deductible by the Employers for federal income tax purposes.
Parachute payments generally are payments in excess of three times the base
amount, which is defined to mean the recipient's average annual compensation
from the employer includible in the recipient's gross income during the most
recent five taxable years ending before the date on which a change in control of
the employer occurred. Recipients of parachute payments are subject to a 20%
excise tax on the amount by which such payments exceed the base amount, in
addition to regular income taxes, and payments in excess of the base amount are
not deductible by the employer as compensation expense for federal income tax
purposes. Under Mr. Ochman's employment agreement with the Company, Mr. Ochman
could receive payments and benefits that constitute a parachute payment, in
which event the Company has agreed to pay the 20% excise tax that would
otherwise be owed by Mr. Ochman and such additional amounts as may be necessary
to reimburse Mr. Ochman for the state and federal income and excise taxes on
such amounts. Because the amount of the payments and benefits that could
constitute a parachute payment is dependent upon the timing, price and structure
of any change in control that may occur in the future, it is not possible at
this time to quantify the dollar impact of this change in Mr. Ochman's
employment agreement.

    Consistent with past practice, Mr. Ochman is provided with the use of an
automobile and the Employers pay the annual membership dues at two clubs. Under
Mr. Ochman's employment agreements, the Employers will provide coverage for Mr.
Ochman and his spouse under the Employers' health insurance plan until Mr.
Ochman attains age 70. In the event of Mr. Ochman's death or disability during
the term of the agreements, his spouse, estate, legal representative or named
beneficiaries will receive payments equal to the balance due to Mr. Ochman for
the remaining term of the agreements and Mr. Ochman's spouse will continue to be
covered under the Employers' health insurance plan for three years.

                                       -53-

<PAGE>

    Although the above-described employment agreements could increase the cost
of any acquisition of control of the Company, management of the Company does not
believe that the terms thereof would have a significant anti-takeover effect.
 
BENEFITS
 
    RETIREMENT PLAN.  The Association previously maintained a defined benefit 
pension plan ("Retirement Plan") for all full time employees who had attained 
the age of 21 years and had completed one year of service with the 
Association. In general, the Retirement Plan provided for annual benefits 
payable monthly upon retirement at age 65 in an amount equal to between 1.35% 
and 2.00% of an employee's average earnings, which was the average 
compensation paid to him or her over the five consecutive years of service 
which produced the highest average during the 10 years preceding the 
participant's retirement or termination of employment, excluding overtime, 
commissions and bonuses, multiplied by his or her years of service (to a 
maximum of 35 years). Under the Retirement Plan, an employee's benefits were 
fully vested after five years of service. During the year ended September 30, 
1996, the Association's pension expense under the Retirement Plan amounted to 
$291,000.
 
    At September 30, 1996, Messrs. Ochman, Sharp and Kennedy had 27, 24 and 2
years, respectively, of credited service under the Retirement Plan. The
Association terminated the Retirement Plan effective September 1, 1996 and
provided the participants with their benefits in March 1997. Messrs. Ochman,
Sharp and Kennedy received cumulative benefits under the Retirement Plan in lump
sum distributions of approximately $1.15 million, $543,000 and $22,000,
respectively, which cumulative benefits reflect 27, 24 and 2 years,
respectively, of credited service.
 
    SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT.  In September 1987, the
Association entered into a Supplemental Executive Retirement Agreement ("SERP")
with Mr. Ochman in order to supplement the retirement benefits to be received by
him pursuant to the Association's Retirement Plan. Under the SERP, upon
retirement from the Association after attaining age 65, Mr. Ochman would have
been entitled to receive an annual supplemental retirement benefit equal to
1.35% of his final average earnings, as defined in the Retirement Plan, up to
the social security covered compensation, plus 2% of final average earnings in
excess of such amount multiplied by Mr. Ochman's years of service (to a maximum
of 35 years), and reduced by the benefit payable under the Retirement Plan. The
obligation to make payments pursuant to the SERP was unfunded, and the
Association annually credited to an account an amount which was projected to be
sufficient to defray the Association's obligation under the SERP. During the
year ended September 30, 1996, the Association recognized an expense of $824,000
in connection with the SERP. The Association has terminated the SERP effective
September 1, 1996 and provided cumulative SERP benefits of approximately $1.7
million to Mr. Ochman in March 1997. This amount represents cumulative benefits,
including the earnings thereon, since 1987.

