EXHIBIT 13.0

               Portions of the 1999 Annual Report to Stockholders






<PAGE>

                                TABLE OF CONTENTS


West Essex Bancorp,  Inc. is a $348.3 million  savings and loan holding  company
headquartered in Caldwell, New Jersey. Through its subsidiary,  West Essex Bank,
the  Company  operates  8 banking  offices in Essex,  Morris and Bergen  County.
Founded in 1915,  West Essex Bank is a  federally-chartered  FDIC-insured  stock
savings bank.

Financial Highlights .......................................................  1

President's Message ........................................................  2

Selected Consolidated Financial and Other Data .............................  4

Management's Discussion and Analysis of Financial Condition and
    Results of Operations ..................................................  6

Management Responsibility Statement ........................................ 20

Independent Auditor's Report ............................................... 21

Consolidated Statements of Financial Condition ............................. 22

Consolidated Statements of Income .......................................... 23

Consolidated Statements of Comprehensive Income ............................ 24

Consolidated Statements of Changes in Stockholders' Equity ................. 25

Consolidated Statements of Cash Flows ...................................... 26

Notes to Consolidated Financial Statements ................................. 28

Directors and Officers ..................................................... 60

Investor and Corporate Information  ........................  Inside Back Cover
<PAGE>
<TABLE>
<CAPTION>
                                   WEST ESSEX BANCORP, INC.
                                     FINANCIAL HIGHLIGHTS
                     (Dollar amounts in thousands, except per share date)

                                                     At or for the Year Ended December 31,
                                                   ------------------------------------------
                                                      1999           1998            1997
                                                   -----------    -----------     -----------
<S>                                                <C>            <C>             <C>
Total assets ..................................    $   348,307    $   328,609     $   299,025
Total investment and mortgage-backed securities        165,729        155,532         160,184
Total loans receivable ........................        156,196        143,002         116,127
Allowance for loan losses .....................          1,400          1,717           1,885
Total deposits ................................        234,978        238,313         238,192
Borrowed money ................................         64,340         42,101          30,300
Total stockholders' equity ....................         47,110         46,754          29,275
Net interest income ...........................         10,891          9,096           8,460
Provision for (recapture of) loan losses ......           --             (131)            487
Net income (1)(2) .............................          3,043          1,397             737
Basic and diluted earnings per share (1)(3) ...           0.76           0.34             N/A
Book value per share ..........................          11.62          11.14             N/A
Average interest rate spread ..................           2.66%          2.48%           2.87%
Return on average assets (1)(2) ...............           0.89%          0.44%           0.29%
Return on average stockholders' equity (1)(2) .           6.46%          4.10%           2.51%
Common shares outstanding at year end .........      4,054,357      4,197,233             N/A


</TABLE>
(1)     Results  for  1998   include   $842,000  of   charitable   contributions
        representing  the  initial  funding  by the  Company  of the West  Essex
        Bancorp  Charitable  Foundation.  Exclusive  of this  contribution,  net
        income would have been $1,936,000,  or $0.48 per share, which reflects a
        return on average assets of 0.61% and a return on average  stockholders'
        equity of 5.68%.

(2)     Results for 1997 include a $1.6  million loss  recorded on the excess of
        cost over assets  acquired in conjunction  with deposits  purchased from
        another institution.  Exclusive of this loss, net income would have been
        $1,752,000,  which  reflects a return on  average  assets of 0.69% and a
        return on average stockholders' equity of 5.96%.

(3)     Assumes the stock conversion was completed on January 1, 1998.

                                      - 1 -
<PAGE>
                            WEST ESSEX BANCORP, INC.
                                  ANNUAL REPORT
                               PRESIDENT'S MESSAGE


         In reviewing 1999, our first full year as a publicly traded company, we
recorded  excellent growth in earnings per share and return on equity. I am also
pleased to report a substantial  increase in cash earnings,  net interest income
and total assets.  Also, a smooth transition into the year 2000 occurred despite
speculation by many of a Y2K meltdown.

         While we are excited about our long-term growth  opportunities for West
Essex Bank, our enthusiasm is quieted by the reaction of the  marketplace to the
equities of financial companies. With the equity market seemingly focused on the
Internet community, it appears large and small cap banks and financial companies
have been relegated to the rear of the  marketplace  for the time being.  Having
said this, we believe West Essex Bancorp is well positioned to continuously seek
out opportunities  that enhance  shareholder  value. With a solid financial base
and prudent  management  we will strive to grow the  earnings  and assets of the
Company in a qualitative manner thereby enhancing the Company's franchise value.

         Management's  vision is to make West Essex Bank the  community  bank of
choice in each location where we are established.  Our mission is to demonstrate
through  product  delivery and  excellent  service,  how we can  strengthen  the
economic and social  fabric of our  community.  While  mergers and  acquisitions
continue  to reduce the number of banks in the  country,  we continue to see the
demand for  community-oriented  institutions  such as ours. We are excited about
the opportunities of the new millennium and the rapid changes that technology is
providing and look forward to capitalizing on these factors.

         Significant  highlights  for the Company in 1999 include the initiation
of a $.30 per share annual  dividend on our common stock,  asset growth of $19.7
million to $348.3  million and loan and  investment  growth of $23.2  million to
$319.1  million.  Net income rose from $1.4  million in 1998 to $3.0  million in
1999,  an increase of 118%.  Cash  earnings  increased  significantly  from $1.8
million in 1998 to $3.4 million in 1999, an increase of 93%.  Loan  originations
for 1999 totaled $43.2 million,  and our loan to deposit ratio  increased to 66%
from 60% in the prior period.  Finally,  as of December 31, 1999,  core deposits
represented 40.4% of deposit account balances.

         Other measures of  performance  include  improvements  in the return on
average  assets to .89% from 0.44% in the prior  period and an  increase  in the
return an  average  equity to 6.46%  from  4.10%.  Also very  important  was the
significant  improvement in the Company's  efficiency ratio from 71.41% for 1998
to 54.45% for 1999.  Earnings per share  (diluted),  also  increased to $0.76 in
1999 from $0.34 for 1998. Net interest  margin  increased to 3.31% from 3.01% at
the same time that operating  expenses to average assets  decreased to 2.00% for
1999 from 2.40% for 1998.


                                      -2-
<PAGE>
         In  August  of  1999,  the  Company  received  regulatory  approval  to
repurchase up to 15% of it's publicly  traded common shares.  Through the end of
1999,  the Company was  successful in  repurchasing  approximately  79% of those
shares. While limited liquidity in the Company's stock has impeded the Company's
efforts to  repurchase  its shares,  the Company is  committed  to  aggressively
managing its excess capital through stock repurchases.

         In the year ahead,  the Company will  continue to seek means to enhance
stockholder value through continued stock  repurchases,  balance sheet growth, a
possible increase in our cash dividends,  possible branch  expansion,  and other
reasonable  opportunities  that may become available to the Company.  The Bank's
web site,  which  initially  will only provide  information  to customers,  will
ultimately allow transactions.  Through our service provider,  our web site will
give us the ability to deliver not only our current products and services to our
customer base, but new products and services as well,  including on-line banking
and the ability to pay bills over the Internet.

         We remain optimistic about our long-term  outlook,  especially with the
recent  passage  of  financial  modernization   legislation  permitting  banking
institutions to engage in any financial  activities  complementing the financial
service industry.  We will continue to focus on those  opportunities and markets
that are in alignment  with the strategic  position and objectives of West Essex
Bancorp.

         I would be remiss if I did not recognize the efforts and  contributions
of our very  dedicated  directors,  officers  and staff who  continue to work to
achieve the goals and aspirations of the Company, its shareholders and customers
and we will continue as always to remain grateful for the confidence and loyalty
you have placed in us.

                                                         Sincerely,


                                                         /s/Leopold W. Montanaro
                                                         -----------------------
                                                         Leopold W. Montanaro
                                                         President & CEO


                                      -3-
<PAGE>

WEST ESSEX BANCORP, INC.

Selected Consolidated Financial and Other Data
----------------------------------------------

         The selected  consolidated  financial and other data of the Company set
forth below is derived in part from, and should be read in conjunction with, the
Consolidated  Financial  Statements of the Company and Notes  thereto  presented
elsewhere in this Annual Report.


<PAGE>
<TABLE>
<CAPTION>
                                                             At December 31,
                                          --------------------------------------------------------
                                            1999        1998        1997        1996         1995
                                          --------    --------    --------    --------    --------
                                                               (In Thousands)
<S>                                      <C>         <C>         <C>         <C>         <C>
Selected Consolidated Financial Data:
Total assets (1) ....................     $348,307    $328,609    $299,025    $235,969   $223,165
Loans receivable, net (2) ...........     153,276     140,272     112,735      82,134      85,031

Securities available-for-sale:
     Investment securities, net .....       2,924       8,282       7,081       1,647       1,932

Securities held-to-maturity:
     Investment securities, net .....      41,582      36,873      22,929      22,476      18,482
     Mortgage-backed securities, net      121,223     110,376     130,174     113,254     100,032
Deposits (1) ........................     234,978     238,313     238,192     179,946     178,392
Borrowed money ......................      64,340      42,101      30,300      23,650      17,000
Total stockholders' equity ..........      47,110      46,754      29,275      28,452      26,856

<CAPTION>
                                                               For the Years Ended December 31,
                                                   --------------------------------------------------------
                                                      1999        1998        1997        1996        1995
                                                   --------    --------    --------    --------    --------
                                                                         (In Thousands)
<S>                                                <C>         <C>         <C>         <C>         <C>
Selected Operating Data:
Interest income ...............................    $ 22,751    $ 21,315     $ 18,116    $ 16,467    $ 15,735
Interest expense ..............................      11,860      12,219        9,656       8,300       7,618
                                                   --------    --------     --------    --------    --------

     Net interest income ......................      10,891       9,096        8,460       8,167       8,117
Provision for (recapture of) loan
  losses ......................................        --          (131)         487         232         510
                                                   --------    --------     --------    --------    --------
     Net interest income after ................
       provision for (recapture of) loan losses      10,891       9,227        7,973       7,935       7,607
Noninterest income ............................         685         529          373         476         332
Noninterest expense (3) .......................       6,869       7,607        7,173       5,919       4,446
                                                   --------    --------     --------    --------    --------

Income before income taxes (3) ................       4,707       2,149        1,173       2,492       3,493
Income taxes (3) ..............................       1,664         752          436         836       1,221
                                                   --------    --------     --------    --------    --------

Net income ....................................    $  3,043    $  1,397     $    737    $  1,656    $  2,272
                                                   ========    ========     ========    ========    ========

</TABLE>
                                                        (continued on next page)
                                      -4-
<PAGE>
<TABLE>
<CAPTION>
                                                                At or For the Years Ended December 31,
                                                          ----------------------------------------------
                                                           1999      1998      1997       1996     1995
                                                          ------    ------    ------    ------    ------
<S>                                                       <C>       <C>       <C>        <C>       <C>
Selected Financial Ratios and Other Data:
Performance Ratios (4):
        Return on average assets (3) ..............         0.89 %    0.44 %    0.29 %    0.74 %    1.07 %
        Return on average stockholders' equity (3)          6.46      4.10      2.51      5.95      8.84
        Average stockholders' equity
          /average assets .........................        13.73     10.75     11.55     12.37     12.09
        Interest rate spread (5) ..................         2.66      2.48      2.87      3.15      3.34
        Net interest margin (6) ...................         3.31      3.01      3.44      3.74      3.93
        Non-interest expenses to average assets (3)         2.00      2.40      2.82      2.63      2.09
        Stockholders' equity to total assets ......        13.53     14.23      9.79     12.06     12.03
        Efficiency ratio (7) ......................        54.45     71.41     57.04     56.58     52.86

Regulatory Capital Ratios (4):
        Tangible capital ..........................        10.69     10.44      7.98     12.06     12.02
        Core capital ..............................        10.69     10.44      7.98     12.06     12.02
        Risk-based capital ........................        28.55     28.81     26.10     39.15     37.50

Asset Quality Ratios (4):
        Non-performing loans to total assets ......         0.25      0.67      0.84      1.26      0.96
        Non-performing loans to total loans
          receivable ..............................         0.57      1.46      2.16      3.51      2.46
        Non-performing assets to total assets .....         0.51      0.84      1.24      1.85      1.57
        Allowance for loan losses to
          non-performing loans ....................       158.37     78.47     75.19     52.70     55.84
        Average interest-earning assets to average
          interest-bearing liabilities ............       117.99    112.99    114.39    115.46    115.94
        Net interest income after provision for
          loan losses to non-interest expenses (3)        158.55    121.30    111.15    134.06    171.10

Number of full-service customer facilities ........         8         8         8         5         5

</TABLE>

(1)     The increase in assets in fiscal 1997 was due  primarily to the purchase
        of three branch offices from Summit Bank.
(2)     The allowance for loan losses at December 31, 1999,  1998,  1997,  1996,
        and 1995 was $1.4 million, $1.7 million, $1.9 million, $1.6 million, and
        $1.2 million, respectively.
(3)     Includes,  for the year  ended  December  31,  1996,  the  SAIF  Special
        Assessment  of $1.1  million  and the  related  income  tax  benefit  of
        $395,000.  If  excluded,  return on  average  assets,  return on average
        stockholders'  equity,  non-interest  expenses to average assets and net
        interest income after provision for loan losses to non-interest expenses
        would be 1.05%,  8.47%  2.14% and  164.59%,  respectively,  for the year
        ended  December 31,  1996.  Includes,  for the years ended  December 31,
        1999, 1998 and 1997,  amortization expense related to the excess of cost
        over assets  acquired from Summit Bank of $593,000,  $593,000,  and $1.7
        million,  respectively,  and the related income tax benefit of $213,000,
<PAGE>
        $213,000 and  $627,000,  respectively.  If  excluded,  return on average
        assets, return on average stockholders' equity, non-interest expenses to
        average assets and net interest  income after  provision for loan losses
        to  non-interest  expense  would be 1.00%,  7.26%,  1.83%  and  173.53%,
        respectively,  for the year ended December 31, 1999, 0.56%, 5.21%, 2.21%
        and  131.55%,  respectively,  for the year ended  December  31, 1998 and
        0.73%,  6.30%,  2.13%  and  146.83%,  respectively,  for the year  ended
        December 31, 1997.
(4)     With the  exception  of end of period  ratios,  all  ratios are based on
        average monthly balances during the indicated periods and are annualized
        where appropriate.
(5)     The interest rate spread represents the difference  between the weighted
        average  yield on average  interest-  earning  assets  and the  weighted
        average cost of average interest-bearing liabilities.
(6)     The net interest  margin  represents net interest income as a percent of
        average interest-earning assets.
(7)     The efficiency ratio  represents  non-interest  expenses,  excluding the
        SAIF special  Assessment,  impairment loss and amortization  relating to
        intangible  assets and loss on REO,  divided by the sum of net  interest
        and non-interest income excluding income on REO and security gain/loss.

                                      -5-
<PAGE>
                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


         West Essex Bancorp, Inc. ("the Company"),  is the stock holding company
for West Essex Bank ("the Bank"). The Company is headquartered in Caldwell,  New
Jersey and its principal  business  currently  consists of the operations of the
Bank. West Essex Bancorp,  M.H.C., a mutual holding company formed in connection
with the Bank's  conversion  to stock form and  reorganization  into the holding
company form of organization,  which was consummated October 2, 1998, owns 58.0%
of the Company's  outstanding common stock. The Bank's results of operations are
dependent primarily on net interest income,  which is the difference between the
income  earned  on its loan and  investment  portfolios  and its cost of  funds,
consisting  of  the  interest  paid  on  deposits  and  borrowings.  Results  of
operations  are also  affected by the Bank's  provision for loan losses and fees
and other service charges.  The Bank's noninterest expense principally  consists
of compensation and employee  benefits,  office occupancy and equipment expense,
federal  deposit  insurance  premiums,   the  cost  of  foreclosed  real  estate
operations,  data  processing,  advertising  and  business  promotion  and other
expenses.  Results of  operations  are also  significantly  affected  by general
economic and  competitive  conditions,  particularly  changes in interest rates,
government  policies and actions of regulatory  authorities.  Future  changes in
applicable  law,  regulations or government  policies may materially  impact the
Bank.

Forward-Looking Statements

         This  Annual  Report  on Form  10-K  contains  certain  forward-looking
statements  which are based on certain  assumptions  and describe  future plans,
strategies and expectations of the Company. These forward-looking statements are
generally  identified  by  use  of  the  words  "believe",  "expect",  "intend",
"anticipate",  "estimate",  "project",  or similar  expressions.  The  Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain.  Factors which could have a material adverse effect on the
operations of the Company and the subsidiaries  include, but are not limited to,
changes in: interest rates, general economic conditions,  legislative/regulatory
changes, monetary and fiscal policies of the U.S. Government, including policies
of the U.S.  Treasury and the Federal Reserve Board,  the quality or composition
of the loan or investment portfolios,  demand for loan products,  deposit flows,
competition,  demand for  financial  services in the  Company's  market area and
accounting  principles and guidelines.  These risks and uncertainties  should be
considered in evaluating  forward-looking  statements and undue reliance  should
not be  placed  on  such  statements.  The  Company  does  not  undertake  - and
specifically  disclaims any  obligation - to publicly  release the result of any
revisions which may be made to any forward-looking  statements to reflect events
or circumstances  after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.

Management of Interest Rate Risk and Market Risk Analysis

         The principal objectives of the Company's interest rate risk management
is to  evaluate  the  interest  rate risk  included  in  certain  balance  sheet
accounts;  determine the level of risk appropriate given the Company's  business
strategy,   operating  environment,   capital  and  liquidity  requirements  and
performance  objectives;  and  manage  the risk  consistent  with  the  Board of
Directors' approved  guidelines.  Through such management,  the Company seeks to
<PAGE>
reduce the  vulnerability  of its operations to changes in interest  rates.  The
Board of Directors of the Bank has  established  an  Asset/Liability  Committee,
which is responsible  for reviewing  asset/liability  policies and interest rate
risk  position.  The  Asset/Liability  Committee  meets at least on a  quarterly
basis,  reports trends and interest rate risk position to the Board of Directors
and reviews with the Board its  activities and  strategies,  the effect of those
strategies on the Bank's net interest margin, the market value of the portfolio,
and the effect the changes in interest  rates will have on the Bank's  portfolio
and  exposure  limits.  The  extent  of the  movement  of  interest  rates is an
uncertainty that could have a negative impact on the earnings of the Company.

                                      - 6 -
<PAGE>
                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


         To manage its interest  rate risk and help offset the  originations  of
long-term  fixed rate  mortgage  loans,  the Company has employed the  following
strategies:  (i) utilizing adjustable-rate  mortgage-backed securities to offset
the effect of holding  long-term fixed rate mortgage loans and (ii)  lengthening
the maturities of both borrowed money and deposits.

         The Bank continues to seek opportunities to originate for its portfolio
one-to  four-family  residential  mortgage loans, as well as other loans, in its
primary market area of Essex, Morris and Bergen Counties, New Jersey. The Bank's
total loan  portfolio had decreased as a percent of the Bank's total assets from
1993 through 1996 when loan originations,  primarily due to intense  competition
in the Bank's market area for loan originations,  began to decrease.  To address
this situation, the Bank began to pursue loan originations more aggressively and
began, in 1997, to use outside  mortgage brokers to generate  increased  volume.
During 1999,  the Bank,  as part of its efforts to generate new loans,  moved to
aggressively promote its loan products by using newspaper  advertisements and by
instituting an incentive  program with its employees.  The latter program proved
highly successful and will be continued in 2000. Further,  due to the relatively
low interest rate  environment  that has existed in recent  years,  the Bank has
originated  primarily  fixed-rate one-to four-family  mortgage loans. The Bank's
purchase  of  adjustable-rate  mortgage-backed  securities,  as well as  various
shorter  term debt  obligations  of federal,  state and local  governments,  has
enabled the Company to  effectively  manage its interest  rate risk. At December
31,  1999,  the  Company  had  $121.2  million  or  34.8%  of  total  assets  in
mortgage-backed securities classified as held-to-maturity,  and $44.5 million or
12.8% of total assets in investment securities, of which $2.9 million or 0.8% of
total assets were  classified  as  available-for-sale.  At the same date,  loans
receivable, net, totalled $153.3 million or 44.0% of total assets.

