SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

                   Annual report pursuant to Section 13 of the
                   Securities Exchange Act of 1934, as amended

                   For the fiscal year ended December 31, 1999
                          Commission File No.: 0-29770

                            WEST ESSEX BANCORP, INC.
             (exact name of registrant as specified in its charter)

          UNITED STATES                                   22-3597632
  (State or other jurisdiction of                  (I.R.S. Employer I.D. No.)
  incorporation or organization)

               417 Bloomfield Avenue, Caldwell, New Jersey 07006
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (973) 226-7911
        Securities registered pursuant to Section 12(b) of the Act: None

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

                     Common Stock, par value $0.01 per share
                                (Title of class)


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X No

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of the  registrant's  knowledge,  in definitive proxy or information
statements  incorporated  by  reference  in  Part  III of the  Form  10-K or any
amendment to this Form 10-K. Yes X   No

         The aggregate  market value of the voting stock held by  non-affiliates
of the registrant, i.e., persons other than the directors and executive officers
of the registrant,  was $12,516,894  based upon the last sales price of $9.00 as
listed on The Nasdaq National Market for March 20, 2000.  Solely for purposes of
this  calculation,  the  shares  held  by West  Essex  Bancorp,  M.H.C.  and the
directors  and  officers  of the  registrant  are  deemed to be  shares  held by
affiliates.

         The number of shares of Common Stock  outstanding  as of March 20, 2000
is: 4,038,357.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the 1999 Annual Report to  Shareholders  and the definitive
Proxy  Statement for the Annual Meeting of  Stockholders to be held on April 27,
2000 are incorporated herein by reference to Parts II and III, respectively,  of
this Form 10-K.
<PAGE>
                                      INDEX
                                                                           PAGE
                                     PART I

Item 1.      Business......................................................   1
Item 2.      Properties....................................................  36
Item 3.      Legal Proceedings.............................................  36
Item 4.      Submission of Matters to a Vote of Security Holders...........  37

                                    PART II

Item 5.      Market for Registrant's Common Equity and Related
             Stockholder Matters...........................................  37
Item 6.      Selected Financial Data.......................................  37
Item 7.      Management's Discussion and Analysis of Financial ............  37
             Condition and Results of Operations...........................  37
Item 7A.     Quantitative and Qualitative Disclosures About Market Risk....  37
Item 8.      Financial Statements and Supplementary Data...................  37
Item 9.      Changes in and Disagreements with Accountants
             on Accounting and Financial Disclosure........................  37

                                    PART III

Item 10.     Directors and Executive Officers of the Registrant............  38
Item 11.     Executive Compensation........................................  38
Item 12.     Security Ownership of Certain Beneficial Owners
             and Management................................................  38
Item 13.     Certain Relationships and Related Transactions................  38

                                     PART IV

Item 14.     Exhibits, Financial Statement Schedules and Reports
             on Form 8-K...................................................  38

SIGNATURES
<PAGE>
Item 1.  Business.
------------------

General

         West Essex Bancorp, Inc. (the "Company") became the federally chartered
stock holding  company for West Essex Bank (the "Bank"),  a federally  chartered
stock savings bank on October 2, 1998 in connection  with the  conversion of the
Bank from the mutual to stock form and  reorganization of the Bank into a mutual
holding   company   structure   ("Reorganization").   In  connection   with  the
Reorganization,  West Essex Bancorp, M.H.C. (the "MHC") was organized and became
a majority holder of the Company's  outstanding  common stock. The Company,  the
Bank and the MHC are regulated by the Office of Thrift  Supervision (the "OTS").
The  Bank is a  federally  chartered  savings  bank and is  wholly-owned  by the
Company.  The  Company is a savings and loan  holding  company and is subject to
regulation by the OTS, the Federal Deposit  Insurance  Corporation  ("FDIC") and
the Securities and Exchange Commission ("SEC").  Currently, other than investing
in various  securities,  the Company  does not  directly  transact  any material
business  other  than  through  the Bank.  Accordingly,  the  discussion  herein
addresses the operations of the Company as they are conducted  through the Bank.
At December 31,  1999,  the Company had total  assets of $348.3  million,  total
deposits of $235.0 million and total stockholders' equity of $47.1 million.

         The Bank was  originally  organized  in 1915 as a New Jersey  chartered
building and loan association and, in 1995, became a federally chartered savings
bank.  The  Bank is a  community-oriented  savings  institution  whose  business
primarily  consists of accepting  deposits from  customers  and investing  those
funds primarily in mortgage-backed securities and mortgage loans secured by one-
to  four-family  residences  located in the Bank's  primary  market  area.  To a
significantly  lesser extent,  the Bank invests in commercial real estate loans,
multi-family  loans,  construction  and land  development  loans and home equity
loans as well as consumer loans and  obligations  of the federal  government and
federal  agencies  as well as  states  and  municipalities.  The Bank  generally
retains  for its  portfolio  all one- to  four-family  mortgage  loans  which it
originates.

         The  Company's  and  Bank's  executive   offices  are  located  at  417
Bloomfield  Avenue,  Caldwell,  New Jersey 07006.  The telephone number is (973)
226-7911.

Market Area and Competition

         The Bank conducts its business  through its  administrative  and branch
office  located in Caldwell,  New Jersey,  and seven other full  service  branch
offices  located in West Orange,  Franklin Lakes,  River Vale,  Pine Brook,  Old
Tappan  and  Northvale,  all of which are  located  in the  Northern  New Jersey
counties  of Essex,  Morris and Bergen.  The Bank's  deposit  gathering  base is
concentrated in the communities  surrounding its offices. While its lending area
extends throughout New Jersey,  most of the Bank's mortgage loans are secured by
properties located in Essex, Morris and Bergen Counties in Northern New Jersey.

         The economy in the Bank's  primary  market area is based upon a mixture
of service  and retail  trade.  Other  employment  is  provided  by a variety of
wholesale trade, manufacturing,  federal, state and local government,  hospitals
and  utilities.  The area is also home to  commuters  working in the greater New
York City metropolitan  area.  Certain  communities in Bergen,  Essex and Morris
Counties are among the highest per capita  income in the  country.  Essex County
contains  many older  residential  commuter  towns which  function  partially as
business  and service  centers.  Morris  County was once  predominantly  a rural
farming area. It has experienced rapid growth in the residential, commercial and
industrial sectors. Bergen County has benefitted from its geographical proximity
to New York City.  Originally an agricultural  region, the county shifted toward
manufacturing  and service  industries  and many foreign firms have set up their
American headquarters in this County.
<PAGE>
         The Bank  faces  significant  competition  both in making  loans and in
attracting  deposits.  The State of New Jersey has a high  density of  financial
institutions,  many of which are branches of significantly  larger  institutions
which  have  greater  financial  resources  than  the  Bank,  all of  which  are
competitors of the Bank to varying  degrees.  The Bank's  competition  for loans
comes  principally  from  commercial  banks,  savings  banks,  savings  and loan
associations, credit unions, mortgage banking companies and insurance companies.
These companies compete aggressively through advertising and by cutting interest
rates on loans. The Bank has sought to compete for loans by advertising in local
papers,  developing contacts with local real estate brokers,  and providing cash
incentives to its retail and mortgage  origination staff to attract loans to the
Bank. In addition, the Bank is affiliated with several mortgage brokers who, for
a fee,  provide  the Bank with  loans.  The Bank does not  attempt to compete by
offering  interest  rates  below  those  offered  by its  competitors,  but does
endeavor to keep its  interest  rates  competitive  in that the Bank's rates are
neither  higher  nor  lower  than  rates  generally  available  from the  Bank's
competitors  in its market area.  Its most direct  competition  for deposits has
historically  come  from  commercial  banks,  savings  banks,  savings  and loan
associations  and credit  unions.  The Bank  faces  additional  competition  for
deposits from short-term money market funds,  common stock,  other corporate and
government  securities funds and from other financial service  institutions such
as brokerage firms and insurance companies.

