TABLE OF CONTENTS


West Essex Bancorp, Inc. is a $370.8 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 Counties.
Founded in 1915, West Essex Bank is a federally-chartered FDIC-insured stock
savings bank.
<TABLE>
<CAPTION>

<S>                                                                                               <C>
President's Message ...........................................................................   1
Selected Consolidated Financial and Other Data ................................................   3
Management's Discussion and Analysis of Financial Condition and Results of Operations .........   5
Management Responsibility Statement ...........................................................  14
Independent Auditor's Report...................................................................  15
Consolidated Statements of Financial Condition.................................................  16
Consolidated Statements of Income  ............................................................  17
Consolidated Statements of Comprehensive Income ...............................................  18
Consolidated Statements of Changes in Stockholders' Equity ....................................  19
Consolidated Statements of Cash Flows .........................................................  20
Notes to Consolidated Financial Statements  ...................................................  22
Directors and Officers ........................................................................  54
Investor and Corporate Information  ............................................. Inside Back Cover

</TABLE>

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

Dear Stockholders,

               On behalf on the Board of Directors, management and employees, I
am pleased to report on your company and it's accomplishments for the year 2001.


               The year 2001 was a difficult and sad year. It began with the
Federal Reserve's ambitious reduction of interest rates, which were intended to
stimulate the economy. On September 11, 2001, the terrorist attacks on the World
Trade Center and Pentagon adversely affected the economy and prompted further
Federal Reserve interest rate cuts. The combination of a weak economy and the
terrorist attacks, which caused a dramatic loss of life and property, had the
effect of further slowing the economic recovery that the Federal Reserve
monetary policy had pursued. At year-end, interest rates were at their lowest
level since the 1960's. In the aftermath of the tragic attacks, our spirit and
our concerns for our fellow man and our country have never been greater. We are
rebuilding and we will remain the great nation that we are. Our thoughts and
prayers go out to the families of those lost in the tragic attacks and we all
salute the uniformed services and volunteers who gave so much and asked so
little.


               The Bank continues to operate in one of the most competitive
banking environments and yet continues to maintain its posture of excellence in
customer service with that " hometown touch" so sought after by the banking
public.


               In the last two years the investing public has begun to focus on
industries whose balance sheets are understood and reflect assets, which are the
backbone of America. This has encouraged investors to recognize well-managed
community banks as a safe and profitable investment.


               At our Company, for the third consecutive year net income topped
the $3.0 million mark. Loan growth remained strong as the Bank originated in
excess of $41.0 million in new loans for the year. Loan originations continue to
be an excellent investment vehicle for the Bank and a large contributor to its
profitability. Asset quality remains strong as non-performing assets stood at
0.21% of tangible assets and loan loss reserves as a percentage of
non-performing assets 173.20%.


               Efficiency ratios are an important component when evaluating the
health of a Company, as they reflect the efficiency of operations and the
operating costs associated with doing business. At the Company, we continually
strive to maintain a ratio that produces maximized shareholder value.

                                       1
<PAGE>




               During the year, our stock price performed extremely well. The
year-end 2001 closing price of $15.25 represented an increase in the share price
of 59% for the year. Dividend payments and share repurchases continue to be
viewed by the Company as important types of capital management. In 2001 cash
dividends increased by 53% and since the first dividend declared in early 1999,
cash dividends to minority shareholders have increased by 117%.
The Company also continued to use stock repurchases to further manage its
capital level. During 2001,stock buybacks totaled 88,500 shares at an average
price of $15.59 per share. Management believes that the use of generous
dividends and share repurchases have a positive effect on capital and promote
increased shareholder value. The Company will continue to review and adjust
these strategies in the coming year as market conditions permit.


               Additionally, in a further effort to enhance shareholder value
and add liquidity to the stock, the Company, on September 28, 2001, announced a
5 for 4 stock split in the form of a twenty five percent (25%) stock dividend to
its shareholders of record on October 8, 2001.


               The Company's expectation that the elimination of goodwill
amortization would produce an increase in 2001 earnings was extinguished when,
in June 2001, the Financial Accounting Standards Board released Statement 142,
which in essence said that the intangible asset created in branch acquisitions,
such as those on the Company's books, was not in fact goodwill and would
continue to be amortized. The confusion as to what constitutes goodwill is a
FASB matter that is being worked on by their board and is on the FASB agenda for
this year. In the meantime, West Essex Bank continues to amortize the goodwill
maintained on its balance sheet.


               As the year 2002 unfolds, the Company anticipates that its net
interest margin will continue to improve. As we continue to fund loan
commitments at current market rates and our longer-term deposit liabilities
continue to reprice, also at lower rates, we expect the Bank's net interest
margin to increase. Additionally, the Company will continue to focus on its
efficiency ratio and strive to improve it through expense controls. Efforts will
be made to continue to grow non-interest income and transaction-type deposit
accounts. Lastly, maximizing shareholder value will continue to be a primary
goal of the Company. Profitable growth, generous cash dividends and share
repurchases will continue to be the means used by the Company to achieve that
goal.


               Our Board of Directors, management and staff appreciate your
support and your investment in the Company. We remain committed to the needs of
our customers and shareholders alike and will continue to strive to be a
respected, profitable, efficient and caring community banking institution.


                                        2
<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.

<TABLE>
<CAPTION>

                                                                                                 At December 31,
                                                   --------------------------------------------------------------------------------
                                                     2001             2000             1999             1998             1997
                                                   ------------   --------------   --------------   --------------   --------------
                                                                                  (In Thousands)
<S>                                                   <C>              <C>              <C>              <C>              <C>
        Selected Consolidated Financial Data:
        -------------------------------------
        Total assets                                  $370,764         $364,406         $348,307         $328,609         $299,025
        Loans receivable, net (1)                      165,936          164,038          153,276          140,272          112,735

        Securities available-for-sale:
             Investment securities, net                     --            2,994            2,924            8,282            7,081

        Securities held-to-maturity:
             Investment securities, net                 33,169           41,728           41,582           36,873           22,929
             Mortgage-backed securities, net           137,328          130,628          121,223          110,376          130,174
        Deposits                                       240,864          237,956          234,978          238,313          238,192
        Borrowed money                                  76,856           62,290           64,340           42,101           30,300
        Total stockholders' equity                      50,915           49,448           47,110           46,754           29,275


<CAPTION>

                                                                         For the Years Ended December 31,
                                                   --------------------------------------------------------------------------------
                                                     2001             2000             1999             1998             1997
                                                   ------------   --------------   --------------   --------------   --------------
                                                                                   (In Thousands)
<S>                                                   <C>              <C>              <C>              <C>              <C>
        Selected Operating Data:
        Interest income                               $ 23,465         $ 24,102         $ 22,751         $ 21,315         $ 18,116
        Interest expense                                12,782           13,194           11,860           12,219            9,656
                                                       -------          -------          -------          -------            -----

             Net interest income                        10,683           10,908           10,891            9,096            8,460
        (Recapture of) provision for loan losses            --               --               --             (131)            487
                                                       -------          -------          -------          -------            -----

             Net interest income after
        Provision for (recapture of) loan losses        10,683           10,908           10,891            9,227            7,973
        Non-interest income                                687              548              685              529              373
        Non-interest expense (2)                         6,676            6,401            6,869            7,607            7,173
                                                       -------          -------          -------          -------            -----

        Income before income taxes (2)                   4,694            5,055            4,707            2,149            1,173
        Income taxes (2)                                 1,621            1,775            1,664              752              436
                                                       -------          -------          -------          -------            -----

        Net income                                     $ 3,073          $ 3,280          $ 3,043          $ 1,397            $ 737
                                                       =======          =======          =======          =======            =====
</TABLE>





                            (continued on next page)




                                       3
<PAGE>
<TABLE>
<CAPTION>

                                                                           At or For the Years Ended December 31,
                                                       -----------------------------------------------------------------------------
                                                          2001             2000             1999             1998             1997
                                                       ---------         --------         --------         --------        ---------
<S>                                                       <C>              <C>              <C>              <C>              <C>
Selected Financial Ratios and Other Data:
Performance Ratios (3):
        Return on average assets (2)                      0.86 %           0.93 %           0.89 %           0.44 %           0.29 %
        Return on average stockholders' equity (2)        6.12             6.81             6.46             4.10             2.51
        Average equity/average assets                    14.06            13.70            13.73            10.75            11.55
        Interest rate spread (4)                          2.38             2.51             2.66             2.48             2.87
        Net interest margin (5)                           3.11             3.23             3.31             3.01             3.44
        Non-interest expenses to average assets (2)       1.87             1.82             2.00             2.40             2.82
        Equity to total assets                           13.73            13.57            13.53            14.23             9.79
        Efficiency ratio (6)                             53.66            52.40            54.45            71.41            57.04
        Dividend Payout Ratio                            75.90            46.98            39.47            --                 N/A

Common Share Data:
        Diluted net income per share (7)                 $0.63            $0.68            $0.61            $0.27              N/A
        Book value per share                             10.35            12.40            11.62            11.14              N/A
        Dividends declared per share (7)                  0.49             0.32             0.24            --                 N/A
        Shares outstanding at year end (thousands)       4,922            3,987            4,054            4,197              N/A

Regulatory Capital Ratios (3):
        Tangible capital                                 12.11 %          11.24 %          10.69 %          10.44 %           7.98 %
        Core capital                                     12.11            11.24            10.69            10.44             7.98
        Risk-based capital                               32.35            30.59            28.55            28.81            26.10

Asset Quality Ratios (3):
        Non-performing loans to total assets              0.16 %           0.06 %           0.25 %           0.67 %           0.84 %
        Non-performing loans to total loans
          receivable                                      0.34             0.12             0.57             1.46             2.16
        Non-performing assets to total assets             0.21             0.22             0.51             0.84             1.24
        Allowance for loan losses to
          non-performing loans                          235.82           677.75           158.37            78.47            75.19
        Average interest-earning assets to average
          interest-bearing liabilities                  119.43           118.37           117.99           112.99           114.39
        Net interest income after provision for
          loan losses to non-interest expenses (2)      160.02           170.41           158.55           121.30           111.15

Number of full-service customer facilities                   8                8                8                8                8
</TABLE>
--------------------------------------------------------------------------------

(1)  The allowance for loan losses at December 31, 2001, 2000, 1999, 1998 and
     1997 was $1.4 million, $1.4 million, $1.4 million, $1.7 million and $1.9
     million, respectively.

(2)  Includes, for the years ended December 31, 2001, 2000, 1999, 1998 and 1997,
     amortization expense related to the excess of cost over assets acquired
     from Summit Bank of $593,000, $593,000, $593,000, $593,000, and $1.7
     million, respectively, and the related income tax benefit of $213,000,
     $213,000, $213,000, $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 0.97%, 6.88%,
     1.70%, and 175.62%, respectively, for the year ended December 31, 2001,
     1.04%, 7.60%, 1.65%, and 187.80%, respectively, for the year ended December
     31, 2000, 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.

(3)  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.

(4)  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.

(5)  The net interest margin represents net interest income as a percent of
     average interest-earning assets.

(6)  The efficiency ratio represents non-interest expenses, 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.

(7)  Restated to give retroactive effect to the Company's five-for-four stock
     split declared on September 28, 2001.



                                       4
<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 59.7%
of the Company's outstanding common stock at December 31, 2001. 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 securities 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 non-interest
income and expense. The Bank's non-interest income consists primarily of fees
and other service charges. The Bank's non-interest expense principally consists
of compensation and employee benefits, office occupancy and equipment expenses,
the cost of foreclosed real estate operations, amortization of intangible
assets, 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-KSB 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.

Average Balance Sheet

     The following table sets forth certain information relating to the Company
at December 31, 2001, and for the years ended December 31, 2001 and 2000. 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.
Nonaccrual loans are included in the average balances for loans receivable.