         Net Portfolio  Value. The Bank's interest rate sensitivity is monitored
by management through the use of the OTS model which estimates the change in the
Bank's net portfolio value ("NPV") over a range of interest rate scenarios.  NPV
is the  present  value of  expect  cash  flows  from  assets,  liabilities,  and
off-balance sheet contracts. The NPV ratio, under any interest rate scenario, is
defined as the NPV in that scenario divided by the market value of assets in the
same  scenario.  The OTS produced its analysis  based upon data submitted on the
Bank's quarterly Thrift Financial Reports.
<PAGE>
The  following  table  sets forth the Bank's NPV as of  December  31,  1999,  as
calculated by the OTS.
<TABLE>
<CAPTION>

                                                                                                       NPV as % of Portfolio
                   Change in                           Net Portfolio Value                                  Value of Assets
                Interest Rates               ------------------------------------------              ---------------------------
                In Basis Points                                $                  %                   NPV
                 (Rate Shock)                Amount          Change             Change               Ratio            Change (1)
                 ------------                ------          ------             ------               -----            ----------
<S>                                        <C>              <C>                    <C>                <C>                <C>
                     300                   $ 10,792         $ (21,276)             (66)%               3.53 %            (605)
                     200                     18,266           (13,802)             (43)                5.79              (379)
                     100                     25,444            (6,624)             (21)                7.82              (176)
                    Static                   32,068              -                   -                 9.58                  -
                    (100)                    37,248             5,180               16                10.87               129
                    (200)                    40,539             8,470               26                11.61               203
                    (300)                    41,334             9,265               29                11.71               213
</TABLE>

(1) Expressed in basis points.


                                      -7-
<PAGE>
                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


                  Average Balance Sheet.  The following table sets forth certain
information  relating  to the Company at December  31,  1999,  and for the years
ended December 31, 1999, 1998 and 1997. The average yields and costs are derived
by dividing income or expense by the average balance of interest-earning  assets
or interest-bearing liabilities, respectively, for the period shown except where
noted otherwise and reflect  annualized  yields and costs.  Average balances are
derived from average month-end balances except for the average balances of other
interest-earning assets and borrowed money, which are derived from average daily
balances.  Management does not believe that the use of average monthly  balances
instead of average  daily  balances has caused any material  differences  in the
information  presented.  The yields and costs include fees which are  considered
adjustments to yields.
<PAGE>
<TABLE>
<CAPTION>
                                                                           At December 31, 1999
                                                                          ---------------------
                                                                                         Yield/
                                                                            Balance       Cost
                                                                            -------       ----
<S>                                                                       <C>              <C>
Assets:                                                                   (Dollars in Thousands)
        Interest-earning assets:
              Loans receivable .......................................    $ 154,677        7.44 %
              Mortgage-backed securities .............................      121,223        6.55
              Investment securities(1) ...............................       44,506        6.84
              Other interest-earning assets ..........................       10,290        4.58
                                                                          ---------
                               Total interest-earning assets .........      330,696        6.94

              Allowance for loan losses ..............................       (1,400)
              Non-interest-earning assets ............................       19,011
                                                                          ---------
                               Total assets ..........................    $ 348,307
                                                                          =========
Liabilities and Retained Earnings:
        Interest-bearing liabilities:
              Interest-bearing deposits:
                     Demand deposits .................................    $  21,092        1.39
                     Savings and club accounts .......................       57,735        2.04
                     Certificates of deposit .........................      140,140        5.05
                                                                          ---------
                               Total interest-bearing deposits .......      218,967        3.90

              Borrowed money .........................................       64,340        5.66
                                                                          ---------
                               Total interest-bearing liabilities ....      283,307        4.30

        Non-interest bearing deposits ................................       16,011
        Other non-interest-bearing liabilities .......................        1,879
                                                                          ---------

                               Total liabilities .....................      301,197

        Retained earnings ............................................       47,110
                                                                          ---------
                               Total liabilities and retained earnings    $ 348,307
                                                                          =========
        Interest rate spread .........................................                    2.64 %
                                                                                          ====
        Net interest-earning assets ..................................    $  47,389
                                                                          =========
        Ratio of average interest-earning assets to average
              interest-bearing liabilities ...........................         1.17x
                                                                               ====
</TABLE>
(1) Included securities available for sale.

                                      -8-
<PAGE>
<TABLE>
<CAPTION>
                                                     WEST ESSEX BANCORP, INC.
                                              MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                                           FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                                                                    For the Years Ended December 31,
                                                                  ----------------------------------------------------------------
                                                                                1999                              1998
                                                                  ------------------------------   ------------------------------
                                                                                        Average                           Average
                                                                   Average               Yield/     Average                Yield/
                                                                   Balance    Interest    Cost      Balance     Interest    Cost
                                                                   -------    --------    ----      -------     --------    ----
<S>                                                                <C>         <C>          <C>      <C>         <C>         <C>
Assets:                                                                   (Dollars in Thousands)
        Interest-earning assets:
             Loans receivable                                      $ 149,356   $ 11,240     7.53 %   $ 129,416   $ 10,083    7.79 %
             Mortgage-backed securities                              119,953      7,722     6.44       121,346      7,853    6.47
             Investment securities (1)                                47,227      3,177     6.73        39,195      2,695    6.88
             Other interest-earning assets                            12,241        611     4.99        12,419        684    5.51
                                                                   ---------   --------              ---------   --------
                      Total interest-earning assets                  328,777     22,750     6.92       302,376     21,315    7.05
                                                                                -------                           -------
             Allowance for loan losses                                (1,546)                           (1,832)
             Other non-interest-earning assets                        15,912                            16,503
                                                                   ---------                         ---------
                      Total assets                                 $ 343,143                         $ 317,047
                                                                   =========                         =========

Liabilities and Retained Earnings:
        Interest-bearing liabilities:
             Interest-bearing deposits:
                 Demand                                             $ 20,732        284     1.37      $ 20,412        339    1.66
                 Savings and club                                     58,727      1,210     2.06        62,120      1,672    2.69
                 Certificates of deposit                             141,432      7,090     5.01       142,714      7,736    5.42
                                                                   ---------   --------              ---------   --------
                      Total interest-bearing deposits                220,891      8,584     3.89       225,246      9,747    4.33

        Borrowed money                                                57,756      3,275     5.67        42,364      2,472    5.84
                                                                   ---------   --------              ---------   --------
                      Total interest-bearing liabilities             278,647     11,859     4.26       267,610     12,219    4.57
                                                                               --------                          --------

        Non-interest-bearing deposits                                 15,576                            13,219
        Other non-interest-bearing liabilities                         1,796                             2,121
                                                                   ---------                         ---------
                          Total liabilities                          296,019                           282,950

        Stockholders' equity                                          47,124                            34,097
                                                                   ---------                         ---------
                      Total liabilities and stockholders' equity   $ 343,143                         $ 317,047
                                                                   =========                         =========
        Net interest income/interest rate spread                              $ 10,891      2.66 %               $ 9,096     2.48 %
                                                                              ========      ====                 =======     ====
        Net interest-earning assets/net yield on
          interest-earning assets                                  $  50,130                3.31 %   $ 34,766                3.01 %
                                                                   =========                ====     ========                ====
        Ratio of interest-earning assets to interest-bearing
          liabilities                                                  1.18x                              1.13x
                                                                      =====                              =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                    ------------------------------------
                                                                                       1997
                                                                    ------------------------------------
                                                                                                 Average
                                                                     Average                      Yield/
                                                                     Balance        Interest       Cost
                                                                     -------        --------       ----
<S>                                                                  <C>             <C>            <C>
Assets:
        Interest-earning assets:
             Loans receivable                                       $  97,277        $ 7,908        8.13 %
             Mortgage-backed securities                               114,996          7,909        6.88
             Investment securities (1)                                 26,774          1,897        7.09
             Other interest-earning assets                              7,019            401        5.71
                                                                    --------         -------
                          Total interest-earning assets               246,016         18,115        7.36
                                                                                    --------
             Allowance for loan losses                                 (1,739)
             Other non-interest-earning assets                         10,422
                                                                    ---------
                          Total assets                              $ 254,699
                                                                    =========

Liabilities and Retained Earnings:
        Interest-bearing liabilities:
             Interest-bearing deposits:
                 Demand                                             $  16,360            293        1.79
                 Savings and club                                      53,221          1,357        2.55
                 Certificates of deposit                              119,272          6,439        5.40
                                                                     --------        -------
                       Total interest-bearing deposits                188,853          8,089        4.28
        Borrowed money                                                 26,223          1,566        5.97
                                                                    ---------         ------
                      Total interest-bearing liabilities              215,076          9,655        4.49
                                                                                    --------
        Non-interest-bearing deposits                                   8,503
        Other non-interest-bearing liabilities                          1,711
                                                                    ---------
                      Total liabilities                               225,290
                                                                       29,409
        Stockholders' equity                                        ---------
                      Total liabilities and stockholders' equity    $ 254,699
                                                                    =========

        Net interest income/interest rate spread                                      $ 8,460       2.87 %
                                                                                      ========      ====
        Net interest-earning assets/net yield on
          interest-earning assets                                   $ 30,940                        3.44 %
                                                                    ========                        ====
        Ratio of interest-earning assets to interest-bearing             1.14x
          liabilities                                                   =====

</TABLE>
(1)  Includes securities available for sale.

                                       -9-


<PAGE>

                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


         Rate/Volume Analysis.  The following table presents the extent to which
changes in interest rates and changes in the volume of  interest-earning  assets
and interest-bearing liabilities have affected the Company's interest income and
interest expense during the periods  indicated.  Information is provided in each
category with respect to: (i) changes attributable to changes in volume (changes
in volume  multiplied by prior rate);  (ii) changes  attributable  to changes in
rate (changes in rate multiplied by prior volume); and (iii) the net change. The
changes  attributable  to the  combined  impact  of  volume  and rate  have been
allocated on a proportional basis between changes in rate and volume.
<TABLE>
<CAPTION>
                                              Year Ended                          Year Ended
                                           December 31, 1999                   December 31, 1998
                                              Compared to                        Compared to
                                              Year Ended                         Year Ended
                                              December 31, 1998                  December 31, 1997
                                     -------------------------------      ------------------------------
                                     Increase (Decrease)                  Increase (Decrease)
                                            Due to                               Due to
                                     -------------------                   -----------------
                                      Volume       Rate         Net        Volume      Rate        Net
                                      ------       ----         ---        ------      ----        ---
                                                                (In Thousands)
<S>                                   <C>         <C>         <C>         <C>        <C>         <C>
Interest income:
     Loans receivable ............    $ 1,504     $  (347)    $ 1,157     $ 2,517    $  (342)    $ 2,175
     Mortgage-backed securities ..        (93)        (38)       (131)        427       (483)        (56)
     Investment securities .......        542         (60)        482         856        (58)        798
     Other interest-earning assets        (10)        (63)        (73)        298        (15)        283
                                      -------     -------     -------     -------    -------     -------

Total ............................      1,943        (508)      1,435       4,098       (898)      3,200
                                      -------     -------     -------     -------    -------     -------

Interest expense:
     Demand deposits (1) .........          5         (60)        (55)         69        (23)         46
     Savings and club accounts ...        (87)       (375)       (462)        237         78         315
     Certificates of deposit .....        (69)       (577)       (646)      1,273         24       1,297
     Borrowed money ..............        877         (74)        803         941        (35)        906
                                      -------     -------     -------     -------    -------     -------

Total ............................        726      (1,086)       (360)      2,520         44       2,564
                                      -------     -------     -------     -------    -------     -------

Net change in net interest income     $ 1,217     $   578     $ 1,795     $ 1,578    $  (942)    $   636
                                      =======     =======     =======     =======    =======     =======

</TABLE>

         (1)  Includes NOW and Money Market accounts.
<PAGE>
Comparison of Financial Condition at December 31, 1999 and December 31, 1998

         Total  assets were $348.3  million at December  31,  1998,  compared to
$328.6 million at December 31, 1998, an increase of $19.7 million,  or 6.0%. The
increase in assets was funded  primarily  by an increase in FHLB  borrowings  of
$22.3 million.

         Cash and cash equivalents, primarily interest-bearing deposits with the
FHLB,  decreased  $3.7 million to $12.7  million at December 31, 1999 from $16.4
million at December 31, 1998. The decrease in cash and cash equivalents was used
to fund securities purchases.




                                      -10-
<PAGE>
                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


         In the aggregate, mortgage-backed securities and investment securities,
including  available-for-  sale and  held-to-maturity  issues,  totalled  $165.7
million at December 31, 1999, an increase of $10.2  million from $155.5  million
at December 31, 1998. Such increase was funded by the aforementioned decrease in
cash  and  cash  equivalents  and  by  increased   borrowings.   Mortgage-backed
securities,  all of which are  held-to-maturity,  increased $10.8 million due to
purchases exceeding repayments. Investment securities held-to-maturity increased
$4.7 million, due to security purchases exceeding  maturities,  while investment
securities  available-for-sale  decreased  $5.4  million,  primarily due to $5.0
million in  securities  sold.  At December  31,  1999,  75.9% of the  investment
securities,  including available-for-sale and held-to-maturity issues, consisted
of U.S.  Government and Agency  obligations,  while 72.0% of the mortgage-backed
securities portfolio consisted of Fannie Mae ("FNMA"), Freddie Mac ("FHLMC") and
Ginnie Mae ("GNMA") issues.  Investment  securities  available for sale included
$2.0 million of U.S. Treasury notes and $909,000 of U.S. Government Agency notes
while  investment  securities  held-to-maturity  consisted  of  $500,000 of U.S.
Treasury notes, $30.4 million of U.S.  Government Agency notes, $10.0 million in
trust preferred securities and $733,000 in municipal bonds and notes.

         Loans receivable  increased $13.0 million to $153.3 million at December
31, 1999 from $140.3 million at December 31, 1998. The increase was primarily in
the  one- to  four-family  mortgage  and  home  equity  loan  categories,  which
increased  $7.6 million and $4.8  million,  respectively.  At December 31, 1999,
87.5% of the outstanding  balance of loans in the portfolio  consisted of one-to
four-family related loans, compared to 86.9% at December 31, 1998.

         Deposits  totalled  $235.0  million at December 31, 1999, a decrease of
$3.3 million or 1.4% from the $238.3 million balance at December 31, 1998.

         Borrowed money increased $22.3 million to $64.3 million at December 31,
1999, as compared to $42.0 million at December 31, 1998. Based on the lower cost
of  wholesale  funds  as  compared  to  comparable   maturity  retail  deposits,
management  chose to fund the asset growth  discussed above with additional FHLB
borrowings.  During the year ended  December  31,  1999,  short-term  borrowings
increased  $6.0 million to $6.0  million,  with an average cost of 5.80% at year
end, while long-term debt increased  $16.3 million to $58.3 million,  the result
of $24.0 million in new borrowings  with 1 to 10 year  maturities and an average
cost of 5.75% and the repayment of current  maturities of long-term debt of $7.7
million. The increased borrowed money was used to fund increased lending.

         Stockholders'  equity  increased  $356,000 or 0.8%, to $47.1 million at
December 31, 1999 from $46.8  million at the prior year end.  During  1999,  net
income of $3.0  million was  largely  offset by $1.5  million in treasury  stock
acquisitions,  $739,000 used to fund the Company's newly implemented Stock-Based
Incentive Plan, and $496,000 in dividends declared to stockholders.

Comparison of Operating Results for the Years Ended December 31, 1999 and 1998

         Net Income. Net income for 1999 was $3.04 million, an increase of $1.64
million from $1.40 million in 1998. The increase was primarily the result of two
factors.  The primary  factor was the $1.79  million  increase  in net  interest
income to $10.89  million in 1999 compared to $9.10  million in 1998,  which was
<PAGE>
the result of an  increase  in total  interest  income  and a decrease  in total
interest  expense.  Additionally,   charitable  contribution  expenses  totalled
$17,000  in 1999,  a  decrease  of  $846,000  from the 1998  total of  $863,000.
$842,000  of the 1998  charitable  contribution  expense  related to the initial
funding of the West Essex Bancorp Charitable Foundation, a charitable foundation
established in


                                      -11-
<PAGE>
                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

connection  with the Company's  initial public stock  offering,  with a $100,000
cash  contribution and a contribution by the Company of 74,214 shares of Company
common stock. The  aforementioned two factors combined to increase income before
income taxes and net income by $2.64 million and $1.69 million, respectively.

         Interest Income. Total interest income increased 6.7% to $22.75 million
for 1999 as compared to $21.31 million for 1998. The increase was due to a $26.4
million or 8.7% increase in average  interest-earning  assets during 1999, which
more than offset a drop of 13 basis points in the yield earned  thereon to 6.92%
in 1999 from 7.05% in 1998.  The increased  average  balances of earning  assets
were funded by increased FHLB borrowings.

         Interest  income on loans during 1999  increased by $1.16  million,  or
11.5%, to $11.24 million when compared to $10.08 million during 1998. During the
years ended  December 31, 1999 and 1998,  the yield earned on the loan portfolio
was 7.53% and 7.79%,  respectively.  The  average  balance of loans  outstanding
during the years ended  December 31, 1999 and 1998 totalled  $149.4  million and
$129.4  million,  respectively.  The decreased  yield is the result of the lower
market  interest rates  prevailing  during much of 1999.  The increased  average
balance during 1999 is the result of the continued  increase in loan origination
efforts,  including the use of outside  mortgage  brokers,  which began in 1997.
Loan originations were $42.2 million in 1999 and $50.5 million in 1998.

         Interest   on   mortgage-backed    securities,   all   of   which   are
held-to-maturity,  decreased  $131,000,  or 1.7%,  during 1998 to $7.72  million
compared to $7.85 million for 1998. During the year ended December 31, 1999, the
average  balance  of  mortgage-backed   securities  outstanding  decreased  $1.3
million,  or 1.1%, to $120.0  million when compared to $121.3  million for 1998.
The  yield  earned  on  the  mortgage-backed   securities   portfolio  decreased
marginally to 6.44% in 1999 from 6.47% in 1998.

         Interest    earned   on   investment    securities,    including   both
available-for-sale and held-to-maturity issues, increased by $482,000, or 17.9%,
to $3.2 million for 1999,  when compared to $2.7 million for 1998.  The increase
resulted from an increase of $8.0 million,  or 20.5%,  in the average balance of
the  investment  securities  portfolio,  which more than offset a decrease of 15
basis points in the yield earned on the investment securities portfolio to 6.73%
in 1999 from  6.88% in 1998.  The  increased  average  balance  is the result of
purchases during 1999 while the decreased yield is due to the lower market rates
available thereon.

         Interest  on  other  interest-earning   assets  totalled  $611,000  and
$684,000  during  1999  and  1998,  respectively.  The  yield  earned  on  other
interest-earning assets decreased to 4.99% in 1999 from 5.51% in 1998, while the
average balance of other interest-earning  assets outstanding decreased $178,000
or 1.4%.

         Interest Expense. Interest expense on deposits decreased $1.17 million,
or 11.9%,  to $8.58 million  during 1999 compared to $9.75 million for 1998. The
decrease  during 1999 was  attributable  to a decrease of 44 basis points in the
average cost of interest-bearing  deposits to 3.89% for 1999 from 4.33% or 1998,
along  with a decrease  of $4.4  million,  or 1.9%,  in the  average  balance of
interest-bearing deposits outstanding. The decreased cost of deposits was due to
the lower market rates  prevailing  for much of 1999 and was seen in all deposit
categories.

                                      -12-
<PAGE>
                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         Interest  expense on borrowed money  increased  $803,000,  or 32.5%, to
$3.3 million during 1999 compared to $2.5 million for 1998. The increase  during
1999 was  attributable to an increase of $15.4 million in the average balance of
borrowings outstanding, partially offset by a decrease of 17 basis points in the
cost of borrowings to 5.67% for 1999 from 5.84% for 1998. The increased  average
balance reflects management's  increased use of borrowed funds to compensate for
deposit loss,  leverage the balance sheet and to manage  interest rate risk. The
decreased  interest rate on  borrowings  resulted from the paydown of older debt
having higher interest rates.

         Net  Interest  Income.  Net  interest  income for 1999  increased  $1.8
million,  or 19.7%,  to $10.9 million in 1999 from $9.1 million in 1998. The net
interest  rate  spread  increased  to 2.66% in 1999  from  2.48% in 1998 and the
interest  rate  margin  increased  to 3.31% in 1999  from  3.01% in 1998.  These
increases  primarily  resulted  from a 31 basis  point  decrease  in the cost of
interest-bearing  liabilities  to 4.26% in 1999 from  4.57% in 1998,  which more
than  offset  a  13  basis  point  decrease  in  the  yield  earned  on  average
interest-earning  assets to 6.92% in 1999 from 7.05% in 1998. In addition to the
increases  in interest  rate spread and margin,  the Company was able to improve
net interest income by increasing net  interest-earning  assets by $15.4 million
and by leveraging the balance sheet through increased borrowings.