Lending Activities

         Loan  Portfolio   Composition.   The  Bank's  loan  portfolio  consists
primarily of first mortgage loans secured by one- to four-family residences.  At
December 31, 1999,  the Bank had total loans  receivable of $156.2  million,  of
which  $122.7  million were one- to  four-family,  residential  mortgage  loans,
equalling  78.5%  of the  Bank's  total  loans  receivable.  At such  date,  the
remainder of the Bank's loan portfolio  consisted primarily of: $13.0 million of
commercial real estate loans or 8.3% of total loans receivable; $14.4 million of
home equity loans and lines of credit, or 9.2% of total loans  receivable;  $1.7
million of multi-family  residential  loans, or 1.1% of total loans  receivable;
$3.8  million of  construction  and  development  loans,  or 2.4% of total loans
receivable;  and $617,000 of consumer loans, or 0.4% of total loans  receivable,
consisting primarily of loans on passbook deposit accounts and automobile loans.

         The types of loans that the Bank may  originate  are subject to federal
and state laws and regulations.  Interest rates charged by the Bank on loans are
affected  by the demand for such  loans and the  supply of money  available  for
lending  purposes and the rates  offered by  competitors.  These factors are, in
turn, affected by, among other things, economic conditions, monetary policies of
the federal government, including the Federal Reserve Board, and legislative tax
policies.  In recent  years,  the Bank has  aggressively  sought to increase its
originations  of  mortgage  loans  and has  sought  to  purchase  loans and loan
participations.  This has resulted in total loans increasing from $116.1 million
at December 31, 1997 to $143.0  million at December 31, 1998 and $156.2  million
at December 31, 1999.

                                       2
<PAGE>
         The  following  table sets  forth the  composition  of the Bank's  loan
portfolio in dollar  amounts and as a percentage  of the  portfolio at the dates
indicated.
<TABLE>
<CAPTION>
                                                                              At December 31,
                                              -------------------------------------------------------------------------------------

                                                      1999                1998                 1997                 1996
                                              --------------------- -------------------- -------------------- --------------------

                                                          Percent              Percent              Percent              Percent
                                               Amount    of Total    Amount    of Total   Amount    of Total   Amount    of Total
                                               ------    --------    ------    --------   ------    --------   ------    --------
<S>                                            <C>          <C>      <C>         <C>       <C>        <C>       <C>        <C>
Mortgage Loans:
  Residential:
   One- to four-family......................   $122,680     78.54%   $114,690    80.20%    $87,489    75.34%    $60,741    71.88%
   Multi-family.............................      1,693       1.08      1,943      1.36      2,004      1.73      2,068      2.45
   Home equity loans and lines(1)...........     14,382       9.21      9,631      6.73      8,554      7.37      6,653      7.87
   Commercial real estate...................     12,965       8.30     11,589      8.11     10,695      9.21     12,275     14.53
   Construction and development.............      3,819       2.45      4,394      3.07      6,485      5.58      2,080      2.46
                                               --------     -----    --------     -----     -------    -----     -------    -----
      Total mortgage loans..................    155,539      99.58    142,247     99.47    115,227     99.23     83,817     99.19
                                               --------     -----    --------    -----     -------    -----     -------    -----
 Commercial loans............................        40       0.02         49      0.04         59      0.05         87      0.10
                                               --------     -----    --------    -----     -------    -----     -------    -----
 Consumer Loans:
    Passbook or certificate.................        341       0.22        401      0.28        550      0.47        427      0.51
    Other....................................       276       0.18        305      0.21        291      0.25        168      0.20
                                               --------     -----    --------    -----     -------    -----     -------    -----
      Total consumer loans..................        617       0.40        706      0.49        841      0.72        595      0.71
                                               --------     -----    --------    -----     -------    -----     -------    -----
  Total loans receivable....................    156,196    100.00%    143,002    100.00%   116,127    100.00%    84,499    100.00%
                                                           ======                ======               ======               ======

  Less:
    Construction loans in process...........    (1,886)               (1,311)              (1,437)                (440)
    Allowance for loan losses...............    (1,400)               (1,717)              (1,885)              (1,564)
    Deferred loan fees, net.................        366                   298                 (70)                (361)
                                               --------              ---------            -------              -------

  Loans receivable, net.....................   $153,276              $140,272             $112,735              $82,134
                                               ========              ========             ========              =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                         1996
                                                  --------------------
                                                             Percent
                                                   Amount    of Total
                                                   ------    --------
<S>                                               <C>       <C>
Mortgage Loans:
  Residential:
   One- to four-family......................      $65,002    74.50%
   Multi-family.............................        1,115     1.28
   Home equity loans and lines(1)...........        4,388     5.03
   Commercial real estate...................       12,707    14.56
   Construction and development.............        3,032     3.47
                                                  -------    -----
      Total mortgage loans..................       86,244    98.84
                                                  -------    -----
 Commercial loans............................         234     0.27
                                                  -------    -----
 Consumer Loans:
    Passbook or certificate.................          543     0.62
    Other....................................         234     0.27
                                                  -------    -----
      Total consumer loans..................          777     0.89
                                                  -------    -----
  Total loans receivable....................       87,255   100.00%
                                                            ======

  Less:
    Construction loans in process...........         (592)
    Allowance for loan losses...............       (1,200)
    Deferred loan fees, net.................         (432)
                                                  -------
    Loans receivable, net...................      $85,031
                                                  =======

</TABLE>
(1)  Includes second mortgage loans other than home equity loans of $-0-,  $-0-,
     $63,000,  $74,000 and $91,000 at December 31, 1999,  1998,  1997,  1996 and
     1995.