                                       5
<PAGE>


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

<TABLE>
<CAPTION>


                                                                                      At December 31, 2001
                                                                                --------------------------------
                                                                                                      Yield/
                                                                                    Amount             Cost
                                                                                ---------------     ------------
Assets:                                                                              (Dollars in Thousands)
<S>                                                                                   <C>                  <C>
        Interest-earning assets:
              Loans receivable                                                        $167,299             7.18 %
              Mortgage-backed securities                                               137,328             6.20
              Investment securities                                                     33,169             5.79
              Other interest-earning assets                                             19,324             2.30
                                                                                      --------
                               Total interest-earning assets                           357,120             6.41

              Allowance for loan losses                                                 (1,363)
              Non-interest-earning assets                                               15,007
                                                                                      --------
                               Total assets                                           $370,764
                                                                                      ========

Liabilities and Stockholders' Equity:
        Interest-bearing liabilities:
              Interest-bearing deposits:
                     Demand deposits                                                  $ 20,957             0.87
                     Savings and club accounts                                          56,349             2.00
                     Certificates of deposit                                           145,285             4.37
                                                                                      --------

                               Total interest-bearing deposits                         222,591             3.44

              Borrowed money                                                            76,856             5.08
                                                                                      --------
                               Total interest-bearing liabilities                      299,447             3.86

        Non-interest bearing deposits                                                   18,273
        Other non-interest-bearing liabilities                                           2,129
                                                                                      --------
                               Total liabilities                                       319,849

        Stockholders' equity                                                            50,915
                                                                                      --------
                               Total liabilities and stockholders' equity             $370,764
                                                                                      ========

        Interest rate spread                                                                               2.55 %
                                                                                                           ====
        Net interest-earning assets                                                   $ 57,673
                                                                                      ========
        Ratio of average interest-earning assets to average
              interest-bearing liabilities                                               1.19x
                                                                                      ========


</TABLE>




                                       6
<PAGE>


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

<TABLE>
<CAPTION>

                                                                         For the Years Ended December 31,
                                                                       ---------------------------------------
                                                                         2001
                                                                       --------------------------------------
                                                                                                    Average
                                                                        Average                      Yield/
                                                                        Balance        Interest       Cost
                                                                       -----------   ------------   ---------
Assets:                                                                          (Dollars in Thousands)
        Interest-earning assets:
<S>                                                                     <C>             <C>             <C>
             Loans receivable                                           $ 169,150       $ 12,465        7.37 %
             Mortgage-backed securities                                   123,203          8,141        6.61
             Investment securities (1)                                     34,598          2,221        6.42
             Other interest-earning assets                                 16,452            638        3.88
                                                                        ---------       --------
                          Total interest-earning assets                   343,403         23,465        6.83
                                                                                        --------

             Allowance for loan losses                                     (1,363)
             Other non-interest-earning assets                             15,034
                                                                        ---------
                          Total assets                                  $ 357,074
                                                                        =========

Liabilities and Stockholders' Equity:
        Interest-bearing liabilities:
             Interest-bearing deposits:
                 Demand                                                  $ 19,171            247        1.29 %
                 Savings and club                                          54,585          1,100        2.02
                 Certificates of deposit                                  147,240          7,701        5.23
                                                                        ---------       --------
                          Total interest-bearing deposits                 220,996          9,048        4.09

        Borrowed money                                                     66,532          3,734        5.61
                                                                        ---------       --------
                          Total interest-bearing liabilities              287,528         12,782        4.45
                                                                                        --------

        Non-interest-bearing deposits                                      17,074
        Other non-interest-bearing liabilities                              2,251
                                                                        ---------

                          Total liabilities                               306,853

        Stockholders' equity                                               50,221
                                                                        ---------
                          Total liabilities and stockholders' equity    $ 357,074
                                                                        =========

        Net interest income/interest rate spread                                        $ 10,683        2.38 %
        Net interest-earning assets/net yield on                                        ========        ====
          interest-earning assets                                       $ 55,875                        3.11 %
                                                                        =========                       ====
        Ratio of interest-earning assets to interest-bearing
          liabilities                                                      1.19x
                                                                        =========

(1)  Includes available for sale and held to maturity securities.

<CAPTION>


                                                                            For the Years Ended December 31,
                                                                        ---------------------------------------
                                                                          2000
                                                                        ---------------------------------------
                                                                                                      Average
                                                                         Average                      Yield/
                                                                         Balance        Interest       Cost
                                                                        ------------  -------------  ----------
Assets:                                                                           (Dollars in Thousands)
<S>                                                                       <C>             <C>             <C>
        Interest-earning assets:
             Loans receivable                                             $ 162,900       $ 12,272        7.53 %
             Mortgage-backed securities                                     122,631          8,287        6.76
             Investment securities (1)                                       44,612          3,083        6.91
             Other interest-earning assets                                    7,507            460        6.13
                                                                           ---------       --------
                          Total interest-earning assets                     337,650         24,102        7.14
                                                                                           --------
             Allowance for loan losses                                       (1,367)
             Other non-interest-earning assets                               15,465
                                                                           ---------
                          Total assets                                    $ 351,748
                                                                          =========

Liabilities and Stockholders' Equity:
        Interest-bearing liabilities:
             Interest-bearing deposits:
                 Demand                                                    $ 20,189            274        1.36 %
                 Savings and club                                            54,218          1,109        2.05
                 Certificates of deposit                                    145,253          7,973        5.49
                                                                           ---------       --------
                          Total interest-bearing deposits                   219,660          9,356        4.26

        Borrowed money                                                       65,592          3,838        5.85
                                                                           ---------        --------
                          Total interest-bearing liabilities                285,252         13,194        4.63
                                                                                            --------
        Non-interest-bearing deposits                                        16,347
        Other non-interest-bearing liabilities                                1,976
                                                                           ---------
                          Total liabilities                                 303,575

        Stockholders' equity                                                 48,173
                                                                           ---------
                          Total liabilities and stockholders' equity      $ 351,748
                                                                           =========

        Net interest income/interest rate spread                                          $ 10,908        2.51 %
        Net interest-earning assets/net yield on                                           ========       ====
          interest-earning assets                                          $ 52,398                       3.23 %
                                                                           =========                      ====
        Ratio of interest-earning assets to interest-bearing
          liabilities                                                        1.18x
                                                                           =========

(1)  Includes available for sale and held to matuirty securiites.

</TABLE>




                                       7
<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 December 31, 2001
                                                           Compared to
                                                 Year Ended December 31, 2000
                                                --------------------------------
                                                   Increase (Decrease)
                                                         Due to
                                                -----------------------
                                                 Volume       Rate        Net
                                                --------  ------------- --------
                                                         (In Thousands)
         Interest income:
<S>                                               <C>    <C>             <C>
              Loans receivable                    $ 460  $     (267)     $ 193
              Mortgage-backed securities             39        (185)      (146)
              Investment securities                (655)       (207)      (862)
              Other interest-earning assets         394        (216)       178
                                                  -----  ----------      -----
         Total                                      238        (875)      (637)
                                                  -----  ----------      -----

         Interest expense:
              Demand deposits (1)                   (13)        (14)       (27)
              Savings and club accounts               7         (16)        (9)
              Certificates of deposit               108        (380)      (272)
              Borrowed money                         55        (159)      (104)
                                                  -----  ----------      -----
         Total                                      157        (569)      (412)
                                                  -----  ----------      -----
         Net change in net interest income        $  81  $     (306)     $(225)
                                                  =====  ==========      =====
</TABLE>


         (1)  Includes NOW and Money Market accounts.


Comparison of Financial Condition at December 31, 2001 and 2000

     Total assets were $370.8 million at December 31, 2001, compared to $364.4
million at December 31, 2000, an increase of $6.4 million, or 1.8%. The increase
in assets was reflected primarily in federal funds sold and mortgage-backed
securities, which increased by $10.5 million and $6.7 million, respectively, and
was funded primarily by a decrease in investment securities of $11.6 million.
Additionally, funding for asset growth was provided by an increase of $14.6
million in borrowed money, net of a $12.8 million reduction in amounts due to
broker.


                                       8
<PAGE>



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


     Cash and cash equivalents, primarily interest-bearing deposits and federal
funds sold, increased $8.4 million to $17.3 million at December 31, 2001, from
$8.9 million at December 31, 2000. The increase in cash and cash equivalents
resulted from the proceeds of called investment securities which have not yet
been reinvested.

     In the aggregate, mortgage-backed securities and investment securities,
including available-for- sale and held-to-maturity issues, totalled $170.5
million at December 31, 2001, a decrease of $4.8 million or 2.7% from $175.3
million at December 31, 2000. Mortgage-backed securities, all of which are
held-to-maturity, increased $6.7 million or 5.1% to $137.3 million at December
31, 2001, from $130.6 million at December 31, 2000, due to purchases exceeding
repayments. Investment securities held-to-maturity decreased $8.5 million or
20.4% to $33.2 million at December 31, 2001 from $41.7 million at December 31,
2000, due to calls of such securities exceeding purchases. Securities available
for sale, which totalled $3.0 million at December 31, 2000, were fully
liquidated by sales of $2.0 million and a call of $1.0 million. At December 31,
2001, 68.1% of the investment securities consisted of U.S. Government and Agency
obligations, while 82.5% of the mortgage-backed securities portfolio consisted
of Fannie Mae ("FNMA"), Freddie Mac ("FHLMC") and Ginnie Mae ("GNMA") issues.
Investment securities held-to-maturity consisted of $493,000 of U.S. Treasury
notes, $22.1 million of U.S. Government Agency notes, $10.0 million in trust
preferred securities and $584,000 in municipal obligations.

     Loans receivable increased $1.9 million or 1.2% to $165.9 million at
December 31, 2001, from $164.0 million at December 31, 2000. At December 31,
2001, 83.7% of the outstanding balance of loans in the portfolio consisted of
one-to four-family real estate related loans, compared to 84.2% at December 31,
2000.

     Deposits totalled $240.9 million at December 31, 2001, an increase of $2.9
million or 1.2% from the $238.0 million balance at December 31, 2000.

     Borrowed money increased $14.6 million or 23.4% to $76.9 million at
December 31, 2001, as compared to $62.3 million at December 31, 2000. During the
year ended December 31, 2001, short-term borrowings increased $7.1 million to
$15.0 million, with an average cost of 2.86% at year end, while long-term debt
increased $7.5 million to $61.9 million, the result of a new borrowing of $10.0
million with a 10 year maturity and an interest rate of 5.40% and the repayment
of long-term debt totalling $2.5 million. The increase in borrowed money was
primarily used to finance purchases of mortgage-backed securities.

     Stockholders' equity increased $1.5 million or 3.0%, to $50.9 million at
December 31, 2001, from $49.4 million at the prior year end. During 2001, net
income of $3.1 million was partially offset by $1.4 million in treasury stock
acquisitions and $893,000 in dividends declared to stockholders. The treasury
stock acquisitions were made in accordance with stock repurchase plans
authorized by the Company's Board of Directors. At December 31, 2001, an
additional 279,742 shares of Company common stock may be repurchased under these
plans.

     Comparison of Operating Results for the Years Ended December 31, 2001 and
2000

     Net Income. Net income for 2001 was $3.07 million, a decrease of $207,000,
or 6.7%, from $3.28 million in 2000. The decrease was primarily the result of a
$225,000 decrease in net interest income and a $275,000 increase in total
non-interest expense, partially offset by a $139,000 increase in total
non-interest income and a $154,000 decrease in income tax expense.


                                       9
<PAGE>



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


     Interest Income. Total interest income decreased $637,000 or 2.6% to $23.5
million for 2001 as compared to $24.1 million for 2000. The decrease was due to
a decrease of 31 basis points in the yield earned on interest-earning assets to
6.83% in 2001 from 7.14% in 2000, partially offset by a $5.8 million or 1.7%
increase in average interest-earning assets. The increased average balances of
earning assets were funded by an increase in average FHLB borrowings.

     Interest income on loans during 2001 increased by $193,000, or 1.6%, to
$12.5 million when compared to $12.3 million during 2000. The increase was due
to a $6.3 million or 3.8% increase in average loans, partially offset by a 16
basis point decrease in the yield earned on loans to 7.37% in 2001 from 7.53% in
2000.