         Provision  for Loan Losses.  During 1999,  the Company did not record a
provision for loan losses as management  determined that the existing  allowance
for loan losses was  adequate.  During  1998,  the Bank  recorded a recapture of
$131,000  from the  allowance  for loan losses as a credit to provision for loan
losses.  The recaptured  allowance of $131,000 in 1998  represented  6.9% of the
allowance  for loan losses at the end of 1997 and  reflected a $405,000 or 16.3%
decrease in loans delinquent ninety days or more. At December 31, 1999 and 1998,
the Bank's loan portfolio  included loans  totalling  $792,000 and $2.1 million,
respectively,  which were delinquent  ninety days or more. The Bank maintains an
allowance for loan losses based on management's evaluation of the risks inherent
in its loan portfolio which gives due consideration to changes in general market
conditions  and in the  nature  and  volume of the  Bank's  loan  activity.  The
allowance  for loan losses  amounted  to $1.40  million at  December  31,  1999,
representing  0.90% of total loans and 176.8% of loans delinquent ninety days or
more,  compared  to  an  allowance  of  $1.72  million  at  December  31,  1998,
representing  1.20% of total loans and 82.4% of loans delinquent  ninety days or
more. During 1999 and 1998, the Bank charged off loans aggregating  $317,000 and
$37,000,  respectively.  The $317,000  charge-off in 1999  represented the final
resolution of the Bank's largest  nonperforming  loan, a construction  loan that
had been in default for over six years. The Bank monitors its loan portfolio and
intends to continue to provide  for loan  losses  based on its ongoing  periodic
review of the loan portfolio and general market conditions.

         The Bank has established a standardized  process to assess the adequacy
of the allowance for loan losses and to identify the risks  inherent in the loan
portfolio.  The process  incorporates  credit reviews and gives consideration to
areas of exposure such as concentrations of credit,  local economic  conditions,
trends in delinquencies,  collateral coverage, the composition of the performing
and  non-performing  loan  portfolios,  and  other  risks  inherent  in the loan
portfolio.

                                      -13-
<PAGE>
                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         Specific allocations of the allowance for loan losses are identified by
individual loan based upon a detailed  credit review of each such loan.  General
loan loss  allowances  are allocated to pools of loans  categorized  by type and
assigned  allowance  percentages which take into effect past charge off history,
industry averages and current trends and risks.  Finally, an unallocated portion
of the allowance is  maintained to account for the general  inherent risk in the
loan  portfolio,  known  circumstances  which are not addressed in the allocated
portion of the allowance (such as the increased  dependence on outside  mortgage
brokers for originations), and the necessary imprecision in the determination of
the allocated portion of the allowance.

         The  allowance  for  loan  losses   includes   specific,   general  and
unallocated  allowances  of $50,000,  $878,000 and  $472,000,  respectively,  at
December 31, 1999, as compared to $492,000, $817,000 and $408,000, respectively,
at December 31, 1998. The decrease in the specific allowance  primarily reflects
the final  resolution of several loans  related to a large  condominium  project
which had been in default since 1993. The general allowance at December 31, 1999
represents  0.56% of total loans, a slight decrease from 0.57% at the prior year
end. The unallocated  allowance at December 31, 1999  represents  0.30% of total
loans, a slight  increase from 0.29% at the prior year end. A factor included in
the unallocated allowance at both December 31, 1999 and 1998 is the large volume
of loan  originations  generated  by the  Bank via the use of  outside  mortgage
brokers  since 1997 as  compared  to no such loans in prior  years.  The Company
believes the use of outside brokers somewhat increases the inherent risks in the
loan portfolio.  The general and unallocated  allowances increased primarily due
to the $13.2 million increase in the loan portfolio.

         Non-Interest  Income.  Non-interest  income  increased by $156,000,  or
29.5% to $685,000  during 1999 as compared to $529,000 for 1998. The increase in
non-interest  income  during 1999 resulted  primarily  from $127,000 in gains on
sales of securities  during 1999 compared to none in 1998, and increases in fees
and service charges of $21,000, or 5.7%, and miscellaneous  income of $8,000, or
4.9%.

         Non-Interest  Expenses.  Non-interest  expenses decreased $738,000,  or
9.7%, to $6.9 million during 1999 compared to $7.6 million for 1998.  Charitable
contribution  expense  totalled $17,000 in 1999, a decrease of $846,000 over the
1998 amount of $863,000.  $842,000 of the 1998 charitable  contribution  expense
related to the initial funding of the West Essex Bancorp  Charitable  Foundation
with a $100,000 cash  contribution  and a contribution  by the Company of 74,214
shares of Company common stock.  Loss on real estate owned  decreased by $98,000
to $42,000 in 1999 as compared to $140,000 in 1998,  due to a reduction  in loss
provisions  recorded  to $ - 0 - in 1999 from  $131,000 in 1998.  Excluding  the
aforementioned  factors,  non-interest  expenses  were $6.81 million in 1999, or
$207,000 higher than the $6.60 million  comparable amount in 1998. This increase
of 3.1% is  attributable  to the growth of the Company,  which is reflected by a
8.2%  increase  in average  total  assets.  In  accordance  with the  foregoing,
salaries  and  employee  benefits  increased  $179,000  or 5.8%,  occupancy  and
equipment  expenses  increased  $25,000,  or 2.5%,  and  miscellaneous  expenses
increased  $3,000 or 0.2%.  Included  in  miscellaneous  expenses,  among  other
things, are legal fees, accounting and auditing fees, director fees, FHLB demand
deposit charges, insurance costs, telephone expenses and stationery and supplies
expenses and the  nonrecurring  expenses  associated  with Year 2000  compliance
issues.
<PAGE>
         Income Taxes.  Income tax expense  totalled  $1.66 million and $752,000
during 1999 and 1998, respectively. The increase in 1999 resulted primarily from
an increase in pre-tax income of $2.56 million.  The Company's  effective income
tax rate was 35.3% in 1999 and 35.0% in 1998.


                                      -14-
<PAGE>
                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Comparison of Operating Results for the Years Ended December 31, 1998 and 1997

         Net  Income.  Net income for 1998 was $1.40  million,  an  increase  of
$660,000  from  $737,000 in 1997.  The increase was primarily the result of four
factors.  The  amortization  of the  excess  of cost  over  assets  acquired  in
connection  with the October 1997 purchase of deposits from Summit Bank totalled
$593,000 in 1998, or $1.15 million less than the comparable 1997 figure of $1.74
million,  which  included  a $1.59  million  loss upon the  reassessment  of the
carrying value of this asset at the end of 1997. Charitable contribution expense
totalled  $863,000 in 1998,  an  increase  of  $849,000  over the 1997 amount of
$14,000.  $842,000 of the 1998  charitable  contribution  expense related to the
initial funding of the West Essex Bancorp  Charitable  Foundation,  a charitable
foundation  established  in connection  with the Company's  initial public stock
offering, with a $100,000 cash contribution and a contribution by the Company of
74,214  shares of  Company  common  stock.  In 1998,  a  $131,000  recapture  of
provision  for loan losses  represented  an  improvement  of  $618,000  over the
provision  of $487,000  recorded  in 1997.  Finally,  loss on real estate  owned
decreased  by $240,000 to $140,000 in 1998 as compared to $380,000 in 1997.  The
aforementioned  four factors combined to increase income before income taxes and
net income by $1.16 million and $742,000,  respectively.  The remaining decrease
of $82,000 in net income  was the  result of  increased  non-interest  expenses,
exclusive of those discussed above,  partially offset by increased  non-interest
income, and the income tax effect thereon.

         Interest Income. Total interest income increased 17.7% to $21.3 million
for 1998 as compared to $18.1  million or 1997.  The increase was due to a $56.4
million or 22.9% increase in average  interest-earning assets during 1998, which
more than offset a drop of 31 basis points in the yield earned  thereon to 7.05%
in 1998 from 7.36% in 1997.  Increased average balances and decreased yield were
experienced in all categories of interest-earning  assets. The increased average
balances of earning  assets were the result of increased loan  originations  and
securities  purchases  funded by the $16.6 million net proceeds of the Company's
1998 initial public stock offering, the Summit deposit purchase of late 1997 and
increased FHLB borrowings.

         Interest  income on loans  during 1998  increased by $2.2  million,  or
27.5%,  to $10.1 million when compared to $7.9 million  during 1997.  During the
years ended  December 31, 1998 and 1997,  the yield earned on the loan portfolio
was 7.79% and 8.13%,  respectively.  The  average  balance of loans  outstanding
during the years ended  December 31, 1998 and 1997 totalled  $129.4  million and
$97.3  million,  respectively.  The  decreased  yield is the result of the lower
market  interest rates  prevailing  during 1998. The increased  average  balance
during 1998 is the result of the continued increase in loan origination efforts,
including the use of outside mortgage brokers, which began in 1997. Originations
were $50.5 million in 1998, up from $47.1 million in 1997.

         Interest   on   mortgage-backed    securities,   all   of   which   are
held-to-maturity,  decreased  $56,000  or 0.7%,  during  1998 to  $7.85  million
compared to $7.91 million for 1997. During the year ended December 31, 1998, the
average  balance  of  mortgage-backed   securities  outstanding  increased  $6.3
million,  or 5.5%, to $121.3  million when compared to $115.0  million for 1997.
The yield earned on the mortgage-backed  securities portfolio decreased to 6.47%
in 1998 from 6.88% in 1997. The decrease in the average yield on mortgage-backed
securities during 1998 resulted primarily from lower market interest rates.

                                      -15-
<PAGE>
                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         Interest    earned   on   investment    securities,    including   both
available-for-sale and held-to-maturity issues, increased by $798,000, or 42.1%,
to $2.7 million for 1998,  when compared to $1.9 million for 1997.  The increase
resulted from an increase of $12.4 million,  or 46.4%, in the average balance of
the  investment  securities  portfolio,  which more than offset a decrease of 21
basis points in the yield earned on the investment securities portfolio to 6.88%
in 1998 from  7.09% in 1997.  The  increased  average  balance  is the result of
purchases during 1998 while the decreased yield is due to the lower market rates
available thereon.

         Interest  on  other  interest-earning   assets  totalled  $684,000  and
$401,000  during  1998  and  1997,  respectively.  The  yield  earned  on  other
interest-earning  assets  decreased  to 5.51% in 1998 from 5.71% in 1997,  which
partially  offset an increase of $5.4 million,  or 76.9%, in the average balance
of other interest-earning  assets outstanding.  The increased average balance in
1998 is due to the temporary  investment  of net proceeds of the initial  public
stock offering in overnight deposits.

         Interest Expense.  Interest expense on deposits increased $1.7 million,
or 13.1%,  to $9.74 million  during 1998 compared to $8.09 million for 1997. The
increase during 1998 was attributable to an increase of five basis points in the
average cost of interest-bearing  deposits to 4.33% for 1998 from 4.28% or 1997,
along with an increase of $36.4  million,  or 19.3%,  in the average  balance of
interest-bearing   deposits  outstanding.   The  increased  average  balance  of
interest-bearing  deposits  primarily  reflects  the  purchase of deposits  from
Summit Bank during October 1997.

         Interest  expense on borrowed money  increased  $906,000,  or 57.9%, to
$2.5 million during 1998 compared to $1.6 million for 1997. The increase  during
1998 was  attributable to an increase of $16.1 million in the average balance of
borrowings outstanding, partially offset by a decrease of 13 basis points in the
cost of borrowings to 5.84% for 1998 from 5.97% for 1997. The increased  average
balance  reflects  management's  increased use of borrowed funds to leverage the
balance  sheet.  The decreased  interest  rate on  borrowings  resulted from the
paydown of older debt having higher interest rates as well as the lower interest
rates available on new borrowings obtained in 1998.

         Net Interest Income.  Net interest income for 1998 increased  $636,000,
or 7.5%,  to $9.1  million in 1998 from $8.5  million in 1997.  The net interest
rate spread  decreased to 2.48% in 1998 from 2.87% in 1997 and the interest rate
margin decreased to 3.01% in 1998 from 3.44% in 1997. These decreases  primarily
resulted from a 31 basis point decrease in the yield earned on  interest-earning
assets  to  7.05%  in 1998  from  7.36% in 1997  coupled  with an 8 basis  point
increase in the cost of average  interest-bearing  liabilities  to 4.57% in 1998
from 4.49% in 1997.  Despite the  decreases in interest  rate spread and margin,
the  Company  was  able  to  improve  net  interest  income  by  increasing  net
interest-earning  assets by $3.8  million and by  leveraging  the balance  sheet
through increased borrowings.

         Provision for Loan Losses.  During 1998,  the Bank recorded a recapture
of $131,000 from the allowance for loan losses as a credit to provision for loan
losses.  During 1997, the Bank provided $487,000 for loan losses. The recaptured
allowance of $131,000 in 1998  represented 6.9% of the allowance for loan losses
<PAGE>
at the end of 1997  and  reflected  the  $405,000  or  16.3%  decrease  in loans
delinquent   ninety  days  or  more  and  the  reduced   uncertainty   involving
circumstances  discussed in the third succeeding paragraph. At December 31, 1998
and 1997,  the Bank's loan portfolio  included loans  totalling $2.1 million and
$2.5 million, respectively,  which were delinquent ninety days or more. The Bank
maintains an allowance for loan losses based on  management's  evaluation of the
risks inherent in


                                      -16-
<PAGE>
                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


its loan  portfolio  which give due  consideration  to changes in general market
conditions  and in the  nature  and  volume of the  Bank's  loan  activity.  The
allowance  for loan losses  amounted  to $1.72  million at  December  31,  1998,
representing  1.20% of total loans and 82.4% of loans delinquent  ninety days or
more   compared  to  an  allowance  of  $1.89  million  at  December  31,  1997,
representing  1.62% of total loans and 75.7% of loans delinquent  ninety days or
more. During 1998 and 1997, the Bank charged off loans  aggregating  $37,000 and
$166,000,  respectively.  The Bank  monitors its loan  portfolio  and intends to
continue to provide for loan losses based on its ongoing  periodic review of the
loan portfolio and general market conditions.

         The Bank has established a standardized  process to assess the adequacy
of the allowance for loan losses and to identify the risks  inherent in the loan
portfolio.  The process  incorporates  credit reviews and gives consideration to
areas of exposure such as concentrations of credit,  local economic  conditions,
trends in delinquencies,  collateral coverage, the composition of the performing
and  non-performing  loan  portfolios,  and  other  risks  inherent  in the loan
portfolio.

         Specific allocations of the allowance for loan losses are identified by
individual loan based upon a detailed  credit review of each such loan.  General
loan loss  allowances  are allocated to pools of loans  categorized  by type and
assigned  allowance  percentages which take into effect past charge off history,
industry averages and current trends and risks.  Finally, an unallocated portion
of the allowance is  maintained to account for the general  inherent risk in the
loan  portfolio,  known  circumstances  which are not addressed in the allocated
portion of the allowance (such as the increased  dependence on outside  mortgage
brokers for originations), and the necessary imprecision in the determination of
the allocated portion of the allowance.

         The  allowance  for  loan  losses   includes   specific,   general  and
unallocated  allowances  of $492,000,  $817,000 and $408,000,  respectively,  at
December 31, 1998, as compared to $605,000, $761,000 and $518,000, respectively,
at December 31, 1997. The decrease in the specific allowance  primarily reflects
the continued  resolution of loans related to a large condominium  project which
had been in default since 1993 and was subject to bankruptcy  proceedings  and a
lawsuit. The uncertainty in regard to these credits is also accounted for in the
unallocated  allowance  in  amounts  which  decrease  as the  ability to clearly
quantify  the  specific  losses  increases.   Another  factor  included  in  the
unallocated  allowance at December 31, 1998 and 1997 is the large volume of loan
originations  generated by the bank by outside  mortgage brokers during 1998 and
1997 as compared to no such loans in prior years.  The Company  believes the use
of outside  brokers  increases  the inherent  risks in the loan  portfolio.  The
general allowance  increased  primarily due to the $26.9 million increase in the
loan portfolio.

         Non-Interest  Income.  Non-interest  income  increased by $156,000,  or
41.8%, to $529,000 during 1998 as compared to $373,000 for 1997. The increase in
non-interest  income during 1998 resulted  primarily from a $20,000 loss on sale
of  securities  available  for sale  during 1997  compared to none in 1998,  and
increases  in fees and service  charges of $93,000 and  miscellaneous  income of
$43,000.  The  increase  during  the 1998  period  in fees and  service  charges
resulted  primarily from the increased number of deposit accounts serviced since
the October 1997 Summit Bank deposit purchase.
<PAGE>
         Non-Interest Expenses. Non-interest expense increased $434,000, or 6.1%
to $7.6 million  during 1998 compared to $7.2 million for 1997.  During 1997, in
conjunction with the purchase of three branches and related deposit  liabilities
from Summit Bank,  the Bank  recorded $7.6 million in excess of cost over assets
acquired.  The  amortization  of the  excess of cost  over  assets  acquired  in
connection  with the October 1997 purchase of deposits from Summit Bank totalled
$593,000 in 1998, or $1.15 million

                                      -17-
<PAGE>
                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


less than the comparable  1997 figure of $1.74  million,  which included a $1.59
million loss upon the  reassessment  of the carrying  value of this asset at the
end of 1997.  Charitable  contribution  expense  totalled  $863,000 in 1998,  an
increase  of  $849,000  over the 1997  amount of  $14,000.  $842,000 of the 1998
charitable contribution expense related to the initial funding of the West Essex
Bancorp Charitable foundation, a charitable foundation established in connection
with  the  Company's  initial  public  stock  offering,  with  a  $100,000  cash
contribution  and a  contribution  by the  Company  of 74,214  shares of Company
common  stock.  Loss on real estate  owned  decreased by $240,000 to $140,000 in
1998 as  compared to $380,000  in 1997,  due to a reduction  in loss  provisions
recorded to $131,000 in 1998 from $373,000 in 1997. Excluding the aforementioned
factors,  non-interest  expenses were $6.0 million in 1998,  or $974,000  higher
than the $5.0  million  comparable  amount in 1997.  This  increase  of 19.3% is
attributable to the growth of the Company,  which is reflected by a 24.5% growth
in average total assets and an increase in business locations from five to eight
effective October 1997. In accordance with the foregoing,  salaries and employee
benefits increased $255,000 or 9.0%,  occupancy and equipment expenses increased
$253,000  or 34.1%  and  miscellaneous  expense  increased  $445,000  or  33.4%.
Included  in  miscellaneous  expenses,  among  other  things,  are  legal  fees,
accounting  and auditing  fees,  director  fees,  FHLB demand  deposit  charges,
insurance  costs,  telephone  expense and stationery  and supplies  expenses and
expenses associated with Year 2000 compliance issues.

         Income Taxes.  Income tax expense totalled $752,000 and $436,000 during
1998 and 1997,  respectively.  The increase in 1998 resulted  primarily  from an
increase in pre-tax income of $976,000 and from the purchase,  in 1998, of trust
preferred securities which are afforded favorable income tax treatment under the
internal revenue code. The Company's effective income tax rate was 35.0% in 1998
and 37.2% in 1997.

Liquidity and Capital Resources

         The Bank's primary sources of funds on a long-term and short-term basis
are deposits,  principal  and interest  payments on loans,  mortgage-backed  and
investment securities and FHLB borrowings.  The Bank uses the funds generated to
support its lending and  investment  activities as well as any other demands for
liquidity such as deposit outflows.  While maturities and scheduled amortization
of loans are predictable sources of funds,  deposit flows,  mortgage prepayments
and the exercise of call  features are greatly  influenced  by general  interest
rates,  economic conditions and competition.  The Bank has continued to maintain
the  required  levels  of liquid  assets as  defined  by OTS  regulations.  This
requirement  of the  OTS,  which  may be  varied  at the  direction  of the  OTS
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term  borrowings.  The Bank's currently required liquidity
ratio is 4.0%. At December 31, 1999, the Bank's  regulatory  liquidity ratio was
25.40%.

         At December 31, 1999, the Bank exceeded all of its  regulatory  capital
requirements with a tangible capital level of $36.6 million,  or 10.7%, of total
adjusted  assets,  which is above the required  level of $5.1 million,  or 1.5%;
core capital of $36.6  million,  or 10.7%,  of total adjusted  assets,  which is
above the required  level of $13.7  million,  or 4%; and  risk-based  capital of
$38.0 million,  or 28.6%, of risk-weighted  assets,  which is above the required
level of $10.6 million, or 8%.
<PAGE>
         The most liquid  assets are cash and cash  equivalents  and  investment
securities  available  for sale.  The levels of these  assets are  dependent  on
operating,  financing, lending and investing activities during any given period.
At December  31,  1999,  cash and cash  equivalents  and  investment  securities
available for sale totalled $15.7 million, or 4.5% of total assets.

                                      -18-
<PAGE>
                            WEST ESSEX BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The Company and the Bank have other  sources of liquidity if a need for
additional funds arises,  including FHLB  borrowings.  At December 31, 1999, the
Bank had $64.3 million in  borrowings  outstanding  from the FHLB.  Depending on
market  conditions and the pricing of deposit products and FHLB borrowings,  the
Bank may continue to rely on FHLB borrowing to fund asset growth.

         At  December  31,  1999,  the Bank had  commitments  to  originate  and
purchase  loans and fund  unused  outstanding  lines of credit  and  undisbursed
proceeds of construction  mortgages totaling $12.1 million. The Bank anticipates
that  it  will  have  sufficient  funds  available  to  meet  its  current  loan
origination commitments.  Certificate accounts,  including Individual Retirement
Account  ("IRA")  accounts,  which are scheduled to mature in less than one year
from  December  31,  1999,  totalled  $111.8  million.  The  Bank  expects  that
substantially all of the maturing  certificate  accounts will be retained by the
Bank at maturity.