                                       3

<PAGE>
         Loan  Maturity.  The following  table shows the  remaining  contractual
maturity of the Bank's loans at December  31,  1999.  The table does not include
the effect of future principal repayments or prepayments.
<TABLE>
<CAPTION>
                                                                           At December 31, 1999
                                                  -------------------------------------------------------------------------

                                                  One- to                Equity                 Construction
                                                   Four-       Multi-   Loans and    Commercial      and
                                                  Family       Family    Lines      Real Estate  Development   Commercial
                                                  ------       ------    -----      -----------  -----------   ----------
                                                                             (In thousands)
Amounts due:
<S>                                               <C>           <C>       <C>           <C>      <C>               <C>
    One year or less...........................   $  398        $ --      $ 151         $ --     $ 3,259           $-
                                                --------      ------    -------      -------     -------          ---
    After one year:
       More than one year to three years.......      893          38        163          333         490           --
       More than three years to five years.....    1,279         267      1,412        1,084          --            2
       More than five years to ten years.......    8,413          --      3,537        2,273          30           38
       More than 10 years to 20 years..........   26,550       1,204      8,348        8,307          --           --
        More than 20 years.....................   85,147         184        771          968          40           --
                                                --------      ------    -------      -------     -------          ---

    Total due after one year...................  122,282       1,693     14,231       12,965         560           40
                                                --------      ------    -------      -------     -------          ---
    Total due..................................  122,680       1,693     14,382       12,965       3,819           40
          Less:
              Loans in process.................       --          --         --           --      (1,886)          --
              Deferred loan (fees) costs.......      340           5         --           36         (15)          --
              Allowance for loan losses........     (927)        (29)      (198)        (180)        (58)          --
                                                --------      ------    -------      -------     -------          ---
       Loans receivable, net................... $122,093      $1,669    $14,184      $12,821     $ 1,860          $40
                                                ========      ======    =======      =======     =======          ===
<CAPTION>
                                                   -----------------
                                                                Total
                                                   Consumer     Loans
                                                   --------     -----
<S>                                                  <C>       <C>
Amounts due:
    One year or less...........................      $356      $ 4,164
                                                     ----      -------
    After one year:
       More than one year to three years.......       123        2,040
       More than three years to five years.....       138        4,182
       More than five years to ten years.......        --       14,291
       More than 10 years to 20 years..........        --       44,409
       More than 20 years......................        --       87,110
                                                      ---      -------
    Total due after one year...................       261      152,032
                                                      ---      -------

    Total due..................................       617      156,196
          Less:
              Loans in process.................        --       (1,886)
              Deferred loan (fees) costs.......        --          366
              Allowance for loan losses........       (8)       (1,400)
                                                      ---       ------
       Loans receivable, net...................      $609     $153,276
                                                     ====     ========
</TABLE>
                                       4
<PAGE>
         The following table sets forth, at December 31, 1999, the dollar amount
of loans  contractually due after December 31, 2000, and whether such loans have
fixed interest rates or adjustable interest rates.
<TABLE>
<CAPTION>
                                                                         Due After December 31, 2000
                                                           -------------------------------------------------------
                                                             Fixed                Adjustable                Total
                                                           --------                 -------               --------
                                                                               (In thousands)
<S>                                                         <C>                     <C>                   <C>
Mortgage loans:
   One- to four-family......................                $85,773                 $36,509               $122,282
   Multi-family.............................                  1,693                      --                  1,693
   Equity loans and lines...................                 10,077                   4,154                 14,231
   Commercial real estate...................                 11,467                   1,498                 12,965
   Construction and development.............                    290                     270                    560
                                                           --------                 -------               --------
     Total mortgage loans...................                109,300                  42,431                151,731
Commercial loans............................                     40                      --                     40
Consumer loans..............................                    227                      34                    261
                                                           --------                 -------               --------

       Total loans .........................               $109,567                 $42,465               $152,032
                                                           ========                 =======               ========

</TABLE>

         Origination,  Purchase  and  Servicing  of Loans.  The Bank's  mortgage
lending  activities are conducted  primarily by its loan personnel  operating in
all of the Bank's  branch  offices.  All loans  originated  by the Bank,  either
through internal  sources or through loan brokers,  are underwritten by the Bank
pursuant  to  the  Bank's  policies  and  procedures.  The  Bank's  underwriting
policies,  guidelines  and procedures are modeled after those of FNMA and FHLMC.
The Bank  originates  both  adjustable-rate  and  fixed-rate  loans.  The Bank's
ability to  originate  fixed- or  adjustable-rate  loans is  dependent  upon the
relative  customer  demand for such loans,  which is affected by the current and
expected future level of interest rates. It is the general policy of the Bank to
retain all loans  originated in its portfolio.  The Bank  currently  retains the
servicing  for all  loans  originated  in its  portfolio.  The  Bank  has  faced
significant  competition for loans in its market area.  Until 1996, the Bank had
relied  solely  upon its own  mortgage  staff to  originate  loans and  depended
primarily  upon getting loans from the Bank's  customer  base.  The Bank did not
aggressively  advertise,  nor did it pay brokers to introduce loans to the Bank.
Since 1996, the Bank has sought to compete more  aggressively for loans. To that
end, the Bank began paying its retail and mortgage loan  origination  staff cash
incentives  based upon loan  originations  and has  significantly  increased its
advertising  in its local  market  area.  The Bank has also begun  working  with
mortgage brokers and paying them fees in return for referring loan applicants to
the Bank.  The Bank's  efforts have enabled it to  substantially  increase  loan
originations  since 1996.  Specifically,  the Bank  originated  $42.2 million in
mortgage loans in 1999, $50.5 million in 1998 and $46.4 million in 1997.
<PAGE>
         During the years ended  December 31, 1999 and  December  31, 1998,  the
Bank  originated  $34.5 million and $45.8 million of one- to four-family  loans,
respectively,  including  home equity loans and lines of credit.  Based upon the
Bank's  investment  needs and market  opportunities,  the Bank has, on occasion,
purchased loans,  primarily one- to four-family loans, or participated in loans,
primarily   multi-family  loans  through  the  Thrift   Institutions   Community
Investment  Corporation of New Jersey ("TICIC").  At December 31, 1999, the Bank
had nine loan participations  through TICIC totalling $2.0 million. The Bank has
in its loan portfolio  loans generated by third-party  mortgage  companies which
were underwritten pursuant to the Bank's policies, and closed in the name of the
Bank.


                                       5
<PAGE>
         The following table sets forth the Bank's loan originations, purchases,
and  principal  repayments  for the  periods  indicated.  The Bank sold no loans
during the periods indicated.
<TABLE>
<CAPTION>
                                                                                         For the Years Ended
                                                                                            December 31,
                                                                                  ---------------------------------
                                                                                    1999         1998        1997
                                                                                  --------    --------     --------
<S>                                                                               <C>         <C>          <C>
Beginning balance.............................................................    $143,002    $116,127     $ 84,499
                                                                                  --------    --------     --------
  Purchases--Multi-family mortgage loans.......................................        970         281           --
                                                                                  --------    --------     --------
  Loans originated:
    Mortgage  loans:
       One- to four-family....................................................      25,440      41,194       35,017
       Multi-family...........................................................         455          --           --
       Home equity lines......................................................       9,022       4,644        4,330
       Commercial real estate.................................................       2,485       2,310        1,436
       Construction and land development......................................       4,803       2,317        5,610
                                                                                  --------    --------     --------
           Total mortgage loans...............................................      42,205      50,465       46,393
                                                                                  --------    --------     --------
    Consumer loans:
       Passbook loans.........................................................         725         371          477
       Automobile.............................................................         116         167          222
       Credit lines(1)........................................................         141           3           28
                                                                                    -------    --------     --------
           Total consumer loans...............................................         982         541          727
                                                                                   --------    --------     --------

