EXHIBIT 13.0

               Portions of the 2000 Annual Report to Stockholders















<PAGE>




                                TABLE OF CONTENTS

West Essex Bancorp,  Inc. is a $364.4 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.

Financial Highlights ...............................................     1
President's Message ................................................     2
Selected Consolidated Financial and Other Data .....................     4
Management's Discussion and Analysis of Financial Condition and
  Results of Operations ............................................     6
Management Responsibility Statement ................................    15
Independent Auditor's Report .......................................    16
Consolidated Statements of Financial Condition .....................    17
Consolidated Statements of Income ..................................    18
Consolidated Statements of Comprehensive Income ....................    19
Consolidated Statements of Changes in Stockholders' Equity .........    20
Consolidated Statements of Cash Flows ..............................    21
Notes to Consolidated Financial Statements .........................    23
Directors and Officers .............................................    54
Investor and Corporate Information ...........................Inside Back Cover


<PAGE>


                            WEST ESSEX BANCORP, INC.
                              FINANCIAL HIGHLIGHTS
              (Dollar amounts in thousands, except per share data)

<TABLE>
<CAPTION>
                                                         At or for the Year Ended December 31,
                                                  ----------------------------------------------------
                                                      2000               1999               1998
                                                  --------------    ---------------    ---------------
<S>                                                    <C>                <C>                <C>
Total assets                                           $364,406           $348,307           $328,609
Total investment and mortgage-backed securities         175,349            165,729            155,532
Total loans receivable                                  169,265            156,196            143,002
Allowance for loan losses                                 1,363              1,400              1,717
Total deposits                                          237,956            234,978            238,313
Borrowed money                                           62,290             64,340             42,101
Total stockholders' equity                               49,448             47,110             46,754
Net interest income                                      10,908             10,891              9,096
Provision for (recapture of) loan losses                     --                 --               (131)
Net income (1)                                            3,280              3,043              1,397
Basic and diluted earnings per share (1)(2)                0.85               0.76               0.34
Book value per share                                      12.40              11.62              11.14
Dividends declared per share (3)                           0.40               0.30                N/A
Dividend payout ratio (3)                                 46.98%             39.47%               N/A
Average interest rate spread                               2.51%              2.66%              2.48%
Return on average assets (1)                               0.93%              0.89%              0.44%
Return on average stockholders' equity (1)                 6.81%              6.46%              4.10%
Common shares outstanding at year end                 3,986,991          4,054,357          4,197,233
</TABLE>


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

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

(3)  The Company, which converted to stock form in October 1998, did not declare
     any dividends to stockholders prior to 1999.


                                      - 1 -

<PAGE>

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


Dear Stockholders,

         Our financial  results in 2000  demonstrate  the value of hard work and
loyalty to our communities and customer base. The cornerstone of our strategy is
to provide warm and friendly specialized customer service which coupled with the
use of state of the art  technology,  is helping to position our bank to compete
with the giants in the financial market place.

         Our primary  objective  in the year 2001 is to continue to position the
bank to  compete  in our  marketplace  by  developing  additional  products  and
services  and  servicing  our customer  needs as a true  community  bank,  while
maintaining our focus on profitability and enhanced stockholder value.

         The  essence of a  well-managed  financial  institution  is  consistent
profitability,  which fUnds growth,  and efficiency,  which, in turn,  minimizes
costs.

         The Year 2000 was a milestone for our bank. We  accomplished a rollover
to the millennium without a single banking malfunction and the millennium marked
our 85th anniversary of providing  financial  products to our  communities.  The
fourth  quarter  marked  our  conversion  to a state of the art data  processing
system  which,  when fully  implemented,  will give  management  the  ability to
analyze  opportunities  to further  expand our ability to service  our  customer
needs.  In 2001 we look forward to the  completion of this  conversion and other
technological endeavors, and the ability to capitalize on these accomplishments.

         I would be remiss if I did not credit the hard work and diligence of my
staff in the abov  accomplishments,  and the many long and  arduous  hours  they
unselfishly gave to accomplish these tasks.

         West Essex  Bancorp  net income for fiscal year 2000 rose 7.8% to $3.28
million  compared to $3.04  million for fiscal year 1999.  Earnings  per diluted
share rose to $0.85 for the period  ending  December 31, 2000  compared to $0.76
earnings per diluted share for the same period last year, an increase of 11.8%.

         Cash earnings of West Essex Bancorp,  which are determined by adding to
reported  earnings non-cash expenses related to the amortization of goodwill and
the  company's  stock related  benefit plans net of income taxes,  rose to $3.85
million  or $1.00 per  diluted  share  compared  to $3.59  million  or $0.90 per
diluted  shares for the same period last year,  an increas of 11%. This increase
in year to year  earnings was  accomplished  in spite of the  continued  intense
competition  in the  financial  markets,  a steeply  inverted  yield curve,  and
significantly higher funding costs.

         Our loan growth  remained  healthy as loan  originations in residential
and  commercial  real  estate in New Jersey  provided  an  excellent  investment
vehicle for the Bank. Loan and asset quality,  a leading  indicator of potential
problems within a bank, remain at historically high levels.

                                     - 2 -
<PAGE>


         Total assets for the period ended  December  31, 2000  increased  $16.1
million to $364.4 from $348.3  million at December  31, 1999.  Loans  Receivable
increased  $10.7 million to $164  million.  Deposits  increased  $3.0 million to
$238.0  million and Federal Home Loan Bank  advances  decreased  $2.0 million to
$62.3 million for the year ended December 31, 2000.

         On August 25, 2000 the  Company  reported  it had  completed  its first
repurchase program of 15% of its outstanding  minority shares or 277,067 shares.
The Company also  announced  on that date the Board of Directors  had approved a
second  repurchase  program of another 10%, or 164,687  shares of the  Company's
outstanding minority shares.

         Management  will  continue  to focus on  means to  enhance  shareholder
value,  including through stock repurchases,  increased per share earnings,  and
increased cash dividends.  During the year 2000, the Bank increased dividends by
33% from  $0.30 per share per  annum to $0.40 per share per  annum.  We  believe
increasing  dividends  is  a  further  opportunity  to  prudently  leverage  the
Company's capital,  which will ultimately result in increased  shareholder value
and recognition.

         West  Essex  Bancorp  is  aware  of the  importance  of good  corporate
citizenship  and  the  responsibility  of  serving  the  communities  that  have
entrusted  their  business  to us. We are proud that our  employees  have a long
standing commitment to give their own time to help the communities in which they
live and work continue to be a better place for  everyone.  By founding the West
Essex  Bancorp   Charitable   Foundation  in  1998,  the  Bank   recognized  its
responsibility  to give  back  to the  communities  which  enabled  the  Bank to
flourish.  In the year 2000,  the Foundation  supported a significant  number of
non-profit housing  organizations that have dedicated  themselves to helping the
low and moderate-income  individuals enjoy the American dream of home ownership.
The  Foundation  has also been  involved  with other  organizations  designed to
promote self-sufficiency in family and life skills.

         The new era of financial  modernization  and of blockbuster  mergers in
the industry has resulted in the financial  services industry being dominated by
the nation's and the world's  largest  commercial  banks. We believe the virtual
collapse of the  technology  industry will cause  investors to return to basics,
and renew their interest in community banks such as ours. With our  conservative
loan portfolio,  solid capital,  prudent  management and community  roots,  many
investors in Year 2000 saw our Bank as an attractive  alternative  for the value
investor.

         We look forward to, and are optimistic for our  institution in 2001. We
expect in 2001 to enjoy a declining  interest rate environment,  which generally
benefits financial  institutions,  and, coupled with the declining interest rate
environment,  the elimination of the  amortization  of goodwill  (subject to any
impairment  write-down),  which should contribute to an improvement of the value
of the Bank.

         Our Board of  Directors  and  management  appreciates  your support and
investment and is dedicated to satisfying the long-term  needs of our customers,
employees,  shareholders and the communities served by the Bank. As in the past,
we will continue to strive to be a respected,  profitable,  efficient and caring
community banking institution.


Sincerely,

/s/ Leopold W. Montanaro

Leopold W. Montanaro
President & CEO

                                     - 3 -
<PAGE>

WEST ESSEX BANCORP, INC.

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

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

<TABLE>
<CAPTION>
                                                                               At December 31,
                                                ----------------------------------------------------------------------------
                                                  2000             1999             1998             1997            1996
                                                ---------       ----------       ----------       ----------       ---------
                                                                               (In Thousands)
        Selected Consolidated Financial Data:
        <S>                                    <C>              <C>              <C>              <C>              <C>
        Total assets (1)                       $ 364,406        $ 348,307        $ 328,609        $ 299,025        $ 235,969
        Loans receivable, net (2)                164,038          153,276          140,272          112,735           82,134

        Securities available-for-sale:
             Investment securities, net            2,994            2,924            8,282            7,081            1,647

        Securities held-to-maturity:
             Investment securities, net           41,728           41,582           36,873           22,929           22,476
             Mortgage-backed securities, net     130,628          121,223          110,376          130,174          113,254
        Deposits (1)                             237,956          234,978          238,313          238,192          179,946
        Borrowed money                            62,290           64,340           42,101           30,300           23,650
        Total stockholders' equity                49,448           47,110           46,754           29,275           28,452
</TABLE>

<TABLE>
<CAPTION>
                                                                            For the Years Ended December 31,
                                                    --------------------------------------------------------------------------------
                                                        2000             1999             1998             1997             1996
                                                    --------------   --------------   --------------   --------------   ------------
                                                                                      (In Thousands)
        Selected Operating Data:
        <S>                                           <C>              <C>              <C>              <C>              <C>
        Interest income                               $ 24,102         $ 22,751         $ 21,315         $ 18,116         $ 16,467
        Interest expense                                13,194           11,860           12,219            9,656            8,300
                                                      --------         --------         --------         --------         --------

             Net interest income                        10,908           10,891            9,096            8,460            8,167
        Provision for (recapture of) loan
          losses                                           -                -               (131)            487              232
                                                      --------         --------         --------         --------         --------
             Net interest income after
        Provision for (recapture of) loan losses        10,908           10,891            9,227            7,973            7,935
        Non-interest income                                548              685              529              373              476
        Non-interest expense (3)                         6,401            6,869            7,607            7,173            5,919
                                                      --------         --------         --------         --------         --------

        Income before income taxes (3)                   5,055            4,707            2,149            1,173            2,492
        Income taxes (3)                                 1,775            1,664              752              436              836
                                                      --------         --------         --------         --------         --------

        Net income                                    $  3,280         $  3,043         $  1,397         $    737         $  1,656
                                                      ========         ========         ========         ========         ========
</TABLE>