                                      -54-

<PAGE>
 
    DEFERRED COMPENSATION AGREEMENT.  In January 1977, the Association and 
Mr. Ochman entered into a deferred compensation agreement which was restated 
as of December 1988 (the "Agreement"), pursuant to which Mr. Ochman was 
permitted to defer a discretionary percentage of the total compensation 
otherwise payable to him. The payment of deferred compensation pursuant to 
the Agreement was unfunded, and the Association credited to a deferred 
compensation account the amounts of compensation deferred by Mr. Ochman. 
Amounts held pursuant to the Agreement were required to be paid to Mr. Ochman 
within 60 days following the date of the termination of his employment with 
the Association, or as may be permitted at an earlier date by the Board of 
Directors with Mr. Ochman abstaining from voting. Mr. Ochman deferred $16,000 
of compensation during fiscal 1996. The Association and Mr. Ochman terminated 
the agreement in January 1996, at which time the remaining cumulative 
deferred amount of $202,000 was distributed to Mr. Ochman.
 
    LIFE INSURANCE ARRANGEMENTS.  In October 1981, the Association and Mr.
Ochman entered into a supplemental deferred compensation agreement (the
"Supplemental Agreement") pursuant to which the Association agreed to maintain
certain life insurance policies on Mr. Ochman's life with an aggregate face
amount of approximately $389,600 until Mr. Ochman's retirement after having
attained the age of 65. Life insurance policies that were previously owned by
the Association's Retirement Plan were purchased from the Retirement Plan by the
Association pursuant to the Supplemental Agreement for an amount equal to their
then cash value. The policies were amended to provide that the beneficiary of
the policies shall be Mr. Ochman's spouse and her heirs, and the Association
agreed to continue to pay the required premium payments. During the year ended
September 30, 1997, the Association paid total premiums of $9,510 with respect
to these insurance contracts. The Supplemental Agreement provides that,
following Mr. Ochman's retirement or disability, the Association will commence
payment to Mr. Ochman of the cash value of the insurance contracts in monthly
installments over a period of ten years.
 
    EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST.  The Company has established the
ESOP for employees of the Company and the Association. Full-time employees of
the Company and the Association who have been credited with at least 1,000 hours
of service during a twelve month period and who have attained at least age 21
are eligible to participate in the ESOP.
 
    In connection with the mutual to stock conversion of the Association, the
ESOP borrowed funds from the Company to purchase 8% of the Common Stock issued
in the conversion. The loan to the ESOP is being repaid principally from the
Company's and the Association's contributions to the ESOP over a period of 10
years, and the collateral for the loan is the Common Stock purchased by the
ESOP. The Company may, in any plan year, make additional discretionary
contributions for the benefit of plan participants in either cash or shares of
Common Stock, which may be acquired through the purchase of outstanding shares
in the market or from individual stockholders, upon the original issuance of
additional shares by the Company or upon the sale of treasury shares by the
Company. Such purchases, if made, would be funded through additional borrowings
by the ESOP or 

                                       -55-

<PAGE>

additional contributions from the Company. The timing, amount and manner of 
future contributions to the ESOP will be affected by various factors, 
including prevailing regulatory policies, the requirements of applicable laws 
and regulations, and market conditions.
 
    Shares purchased by the ESOP with the proceeds of the loan are held in a
suspense account and released on a pro rata basis as debt service payments are
made. Discretionary contributions to the ESOP and shares released from the
suspense account are allocated among participants on the basis of compensation.
Forfeitures are reallocated among remaining participating employees and may
reduce any amount the Company might otherwise have contributed to the ESOP.
Participants will vest in their right to receive their account balances within
the ESOP at the rate of 20% per year, starting with completion of their third
year of service. In the case of a "change in control," as defined, however,
participants will become immediately fully vested in their account balances.
Benefits may be payable upon retirement, early retirement, disability or
separation from service. The Company's contributions to the ESOP are not fixed,
so benefits payable under the ESOP cannot be estimated. Messrs. Borden, Gleason
and Stiles serve as trustees of the ESOP.
 
    The Board of Directors of the Company has authorized an excess benefit 
plan ("EBP") to provide certain additional retirement benefits to Mr. Ochman. 
The EBP provides that Mr. Ochman shall receive an annual allocation of stock 
units representing shares of Common Stock of the Company. The number of stock 
units allocable to his benefit each year shall be equal to the difference 
between the annual allocation of shares that would have been made to him in 
the ESOP, without regard to the $150,000 limitation as set forth in Section 
401(a)(17) of the Code, minus the number of shares actually allocated to his 
ESOP account in a particular year. The Company allocated 33,746 stock units 
having an aggregate value of $535,521 as of September 30, 1997 to the EBP in 
fiscal 1997.