    Loans made to facilitate the sale of
      real estate owned.......................................................          --          --           --
                                                                                  --------    --------     --------
           Total originations.................................................      43,187      51,006       47,120
                                                                                  --------    --------     --------
  Loans transferred to real estate owned......................................        (309)         --        (680)
                                                                                  --------    --------     --------
    Principal repayments and other, net.......................................    (30,654)     (24,412)    (14,812)
                                                                                  --------    --------     --------
Ending balance................................................................    $156,196    $143,002     $116,127
                                                                                  ========    ========     ========
</TABLE>
         One- to Four-Family  Mortgage Lending.  The Bank offers both fixed-rate
and  adjustable-rate  mortgage  loans  ("ARM")  secured  by one- to  four-family
residences with maturities of up to 30 years.  Loan  originations  are generally
obtained  from the Bank's  retail and loan  origination  staff,  from local real
estate  agents,  from  wholesale  brokers and their contacts in the Bank's local
real estate industry, from existing or past customers and through referrals from
members of the local communities and advertising.  One- to four-family  mortgage
loans are generally  underwritten in accordance with  FHLMC/FNMA  standards.  At
December 31, 1999,  one- to four-family  mortgage loans totalled $122.7 million,
or 78.5% of the Bank's  total loans  receivable.  Of the Bank's  mortgage  loans
secured  by one- to  four-family  residences,  $86.2  million,  or  70.2%,  were
fixed-rate loans and $36.5 million or 29.8% were ARM loans.

                                       6
<PAGE>
         The Bank currently offers fixed-rate  mortgage loans with terms from 10
to 30  years.  The  Bank  generally  retains  for its  portfolio  all  loans  it
originates.  The Bank also offers ARM loan  programs  made for terms of 30 years
with interest rates which adjust  periodically.  The Bank's ARM loans  generally
provide for periodic  (not more than 2.0% over the existing  interest  rate) and
overall  (not more than 6.0%) caps on the  increase or decrease in the  interest
rate at any  adjustment  date and over the life of the loan.  The interest  rate
adjustment  on these loans is indexed to the  one-year  U.S.  Treasury CMT Index
with a repricing margin of 2.75% above the index.

         The  origination of  adjustable-rate  residential  mortgage  loans,  as
opposed  to  fixed-rate  residential  mortgage  loans,  helps  reduce the Bank's
interest rate exposure to increases in interest rates. However,  adjustable-rate
loans  generally pose credit risks not inherent in fixed-rate  loans,  primarily
because as interest rates rise,  the  underlying  payments of the borrower rise,
thereby  increasing  the  potential  for default.  Periodic and lifetime caps on
interest  rate  increases  help to reduce the credit  risk  associated  with the
Bank's adjustable-rate loans but also limit the interest rate sensitivity of its
adjustable-rate mortgage loans.

         The  Bank's  policy  generally  is to  originate  one-  to  four-family
residential  mortgage  loans in amounts up to 90% of the lower of the  appraised
value or the selling  price of the  property  securing the loan,  but  generally
requires private mortgage insurance if the loan is in an amount in excess of 80%
of the lower of the appraised value or selling price.  Mortgage loans originated
by the  Bank  include  due-on-sale  clauses  which  provide  the  Bank  with the
contractual  right to deem the loan immediately due and payable in the event the
borrower  transfers  ownership  of the  property  without  the  Bank's  consent.
Due-on-sale  clauses are an important means of adjusting the rates on the Bank's
fixed-rate  mortgage loan  portfolio  and the Bank has  generally  exercised its
rights under these  clauses.  The Bank requires  fire,  casualty,  title and, in
certain cases, flood insurance on all properties securing real estate loans made
by the Bank.

         In an effort to provide financing for first-time home buyers,  the Bank
offers a first-time home buyers program. This program offers one- to four-family
residential mortgage loans to qualified individuals.  These loans are originated
using the Bank's standard underwriting guidelines. With respect to loans granted
under this program,  the Bank originates these loans in amounts up to 95% of the
lower of the appraised value or selling price of the property securing the loan.
In addition,  the Bank also  participates in the First Home Club Program through
the FHLB-NY, which benefits low income first time homebuyers.

         Home Equity  Loans.  The Bank offers  fixed-rate  home equity loans and
floating rate home equity lines of credit in amounts of up to $150,000. Loans in
excess of $150,000 may be made with Board approval. Home equity loans have fixed
rates of  interest  with terms of up to 20 years.  Interest  rates on such loans
will vary depending on the  amortization  period chosen by the  borrowers.  Home
equity lines of credit have adjustable-rates of interest,  which may adjust on a
monthly basis. The  adjustable-rate of interest charged on such loans is indexed
to the prime rate as  published  in The Wall  Street  Journal.  Currently,  home
equity lines of credit  originated at this time bear a maximum lifetime interest
rate cap of 14.0%.  The maximum  combined  loan-to-value  ("LTV")  ratio on home
equity loans and equity lines of credit is 70%;  however,  this policy  provides
that  management  has the discretion to make such real estate loans in excess of
70%. At December  31, 1999,  the Bank had in its loan  portfolio an aggregate of
$19.4  million of home equity loans and equity  lines of credit,  of which $10.3
<PAGE>
million were  fixed-rate home equity loans and $9.1 million were equity lines of
credit. Of the $9.1 million equity lines of credit,  $5.0 million was drawn upon
such loans at December 31, 1999. The underwriting standards employed by the Bank
for home  equity  loans  and  lines of credit  include  a  determination  of the
applicant's credit history and an assessment of the applicant's  ability to meet
existing  obligations  and  payments on the  proposed  loan and the value of the
collateral  securing the loan. The stability of the  applicant's  monthly income
may  be  determined  by  verification  of  gross  monthly  income  from  primary
employment   and,   additionally,   from  any   verifiable   secondary   income.
Creditworthiness of the applicant is of

                                       7
<PAGE>
primary  consideration.  The Bank's  home  equity  loans and lines of credit are
secured  by  first  or  second  liens  on one-  to  four-family  residences  and
condominiums located in the Bank's primary market area.