                                                       (continued on next page)

                                      - 4 -
<PAGE>

<TABLE>
<CAPTION>
                                                                       At or For the Years Ended December 31,
                                                         ---------------------------------------------------------------
                                                             2000         1999         1998         1997        1996
                                                         -----------   ----------   -----------  ----------  -----------

Selected Financial Ratios and Other Data:
Performance Ratios (4):
<S>                                                          <C>          <C>          <C>         <C>         <C>
        Return on average assets (3)                          0.93 %       0.89 %       0.44 %      0.29 %      0.74 %
        Return on average stockholders' equity (3)            6.81         6.46         4.10        2.51        5.95
        Average equity/average assets                        13.70        13.73        10.75       11.55       12.37
        Interest rate spread (5)                              2.51         2.66         2.48        2.87        3.15
        Net interest margin (6)                               3.23         3.31         3.01        3.44        3.74
        Non-interest expenses to average assets (3)           1.82         2.00         2.40        2.82        2.63
        Equity to total assets                               13.57        13.53        14.23        9.79       12.06
        Efficiency ratio (7)                                 52.40        54.45        71.41       57.04       56.58

Regulatory Capital Ratios (4):

        Tangible capital                                     11.24        10.69        10.44        7.98       12.06
        Core capital                                         11.24        10.69        10.44        7.98       12.06
        Risk-based capital                                   30.59        28.55        28.81       26.10       39.15

Asset Quality Ratios (4):

        Non-performing loans to total assets                  0.06         0.25         0.67        0.84        1.26
        Non-performing loans to total loans
          receivable                                          0.12         0.57         1.46        2.16        3.51
        Non-performing assets to total assets                 0.22         0.51         0.84        1.24        1.85
        Allowance for loan losses to
          non-performing loans                              677.75       158.37        78.47       75.19       52.70
        Average interest-earning assets to average
          interest-bearing liabilities                      118.37       117.99       112.99      114.39      115.46
        Net interest income after provision for
          loan losses to non-interest expenses (3)          170.41       158.55       121.30      111.15      134.06

Number of full-service customer facilities                       8            8            8           8           5
</TABLE>


(1)  The increase in assets in fiscal 1997 was due  primarily to the purchase of
     three branch offices from Summit Bank.
(2)  The allowance for loan losses at December 31, 2000,  1999,  1998, 1997, and
     1996 was $1.4 million,  $1.4 million,  $1.7 million,  $1.9 million and $1.6
     million, respectively.
(3)  Includes, for the year ended December 31, 1996, the SAIF Special Assessment
     of $1.1  million  and the  related  income  tax  benefit  of  $395,000.  If
     excluded, return on average assets, return on average stockholders' equity,
     non-interest  expenses  to average  assets and net  interest  income  after
     provision for loan losses to  non-interest  expenses would be 1.05%,  8.47%
     2.14% and  164.59%,  respectively,  for the year ended  December  31, 1996.
     Includes,  for the years ended  December  31,  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,  and  $1.7  million,
     respectively,  and the related  income tax benefit of  $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  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.
(4)  With the exception of end of period ratios, all ratios are based on average
     monthly  balances  during the indicated  periods and are  annualized  where
     appropriate.
(5)  The interest rate spread  represents  the  difference  between the weighted
     average yield on average  interest- earning assets and the weighted average
     cost of average interest-bearing liabilities.
(6)  The net interest  margin  represents  net  interest  income as a percent of
     average interest-earning assets.
(7)  The efficiency ratio represents  non-interest expenses,  excluding the SAIF
     special Assessment, impairment loss and amortization relating to intangible
     assets and loss on REO, divided by the sum of net interest and non-interest
     income excluding income on REO and security gain/loss.

                                      - 5 -

<PAGE>

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

     West Essex Bancorp, Inc. ("the Company"),  is the stock holding company for
West Essex Bank ("the  Bank").  The Company is  headquartered  in Caldwell,  New
Jersey and its principal  business  currently  consists of the operations of the
Bank. West Essex Bancorp,  M.H.C., a mutual holding company formed in connection
with the Bank's  conversion  to stock form and  reorganization  into the holding
company form of organization,  which was consummated October 2, 1998, owns 58.9%
of the  Company's  outstanding  common stock at December  31,  2000.  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,  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, 2000,  and for the years ended  December
31, 2000 and 1999. 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.

                                      - 6 -

<PAGE>

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


<TABLE>
<CAPTION>
                                                                                     At December 31, 2000
                                                                               --------------------------------
                                                                                                     Yield/
                                                                                   Amount             Cost
                                                                               ---------------     ------------
Assets:                                                                             (Dollars in Thousands)
<S>                                                                                 <C>               <C>
        Interest-earning assets:
              Loans receivable                                                      $165,401          7.61%
              Mortgage-backed securities                                             130,628          6.86
              Investment securities(1)                                                44,722          6.92
              Other interest-earning assets                                           10,020          5.95
                                                                                    ---------
                               Total interest-earning assets                         350,771          7.20

              Allowance for loan losses                                               (1,363)
              Non-interest-earning assets                                             14,998
                                                                                    ---------
                               Total assets                                         $364,406
                                                                                    =========

Liabilities and Stockholders' Equity:
        Interest-bearing liabilities:
              Interest-bearing deposits:
                     Demand deposits                                                $ 18,880          1.34
                     Savings and club accounts                                        53,098          2.03
                     Certificates of deposit                                         149,051          5.82
                                                                                    ---------

                               Total interest-bearing deposits                       221,029          4.52

              Borrowed money                                                          62,290          5.78
                                                                                    ---------
                               Total interest-bearing liabilities                    283,319          4.80

        Non-interest bearing deposits                                                 16,927
        Other non-interest-bearing liabilities                                        14,712
                                                                                    ---------

                               Total liabilities                                     314,958

        Stockholders' equity                                                          49,448
                                                                                    ---------
                               Total liabilities and stockholders' equity           $364,406
                                                                                    =========

        Interest rate spread                                                                          2.40%
                                                                                                      =====
        Net interest-earning assets                                                 $ 67,452
                                                                                    =========
        Ratio of average interest-earning assets to average
              interest-bearing liabilities                                              1.24x
                                                                                    =========
</TABLE>


(1)  Includes securities available for sale.


                                      - 7 -

<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,
                                                        ------------------------------------------------------------------------
                                                                        2000                                 1999
                                                        -----------------------------------  -----------------------------------
                                                                                  Average                              Average
                                                           Average                Yield/        Average                Yield/
                                                           Balance     Interest    Cost         Balance     Interest    Cost
                                                        -------------  --------  ----------  -------------  --------  ----------
Assets:                                                          (Dollars in Thousands)              (Dollars in Thousands)
<S>                                                        <C>          <C>         <C>         <C>          <C>         <C>
  Interest-earning assets:
     Loans receivable                                      $162,900     $12,272     7.53%       $149,356     $11,240     7.53%
     Mortgage-backed securities                             122,631       8,287     6.76         119,953       7,722     6.44
     Investment securities (1)                               44,612       3,083     6.91          47,227       3,177     6.73
     Other interest-earning assets                            7,507         460     6.13          12,241         611     4.99
                                                           ---------    -------                 ---------    -------
             Total interest-earning assets                  337,650      24,102     7.14         328,777      22,750     6.92
                                                                        -------                              -------

     Allowance for loan losses                               (1,367)                              (1,546)
     Other non-interest-earning assets                       15,465                               15,912
                                                           ---------                            ---------
             Total assets                                  $351,748                             $343,143
                                                           =========                            =========

Liabilities and Stockholders' Equity:
  Interest-bearing liabilities:
     Interest-bearing deposits:
         Demand                                            $ 20,189         274     1.36%       $ 20,732         284     1.37%
         Savings and club                                    54,218       1,109     2.05          58,727       1,210     2.06
         Certificates of deposit                            145,253       7,973     5.49         141,432       7,090     5.01
                                                           ---------    -------                 ---------    -------
             Total interest-bearing deposits                219,660       9,356     4.26         220,891       8,584     3.89

  Borrowed money                                             65,592       3,838     5.85          57,756       3,275     5.67
                                                           ---------    -------                 ---------    -------
             Total interest-bearing liabilities             285,252      13,194     4.63         278,647      11,859     4.26
                                                                        -------                              -------

  Non-interest-bearing deposits                              16,347                               15,576
  Other non-interest-bearing liabilities                      1,976                                1,796
                                                           ---------                            ---------
             Total liabilities                              303,575                              296,019

  Stockholders' equity                                       48,173                               47,124
                                                           ---------                            ---------
             Total liabilities and stockholders' equity    $351,748                             $343,143
                                                           =========                            =========

  Net interest income/interest rate spread                             $ 10,908     2.51%                    $10,891     2.66%
                                                                       ========     =====                    =======     ====
  Net interest-earning assets/net yield on
    interest-earning assets                                $ 52,398                 3.23%       $ 50,130                 3.31%
                                                           =========                =====       =========                ====
  Ratio of interest-earning assets to interest-bearing
    liabilities                                                1.18x                                1.18x
                                                           =========                            =========
</TABLE>

(1)  Includes securities available for sale.

                                      - 8 -

<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, 2000
                                                                  Compared to
                                                                  Year Ended
                                                               December 31, 1999
                                                  -----------------------------------------
                                                      Increase (Decrease)
                                                            Due to
                                                  ---------------------------
                                                     Volume          Rate          Net
                                                  ------------   ------------  ------------
                                                               (In Thousands)
         Interest income:
         <S>                                         <C>             <C>         <C>
              Loans receivable                       $1,032          $   -       $1,032
              Mortgage-backed securities                175            390          565
              Investment securities                    (178)            84          (94)
              Other interest-earning assets            (270)           119         (151)
                                                     -------         ------      -------

         Total                                          759            593        1,352
                                                     -------         ------      -------

         Interest expense:
              Demand deposits (1)                        (8)            (2)         (10)
              Savings and club accounts                 (95)            (6)        (101)
              Certificates of deposit                   194            689          883
              Borrowed money                            457            106          563
                                                     -------         ------      -------

         Total                                          548            787        1,335
                                                     -------         ------      -------

         Net change in net interest income           $  211          $(194)      $   17
                                                     =======         ======      =======
</TABLE>

         (1)  Includes NOW and Money Market accounts.

Comparison of Financial Condition at December 31, 2000 and 1999

     Total assets were $364.4  million at December 31, 2000,  compared to $348.3
million at  December  31,  1999,  an  increase of $16.1  million,  or 4.6%.  The
increase  in  assets  was   reflected   primarily   in  loans   receivable   and
mortgage-backed  securities,  which increased by $10.8 million and $9.4 million,
respectively,  and was  funded  primarily  by net  income  of $3.3  million,  an
increase in deposits of $3.0 million, and by $12.8 million due to a broker for a
security purchase which was settled in January 2001.