                                       -56-

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
 
    The following table sets forth, as of the date indicated, certain
information as to the Common Stock beneficially owned by (i) each person or
entity, including any "group" as that term is used in Section 13(d)(3) of the
1934 Act, who or which was known to the Company to be the beneficial owner of
more than 5% of the issued and outstanding Common Stock, (ii) the directors of
the Company, (iii) certain executive officers of the Company, and (iv) all
directors and executive officers of the Company and the Association as a group.
 
<TABLE>
<CAPTION>
                                                                                            Common Stock 
                                                                                      Beneficially Owned as of
                                                                                      September 30, 1997(1)(2)
                                                                                      -------------------------
Name of Beneficial Owner                                                                     No.            %
------------------------------------------------------------------------------------  -----------------  ------
<S>                                                                                   <C>                <C>
IBS Financial Corp. Employee                                                          1,223,347(3)        11.2%
  Stock Ownership Plan Trust
  1909 E. Route 70                                                                      
  Cherry Hill, New Jersey 08003

Lawrence B. Seidman, ET AL.                                                             887,506(4)         8.1%
1235A Route 23 South 
Wayne, New Jersey 07470

Directors:
  Thomas J. Auchter                                                                     164,534(3)(5)(6)   1.5%
  John A. Borden                                                                        123,904(3)(5)(7)   1.1%
  Paul W. Gleason                                                                       116,027(5)         1.1%
  Francis X. Lorbecki, Jr                                                               115,515(5)(8)      1.0%
  Joseph M. Ochman, Sr                                                                  440,436(3)(9)      4.0%
  Albert D. Stiles, Jr                                                                  199,051(5)(10)     1.7%

Certain other executive officers:
  Richard G. Sharp                                                                      149,691(11)        1.4%

All directors and executive officers of the Company and the Association 
  as a group (12 persons)                                                             1,584,854(3)(12)    13.7%
</TABLE>
 
                                                  (FOOTNOTES ON FOLLOWING PAGES)
 

                                          -57-

<PAGE>

------------------------
(1) For purposes of this table, pursuant to rules promulgated under the 1934
    Act, an individual is considered to beneficially own shares of Common Stock
    if he or she directly or indirectly has or shares (1) voting power, which
    includes the power to vote or to direct the voting of the shares; or (2)
    investment power, which includes the power to dispose or direct the
    disposition of the shares. Unless otherwise indicated, an individual has
    sole voting power and sole investment power with respect to the indicated
    shares.
 
(2) Under applicable regulations, a person is deemed to have beneficial
    ownership of any shares of Common Stock which may be acquired within 60 days
    of September 30, 1997 pursuant to the exercise of outstanding stock options.
    Shares of Common Stock which are subject to stock options are deemed to be
    outstanding for the purpose of computing the percentage of outstanding
    Common Stock owned by such person or group but not deemed outstanding for
    the purpose of computing the percentage of Common Stock owned by any other
    person or group.
 
(3) The IBS Financial Corp. Employee Stock Ownership Plan Trust ("Trust") was 
    established pursuant to the IBS Financial Corp. Employee Stock Ownership 
    Plan ("ESOP") by an agreement between the Company and Messrs. Ochman, 
    Auchter and Borden, who act as trustees of the plan ("Trustees"). As of 
    September 30, 1997, 899,712 shares of Common Stock held in the Trust were 
    unallocated and 323,635 shares had been allocated to the accounts of 
    participating employees. Under the terms of the ESOP, the Trustees will 
    generally vote the allocated shares held in the ESOP in accordance with 
    the instructions of the participating employees and will generally vote 
    unallocated shares held in the ESOP in the same proportion for and 
    against proposals to stockholders as the ESOP participants and 
    beneficiaries actually vote shares of Common Stock allocated to their 
    individual accounts, subject in each case to the fiduciary duties of the 
    ESOP trustees and applicable law. Any allocated shares which either 
    abstain on the proposal or are not voted will be disregarded in 
    determining the percentage of stock voted for and against each proposal 
    by the participants and beneficiaries. The amount of Common Stock 
    beneficially owned by directors who serve as trustees of the ESOP and by 
    all directors and executive officers as a group does not include the 
    unallocated shares held by the Trust.
 
(4) Based on a Schedule 13D filed pursuant to the 1934 Act by Lawrence B.
    Seidman, Seidman and Associates, L.L.C. ("SAL"), Seidman and Associates II,
    L.L.C. ("SAL II"), Federal Holdings, L.L.C. ("Holdings"), Seidman Investment
    Partnership, L.P. ("SIP"), The Benchmark Company, Inc. ("TBCI"), Benchmark
    Partners, LP ("Partners"), Richard Whitman, Lorraine Di Paolo, Dennis
    Pollack, and Ernest Beier, Jr. (collectively, the "Reporting Persons"),
    which have formed a "group" pursuant to Rule 13d-5 under the 1934 Act. Mr.
    Seidman beneficially owns and has the right to vote and dispose of 4,117
    shares of Common Stock owned by his retirement account. 