         Commercial  Real  Estate  and  Multi-Family   Lending.  The  Bank  also
originates  multi-family  and  commercial  real estate loans that are  generally
secured  by five or more  unit  apartment  buildings  and  properties  used  for
business purposes such as small shopping centers located in northern New Jersey.
The Bank's  multi-family and commercial real estate underwriting policy provides
that such real  estate  loans may be made in amounts up to 65% of the  appraised
value of the property;  however,  this policy  provides that  management has the
discretion  to make such  real  estate  loans in excess of 65% of the  appraised
value of the  property.  The Bank's  multi-family  and  commercial  real  estate
lending  is limited  by the  regulatory  loans-to-one  borrower  limit  which at
December 31, 1999 was $5.7 million. The Bank currently  originates  multi-family
and commercial real estate loans, generally with terms of up to 20 years and has
developed  a  variety  of  programs,   including   balloon-type  and  adjustable
mortgages,  indexed  to the  FHLB  advance  rate,  the  Prime  Rate and the U.S.
Treasury Bill rate. The Bank's  multi-family  and  commercial  real estate loans
have fixed or  adjustable  rates of interest  that adjust  periodically  and are
indexed to either the prime rate as published in The Wall Street  Journal or the
U.S.  Treasury  Bill. In reaching its decision on whether to make a multi-family
or commercial  real estate loan, the Bank considers the net operating  income of
the property, the borrower's expertise, credit history and profitability and the
value of the  underlying  property.  The Bank has  generally  required  that the
properties  securing these real estate loans have debt service  coverage  ratios
(the ratio of earnings before debt service to debt service) of at least 1.15. In
addition,  environmental  impact  surveys may be required for  multi-family  and
commercial real estate loans. Generally, multi-family and commercial real estate
loans made to  corporations,  partnerships  and other business  entities require
personal  guarantees  by the  principals.  The Bank may not  require a  personal
guarantee on such loans  depending on the  creditworthiness  of the borrower and
the amount of the downpayment  and other  mitigating  circumstances.  The Bank's
multi-family  real estate loan  portfolio at December 31, 1999 was $1.7 million,
or 1.1%, of total loans  receivable and the Bank's  commercial  real estate loan
portfolio at such date was $13.0 million, or 8.3%, of total loans receivable.

         Loans secured by multi-family and commercial real estate properties are
generally  larger and involve a greater  degree of risk than one- to four-family
residential  mortgage loans.  Because  payments on loans secured by multi-family
and  commercial  real  estate  properties  are  often  dependent  on  successful
operation  or  management  of the  properties,  repayment  of such  loans may be
subject to a greater extent to the then prevailing conditions in the real estate
market or the  economy.  The Bank seeks to  minimize  these  risks  through  its
underwriting standards.

         Construction and Development Lending. The Bank originates  construction
and  development  loans for the  development of one- to four-family  residences.
Such loans are made principally to licensed and experienced  developers known to
the Bank in its  primary  market  area  for the  construction  of  single-family
developments.  The Bank also originates  construction and development  loans for
the development of commercial properties.  The Bank generally does not originate
loans secured by unimproved land.  Construction  loans are originated in amounts
up to 70% of the lesser of the appraised value of the property,  as improved, or
the sales price.  Such loans are offered for up to two year terms and adjustable
<PAGE>
interest rates which may adjust monthly and float at margins which are generally
indexed to the Prime Rate of interest  as  reported in The Wall Street  Journal.
Proceeds of construction  loans are disbursed as phases of the  construction are
completed.  Generally,  if the borrower is a  corporation,  partnership or other
business entity, personal guarantees by the principals are required. At December
31, 1999, the Bank had $3.8 million of construction loans which amounted to 2.4%
of the Bank's total loans receivable.

         Construction  and  development  financing  is generally  considered  to
involve a higher  degree of credit risk than  long-term  financing  on improved,
owner-occupied  real estate.  Risk of loss on a  construction  loan

                                       8
<PAGE>
is dependent largely upon the accuracy of the initial estimate of the property's
value at completion of  construction  or  development  compared to the estimated
cost (including  interest) of construction and other assumptions,  including the
estimated time to sell residential  properties.  If the estimate of value proves
to be inaccurate,  the Bank may be confronted  with a project,  when  completed,
having a value which is insufficient to assure full repayment.

         Consumer  Lending.  Consumer  loans at December  31,  1999  amounted to
$617,000, or 0.4% of the Bank's total loans receivable,  and consisted primarily
of $341,000 in loans  secured by deposit  accounts  and  $243,000 in  automobile
loans.  Such loans are generally  originated in the Bank's  primary market area.
These loans are generally  shorter term and have higher interest rates than one-
to four-family mortgage loans.

         Loans secured by rapidly depreciable assets such as automobiles or that
are unsecured  entail greater risks than one- to four-family  mortgage loans. In
such  cases,  repossessed  collateral  for a  defaulted  loan may not provide an
adequate source of repayment of the outstanding  loan balance,  since there is a
greater likelihood of damage, loss or depreciation of the underlying collateral.
Further,  consumer  loan  collections  on  these  loans  are  dependent  on  the
borrower's continuing financial stability and, therefore,  are more likely to be
adversely  affected  by job  loss,  divorce,  illness  or  personal  bankruptcy.
Finally,  the application of various federal and state laws,  including  federal
and state  bankruptcy  and  insolvency  laws,  may limit the amount which can be
recovered on such loans in the event of a default.

         Commercial  Lending.  At  December  31,  1999,  the Bank had $40,000 in
commercial loans,  which the Bank originated through FHLB program over ten years
ago. The Bank  currently  anticipates  that  commercial  lending  activity  will
increase in the immediate future.

         Loan  Approval  Procedures  and  Authority.   The  Board  of  Directors
establishes the lending policies and loan approval limits of the Bank. All loans
originated by the Bank with principal  amounts in excess of $1.0 million require
the approval of the Board of  Directors.  All loans  originated by the Bank with
principal amounts above $350,000, but less than or equal to $1.0 million require
the  approval of the Lending  Committee.  All other loans may be approved by the
Bank's Chief Lending Officer. Pursuant to OTS regulations, loans to one borrower
cannot exceed 15% of the Bank's  unimpaired  capital and surplus.  The Bank will
not make loans to one borrower that are in excess of the regulatory limits.

         Underwriting.  With respect to all loans  originated by the Bank, it is
the general  policy of the Bank to retain all such loans in its  portfolio.  The
Bank usually underwrites loans in accordance with FNMA or FHLMC guidelines. Upon
receipt of a completed loan  application from a prospective  borrower,  a credit
report is ordered and certain other  information  is verified by an  independent
credit agency. If necessary,  additional financial  information may be required.
An  appraisal  of real estate  intended to secure a proposed  loan  generally is
required to be performed by outside  appraisers  approved by the Bank. The Board
annually  approves  independent  appraisers  used by the Bank and  approves  the
Bank's  appraisal  policy.  The  Bank's  policy  is to obtain  title and  hazard
insurance on all mortgage loans and flood  insurance when necessary and the Bank
generally  requires  borrowers to make payments to a mortgage escrow account for
the payment of property taxes. No title or flood insurance is required, however,
for home equity loans.
<PAGE>
Delinquent Loans, Classified Assets and Real Estate Owned

         Delinquencies  and Classified  Assets.  Reports  listing all delinquent
accounts are  generated and reviewed by management at least once a month and the
Board  of  Directors   performs  a  monthly  review  of  all  loans  or  lending
relationships  delinquent 60 days or more and all real estate owned ("REO"). The
procedures taken by the Bank with respect to delinquencies vary depending on the
nature of the loan,  period and cause