                                      - 9 -

<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 with the
FHLB,  decreased  $3.8 million to $8.9 million at December 31, 2000,  from $12.7
million at December 31, 1999. The decrease in cash and cash equivalents was used
to fund loan originations.

     In the aggregate,  mortgage-backed  securities  and investment  securities,
including   available-for-sale  and  held-to-maturity  issues,  totalled  $175.3
million at December 31, 2000, an increase of $9.6 million from $165.7 million at
December 31, 1999. Such increase was funded by the aforementioned  $12.8 million
due to a broker for a mortgage-backed  security purchased in December 2000 which
was  settled  in  January  2001.  Mortgage-backed  securities,  all of which are
held-to-maturity,  increased $9.4 million due to purchases exceeding repayments.
Investment  securities  held-to-maturity  increased  $146,000,  due to  security
purchases,  while investment  securities  available-for-sale  increased $70,000,
primarily due to a $69,000  decrease in  unrealized  loss. At December 31, 2000,
76.4%  of  the   investment   securities,   including   available-for-sale   and
held-to-maturity  issues,  consisted of U.S.  Government and Agency obligations,
while 80.5% of the mortgage-backed  securities portfolio consisted of Fannie Mae
("FNMA"),  Freddie Mac  ("FHLMC")  and Ginnie Mae  ("GNMA")  issues.  Investment
securities  available for sale included $2.0 million of U.S.  Treasury notes and
$966,000  of  U.S.   Government   Agency  notes  while   investment   securities
held-to-maturity  consisted of $492,000 of U.S. Treasury notes, $30.7 million of
U.S.  Government Agency notes,  $10.0 million in trust preferred  securities and
$584,000 in municipal obligations.

     Loans receivable  increased $10.7 million to $164.0 million at December 31,
2000,  from $153.3  million at December 31, 1999.  The increase was primarily in
the  one- to  four-family  mortgage,  home  equity  loan  and  construction  and
development loan categories, which increased $3.3 million, $2.3 million and $4.4
million, respectively. At December 31, 2000, 84.2% of the outstanding balance of
loans in the portfolio consisted of one-to four-family  related loans,  compared
to 87.5% at December 31, 1999.

     Deposits  totalled $238.0 million at December 31, 2000, an increase of $3.0
million or 1.3% from the $235.0 million balance at December 31, 1999.

     Borrowed  money  decreased  $2.0  million to $62.3  million at December 31,
2000, as compared to $64.3  million at December 31, 1999.  During the year ended
December 31, 2000, short-term borrowings increased $2.0 million to $8.0 million,
with an average cost of 6.52% at year end,  while  long-term debt decreased $4.0
million to $54.3 million, the result of a new borrowing of $2.0 million with a 4
year maturity and an interest rate of 6.54% and the repayment of long-term  debt
totalling $6.0 million.

     Stockholders'  equity  increased  $2.3 million or 4.9%, to $49.4 million at
December 31, 2000,  from $47.1 million at the prior year end.  During 2000,  net
income of $3.3  million was  partially  offset by  $658,000  in  treasury  stock
acquisitions and $601,000 in dividends declared to stockholders.

Comparison of Operating Results for the Years Ended December 31, 2000 and 1999

     Net Income. Net income for 2000 was $3.28 million, an increase of $237,000,
or 7.8%,  from $3.04 million in 1999. The increase was primarily the result of a
$468,000 decrease in total non-interest expense,  partially offset by a $137,000
decrease in total  non-interest  income. The aforementioned two factors combined
to increase  income before income taxes and net income by $331,000 and $212,000,
respectively.

                                     - 10 -

<PAGE>

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

     Interest  Income.  Total interest income  increased $1.3 million or 5.7% to
$24.1 million for 2000 as compared to $22.8  million for 1999.  The increase was
due to an $8.9  million  or 2.7%  increase  in average  interest-earning  assets
during  2000,  along with an  increase  of 22 basis  points in the yield  earned
thereon to 7.14% in 2000 from 6.92% in 1999. The increased  average  balances of
earning  assets  were  funded  by  increases  in  average  FHLB  borrowings  and
stockholders' equity.

     Interest  income on loans during 2000 increased by $1.03 million,  or 9.2%,
to $12.27 million when compared to $11.24  million during 1999.  During both the
years ended  December 31, 2000 and 1999,  the yield earned on the loan portfolio
was 7.53%.  The  average  balance of loans  outstanding  during the years  ended
December  31,  2000  and  1999  totalled  $162.9  million  and  $149.4  million,
respectively.  The increased  average  balance  during 2000 is the result of the
continued  strength in loan  origination  efforts,  including the use of outside
mortgage  brokers,  which began in 1997. Loan originations were $30.4 million in
2000 and $41.1 million in 1999.

     Interest on mortgage-backed  securities, all of which are held-to-maturity,
increased  $565,000,  or 7.3%,  during 2000 to $8.29  million  compared to $7.72
million for 1999.  During the year ended December 31, 2000, the average  balance
of mortgage-backed  securities  outstanding  increased $2.6 million, or 2.2%, to
$122.6 million when compared to $120.0 million for 1999. The yield earned on the
mortgage-backed  securities  portfolio  increased to 6.76% in 2000 from 6.44% in
1999.

     Interest earned on investment securities, including both available-for-sale
and held-to-maturity  issues, decreased by $94,000, or 3.0%, to $3.1 million for
2000,  when  compared to $3.2  million for 1999.  The decrease  resulted  from a
decrease of $2.6  million,  or 5.5%,  in the average  balance of the  investment
securities  portfolio,  which more than offset an increase of 18 basis points in
the yield earned on the  investment  securities  portfolio to 6.91% in 2000 from
6.73% in 1999.

     Interest on other  interest-earning  assets totalled  $460,000 and $611,000
during 2000 and 1999,  respectively.  The yield earned on other interest-earning
assets  increased to 6.13% in 2000 from 4.99% in 1999, while the average balance
of other interest-earning  assets outstanding decreased $4.7 million or 38.6% as
such assets were redeployed to fund loan originations.

     Interest Expense. Interest expense on deposits increased $772,000, or 9.0%,
to $9.36 million  during 2000  compared to $8.58 million for 1999.  The increase
during 2000 was  attributable  to an increase of 37 basis  points in the average
cost of  interest-bearing  deposits  to  4.26%  for  2000  from  3.89%  or 1999,
partially offset by a decrease of $1.2 million,  or 0.6%, in the average balance
of interest-bearing deposits outstanding.  The increase cost of deposits was due
to the higher  market  rates  prevailing  for much of 2000,  which  effected all
deposit categories.

     Interest expense on borrowed money increased  $563,000,  or 17.2%, to $3.84
million during 2000 compared to $3.28 million for 1999. The increase during 2000
was  attributable  to an  increase  of $7.8  million,  or 13.5%,  in the average
balance of borrowings outstanding,  along with an increase of 18 basis points in
the cost of  borrowings  to 5.85% for 2000 from  5.67% for 1999.  The  increased
average  balance  reflects  management's  increased  use of  borrowed  funds  to
compensate for deposit loss,  leverage the balance sheet and to manage  interest
rate risk. The increased cost of borrowings resulted from higher market interest
rates.

                                     - 11 -

<PAGE>

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

     Net Interest  Income.  Net interest income for 2000 increased  $17,000,  or
0.2%, to $10.91  million in 2000 from $10.89  million in 1999.  The net interest
rate spread  decreased to 2.51% in 2000 from 2.66% in 1999 and the interest rate
margin decreased to 3.23% in 2000 from 3.31% in 1999. These decreases  primarily
resulted  from a 37  basis  point  increase  in  the  cost  of  interest-bearing
liabilities  to 4.63% in 2000 from 4.26% in 1999,  which  more than  offset a 22
basis point increase in the yield earned on average  interest-earning  assets to
7.14% in 2000 from 6.92% in 1999.  Despite the decreases in interest rate spread
and margin,  the Company was able to improve net interest  income by  increasing
net interest-earning assets by $2.3 million.

     Provision for Loan Losses.  During both 2000 and 1999,  the Company did not
record a provision  for loan losses as management  determined  that the existing
allowance  for loan  losses was  adequate.  At December  31, 2000 and 1999,  the
Bank's  loan  portfolio   included  loans   totalling   $109,000  and  $792,000,
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,  2000,
representing 0.81% of total loans and 1251.7% of loans delinquent ninety days or
more,  compared  to  an  allowance  of  $1.40  million  at  December  31,  1999,
representing  0.90% of total loans and 176.8% of loans delinquent ninety days or
more. During 2000 and 1999, the Bank charged off loans  aggregating  $37,000 and
$317,000,  respectively.  The $317,000  charge-off in 1999 represented the final
resolution of the Bank's largest  nonperforming  loan, a construction  loan that
had been in default for over six years. The Bank monitors its loan portfolio and
intends to continue to provide  for loan  losses  based on its ongoing  periodic
review of the loan portfolio and general market conditions.

     Non-Interest Income.  Non-interest income decreased by $137,000,  or 20.0%,
to  $548,000  during 2000 as compared  to  $685,000  for 1999.  The  decrease in
non-interest  income  during 2000 resulted  primarily  from $127,000 in gains on
sales of securities during 1999 compared to none in 2000.

     Non-Interest  Expenses.  Non-interest expenses decreased $468,000, or 6.9%,
to $6.4 million  during 2000 compared to $6.9 million for 1999. The decrease was
primarily  attributable to a $237,000  improvement in the results of real estate
owned and a $256,000  decrease  in  miscellaneous  non-interest  expenses.  Real
estate  owned  generated  income of  $196,000  in 2000 as  compared to a loss of
$42,000 in 1999,  due to $235,000  in gains on real  estate sold in 2000.  There
were no real estate  sales in 1999.  The decrease in  miscellaneous  expenses is
primarily  due to  significant  reductions  in legal  fees and  Federal  deposit
insurance and the  nonrecurring  expenses  incurred in 1999 associated with Year
2000 compliance  issues.  The reduction in legal costs was largely the result of
the final resolution,  during 1999, of the Bank's largest  non-performing asset.
The reduction in Federal  deposit  insurance  expense is the result of decreased
premium rates. The remaining  elements of non-interest  expenses  totalled $4.94
million in 2000, a $25,000,  or 0.5%, increase from the $4.91 million comparable
amount in 1999.