                                       -58-

<PAGE>

     Mr. Seidman also claims sole investment discretion and voting authority 
     over an additional 8,976 shares of Common Stock held by Jeffrey Greenberg 
     (3,105 shares), Steven Greenberg (3,105 shares), Richard Baer (730 
     shares), Brent Wolmer (690 shares) and Sonia Seidman (1,346 shares). The 
     Schedule 13D filed by Mr. Seidman's group indicates that these last five 
     individuals have agreed to sell and vote their shares as directed by Mr. 
     Seidman. In addition, Mr. Seidman, in his capacity as the President of 
     Veteri Place Corporation, the sole general partner of SIP, which is an 
     investment partnership, and as manager of SAL, SAL II and Holdings, 
     companies organized to invest in securities, may be deemed to 
     beneficially own 418,674 shares of Common Stock owned beneficially by 
     such companies. Mr. Whitman and Ms. Di Paolo, the President and Executive 
     Vice President, respectively, of TCBI, a broker-dealer and investment 
     advisor, and each a general partner of Partners, an investment 
     partnership, have sole dispositive and voting power as to 3,542 shares 
     and 32,677 shares, respectively, of Common Stock. In addition, Mr. 
     Whitman and Ms. DiPaolo may be deemed to have shared dispositive and 
     voting power as to the 250,504 shares and the 143,750 shares of Common 
     Stock held by TBCI and Partners, respectively, except that one or both of 
     these companies sold an aggregate of 2,875 shares subsequent to the 
     Schedule 13D amendment dated January 23, 1997. Messrs. Pollack and Beier 
     own 14,081 shares and 14,950 shares, respectively, of Common Stock. The 
     above amounts exclude shares held by relatives of Messrs. Pollack and 
     Beier, as to which shares they disclaim beneficial ownership.
 
(5)  Includes 18,946 unvested shares granted to each non-employee director 
     pursuant to the Company's Recognition and Retention Plan and Trust 
     ("Recognition Plan"), which shares may be voted by each director, and 
     73,431 shares (67,681 shares for Mr. Gleason) which may be acquired upon 
     the exercise of stock options exercisable within 60 days of September 30, 
     1997.
 
(6)  Includes 31,625 shares held by Mr. Auchter's wife.
  
(7)  Includes 1,897 shares held by Mr. Borden's wife.
 
(8)  Includes 63 shares held by Mr. Lorbecki's wife.
 
(9)  Includes 111,495 shares held jointly with Mr. Ochman's wife, 88,116 
     unvested shares granted to Mr. Ochman pursuant to the Company's 
     Recognition Plan which may be voted by Mr. Ochman, 15,034 shares 
     allocated to Mr. Ochman pursuant to the Company's ESOP, 6,325 shares held 
     by Mr. Ochman's wife, 3,232 shares held in trust for the benefit of Mr. 
     Ochman's grandchildren and 87,977 shares which may be acquired upon the 
     exercise of stock options exercisable within 60 days of 
     September 30, 1997.
 
(10) Includes 10,120 shares held by Mr. Stiles' wife.
 
(11) Includes 12,650 shares held jointly with Mr. Sharp's wife, 8,133 shares
     held by Mr. Sharp's wife, 35,245 unvested shares granted to Mr. Sharp
     pursuant to the

                                       -59-

<PAGE>

     Company's Recognition Plan which may be voted by Mr. Sharp, 15,454 
     shares allocated to Mr. Sharp pursuant to the Company's ESOP and 59,188 
     shares which may be acquired upon the exercise of stock options 
     exercisable within 60 days of September 30, 1997.

(12) Includes 65,120 shares allocated to all executive officers as a group
     pursuant to the Company's ESOP, 274,755 unvested shares granted to all
     executive officers and directors as a group pursuant to the Company's
     Recognition Plan which may be voted by such persons, and 612,326 shares
     which may be acquired by all executive officers and directors as a group
     upon the exercise of stock options exercisable within 60 days of September
     30, 1997.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
    The Association's policy provides that all loans made by the Association to
its directors and officers are made in the ordinary course of business, are made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons and
do not involve more than the normal risk of collectability or present other
unfavorable features. During the fiscal year ended September 30, 1997, none of
the Association's directors and executive officers had aggregate loan balances
in excess of $60,000, and no such individual had engaged in any transaction with
the Association with a value in excess of $60,000.