                                       9
<PAGE>
of  delinquency  and  whether  the  borrower is  habitually  delinquent.  When a
borrower fails to make a required  payment on a loan, the Bank takes a number of
steps to have the borrower cure the  delinquency and restore the loan to current
status.  The Bank  generally  sends the borrower a written notice of non-payment
after the loan is first past due. The Bank's guidelines  provide that telephone,
written   correspondence  and/or  face-to-face  contact  will  be  attempted  to
ascertain  the reasons for  delinquency  and the  prospects of  repayment.  When
contact is made with the  borrower  at any time prior to  foreclosure,  the Bank
will attempt to obtain full payment, offer to work out a repayment schedule with
the borrower to avoid  foreclosure or, in some instances,  accept a deed in lieu
of  foreclosure.  In the  event  payment  is not then  received  or the loan not
otherwise satisfied,  additional letters and telephone calls generally are made.
If the loan is still not brought  current or satisfied and it becomes  necessary
for the Bank to take legal  action,  which  typically  occurs after a loan is 90
days or more delinquent,  the Bank will commence foreclosure proceedings against
any real property  that secures the loan. If a foreclosure  action is instituted
and the loan is not brought  current,  paid in full,  or  refinanced  before the
foreclosure   sale,  the  property  securing  the  loan  generally  is  sold  at
foreclosure and, if purchased by the Bank, becomes real estate owned.

         Federal regulations and the Bank's Asset Classification  Policy require
that the Bank  utilize an  internal  asset  classification  system as a means of
reporting  problem and potential  problem assets.  The Bank has incorporated the
OTS internal asset  classifications  as a part of its credit monitoring  system.
The  Bank  currently   classifies   problem  and  potential  problem  assets  as
"Substandard," "Doubtful" or "Loss" assets. An asset is considered "Substandard"
if it is inadequately  protected by the current net worth and paying capacity of
the obligor or of the collateral pledged, if any.  "Substandard"  assets include
those  characterized by the "distinct  possibility" that the insured institution
will  sustain  "some  loss"  if  the  deficiencies  are  not  corrected.  Assets
classified as "Doubtful" have all of the weaknesses inherent in those classified
"Substandard"  with the added  characteristic  that the weaknesses  present make
"collection or liquidation in full," on the basis of currently  existing  facts,
conditions,  and values, "highly questionable and improbable." Assets classified
as "Loss" are those  considered  "uncollectible"  and of such little  value that
their continuance as assets without the establishment of a specific loss reserve
is not warranted.

         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: (i) 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.
<PAGE>
         A savings  institution's  determination as to the classification of its
assets and the amount of its  valuation  allowances  is subject to review by the
OTS which can order the  establishment  of  additional  general or specific loss
allowances. The OTS, in conjunction with the other federal banking agencies, has
adopted an  interagency  policy  statement on the  allowance  for loan and lease
losses.  The policy statement  provides  guidance for financial  institutions on
both the  responsibilities of management for the assessment and establishment of
adequate  allowances  and  guidance  for  banking  agency  examiners  to  use in
determining the adequacy of general valuation guidelines.  Generally, the policy
statement  recommends that  institutions  have effective systems and

                                       10
<PAGE>
controls  to  identify,   monitor  and  address  asset  quality  problems;  that
management has analyzed all significant  factors that affect the  collectibility
of the portfolio in a reasonable  manner;  and that  management has  established
acceptable  allowance evaluation processes that meet the objectives set forth in
the policy statement.  Although  management  believes that, based on information
currently  available  to it at this  time,  its  allowance  for loan  losses  is
adequate,  actual losses are dependent upon future events and, as such,  further
additions to the level of allowances for loan losses may become necessary.

         The Board reviews  classified assets reports prepared by management and
classifies  its  assets on a  quarterly  basis.  The Bank  classifies  assets in
accordance with the management guidelines described above. At December 31, 1999,
the Bank had $1.2  million,  or 0.36% of total assets,  of assets  designated as
"Substandard,"  consisting of five one- to four-family mortgage loans, totalling
$553,000,  and real estate owned totalling  $691,000.  At December 31, 1999, the
largest loan designated as "Substandard" had a carrying balance of $189,000, and
was a  single-family  mortgage  loan.  At  December  31,  1999,  no assets  were
designated as "Doubtful" or "Loss."

                                       11
<PAGE>
                  The  following  table sets forth  delinquencies  in the Bank's
loan portfolio as of the dates indicated.
<TABLE>
<CAPTION>
                                           At December 31, 1999                              At December 31, 1998
                               -------------------------------------------------   ----------------------------------------------
                                   60-89 Days              90 Days or More             60-89 Days              90 Days or More
                               ---------------------     -----------------------   ---------------------   -----------------------
                                           Principal                  Principal                 Principal                 Principal
                                Number     Balance        Number      Balance       Number      Balance      Number       Balance
                               of Loans    of Loans      of Loans     of Loans     of Loans     of Loans     of Loans     of Loans
                               --------    --------      --------     --------     --------     --------     --------     --------
<S>                              <C>         <C>           <C>        <C>            <C>        <C>            <C>        <C>
Loans: ..................                                            (Dollars in thousands)
   Residential Mortgage .           7       $  369           11       $  792            1       $   15           14       $1,201
   Commercial Mortgage ..          --           --           --           --           --           --            1          158
   Construction and land           --           --           --           --           --           --            2          725
      development
                                 ----         ----         ----         ----         ----         ----         ----         ----
     Total loans ........           7       $  369           11       $  792            1       $   15           17       $2,084
                                 ====         ====         ====         ====         ====         ====         ====         ====
Delinquent loans to total
    loans ...............        0.51%        0.24%        0.79%        0.51%        0.01%        0.01%        1.25%        1.46%
                                 ====         ====         ====         ====         ====         ====         ====         ====
<CAPTION>

                                                         At December 31, 1997
                                          -----------------------------------------------------
                                                60-89 Days                 90 Days or More
                                                         Principal                    Principal
                                           Number         Balance         Number       Balance
                                          of Loans        of Loans       of Loans      of Loans
                                          --------        --------       --------      --------
<S>                                          <C>          <C>               <C>        <C>
Loans:                                                    (Dollars in thousands)
   Residential Mortgage.........              10           $528              19         $1,652
   Commercial Mortgage..........              --             --               1            119
   Construction and land                      --             --               2            718
      development...............            ----           ----            ----         ------
     Total loans................              10           $528              22         $2,489
                                            ====           ====            ====         ======