     Income Taxes.  Income tax expense  totalled $1.78 million and $1.66 million
during 2000 and 1999, respectively. The increase in 2000 resulted primarily from
an increase in pre-tax income of $348,000.  The Company's  effective  income tax
rate was 35.1% in 2000 and 35.3% in 1999.

                                     - 12 -

<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.  The Bank has continued to
maintain the  required  levels of liquid  assets as defined by OTS  regulations.
This  requirement  of the OTS,  which may be varied at the  direction of the OTS
depending upon economic conditions and deposit flows, is based upon a percentage
of deposits and short-term  borrowings.  The Bank's currently required liquidity
ratio is 4.0%. At December 31, 2000, the Bank's  regulatory  liquidity ratio was
23.0%.

     At December  31, 2000,  the Bank  exceeded  all of its  regulatory  capital
requirements  with a tangible capital level of $40.4 million,  or 11.2% of total
adjusted  assets,  which is above the required  level of $5.4 million,  or 1.5%;
core capital of $40.4 million, or 11.2% of total adjusted assets, which is above
the required  level of $14.4 million,  or 4.0%; and risk-based  capital of $41.8
million, or 30.6% of risk-weighted  assets, which is above the required level of
$10.9 million, or 8.0%.

     The  most  liquid  assets  are cash and  cash  equivalents  and  investment
securities  available  for sale.  The levels of these  assets are  dependent  on
operating,  financing, lending and investing activities during any given period.
At December  31,  2000,  cash and cash  equivalents  and  investment  securities
available for sale totalled $11.9 million, or 3.3% 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, 2000, the
Bank had $62.3 million in  borrowings  outstanding  from the FHLB.  Depending on
market  conditions and the pricing of deposit products and FHLB borrowings,  the
Bank may continue to rely on FHLB borrowing to fund asset growth.

     At December 31, 2000,  the Bank had  commitments  to originate and purchase
loans and fund unused  outstanding  lines of credit and undisbursed  proceeds of
construction mortgages totaling $14.5 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, 2000, totalled $121.5 million.  The Bank expects that substantially
all of the  maturing  certificate  accounts  will  be  retained  by the  Bank at
maturity.

Impact of Inflation and Changing Prices

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



                                     - 13 -
<PAGE>

Recent Accounting Pronouncements

     Accounting for Derivative Instruments and Hedging Activities. In June 1998,
the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities".  SFAS No. 133  establishes  accounting and reporting  standards for
derivative  instruments and for hedging  activities.  It requires that an entity
recognize all  derivatives  as either assets or  liabilities in the statement of
financial  position and measure those  instruments  at fair value.  In addition,
certain  provisions  of this  statement  will  permit,  at the  date of  initial
adoption of SFAS No. 133, the  transfer of any  held-to-maturity  security  into
either  the  available-for-sale  or trading  category  and the  transfer  of any
available-for-sale  security  into  the  trading  category.  Transfers  from the
held-to-maturity  portfolio at the date of initial  adoption  will not call into
question the entity's  intent to hold other debt  securities  to maturity in the
future.  SFAS No. 133 is  effective  for all  fiscal  quarters  of fiscal  years
beginning  after June 15, 2000.  SFAS No. 133 was adopted  effective  January 1,
2001, and did not have a material impact on the Company and the Bank.

                                     - 14 -

<PAGE>


                            WEST ESSEX BANCORP, INC


                                                February 16, 2001



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 finding.


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


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


                                     - 15-

<PAGE>


                         [RADICS & CO., LLC LETTERHEAD]


                          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,
2000 and 1999, 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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to in the second
preceding  paragraph present fairly, in all material respects,  the consolidated
financial  position of West Essex Bancorp,  Inc. and Subsidiaries as of December
31, 2000 and 1999,  and the results of their  operations  and cash flows for the
years then ended, in conformity with generally accepted accounting principles.


                                        /s/ Radics & Co., LLC


February 16, 2001


                                     - 16 -

<PAGE>



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

<TABLE>
<CAPTION>
                                                                                                           December 31,
                                                                                             ---------------------------------------
Assets                                                                 Note(s)                      2000                    1999
------                                                                 -------                      ----                    ----
<S>                                                                <C>                       <C>                      <C>

Cash and amounts due from depository institutions                                              $ 2,416,155              $ 5,728,992
Interest-bearing deposits in other banks                                                         6,461,762                7,016,853
                                                                                             -------------            -------------

          Total cash and cash equivalents                             1 and 17                   8,877,917               12,745,845

Securities available for sale                                      1, 3, 11 and 17               2,994,063                2,923,750
Investment securities held to maturity                             1, 4, 11 and 17              41,727,821               41,582,003
Mortgage-backed securities held to maturity                        1, 5, 11 and 17             130,627,541              121,223,315
Loans receivable                                                     1, 6 and 17               164,037,987              153,276,187
Real estate owned                                                      1 and 7                     601,595                  899,738
Premises and equipment                                                 1 and 8                   2,595,036                2,737,456
Federal Home Loan Bank of New York stock                                 11                      3,558,400                3,272,700
Accrued interest receivable                                          1, 9 and 17                 2,307,828                2,005,563
Excess of cost over assets acquired                                       1                      4,050,580                4,643,348
Other assets                                                             14                      3,026,894                2,996,932
                                                                                             -------------            -------------
          Total assets                                                                       $ 364,405,662            $ 348,306,837
                                                                                             =============            =============

Liabilities and Stockholders' Equity
------------------------------------
Liabilities
-----------
Deposits                                                              10 and 17              $ 237,956,208            $ 234,977,812
Borrowed money                                                        11 and 17                 62,290,413               64,340,115
Advance payments by borrowers for taxes and insurance                                            1,032,953                1,044,140
Due to broker                                                                                   12,768,419                       --
Other liabilities                                                     13 and 14                    909,657                  834,824
                                                                                             -------------            -------------

          Total liabilities                                                                    314,957,650              301,196,891
                                                                                             -------------            -------------

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 4,197,233; shares outstanding
  3,986,991 (2000) and  4,054,357 (1999)                                                            41,972                   41,972
Additional paid-in capital                                                                      17,332,221               17,332,133
Retained earnings - substantially restricted                                                    35,733,815               33,054,528
Common stock acquired by Employee Stock Ownership
  Plan ("ESOP")                                                                                 (1,031,516)              (1,178,874)
Unearned Incentive Plan stock                                                                     (530,666)                (655,549)
Treasury stock, at cost; 210,242 shares (2000)
  and 142,876 shares (1999)                                                                     (2,094,524)              (1,436,550)
Accumulated other comprehensive (loss)  - Unrealized
  (loss) on securities available for sale, net of income taxes                                      (3,290)                 (47,714)
                                                                                             -------------            -------------

          Total stockholders' equity                                                            49,448,012               47,109,946
                                                                                             -------------            -------------

          Total liabilities and stockholders' equity                                         $ 364,405,662            $ 348,306,837
                                                                                             =============            =============
</TABLE>


See notes to consolidated financial statements.

                                     - 17 -


<PAGE>



                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                                                           Year Ended December 31,
                                                                                    ------------------------------------
                                                                  Note(s)                2000                   1999
                                                              --------------        -------------           ------------
<S>                                                               <C>                <C>                    <C>
Interest income:
        Loans                                                     1 and 6            $ 12,272,206           $ 11,240,049
        Mortgage-backed securities                                   1                  8,286,583              7,722,483
        Investment securities                                        1                  2,880,633              2,834,753
        Securities available for sale                                1                    202,550                341,975
        Other interest-earning assets                                                     460,151                611,308
                                                                                      -----------            -----------

                     Total interest income                                             24,102,123             22,750,568
                                                                                      -----------            -----------

Interest expense:
        Deposits                                                     10                 9,356,419              8,583,870
        Borrowed money                                                                  3,837,807              3,275,525
                                                                                      -----------            -----------

                     Total interest expense                                            13,194,226             11,859,395
                                                                                      -----------            -----------

Net interest income                                                                    10,907,897             10,891,173
Provision for loan losses                                            6                         --                     --
                                                                                      -----------            -----------

Net interest income after provision for  loan losses                                   10,907,897             10,891,173
                                                                                      -----------            -----------

Non-interest income:
        Fees and service charges                                                          385,192                387,300
        Gain on dispositions of securities                       1, 3 and 4                    --                126,597
        Other                                                                             163,327                170,957
                                                                                      -----------            -----------

                     Total non-interest income                                            548,519                684,854
                                                                                      -----------            -----------

Non-interest expenses:
        Salaries and employee benefits                            1 and 13              3,280,889              3,282,547
        Net occupancy expense of premises                         1 and 16                349,119                354,017
        Equipment                                                    1                    713,920                665,517
        (Income) loss on real estate owned                        1 and 7                (195,081)                41,891
        Amortization of intangibles                                  1                    592,768                592,768
        Other                                                                           1,659,323              1,932,555
                                                                                      -----------            -----------

                     Total non-interest expenses                                        6,400,938              6,869,295
                                                                                      -----------            -----------

Income before income taxes                                                              5,055,478              4,706,732
Income taxes                                                      1 and 14              1,775,150              1,663,383
                                                                                      -----------            -----------

Net income                                                                           $  3,280,328            $ 3,043,349
                                                                                      ===========            ===========

Net income per common share:                                      1 and 15
        Basic                                                                        $       0.85            $      0.76
                                                                                      ===========            ===========
        Diluted                                                                      $       0.85            $      0.76
                                                                                      ===========            ===========

Weighted average number of common shares outstanding:             1 and 15
        Basic                                                                           3,847,096              4,004,069
                                                                                      ===========            ===========
        Diluted                                                                         3,862,184              4,007,751
                                                                                      ===========            ===========
</TABLE>

                See notes to consolidated financial statements.

                                     - 18 -


<PAGE>


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

                                                                        Year Ended December 31,
                                                                     ----------------------------
                                                                        2000             1999
                                                                     -----------      -----------
<S>                                                                  <C>              <C>
Net income                                                           $ 3,280,328      $ 3,043,349
                                                                     -----------      -----------
Other comprehensive income (loss), net of income taxes:
        Unrealized holding gains (losses) on securities
               available for sale, net of income taxes (benefit)
               of $24,967 and $(122,051), respectively                    44,424         (217,166)

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

Other comprehensive income (loss)                                         44,424         (239,263)
                                                                     -----------      -----------

Comprehensive income                                                 $ 3,324,752      $ 2,804,086
                                                                     ===========      ===========
</TABLE>

                See notes to consolidated financial statements.