                                       -60-

<PAGE>

PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
    (a) Document filed as part of this Report. 

        (1) The following documents are filed as part of this report and are 
    incorporated herein by reference from the Registrant's 1997 Annual Report.
 
    Report of Independent Auditors.
 
    Consolidated Statements of Financial Condition at September 30, 1997 and
    1996.
 
    Consolidated Statements of Income for the Years Ended September 30, 1997,
    1996, and 1995.
 
    Consolidated Statements of Changes in Stockholders' Equity for the Years
    Ended September 30, 1997, 1996 and 1995.
 
    Consolidated Statements of Cash Flows for the Years Ended September 30,
    1997, 1996 and 1995.
 
    Notes to the Consolidated Financial Statements. 

        (2) All schedules for which provision is made in the applicable 
accounting regulation of the Securities and Exchange Commission are omitted 
because they are not applicable or the required information is included in 
the Consolidated Financial Statements or notes thereto. 

                                    -61-

<PAGE>

        (3)(a) The following exhibits are filed as part of this Form 10-K, 
and this list includes the Exhibit Index.

<TABLE>
<CAPTION>


   No.                                       Description
-------  -----------------------------------------------------------------------------------------
<S>      <C>

 3.1     Certificate of Incorporation of IBS Financial Corp.(1)
 3.2     Amended Bylaws of IBS Financial Corp.(2)
 4       Stock Certificate of IBS Financial Corp.(1)
10.1     IBS Financial Corp. Employee Stock Ownership Plan and Trust(1) *
10.2     Amendment No. 1 to the IBS Financial Corp. Employee Stock Ownership Plan and Trust(2) *
10.3     Employment Agreement between the Registrant and Joseph M. Ochman, Sr.(2) *
10.4     Employment Agreement between Inter-Boro Savings and Loan Association and Joseph M.
         Ochman, Sr.(2)*
10.5     Employment Agreement between the Registrant, Inter-Boro Savingsand Loan Association
         and Richard G. Sharp (expired in 10/97)(3)*
10.6     Stock Option Plan(3) *
10.7     Recognition and Retention Plan of Inter-Boro Savings and Loan Association and Trust
         Agreement(3) *
10.8     Amendment Nos. 2 and 3 to the IBS Financial Corp. Employee Stock Ownership Plan and
         Trust *
13       1997 Annual Report to Stockholders
21       Subsidiaries of the Registrant--Reference is made to Item 1. "Business" for the
         required information
27       Financial Data Schedule

</TABLE>

------------------------
 
(1) Incorporated by reference from the Registration Statement on Form S-1
    (Registration No. 33-80548) filed by the Registrant with the Securities and
    Exchange Commission ("SEC") on June 21, 1994, as amended.

(2) Incorporated by reference from the Annual Report on Form 10-K for the 
    year ended September 30, 1996 filed by the Registrant with the SEC.

(3) Incorporated by reference from the Annual Report on Form 10-K for the 
    year ended September 30, 1994 filed by the Registrant with the SEC.
 
*   Management contract or compensatory plan or arrangement.
 
(3) (b) Reports filed on Form 8-K. 

    None.


                                 -62-
<PAGE>

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

                                            IBS FINANCIAL CORP.


                                            By: /s/ Joseph M. Ochman, Sr.
                                                -------------------------------
                                                Joseph M. Ochman, Sr.
                                                Chairman of the Board,
                                                President and Chief Executive 
                                                Officer

    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.

/s/ Joseph M. Ochman, Sr.                                  December 19, 1997 
---------------------------------------
Joseph M. Ochman, Sr. 
Chairman of the Board, President and
Chief Executive Officer 

/s/ Richard G. Sharp                                       December 19, 1997
---------------------------------------
Richard G. Sharp
Executive Vice President and
Chief Financial Officer

/s/ Matthew J. Kennedy                                     December 19, 1997 
---------------------------------------
Matthew J. Kennedy
Executive Vice President and Treasurer 

<PAGE>

/s/ Thomas J. Auchter                                      December 19, 1997 
---------------------------------------
Thomas J. Auchter
Director 

/s/ John A. Borden                                         December 19, 1997 
---------------------------------------
John A. Borden
Director

/s/ Albert D. Stiles, Jr.                                  December 19, 1997 
---------------------------------------
Albert D. Stiles, Jr. 
Director 

/s/ Paul W. Gleason                                        December 19, 1997
---------------------------------------
Paul W. Gleason
Director