Delinquent loans to total
  loans.........................            0.72%          0.45%           1.59%          2.14%
                                            ====           ====            ====         ======
</TABLE>
                                       12
<PAGE>
         Non-Performing  Assets and Impaired  Loans.  The  following  table sets
forth information  regarding nonaccrual loans and REO. At December 31, 1999, REO
totalled $900,000 and consisted of nine properties. It is the policy of the Bank
to  cease  accruing  interest  on  loans  90 days or more  past due and to fully
reserve for all previously  accrued  interest.  For the years ended December 31,
1999 and 1998,  the amount of  additional  interest  income that would have been
recognized  on  non-accrual  loans if such  loans had  continued  to  perform in
accordance with their contractual terms was $23,000 and $162,000,  respectively.
On January 1, 1995,  the Bank adopted SFAS No. 114  "Accounting by Creditors for
Impairment  of a Loan," as amended by SFAS No.  118.  At  December  31, 1999 and
1998,  total impaired loans were $189,000 and $1.46 million,  respectively.  All
impaired  loans are  residential  real  estate  mortgage  loans  which have been
measured for impairment  using the fair value of the collateral  method.  During
the year ended December 31, 1999,  the average  recorded value of impaired loans
was $647,000. For these loans, interest income of $147,000 was recognized during
1999.
<TABLE>
<CAPTION>
                                                                                  At December 31,
                                                               --------------------------------------------------
                                                                1999       1998       1997       1996       1995
                                                               ------     ------     ------     ------     ------
<S>                                                            <C>        <C>        <C>        <C>          <C>
Nonaccrual loans:
   Residential Mortgages..................................     $  792     $1,201     $1,576     $1,733       $931
   Commercial Mortgages...................................         --        158        119        431        380
   Construction and land development......................         --        725        718        705        734
                                                               ------     ------     ------     ------     ------
     Total nonaccrual loans...............................        792      2,084      2,413      2,869      2,045
Restructured loans:
   Residential Mortgages..................................         92         94         94         99        104
                                                               ------     ------     ------     ------     ------
     Total non-performing loans...........................        884      2,188      2,507      2,968      2,149

Real estate owned, net(1).................................        900        582      1,215      1,394      1,352
                                                               ------     ------     ------     ------     ------

     Total non-performing assets..........................     $1,784     $2,770     $3,722     $4,362     $3,501
                                                               ======     ======     ======     ======     ======
Non-performing loans as a
   percent of total loans(2)..............................      0.57%      1.46%      2.16%      3.51%      2.46%
                                                               ======     ======     ======     ======     ======
Non-performing assets as
   a percent of total assets(3)...........................      0.51%      0.84%      1.24%      1.85%      1.57%
                                                               ======     ======     ======     ======     ======
</TABLE>
(1)   REO balances are shown net of related valuation  allowances.  REO includes
      $209,000 of property that is not considered substandard.
(2)   Non-performing  loans  consist  of all  loans 90 days or more past due and
      other  loans  which  have  been  identified  by  the  Bank  as  presenting
      uncertainty with respect to the collectibility of interest or principal.
(3)   Non-performing assets consist of non-performing loans and REO.
<PAGE>
         Allowance for Loan Losses. The allowance for loan losses is established
through a provision  for loan losses  based on  management's  evaluation  of the
risks inherent in its loan portfolio and the general economy.  The allowance for
loan losses is maintained at an amount  management  considers  adequate to cover
estimated  losses in loans  receivable  which are deemed  probable and estimable
based on information currently known to management.  The allowance is based upon
a  number  of  factors,  including  current  economic  conditions,  actual  loss
experience and industry trends. In addition,  various regulatory agencies, as an
integral  part of their  examination  process,  periodically  review  the Bank's
allowance for loan losses. Such agencies may require the Bank to make additional
provisions for estimated  loan losses based upon judgments  different from those
of management.  As of December 31, 1999 and 1998, the Bank's  allowance for loan
losses was 0.90% and 1.20%,  respectively,  of total loans receivable and 176.8%
and 82.4%, respectively,  of nonaccrual loans. The Bank had non-accrual loans of
$792,000 and $2.1 million at December 31, 1999 and 1998, respectively.  The Bank
will continue to monitor and modify its allowances for loan losses as conditions
dictate.  While  management  believes  the Bank's  allowance  for loan losses is
sufficient  to cover  losses  inherent in its loan  portfolio  at this

                                       13
<PAGE>
time,  no  assurances  can be given that the Bank's level of allowance  for loan
losses will be  sufficient  to cover future loan losses  incurred by the Bank or
that future  adjustments  to the allowance for loan losses will not be necessary
if economic  and other  conditions  differ  substantially  from the economic and
other  conditions  used by  management  to  determine  the current  level of the
allowance for loan losses.

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

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

         Among  the more  significant  situations  and  circumstances  which are
considered  within the  unallocated  portion of the  allowance  is that the Bank
began  aggressively  competing in the market for loan originations in early 1997
via various means not previously  utilized,  such as the use of outside mortgage
brokers and paying bonuses to inside loan  origination  personnel.  In addition,
the Bank  increased  its  advertising  efforts and  expanded its product line to
include product types with more risk, such as a first-time  homeowner loan which
allows for higher than normal loan to collateral ratios. The loan portfolio grew
by $13.2 million or 9.2% in 1999, by $26.9 million or 23.1% in 1998 and by $31.6
million,  or 37.4%,  in 1997,  due to these factors after  declining in 1996 and
1995.  The  increased   inherent  risk   associated   with  the   aforementioned
circumstances  are  elements  within the  unallocated  allowance.  Finally,  the
determination of the allocated portion of the allowance is highly subjective and
requires significant reliance on estimates,  assumptions and judgments. Specific
allowances  are  typically  based  upon the  appraised  value of the  underlying
collateral,  which can vary based upon the particular  appraiser  involved,  and
management's  estimates of property disposal costs. General allowances are based
upon  loss  percentages   applied  to  delineated  loan  categories.   The  loss
percentages are a particularly  inexact science. As such,  management has deemed
it prudent to recognize the inherent  imprecision  of the process by maintaining
what it believes to be a  conservative,  but  appropriate  level of  unallocated
reserves.
<PAGE>
         The  following  table sets forth  activity in the Bank's  allowance for
loan losses for the periods set forth in the following table.
<TABLE>
<CAPTION>
                                                           At or For the Years Ended December 31,
                                               ----------------------------------------------------------------
                                                 1999         1998           1997          1996           1995
                                               -------      -------        -------       -------        -------
                                                                      (Dollars in thousands)
<S>                                           <C>           <C>            <C>           <C>            <C>
Balance at beginning of period .........      $ 1,717       $ 1,885        $ 1,564       $ 1,200        $ 1,236
                                              -------       -------        -------       -------        -------
Provision for (recapture of) loan losses         --            (131)           487           232            510
                                              -------       -------        -------       -------        -------
Charge-offs:
   Mortgage loans:
      One- to four-family ..............         --              37             60          --             --
      Multi-family .....................         --            --             --            --               56
   Commercial real estate ..............         --            --              106          --             --
   Construction and land development ...          317          --             --            --              490
                                              -------       -------        -------       -------        -------
      Total mortgage loans .............          317            37            166          --              546
                                              -------       -------        -------       -------        -------
Recoveries:
   Construction and land development ...         --            --             --             132           --
                                              -------       -------        -------       -------        -------
Balance at end of period ...............      $ 1,400       $ 1,717        $ 1,885       $ 1,564        $ 1,200
                                              =======       =======        =======       =======        =======
Ratio of net charge-offs during
  the period to average gross loans
  during the period  ...................         0.21%         0.03%          0.17%        (0.15)%         0.63%
                                              =======       =======        =======       =======        =======
Allowance for loan losses as a
   percent of total loans ..............         0.90%         1.20%          1.62%         1.85%          1.38%
                                              =======       =======        =======       =======        =======
Allowance for loan losses as a
   percent of non-performing loans .....       158.37%        78.47%         75.19%        52.70%         55.84%
                                              =======       =======        =======       =======        =======