     Interest on mortgage-backed securities, all of which are held-to-maturity,
decreased $146,000, or 1.8%, during 2001 to $8.14 million compared to $8.29
million for 2000. During the year ended December 31, 2001, the average balance
of mortgage-backed securities outstanding increased $572,000, or 0.5%, to $123.2
million when compared to $122.6 million for 2000. The yield earned on the
mortgage-backed securities portfolio decreased to 6.61% in 2001 from 6.76% in
2000.

     Interest earned on investment securities, including both available-for-sale
and held-to-maturity issues, decreased by $862,000, or 28.0%, to $2.2 million
for 2001, when compared to $3.1 million for 2000. The decrease resulted from a
decrease of $10.0 million, or 22.4%, in the average balance of the investment
securities portfolio, along with a decrease of 49 basis points in the yield
earned on the investment securities portfolio to 6.42% in 2001 from 6.91% in
2000. During 2001, $22.8 million of investment securities were called in advance
of their maturity dates, resulting in the reduced average portfolio balance. A
portion of the proceeds of such calls were reinvested in securities of generally
lower yield.

     Interest on other interest-earning assets totalled $638,000 and $460,000
during 2001 and 2000, respectively. The yield earned on other interest-earning
assets decreased to 3.88% in 2001 from 6.13% in 2000, while the average balance
of other interest-earning assets outstanding increased $8.9 million or 119.2%.
The low yield reflects the sharp drop in short-term market interest rates while
the increased average balance is largely due to the previously mentioned calls
of investment securities.

     Interest Expense. Interest expense on deposits decreased $308,000, or 3.3%,
to $9.05 million during 2001 compared to $9.36 million for 2000. The decrease
during 2001 was attributable to a decrease of 17 basis points in the average
cost of interest-bearing deposits to 4.09% for 2001 from 4.26% or 2000,
partially offset by an increase of $1.3 million, or 0.6%, in the average balance
of interest-bearing deposits outstanding. The decrease cost of deposits was due
to the lower market rates prevailing for much of 2001, which effected all
deposit categories.

     Interest expense on borrowed money decreased $104,000, or 2.7%, to $3.7
million during 2001 compared to $3.8 million for 2000. The decrease during 2001
was attributable to a decrease of 24 basis points in the cost of borrowings to
5.61% in 2001 from 5.85% in 2000, partially offset by a $940,000, or 1.4%
increase in average borrowings. The decreased cost of borrowings resulted from
lower market interest rates.






                                       10
<PAGE>


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


     Net Interest Income. Net interest income for 2001 decreased $225,000, or
2.1%, to $10.7 million in 2001 from $10.9 million in 2000. The net interest rate
spread decreased to 2.38% in 2001 from 2.51% in 2000 and the interest rate
margin decreased to 3.11% in 2001 from 3.23% in 2000. These decreases primarily
resulted from a 31 basis point decrease in the yield on interest-earning assets
to 6.83% in 2001 from 7.14% in 2000, which more than offset an 18 basis point
decrease in the cost of interest-bearing liabilities to 4.45% in 2001 from 4.63%
in 2000.

     Provision for Loan Losses. During both 2001 and 2000, the Bank did not
record a provision for loan losses as management determined that the existing
allowance for loan losses was adequate. At December 31, 2001 and 2000, the
Bank's loan portfolio included loans totalling $578,000 and $109,000,
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 $1.36 million at December 31, 2001,
representing 0.80% of total loans and 235.8% of loans delinquent ninety days or
more, compared to an allowance of $1.36 million at December 31, 2000,
representing 0.81% of total loans and 1251.7% of loans delinquent ninety days or
more. During 2001, the Bank did not charge off any loans. During 2000, the Bank
charged off loans aggregating $37,000. 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.

     Non-Interest Income. Non-interest income increased by $139,000, or 25.4%,
to $687,000 during 2001 as compared to $548,000 for 2000. The increase in
non-interest income during 2001 resulted primarily from $45,000 in gain on sale
of securities during 2001 compared to none in 2000 and an $81,000 increase in
earnings related to an insurance investment.

     Non-Interest Expenses. Non-interest expenses increased $275,000, or 4.3%,
to $6.7 million during 2001 compared to $6.4 million for 2000. The increase was
primarily attributable to a $345,000 increase in salaries and employee benefits
and a $201,000 decline in the results of real estate owned, partially offset by
a $236,000 decrease in other non-interest expenses. The $345,000 or 10.5%
increase in salaries and employee benefits, the largest component of
non-interest expense, was primarily due to normal salary increases and the
increased compensation cost related to the Company's Employee Stock Ownership
Plan, which is based upon the average price of the Company's common stock, which
increased to $12.29 in 2001 from $8.02 in 2000. Real estate owned generated a
loss of $6,000 in 2001 as compared to income of $196,000 in 2000 due to $213,000
decrease in gains on real estate sold. The decrease in miscellaneous expenses is
due to reductions in a number of expense categories, the most significant of
which were in advertising expense and in expenses related to the attendance of
Bank officers, directors and employees at outside seminars and conferences. The
remaining elements of non-interest expenses totalled $1.62 million in 2001, a
$36,000, or 2.2%, decrease from the $1.66 million comparable amount in 2000.

     Income Taxes. Income tax expense totalled $1.62 million and $1.78 million
during 2001 and 2000, respectively. The decrease in 2001 resulted primarily from
a decrease in pre-tax income of $361,000. The Company's effective income tax
rate was 34.5% in 2001 and 35.1% in 2000.






                                       11
<PAGE>

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


                        Liquidity and Capital Resources

     The Company'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 Company 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.

     At December 31, 2001, the Bank exceeded all of its regulatory capital
requirements with a tangible capital level of $44.3 million, or 12.1% of total
adjusted assets, which is above the required level of $5.5 million, or 1.5%;
core capital of $44.3 million, or 12.1% of total adjusted assets, which is above
the required level of $14.6 million, or 4.0%; and risk-based capital of $45.6
million, or 32.4% of risk-weighted assets, which is above the required level of
$11.3 million, or 8.0%.

     The most liquid assets are cash and cash equivalents. The levels of these
assets are dependent on operating, financing, lending and investing activities
during any given period. At December 31, 2001, cash and cash equivalents
totalled $17.3 million, or 4.7% of total assets.

     The Company and the Bank have other sources of liquidity if a need for
additional funds arises, including FHLB borrowings. At December 31, 2001, the
Bank had $76.9 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, 2001, the Bank had commitments to originate and purchase
loans and fund unused outstanding lines of credit and undisbursed proceeds of
construction mortgages totaling $17.9 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, 2001, totalled $124.4 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 generally accepted accounting principles,
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.







                                       12
<PAGE>

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


Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 applies to
all business combinations completed after June 30, 2001 and requires the use of
the purchase method of accounting. SFAS No. 141 also establishes new criteria
for determining whether intangible assets should be recognized separately from
goodwill. SFAS No. 142 provides that goodwill and intangible assets with
indefinite lives will not be amortized, but rather will be tested for impairment
on at least an annual basis. The Company adopted SFAS No. 142 on January 1,
2002. The scope of SFAS No. 142 does not include unidentifiable intangible
assets related to acquisitions of banks, savings bank, credit unions, other
financial institutions having assets and liabilities of similar type, and
branches of such enterprises. Such unidentifiable intangible assets, which
include the excess of cost over assets acquired reported by the Company in its
consolidated statements of financial condition, will continue to be governed by
SFAS No. 72, "Accounting for Certain Acquisitions of Banking or Thrift
Institutions". The Company does not believe the adoption of SFAS No. 142 will
have a material impact on its consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment of
Disposal of Long-Lived Assets." This standard sets forth the accounting for the
impairment of long-lived assets, whether they are held and used or are disposed
of by sale or other means. It also broadens and modifies the presentation of
discontinued operations. The standard will be effective for the Company's fiscal
year beginning January 1, 2002, and its provisions are generally to be applied
prospectively. The Company does not believe SFAS No. 144 will have a material
impact on its consolidated financial statements.



                                       13
<PAGE>

                       [LETTERHEAD - WEST ESSEX BANCORP]

                                Januarv 28 2002


                      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, approves the
overall scope of audit work and related fee arrangements and review audit
reports and findings.



/s/ Dennis A. Petrello
----------------------
     Dennis A.Petrello
     Senior Executive Vice President

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


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

               417 Bloomfield Avenue, Caldwell, New Jersey 07006
               -------------------------------------------------
                       (973) 226-7911 Fax (973) 226-6764


                                       14
<PAGE>
                        [LETTERHEAD - RADICS & CO., LLC]
                          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 "Company") and Subsidiaries as of December 31,
2001 and 2000, and the related consolidated statements of income, comprehensive
income, changes in stockholders' equity and cash flows for the years then ended.
These consolidated financial statements are the responsibility of the Company'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 auditing standards generally accepted
in the United States of America. 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, 2001 and 2000, and the results of their operations and cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America.




/s/Radics & Co., LLC


January 28, 2002

                                       15
<PAGE>

<TABLE>
<CAPTION>


                                              WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                             CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                             ----------------------------------------------

                                                                                                   December 31,
                                                                                        ------------------------------------
Assets                                                               Note(s)                 2001                2000
------                                                          ----------------       ----------------    ----------------
<S>                                                              <C>   <C>    <C>           <C>                 <C>
Cash and amounts due from depository institutions                                           $ 2,008,885         $ 2,416,155
Federal funds sold                                                                           10,500,000                  --
Interest-bearing deposits in other banks                                                      4,781,061           6,461,762
                                                                                          -------------       -------------
       Total cash and cash equivalents                              1 and 17                 17,289,946           8,877,917

Term deposits                                                                                   200,000                  --
Securities available for sale                                    1, 3, 11 and 17                     --           2,994,063
Investment securities held to maturity                           1, 4, 11 and 17             33,169,187          41,727,821
Mortgage-backed securities held to maturity                      1, 5, 11 and 17            137,327,932         130,627,541
Loans receivable                                                   1, 6 and 17              165,935,968         164,037,987
Real estate owned                                                    1 and 7                    209,000             601,595
Premises and equipment                                               1 and 8                  2,502,584           2,595,036
Federal Home Loan Bank of New York stock                               11                     3,842,800           3,558,400
Accrued interest receivable                                        1, 9 and 17                1,879,537           2,307,828
Excess of cost over assets acquired                                     1                     3,457,813           4,050,580
Other assets                                                           14                     4,949,385           3,026,894
                                                                                          -------------       -------------
       Total assets                                                                       $ 370,764,152       $ 364,405,662
                                                                                          =============       =============

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

Liabilities
-----------
Deposits                                                            10 and 17             $ 240,864,308       $ 237,956,208
Borrowed money                                                      11 and 17                76,855,928          62,290,413
Advance payments by borrowers for taxes and insurance                                           927,375           1,032,953
Due to broker                                                                                        --          12,768,419
Other liabilities                                                      13                     1,201,590             909,657
                                                                                          -------------       -------------
       Total liabilities                                                                    319,849,201         314,957,650
                                                                                          =============       =============

Commitments and contingencies                                       16 and 17                        --                  --

Stockholders' Equity                                              1, 2, 12, 13 and 14
--------------------

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 5,246,461 (2001) and
  4,197,233 (2000); shares outstanding 4,921,615 (2001)
  and 3,986,991 (2000)                                                                           52,465              41,972
Additional paid-in capital                                                                   17,379,880          17,332,221
Retained earnings - substantially restricted                                                 37,914,015          35,733,815
Common stock acquired by Employee Stock Ownership
  Plan ("ESOP")                                                                                (884,158)         (1,031,516)
Unearned Incentive Plan stock                                                                  (405,730)           (530,666)
Treasury stock, at cost; 324,846 shares (2001) and
  210,242 shares (2000)                                                                      (3,141,521)         (2,094,524)
Accumulated other comprehensive (loss)  - Unrealized
  (loss) on securities available for sale, net of income taxes                                       --              (3,290)
                                                                                          -------------       -------------
       Total stockholders' equity                                                            50,914,951          49,448,012
                                                                                          -------------       -------------
       Total liabilities and stockholders' equity                                         $ 370,764,152       $ 364,405,662
                                                                                          =============       =============