                                     - 19 -
<PAGE>


                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                                         Accumulated
                                                                                          Retained
                                                                       Additional         Earnings -        Common Stock
                                                        Common          Paid-In         Substantially        Acquired by
                                                        Stock           Capital           Restricted            ESOP
                                                     -----------      ------------       ------------       ------------
<S>                                                  <C>              <C>                <C>                <C>
Balance - December 31, 1998                          $    41,972      $ 17,339,291       $ 30,507,475       $ (1,326,233)

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

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

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

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

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

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

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

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

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)
                                                     ===========      ============       ============       ============
</TABLE>


<TABLE>
<CAPTION>
                                                        Other
                                                       Unearned         Comprehensive          Total
                                                      Incentive           Treasury            (Loss)          Stockholders'
                                                      Plan Stock           Stock              Income             Equity
                                                     ------------       ------------       ------------       ------------
<S>                                                      <C>              <C>              <C>                <C>
Balance - December 31, 1998                          $         --       $         --       $    191,549       $ 46,754,054

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

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

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

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

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

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

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

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

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
                                                     ============       ============       ============       ============
</TABLE>



                See notes to consolidated financial statements.

                                     - 20 -


<PAGE>


                    WEST ESSEX BANCORP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------
<TABLE>
<CAPTION>
                                                                                                Year Ended December 31,
                                                                                            -------------------------------
                                                                                                2000               1999
                                                                                            ------------       ------------
<S>                                                                                         <C>                <C>
Cash flows from operating activities:
          Net income                                                                        $  3,280,328       $  3,043,349
          Adjustments to reconcile net income
           to net cash provided by operating activities:
                 Depreciation and amortization of premises and equipment                         258,494            235,426
                 Net accretion of premiums, discounts and deferred loan fees                    (400,037)          (180,677)
                 Amortization of intangibles                                                     592,768            592,768
                 (Gain) loss on sale of securities available for sale                                 --            (34,515)
                 (Gain) on sale of investment security held to maturity                               --            (92,082)
                 (Gain) on sale of real estate owned                                            (234,635)                --
                 Deferred income tax (benefit)                                                   (47,074)           219,825
                 (Increase) in accrued interest receivable                                      (236,154)              (754)
                 (Increase) in other assets                                                       (7,855)           (26,463)
                 Increase in interest payable                                                    306,633            115,353
                 Increase in other liabilities                                                    78,118             12,172
                 Amortization of Incentive Plan cost                                             124,883             83,291
                 ESOP shares committed to be released                                            148,256            141,419
                                                                                            ------------       ------------

                        Net cash provided by operating activities                              3,863,725          4,109,112
                                                                                            ------------       ------------

Cash flows from investing activities:
          Proceeds from sales of securities available for sale                                        --          5,021,875
          Proceeds from sale of investment security held to maturity                                  --          1,000,000
          Proceeds from maturities and calls of investment securities held to maturity           150,000         15,700,000
          Purchases of investment securities held to maturity                                         --        (21,044,969)
          Principal repayments on mortgage-backed securities held to maturity                 22,699,074         35,580,321
          Purchases of mortgage-backed securities held to maturity                           (19,314,117)       (46,531,053)
          Purchases of loans receivable                                                       (5,056,994)        (3,010,155)
          Net (increase) in loans receivable                                                  (5,853,653)       (10,293,080)
          Proceeds from sales of real estate owned                                               698,047                 --
          Capitalized cost of real estate owned                                                       --             (8,362)
          Additions to premises and equipment                                                   (116,074)           (25,508)
          Purchase of Federal Home Loan Bank of New York stock                                  (285,700)          (665,400)
                                                                                            ------------       ------------

                        Net cash (used in) investing activities                               (7,079,417)       (24,276,331)
                                                                                            ------------       ------------

Cash flows from financing activities:
          Net increase (decrease) in deposits                                                  2,654,330         (3,344,709)
          Net increase in short-term borrowed money                                            1,950,000          6,000,000
          Proceeds of long-term borrowed money                                                 2,000,000         24,000,000
          Repayment of long-term borrowed money                                               (5,999,702)        (7,669,765)
          Net (decrease) increase in advance payments by borrowers for
           taxes and insurance                                                                   (11,187)           122,182
          Purchases of treasury stock                                                           (671,391)        (1,453,094)
          Cost of Incentive Plan stock                                                                --           (738,840)
          Cash dividends paid on common stock                                                   (574,286)          (374,141)
                                                                                            ------------       ------------

                        Net cash (used in) provided by financing activities                     (652,236)        16,541,633
                                                                                            ------------       ------------

Net (decrease) in cash and cash equivalents                                                   (3,867,928)        (3,625,586)
Cash and cash equivalents - beginning                                                         12,745,845         16,371,431
                                                                                            ------------       ------------

Cash and cash equivalents - ending                                                          $  8,877,917       $ 12,745,845
                                                                                            ============       ============
</TABLE>

                                     - 21 -

<PAGE>


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

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                                       -----------------------------
                                                                           2000              1999
                                                                       ------------      -----------
<S>                                                                     <C>              <C>
Supplemental disclosure of cash flow information:
 Cash paid during the year for:
          Income taxes                                                  $ 1,755,859      $ 1,358,707
                                                                        ===========      ===========

          Interest                                                      $12,887,593      $11,744,042
                                                                        ===========      ===========

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      $   309,238
                                                                        ===========      ===========

          Issuance of treasury stock to fund Supplemental Employee
            Retirement Plan                                             $    12,607      $    15,326
                                                                        ===========      ===========

          Cash dividend declared, net paid                              $   148,910      $   122,155
                                                                        ===========      ===========
</TABLE>

                See notes to consolidated financial statements.


                                     - 22 -
<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  generally   accepted   accounting   principles.   All
         significant intercompany accounts and transactions have been eliminated
         in consolidation.

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

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

         Cash and cash equivalents

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

         Investments and mortgage-backed securities

         Debt  securities over which there exists positive intent and ability to
         hold to maturity are  classified  as  held-to-maturity  securities  and
         reported at amortized cost. Debt and equity  securities that are bought
         and held  principally  for the purpose of selling them in the near term
         are classified as trading  securities and reported at fair value,  with
         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.


                                     - 23 -
<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.


                                     - 24 -
<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.


                                     - 25 -
<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.


                                     - 26 -
<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, 1999,  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  58.9% and 58.0% of the  Company's
outstanding common stock at December 31, 2000 and 1999, respectively.

During the years ended  December 31, 2000 and 1999,  the MHC waived its right to
receive cash dividends on the shares of Company common stock it owns. If MHC had
not waived its rights to receive  dividends,  the amount of such dividends would
have been $940,000 and $705,000,  respectively.  The  cumulative  amount of such
waived  dividends at December 31, 2000 and 1999,  was  $1,645,000  and $705,000,
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, 2000 and 1999, there were no shares
of Preferred Stock issued.


                                     - 27 -
<PAGE>

<PAGE>


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


3.   SECURITIES AVAILABLE FOR SALE

<TABLE>
<CAPTION>

                                                                                   December 31, 2000
                                                        --------------------------------------------------------------------------
                                                                                    Gross Unrealized
                                                           Amortized        ------------------------------           Carrying
                                                             Cost              Gains              Losses              Value
                                                        -------------       -----------         ----------         ----------
<S>                                                       <C>                <C>                <C>                <C>
U.S. Government (including agencies) obligations:
     Due after one year through five years                $1,999,202         $   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
                                                          ==========         ==========         ==========         ==========
</TABLE>

<TABLE>
<CAPTION>

                                                                                   December 31, 1999
                                                        --------------------------------------------------------------------------
                                                                                    Gross Unrealized
                                                           Amortized        ------------------------------           Carrying
                                                             Cost              Gains              Losses              Value
                                                        -------------       -----------         ----------         ----------

<S>                                                       <C>                <C>                <C>                <C>
U.S. Government (including agencies) obligations:
     Due after one year through five years                $1,998,280         $   16,720         $       --         $2,015,000
     Due after ten years                                   1,000,000                 --             91,250            908,750
                                                          ----------         ----------         ----------         ----------

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

</TABLE>


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


                                               Year Ended December 31,
                                            -------------------------------
                                                2000                1999
                                            ------------       ------------


Sales proceeds                              $       --         $5,021,875
Gross gains                                         --             34,515






                                     - 28 -
<PAGE>



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

4.   INVESTMENT SECURITIES HELD TO MATURITY

<TABLE>
<CAPTION>
                                                                                       December 31, 2000
                                                           -----------------------------------------------------------------------
                                                                                       Gross Unrealized
                                                             Carrying          -------------------------------          Estimated
                                                              Value               Gains              Losses            Fair Value
                                                           -----------         ------------        -----------         -----------
<S>                                                        <C>                 <C>                 <C>                 <C>
U.S. Government (including agencies):
         Due after five years through ten years            $ 8,000,000         $        --         $    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
                                                           ===========         ===========         ===========         ===========
</TABLE>

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

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

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

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

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

                                                           $41,582,003         $   106,438         $ 2,819,704         $38,868,737
                                                           ===========         ===========         ===========         ===========

</TABLE>


During the year ended  December 31, 1999,  proceeds of $1,000,000  were received
and a gain of $92,082  recorded as the result of the sale of one  security.  The
issuer of the security was involved in a merger/acquisition  and issued a tender
offer to buy back the security at par value.  There were no sales of  investment
securities held to maturity during the year ended December 31, 2000.

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


                                     - 29 -
<PAGE>


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


5.   MORTGAGE-BACKED SECURITIES HELD TO MATURITY

<TABLE>
<CAPTION>


                                                                                 December 31, 2000
                                                    --------------------------------------------------------------------------
                                                                                 Gross Unrealized
                                                      Carrying          ----------------------------------          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>

<TABLE>
<CAPTION>
                                                                                 December 31, 1999
                                                    --------------------------------------------------------------------------
                                                                                 Gross Unrealized
                                                      Carrying          ----------------------------------          Estimated
                                                       Value               Gains                  Losses            Fair Value
                                                    -----------         ------------           -----------         -----------

<S>                                               <C>                   <C>                   <C>                   <C>
Government National Mortgage Association          $ 51,615,620          $    358,293          $    212,091          $ 51,761,822
Federal Home Loan Mortgage Corporation              18,781,288                67,310               272,548            18,576,050
Federal National Mortgage Association               16,894,108                51,290               157,943            16,787,455
Collateralized mortgage obligations                 33,927,305                    --             2,250,606            31,676,699
Other                                                    4,994                    --                    --                 4,994
                                                  ------------          ------------          ------------          ------------

                                                  $121,223,315          $    476,893          $  2,893,188          $118,807,020
                                                  ============          ============          ============          ============

</TABLE>

There were no sales of  mortgage-backed  securities  held to maturity during the
years ended December 31, 2000 and 1999.