Impact of Inflation and Changing Prices

         The  Consolidated  Financial  Statements  and Notes  thereto  presented
herein have been prepared in accordance with GAAP, which require the measurement
of financial  position and  operating  results  generally in terms of historical
dollar amounts without  considering the changes in the relative purchasing power
of money over time due to inflation. The impact of inflation is reflected in the
increased cost of the Company's operations.  Unlike industrial companies, nearly
all of the assets and  liabilities  of the Company are monetary in nature.  As a
result,  interest rates have a greater impact on the Company's  performance than
do the effects of general levels of inflation. Interest rates do not necessarily
move in the same  direction  or to the same  extent  as the  prices of goods and
services.

         Accounting for Derivative  Instruments and Hedging Activities.  In June
1998, the FASB issued SFAS No. 133,  "Accounting for Derivative  Instruments and
Hedging Activities". SFAS No. 133 establishes accounting and reporting standards
for  derivative  instruments  and for hedging  activities.  It requires  that an
entity  recognize  all  derivatives  as  either  assets  or  liabilities  in the
statement of financial  position and measure those instruments at fair value. In
addition,  certain  provisions  of this  statement  will permit,  at the date of
initial adoption of SFAS No. 133, the transfer of any held-to-maturity  security
into either the  available-for-sale  or trading category and the transfer of any
available-for-sale  security  into  the  trading  category.  Transfers  from the
held-to-maturity  portfolio at the date of initial  adoption  will not call into
question the entity's  intent to hold other debt  securities  to maturity in the
future.  SFAS No. 133 is  effective  for all  fiscal  quarters  of fiscal  years
beginning  after June 15, 2000 and is not expected to have a material  impact on
the Company and the Bank, which do not intend to adopt SFAS No. 133 earlier than
required.

                                      -19-
<PAGE>
                                                                January 27, 2000


                       MANAGEMENT RESPONSIBILITY STATEMENT


Management of West Essex Bancorp,  Inc. and  Subsidiaries is responsible for the
preparation of the consolidated  financial statements and all other consolidated
financial  information  included  in this  report.  The  consolidated  financial
statements  were  prepared in  accordance  with  generally  accepted  accounting
principles applied on a consistent basis. All consolidated financial information
included in this report agrees with the consolidated  financial  statements.  In
preparing the  consolidated  financial  statements,  management  makes  informed
estimates and judgments,  with  consideration  given to  materiality,  about the
expected results of various events and transactions.

Management  maintains  a system of internal  accounting  control  that  includes
personnel  selection,   appropriate  division  of  responsibilities  and  formal
procedures  and  policies  consistent  with high  standards  of  accounting  and
administrative  practice.  Consideration has been given to the necessary balance
between costs of systems of internal control and the benefits derived.

Management  reviews and modifies its systems of accounting and internal  control
in light of changes in  conditions  and  operations  as well as in  response  to
recommendations  from the independent  certified public accountants.  Management
believes  the  accounting  and  internal  control  systems  provide   reasonable
assurance that assets are safeguarded and financial information is reliable.

The Board of  Directors  (the  "Board")  is  responsible  for  determining  that
management fulfills its  responsibilities in the preparation of the consolidated
financial  statements and in the control of  operations.  The Board appoints the
independent certified public accountants.  The Board meets with management,  the
independent certified public accountants and the internal auditor,  approved the
overall  scope of audit work and related  fee  arrangements  and  reviews  audit
reports and findings.


/s/ Dennis A. Petrello                               /s/ Leopold W. Montanaro
--------------------------                           -------------------------
Dennis A. Petrello                                   Leopold W. Montanaro
Executive Vice President                             President & CEO

                           /s/ Charles E. Filippo
                           -------------------------
                           Charles E. Filippo
                           Executive Vice President


                                      -20-
<PAGE>
                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------



To The Board of Directors and Stockholders
West Essex Bancorp, Inc.



We have audited the accompanying  consolidated statements of financial condition
of West Essex Bancorp,  Inc. (the "Bancorp") and Subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of income,  comprehensive
income,  changes in stockholders' equity and cash flows for each of the years in
the three-year  period ended  December 31, 1999.  These  consolidated  financial
statements   are  the   responsibility   of  the   Bancorp's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to in the second
preceding  paragraph present fairly, in all material respects,  the consolidated
financial  position of West Essex Bancorp,  Inc. and Subsidiaries as of December
31, 1999 and 1998,  and the results of their  operations and cash flows for each
of the years in the  three-year  period ended  December 31, 1999,  in conformity
with generally accepted accounting principles.



                                                         /s/Radics & Co., LLC
                                                         --------------------
                                                         Radics & Co., LLC




Pine Brook, New Jersey
January 27, 2000


                                      -21-
<PAGE>
<TABLE>
<CAPTION>
                                          WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                        CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

                                                                                                      December 31,
                                                                                         -----------------------------------
Assets                                                               Note(s)                 1999                 1998
------                                                               -------             --------------       --------------
<S>                                                              <C>                     <C>                  <C>
Cash and amounts due from depository institutions                                           $ 5,728,992          $ 1,547,464
Interest-bearing deposits in other banks                                                      7,016,853           14,823,967
                                                                                         -------------        -------------

       Total cash and cash equivalents                              1 and 18                 12,745,845           16,371,431

Securities available for sale                                    1, 3, 12 and 18              2,923,750            8,282,450
Investment securities held to maturity                           1, 4, 12 and 18             41,582,003           36,873,165
Mortgage-backed securities held to maturity                      1, 5, 12 and 18            121,223,315          110,376,072
Loans receivable                                                   1, 6 and 18              153,276,187          140,272,203
Real estate owned                                                    1 and 7                    899,738              582,138
Premises and equipment                                               1 and 8                  2,737,456            2,947,374
Federal Home Loan Bank of New York stock                               12                     3,272,700            2,607,300
Accrued interest receivable                                        1, 9 and 18                2,005,563            2,004,809
Excess of cost over assets acquired                                 1 and 10                  4,643,348            5,236,116
Other assets                                                           15                     2,996,932            3,055,825
                                                                                         --------------       --------------

       Total assets                                                                      $  348,306,837       $  328,608,883
                                                                                         ==============       ==============

Liabilities and Stockholders' Equity
------------------------------------

Liabilities
-----------

Deposits                                                            11 and 18             $ 234,977,812        $ 238,312,941
Borrowed money                                                      12 and 18                64,340,115           42,009,880
Advance payments by borrowers for taxes and insurance                                         1,044,140              921,958
Other liabilities                                                   14 and 15                   834,824              610,050
                                                                                          -------------        -------------

       Total liabilities                                                                    301,196,891          281,854,829
                                                                                           -------------        -------------

Commitments and contingencies                                       17 and 18                         -                    -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                              <C>                     <C>                  <C>
Stockholders' Equity                                              1, 2, 13, 14 and 15
--------------------

Preferred stock (par value $.01), 1,000,000 shares
  authorized; no shares issued or outstanding                                                         -                    -
Common stock (par value $.01), 9,000,000 shares
  authorized; shares issued 4,197,233; shares outstanding
  4,054,357 (1999) and 4,197,233 (1998)                                                          41,972               41,972
Additional paid-in capital                                                                   17,332,133           17,339,291
Retained earnings - substantially restricted                                                 33,054,528           30,507,475
Common stock acquired by Employee Stock Ownership
  Plan ("ESOP")                                                                              (1,178,874)          (1,326,233)
Unearned Incentive Plan stock                                                                  (655,549)                   -
Treasury stock, at cost; 142,876 shares (1999)                                               (1,436,550)                   -
Accumulated other comprehensive (loss) income - Unrealized
  (loss) gain on securities available for sale, net of income taxes                             (47,714)             191,549
                                                                                           -------------        -------------

       Total stockholders' equity                                                             47,109,946          46,754,054
                                                                                         -------------        -------------

       Total liabilities and stockholders' equity                                          $ 348,306,837       $ 328,608,883
                                                                                           =============       =============

</TABLE>
See notes to consolidated financial statements.


                                      -22-
<PAGE>
<TABLE>
<CAPTION>
                                     WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF INCOME

                                                                                                   Year Ended December 31,
                                                                                      ----------------------------------------------
                                                                        Note(s)            1999            1998             1997
                                                                        ------         ------------    ------------     -----------
<S>                                                                     <C>            <C>             <C>              <C>
Interest income:
     Loans                                                              1 and 6        $ 11,240,049    $ 10,082,633     $ 7,908,541
     Mortgage-backed securities                                            1              7,722,483       7,852,565       7,908,940
     Investment securities                                                 1              2,834,753       2,216,231       1,661,624
     Securities available for sale                                         1                341,975         478,981         235,529
     Other interest-earning assets                                                          611,308         684,273         400,842
                                                                                       ------------    ------------     -----------

             Total interest income                                                       22,750,568      21,314,683      18,115,476
                                                                                       ------------    ------------     -----------

Interest expense:
     Deposits                                                             11              8,583,870       9,747,271       8,089,473
     Borrowed money                                                                       3,275,525       2,471,538       1,566,165
                                                                                       ------------    ------------     -----------

             Total interest expense                                                      11,859,395      12,218,809       9,655,638
                                                                                       ------------    ------------     -----------

Net interest income                                                                      10,891,173       9,095,874       8,459,838
Provision for (recapture of) loan losses                                   6               -               (130,630)        487,015
                                                                                       ------------    ------------     -----------

Net interest income after provision for (recapture of) loan losses                       10,891,173       9,226,504       7,972,823
                                                                                       ------------    ------------     -----------

Non-interest income:
     Fees and service charges                                                               387,300         366,319         273,443
     Gain (loss) on dispositions of securities                         1, 3 and 4           126,597               -         (20,245)
     Other                                                                                  170,957         163,331         120,039
                                                                                       ------------    ------------     -----------

             Total non-interest income                                                      684,854         529,650         373,237
                                                                                       ------------    ------------     -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                     <C>        <C>              <C>             <C>
Non-interest expenses:
     Salaries and employee benefits                                    1 and 14       3,282,547        3,103,230      2,847,886
     Net occupancy expense of premises                                 1 and 17         354,017          334,699        245,879
     Equipment                                                             1            665,517          659,998        495,742
     Loss on real estate owned                                          1 and 7          41,891          140,277        379,870
     Charitable contributions                                              2             17,178          863,434         14,401
     Amortization of intangibles                                          10            592,768          592,768      1,743,062
     Other                                                                            1,915,377        1,912,411      1,446,101
                                                                                   ------------     ------------    -----------

             Total non-interest expenses                                              6,869,295        7,606,817      7,172,941
                                                                                   ------------     ------------    -----------

Income before income taxes                                                            4,706,732        2,149,337      1,173,119
Income taxes                                                           1 and 15       1,663,383          752,037        436,279
                                                                                   ------------     ------------    -----------

Net income                                                                         $  3,043,349     $  1,397,300    $   736,840
                                                                                   ============     ============    ===========

Net income per common share:                                           1 and 16
     Basic                                                                         $       0.76     $       0.34(1)         N/A(1)
                                                                                   ============     ============    ===========
     Diluted                                                                       $       0.76     $       0.34(1)         N/A(1)
                                                                                   ============     ============    ===========

Weighted average number of common shares outstanding:                  1 and 16
     Basic                                                                            4,004,069        4,062,395(1)        N/A(1)
                                                                                   ============     ============     =========
     Diluted                                                                          4,007,751        4,062,395(1)        N/A(1)
                                                                                   ============     ============     =========
</TABLE>
(1) West Essex Bank converted to stock form on October 2, 1998.
<PAGE>

See notes to consolidated financial statements.
                                      -23-
<PAGE>
<TABLE>
<CAPTION>
                                  WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                                                                            Year Ended December 31,
                                                                 ------------------------------------------
                                                                     1999            1998          1997
                                                                 -----------     -----------    -----------
<S>                                                              <C>             <C>            <C>
Net income ..................................................    $ 3,043,349     $ 1,397,300    $   736,840
                                                                 -----------     -----------    -----------
Other comprehensive (loss) income, net of income taxes:
     Unrealized holding (losses) gains on securities
          available for sale, net of income taxes
          of $122,051, $(71,384) and  $(36,269), respectively       (217,166)        127,015         65,387

     Reclassification adjustment
          for realized (gains) losses on securities
          available for sale, net of income taxes
          of $12,418, $ - 0 - and $ - 0 -  , respectively ...        (22,097)           --           20,245
                                                                 -----------     -----------    -----------

Other comprehensive (loss) income ...........................       (239,263)        127,015         85,632
                                                                 -----------     -----------    -----------

Comprehensive income ........................................    $ 2,804,086     $ 1,524,315    $   822,472
                                                                 ===========     ===========    ===========
</TABLE>

See notes to consolidated financial statements.


                                      -24-
<PAGE>
<TABLE>
<CAPTION>
                                 WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


                                                                                               Retained
                                                                          Additional           Earnings -      Common Stock
                                                            Common          Paid-In          Substantially     Acquired by
                                                             Stock          Capital            Restricted          ESOP
                                                             -----          -------            ----------          ----
<S>                                                       <C>              <C>               <C>               <C>
Balance - December 31, 1996 .........................     $       --       $       --        $ 28,473,335      $       --

Net income for the year ended December 31, 1997 .....             --               --             736,840              --

Unrealized gain on securities available
  for sale, net of income taxes .....................             --               --                --                --
                                                          ------------     ------------      ------------      ------------
Balance - December 31, 1997 .........................             --               --          29,210,175              --

Net income for the year ended December 31, 1998 .....             --               --           1,397,300              --

Net proceeds from initial public stock offering .....           41,972       17,340,088              --                --

Common stock acquired by ESOP .......................             --               --                --          (1,473,584)

ESOP shares committed to be released ................             --               (797)             --             147,351

Initial capitalization of mutual holding company ....             --               --            (100,000)             --

Unrealized gain on securities available for sale, net
  of income taxes ...................................             --               --                --                --
                                                          ------------     ------------      ------------      ------------
Balance - December 31, 1998 .........................           41,972       17,339,291        30,507,475        (1,326,233)

Net income for the year ended December 31, 1999 .....             --               --           3,043,349              --

Purchase of 144,500 shares of treasury stock ........             --               --                --                --

Acquisition of 73,884 shares of common stock by
  Incentive Plan ....................................             --               --                --                --

Incentive Plan stock earned .........................             --               --                --                --

ESOP shares committed to be released ................             --             (5,940)             --             147,359

Reissuance of 1,624 shares of treasury stock ........             --             (1,218)             --                --

Cash dividends declared on common stock .............             --               --            (496,296)             --

Unrealized loss on securities available for sale,
  net of income taxes ...............................             --               --                --                --
                                                          ------------     ------------      ------------      ------------
Balance - December 31, 1999 .........................     $     41,972     $ 17,332,133      $ 33,054,528      $ (1,178,874)
                                                          ============     ============      ============      ============



</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                               Accumulated
                                                                                                  Other
                                                            Unearned                          Comprehensive         Total
                                                          Incentive           Treasury            (Loss)        Stockholders'
                                                          Plan Stock           Stock              Income           Equity
                                                          ----------           -----              ------           ------
<S>                                                       <C>               <C>               <C>               <C>
Balance - December 31, 1996 .........................     $       --        $       --        $    (21,098)     $ 28,452,237

Net income for the year ended December 31, 1997 .....             --                --                --             736,840

Unrealized gain on securities available
  for sale, net of income taxes .....................             --                --              85,632            85,632
                                                           ------------     ------------      ------------      ------------
Balance - December 31, 1997 .........................             --                --              64,534        29,274,709

Net income for the year ended December 31, 1998 .....             --                --                --           1,397,300

Net proceeds from initial public stock offering .....             --                --                --          17,382,060

Common stock acquired by ESOP .......................             --                --                --          (1,473,584)

ESOP shares committed to be released ................             --                --                --             146,554

Initial capitalization of mutual holding company ....             --                --                --            (100,000)

Unrealized gain on securities available for sale, net
  of income taxes ...................................             --                --             127,015           127,015
                                                           ------------     ------------      ------------      ------------
Balance - December 31, 1998 .........................             --                --             191,549        46,754,054

Net income for the year ended December 31, 1999 .....             --                --                --           3,043,349

Purchase of 144,500 shares of treasury stock ........             --          (1,453,094)             --          (1,453,094)

Acquisition of 73,884 shares of common stock by
  Incentive Plan ....................................         (738,840)             --                --            (738,840)

Incentive Plan stock earned .........................           83,291              --                --              83,291

ESOP shares committed to be released ................             --                --                --             141,419

Reissuance of 1,624 shares of treasury stock ........             --              16,544              --              15,326

Cash dividends declared on common stock .............             --                --                --            (496,296)

Unrealized loss on securities available for sale,
  net of income taxes ...............................             --                --            (239,263)         (239,263)
                                                          ------------      ------------      ------------      ------------
Balance - December 31, 1999 .........................     $   (655,549)     $ (1,436,550)     $    (47,714)     $ 47,109,946
                   === ====                               ============      ============      ============      ============

</TABLE>
See notes to consolidated financial statements.

                                      -25-
<PAGE>
<TABLE>
<CAPTION>
                                              WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                                CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                                 Year Ended December 31,
                                                                                    ----------------------------------------------
                                                                                       1999               1998               1997
                                                                                    ------------     ------------     ------------
<S>                                                                                 <C>              <C>              <C>
Cash flows from operating activities:
      Net income .................................................................  $  3,043,349     $  1,397,300     $    736,840
      Adjustments to reconcile net income
       to net cash provided by (used in) operating activities:
           Depreciation and amortization of premises and equipment ...............       235,426          278,355          230,524
           Net accretion of premiums, discounts and deferred loan fees ...........      (180,677)        (245,904)        (127,373)
           Amortization of intangibles ...........................................       592,768          592,768        1,743,062
           Provision for (recapture of) loan losses ..............................          --           (130,630)         487,015
           Provision for losses on real estate owned .............................          --            130,630          372,985
           (Gain) loss on sale of securities available for sale ..................       (34,515)            --             20,245
           (Gain) on sale of investment security held to maturity ................       (92,082)            --               --
           (Gain) on sale of real estate owned ...................................          --             (5,386)         (30,080)
           (Gain) on trade-in of automobile ......................................          --            (16,401)            --
           Deferred income tax (benefit) .........................................       219,825          (11,944)        (725,335)
           (Increase) decrease  in accrued interest receivable ...................          (754)           7,388         (360,770)
           (Increase) in other assets ............................................       (26,463)         (67,304)         (11,726)
           Increase (decrease)  in interest payable ..............................       115,353          (29,160)          90,624
           Increase (decrease) in other liabilities ..............................        12,172          124,497       (2,815,465)
           Amortization of Incentive Plan cost ...................................        83,291             --               --
           Contribution of common stock ..........................................          --            742,140             --
           ESOP shares committed to be released ..................................       141,419          146,554             --
                                                                                    ------------     ------------     ------------

               Net cash provided by (used in) operating activities ...............     4,109,112        2,912,903         (389,454)
                                                                                    ------------     ------------     ------------

Cash flows from investing activities:
      Proceeds from sales of securities available for sale .......................     5,021,875             --          1,588,229
      Proceeds from repayments on and calls of securities available for sale .....          --               --            115,272
      Purchases of securities available for sale .................................          --         (1,000,000)      (7,033,784)
      Proceeds from sale of security held to maturity ............................     1,000,000             --               --
      Proceeds from maturities and calls of investment securities held to maturity    15,700,000        9,889,845       10,000,000
      Purchases of investment securities held to maturity ........................   (21,044,969)     (23,640,389)     (10,399,678)
      Principal repayments on mortgage-backed securities held to maturity ........    35,580,321       41,586,542       20,084,461
      Purchases of mortgage-backed securities held to maturity ...................   (46,531,053)     (21,891,969)     (37,026,167)
      Purchases of loans receivable ..............................................      (970,155)        (280,707)            --
      Net (increase) decrease in loans receivable ................................   (12,333,080)     (26,973,831)     (31,617,835)
      Proceeds from sales of real estate owned ...................................          --            503,458          483,300
      Proceeds from other payments received on real estate owned .................          --              4,000           39,602
      Capitalized cost of real estate owned ......................................        (8,362)            --             (6,665)
      Additions to premises and equipment ........................................       (25,508)         (86,744)        (352,753)
      Purchase of Federal Home Loan Bank of New York stock .......................      (665,400)        (423,500)        (513,400)
                                                                                    ------------     ------------     ------------

               Net cash (used in) investing activities ...........................   (24,276,331)     (22,313,295)     (54,639,418)
                                                                                    ------------     ------------     ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                                 <C>              <C>              <C>
Cash flows from financing activities:
      Net proceeds from initial public stock offering ............................          --         16,639,920             --
      Initial capitalization of mutual holding company ...........................          --           (100,000)            --
      Common stock acquired by ESOP ..............................................          --         (1,473,584)            --
      Net (decrease) increase in deposits ........................................    (3,344,709)         149,960        7,148,632
      Net (decrease) increase in short-term borrowed money .......................     6,000,000      (18,000,000)      12,000,000
      Proceeds of long-term borrowed money .......................................    24,000,000       38,000,000        3,000,000
      Repayment of long-term borrowed money ......................................    (7,669,765)      (8,290,120)      (8,350,000)
      Net increase in advance payments by borrowers for
       taxes and insurance .......................................................       122,182          149,529          150,239
      Purchases of treasury stock ................................................    (1,453,094)            --               --
      Cost of Incentive Plan stock ...............................................      (738,840)            --               --
      Cash dividends paid on common stock ........................................      (374,141)            --               --
      Cash received in connection with branch purchases ..........................          --               --         42,021,857
                                                                                    ------------     ------------     ------------

               Net cash provided by financing activities .........................    16,541,633       27,075,705       55,970,728
                                                                                    ------------     ------------     ------------
 Net (decrease) increase  in cash and cash equivalents ...........................    (3,625,586)       7,675,313          941,856
Cash and cash equivalents - beginning ............................................    16,371,431        8,696,118        7,754,262
                                                                                    ------------     ------------     ------------

Cash and cash equivalents - ending ...............................................  $ 12,745,845     $ 16,371,431     $  8,696,118
                                                                                    ============     ============     ============

</TABLE>
See notes to consolidated financial statements.