See notes to consolidated financial statements.
</TABLE>




                                       16
<PAGE>

<TABLE>
<CAPTION>


                                               WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                                   CONSOLIDATED STATEMENTS OF INCOME
                                                   ---------------------------------

                                                                                         Year Ended December 31,
                                                                                    -----------------------------------
                                                                        Note(s)          2001                2000
                                                                       ----------   ----------------    ---------------

Interest income:
<S>                                                                     <C>   <C>      <C>                <C>
     Loans                                                              1 and 6        $ 12,464,835       $ 12,272,206
     Mortgage-backed securities                                            1              8,141,400          8,286,583
     Investment securities                                                 1              2,133,395          2,880,633
     Securities available for sale                                         1                 87,310            202,550
     Other interest-earning assets                                                          638,343            460,151
                                                                                         ----------         ----------

             Total interest income                                                       23,465,283         24,102,123
                                                                                         ----------         ----------
Interest expense:
     Deposits                                                             10              9,048,495          9,356,419
     Borrowed money                                                                       3,734,251          3,837,807
                                                                                         ----------         ----------

             Total interest expense                                                      12,782,746         13,194,226
                                                                                         ----------         ----------

Net interest income                                                                      10,682,537         10,907,897
Provision for loan losses                                                  6                     --                 --
                                                                                         ----------         ----------
Net interest income after provision for  loan losses                                     10,682,537         10,907,897
                                                                                         ----------         ----------

Non-interest income:
     Fees and service charges                                                               350,483            385,192
     Gain on sale of securities                                         1 and 3              45,000                 --
     Other                                                                                  292,184            163,327
                                                                                         ----------         ----------
             Total non-interest income                                                      687,667            548,519
                                                                                         ----------         ----------
Non-interest expenses:
     Salaries and employee benefits                                    1 and 13           3,625,861          3,280,889
     Net occupancy expense of premises                                 1 and 16             363,463            349,119
     Equipment                                                             1                664,085            713,920
     Loss (income) on real estate owned                                 1 and 7               6,165           (195,081)
     Amortization of intangibles                                           1                592,768            592,768
     Other                                                                                1,423,346          1,659,323
                                                                                         ----------         ----------
             Total non-interest expenses                                                  6,675,688          6,400,938
                                                                                         ----------         ----------
Income before income taxes                                                                4,694,516          5,055,478
Income taxes                                                           1 and 14           1,621,123          1,775,150
                                                                                         ----------         ----------

Net income                                                                              $ 3,073,393        $ 3,280,328
                                                                                         ==========         ==========

Net income per common share:                                           1 and 15
     Basic                                                                           $         0.64      $        0.68
                                                                                         ==========         ==========
     Diluted                                                                         $         0.63      $        0.68
                                                                                         ==========         ==========

Weighted average number of common shares outstanding:                  1 and 15
     Basic                                                                                4,768,681          4,808,870
                                                                                         ==========         ==========
     Diluted                                                                              4,859,567          4,827,730
                                                                                         ==========         ==========
</TABLE>


See notes to consolidated financial statements.




                                       17
<PAGE>

<TABLE>
<CAPTION>

                                               WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                            -----------------------------------------------


                                                                                         Year Ended December 31,
                                                                                    -----------------------------------
                                                                                         2001                2000
                                                                                    ----------------    ---------------

<S>                                                                                     <C>                <C>
Net income                                                                              $ 3,073,393        $ 3,280,328
                                                                                        -----------        -----------

Other comprehensive income, net of income taxes:
     Unrealized holding gains on securities
         available for sale, net of income taxes
         of $18,040 and $24,967, respectively                                                32,099             44,424

     Reclassification adjustment
         for realized (gains) on securities
         available for sale, net of income taxes
         of $16,191 and $ -0-, respectively                                                 (28,809)                --
                                                                                        -----------        -----------

Other comprehensive income                                                                    3,290             44,424
                                                                                        -----------        -----------

Comprehensive income                                                                    $ 3,076,683        $ 3,324,752
                                                                                        ===========        ===========

</TABLE>

See notes to consolidated financial statements.





                                       18
<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, 1999                                 $ 41,972       $ 17,332,133        $ 33,054,528        $ (1,178,874)

Net income for the year ended December 31, 2000                   --                 --           3,280,328                  --

Purchase of 68,683 shares of treasury stock                       --                 --                  --                  --

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

ESOP shares committed to be released                              --                898                  --             147,358

Reissuance of 1,317 shares of treasury stock                      --               (810)                 --                  --

Cash dividends declared on common stock                           --                 --            (601,041)                 --

Unrealized gain on securities available for sale,
  net of income taxes                                             --                 --                  --                  --
                                                            --------       ------------        ------------        ------------

Balance - December 31, 2000                                   41,972         17,332,221          35,733,815          (1,031,516)

Net income for the year ended December 31, 2001                   --                 --           3,073,393                  --

Purchase of 88,500 shares of treasury stock                       --                 --                  --                  --

Reissuance of 40,007 shares of treasury stock                     --            (23,786)                 --                  --

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

ESOP shares committed to be released                              --             81,938                  --             147,358

Stock dividend                                                10,493            (10,493)                 --                  --

Cash dividends declared on common stock                           --                 --            (893,193)                 --

Unrealized gain on securities available for sale,
  net of income taxes                                             --                 --                  --                  --

                                                            --------       ------------        ------------        ------------
Balance - December 31, 2001                                 $ 52,465       $ 17,379,880        $ 37,914,015        $   (884,158)
                                                            ========       ============        ============        ============

<CAPTION>


                                                                                                Accumulated
                                                                                                   Other
                                                         Unearned                              Comprehensive            Total
                                                         Incentive           Treasury              (Loss)           Stockholders'
                                                        Plan Stock            Stock                Income               Equity
                                                      ----------------   -----------------   ------------------   ------------------

<S>                                                 <C>                   <C>                <C>                      <C>
Balance - December 31, 1999                         $   (655,549)         $ (1,436,550)      $    (47,714)            $ 47,109,946

Net income for the year ended December 31, 2000               --                    --                 --                3,280,328

Purchase of 68,683 shares of treasury stock                   --              (671,391)                --                 (671,391)

Incentive Plan stock earned                              124,883                    --                 --                  124,883

ESOP shares committed to be released                          --                    --                 --                  148,256

Reissuance of 1,317 shares of treasury stock                  --                13,417                 --                   12,607

Cash dividends declared on common stock                       --                    --                 --                 (601,041)

Unrealized gain on securities available for sale,
  net of income taxes                                         --                    --             44,424                   44,424
                                                    ------------          -----------        ------------             ------------

Balance - December 31, 2000                             (530,666)           (2,094,524)            (3,290)              49,448,012

Net income for the year ended December 31, 2001               --                    --                 --                3,073,393

Purchase of 88,500 shares of treasury stock                   --            (1,379,425)                --               (1,379,425)

Reissuance of 40,007 shares of treasury stock                 --               332,428                 --                  308,642

Incentive Plan stock earned                              124,936                    --                 --                  124,936

ESOP shares committed to be released                          --                    --                 --                  229,296

Stock dividend                                                --                    --                 --                       --

Cash dividends declared on common stock                       --                    --                 --                 (893,193)

Unrealized gain on securities available for sale,
  net of income taxes                                         --                    --              3,290                    3,290
                                                    ------------          ------------        ------------             ------------
Balance - December 31, 2001                         $    (405,730)        $ (3,141,521)       $         --             $ 50,914,951
                                                    ============          ============        ============             ============



</TABLE>


See notes to consolidated financial statements.




                                       19
<PAGE>

<TABLE>
<CAPTION>

                                               WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 -------------------------------------

                                                                                          Year Ended December 31,
                                                                                     -----------------------------------
                                                                                          2001               2000
                                                                                     ----------------   ----------------
Cash flows from operating activities:
<S>                                                                                  <C>             <C>
      Net income                                                                     $  3,073,393    $  3,280,328
      Adjustments to reconcile net income
       to net cash provided by operating activities:
           Depreciation and amortization of premises and equipment                        250,906         258,494
           Net accretion of premiums, discounts and deferred loan fees                   (229,399)       (400,037)
           Amortization of intangibles                                                    592,768         592,768
           (Gain) loss on sale of securities available for sale                           (45,000)             --
           (Gain) on trade-in of automobile                                                (2,360)             --
           (Gain) on sale of real estate owned                                            (22,083)       (234,635)
           Deferred income tax expense (benefit)                                           94,532         (47,074)
           Decrease (increase) in accrued interest receivable                             362,180        (236,154)
           (Increase) in other assets                                                    (318,873)         (7,855)
           Increase in interest payable                                                   185,830         306,633
           Increase in other liabilities                                                  125,439          78,118
           Amortization of Incentive Plan cost                                            124,936         124,883
           ESOP shares committed to be released                                           229,296         148,256
                                                                                     ------------    ------------

               Net cash provided by operating activities                                4,421,565       3,863,725
                                                                                     ------------    ------------

Cash flows from investing activities:
      Purchase of term deposits                                                          (300,000)             --
      Proceeds from maturity of term deposits                                             100,000              --
      Proceeds from sales of securities available for sale                              2,045,000              --
      Proceeds from call of security available for sale                                 1,000,000              --
      Proceeds from maturities and calls of investment securities held to maturity     22,848,188         150,000
      Purchases of investment securities held to maturity                             (14,000,000)             --
      Principal repayments on mortgage-backed securities held to maturity              40,382,836      22,699,074
      Purchases of mortgage-backed securities held to maturity                        (59,814,828)    (19,314,117)
      Purchases of loans receivable                                                    (2,915,934)     (5,056,994)
      Net decrease (increase) in loans receivable                                         986,293      (5,853,653)
      Proceeds from sales of real estate owned                                            414,678         698,047
      Additions to premises and equipment                                                (156,094)       (116,074)
      Purchase of Federal Home Loan Bank of New York stock                               (284,400)       (285,700)
      Purchase of life insurance policy                                                (1,700,000)             --
                                                                                     ------------    ------------

               Net cash (used in) investing activities                                (11,394,261)     (7,079,417)
                                                                                     ------------    ------------

Cash flows from financing activities:
      Net increase in deposits                                                          2,818,033       2,654,330
      Net increase in short-term borrowed money                                         7,050,000       1,950,000
      Proceeds of long-term borrowed money                                             10,000,000       2,000,000
      Repayment of long-term borrowed money                                            (2,484,485)     (5,999,702)
      Net (decrease) in advance payments by borrowers for
       taxes and insurance                                                               (105,578)        (11,187)
      Purchases of treasury stock                                                      (1,379,425)       (671,391)
      Proceeds from sales of treasury stock                                               294,380              --
      Cash dividends paid on common stock                                                (808,200)       (574,286)
                                                                                     ------------    ------------

               Net cash provided by (used in) financing activities                     15,384,725        (652,236)
                                                                                     ------------    ------------

Net increase (decrease) in cash and cash equivalents                                    8,412,029      (3,867,928)
Cash and cash equivalents - beginning                                                   8,877,917      12,745,845
                                                                                     ------------    ------------

Cash and cash equivalents - ending                                                   $ 17,289,946    $  8,877,917
                                                                                     ============    ============
</TABLE>

See notes to consolidated financial statements.