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



                                     - 30 -
<PAGE>


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

6.   LOANS RECEIVABLE

<TABLE>
<CAPTION>
                                                             December 31,
                                                  --------------------------------
                                                       2000              1999
                                                  --------------     -------------
<S>                                                <C>               <C>
Real estate mortgage                               $ 141,259,052     $ 137,337,504
                                                  --------------     -------------

Agency for International Development                      35,360            40,136
                                                   -------------     -------------

Construction and land development                     10,587,471         3,819,271
                                                   -------------     -------------

Consumer:
        Passbook or certificate                          453,990           340,492
        Equity                                        16,662,700        14,381,738
        Automobile                                       212,142           242,641
        Other                                             54,768            33,732
                                                   -------------     -------------

                                                      17,383,600        14,998,603
                                                   -------------     -------------

              Total loans                            169,265,483       156,195,514
                                                   -------------     -------------

Less:   Loans in process                               4,219,192         1,885,739
              Allowance for loan losses                1,363,366         1,400,366
              Net deferred loan (costs) fees            (355,062)         (366,778)
                                                   -------------     -------------

                                                       5,227,496         2,919,327
                                                   -------------     -------------

                                                   $ 164,037,987     $ 153,276,187
                                                  ==============     =============
</TABLE>



The Bank has granted  loans to officers  and  directors of the Bank and to their
associates.  Related  party  loans  do not  involve  more  than  normal  risk of
collectibility.  The aggregate  dollar amount of these loans was  $1,688,000 and
$1,441,000  at December 31, 2000 and 1999,  respectively.  During the year ended
December 31, 2000,  new loans  aggregating  $304,000 were granted and repayments
totalled $57,000.

                                     - 31 -
<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:



                                                             December 31,
                                                         -------------------
                                                         2000           1999
                                                         ----           ----
                                                            (In Thousands)

Nonaccrual                                               $109          $792
Renegotiated                                               90            92
                                                         ----          ----

                                                         $199          $884
                                                         ====          ====



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


<TABLE>
<CAPTION>
                                                                  Year Ended December 31,
                                                                  -----------------------
                                                                      2000      1999
                                                                      ----      ----
                                                                      (In Thousands)

<S>                                                                    <C>        <C>
Interest income if performing in accordance with original terms        $17        $70
Interest income actually recorded                                        9         47
                                                                      ----       ----

Interest income lost                                                   $ 8        $23
                                                                      ====       ====
</TABLE>


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



                                                   Year Ended December 31,
                                                   -----------------------
                                                   2000               1999
                                                   ----               ----

Balance - beginning                            $ 1,400,366         $ 1,716,790
Provision charged  to operations                        --                  --
Loans charged off                                  (37,000)           (316,424)
                                               -----------         -----------

                                               $ 1,363,366         $ 1,400,366
                                               ===========         ===========


                                     - 32 -
<PAGE>



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

6.   LOANS RECEIVABLE  (Cont'd.)

Impaired loans and related amounts recorded in the allowance for loan losses are
summarized as follows:


                                                         December 31,
                                                -----------------------------
                                                   2000               1999
                                                ---------          ----------
                                                        (In Thousands)
Recorded investment in impaired loans:
    With recorded allowances                    $      --          $      189
    Without recorded allowances                        --                  --
                                                ---------          ----------
            Total impaired loans                       --                 189
    Related allowance for loan losses                  --                  35
                                                ---------          ----------
            Net impaired loans                  $      --          $      154
                                                =========          ==========



For the years ended December 31, 2000 and 1999, the average recorded  investment
in impaired loans totalled $3,000 and $647,000,  respectively.  During the years
ended  December  31,  2000 and  1999,  interest  income  of $ -0- and  $147,000,
respectively,  was recognized on such loans,  all on the cash basis,  during the
time each loan was impaired.

7.   REAL ESTATE OWNED


                                                         December 31,
                                                ------------------------------
                                                   2000               1999
                                                ----------          ----------

Acquired in settlement of loans                  $ 601,595           $ 899,738
                                                ==========          ==========



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



                                                  Year Ended December 31,
                                             ----------------------------------
                                                  2000                1999
                                             --------------       -------------


Gain on sale, net                              $ 234,635            $     --
Carrying costs, net of rental income             (39,554)            (41,891)
                                               ---------            --------

                                               $ 195,081            $ (41,891)
                                              ==========           ==========



                                     - 33 -
<PAGE>


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


8.   PREMISES AND EQUIPMENT



                                                 December 31,
                                       ------------------------------
                                          2000               1999
                                       ----------         -----------
Land                                   $  979,315          $  979,315
                                       ----------          ----------

Buildings and improvements              2,174,219           2,171,300
Less accumulated depreciation           1,003,667             933,255
                                       ----------          ----------

                                        1,170,552           1,238,045
                                       ----------          ----------

Leasehold improvements                    112,754             112,754
Less accumulated amortization             112,754             112,136
                                       ----------          ----------

                                               --                 618
                                       ----------          ----------

Furnishings and equipment               1,009,854           2,678,794
Less accumulated depreciation             564,685           2,159,316
                                       ----------          ----------

                                          445,169             519,478
                                       ----------          ----------

                                       $2,595,036          $2,737,456
                                       ==========          ==========


9.   ACCRUED INTEREST RECEIVABLE


                                                 December 31,
                                       ------------------------------
                                          2000                1999
                                       ----------          ----------

Loans                                  $  968,112          $  758,518
Mortgage-backed securities                786,078             697,578
Investment securities                     553,638             549,467
                                        ---------           ---------

                                       $2,307,828          $2,005,563
                                       ==========          ==========


                                     - 34 -
<PAGE>



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

10.  DEPOSITS

<TABLE>
<CAPTION>
                                                                                 December 31,
                                    ----------------------------------------------------------------------------------------------
                                                         2000                                            1999
                                    ---------------------------------------------     --------------------------------------------
                                     Weighted                                           Weighted
                                     Average                                             Average
                                      Rate           Amount             Percent           Rate          Amount             Percent
                                    --------     -------------         ----------        -------     ------------         --------
<S>                                  <C>         <C>                      <C>            <C>         <C>                     <C>
Demand accounts:
          Non-interest-bearing       0.00%       $ 16,927,220             7.11           0.00%       $ 16,011,384            6.81
          Interest-bearing           1.34%         18,879,594             7.94           1.39%         21,091,606            8.98
                                                 ------------           ------                       ------------          ------

                                     0.71%         35,806,814            15.05           0.79%         37,102,990           15.79
Savings and club accounts            2.03%         53,098,430            22.31           2.04%         57,735,315           24.57
Certificates of deposit              5.82%        149,050,964            62.64           5.05%        140,139,507           59.64
                                                 ------------           ------                       ------------          ------

                                     4.20%       $237,956,208           100.00           3.64%       $234,977,812          100.00
                                                 ============           ======                       ============          ======
</TABLE>


The amount of  certificates  of deposit  with  balances  of  $100,000 or more at
December  31,  2000 and 1999 were  approximately  $25,932,000  and  $18,156,000,
respectively.

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

                                                    December 31,
                                          --------------------------------
                                              2000                1999
                                          ------------        ------------

One year or less                            $ 121,508           $ 111,800
After one to three years                       24,274              24,400
After three years                               3,269               3,940
                                            ---------           ---------

                                            $ 149,051           $ 140,140
                                           ==========          ==========




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



                                          Year Ended December 31,
                                          -----------------------
                                            2000           1999
                                          -------         -------

Demand accounts                            $  274          $  284
Savings and club accounts                   1,109           1,210
Certificates of deposit                     7,973           7,090
                                           ------          ------

                                           $9,356          $8,584
                                           ======          ======




                                     - 35 -
<PAGE>


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

11.   BORROWED MONEY

<TABLE>
<CAPTION>
                                                   -------------------------------------------------------------------
                                                                2000                                1999
                                                   ------------------------------       ------------------------------
                                                      Weighted                            Weighted
                                                       Average                             Average
                                                        Rate           Amount               Rate            Amount
                                                   -------------     ------------       -------------    ------------
<S>                                                      <C>         <C>                    <C>          <C>
Securities sold under agreements to
 to repurchase maturing within one year                  6.52%       $ 7,950,000            5.80%        $ 6,000,000

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 May 12, 2008                                   --                 --            5.23%          3,000,000
        due March 24, 2009                               5.42%         5,000,000            5.42%          5,000,000

Monthly amortizing advances:
        Payable in 37 monthly principal
         and interest installments of $96,286 and
         a final payment of $192,818 on
         February 24, 2003                               5.84%         2,430,702            5.84%          3,412,916

        Payable in 97 monthly principal
         and interest installments of $55,591 and
         a final payment of $111,347 on
         February 25, 2008                               6.03%         3,909,711            6.03%          4,327,199

Term advances maturing during:
        2000                                               --                 --            6.40%          1,600,000
        2001                                             6.27%         1,000,000            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            5.60%         10,000,000
        2008                                             5.55%         3,000,000            5.55%          3,000,000
                                                                      ----------                          ----------

                                                         5.78%       $62,290,413            5.66%        $64,340,115
                                                                    ============                        ============
</TABLE>


(a)  Convertible at lender option to  replacement  funding at then current rates
     on November 12,  2002,  March 24,  2001,  March 25, 2003,  May 12, 2000 and
     March 24, 2004,  respectively,  and quarterly thereafter.  During 2000, the
     lender  exercised  its option on the  advance due May 12, 2008 and the Bank
     chose to repay the advance.

Certain information concerning borrowed money is summarized as follows:



                                                    Year Ended December 31,
                                                 -----------------------------
                                                    2000               1999
                                                 ----------         ----------

Average balance outstanding                       $ 65,592           $ 57,756
Maximum month-end balance outstanding               69,167             65,453
Average interest rate                                5.85%              5.67%



                                     - 36 -
<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,
                                                    ---------------------------
                                                       2000             1999
                                                    -----------     -----------
                                                          (In Thousands)

      FHLB capital stock                              $  3,558         $ 3,273
      Mortgage-backed securities held to maturity       55,525          51,596
      Investment securities held to maturity            23,187          19,847
      Securities available for sale                      2,994           2,015
                                                        ------          ------

                                                      $ 85,264        $ 76,731
                                                     =========       =========


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 generally  accepted  accounting
principles  ("GAAP") and  regulatory  capital and  information  as to the Bank's
capital levels at the dates presented:


                                                          December 31,
                                                 -----------------------------
                                                    2000               1999
                                                 ------------      -----------
                                                         (In Thousands)

GAAP capital                                      $ 44,444           $ 41,187
Less: excess of cost over assets acquired           (4,051)            (4,643)
Less: unrealized loss (gain) on debt securities          3                 48
                                                    ------             ------

Core and tangible capital                           40,396             36,592
Add: loan valuation allowance                        1,363              1,400
                                                    ------             ------

          Total regulatory capital                $ 41,759           $ 37,992
                                                 =========           ========



                                     - 37 -
<PAGE>



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


12.   REGULATORY CAPITAL  (Cont'd.)

<TABLE>
<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>



<TABLE>
<CAPTION>
                                                            As of December 31, 1999
                                     ----------------------------------------------------------------------
                                                                                           To Be Well
                                                                                          Capitalized
                                                                                          Under prompt
                                                                 Minimum Capital           Corrective
                                             Actual               Requirements         Actions Provisions
                                     --------------------     --------------------    ---------------------
                                      Amount      Ratio        Amount      Ratio        Amount       Ratio
                                     -------    --------      --------    -------      --------     -------
                                                             (Dollars in Thousands)

<S>                                  <C>         <C>           <C>          <C>         <C>          <C>
Total Capital
 (to risk-weighted assets)           $37,992     28.55%        $10,645      8.00%       $13,306      10.00%

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

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

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

</TABLE>


As of March 31, 2000,  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.