                                      -26-
<PAGE>
<TABLE>
<CAPTION>
                                   WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                Year Ended December 31,
                                                                   -------------------------------------------
                                                                        1999             1998           1997
                                                                   -------------    -----------    -----------
<S>                                                                <C>              <C>              <C>
Supplemental disclosure of cash flow information:
  Cash paid during the year for:
      Income taxes ............................................    $   1,358,707    $   860,000    $ 1,035,078
                                                                   =============    ===========    ===========

      Interest ................................................    $  11,744,042    $12,241,337    $ 9,501,814
                                                                   =============    ===========    ===========

Supplemental schedule of noncash investing activities:
      Unrealized (loss) gain on securities
            available or sale, net of income taxes ............    $    (239,263)   $   127,015    $    85,632
                                                                   =============    ===========    ===========

      Loans receivable transferred to real estate owned .......    $     309,238    $      --      $   679,914
                                                                   =============    ===========    ===========

      Assets acquired in connection with branch purchases:
           Loans receivable ...................................    $        --      $      --      $    54,693
           Premises and equipment .............................             --             --        1,360,000
           Excess of cost over assets acquired ................             --             --        7,571,946
           Other assets .......................................             --             --              457
                                                                   -------------    -----------    -----------

                                                                   $        --      $      --      $ 8,987,096
                                                                   =============    ===========    ===========

      Liabilities acquired in connection with branch purchases:
           Deposits ...........................................    $        --      $      --      $51,007,382
           Other liabilities ..................................             --             --            1,571
                                                                   -------------    -----------    -----------

                                                                   $        --      $      --      $51,008,953
                                                                   =============    ===========    ===========

      Issuance of treasury stock to fund Supplemental Employee
        Retirement Plan .......................................    $      15,326    $      --      $      --
                                                                   =============    ===========    ===========

      Cash dividend declared, not paid ........................    $     122,155    $      --      $      --
                                                                   =============    ===========    ===========

</TABLE>

See notes to consolidated financial statements.
                                      -27-

<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------

         Basis of consolidated financial statement presentation
         ------------------------------------------------------

         The  consolidated  financial  statements  include the  accounts of West
         Essex Bancorp, Inc. ("Bancorp"), the Bancorp's wholly owned subsidiary,
         West Essex Bank ("Bank") and the Bank's wholly owned  subsidiary,  West
         Essex Insurance Agency, Inc. ("Subsidiary"),  and have been prepared in
         conformity  with  generally   accepted   accounting   principles.   All
         significant intercompany accounts and transactions have been eliminated
         in consolidation.

         In preparing  the  consolidated  financial  statements,  management  is
         required to make  estimates  and  assumptions  that affect the reported
         amounts of assets and  liabilities as of the dates of the  consolidated
         statements  of  financial  condition  and revenues and expenses for the
         periods then ended.  Actual  results  could differ  significantly  from
         those estimates.  Material estimates that are particularly  susceptible
         to significant changes relate to the determination of the allowance for
         loan losses,  the valuation of real estate owned and the recoverability
         of excess of cost over assets  acquired.  Management  believes that the
         allowance  for loan losses is adequate  and that real estate  owned and
         excess of cost over assets  acquired are  appropriately  valued.  While
         management uses available  information to recognize losses on loans and
         real estate  owned and to assess the  recoverability  of excess of cost
         over assets acquired, future additions to the allowance for loan losses
         or  further  writedowns  of real  estate  owned and excess of cost over
         assets  acquired  may be  necessary  based on changes in  economic  and
         market conditions in the Bank's market area.

         In addition,  various regulatory agencies, as an integral part of their
         examination process,  periodically review the Bank's allowance for loan
         losses and real estate owned valuations.  Such agencies may require the
         Bank to recognize  additions to the allowance or additional  writedowns
         based on their  judgments  about  information  available to them at the
         time of their examination.

         Cash and cash equivalents
         -------------------------

         Cash and cash equivalents  include cash and amounts due from depository
         institutions and interest-bearing deposits in other banks with original
         maturities of three months or less.

         Investments and mortgage-backed securities
         ------------------------------------------

         Debt  securities over which there exists positive intent and ability to
         hold to maturity are  classified  as  held-to-maturity  securities  and
         reported at amortized cost. Debt and equity  securities that are bought
         and held  principally  for the purpose of selling them in the near term
         are classified as trading  securities and reported at fair value,  with
<PAGE>
         unrealized  holding  gains and losses  included in  earnings.  Debt and
         equity   securities  not  classified  as  trading   securities  nor  as
         held-to-maturity  securities  are  classified  as  available  for  sale
         securities and reported at fair value, with unrealized holding gains or
         losses, net of deferred income taxes,  reported in a separate component
         of stockholders' equity.

         Premiums and discounts on all securities are  amortized/accreted  using
         the interest method. Interest and dividend income on securities,  which
         includes  amortization  of premiums  and  accretion  of  discounts,  is
         recognized in the consolidated  financial  statements when earned.  The
         adjusted  cost basis of an  identified  security sold or called is used
         for   determining   security   gains  and  losses   recognized  in  the
         consolidated statements of income.

                                      -28-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Cont'd.)
-----------------------------------------------

         Loans receivable
         ----------------

         Loans  receivable  are  stated at unpaid  principal  balances  less the
         allowance for loan losses and net deferred loan (costs) fees.  Interest
         is calculated by the use of the actuarial method.

         The  Bank  defers  loan   origination  fees  and  certain  direct  loan
         origination  costs and  amortizes  such  amounts,  using a method which
         approximates the level-yield method, as an adjustment of yield over the
         contractual lives of the related loans.

         Uncollectible  interest  on  loans  that are  contractually  delinquent
         ninety  days or more is charged  off and the  related  loans  placed on
         nonaccrual  status, or,  alternatively,  an allowance for uncollectible
         interest is  established  by a charge to interest  income  equal to all
         interest   previously   accrued.   Under  either   method,   income  is
         subsequently  recognized  only to the  extent  that cash  payments  are
         received  until, in management's  judgment,  the borrower's  ability to
         make  periodic  interest and principal  payments is probable,  in which
         case the loan is returned to an accrual status.

         Allowance for loan losses
         -------------------------

         An  allowance  for loan  losses  is  maintained  at a level  considered
         adequate to absorb loan losses.  Management of the Bank, in determining
         the allowance for loan losses, considers the risks inherent in its loan
         portfolio and changes in the nature and volume of its loan  activities,
         along with the general economic and real estate market conditions.

         The Bank utilizes a two tier approach:  (1)  identification of impaired
         loans and the  establishment of specific loss allowances on such loans;
         and (2) establishment of general valuation  allowances on the remainder
         of its loan  portfolio.  The Bank  maintains a loan review system which
         allows  for a  periodic  review  of its loan  portfolio  and the  early
         identification  of  potential  impaired  loans.  Such system takes into
         consideration,  among other things,  delinquency status, size of loans,
         type and estimated fair value of collateral and financial  condition of
         the  borrowers.  Specific  loan loss  allowances  are  established  for
         identified  loans based on a review of such  information.  General loan
         loss allowances are based upon a combination of factors including,  but
         not limited to, actual loan loss  experience,  composition  of the loan
         portfolio,  current  economic  conditions  and  management's  judgment.
         Although  management  believes that adequate loan loss  allowances  are
         established,  actual  losses are  dependent  upon future events and, as
         such,  further  additions to the level of the allowance for loan losses
         may be necessary.

                                      -29-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Cont'd)
------------------------------------------------

         Allowance for loan losses  (Cont'd)
         -------------------------

         A loan  evaluated for impairment is deemed to be impaired when based on
         current  information  and events,  it is probable that the Bank will be
         unable to collect all amounts due according to the contractual terms of
         the loan agreement.  The amount of loan impairment is measured based on
         the present  value of  expected  future  cash flows  discounted  at the
         loan's  effective  interest rate or, as a practical  expedient,  at the
         loan's  observable  market price or the fair value of the collateral if
         the loan is collateral dependent.  All loans identified as impaired are
         evaluated  independently.  The Bank does not  aggregate  such loans for
         evaluation  purposes.  Payments  received on impaired loans are applied
         first to interest receivable and then to principal.

         Real estate owned
         -----------------

         Real estate owned  consists of real estate  acquired by  foreclosure or
         deed in lieu of foreclosure. Real estate owned is recorded at the lower
         of cost or fair value at date of acquisition and thereafter  carried at
         the  lower  of  such  initially  recorded  amount  or fair  value  less
         estimated  selling  costs.  Costs  incurred in  developing or preparing
         properties for sale are capitalized.  Income and expense related to the
         holding and operating of properties are recorded in  operations.  Gains
         and losses from sales of such properties are recognized as incurred.

         Concentration of risk
         ---------------------

         The Bank's  real estate and lending  activity is  concentrated  in real
         estate  and loans  secured by real  estate  located in the State of New
         Jersey

         Premises and equipment
         ----------------------

         Premises and equipment  are  comprised of land, at cost,  and buildings
         and improvements, leasehold improvements and furnishings and equipment,
         at cost less accumulated  depreciation and  amortization.  Depreciation
         and amortization  charges are computed on the straight-line method over
         the following estimated useful lives.

                  Buildings and improvements            10 to 50 years
                  Leasehold improvements                Shorter of useful life
                                                          or term of lease
                  Furnishing and equipment              3 to 10 years

         Significant  renewals and  betterments  are charged to the property and
         equipment  account.  Maintenance  and repairs are charged to expense in
         the year incurred.  Rental income is netted against  occupancy costs in
         the consolidated statements of income.

                                      -30-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Cont'd)
------------------------------------------------

         Excess of cost over assets acquired
         -----------------------------------

         The  cost in  excess  of the  fair  value of net  assets  acquired  was
         recorded on October 17, 1997 in  conjunction  with the  acquisition  of
         certain  assets and  assumption of certain  liabilities of three branch
         offices of another financial institution. This asset primarily consists
         of core deposit  intangibles,  which represent the intangible  value of
         depositor  relationships  assumed  in the  transaction,  and  is  being
         amortized to expense over a ten-year period by use of the straight-line
         method.

         On a periodic basis,  management reviews the excess of cost over assets
         acquired  and  evaluates  events or changes in  circumstances  that may
         indicate  impairment  in the  carrying  amount of such  asset.  In such
         instances,  impairment,  if any, is measured on a discounted  estimated
         cash flow basis.

         Interest-rate risk
         ------------------

         The Bank is principally  engaged in the business of attracting deposits
         from the  general  public  and  using  these  deposits,  together  with
         borrowings  and other funds,  to purchase  securities and to make loans
         secured by real estate.  The potential for interest-rate risk exists as
         a  result   of  the   generally   shorter   duration   of  the   Bank's
         interest-sensitive   liabilities   compared  to  the  generally  longer
         duration of its  interest-sensitive  assets.  In a rising interest rate
         environment,  liabilities  will  reprice  faster than  assets,  thereby
         reducing net interest  income.  For this reason,  management  regularly
         monitors the maturity structure of the Bank's  interest-earning  assets
         and  interest-bearing  liabilities  in order to  measure  its  level of
         interest-rate risk and to plan for future volatility.

         Accounting for stock-based compensation
         ---------------------------------------

         Statement  of  Financial  Accounting  Standards  ("Statement")  No. 123
         "Accounting  for  Stock-Based  Compensation",  issued by the  Financial
         Accounting Standards Board ("FASB"),  establishes  financial accounting
         and reporting  standards for stock-based  employee  compensation plans.
         While all  entities  are  encouraged  to adopt the  "fair  value  based
         method" of accounting for employee stock compensation plans,  Statement
         No. 123 also allows an entity to continue to measure  compensation cost
         under such plans using the "intrinsic value based method"  specified in
         Accounting  Principles Board Opinion No. 25. The Bancorp has elected to
         apply  the  intrinsic  value  based  method.  Included  in  Note  14 to
         consolidated   financial  statements  are  the  pro  forma  disclosures
         required by Statement No. 123.
<PAGE>
         Income taxes
         ------------

         The Bancorp and  Subsidiaries  file a  consolidated  federal income tax
         return.  Income taxes are allocated based on the contribution of income
         to the  consolidated  income  tax  return.  Separate  state  income tax
         returns are filed.

                                      -31-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (Cont'd)
------------------------------------------------

         Income taxes  (Cont'd.)
         ------------

         Federal  and state  income  taxes  have been  provided  on the basis of
         reported income. The amounts reflected on the income tax returns differ
         from these  provisions due principally to temporary  differences in the
         reporting of certain  items for  financial  reporting and tax reporting
         purposes.  The  income  tax effect of these  temporary  differences  is
         accounted for as deferred income taxes applicable to future periods.

         Net income per common share
         ---------------------------

         Basic net income per common  share is computed  by dividing  net income
         for the year by the weighted  average  number of shares of common stock
         outstanding,  adjusted  for  unearned  shares of the ESOP.  Diluted net
         income per common share is computed by adjusting  the weighted  average
         number of shares of common stock  outstanding  to include the effect of
         outstanding stock options and compensation  grants, if dilutive,  using
         the treasury stock method.  For 1998, per share amounts were calculated
         based upon income for the entire year 1998, although the Bank converted
         to stock form on October 2, 1998,  and the weighted  average  number of
         shares  outstanding  since  October  2,  1998  as if such  shares  were
         outstanding during all of 1998.

         Reclassification
         ----------------

         Certain amounts as of and for the year ended December 31, 1998 and 1997
         have been reclassified to conform with the current year's presentation.

2.   REORGANIZATION AND STOCKHOLDERS' EQUITY
--------------------------------------------

The Bancorp is a business  corporation formed at the direction of the Bank under
the laws of the United  States on October 2, 1998.  On October 2, 1998:  (i) the
Bank reorganized  from a federally  chartered mutual savings bank to a federally
chartered stock savings bank in the mutual holding company form of organization;
(ii) the Bank issued all of its  outstanding  capital stock to the Bancorp;  and
(iii) the Bancorp  consummated its initial public offering of common stock,  par
value $.01 per share (the "Common  Stock"),  by selling at a price of $10.00 per
share, 1,772,898 of common stock to certain eligible account holders of the Bank
who had subscribed for such shares,  by issuing 2,350,121 shares of Common Stock
to West Essex Bancorp,  M.H.C.  ("MHC"),  a mutual holding company formed at the
direction of the Bank  (collectively,  the "Reorganization and Offering") and by
contributing  74,214  shares of Common  Stock to West Essex  Bancorp  Charitable
Foundation  (the  "Foundation").  The MHC was  initially  funded  with  $100,000
received from the Bank. The Reorganization and Offering resulted in net proceeds
of $16.6 million,  after expenses of $1.1 million.  The Bancorp also established
the  Foundation,  which is dedicated to the  communities  served by the Bank. In
connection with the Reorganization and Offering, the Common Stock contributed by
the Bancorp to the  Foundation  at a value of $742,140,  along with  $100,000 in
cash, was charged to charitable contribution expense.
<PAGE>
During the year ended  December  31,  1999,  the MHC waived its right to receive
cash  dividends on the shares of Company  common  stock it owns.  If MHC had not
waived its rights to receive dividends,  the amount of such dividends would have
been $705,000.


                                      -32-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   REORGANIZATION AND STOCKHOLDERS' EQUITY  (Cont'd.)
-------------------------------------------------------

In addition to the  9,000,000  authorized  shares of Common  Stock,  the Bancorp
authorized  1,000,000  shares of  preferred  stock with a par value of $0.01 per
share (the "Preferred Stock"). The Board of Directors is authorized,  subject to
any  limitations  by law, to provide for the issuance of the shares of Preferred
Stock in  series,  to  establish  from  time to time the  number of shares to be
included in each such series, and to fix the designation,  powers,  preferences,
and rights of the shares of each such series and any qualifications, limitations
or restriction  thereof.  As of December 31, 1999 and 1998, there were no shares
of Preferred Stock issued.

3.   SECURITIES AVAILABLE FOR SALE
----------------------------------
<TABLE>
<CAPTION>
                                                                      December 31, 1999
                                                     -----------------------------------------------------
                                                                       Gross Unrealized
                                                     Amortized     ------------------------      Carrying
                                                        Cost         Gains        Losses          Value
                                                     ----------    ----------    ----------    ----------
<S>                                                  <C>           <C>           <C>           <C>
U.S. Government (including agencies) obligations:
     Due after one year through five years ......    $1,998,280    $   16,720    $     --      $2,015,000
     Due after ten years ........................     1,000,000          --          91,250       908,750
                                                     ----------    ----------    ----------    ----------

                                                     $2,998,280    $   16,720    $   91,250    $2,923,750
                                                     ==========    ==========    ==========    ==========

<CAPTION>
                                                                      December 31, 1998
                                                     -----------------------------------------------------
                                                                       Gross Unrealized
                                                     Amortized     ------------------------      Carrying
                                                        Cost         Gains        Losses          Value
                                                     ----------    ----------    ----------    ----------
<S>                                                  <C>           <C>           <C>           <C>
U.S. Government (including agencies) obligations:
     Due after one year through five years ......    $6,983,248    $  300,452    $     --      $7,283,700
     Due after ten years ........................     1,000,000          --           1,250       998,750
                                                     ----------    ----------    ----------    ----------

                                                     $7,983,248    $  300,452    $    1,250    $8,282,450
                                                     ==========    ==========    ==========    ==========
</TABLE>
<PAGE>
The following table presents details of sales of securities available for sale:

<TABLE>
<CAPTION>

                                               Year Ended December 31,
                                  ----------------------------------------------
                                      1999              1998              1997
                                  ----------        ---------         ----------
<S>                               <C>               <C>               <C>
Sales proceeds ...........        $5,021,875        $     --          $1,588,229
Gross gains ..............            34,515              --                --
Gross losses .............              --                --              20,245
</TABLE>



                                      -33-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.   INVESTMENT SECURITIES HELD TO MATURITY
-------------------------------------------
<TABLE>
<CAPTION>
                                                                       December 31, 1999
                                                  --------------------------------------------------------
                                                                       Gross Unrealized
                                                   Carrying      --------------------------     Estimated
                                                     Value          Gains         Losses       Fair Value
                                                  -----------    -----------    -----------    -----------
<S>                                               <C>            <C>            <C>            <C>
U.S. Government (including agencies):
      Due after five years through ten years .    $ 8,000,000    $      --      $   229,690    $ 7,770,310
      After ten years ........................     22,856,030        106,438      1,829,053     21,133,415
                                                  -----------    -----------    -----------    -----------

                                                   30,856,030        106,438      2,058,743     28,903,725
                                                  -----------    -----------    -----------    -----------

Obligations of states and municipalities:
      Due in one year or less ................        150,000           --             --          150,000
      After ten years ........................        583,074           --           53,665        529,409
                                                  -----------    -----------    -----------    -----------

                                                      733,074           --           53,665        679,409
                                                  -----------    -----------    -----------    -----------

Trust preferred securities due after ten years      9,992,899           --          707,296      9,285,603
                                                  -----------    -----------    -----------    -----------

                                                  $41,582,003    $   106,438    $ 2,819,704    $38,868,737
                                                  ===========    ===========    ===========    ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                       December 31, 1998
                                                  --------------------------------------------------------
                                                                       Gross Unrealized
                                                   Carrying      --------------------------     Estimated
                                                     Value          Gains         Losses       Fair Value
                                                  -----------    -----------    -----------    -----------
<S>                                               <C>            <C>            <C>            <C>

U.S. Government (including agencies):
      Due in one year or less ................    $   999,854    $     8,896    $      --      $ 1,008,750
      After one year through five years ......      2,000,000          1,250           --        2,001,250
      After five years through ten years .....     14,000,000         67,341           --       14,067,341
      After ten years ........................      8,582,551        287,313         63,067      8,806,797
                                                  -----------    -----------    -----------    -----------

                                                   25,582,405        364,800         63,067     25,884,138
                                                  -----------    -----------    -----------    -----------

Obligations of states and municipalities:
      Due in one year or less ................        150,000           --             --          150,000
      After ten years ........................        237,859           --               11        237,848
                                                  -----------    -----------    -----------    -----------

                                                      387,859           --               11        387,848
                                                  -----------    -----------    -----------    -----------

Trust preferred securities due after ten years     10,902,901           --          284,151     10,618,750
                                                  -----------    -----------    -----------    -----------

                                                 $ 36,873,165    $   364,800    $   347,229    $36,890,736
                                                 ============    ===========    ===========    ===========

</TABLE>
During the year ended  December 31, 1999,  proceeds of $1,000,000  were received
and a gain of $92,082  recorded as the result of the sale of one  security.  The
issuer of the security was involved in a merger/acquisition  and issued a tender
offer to buy back the security at par value.  There were no sales of  investment
securities held to maturity during the years ended December 31, 1998 and 1997.