                                       20
<PAGE>

<TABLE>
<CAPTION>

                                               WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 -------------------------------------



                                                                                        Year Ended December 31,
                                                                                   -------------------------------
                                                                                        2001               2000
                                                                                   ----------------   ------------

<S>                                                                                   <C>             <C>
Supplemental  disclosure of cash flow information:
   Cash paid during the year for:
      Income taxes                                                                    $ 1,654,563     $ 1,755,859
                                                                                      ===========     ===========

      Interest                                                                        $12,596,916     $12,887,593
                                                                                      ===========     ===========

Supplemental schedule of noncash investing activities:
      Security purchase not settled:
           Mortgage-backed security held to maturity                                  $        --     $12,702,308
           Accrued interest receivable                                                         --          66,111
                                                                                      -----------     -----------

           Due to broker                                                              $        --     $12,768,419
                                                                                      ===========     ===========

      Loans receivable transferred to real estate owned                               $        --     $   165,269
                                                                                      ===========     ===========

      Issuance of treasury stock to fund Supplemental Employee
        Retirement Plan                                                               $    14,262     $    12,607
                                                                                      ===========     ===========

      Cash dividend declared, not paid                                                $   233,903     $   148,910
                                                                                      ===========     ===========

See notes to consolidated financial statements.
</TABLE>




                                       21
<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. ("Company"), the Company'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 accounting principles generally
          accepted in the United States of America ("GAAP"). 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 and the carrying value of excess of cost over assets
          acquired. Management believes that the allowance for loan losses is
          adequate and that excess of cost over assets acquired is appropriately
          valued. While management uses available information to recognize
          losses on loans and to assess the carrying value of excess of cost
          over assets acquired, future additions to the allowance for loan
          losses or further writedowns of 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. Such agencies may require the Bank to recognize additions to
          the allowance 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, federal funds sold 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
          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.




                                       22
<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.




                                       23
<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.



                                       24
<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 in conjunction with the acquisition of certain assets and
          assumption of certain liabilities of three branch offices of another
          financial institution. This asset is being amortized to expense over a
          ten-year period by use of the straight-line method.

          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 Company has elected to
          apply the intrinsic value based method. Included in Note 13 to
          consolidated financial statements are the pro forma disclosures
          required by Statement No. 123.

          Income taxes
          ------------

          The Company, Bank and Subsidiary 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.

          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.







                                       25
<PAGE>


                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



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

          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.

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

          Certain amounts as of and for the year ended December 31, 2000, have
          been reclassified to conform with the current year's presentation.



2.   ORGANIZATION AND STOCKHOLDERS' EQUITY
------------------------------------------

The Company is a business corporation formed at the direction of the Bank under
the laws of the United States and is the stock holding company for the Bank. The
Company's principal business is the operation of the Bank. West Essex Bancorp,
M.H.C. ("MHC"), a mutual holding company formed at the direction of the Bank, is
the majority owner of the Company, owning 59.7% and 58.9% of the Company's
outstanding common stock at December 31, 2001 and 2000, respectively.

During the years ended  December 31, 2001 and 2000,  the MHC waived its right to
receive cash dividends on the shares of Company common stock it owns. If the MHC
had not waived its rights to  receive  dividends,  the amount of such  dividends
would have been $1,440,000 and $940,000,  respectively. The cumulative amount of
such  waived  dividends  at  December  31,  2001 and 2000,  was  $3,085,000  and
$1,645,000, respectively.

In addition to the 9,000,000 authorized shares of Common Stock, the Company
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, 2001 and 2000, there were no shares
of Preferred Stock issued.

On September 28, 2001, the Company's Board of Directors authorized a
five-for-four stock split, which was distributed on October 22, 2001, to
stockholders of record on October 8, 2001. Basic and diluted net income per
common share and the weighted average number of basic and diluted common shares
outstanding have been retroactively restated to give effect to the stock split.




                                       26
<PAGE>

<TABLE>
<CAPTION>

                                            WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                            ------------------------------------------



3.   SECURITIES AVAILABLE FOR SALE
     -----------------------------

                                                                                          December 31, 2000
                                                              ---------------------------------------------------------------------
                                                                Amortized               Gross Unrealized               Carrying
                                                                                ---------------------------------
                                                                   Cost             Gains             Losses            Value
                                                              ---------------   ---------------   ---------------   ---------------

U.S. Government (including agencies) obligations:
<S>                                                              <C>               <C>             <C>                 <C>
     Due after one year through five years                       $1,999,202        $ 28,924        $        --         $2,028,126
     Due after ten years                                          1,000,000              --             34,063            965,937
                                                                 ----------       ----------       -----------         ----------

                                                                 $2,999,202       $   28,924       $    34,063         $2,994,063
                                                                 ==========       ==========       ===========         ==========


The following table presents details of sales of securities available for sale:

<CAPTION>

                                                                                    Year Ended December 31,
                                                                                ---------------------------------
                                                                                     2001              2000
                                                                                ---------------   ---------------


<S>                                                                                 <C>            <C>
Sales proceeds                                                                      $2,045,000     $     --
Gross gains                                                                             45,000           --

<CAPTION>

4.   INVESTMENT SECURITIES HELD TO MATURITY
     --------------------------------------

                                                                                 December 31, 2001
                                                      ------------------------------------------------------------------------
                                                          Carrying                 Gross Unrealized               Estimated
                                                                          ----------------------------------
                                                            Value              Gains             Losses          Fair Value
                                                      -----------------   ---------------   ----------------   ---------------

<S>                                                     <C>                   <C>             <C>                <C>
U.S. Government (including agencies):
      Due after five years through ten years            $ 4,000,000           $      --       $   109,375        $ 3,890,625
      After ten years                                    18,599,690             145,604           294,026         18,451,268
                                                         ----------             -------           -------         ----------

                                                         22,599,690             145,604           403,401         22,341,893
                                                         ----------             -------           -------         ----------

Obligations of states and municipalities:
      After five years through ten years                    100,000                  --               506             99,494
      After ten years                                       484,446                  --             8,316            476,130
                                                         ----------             -------           -------         ----------

                                                            584,446                  --             8,822            575,624
                                                         ----------             -------           -------         ----------

Trust preferred securities due after ten years            9,985,051                  --         1,528,003          8,457,048
                                                         ----------             -------           -------         ----------

                                                        $33,169,187         $   145,604       $ 1,940,226        $31,374,565
                                                        ===========         ===========       ===========        ===========
</TABLE>




                                       27
<PAGE>

<TABLE>
<CAPTION>


                                               WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                              ------------------------------------------



4.   INVESTMENT SECURITIES HELD TO MATURITY  (Cont'd.)
------------------------------------------------------


                                                                                 December 31, 2000
                                                      ------------------------------------------------------------------------
                                                          Carrying                 Gross Unrealized               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         $      --          $    13,600        $ 7,986,400
      After ten years                                    23,155,160           150,578              714,933         22,590,805
                                                        -----------       -----------          -----------        -----------

                                                         31,155,160           150,578              728,533         30,577,205
                                                        -----------       -----------          -----------        -----------

Obligations of states and municipalities:
      Due after ten years                                   583,525               115                4,038            579,602
                                                        -----------       -----------          -----------        -----------

                                                            583,525               115                4,038            579,602
                                                        -----------       -----------          -----------        -----------

Trust preferred securities due after ten years            9,989,136                --            1,220,687          8,768,449
                                                        -----------       -----------          -----------        -----------

                                                        $41,727,821       $   150,693          $ 1,953,258        $39,925,256
                                                        ===========       ===========          ===========        ===========

<CAPTION>

There were no sales of investment securities held to maturity during the years
ended December 31, 2001 and 2000.

At December 31, 2001 and 2000, investment securities held to maturity with an
aggregate carrying value of $291,000 and $590,000, respectively, were pledged to
secure public deposits.



5.   MORTGAGE-BACKED SECURITIES HELD TO MATURITY
     -------------------------------------------

                                                                                     December 31, 2001
                                                         -------------------------------------------------------------------------
                                                             Carrying                Gross Unrealized                Estimated
                                                                             --------------------------------
                                                              Value              Gains             Losses           Fair Value
                                                         ----------------    --------------    --------------    -----------------

<S>                                                       <C>                <C>               <C>                  <C>
Government National Mortgage Association                  $ 56,909,281       $    846,131      $     66,564         $ 57,688,848
Federal Home Loan Mortgage Corporation                      27,872,512            755,989                --           28,628,501
Federal National Mortgage Association                       24,226,546            294,116           244,610           24,276,052
Collateralized mortgage obligations                         26,714,653            508,818            73,995           27,149,476
Other                                                        1,604,940                 --            12,383            1,592,557
                                                          ------------       ------------      ------------         ------------

                                                          $137,327,932       $  2,405,054      $    397,552         $139,335,434
                                                          ============       ============      ============         ============

</TABLE>



                                       28
<PAGE>


                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



5.   MORTGAGE-BACKED SECURITIES HELD TO MATURITY  (Cont'd.)
-----------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                     December 31, 2000
                                                         -------------------------------------------------------------------------
                                                             Carrying                Gross Unrealized                Estimated
                                                                             --------------------------------
                                                              Value              Gains             Losses           Fair Value
                                                         ----------------    --------------    --------------    -----------------

<S>                                                      <C>                 <C>                <C>                <C>
Government National Mortgage Association                 $ 56,872,925        $    365,587       $     12,314       $ 57,226,198
Federal Home Loan Mortgage Corporation                     29,344,273             201,310             12,731         29,532,852
Federal National Mortgage Association                      13,573,469             100,447             86,775         13,587,141
Collateralized mortgage obligations                        30,832,255               2,715          1,001,156         29,833,814
Other                                                           4,619                  --                 --              4,619
                                                          ------------       ------------      ------------         ------------

                                                         $130,627,541        $    670,059       $  1,112,976       $130,184,624
                                                         ============        ============       ============       ============



</TABLE>



There were no sales of mortgage-backed securities held to maturity during the
years ended December 31, 2001 and 2000.

At December 31, 2001 and 2000, mortgage-backed securities held to maturity
having an aggregate carrying value of $686,000 and $841,000, respectively, were
pledged to secure public deposits.




                                       29
<PAGE>



                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



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


                                                          December 31,
                                              ------------------------------
                                                    2001             2000
                                              -------------    -------------

Real estate mortgage                          $ 142,994,796    $ 141,259,052
                                              -------------    -------------

Agency for International Development                 30,160           35,360
                                              -------------    -------------

Construction and land development                 9,524,452       10,587,471
                                              -------------    -------------

Consumer:
      Passbook or certificate                       297,788          453,990
      Equity                                     16,919,114       16,662,700
      Automobile                                    118,257          212,142
      Other                                         105,846           54,768
                                              -------------    -------------

                                                 17,441,005       17,383,600
                                              -------------    -------------

         Total loans                            169,990,413      169,265,483
                                              -------------    -------------

Less:   Loans in process                          3,078,106        4,219,192
         Allowance for loan losses                1,363,366        1,363,366
         Net deferred loan (costs) fees            (387,027)        (355,062)
                                              -------------    -------------

                                                  4,054,445        5,227,496
                                              -------------    -------------

                                              $ 165,935,968    $ 164,037,987
                                              =============    =============


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 $1,833,000 and
$1,688,000 at December 31, 2001 and 2000, respectively. During the year ended
December 31, 2001, new loans aggregating $212,000 were granted and repayments
totalled $67,000.



                                       30
<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,
                                                                       --------------------------------
                                                                           2001              2000
                                                                       --------------    --------------
                                                                                (In Thousands)

<S>                                                                           <C>               <C>
Nonaccrual                                                                     $ 578             $ 109
Renegotiated                                                                      --                90
                                                                       --------------    --------------

                                                                               $ 578             $ 199
                                                                       ==============    ==============
<CAPTION>

The impact of nonperforming loans on interest income is as follows:

                                                                           Year Ended December 31,
                                                                       --------------------------------
                                                                           2001              2000
                                                                       --------------    --------------
                                                                                (In Thousands)

<S>                                                                            <C>               <C>
Interest income if performing in accordance with original terms                 $ 48              $ 17
Interest income actually recorded                                                 23                 9
                                                                       --------------    --------------

Interest income lost                                                            $ 25               $ 8
                                                                       ==============    ==============

<CAPTION>

The following is an analysis of the allowance for loan losses:

                                                                           Year Ended December 31,
                                                                       --------------------------------
                                                                           2001              2000
                                                                       --------------    --------------

<S>                                                                      <C>               <C>
Balance - beginning                                                      $ 1,363,366       $ 1,400,366
Provision charged  to operations                                                  --                --
Loans charged off                                                                 --           (37,000)
                                                                       --------------    --------------

Balance - ending                                                         $ 1,363,366       $ 1,363,366
                                                                       ==============    ==============
</TABLE>






                                       31
<PAGE>


                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



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

At December 31, 2001 and 2000, and during the year ended December 31, 2001,
there were no loans classified as impaired. During the year ended December 31,
2000, the average recorded investment in impaired loans was approximately $3,000
and no interest income was recorded thereon.