                                     - 38 -
<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:

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                    ------------------------------------
                                                                        2000                    1999
                                                                    -------------          -------------
<S>                                                                   <C>                   <C>
Actuarial present value of benefit obligation, including
 vested benefits of $2,789,163 and  $2,668,704, respectively          $ 2,830,940           $ 2,704,530
                                                                      ===========           ===========

Projected benefit obligation - beginning                              $ 3,284,312           $ 3,622,467
Service cost                                                              145,200               151,864
Interest cost                                                             260,420               233,456
Actuarial (gain) loss                                                     (83,027)             (581,255)
Benefits paid                                                             (75,279)             (100,372)
Settlements                                                               (49,286)              (41,848)
                                                                      -----------           -----------

Projected benefit obligation - ending                                   3,482,340             3,284,312
                                                                      -----------           -----------

Plan assets at fair value - beginning                                   3,850,539             3,393,200
Actual return on assets                                                   214,668               474,093
Employer's contributions                                                   72,663               125,466
Benefits paid                                                             (75,279)             (100,372)
Settlements                                                               (49,286)              (41,848)
                                                                      -----------           -----------

Plan assets at fair value - ending                                      4,013,305             3,850,539
                                                                      -----------           -----------

Funded status                                                             530,965               566,227
Unrecognized net transition obligation                                     94,937               126,582
Unrecognized past service cost                                             51,833                61,386
Unrecognized net gain                                                    (911,680)             (973,632)
                                                                      -----------           -----------

Accrued pension cost included in other liabilities                    $  (233,945)          $  (219,437)
                                                                      ===========           ===========
</TABLE>


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

<TABLE>
<CAPTION>
                                                         Year Ended December 31,
                                                      ---------------------------
                                                         2000            1999
                                                      -----------    ------------
<S>                                                    <C>             <C>
Net periodic pension cost
 included the following components:
          Service cost                                 $ 145,200       $ 151,864
          Interest cost                                  260,420         233,456
          Expected return on plan assets                (308,293)       (238,402)
          Amortization of net transition obligation       31,645          31,645
          Amortization of past service cost                9,553           9,553
          Amortization of net gain                       (51,354)             --
                                                        --------        --------

Net periodic pension cost
  included in salaries and employee benefits            $ 87,171       $ 188,116
                                                       =========       =========

</TABLE>


                                     - 39 -
<PAGE>



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

13. BENEFIT PLANS

         Pension Plan  (Cont'd.)

         Assumptions used to value the pension plan for the years ended December
         31, 2000 and 1999 were as follows:


            Discount Rate                                     8.00%
            Expected long-term rate of return                 8.00%
            Rate of increase in compensation levels           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. 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 $148,256 and $141,419 for
         the years ended December 31, 2000 and 1999, respectively.

         The ESOP shares were as follows:

                                                            December 31,
                                                  ------------------------------
                                                       2000             1999
                                                  -------------    -------------

            Allocated shares                           44,331           29,554
            Shares committed to be released                --                -
            Unreleased shares                         103,437          118,214
                                                      --------         -------

            Total ESOP shares                         147,768          147,768
                                                      ========         =======

            Fair value of unreleased shares       $ 1,267,103      $ 1,108,256
                                                  ============     ===========



                                     - 40 -
<PAGE>


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

13. BENEFIT PLANS  (Cont'd.)

         ESOP  (Cont'd.)

         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 $22,000 and $15,000 for the years ended December
         31,  2000  and  1999,  respectively.  A  portion  of the  1999 and 1998
         liabilities  was  settled via the  issuance  of 1,317  shares and 1,624
         shares,  respectively,  of Company  common stock during the years ended
         December 31, 2000 and 1999, respectively. The Company plans to settle a
         portion of the 2000 liability in the same manner.

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

         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 73,884 shares of
         Company  common  stock  (the  "Stock  Awards")  and  issued  options to
         purchase  up to 184,711  shares of  Company  common  stock (the  "Stock
         Options"). Additional information on the Stock Awards and Stock Options
         is contained in the succeeding paragraphs.

         Stock Awards

         Stock  Awards  under  the  Incentive  Plan are  granted  in the form of
         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 holder. On April 30, 1999, the Company awarded 65,756 shares of its
         common stock  (47,286  shares to employees and 18,470 shares to outside
         directors).  At December 31, 2000,  stock awards for 13,151 shares were
         vested and 8,128 shares were  available for future  grant.  At December
         31,  1999,  none of the Stock  Awards were vested and 8,128 shares were
         available for future  grants.  During the years ended December 31, 2000
         and 1999, approximately $125,000 and $83,000,  respectively, 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) 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 April 30, 1999, options to purchase 176,048 shares 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 exercised or forfeited during 2000
         or 1999, at December 31, 2000, are summarized as follows:


                                     - 41 -
<PAGE>



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

13. BENEFIT PLANS  (Cont'd.)

         Stock Options  (Cont'd.)


                           Shares                                    Weighted
     --------------------------------------------------               Average
         Non-                                             Exercise   Exercise
      Incentive   Incentive      Total    Excercisable     Price       Price
     ----------- -----------  ---------- -------------- ----------  ----------

       46,855     129,193       176,048      35,210       $ 9.50      $ 9.50
      =======     ========     ========     =======      =======      ======


         At December 31, 1999, no options were excercisable.

         At December 31, 2000 and 1999,  stock options for up to 8,663 shares of
         Company common stock remain available for future grants.

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

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

         Had the Company  used the fair value based  method,  net income for the
         years ended  December 31, 2000 and 1999,  would have been  decreased to
         $3,233,000  and  $3,005,000  and both basic and  diluted net income per
         common  share  would  have been  reduced  to $0.84  for the year  ended
         December 31, 2000, and $0.75 for the year ended December 31, 1999.


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, 2000, include approximately $6.8 million of such bad debt allowance
for which federal  income taxes have not been  provided.  If such amount is used
for  purposes  other  then  for bad  debt  losses,  including  distributions  in
liquidation, it will be subject to income tax at the then current rate.


                                     - 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:

                                                    Year Ended December 31,
                                              --------------------------------
                                                   2000               1999
                                              --------------      ------------
          Current tax expense:
                 Federal income                $ 1,669,845        $ 1,336,166
                 State income                      152,379            107,392
                                               -----------        -----------
                                                 1,822,224          1,443,558
                                               -----------        -----------
          Deferred tax expense (benefit):
                 Federal income                    (39,021)           192,560
                 State income                       (8,053)            27,265
                                               -----------        -----------

                                                   (47,074)           219,825
                                               -----------        -----------

                                               $ 1,775,150        $ 1,663,383
                                              ============       ============



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

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                           ----------------------------
                                                                              2000               1999
                                                                           ----------         ---------
<S>                                                                       <C>               <C>
     Deferred tax assets:
            Allowance for loan losses                                       $ 488,828         $ 501,162
            Benefit plans                                                     225,861           134,307
            Goodwill                                                          674,066           645,052
            Charitable contribution carryforward                                   --            62,394
            Unrealized loss on securities available for sale                    1,849            26,816
            Other                                                              16,745            18,250
                                                                           ----------         ---------

                   Total deferred tax assets                                1,407,349         1,387,981
                                                                           ----------         ---------

     Deferred tax liabilities:
            Deferred loan origination fees, net                               184,008           188,407
            Other                                                              18,856            17,196
                                                                           ----------         ---------

                   Total deferred tax liabilities                             202,864           205,603
                                                                           ----------         ---------

                   Net deferred tax asset included in other assets        $ 1,204,485       $ 1,182,378
                                                                         ============       ===========
</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:


                                                       Year Ended December 31,
                                                    ----------------------------
                                                         2000          1999
                                                     -----------    -----------

   Federal income tax                                $ 1,718,863    $ 1,600,289
   Increases (reductions) in taxes resulting from:
          New Jersey state income tax,
           net of federal income tax effect               95,255         88,814
          Other items, net                               (38,968)       (25,720)
                                                     -----------    -----------

   Effective income tax                              $ 1,775,150    $ 1,663,383
                                                     ===========    ===========


15.   NET INCOME PER COMMON SHARE

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

Basic net income per share              $3,280,328      3,847,096     $   0.85
                                                                      ========

Effect of dilutive securities:
           Stock options                        --         11,307
           Other                                --          3,781
                                        ----------     ----------

Diluted net income per share            $3,280,328      3,862,184     $   0.85
                                        ==========     ==========     ========


                                              Year Ended December 31, 1999
                                        ---------------------------------------
                                                                      Weighted
                                            Net          Average      Per Share
                                          Income         Shares        Amounts
                                        ----------     ----------     ---------

Basic net income per share              $3,043,349      4,004,069     $   0.76
                                                                      ========

Effect of dilutive securities:
           Stock options                        --          2,681
           Other                                --          1,001
                                        ----------     ----------

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



                                     - 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,  2000  and  1999,  the  Bank had  $2,125,000  and  $5,134,000,
respectively,  in outstanding  commitments to originate and purchase loans.  The
outstanding commitments at December 31, 2000, include $240,000 for an adjustable
rate  mortgage  loan with an initial  rate of 7.125%,  $185,000  for home equity
loans at fixed rates ranging from 7.75% to 8.50%, $500,000 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 $1,200,000 commercial loan with an interest rate of 8.875%.

At December 31, 2000 and 1999,  undisbursed  funds from approved lines of credit
under a homeowners' equity lending program amounted to approximately  $6,152,000
and $5,001,000,  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, 2000 and 1999,  undisbursed funds from approved  unsecured lines
of credit  under the Credit  Reserve  program  totalled  $114,000  and  $79,000,
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 and $57,000  for the years  ended  December  31, 2000 and
1999,  respectively.  At December 31, 2000, the minimum rental  commitment under
this noncancellable lease expiring in October, 2003, is $158,000,  consisting of
$56,000 for each of the years 2001 through 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.