                                      -34-

<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.   MORTGAGE-BACKED SECURITIES HELD TO MATURITY
------------------------------------------------
<TABLE>
<CAPTION>
                                                                       December 31, 1999
                                                ------------------------------------------------------------
                                                                       Gross Unrealized
                                                 Carrying       ----------------------------     Estimated
                                                   Value            Gains          Losses        Fair Value
                                                ------------    ------------    ------------    ------------
<S>                                             <C>             <C>             <C>             <C>
Government National Mortgage Association ....   $ 51,615,620    $    358,293    $    212,091    $ 51,761,822
Federal Home Loan Mortgage Corporation ......     18,781,288          67,310         272,548      18,576,050
Federal National Mortgage Association .......     16,894,108          51,290         157,943      16,787,455
Collateralized mortgage obligations .........     33,927,305            --         2,250,606      31,676,699
Other .......................................          4,994            --              --             4,994
                                                ------------    ------------    ------------    -------------
                                                $121,223,315    $    476,893    $  2,893,188    $118,807,020
                                                ============    ============    ============    =============
<CAPTION>
                                                                       December 31, 1998
                                                ------------------------------------------------------------
                                                                       Gross Unrealized
                                                 Carrying       ----------------------------     Estimated
                                                   Value            Gains          Losses        Fair Value
                                                ------------    ------------    ------------    ------------
<S>                                             <C>             <C>             <C>             <C>
Government National Mortgage Association ....   $ 58,815,923    $    684,197    $       --      $ 59,500,120
Federal Home Loan Mortgage Corporation ......     26,698,689         323,089           3,333      27,018,445
Federal National Mortgage Association .......     20,100,956         167,237           1,375      20,266,818
Collateralized mortgage obligations .........      4,754,425           4,325          37,500       4,721,250
Other .......................................          6,079            --              --             6,079
                                                ------------    ------------    ------------    ------------
                                                $110,376,072    $  1,178,848    $     42,208    $111,512,712
                                                ============    ============    ============    =============
</TABLE>
There were no sales of  mortgage-backed  securities  held to maturity during the
years ended December 31, 1999, 1998 and 1997.

                                      -35-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.   LOANS RECEIVABLE
---------------------

<TABLE>
<CAPTION>
                                                      December 31,
                                           --------------------------------
                                                1999             1998
                                           -------------     --------------
<S>                                        <C>               <C>
Real estate mortgage:
      Conventional ....................    $ 136,950,614     $ 127,710,491
      FHA insured and VA guaranteed ...          386,890           511,667
                                           -------------     -------------

                                             137,337,504       128,222,158
                                           -------------     -------------

Agency for International Development ..           40,136            48,510
                                           -------------     -------------

Construction and land development .....        3,819,271         4,393,956
                                           -------------     -------------

Consumer:
      Passbook or certificate .........          340,492           401,484
      Equity ..........................       14,381,738         9,631,219
      Automobile ......................          242,641           273,888
      Credit reserve ..................           33,732            31,053
                                           -------------     -------------

                                              14,998,603        10,337,644
                                           -------------     -------------

         Total loans ..................      156,195,514       143,002,268
                                           -------------     -------------
Less:
         Loans in process .............        1,885,739         1,311,520
         Allowance for loan losses ....        1,400,366         1,716,790
         Net deferred loan (costs) fees         (366,778)         (298,245)
                                           -------------     -------------

                                               2,919,327         2,730,065
                                           -------------     -------------

                                           $ 153,276,187     $ 140,272,203
                                           =============     =============
</TABLE>
The Bank has granted  loans to officers  and  directors of the Bank and to their
associates.  Related  party  loans  do not  involve  more  than  normal  risk of
collectibility.  The aggregate  dollar amount of these loans was  $1,419,000 and
$1,550,000  at December 31, 1999 and 1998,  respectively.  During the year ended
December 31, 1999, no new loans were granted and repayments totalled $131,000.

                                      -36-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.   LOANS RECEIVABLE  (Cont'd.)
---------------------

Nonperforming  loans consist of nonaccrual and  renegotiated  loans.  Nonaccrual
loans are those on which income under the accrual  method has been  discontinued
with subsequent interest payments credited to interest income when received,  or
if  ultimate  collectibility  of  principal  is in doubt,  applied as  principal
reductions.  Renegotiated loans are loans whose contractual  interest rates have
been  reduced or where  other  significant  concessions  have been made due to a
borrower's financial difficulties.  Interest on renegotiated loans is accrued to
interest income.

Nonperforming loans were as follows:
<TABLE>
<CAPTION>
                                                        December 31,
                                          --------------------------------------
                                           1999            1998            1997
                                          ------          ------          ------
                                                     (In Thousands)
<S>                                       <C>             <C>             <C>
Nonaccrual .....................          $  792          $2,084          $2,413
Renegotiated ...................              92              94              94
                                          ------          ------          ------

                                          $  884          $2,178          $2,507
                                          ======          ======          ======
</TABLE>
The impact of nonperforming loans on interest income is as follows:
<TABLE>
<CAPTION>

                                                                 Year Ended December 31,
                                                                 -----------------------
                                                                  1999     1998    1997
                                                                   ----    ----    ----
                                                                     (In Thousands)
<S>                                                                <C>     <C>     <C>
Interest income if performing in accordance with original terms    $ 70    $191    $234
Interest income actually recorded .............................      47      29      57
                                                                   ----    ----    ----

Interest income lost ..........................................    $ 23    $162    $177
                                                                   ====    ====    ====
</TABLE>
<PAGE>
The following is an analysis of the allowance for loan losses:

<TABLE>
<CAPTION>
                                                        Year Ended December 31,
                                               -------------------------------------------
                                                  1999             1998           1997
                                               -----------     -----------     -----------
<S>                                            <C>             <C>             <C>
Balance - beginning .......................    $ 1,716,790     $ 1,885,021     $ 1,563,991
Provision (credited) charged  to operations           --          (130,630)        487,015
Loans charged off to allowance ............       (316,424)        (37,601)       (165,985)
                                               -----------     -----------     -----------

                                               $ 1,400,366     $ 1,716,790     $ 1,885,021
                                               ===========     ===========     ===========
</TABLE>
                                      -37-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6.   LOANS RECEIVABLE  (Cont'd.)
---------------------

Impaired loans and related amounts recorded in the allowance for loan losses are
summarized as follows:
<TABLE>
<CAPTION>
                                                                 December 31,
                                                           ---------------------
                                                             1999         1998
                                                           -------       -------
                                                                (In Thousands)
<S>                                                         <C>           <C>
Recorded investment in impaired loans:
    With recorded allowances .......................        $  189        $1,159
    Without recorded allowances ....................          --             303
                                                            ------        ------

            Total impaired loans ...................           189         1,462
    Related allowance for loan losses ..............            35           442
                                                            ------        ------

            Net impaired loans .....................        $  154        $1,020
                                                            ======        ======
</TABLE>

For the years ended  December  31,  1999,  1998 and 1997,  the average  recorded
investment in impaired  loans  totalled  $647,000,  $1,537,000  and  $1,916,000,
respectively.  During the years ended December 31, 1999, 1998 and 1997, interest
income of $147,000,  $ - 0 - and $ - 0 - , respectively,  was recognized on such
loans, all on the cash basis, during the time each loan was impaired.

7.   REAL ESTATE OWNED
----------------------

<TABLE>
<CAPTION>
                                                               December 31,
                                                           ---------------------
                                                            1999         1998
                                                           --------    ---------

<S>                                                        <C>         <C>
Acquired in settlement of loans ..............             $899,738    $582,138
Allowance for losses .........................                   --          --
                                                           --------    ---------

                                                           $899,738    $ 582,138
                                                           ========    =========

</TABLE>
The following is an analysis of the allowance for losses:
<TABLE>
<CAPTION>

                                          Year Ended December 31,
                                    -------------------------------------
                                      1999          1998          1997
                                    ----------    ---------     ---------
<S>                                 <C>           <C>           <C>
Balance - beginning ............    $     --      $ 174,000     $  98,000
Provisions charged to operations          --        130,630       372,985
Losses charged to allowance ....          --       (304,630)     (296,985)
                                    ----------    ---------     ---------

Balance - ending ...............    $     --      $    --       $ 174,000
                                    ==========    =========     =========

</TABLE>
                                      -38-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.   REAL ESTATE OWNED  (Cont'd.)
----------------------

The following is an analysis of the (loss) on real estate owned:
<TABLE>
<CAPTION>
                                              Year Ended December 31,
                                        -------------------------------------
                                          1999          1998          1997
                                        ---------     ---------     ---------
<S>                                     <C>           <C>           <C>
Gain on sale, net ..................    $    --       $   5,386     $  30,080
Carrying costs, net of rental income      (41,891)      (15,033)      (36,965)
Provision for losses ...............         --        (130,630)     (372,985)
                                        ---------     ---------     ---------

                                        $ (41,891)    $(140,277)    $(379,870)
                                        =========     =========     =========
</TABLE>
8.   PREMISES AND EQUIPMENT
---------------------------
<TABLE>
<CAPTION>
                                                            December 31,
                                                    ----------------------------
                                                      1999                1998
                                                    ----------        ----------
<S>                                                 <C>               <C>
Land .......................................        $  979,315        $  979,315
                                                    ----------        ----------

Buildings and improvements .................         2,171,300         2,171,300
Less accumulated depreciation ..............           933,255           858,469
                                                    ----------        ----------

                                                     1,238,045         1,312,831
                                                    ----------        ----------
Leasehold improvements .....................           112,754           112,754
Less accumulated amortization ..............           112,136           111,077
                                                    ----------        ----------

                                                           618             1,677
                                                    ----------        ----------

Furnishings and equipment ..................         2,678,794         2,654,522
Less accumulated depreciation ..............         2,159,316         2,000,971
                                                    ----------        ----------

                                                       519,478           653,551
                                                    ----------        ----------

                                                    $2,737,456        $2,947,374
                                                    ==========        ==========

</TABLE>
                                      -39-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.   ACCRUED INTEREST RECEIVABLE
--------------------------------
<TABLE>
<CAPTION>
                                                           December 31,
                                                    ------------------------
                                                       1999          1998
                                                    ----------    ----------
<S>                                                 <C>           <C>
Loans ..........................................    $  770,427    $  736,133
Mortgage-backed securities .....................       697,578       661,895
Investments and other interest-earning assets ..       549,467       620,352
                                                    ----------    ----------

                                                     2,017,472     2,018,380
Less allowance for uncollected interest on loans        11,909        13,571
                                                    ----------    ----------

                                                    $2,005,563    $2,004,809
                                                    ==========    ==========
</TABLE>
10.   EXCESS OF COST OVER ASSETS ACQUIRED
-----------------------------------------

On October 17,  1997,  the Bank  acquired  three branch  locations  from another
financial  institution.  The amounts  related to the  transaction  are reflected
separately  in the  consolidated  statement  of cash  flows  for the year  ended
December 31, 1997. The $7,571,946 excess of cost over assets acquired  initially
recorded  was based  upon the  amount of  deposits  the Bank had  acquired.  The
deposits  purchased  declined at a rate significantly in excess of that expected
before stabilizing by December 31, 1997.  Management performed a reassessment of
the  carrying  value of this asset and, as a result,  a loss of  $1,585,313  was
recorded.  Such  loss  is  included  in  "Amortization  of  intangibles"  in the
consolidated statement of income for the year ended December 31, 1997.


11.  DEPOSITS
-------------

<TABLE>
<CAPTION>
                                                                           December 31,
                                   -----------------------------------------------------------------------------
                                                    1999                                     1998
                                   --------------------------------------    ------------------------------------
                                   Weighted                                  Weighted
                                     Average                                  Average
                                      Rate         Amount         Percent      Rate         Amount        Percent
                                      ----         ------         -------      ----         ------        -------
<S>                                   <C>       <C>                <C>        <C>       <C>                <C>
Demand accounts:
       Non-interest-bearing ........  0.00%     $ 16,011,384         6.81     0.00%     $ 16,142,250         6.77
       Interest-bearing ............  1.39%       21,091,606         8.98     1.30%       20,695,238         8.69
                                                ------------        -----               ------------        -----
                                      0.79%       37,102,990        15.79     0.73%       36,837,488        15.46
Savings and club accounts ..........  2.04%       57,735,315        24.57     2.52%       60,306,242        25.30
Certificates of deposit ............  5.05%      140,139,507        59.64     5.26%      141,169,211        59.24
                                                ------------        -----               ------------        -----
                                      3.64%     $234,977,812       100.00     3.87%     $238,312,941       100.00
                                                ============       ======               ============       ======
</TABLE>
<PAGE>
The amount of  certificates  of deposit  with  balances  of  $100,000 or more at
December  31,  1999 and 1998 were  approximately  $18,156,000  and  $17,656,000,
respectively.



                                      -40-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.   DEPOSITS  (Cont'd.)
-------------------------

The  scheduled  maturities  of  certificates  of  deposit  are  as  follows  (in
thousands):
<TABLE>
<CAPTION>
                                                             December 31,
                                                      --------------------------
                                                         1999             1998
                                                      --------         ---------
<S>                                                   <C>               <C>
One year or less ...........................          $111,800          $118,317
After one to three years ...................            24,400            19,572
After three years ..........................             3,940             3,280
                                                      --------          --------

                                                      $140,140          $141,169
                                                      ========          ========
</TABLE>
A summary of interest on deposits is as follows (in thousands):
<TABLE>
<CAPTION>

                                                      Year Ended December 31,
                                             -----------------------------------
                                                1999         1998          1997
                                              ------        ------        ------
<S>                                           <C>           <C>           <C>
Demand accounts ......................        $  284        $  339        $  293
Savings and club accounts ............         1,210         1,672         1,357
Certificates of deposit ..............         7,090         7,736         6,439
                                              ------        ------        ------

                                              $8,584        $9,747        $8,089
                                              ======        ======        ======

</TABLE>
                                      -41-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.   BORROWED MONEY
--------------------
<TABLE>
<CAPTION>
                                                                                 December 31,
                                                       --------------------------------------------------------------
                                                                 1999                                   1998
                                                       -------------------------           --------------------------
                                                       Weighted                            Weighted
                                                       Average                              Average
                                                        Rate              Amount              Rate             Amount
                                                        ----              ------              ----             ------
<S>                                                     <C>           <C>                      <C>          <C>
Securities sold under agreements to
 to repurchase maturing within one year ......          5.80%         $ 6,000,000                --%         $        --

Convertible advances (a):
     due May 14, 2001 ........................            --%                  --              5.55%          2,000,000
     due November 13, 2006 ...................          5.90%           5,000,000                --%                --
     due March 24, 2008 ......................          5.33%          10,000,000              5.33%         10,000,000
     due March 25, 2008 ......................          5.59%          10,000,000              5.59%         10,000,000
     due May 12, 2008 ........................          5.23%           3,000,000              5.23%          3,000,000
     due March 24, 2009 ......................          5.42%           5,000,000               -- %                --

Monthly amortizing advances:
     Payable in 37 monthly principal
      and interest installments of $96,286 and
      a final payment of $192,818 on
      February 24, 2003 ......................          5.84%           3,412,916              5.84%          4,339,572

     Payable in 97 monthly principal
      and interest installments of $55,591 and
      a final payment of $111,347 on
      February 25, 2008 ......................          6.03%           4,327,199              6.03%          4,720,308

Term advances maturing during:
     1999                                                 --%                  --              6.50%          4,350,000
     2000                                               6.40%           1,600,000              6.99%            600,000
     2001                                               6.27%           1,000,000               -- %                --
     2002                                               6.42%           1,000,000               -- %                --
     2003                                               6.55%           1,000,000               -- %                --
     2004                                               5.60%          10,000,000               -- %                --
     2008                                               5.55%           3,000,000              5.55%          3,000,000
                                                                      -----------                           -----------
                                                        5.66%         $64,340,115              5.69%        $42,009,880
                                                                      ===========                           ===========

</TABLE>
<PAGE>
(a)  Convertible at lender option to  replacement  funding at then current rates
     on February 12, 1999,  November 12, 2002,  March 24, 2001,  March 25, 2003,
     May 12, 1999 and March 24, 2004,  respectively,  and quarterly  thereafter.
     During  1999,  the lender  exercised  its option on the advance due May 14,
     2001 and the Bank chose to repay the advance.


Certain information concerning borrowed money is summarized as follows:
<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                 -------------------------------
                                                 1999        1998         1997
                                                -------     -------     -------
                                                    (Dollars in Thousands)
<S>                                             <C>         <C>         <C>
Average balance outstanding ................    $57,756     $42,364     $26,223
Maximum month-end balance outstanding ......     65,453      52,145      43,675
Average interest rate ......................       5.67%       5.84%       5.97%
</TABLE>

                                      -42-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12.   BORROWED MONEY  (Cont'd.)
---------------------

The foregoing borrowings were secured by pledges of the Bank's investment in the
following:
<TABLE>
<CAPTION>
                                                                 December 31,
                                                           ---------------------
                                                            1999           1998
                                                           -------       -------
                                                               (In Thousands)
<S>                                                        <C>           <C>
FHLB capital stock .................................       $ 3,273       $ 2,677
Mortgage-backed securities held to maturity ........        51,596        53,785
Investment securities held to maturity .............        19,847          --
Securities available for sale ......................         2,015          --
                                                           -------       -------

                                                           $76,731       $56,462
                                                           =======       =======
</TABLE>
13.   REGULATORY CAPITAL
------------------------

The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate certain mandatory,  and possibly additional  discretionary,  actions by
regulators that, if undertaken, could have a direct material effect on the Bank.
Under  capital  adequacy  guidelines  and the  regulatory  framework  for prompt
corrective  action,  the Bank must meet specific capital guidelines that involve
quantitative   measures  of  the  Bank's   assets,   liabilities,   and  certain
off-balance-sheet items as calculated under regulatory accounting practices. The
Bank's  capital  amounts  and  classification  are also  subject to  qualitative
judgments  by the  regulators  about  components,  risk  weightings,  and  other
factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require  the Bank to  maintain  minimum  amounts  and ratios of Total and Tier 1
capital (as defined in the  regulations) to  risk-weighted  assets (as defined),
and of Tier 1 capital to  adjusted  total  assets (as  defined).  The  following
tables present a  reconciliation  of capital per generally  accepted  accounting
principles  ("GAAP") and  regulatory  capital and  information  as to the Bank's
capital levels at the dates presented:
<PAGE>
<TABLE>
<CAPTION>
                                                               December 31,
                                                         -----------------------
                                                           1999           1998
                                                         --------      --------
                                                              (In Thousands)
<S>                                                      <C>           <C>
GAAP capital .......................................     $ 41,187      $ 38,428
Less: excess of cost over assets acquired ..........       (4,643)       (5,236)
Less: unrealized loss (gain) on debt securities ....           48          (192)
                                                         --------      --------
Core and tangible capital ..........................       36,592        33,000
Add: loan valuation allowance, as limited ..........        1,400         1,500
                                                         --------      --------
       Total regulatory capital ....................     $ 37,992      $ 34,500
                                                         ========      ========

</TABLE>

                                      -43-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.   REGULATORY CAPITAL  (Cont'd.)
------------------------
<TABLE>
<CAPTION>
                                                                     As of December 31, 1999
                                               ----------------------------------------------------------------------
                                                                                                      To Be Well
                                                                                                     Capitalized
                                                                                                     Under prompt
                                                                         Minimum Capital              Corrective
                                                   Actual                  Requirements           Actions Provisions
                                               -----------------        -------------------       -------------------
                                               Amount      Ratio        Amount        Ratio       Amount        Ratio
                                               ------      -----        ------        -----       ------        -----
                                                                     (Dollars in Thousands)
<S>                                           <C>           <C>         <C>             <C>        <C>           <C>
Total Capital
 (to risk-weighted assets)                    $37,992       28.55%      $10,645         8.00%      $13,306       10.00%

Tier 1 Capital
 (to risk-weighted assets)                     36,592       27.50%        -            -             7,983        6.00%

Core (Tier 1) Capital
 (to adjusted total assets)                    36,592       10.69%       13,693         4.00%       17,116        5.00%

Tangible Capital
 (to adjusted total assets)                    36,592       10.69%        5,135         1.50%       -            -

<CAPTION>
                                                                     As of December 31, 1999
                                               ----------------------------------------------------------------------
                                                                                                      To Be Well
                                                                                                     Capitalized
                                                                                                     Under prompt
                                                                         Minimum Capital              Corrective
                                                   Actual                  Requirements           Actions Provisions
                                               -----------------        -------------------       -------------------
                                               Amount      Ratio        Amount        Ratio       Amount        Ratio
                                               ------      -----        ------        -----       ------        -----
                                                                     (Dollars in Thousands)
<S>                                           <C>           <C>         <C>             <C>        <C>           <C>
Total Capital
 (to risk-weighted assets)                    $34,500       28.81%      $ 9,580         8.00%      $11,975       10.00%

Tier 1 Capital
 (to risk-weighted assets)                     33,000       27.56%        -            -             7,185        6.00%

Core (Tier 1) Capital
 (to adjusted total assets)                    33,000       10.44%       12,649         4.00%       15,811        5.00%

Tangible Capital
 (to adjusted total assets)                    33,000       10.44%        4,743         1.50%       -            -

</TABLE>
As of March 31, 1999,  the most recent  notification  from the OTS, the Bank was
categorized  as well  capitalized  under the  regulatory  framework  for  prompt
corrective  action.  There  are no  conditions  existing  or events  which  have
occurred  since   notification   that  management   believes  have  changed  the
institution's category.