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


                                                   December 31,
                                             ----------------------------
                                              2001              2000
                                             -----------   --------------

Acquired in settlement of loans              $ 209,000         $ 601,595
                                             =========         =========



The following is an analysis of the (loss) income on real estate owned:

                                                 Year Ended December 31,
                                             -----------------------------
                                                2001              2000
                                             -----------   ---------------


Gain on sale, net                             $ 22,083         $ 234,635
Carrying costs, net of rental income           (28,248)          (39,554)
                                              --------         ---------

                                              $ (6,165)        $ 195,081
                                              ========         =========




                                       32
<PAGE>


                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



8.   PREMISES AND EQUIPMENT
---------------------------


                                                       December 31,
                                                ------------------------
                                                    2001         2000
                                                 ----------   ----------

Land                                             $  979,315   $  979,315
                                                 ----------   ----------

Buildings and improvements                        2,197,156    2,174,219
Less accumulated depreciation                     1,075,012    1,003,667
                                                 ----------   ----------

                                                  1,122,144    1,170,552
                                                 ----------   ----------

Leasehold improvements                              112,754      112,754
Less accumulated amortization                       112,754      112,754
                                                 ----------   ----------
                                                         --           --
                                                 ----------   ----------

Furnishings and equipment                         1,140,798    1,009,854
Less accumulated depreciation                       739,673      564,685
                                                 ----------   ----------

                                                    401,125      445,169
                                                 ----------   ----------

                                                 $2,502,584   $2,595,036
                                                 ==========   ==========



9.   ACCRUED INTEREST RECEIVABLE
--------------------------------

                                    December 31,
                             ------------------------
                                2001         2000
                             ----------   ----------

Loans                        $  861,934   $  968,112
Mortgage-backed securities      818,247      786,078
Investment securities           199,356      553,638
                             ----------   ----------

                             $1,879,537   $2,307,828
                             ==========   ==========




                                       33
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



10.  DEPOSITS
-------------
<TABLE>
<CAPTION>

                                                                             December 31,
                                      -------------------------------------------------------------------------------------------
                                                            2001                                          2000
                                      -------------------------------------------   ---------------------------------------------
                                       Weighted                                      Weighted
                                        Average                                       Average
                                         Rate            Amount         Percent        Rate             Amount          Percent
                                      ------------  -----------------  ----------   ------------   -----------------   ----------
<S>                                         <C>         <C>                 <C>        <C>          <C>                    <C>
Demand accounts:
       Non-interest-bearing                 0.00%       $ 18,272,852        7.59       0.00%        $ 16,927,220           7.11
       Interest-bearing                     0.87%         20,956,612        8.70       1.34%          18,879,594           7.94
                                                       -------------      ------                   -------------         ------

                                            0.46%         39,229,464       16.29       0.71%          35,806,814          15.05
Savings and club accounts                   2.00%         56,349,272       23.39       2.03%          53,098,430          22.31
Certificates of deposit                     4.37%        145,285,572       60.32       5.82%         149,050,964          62.64
                                                       -------------      ------                   -------------         ------

                                            3.18%      $ 240,864,308      100.00       4.20%       $ 237,956,208         100.00
                                                       =============      ======                   =============         ======

</TABLE>


The amount of certificates of deposit with balances of $100,000 or more at
December 31, 2001 and 2000 was approximately $25,885,000 and $25,932,000,
respectively.

The scheduled maturities of certificates of deposit are as follows (in
thousands):

                                              December 31,
                                      ------------------------------
                                          2001             2000
                                      -------------    -------------

One year or less                        $124,431        $ 121,508
After one to three years                  18,523           24,274
After three years                          2,332            3,269
                                        --------        ---------
                                        $145,286        $ 149,051
                                        ========        =========

A summary of interest on deposits is as follows (in thousands):

                                         Year Ended December 31,
                                      ------------------------------
                                          2001             2000
                                      -------------    -------------

Demand accounts                            $ 247            $ 274
Savings and club accounts                  1,100            1,109
Certificates of deposit                    7,701            7,973
                                         -------          -------
                                         $ 9,048          $ 9,356
                                         =======          =======





                                       34
<PAGE>


<TABLE>
<CAPTION>


                                             WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                                            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                            ------------------------------------------


11.   BORROWED MONEY
--------------------
                                                                                      December 31,
                                                        --------------------------------------------------------------------------
                                                                       2001                                   2000
                                                        -----------------------------------    -----------------------------------
                                                           Weighted                               Weighted
                                                            Average                                Average
                                                             Rate               Amount              Rate               Amount
                                                        ----------------    ---------------    ----------------   ----------------

<S>                                                          <C>               <C>                   <C>            <C>
Securities sold under agreements to
 to repurchase maturing within one year                      2.86%             $15,000,000           6.52%          $ 7,950,000

Convertible advances (a):
     due November 13, 2006                                   5.90%               5,000,000           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 March 24, 2009                                      5.42%               5,000,000           5.42%             5,000,000

Monthly amortizing advances:
     Payable in 13 monthly principal
      and interest installments of $96,286 and
      a final payment of $192,818 on
      February 24, 2003                                      5.84%               1,389,595           5.84%             2,430,702

     Payable in 73 monthly principal
      and interest installments of $55,591 and
      a final payment of $111,347 on
      February 25, 2008                                      6.03%               3,466,333           6.03%             3,909,711

Term advances maturing during:
     2001                                                      --                       --           6.27%             1,000,000
     2002                                                    6.42%               1,000,000           6.42%             1,000,000
     2003                                                    6.55%               1,000,000           6.55%             1,000,000
     2004                                                    5.75%              12,000,000           5.75%            12,000,000
     2008                                                    5.55%               3,000,000           5.55%             3,000,000
     2011                                                    5.40%              10,000,000             --                     --
     ----                                                                      -----------                           -----------

                                                             5.08%             $76,855,928           5.78%           $62,290,413
                                                                               ===========                           ===========

</TABLE>


(a)  Convertible at lender option to replacement funding at then current rates
     on November 12, 2002, March 24, 2001, March 25, 2003 and March 24, 2004,
     respectively, and quarterly thereafter.


Certain information concerning borrowed money is summarized as follows:


                                                  Year Ended December 31,
                                              ----------------------------------
                                                  2001                2000
                                              ---------------    ---------------
                                                   (Dollars in Thousands)

Average balance outstanding                     $ 66,532             $ 65,592
Maximum month-end balance outstanding             76,856               69,167
Average interest rate                              5.61%                5.85%






                                       35
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



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

The foregoing borrowings were secured by pledges of the Bank's investment in the
following:


                                                       December 31,
                                             ---------------------------------
                                                 2001               2000
                                             --------------     --------------
                                                      (In Thousands)

FHLB capital stock                              $ 3,843              $ 3,558
Mortgage-backed securities held to maturity      77,233               55,525
Investment securities held to maturity           16,875               23,187
Securities available for sale                        --                2,994
                                                -------              -------

                                                $97,951              $85,264
                                                =======              =======



12.   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 GAAP and regulatory capital and
information as to the Bank's capital levels at the dates presented:

                                                          December 31,
                                                 ------------------------------
                                                     2001             2000
                                                 -------------    -------------
                                                        (In Thousands)

GAAP capital                                         $ 47,739         $ 44,444
Less: excess of cost over assets acquired              (3,458)          (4,051)
Less: unrealized loss on debt securities                   --                3
                                                     --------         --------

Core and tangible capital                              44,281           40,396
Add: general allowance for loan losses                  1,363            1,363
                                                     --------         --------

       Total regulatory capital                      $ 45,644         $ 41,759
                                                     ========         ========





                                       36
<PAGE>


                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



12.   REGULATORY CAPITAL  (Cont'd.)
------------------------
<TABLE>
<CAPTION>

                                                                     As of December 31, 2001
                                          ------------------------------------------------------------------------------
                                                                                                      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)                    $45,644       32.35%      $11,286        8.00%       $14,107       10.00%

Tier 1 Capital
 (to risk-weighted assets)                     44,281       31.39%           --          --          8,464        6.00%

Core (Tier 1) Capital
 (to adjusted total assets)                    44,281       12.11%       14,632        4.00%        18,290        5.00%

Tangible Capital
 (to adjusted total assets)                    44,281       12.11%        5,487        1.50%            --          --

<CAPTION>


                                                                     As of December 31, 2000
                                          ------------------------------------------------------------------------------
                                                                                                      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)                    $41,759       30.59%      $10,923        8.00%       $13,653       10.00%

Tier 1 Capital
 (to risk-weighted assets)                     40,396       29.59%           --          --          8,192        6.00%

Core (Tier 1) Capital
 (to adjusted total assets)                    40,396       11.24%       14,374        4.00%        17,967        5.00%

Tangible Capital
 (to adjusted total assets)                    40,396       11.24%        5,390        1.50%            --          --

</TABLE>

As of 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.






                                       37
<PAGE>


                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------


13. 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 an amount ranging from the
         minimum to the maximum amount that can be deducted for federal income
         tax purposes.

         The following table sets forth the plan's funded status:




                                                            December 31,
                                                   --------------------------
                                                      2001           2000
                                                   -----------    -----------

Projected benefit obligation - beginning           $3,482,340     $3,284,312
Service cost                                          141,222        145,200
Interest cost                                         270,969        260,420
Actuarial loss (gain)                                 228,265        (83,027)
Benefits paid                                        (100,372)       (75,279)
Settlements                                           (29,716)       (49,286)
Plan amendments                                         2,278             --
                                                   ----------     ----------

Projected benefit obligation - ending               3,994,986      3,482,340
                                                   ----------     ----------

Plan assets at fair value - beginning               4,047,264      3,850,539
Actual (loss) return on assets                       (329,778)       214,668
Employer's contributions                               73,378        106,622
Benefits paid                                        (100,372)       (75,279)
Settlements                                           (29,716)       (49,286)
                                                   ----------     ----------

Plan assets at fair value - ending                  3,660,776      4,047,264
                                                   ----------     ----------

Funded status                                        (334,210)       564,924
Unrecognized net transition obligation                 63,292         94,937
Unrecognized past service cost                         42,280         51,833
Unrecognized net loss (gain)                           39,737       (911,680)
                                                   ----------     ----------

Accrued pension cost included in other liabilities $ (188,901)    $ (199,986)
                                                   ==========     ==========



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


                                                       Year Ended December 31,
                                                    -------------------------
                                                       2001           2000
                                                    ----------     ----------
Net periodic pension cost
 included the following components:
       Service cost                                 $ 141,222      $ 145,200
       Interest cost                                  270,969        260,420
       Expected return on plan assets                (340,143)      (308,293)
       Amortization of net transition obligation       31,645         31,645
       Amortization of past service cost                9,553          9,553
       Amortization of net gain                       (50,953)       (51,354)
                                                   ----------     ----------
Net periodic pension cost
  included in salaries and employee benefits         $ 62,293       $ 87,171
                                                   ==========     ==========








                                       38
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



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

         Assumptions used to value the pension plan were as follows:

                                                   Year Ended December 31,
                                                   ----------------------
                                                       2001      2000
                                                     --------   -------

          Discount rate                                8.00%     8.00%
          Expected long-term rate of return            8.50%     8.00%
          Rate of increase in  compensation levels     5.50%     5.50%

          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 Company to
          purchase 147,768 shares of Company common stock in the open market. In
          conjunction with the 5-for-4 split of the Company's common stock in
          October 2001, the ESOP shares increased from 147,768 to 184,710. 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.
          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 $229,296 and
          $148,256 for the years ended December 31, 2001 and 2000, respectively.