         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.

         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.


                                     - 46 -
<PAGE>



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

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

         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,
                                                         ---------------------------------------------------------
                                                                    2000                            1999
                                                         ----------------------------  ---------------------------
                                                          Carrying        Estimated      Carrying       Estimated
                                                            Value         Fair Value      Value        Fair Value
                                                         ------------   -------------  -----------    ------------
<S>                                                        <C>           <C>            <C>            <C>
         Financial assets
         ----------------
         Cash and cash equivalents                         $  8,878      $  8,878       $ 12,746       $ 12,746
         Securities available for sale                        2,994         2,994          2,924          2,924
         Investment securities held to maturity              41,728        39,925         41,582         38,869
         Mortgage-backed securities held to maturity        130,628       130,185        121,223        118,807
         Loans receivable                                   164,038       167,854        153,276        153,454
         Accrued interest receivable                          2,308         2,308          2,006          2,006

         Financial liabilities
         ----------------------
         Deposits                                           237,956       238,893        234,978        235,892
         Borrowed money                                      62,290        61,822         64,340         60,032

         Commitments
         -----------
         Loan origination and purchase                        2,125         2,125          5,134          5,134
         Unused lines of credit                               6,266         6,266          5,080          5,080
         Security purchase                                       --            --            246            246

</TABLE>



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.


                                     - 47 -
<PAGE>



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

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

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).


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


                                                          December 31,
                                               --------------------------------
                                                  2000                  1999
                                               -----------          -----------
Assets:
            Cash and due from banks            $    16,406          $    10,904
            Interest-bearing deposits              262,629            1,372,748
            Securities held to maturity          1,055,428            1,057,907
            Loan receivable from the Bank        3,710,993            4,391,828
            Real estate owned                           --              135,000
            Investment in subsidiaries          44,443,991           41,186,716
            Due from subsidiaries                  128,789                   --
            Other assets                             4,133               91,362
                                               -----------          -----------

                        Total assets           $49,622,369          $48,246,465
                                               ===========          ===========

Liabilities:
            Due to subsidiaries                $        --          $   962,623
            Other liabilities                      174,357              173,896
                                               -----------          -----------

                                                   174,357            1,136,519

Stockholders' equity                            49,448,012           47,109,946
                                               -----------          -----------

Total liabilities and stockholders' equity     $49,622,369          $48,246,465
                                               ===========          ===========



                                     - 49 -
<PAGE>


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

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



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


                                                   Year Ended December 31,
                                              ------------------------------
                                                 2000                1999
                                              ----------          ----------

Interest income                               $  393,371          $  433,046
Gain on disposition of security                       --              92,082
Gain on real estate owned                        171,893                  --
                                              ----------          ----------

                        Total income             565,264             525,128

Non-interest expenses                            147,926             179,841
                                              ----------          ----------

Income before income tax and equity in
   undistributed earnings of subsidiaries        417,338             345,287
Income tax                                       146,164             125,405
                                              ----------          ----------

Income before equity in undistributed
  earnings of subsidiaries                       271,174             219,882
Equity in undistributed
  earnings of subsidiaries                     3,009,154           2,823,467
                                              ----------          ----------

Net income                                    $3,280,328          $3,043,349
                                              ==========          ==========



                                     - 50 -
<PAGE>



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


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


                            STATEMENTS OF CASH FLOWS
                            ------------------------
<TABLE>
<CAPTION>

                                                                                                       Year Ended December 31,
                                                                                               ------------------------------------
                                                                                                   2000                    1999
                                                                                                ------------           ------------
<S>                                                                                              <C>                   <C>
Cash flows from operating activities:
            Net income                                                                           $ 3,280,328           $ 3,043,349
            Adjustments to reconcile net income to net cash
              (used in) provided by operating activities:
                        Net amortization of premium and discount                                       2,479                  (603)
                        Equity in undistributed earnings of subsidiaries                          (3,009,154)           (2,823,467)
                        (Gain) on sales of real estate owned                                        (171,893)                   --
                        (Gain) on disposition of security                                                 --               (92,082)
                        Deferred income taxes                                                         69,276               152,937
                        Decrease (increase) in other assets                                           17,953               (30,388)
                        Change in due to/from subsidiaries                                        (1,009,361)              (69,063)
                        (Decrease) increase in other liabilities                                     (26,296)               49,987
                                                                                                 -----------           -----------

                                    Net cash (used in) provided by operating activities             (846,668)              230,670
                                                                                                 -----------           -----------

Cash flows from investing activities:
            Proceeds from disposition of security                                                         --             1,000,000
            Decrease (increase) in loan receivable from Bank                                         680,835            (3,097,364)
            Purchase of real estate owned from subsidiary                                                 --              (135,000)
            Proceeds from sales of real estate owned                                                 306,893                    --
                                                                                                 -----------           -----------

                                    Net cash provided by (used in) investing activities              987,728            (2,232,364)
                                                                                                 -----------           -----------

Cash flows from financing activities:
            Purchase of treasury stock                                                              (671,391)           (1,453,094)
            Purchase of incentive plan stock                                                              --              (738,840)
            Cash dividends paid to stockholders                                                     (574,286)             (374,141)
                                                                                                 -----------           -----------

                                    Net cash (used in ) financing activities                      (1,245,677)           (2,566,075)
                                                                                                 -----------           -----------

Net (decrease) in cash and cash equivalents                                                       (1,104,617)           (4,567,769)

Cash and cash equivalents - beginning                                                              1,383,652             5,951,421
                                                                                                 -----------           -----------

Cash and cash equivalents - ending                                                               $   279,035           $ 1,383,652
                                                                                                 ===========           ===========
</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,
                                                                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                                                     $ 0.23          $ 0.21          $ 0.21          $ 0.20
    Diluted                                                     0.23            0.21            0.21            0.20

Weighted average number of common shares outstanding:
    Basic                                                      3,859           3,859           3,843           3,828
    Diluted                                                    3,859           3,859           3,859           3,872

</TABLE>



<TABLE>
<CAPTION>
                                                                                    Quarter Ended
                                                             ------------------------------------------------------------
                                                              March 31,       June 30,      September 30,   December 31,
                                                                1999            1999           1999            1999
                                                              -------         -------        -------          ------
                                                                      (In thousands, except for per share amounts)
<S>                                                            <C>             <C>             <C>             <C>
Total interest income                                          $5,559          $5,711          $5,746          $5,735
Total interest expense                                          2,825           3,004           3,013           3,018
                                                               ------          ------          ------          ------

Net interest income                                             2,734           2,707           2,733           2,717

Provision for loan losses                                          --              --              --              --
Non-interest income                                               157             174             128             226
Non-interest expenses                                           1,716           1,737           1,652           1,765
Income taxes                                                      423             410             426             404
                                                               ------          ------          ------          ------

Net income                                                     $  752          $  734          $  783          $  774
                                                               ======          ======          ======          ======
Net income per common share:
    Basic                                                      $0.185          $0.180          $0.195          $0.200
    Diluted                                                     0.185           0.180           0.195           0.200

Weighted average number of common shares outstanding:
    Basic                                                       4,066           4,070           4,010           3,871
    Diluted                                                     4,066           4,070           4,018           3,877
</TABLE>


                                     - 52 -
<PAGE>



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


20.   IMPACT OF NEW ACCOUNTING STANDARDS

In June 1999, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging  Activities".  SFAS No. 133  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments   embedded  in  other   contracts   (collectively   referred  to  as
derivatives),  and for hedging activities.  It requires that an entity recognize
all  derivatives  as either assets or liabilities in the statements of financial
position and measure those instruments at fair value. If certain  conditions are
met, a derivative may be specifically  designated as (a) a hedge of the exposure
to  changes  in  the  fair  value  of a  recognized  asset  or  liability  or an
unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows
of a forecasted transaction,  or (c) a hedge of the foreign currency exposure of
a net investment in a foreign  operation,  an unrecognized  firm commitment,  an
available-for-sale  security,  or  a   foreign-currency-denominated   forecasted
transaction.  The accounting for changes in the fair value of a derivative (that
is,  gains and losses)  depends on the intended  use of the  derivative  and the
resulting designation.

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

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

The  implementation  of SFAS No.  133,  as of January  1,  2001,  did not have a
material impact on consolidated financial position or results of operations.


                                     - 53 -
<PAGE>

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

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                       Executive Vice President                    Executive Vice President
  of West Essex Bank                          and Chief Financial Officer                 and Chief Financial Officer
  Managing Partner
  Trammell Crow                             Charles E. Filippo                          Charles E. Filippo
                                              Executive Vice President                    Executive Vice President
                                                                                          and Chief Lending Officer

Everett N. Leonard                          Craig L. Montanaro                          Craig L. Montanaro
  Retired,                                    Senior Vice President,                      Senior Vice President,
  Verona Boro Administrator                   Secretary and Treasurer                     Secretary and Treasurer

John J. Burke                                                                           Michael T. Sferrazza
  President                                                                               Vice President and Controller
  JJ Burke & Associates
                                                                                        Lisa A. Mulligan
David F. Brandley, Esq.                                                                   Vice President and Human Resources
  Partner in the Law Firm of                                                              Officer
  Brandley & Kleppe
                                                                                        Donna Duess
James P. Vreeland                                                                         Vice President
  Retired New Jersey State Senator
                                                                                        John E. Gerasimow
                                                                                          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 April 25, 2001
at the  Radisson  Hotel,  Route 46,  Fairfield,  New  Jersey.  Shareholders  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  shareholders  upon  written  request.
Requests should be sent to Mr. Dominic Tangredi, Compliance Officer.

Stock Transfer/Register

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

Special Counsel

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

Independent Accountants

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

Inquiries

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

Stock Information

WestEssex  Bancorp,  Inc.,  is traded on the Nasdaq  National  Market  under the
ticker  symbol  "WEBK." As of December 31, 2000,  West Essex  Bancorp,  Inc. had
3,986,991 shares of common stock  outstanding and approximately 410 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, 2000            $ 0.10         $ 12.250         $ 11.375
September 30, 2000             0.10           12.000            9.000
June 30, 2000                  0.10            9.313            8.875
March 31, 2000                 0.10            9.625            8.750
December 31, 1999             0.075           10.000            9.375
September 30, 1999            0.075           10.250            9.250
June 30, 1999                 0.075            9.625            9.000
March 31, 1999                0.075           10.000            9.000