                                      -44-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. BENEFIT PLANS
-----------------

         Pension Plan
         ------------

         The Bank has a  non-contributory  pension  plan  covering  all eligible
         employee.  The plan is a defined  benefit plan which provides  benefits
         based on a participant's years of service and compensation.  The Bank's
         funding policy is to contribute annually the maximum amount that can be
         deducted for federal income tax purposes.

         The following table sets forth the plan's funded status:
<TABLE>
<CAPTION>
                                                                          December 31,
                                                                 ---------------------------
                                                                     1999           1998
                                                                 ------------    -----------
<S>                                                               <C>             <C>

Actuarial present value of benefit obligation, including
 vested benefits of  $2,668,704 and $2,977,510, respectively     $ 2,704,530     $ 3,016,288
                                                                 ===========     ===========

Projected benefit obligation - beginning ....................    $ 3,622,467     $ 3,257,644
Service cost ................................................        151,864         116,891
Interest cost ...............................................        233,456         217,015
Actuarial (gain) loss .......................................       (581,255)        132,101
Benefits paid ...............................................       (100,372)        (97,951)
Settlements .................................................        (41,848)         (3,233)
                                                                 -----------     -----------
Projected benefit obligation - ending .......................      3,284,312       3,622,467
                                                                 -----------     -----------

Plan assets at fair value - beginning .......................      3,393,200       2,984,086
Actual return on assets .....................................        474,093         367,471
Employer's contributions ....................................        125,466         142,827
Benefits paid ...............................................       (100,372)        (97,951)
Settlements .................................................        (41,848)         (3,233)
                                                                  -----------     -----------
Plan assets at fair value - ending ..........................      3,850,539       3,393,200
                                                                  -----------     -----------
Funded status ...............................................        566,227        (229,267)
Unrecognized net transition obligation ......................        126,582         158,227
Unrecognized past service cost ..............................         61,386          70,937
Unrecognized net gain .......................................       (973,632)       (156,686)
                                                                  -----------     -----------
Accrued pension cost included in other liabilities ..........    $  (219,437)    $  (156,789)
                                                                 ===========     ===========

</TABLE>
<PAGE>
         Included in the  $973,632  unrecognized  gain at  December  31, 1999 is
         $600,604  related to the change in assumptions  used to value the plan.
         See the second succeeding table for such assumptions.

         The following  table sets forth the components of net periodic  pension
         cost:


<TABLE>
<CAPTION>
                                                       Year Ended December 31,
                                                  -------------------------------------
                                                    1999           1998         1997
                                                  ---------     ---------     ---------
<S>                                               <C>           <C>           <C>
Net periodic pension cost
 included the following components:
     Service cost ............................    $ 151,864     $ 116,891     $ 109,752
     Interest cost ...........................      233,456       217,015       206,416
     Expected return on plan assets ..........     (238,402)     (210,282)     (180,400)
     Amortization of net transition obligation       31,645        31,645        31,645
     Amortization of past service cost .......        9,553         9,553         9,553
                                                  ---------     ---------     ---------
Net periodic pension cost
  included in salaries and employee benefits .    $ 188,116     $ 164,822     $ 176,966
                                                  =========     =========     =========
</TABLE>
                                      -45-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14. BENEFIT PLANS
-----------------

         Pension Plan  (Cont'd.)
         ------------

         Assumptions used to value the pension plan were as follows:

<TABLE>
<CAPTION>
                                                                               December 31,
                                                            --------------------------------------------------
                                                            1999                  1998                    1997
                                                            ----                  ----                    ----
<S>                                                         <C>                  <C>                     <C>
             Discount rate                                  8.00%                6.50%                   6.75%
             Expected long-term rate of return              8.00%                7.00%                   7.00%
             Rate of increase in  compensation levels       5.50%                4.50%                   4.50%

</TABLE>

         ESOP
         ----

         Effective upon the consummation of the Bank's  reorganization,  an ESOP
         was  established  for  all  eligible  employees  who  had  completed  a
         twelve-month  period  of  employment  with the Bank and at least  1,000
         hours  of  service  and had  attained  the  age of 21.  The  ESOP  used
         $1,473,854  in proceeds  from a term loan  obtained from the Bancorp to
         purchase 147,768 shares of Bancorp common stock in the open market. The
         term loan  principal  is  payable  over ten equal  annual  installments
         through December 31, 2007. Interest on the term loan is fixed at a rate
         of  8.25%.   Each  year,   the  Bank  intends  to  make   discretionary
         contributions to the ESOP which will be equal to principal and interest
         payments  required on the term loan.  The loan is further  paid down by
         the amount of dividends  paid, if any, on the common stock owned by the
         ESOP.

         Shares  purchased  with the loan  proceeds  were  initially  pledged as
         collateral  for the term loan and are held in a  suspense  account  for
         future  allocation  among  participants.  Contributions to the ESOP and
         shares  released from the suspense  account will be allocated among the
         participants on the basis of compensation, as described by the Plan, in
         the year of allocation.

         The ESOP is accounted for in accordance with Statement of Position 93-6
         "Accounting  for Employee Stock Ownership  Plans",  which was issued by
         the  American  Institute of Certified  Public  Accountants  in November
         1993.  Accordingly,  the ESOP shares pledged as collateral are reported
         as unearned  ESOP shares in the  consolidated  statements  of financial
         condition. As shares are committed to be released from collateral,  the
         Bank reports  compensation expense equal to the current market price of
         the shares,  and the shares become outstanding for basic net income per
         common share computations.  ESOP compensation  expense was $141,419 and
         $146,554 for the years ended December 31, 1999 and 1998, respectively.
<PAGE>
         The ESOP shares were as follows:

<TABLE>
<CAPTION>
                                                            December 31,
                                                    ----------------------------
                                                        1999               1998
                                                    ----------        ----------
<S>                                                 <C>               <C>
Allocated shares ...........................            29,554            14,777
Shares committed to be released ............              --                --
Unreleased shares ..........................           118,214           132,991
                                                    ----------        ----------
Total ESOP shares ..........................           147,768           147,768
                                                    ==========        ==========
Fair value of unreleased shares ............        $1,108,256        $1,255,103
                                                    ==========        ==========


</TABLE>
                                      -46-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



14. BENEFIT PLANS  (Cont'd.)
----------------------------

         ESOP  (Cont'd.)
         ---------------

         In addition to the above,  the Bancorp has  established a  supplemental
         benefit plan to offset the ESOP benefit reduction applicable to certain
         members  of  Bancorp  management  due  to  limitations  imposed  by the
         Internal  Revenue  Code.  The  amount  expensed  related  to this  plan
         totalled approximately $15,000 for each of the years ended December 31,
         1999 and 1998. The 1998 liability was settled via the issuance of 1,624
         shares of Bancorp common stock during the year ended December 31, 1999.
         The Bancorp plans to settle the 1999 liability in the same manner.

         1999 Stock-Based Incentive Plan (the "Incentive Plan")
         ------------------------------------------------------

         In April 1999,  the Bancorp's  stockholders  approved,  and the Bancorp
         implemented the Incentive Plan. Under the Incentive Plan,  employees of
         the Bancorp and it's subsidiaries may be awarded up to 73,884 shares of
         Bancorp  common  stock  (the  "Stock  Awards")  and  issued  options to
         purchase  up to 184,711  shares of  Bancorp  common  stock (the  "Stock
         Options"). Additional information on the Stock Awards and Stock Options
         is contained in the succeeding paragraphs.

         Stock Awards
         ------------

         Stock  Awards  under  the  Incentive  Plan are  granted  in the form of
         Bancorp common stock,  which are held by the Incentive Plan Trust,  and
         vest over a period of five years (20% annually from the date of grant).
         The Stock Awards  become fully vested upon the death or  disability  of
         the holder. On April 30, 1999, the Bancorp awarded 65,756 shares of its
         common stock  (47,286  shares to employees and 18,470 shares to outside
         directors).  At December 31, 1999, none of the Stock Awards were vested
         and up to 8,128 shares are available for future grants. During the year
         ended December 31, 1999,  approximately  $83,000 in expense  related to
         the Stock Awards was recorded.  The amount of expense  recorded for the
         Stock  Awards is based  upon the number of shares  awarded,  the market
         price of the Bancorp's common stock at the grant date ($9.50 per share)
         and the period over which the Stock Awards are earned (60 months).

         Stock Options
         -------------

         Stock Options  granted under the Incentive  Plan may be either  options
         that  qualify as incentive  stock  options as defined in Section 422 of
         the  Internal  Revenue  Code of  1986,  as  amended,  or  non-statutory
         options.  Options  granted  will  vest  and  will be  exercisable  on a
         cumulative  basis  in  equal  installments  at the rate of 20% per year
         commencing one year from the date of grant. All options granted will be
         exercisable in the event the optionee  terminates his employment due to
         death or  disability.  The  options  expire  ten years from the date of
         grant.
<PAGE>
         On April 30, 1999, options to purchase 176,048 shares of Bancorp common
         stock  were  granted,  which  include  non-incentive  stock  options to
         directors and incentive  stock options to officers and  employees.  The
         options   granted,   none  of  which  were  exercised  during  1999  or
         exercisable at December 31, 1999, are summarized as follows:


                                      -47-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14. BENEFIT PLANS  (Cont'd.)
----------------------------

         Stock Options  (Cont'd.)
         ------------------------

<TABLE>
<CAPTION>
                                Shares                                     Weighted
                --------------------------------------                       Average
                   Non-                                       Exercise      Exercise
                Incentive      Incentive        Total           Price         Price
                ---------      ---------        -----           -----         -----
<S>               <C>           <C>            <C>            <C>          <C>
                  46,855        129,193        176,048        $   9.50     $   9.50
                  ======        =======        =======        ========     ========
</TABLE>

         At December 31, 1999,  stock  options for up to 8,663 shares of Bancorp
         common stock remain available for future grants.

         The Bancorp, as permitted by Statement No. 123, recognizes compensation
         cost for stock  options  granted  based on the  intrinsic  value method
         instead of the fair value based method. The weighted-average grant-date
         fair value of the stock  options  granted  during  1999,  which have an
         exercise price equal to the market price of the Bancorp's  common stock
         at the grant date, is estimated using the Black-Scholes  option-pricing
         model.  Such fair value and the  assumptions  used for estimating  fair
         value are as follows:


                  Weighted average grant-date fair value per share       $2.54
                  Expected common stock dividend yield                    3.16%
                  Expected volatility                                    27.66%
                  Expected option life                                 6.5 years
                  Risk-free interest rate                                 5.36%

         Had the Bancorp  used the fair value based  method,  net income for the
         year ended  December 31, 1999 would have been  decreased to  $3,005,000
         and both basic and diluted net income per common  share would have been
         reduced to $0.75 for the year ended December 31, 1999.

15.  INCOME TAXES
-----------------

The Bank qualifies as a Savings Institution under the provisions of the Internal
Revenue Code and, therefore,  must calculate its bad debt deduction using either
the experience  method or the specific charge off method.  Retained  earnings at
December 31, 1999, include approximately $6.8 million of such bad debt allowance
for which federal  income taxes have not been  provided.  If such amount is used
for  purposes  other  then  for bad  debt  losses,  including  distributions  in
liquidation, it will be subject to income tax at the then current rate.


                                      -48-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



15.  INCOME TAXES  (Cont'd.)
----------------------------

The components of income taxes are summarized as follows:

<TABLE>
<CAPTION>
                                              Year Ended December 31,
                                    --------------------------------------------
                                        1999            1998            1997
                                    -----------     -----------     -----------
<S>                                 <C>             <C>             <C>
Current tax expense:
    Federal income .............    $ 1,336,166     $   676,231     $ 1,066,590
    State income ...............        107,392          87,750          95,024
                                    -----------     -----------     -----------

                                      1,443,558         763,981       1,161,614
                                    -----------     -----------     -----------

Deferred tax expense (benefit):
    Federal income .............        192,560          (6,746)       (664,857)
    State income ...............         27,265          (5,198)        (60,478)
                                    -----------     -----------     -----------

                                        219,825         (11,944)       (725,335)
                                    -----------     -----------     -----------

                                    $ 1,663,383     $   752,037     $   436,279
                                    ===========     ===========     ===========
</TABLE>
<PAGE>
         The components of the net deferred income tax asset are as follows:

<TABLE>
<CAPTION>
                                                                 December 31,
                                                           -------------------------
                                                            1999              1998
                                                           ----------    -----------
<S>                                                        <C>           <C>
Deferred tax assets:
    Allowance for loan losses .........................    $  501,162    $  650,010
    Benefit plans .....................................       134,307        49,569
    Goodwill ..........................................       645,052       610,762
    Charitable contribution carryforward ..............        62,394       209,717
    Unrealized loss on securities available for sale ..        26,816          --
    Other .............................................        18,250        19,142
                                                           ----------    ----------

        Total deferred tax assets .....................     1,387,981     1,539,200
                                                           ----------    ----------

Deferred tax liabilities:
    Deferred loan origination fees, net ...............       188,407       162,415
    Unrealized gain on securities available for sale ..          --         107,653
    Other .............................................        17,196         1,398
                                                           ----------    ----------

        Total deferred tax liabilities ................       205,603       271,466
                                                           ----------    ----------

        Net deferred tax asset included in other assets    $1,182,378    $1,267,734
                                                            ==========    ==========

</TABLE>
Refundable  income taxes  totalling  $121,575 and $129,079 are included in other
assets  at  December  31,  1999 and 1998,  respectively.  Income  taxes  payable
totalling  $76,687 and $1,754 are included in other  liabilities at December 31,
1999 and 1998, respectively.


                                      -49-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


15.  INCOME TAXES  (Cont'd.)
----------------------------

The following table presents a reconciliation  between the reported income taxes
and the income  taxes which would be  computed  by applying  the normal  federal
income tax rate of 34% to income before income taxes:


<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                                   --------------------------------------------
                                                       1999           1998            1997
                                                   -----------     -----------     -----------
<S>                                                <C>             <C>             <C>
Federal income tax ............................    $ 1,600,289     $   730,775     $   398,860
Increases (reductions) in taxes resulting from:
    New Jersey savings institution tax,
     net of federal income tax effect .........         88,814          54,484          22,800
    Other items, net ..........................        (25,720)        (33,222)         14,619
                                                   -----------     -----------     -----------
Effective income tax ..........................    $ 1,663,383     $   752,037     $   436,279
                                                   ===========     ===========     ===========

</TABLE>

16.   NET INCOME PER COMMON SHARE
---------------------------------
<TABLE>
<CAPTION>

                                           Year Ended December 31, 1999
                                        ----------------------------------------
                                                       Weighted
                                           Net         Average      Per Share
                                         Income         Shares       Amounts
                                         ------         ------       -------
<S>                                     <C>            <C>          <C>
Basic net income per share .........    $3,043,349     4,004,069    $   0.76
                                                                    ========
Effect of dilutive securities:
      Stock options ................          --           2,681
      Unearned Incentive Plan shares          --           1,001
                                        ----------     ---------    --------

Diluted net income per share .......    $3,043,349     4,007,751    $   0.76
                                        ==========     =========    ========

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    Year Ended December 31, 1998
                                            -------------------------------------------
                                                          Weighted
                                              Net          Average          Per Share
                                            Income        Shares (1)        Amounts (1)
                                            ------        ----------        -----------
<S>                                         <C>            <C>              <C>
Basic and diluted net income per share      $1,397,300     4,062,395        $   0.34
                                            ==========     =========        ========
</TABLE>


(1)      West Essex  Bank  converted  to stock form on October 2, 1998.  Amounts
         have been  calculated  based upon net income for the entire  year ended
         December  31,  1998 and as if the  conversion  took place on January 1,
         1998.


                                      -50-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


17.  COMMITMENTS AND CONTINGENCIES
----------------------------------

The Bank is a party to financial instruments with  off-balance-sheet risk in the
normal  course of business to meet the  financing  needs of its customers and to
reduce its own  exposure to  fluctuations  in interest  rates.  These  financial
instruments  primarily  include  commitments to extend credit.  Such instruments
involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recognized in the consolidated  statements of financial condition.
The contractual  amounts of these instruments  reflect the extent of involvement
the Bank has in those particular classes of financial instruments.

The Bank's exposure to credit loss in the event of  nonperformance  by the other
party  to  the  financial  instruments  for  commitments  to  extend  credit  is
represented by the contractual  amount of those  instruments.  The Bank uses the
same credit policies in making  commitments  and  conditional  obligations as it
does for on-balance-sheet instruments.

At  December  31,  1999  and  1998,  the  Bank had  $5,134,000  and  $7,209,000,
respectively,  in outstanding  commitments to originate and purchase loans.  The
outstanding  commitments  at December 31, 1999  include  $530,000 for fixed rate
mortgage loans with an interest rate of 7.875%,  $2,923,000 for adjustable  rate
mortgage  loans with initial  rates  ranging from 7.00% to 7.375%,  $256,000 for
home  equity  loans at fixed rates  ranging  from 7.25% to 7.50%,  $125,000  for
floating  rate equity lines of credit with  initial  rates of 7.75% to 8.00% and
$1,300,000  for  purchases  of loan  participations,  consisting  of a  $300,000
adjustable rate loan on which the initial rate will be fixed at funding for five
years at 1.60% above the Federal Home Loan Bank CIP advance rate and will adjust
every fifth year thereafter and a $1,000,000  construction loan which will carry
a floating interest rate of 0.375% above the prime rate.

At December 31, 1999 and 1998,  undisbursed  funds from approved lines of credit
under a homeowners' equity lending program amounted to approximately  $5,001,000
and $4,970,000,  respectively.  Unless they are specifically cancelled by notice
from  the  Bank,  these  funds  represent  firm  commitments  available  to  the
respective borrowers on demand. The interest rate charged for any month on funds
disbursed  under the  program  ranges  from 0.50% below to 1.75% above the prime
rate  published  in The Wall  Street  Journal  on the last day of the  preceding
month.

At December 31, 1999 and 1998,  undisbursed funds from approved  unsecured lines
of credit  under the  Credit  Reserve  program  totalled  $79,000  and  $75,000,
respectively.  Funds  drawn on these  lines are  assessed  interest at a rate of
15.00%.

Commitments  to extend  credit are  agreements  to lend to a customer as long as
there is no violation of any condition established in the contract.  Commitments
generally  have fixed  expiration  dates or other  termination  clauses  and may
require  payment of a fee. Since some of the  commitments are expected to expire
without  being  drawn  upon,  the total  commitment  amounts do not  necessarily
<PAGE>
represent  future  cash   requirements.   The  Bank  evaluates  each  customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained,  if
deemed necessary by the Bank upon extension of credit,  is based on management's
credit  evaluation  of the  counterparty.  Collateral  held varies but primarily
includes commercial and residential real estate.

At  December  31,  1999,   the  Bank  was   committed  to  purchase  a  $246,000
participation  in  a  Federal  National  Mortgage  Association   mortgage-backed
security, the terms of which have not yet been determined.

                                      -51-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



17.  COMMITMENTS AND CONTINGENCIES  (Cont'd.)
---------------------------------------------

Rentals  under a  long-term  operating  lease for a branch  office  amounted  to
approximately  $57,000,  $49,000 and $50,000  for the years ended  December  31,
1999,  1998 and 1997,  respectively.  At December 31, 1999,  the minimum  rental
commitment  under  this  noncancellable  lease  expiring  in  October,  2003  is
$214,000,  consisting  of $56,000  for each of the years 2000  through  2002 and
$46,000 for 2003.