                                       39
<PAGE>


                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



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

         The ESOP shares were as follows:


                                                   December 31,
                                        -------------------------------------
                                            2001                  2000
                                        ---------------      ----------------

Allocated shares                              73,884               55,413
Unreleased shares                            110,826              129,297
                                          ----------           ----------

Total ESOP shares                            184,710              184,710
                                          ==========           ==========

Fair value of unreleased shares           $1,690,097           $1,267,103
                                          ==========           ==========

         In addition to the above, the Company has established a supplemental
         benefit plan to offset the ESOP benefit reduction applicable to certain
         members of Company management due to limitations imposed by the
         Internal Revenue Code. The amount expensed related to this plan
         totalled approximately $23,000 and $22,000 for the years ended December
         31, 2001 and 2000, respectively. A portion of the 2000 and 1999
         liabilities was settled via the issuance of 1,422 shares and 1,317
         shares, respectively, of Company common stock during the years ended
         December 31, 2001 and 2000, respectively. The Company plans to settle a
         portion of the 2001 liability in the same manner.

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

         The following data in regard to the Incentive Plan have been restated
         to give retroactive effect to the 5-for-4 split in the Company's stock
         distributed in October 2001.

         In April 1999, the Company's stockholders approved, and the Company
         implemented the Incentive Plan. Under the Incentive Plan, employees of
         the Company and it's subsidiaries may be awarded up to 92,355 shares of
         Company common stock (the "Stock Awards") and issued options to
         purchase up to 230,889 shares of Company common stock (the "Stock
         Options"). Additional information on the Stock Awards and Stock Options
         is contained in the succeeding paragraphs.




                                       40
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



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

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

          Stock Awards under the Incentive Plan are granted in the form of
          Company 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 awardee. On April 30, 1999, the Company awarded
          82,195 shares of its common stock (59,108 shares to employees and
          23,087 shares to outside directors). On November 28, 2001, the Company
          awarded 7,169 shares of its common stock to employees. At December 31,
          2001 and 2000, stock awards for 35,648 shares and 16,439 shares,
          respectively, were vested and 2,991 shares and 10,160 shares,
          respectively, were available for future grant. During both the years
          ended December 31, 2001 and 2000, approximately $125,000 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 Company's common stock at the grant
          date ($9.50 per share on April 30, 1999 and $14.60 on November 28,
          2001) 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.

          On November 28, 2001, and April 30, 1999, options to purchase 10,829
          shares and 220,060 shares, respectively, of Company 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 forfeited during 2001 or 2000, are
          summarized as follows:

<TABLE>
<CAPTION>

                                                         Number of Option Shares                 Exercise Price Per Share
                                               --------------------------------------------    ------------------------------
                                                   Non-
                                                Incentive       Incentive         Total            Range           Average
                                               -------------   -------------   ------------    ---------------   ------------

<S>                                                  <C>            <C>            <C>             <C>                <C>
Balance - December 31,
  1999 and 2000                                      58,570         161,490        220,060         $ 7.60             $ 7.60

Options granted                                          --          10,829         10,829         14.60               14.60

Options exercised                                   (14,058)        (24,996)       (39,054)         7.60                7.60
                                                    -------         -------        -------

Balance - December 31, 2001                          44,512         147,323        191,835        $7.60 - $14.60       $ 8.00
                                                     ======         =======        =======

</TABLE>

          At December 31, 2001 and 2000, options for 56,748 shares and 44,013
          shares, respectively, were excercisable. At December 31, 2000, stock
          options for up to 10,829 shares of Company common stock were available
          for future grants. At December 31, 2001, all options available under
          the Incentive Plan had been granted.




                                       41
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



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

          The Company, 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 values of the stock options granted
          during 2001 and 1999, which have exercise prices equal to the market
          price of the Company's common stock at the grant dates, were estimated
          using the Black-Scholes option-pricing model. Such fair values and the
          assumptions used for estimating fair value are as follows:

                                                      Year Ended December 31,
                                                    ------------------------
                                                       2001         1999
                                                    ----------    ---------

Weighted average grant-date fair value per share      $4.72         $2.54
Expected common stock dividend yield                  3.29%         3.16%
Expected volatility                                   38.08%       27.66%
Expected option life                                6.5 years     6.5 years
Risk-free interest rate                               4.66%         5.36%


          Had the Company used the fair value based method, proforma net income
          and proforma net income per common share would have been as follows:


                                              Year Ended December 31,
                                              ---------------------------
                                               2001              2000
                                              -----------    ------------

Proforma net income                           $3,016,000      $3,223,000
Proforma net income per common share:
   Basic                                            0.63            0.67
   Diluted                                          0.62            0.67




14.  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, 2001, 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 than for bad debt losses, including distributions in
liquidation, it will be subject to income tax at the then current rate.








                                       42
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



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

The components of income taxes are summarized as follows:

<TABLE>
<CAPTION>

                                                                       Year Ended December 31,
                                                                    -------------------------------
                                                                       2001              2000
                                                                    -------------   ---------------
       Current tax expense:
<S>                                                                  <C>               <C>
           Federal income                                           $ 1,402,918       $ 1,669,845
           State income                                                 123,673           152,379
                                                                    -----------       -----------

                                                                      1,526,591         1,822,224
                                                                    -----------       -----------
       Deferred tax expense (benefit):
           Federal income                                                87,256           (39,021)
           State income                                                   7,276            (8,053)
                                                                    -----------       -----------

                                                                         94,532           (47,074)
                                                                    -----------       -----------

                                                                    $ 1,621,123       $ 1,775,150
                                                                    ===========       ===========
<CAPTION>


The components of the net deferred income tax asset are as follows:

                                                                            December 31,
                                                                    -------------------------------
                                                                       2001              2000
                                                                    -------------   ---------------
       Deferred tax assets:
<S>                                                                   <C>               <C>
           Allowance for loan losses                                  $ 489,985         $ 488,828
           Benefit plans                                                191,789           225,861
           Goodwill                                                     705,718           674,066
           Unrealized loss on securities available for sale                  --             1,849
           Other                                                         12,505            16,745
                                                                    -----------       -----------

               Total deferred tax assets                              1,399,997         1,407,349
                                                                    -----------       -----------

       Deferred tax liabilities:
           Deferred loan origination fees, net                          279,755           184,008
           Other                                                         12,138            18,856
                                                                    -----------       -----------

               Total deferred tax liabilities                           291,893           202,864
                                                                    -----------       -----------

               Net deferred tax asset included in other assets      $ 1,108,104       $ 1,204,485
                                                                    ===========       ===========


</TABLE>





                                       43
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



14.  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,
                                                           ----------------------------
                                                                2001            2000
                                                           ------------    ------------

<S>                                                        <C>             <C>
       Federal income tax                                  $ 1,596,135     $ 1,718,863
       Increases (reductions) in taxes resulting from:
           New Jersey state income tax,
            net of federal income tax effect                    86,426          95,255
           Other items, net                                    (61,438)        (38,968)
                                                           -----------     -----------

       Effective income tax                                $ 1,621,123     $ 1,775,150
                                                           ===========     ===========

</TABLE>


15.   NET INCOME PER COMMON SHARE
---------------------------------

<TABLE>
<CAPTION>
                                                                   Year Ended December 31, 2001
                                                     ---------------------------------------------------------
                                                                               Weighted
                                                            Net                Average              Per Share
                                                          Income                Shares               Amounts
                                                     -----------------      --------------         -----------

<S>                                                       <C>                    <C>                  <C>
Basic net income per share                                $ 3,073,393            4,768,681            $ 0.64
                                                                                                      ======

Effect of dilutive securities:
       Stock options                                              --                78,211
       Other                                                      --                12,675
                                                         -----------             ---------

Diluted net income per share                             $ 3,073,393             4,859,567            $ 0.63
                                                         ===========             =========            ======
<CAPTION>

                                                                   Year Ended December 31, 2000
                                                     ---------------------------------------------------------
                                                                               Weighted
                                                            Net                Average              Per Share
                                                          Income                Shares               Amounts
                                                     -----------------      --------------         -----------

<S>                                                       <C>                    <C>                  <C>
Basic net income per share                                $ 3,280,328            4,808,870            $ 0.68
                                                                                                      ======
Effect of dilutive securities:
       Stock options                                               --               14,134
       Other                                                       --                4,726
                                                         -----------             ---------

Diluted net income per share                             $ 3,280,328             4,827,730            $ 0.68
                                                         ===========             =========            ======
</TABLE>




                                       44
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



16.  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, 2001 and 2000, the Bank had $5,505,000 and $2,125,000,
respectively, in outstanding commitments to originate and purchase loans. The
outstanding commitments at December 31, 2001, include $4,171,000 for fixed rate
mortgage loans at rates ranging from 6.25% to 6.875%, $350,000 for an adjustable
rate mortgage loan with an initial rate of 6.75%, $165,000 for floating rate
home equity lines of credit, $454,000 for the purchase of a loan participation,
consisting of an adjustable rate loan on which the initial rate will be fixed at
funding for fifteen years at 1.60% above the Federal Home Loan Bank CIP advance
rate and will adjust on the fifteenth year thereafter, and a $365,000
construction loan with a floating rate.

At December 31, 2001 and 2000, undisbursed funds from approved lines of credit
under a homeowners' equity lending program amounted to approximately $9,179,000
and $6,152,000, 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, 2001 and 2000, undisbursed funds from approved unsecured lines
of credit under the Credit Reserve program totalled $141,000 and $114,000,
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
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.

Rentals under a long-term operating lease for a branch office amounted to
approximately $56,000 for each of the years ended December 31, 2001 and 2000. At
December 31, 2001, the minimum rental commitment under this noncancellable lease
expiring in October, 2003, is $102,000, consisting of $56,000 for 2002 and
$46,000 for 2003.





                                       45
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



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

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 Company.



17.   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 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.

          Term Deposits
          -------------

          The fair value of term deposits is estimated by discounting future
          cash flows, using the current rates at which term deposits of similar
          remaining maturities could be obtained.

          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.

         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.








                                       46
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



17.   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):

<TABLE>
<CAPTION>
                                                                             December 31,
                                                          ----------------------------------------------------
                                                                    2001                       2000
                                                          -------------------------  -------------------------
                                                           Carrying     Estimated     Carrying     Estimated
                                                             Value      Fair Value     Value      Fair Value
                                                          ------------  -----------  -----------  ------------
 <S>                                                          <C>          <C>          <C>           <C>
     Financial assets
      ----------------
      Cash and cash equivalents                               $17,290      $17,290      $ 8,878       $ 8,878
      Term deposits                                               200          202           --            --
      Securities available for sale                                --           --        2,994         2,994
      Investment securities held to maturity                   33,169       31,375       41,728        39,925
      Mortgage-backed securities held to maturity             137,328      139,335      130,628       130,185
      Loans receivable                                        165,936      170,008      164,038       167,854
      Accrued interest receivable                               1,880        1,880        2,308         2,308

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

      Deposits                                                240,864      242,826      237,956       238,893
      Borrowed money                                           76,856       76,711       62,290        61,822

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

      Loan origination and purchase                             5,505        5,505        2,125         2,125
      Unused lines of credit                                    9,320        9,320        6,266         6,266

</TABLE>


                                       47
<PAGE>


                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



17.   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.



                                       48
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



18.   PARENT ONLY FINANCIAL INFORMATION
---------------------------------------

The following are the condensed financial statements for West Essex Bancorp,
Inc. (Parent company only).