The Bank also has, in the normal  course of business,  commitments  for services
and  supplies.   Management   does  not  anticipate   losses  on  any  of  these
transactions.

The Bank is a party to various litigation which arises primarily in the ordinary
course of business.  In the opinion of management,  the ultimate  disposition of
such litigation should not have a material effect on the consolidated  financial
position or operations of the Bancorp.


18.   ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
---------------------------------------------------

The fair value of a financial  instrument  is defined as the amount at which the
instrument could be exchanged in a current  transaction between willing parties,
other than a forced or liquidation sale.  Significant  estimations were used for
the  purposes of this  disclosure.  Estimated  fair values have been  determined
using the best  available  data and  estimation  methodology  suitable  for each
category of financial  instruments.  For those loans and deposits  with floating
interest rates, it is presumed that estimated fair values generally  approximate
their  recorded  book  balances.  The  estimation  methodologies  used  and  the
estimated fair values and carrying  values of the Bank's  financial  instruments
are set forth below:

         Cash and cash equivalents and accrued interest receivable
         ---------------------------------------------------------

         The carrying amounts for cash and cash equivalents and accrued interest
         receivable approximate fair value.

         Securities
         ----------

         The  fair  values  for  securities   available  for  sale,   investment
         securities  held to maturity  and  mortgage-backed  securities  held to
         maturity  are  based on quoted  market  prices  or  dealer  prices,  if
         available.  If quoted market prices or dealer prices are not available,
         fair value is estimated using quoted market prices or dealer prices for
         similar securities.
<PAGE>
         Loans
         -----

         The fair value of loans is estimated by discounting  future cash flows,
         using the current rates at which  similar loans with similar  remaining
         maturities would be made to borrowers with similar credit ratings.



                                      -52-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


18.   ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS  (Cont'd.)
--------------------------------------------------------------

         Deposits
         --------

         For  demand,  savings  and club  accounts,  fair value is the  carrying
         amount  reported  in  the  consolidated   financial   statements.   For
         certificates of deposit,  fair value is estimated by discounting future
         cash flows,  using  rates  currently  offered  for  deposits of similar
         remaining maturities.

         Borrowed money
         --------------

         Fair value is estimated using rates  currently  offered for liabilities
         of similar  remaining  maturities,  or when  available,  quoted  market
         prices.

         Commitments to extend credit
         ----------------------------

         The fair  value of  credit  commitments  is  estimated  using  the fees
         currently charged to enter into similar agreements, taking into account
         the remaining terms of the agreements and the present  creditworthiness
         of the counterparties. For fixed-rate loan commitments, fair value also
         considers the difference  between  current levels of interest rates and
         the committed rates.

        The carrying  values and estimated fair values of financial  instruments
        are as follows (in thousands):
<PAGE>
<TABLE>
<CAPTION>
                                                                                December 31,
                                                            ---------------------------------------------------
                                                                    1999                       1998
                                                            -------------------------  ------------------------
                                                            Carrying    Estimated       Carrying     Estimated
                                                              Value      Fair Value       Value      Fair Value
                                                            ------------  -----------  -----------  -----------
<S>                                                           <C>          <C>          <C>           <C>
      Financial assets
      ----------------

      Cash and cash equivalents                               $12,746      $12,746      $16,371       $16,371
      Securities available for sale                             2,924        2,924        8,282         8,282
      Investment securities held to maturity                   41,582       38,869       36,873        36,891
      Mortgage-backed securities held to maturity             121,223      118,807      110,376       111,513
      Loans receivable                                        153,276      153,454      140,272       145,855
      Accrued interest receivable                               2,006        2,006        2,005         2,005

      Financial liabilities
      ---------------------

      Deposits                                                234,978      235,892      238,313       239,702
      Borrowed money                                           64,340       60,032       42,010        41,843

      Commitments
      -----------

      Loan origination and purchase                             5,134        5,134        7,209         7,209
      Unused lines of credit                                    5,080        5,080        5,045         5,045
      Security purchase                                           246          246        2,500         2,500


</TABLE>
                                      -53-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


18.   ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS  (Cont'd.)
--------------------------------------------------------------

Fair  value  estimates  are made at a specific  point in time based on  relevant
market  information  and  information  about  the  financial  instrument.  These
estimates do not reflect any premium or discount that could result from offering
for sale at one time the entire holdings of a particular  financial  instrument.
Because no market  value  exists  for a  significant  portion  of the  financial
instruments,  fair  value  estimates  are based on  judgments  regarding  future
expected loss experience,  current economic conditions,  risk characteristics of
various financial instruments, and other factors. These estimates are subjective
in nature, involve uncertainties and matters of judgment and, therefore,  cannot
be determined with precision.  Changes in assumptions could significantly affect
the estimates.

In addition, fair value estimates are based on existing on-and-off balance sheet
financial  instruments  without  attempting to estimate the value of anticipated
future  business,  and exclude the value of assets and liabilities  that are not
considered financial instruments.  Other significant assets and liabilities that
are not  considered  financial  assets  and  liabilities  include  premises  and
equipment,  real estate owned and advance  payments by  borrowers  for taxes and
insurance.  In addition, the tax ramifications related to the realization of the
unrealized  gains  and  losses  can  have a  significant  effect  on fair  value
estimates and have not been considered in any of the estimates.

Finally,  reasonable  comparability  between  financial  institutions may not be
likely due to the wide range of  permitted  valuation  techniques  and  numerous
estimates which must be made given the absence of active  secondary  markets for
many of the financial instruments.  This lack of uniform valuation methodologies
introduces a greater degree of subjectivity to these estimated fair values.


19.   PARENT ONLY FINANCIAL INFORMATION
---------------------------------------

West Essex Bancorp, Inc. operates its wholly owned subsidiary,  West Essex Bank.
The earnings of the subsidiary  are recognized by the holding  company using the
equity  method  of  accounting.  Accordingly,  earnings  of the  subsidiary  are
recorded as increases in the investment in the subsidiary. The following are the
condensed  financial  statements for West Essex Bancorp,  Inc.  (Parent  company
only).



                                      -54-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


19.   PARENT ONLY FINANCIAL INFORMATION  (Cont'd.)
--------------------------------------------------
<TABLE>
<CAPTION>
                             STATEMENTS OF CONDITION
                             -----------------------

                                                             December 31,
                                                     ---------------------------
                                                         1999           1998
                                                     -----------     -----------
<S>                                                  <C>             <C>
Assets:
        Cash and due from banks ................     $    10,904     $    95,743
        Interest-bearing deposits ..............       1,372,748       5,855,678
        Securities held to maturity ............       1,057,907         907,315
        Loan receivable from the Bank ..........       4,391,828       1,294,464
        Real estate owned ......................         135,000            --
        Investment in subsidiaries .............      41,186,716      38,427,846
        Other assets ...........................          91,362         213,911
                                                     -----------     -----------
               Total assets ....................     $48,246,465     $46,794,957
                                                     ===========     ===========


Liabilities:
        Due to subsidiaries ....................     $ 1,045,914     $    39,149
        Other liabilities ......................         173,896           1,754
                                                     -----------     -----------
                                                       1,219,810          40,903

Stockholders' equity ...........................      47,026,655      46,754,054
                                                     -----------     -----------
Total liabilities and stockholders' equity .....     $48,246,465     $46,794,957
                                                     ===========     ===========

</TABLE>

                                      -55-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


19.   PARENT ONLY FINANCIAL INFORMATION  (Cont'd.)
--------------------------------------------------
<TABLE>
<CAPTION>
                            STATEMENTS OF OPERATIONS
                            ------------------------


                                                                             From Inception
                                                         Year Ended          October 2, 1998
                                                         December 31,        to December 31,
                                                             1999                 1998
                                                          -----------          ----------
<S>                                                       <C>                  <C>
Dividend from the Bank ................................   $     --             $  100,000
Interest income .......................................      433,046               73,912
Gain on disposition of security .......................       92,082                 --
                                                          ----------           ----------
               Total income ...........................      525,128              173,912
                                                          ----------           ----------
Charitable contributions ..............................         --                842,140
Other expenses ........................................      179,841                4,259
                                                          ----------           ----------
               Total expenses .........................      179,841              846,399
                                                          ----------           ----------
Income (loss) before income tax (benefit) and equity in
   undistributed earnings of subsidiaries .............      345,287             (672,487)
Income tax (benefit) ..................................      125,405             (261,251)
                                                          ----------           ----------
Income (loss) before equity in undistributed
  earnings of subsidiaries ............................      219,882             (411,236)
Equity in undistributed
  earnings of subsidiaries ............................    2,823,467              329,268
                                                          ----------           ----------
Net income (loss) .....................................   $3,043,349           $  (81,968)
                                                          ==========           ==========



</TABLE>
                                      -56-

<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


19.   PARENT ONLY FINANCIAL INFORMATION  (Cont'd.)
--------------------------------------------------
<TABLE>
<CAPTION>
                                         STATEMENT OF CASH FLOWS

                                                                              Year Ended   October 2, 1998
                                                                             December 31,  to December 31,
                                                                                  1999           1998
                                                                             ------------  ---------------
<S>                                                                          <C>            <C>
Cash flows from operating activities:
        Net income (loss) ................................................   $ 3,043,349    $   (81,968)
        Adjustments to reconcile net income (loss) to net cash
          provided by operating activities:
               Accretion of discount .....................................          (603)          (525)
               Gain on disposition of security ...........................       (92,082)          --
               Deferred income taxes .....................................       152,937       (209,717)
               Contribution of common stock to foundation ................          --          742,140
               Other, net ................................................       (49,464)        36,709
               Equity in undistributed earnings of subsidiaries ..........    (2,823,467)      (329,268)
                                                                              ----------     ----------

                      Net cash provided by operating activities ..........       230,670        157,371
                                                                              ----------     ----------
Cash flows from investing activities:
        Purchase of securities held to maturity ..........................          --         (906,790)
        Proceeds from disposition of security ............................     1,000,000           --
        Increase in loan receivable from Bank ............................    (3,097,364)    (1,294,464)
        Purchase of real estate owned from subsidiary ....................      (135,000)          --
                                                                              ----------     ----------
                      Net cash (used in) investing activities ............    (2,232,364)    (2,201,254)
                                                                              ----------     ----------
Cash flows from financing activities:
        Net proceeds from issuance of common stock .......................          --        7,995,304
        Purchase of treasury stock .......................................    (1,453,094)          --
        Purchase of incentive plan stock .................................      (738,840)          --
        Cash dividends paid to stockholders ..............................      (374,141)          --
                                                                              ----------     ----------
                      Net cash (used in ) provided by financing activities    (2,566,075)     7,995,304
                                                                              ----------     ----------
Net (decrease) increase in cash and cash equivalents .....................    (4,567,769)     5,951,421

Cash and cash equivalents - beginning ....................................     5,951,421           --
                                                                              ----------     ----------
Cash and cash equivalents - ending .......................................   $ 1,383,652    $ 5,951,421
                                                                             ===========    ===========

</TABLE>


                                      -57-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


20.   QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------------
<TABLE>
<CAPTION>
                                                  Quarter Ended
                                   ---------------------------------------------------
                                   March 31,     June 30,  September 30,  December 31,
                                     1999          1999          1999         1999
                                     ----          ----          ----         ----
                                      (In thousands, except for per share amounts)

<S> ........................        <C>           <C>           <C>           <C>
Total interest income ......        $5,559        $5,711        $5,746        $5,735
Total interest expense .....         2,825         3,004         3,013         3,018
                                    ------        ------        ------        ------
Net interest income ........         2,734         2,707         2,733         2,717

Provision for loan losses ..          --            --            --            --
Non-interest income ........           157           174           128           226
Non-interest expenses ......         1,716         1,737         1,652         1,765
Income taxes ...............           423           410           426           404
                                    ------        ------        ------        ------
Net income .................        $  752        $  734        $  783        $  774
                                    ======        ======        ======        ======

Net income per common share:
    Basic ..................        $0.185        $0.180        $0.195        $0.200
    Diluted ................         0.185         0.180         0.195         0.200

Weighted average number of
  common shares outstanding:
    Basic ..................         4,066         4,070         4,010         3,871
    Diluted ................         4,066         4,070         4,018         3,877

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                                        Quarter Ended
                                                  ---------------------------------------------------------
                                                  March 31,       June 30,    September 30,    December 31,
                                                    1998            1998           1998           1998
                                                    ----            ----           ----           ----
                                                        (In thousands, except for per share amounts)
<S>                                               <C>             <C>            <C>             <C>
Total interest income ....................        $ 5,115         $ 5,342        $ 5,460         $ 5,398
Total interest expense ...................          2,870           3,117          3,216           3,016
                                                  -------         -------        -------         -------
Net interest income ......................          2,245           2,225          2,244           2,382


(Recapture of) loan losses ...............            (22)           --              (19)            (90)
Non-interest income ......................            140             121            133             135
Non-interest expenses ....................          1,636           1,607          1,632           2,732
Income taxes .............................            260             257            278             (43)
                                                  -------         -------        -------         -------
Net income (loss) ........................        $   511         $   482        $   486         $   (82)
                                                  =======         =======        =======         =======
Net income (loss) per common share - basic
  and diluted ............................            N/A (1)         N/A (1)        N/A (1)     $(0.020)
                                                      =======         =======        =======     =======

Weighted average number of
  common shares outstanding -
  basic and diluted ......................            N/A (1)         N/A (1)        N/A (1)       4,062 (1)
                                                      =======         =======        =======     ===========
</TABLE>

(1) Converted to stock form on Otober 2, 1998.

                                      -58-
<PAGE>
                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


21.   IMPACT OF NEW ACCOUNTING STANDARDS
----------------------------------------

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging  Activities".  SFAS No. 133  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments   embedded  in  other   contracts   (collectively   referred  to  as
derivatives),  and for hedging activities.  It requires that an entity recognize
all  derivatives  as either assets or liabilities in the statements of financial
position and measure those instruments at fair value. If certain  conditions are
met, a derivative may be specifically  designated as (a) a hedge of the exposure
to  changes  in  the  fair  value  of a  recognized  asset  or  liability  or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction,  or (c) a hedge of the foreign currency exposure of
a net investment in a foreign  operation,  an unrecognized  firm commitment,  an
available-for-sale  security,  or  a   foreign-currency-denominated   forecasted
transaction.  The accounting for changes in the fair value of a derivative (that
is,  gains and losses)  depends on the intended  use of the  derivative  and the
resulting designation.

At the date of initial  application  of SFAS No. 133, an entity may transfer any
held-to-maturity  security into the  available-for-sale  category or the trading
category.  An entity  will then be able in the  future to  designate  a security
transferred  into the  available-for-sale  category as the hedged  item,  or its
variable interest payments as the cash flow hedged  transactions,  in a hedge of
the exposure to changes in market  interest rates,  changes in foreign  currency
exchange rates, or changes in the overall fair value.  (SFAS No. 133 precludes a
held-to-maturity  security  from being  designated  as the hedged item in a fair
value hedge of market  interest  rate risk or the risk of changes in its overall
fair value and precludes the variable cash flows of a held-to-maturity  security
from being  designated as the hedged  transaction in a cash flow hedge of market
interest  rate  risk).  SFAS No.  133  provides  that  such  transfers  from the
held-to-maturity  category at the date of initial  adoption  shall not call into
question an  entity's  intent to hold other debt  securities  to maturity in the
future.

SFAS No. 133 is effective for all fiscal  quarters of all fiscal years beginning
after June 15,  2000,  the  quarter  ended  March 31,  2001 for the  Bancorp and
subsidiaries.  Initial  application  shall be as of the beginning of an entity's
fiscal quarter.  Earlier application of all of the provisions of SFAS No. 133 is
permitted only as of the beginning of a fiscal quarter.  Earlier  application of
selected provisions or retroactive application of provisions of SFAS No. 133 are
not permitted.

Management of the Bancorp and  subsidiaries has not yet determined when SFAS No.
133 will be  implemented,  but does not believe the ultimate  implementation  of
SFAS No.  133 will  have a  material  impact  on  their  consolidated  financial
position or results of operations.


                                      -59-
<PAGE>
WEST ESSEX BANCORP, INC.
------------------------

Corporate Headquarters

417 Bloomfield Avenue
Caldwell, New Jersey  07006
(973) 226-7911

Bank Branch Offices

Montville
267 Changebridge Road
Pine Brook, NJ  07058
(973) 575-7080

Franklin Lakes
574 Franklin Avenue
Franklin Lakes, NJ  07417
(201) 891-5500

Northvale
119 Paris Avenue
Northvale, NJ  07647
(201) 768-7800

Old Tappan
207 Old Tappan Road
Old Tappan, NJ  07675
(201) 767-0007

Pleasant Valley Way
487 Pleasant Valley Way
West Orange, NJ  07052
(973) 731-4630

River Vale
653 Westwood Avenue
River Vale, NJ  07675
(201) 664-3700

Tory Corner
216 Main Street
West Orange, NJ  07052
(973) 325-1230


DIRECTORS AND OFFICERS
----------------------

     Directors of
West Essex Bancorp, Inc.
   and West Essex Bank
------------------------

Leopold W. Montanaro
  Chairman of the Board
  of West Essex Bancorp, Inc.
<PAGE>
William J. Foody
  Chairman of the Board
  of West Essex Bank
  Managing Partner
  Trammell Crow

Everett N. Leonard
  Retired,
  Verona Boro Administrator

John J. Burke
  President
  JJ Burke & Associates

David F. Brandley, Esq.
  Partner in the Law Firm of
  Brandley & Kleppe

James P. Vreeland
  Retired New Jersey State Senator


  Principal Officers of
West Essex Bancorp, Inc.
------------------------

Leopold W. Montanaro
  President and Chief
  Executive Officer

Dennis A. Petrello
  Executive Vice President
  and Chief Financial Officer

Charles E. Filippo
  Executive Vice President

Craig L. Montanaro
  Senior Vice President
  and Secretary and Treasurer


 Principal Officers of
    West Essex Bank
-----------------------

Leopold W. Montanaro
  President and Chief Executive Officer
  Executive Officer

Dennis A. Petrello
  Executive Vice
  and Chief Financial Officer
<PAGE>
Charles E. Filippo
  Executive Vice President
  and Chief Lending Officer

Craig L. Montanaro
  Senior Vice President
  and Secretary and Treasurer

Michael T. Sferrazza
   Vice President and Controller

Lisa A. Mulligan
   Vice President and Personnel
   Officer

Donna Duess
  Vice President

John E. Gerasimow
  Vice President



                                      -60-

<PAGE>
INVESTOR AND CORPORATE INFORMATION
----------------------------------

CORPORATE HEADQUARTERS
West Essex Bancorp, Inc.
417 Bloomfield Avenue, Caldwell, New Jersey  07006
(973) 226-7911

Annual Meeting

The annual meeting of shareholders will be held at 10:00 a.m. on Thursday, April
27,  2000  at  the  Radisson  Hotel,  Route  46  East,  Fairfield,  New  Jersey.
Shareholders are encouraged to attend.

Annual Report on Form 10-K
A copy of West Essex Bancorp, Inc.'s annual report on Form 10-K without exhibits
is available  without  charge to  shareholders  upon written  request.  Requests
should be sent to Mr. Dominic Tangredi, Compliance Officer.

Stock Transfer/Register
Questions  regarding the transfer of stock, lost certificates,  address changes,
account  consolidation  and cash dividends  should be addressed to Registrar and
Transfer  Company,  10  Commerce,  Cranford,  New  Jersey  07203,  phone  number
(908)241-9880. Allow three weeks for a reply.

Special Counsel
Muldoon,  Murphy and Faucette LLP, 5101 Wisconsin  Avenue,  NW,  Washington,  DC
20016.

Independent Accountants
Radics & Co., LLC, Route 46 East, Pine Brook, New Jersey  07058.

Inquiries
Security analysts, retail brokers and shareholders seeking financial information
should contact Dennis A. Petrello,  Executive Vice President and Chief Financial
Officer. Requests for written materials can be forwarded to the attention of Mr.
Dominic Tangredi, Investor Relations Department.

Stock Information
West Essex  Bancorp,  Inc.,  is traded on the Nasdaq  National  Market under the
ticker  symbol  "WEBK." As of December 31, 1999,  West Essex  Bancorp,  Inc. had
4,054,357 shares of common stock  outstanding and approximately 452 shareholders
of record.

Stock Price and Dividends
The following table  discloses the dividends  declared and the high and low bids
for the Company's  common stock on the Nasdaq National Market for each quarterly
period indicated. The Company did not declare or pay dividends in 1998.


                              Dividends       High         Low
Quarter ended                 Per Share       Price       Price
-------------                 ---------       -----       -----

December 31, 1999              $ 0.075      $ 10.000     $ 9.375
September 30, 1999               0.075        10.250       9.250
June 30, 1999                    0.075         9.625       9.000
March 31, 1999                   0.075        10.000       9.000

December 31, 1998                None         10.125       9.250