<TABLE>
<CAPTION>

                                                        STATEMENTS OF CONDITION
                                                        -----------------------


                                                                                            December 31,
                                                                                -------------------------------------
                                                                                     2001                 2000
                                                                                ----------------     ----------------
Assets:
<S>                                                                                    <C>                  <C>
        Cash and due from banks                                                        $ 19,564             $ 16,406
        Interest-bearing deposits                                                       359,343              262,629
        Securities held to maturity                                                   1,051,829            1,055,428
        Loan receivable                                                               1,570,096            3,710,993
        Real estate owned                                                               209,000                   --
        Investment in subsidiaries                                                   47,738,943           44,443,991
        Due from subsidiaries                                                           199,252              128,789
        Other assets                                                                     19,450                4,133
                                                                                   ------------         ------------

               Total assets                                                        $ 51,167,477         $ 49,622,369
                                                                                   ============         ============

Liabilities:
        Other liabilities                                                             $ 252,526            $ 174,357
                                                                                   ------------         ------------

                                                                                        252,526              174,357

Stockholders' equity                                                                 50,914,951           49,448,012
                                                                                   ------------         ------------

Total liabilities and stockholders' equity                                         $ 51,167,477         $ 49,622,369
                                                                                   ============         ============


</TABLE>



                                       49
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



18.   PARENT ONLY FINANCIAL INFORMATION  (Cont'd.)
--------------------------------------------------



                                                         STATEMENTS OF INCOME
                                                         --------------------

<TABLE>
<CAPTION>


                                                                                      Year Ended December 31,
                                                                                -------------------------------------
                                                                                     2001                 2000
                                                                                ----------------     ----------------

<S>                                                                                   <C>                  <C>
Interest income                                                                       $ 292,708            $ 393,371
Gain on real estate owned                                                                    --             171,893
                                                                                   ------------         ------------

               Total income                                                             292,708              565,264

Loss on real estate owned                                                                11,924                   --
Other non-interest expenses                                                             140,413              147,926
                                                                                   ------------         ------------

               Total non-interest expenses                                              152,337              147,926
                                                                                   ------------         ------------

Income before income tax and equity in
   undistributed earnings of subsidiaries                                               140,371              417,338
Income tax                                                                               48,530              146,164
                                                                                   ------------         ------------

Income before equity in undistributed
  earnings of subsidiaries                                                               91,841              271,174
Equity in undistributed
  earnings of subsidiaries                                                            2,981,552            3,009,154
                                                                                   ------------         ------------

Net income                                                                          $ 3,073,393          $ 3,280,328
                                                                                    ===========          ===========

</TABLE>



                                       50
<PAGE>


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



18.   PARENT ONLY FINANCIAL INFORMATION  (Cont'd.)
--------------------------------------------------


                                                       STATEMENTS OF CASH FLOWS
                                                       ------------------------



                                                                                          Year Ended December 31,
                                                                                    ------------------------------------
                                                                                         2001                2000
                                                                                    ----------------    ----------------

Cash flows from operating activities:
<S>                                                                                     <C>                 <C>
        Net income                                                                      $ 3,073,393         $ 3,280,328
        Adjustments to reconcile net income to net cash
          provided by (used in) operating activities:
               Net amortization of premium and discount                                       3,599               2,479
               Equity in undistributed earnings of subsidiaries                          (2,981,552)         (3,009,154)
               Loss (gain) on sales of real estate owned                                     11,924            (171,893)
               Deferred income taxes                                                             --              69,276
               (Increase) decrease in other assets                                          (15,317)             17,953
               Change in due to/from subsidiaries                                           (12,079)         (1,009,361)
               (Decrease) in other liabilities                                               (6,824)            (26,296)
                                                                                         ----------          ----------

                      Net cash provided by (used in)  operating activities                   73,144            (846,668)
                                                                                         ----------          ----------

Cash flows from investing activities:
        Decrease in loans receivable from Bank                                            2,140,897             680,835
        Purchase of real estate owned from subsidiary                                      (240,890)                 --
        Proceeds from sales of real estate owned                                             19,966             306,893

                                                                                         ----------          ----------
                      Net cash provided by investing activities                           1,919,973             987,728
                                                                                         ----------          ----------

Cash flows from financing activities:
        Purchase of treasury stock                                                       (1,379,425)           (671,391)
        Proceeds from sales of treasury stock                                               294,380                  --
        Cash dividends paid to stockholders                                                (808,200)           (574,286)
                                                                                         ----------          ----------

                      Net cash (used in ) financing activities                           (1,893,245)         (1,245,677)
                                                                                         ----------          ----------

Net increase (decrease) in cash and cash equivalents                                         99,872          (1,104,617)

Cash and cash equivalents - beginning                                                       279,035           1,383,652
                                                                                         ----------          ----------

Cash and cash equivalents - ending                                                        $ 378,907           $ 279,035
                                                                                         ==========          ==========

</TABLE>




                                       51
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



19.   QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------------
<TABLE>
<CAPTION>

                                                                 Quarter Ended
                                 -------------------------------------------------------------------------------
                                   March 31,           June 30,          September 30,          December 31,
                                      2001               2001                2001                   2001
                                 ---------------    ---------------    ------------------     ------------------
                                                  (In thousands, except for per share amounts)

<S>                                  <C>                <C>                  <C>                    <C>
Total interest income                $6,129             $5,883               $5,808                 $5,645
Total interest expense                3,353              3,272                3,183                  2,974
                                     ------             ------               ------                 ------

Net interest income                   2,776              2,611                2,625                  2,671

Provision for loan losses                --                 --                   --                     --
Non-interest income                     177                151                  163                    197
Non-interest expenses                 1,714              1,675                1,585                  1,703
Income taxes                            441                375                  392                    413
                                     ------             ------               ------                 ------
Net income                           $  798             $  712               $  811                 $  752
                                     ======             ======               ======                 ======
Net income per common share:
    Basic                            $0.167             $0.149               $0.171                 $0.158
    Diluted                           0.165              0.146                0.167                  0.155

Weighted average number of
  common shares outstanding:
    Basic                             4,781              4,780                4,753                  4,761
    Diluted                           4,850              4,863                4,863                  4,863


<CAPTION>
                                                                 Quarter Ended
                                 -------------------------------------------------------------------------------
                                   March 31,           June 30,          September 30,          December 31,
                                      2000               2000                2000                   2000
                                 ---------------    ---------------    ------------------     ------------------
                                                  (In thousands, except for per share amounts)

<S>                                  <C>                <C>                  <C>                    <C>
Total interest income                $5,852             $6,028               $6,088                 $6,134
Total interest expense                3,067              3,246                3,395                  3,486
                                     ------             ------               ------                 ------

Net interest income                   2,785              2,782                2,693                  2,648

Provision for loan losses                --                 --                   --                     --
Non-interest income                     147                139                  122                    140
Non-interest expenses                 1,555              1,646                1,599                  1,601
Income taxes                            497                454                  393                    431
                                     ------             ------               ------                 ------

Net income                           $  880             $  821               $  823                 $  756
                                     ======             ======               ======                 ======
Net income per common share:
    Basic                            $0.182             $0.170               $0.171                 $0.158
    Diluted                           0.182              0.170                0.171                  0.156

Weighted average number of            4,824              4,823                4,804                  4,785
  common shares outstanding:          4,824              4,823                4,824                  4,840
    Basic
    Diluted

</TABLE>



                                       52
<PAGE>

                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------



20.   IMPACT OF NEW ACCOUNTING STANDARDS
----------------------------------------

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 applies to
all business combinations completed after June 30, 2001 and requires the use of
the purchase method of accounting. SFAS No. 141 also establishes new criteria
for determining whether intangible assets should be recognized separately from
goodwill. SFAS No. 142 provides that goodwill and intangible assets with
indefinite lives will not be amortized, but rather will be tested for impairment
on at least an annual basis. The Company adopted SFAS No. 142 on January 1,
2002. The scope of SFAS No. 142 does not include unidentifiable intangible
assets related to acquisitions of banks, savings banks, credit unions, other
financial institutions having assets and liabilities of similar type, and
branches of such enterprises. Such unidentifiable intangible assets, which
include the excess of cost over assets acquired reported by the Company in its
consolidated statements of financial condition, will continue to be governed by
SFAS No. 72, "Accounting for Certain Acquisitions of Banking or Thrift
Institutions". The Company does not believe the adoption of SFAS No. 142 will
have a material impact on its consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the impairment of
Disposal of Long-Lived Assets." This standard sets forth the accounting for the
impairment of long-lived assets, whether they are held and used or are disposed
of by sale or other means. It also broadens and modifies the presentation of
discontinued operations. The standard will be effective for the Company's fiscal
year 2002, although early adoption is permitted, and its provisions are
generally to be applied prospectively. The Company does not believe SFAS No. 144
will have a material impact on its consolidated financial statements.



                                       53
<PAGE>



<TABLE>
<CAPTION>

WEST ESSEX BANCORP, INC.
------------------------
<S>                                         <C>                                         <C>

Corporate Headquarters

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

Bank Branch Offices

Caldwell                                    Northvale                                   River Vale
417 Bloomfield Avenue                       119 Paris Avenue                            653 Westwood Avenue
Caldwell, New Jersey   07006                Northvale, New Jersey   07647               River Vale, NJ  07675
(973) 226-7911                              (201) 768-7800                              (201) 664-3700

Montville                                   Old Tappan                                  Tory Corner
267 Changebridge Road                       207 Old Tappan Road                         216 Main Street
Pine Brook, NJ  07058                       Old Tappan, NJ  07675                       West Orange, NJ  07052
(973) 575-7080                              (201) 767-0007                              (973) 325-1230

Franklin Lakes                              Pleasant Valley Way
574 Franklin Avenue                         487 Pleasant Valley Way
Franklin Lakes, NJ  07417                   West Orange, NJ  07052
(201) 891-5500                              (973) 731-4630



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

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


Leopold W. Montanaro                        Leopold W. Montanaro                        Leopold W. Montanaro
  Chairman of the Board                       President and Chief                         President and Chief
  of West Essex Bancorp, Inc.                 Executive Officer                           Executive Officer

William J. Foody                            Dennis A. Petrello                          Dennis A.Petrello
  Chairman of the Board                       Senior Executive Vice President             Senior Executive VicePresident
  of West Essex Bank                          and Chief Financial Officer                 and Chief Financial Officer
  Managing Partner
  Crow Holdings                             Charles E. Filippo                          Charles E.Filippo
                                              Executive Vice President                    Executive Vice President
David F. Brandley, Esq.                                                                   and Chief Lending Officer
  Partner in the Law Firm of                Craig L. Montanaro
  Brandley & Kleppe                           Senior Vice President,                    Craig L. Montanaro
                                              Secretary and Treasurer                     Senior Vice President
John J. Burke                                                                             and Chief Operating Officer,
  President                                                                               Secretary and Treasurer
  JJ Burke & Associates
                                                                                        Michael T. Sferrazza
S.M. Terry LaCorte                                                                        Vice President and Controller
  Retired President of
  North Jersey Press, Inc.                                                              Lisa A. Mulligan
                                                                                          Vice President and Human Resources
                                                                                          Officer
Everett N. Leonard
  Retired Verona Boro Administrator
                                                                                        Donna Duess
                                                                                          Vice President

</TABLE>




                                       54

<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 May 21, 2002,
at the Radisson Hotel, Route 46, Fairfield, New Jersey. Stockholders are
encouraged to attend.

Annual Report on Form 10-KSB

A copy of West Essex Bancorp, Inc.'s Annual Report on Form 10-KSB without
exhibits is available without charge to stockholders 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, 55 Route 46 East, Pine Brook, New Jersey 07058.

Inquiries

Security analysts, retail brokers and stockholders seeking financial information
should contact Dennis A. Petrello, Senior 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, 2001, West Essex Bancorp, Inc. had
4,921,615 shares of common stock outstanding and approximately 384 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.


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

December 31, 2001            $ 0.13           $15.80              $12.84
September 31, 2001             0.12            14.64               11.84
June 30, 2001                  0.12            13.36               10.00
March 31, 2001                 0.12            10.40                9.70
December 31, 2000              0.08             9.80                9.10
September 30, 2000             0.08             9.60                7.20
June 30, 2000                  0.08             7.45                7.10
March 31, 2000                 0.08             7.70                7.00



                                       55
<PAGE>