</TABLE>

                                       15
<PAGE>
         The following tables set forth the Bank's percent of allowance for loan
losses to total  allowance  for loan  losses  and the  percent of loans to total
loans in each of the categories listed at the dates indicated.
<TABLE>
<CAPTION>
                                                                 At December 31, 1999
                                                       -------------------------------------
                                                                                  Percent of
                                                                                   Loans in
                                                                      Percent of      Each
                                                                      Allowance    Category
                                                                       to Total    to Total
                                                       Amount         Allowance      Loans
                                                       ------         ---------      -----
                                                                (Dollars in thousands)
<S>                                                     <C>             <C>         <C>
Mortgage loans:
  Residential ....................................      $  735          52.50%      88.83%
  Commercial real estate .........................         141          10.07        8.30
  Construction and land development ..............          46           3.29        2.45
                                                        ------         ------      ------
    Total mortgage loans .........................         922          65.86       99.58
Commercial loans .................................          --             --        0.02
Consumer loans ...................................           6           0.43        0.40
                                                        ------         ------      ------
                                                           928          66.29      100.00%
Unallocated ......................................         472          33.71      ======
                                                        ------         ------
    Total allowance for loan losses ..............      $1,400         100.00%
                                                        ======         ======

<CAPTION>
                                                                          At December 31,
                       -------------------------------------------------------------------------------------------------------------
                                1998                        1997                       1996                       1995
                       --------------------------  --------------------------  -------------------------  --------------------------
                                                                        (Dollars in thousands)
                                         Percent                     Percent                     Percent                    Percent
                                         of Loans                    of Loans                    of Loans                   of Loans
                              Percent of in Each          Percent of in Each          Percent of in Each         Percent of in Each
                               Allowance Category          Allowance Category          Allowance Category         Allowance Category
                               to Total  to Total          to Total  to Total          to Total  to Total         to Total  to Total
                       Amount  Allowance   Loans   Amount  Allowance   Loans   Amount  Allowance   Loans  Amount  Allowance   Loans
                       ------  ---------   -----   ------  ---------   -----   ------  ---------   -----  ------  ---------   -----
<S>                     <C>     <C>       <C>       <C>     <C>      <C>        <C>    <C>      <C>        <C>     <C>      <C>
Mortgage loans:
   Residential.......   $ 763   44.44%     88.29%   $621    32.94%   84.44%     $511   32.67%   82.20%     $413    34.42%   80.81%
   Commercial real
     estate..........     122    7.11       8.11     112     5.94     9.21       184   11.77    14.53       190    15.83    14.56
   Construction and
     land
     development.....     418   24.34       3.07     628    33.32     5.58       349   22.31     2.46       141    11.75     3.47
                        -----   -----     ------    ----     -----    ----      ---    -----     ----       ---    -----     ----
      Total mortgage    1,303   75.89      99.47   1,361    72.20    99.23     1,044   66.75    99.19       744    62.00    98.84
        loans........
Commercial loans.....      --      --       0.04      --       --     0.05        --      --     0.10         1     0.08     0.27
Consumer loans.......       6    0.35       0.49       6     0.32     0.72         4    0.26     0.71         6     0.50     0.89
                        -----   -----     ------    ----    -----     ----     -----   -----     ----       ---    -----     ----
                        1,309   76.24     100.00%  1,367    72.52   100.00%    1,048   67.01   100.00%      751    62.58   100.00%
                                          ======                    ======                     ======                      ======
Unallocated..........     408   23.76                518    27.48                516   32.99                449    37.42
                       ------   -----                ---    -----                ---   -----                ---    -----
   Total.............  $1,717  100.00%            $1,885   100.00%            $1,564  100.00%            $1,200   100.00%
                       ======  ======             ======   ======             ======  ======             ======   ======
</TABLE>
                                       16
<PAGE>
         Real Estate Owned.  At December 31, 1999,  the Company and the Bank had
$900,000 of real estate owned consisting of nine properties, of which seven were
acquired through foreclosure. When a property is acquired through foreclosure or
deed in lieu of  foreclosure,  it is  initially  recorded  at the  lower  of the
recorded  investment in the corresponding  loan or the fair value of the related
assets at the date of foreclosure, less costs to sell. Thereafter, if there is a
further deterioration in value, a specific valuation allowance is provided via a
charge  to  operations  for the  diminution  in value.  It is the  policy of the
Company and the Bank to have obtained an appraisal on all real estate subject to
foreclosure proceedings prior to the time of foreclosure,  to require appraisals
on a periodic  basis on  foreclosed  properties  and to conduct  inspections  on
foreclosed properties.

Investment Activities

         The  Company  can  invest  in  common  and  preferred  stocks,  limited
partnerships  and all  investments  in which the Bank is  permitted  to  invest.
Anything  else requires the Board of Director's  approval.  Federally  chartered
savings  institutions  have the  authority to invest in various  types of liquid
assets,  including  United States  Treasury  obligations,  securities of various
federal  agencies,   certificates  of  deposit  of  insured  banks  and  savings
institutions,  bankers'  acceptances,  repurchase  agreements and federal funds.
Subject to various  restrictions,  federally chartered savings  institutions may
also invest their assets in commercial  paper,  investment-grade  corporate debt
securities  and mutual  funds whose  assets  conform to the  investments  that a
federally  chartered  savings  institution  is  otherwise   authorized  to  make
directly.  Additionally,  the Bank must maintain  minimum  levels of investments
that qualify as liquid assets under OTS regulations.  Historically, the Bank has
maintained  liquid  assets  above the  minimum OTS  requirements  and at a level
considered to be adequate to meet its normal daily activities.

         The Bank's current policies  generally limit securities  investments to
U.S.  Government  and agency  securities,  municipal  bonds and  corporate  debt
obligations  and corporate  equities.  In addition,  the Bank's  policies permit
investments  in  mortgage-backed  securities,  including  securities  issued and
guaranteed by FNMA,  FHLMC and GNMA.  The Bank's current  securities  investment
strategy is to continue to emphasize the purchase of mortgage-backed  securities
and U.S.  Government  and  agency  obligations  as well as state  and  municipal
obligations for purposes of interest rate risk management.

         At December 31,  1999,  the Company had $165.7  million in  securities,
consisting primarily of mortgage-backed  securities,  U.S. Government and agency
obligations,  trust preferred securities and municipal obligations. SFAS No. 115
requires  the  Company  to  designate  its   securities   as   held-to-maturity,
available-for-sale  or trading  depending on the Company's  intent regarding its
investments.  The Company  does not  currently  maintain a trading  portfolio of
securities.   At  December  31,  1999,  all  of  the  Company's  mortgage-backed
securities were classified as  held-to-maturity.  Also at that date, 6.6% of the
Company's investment securities were classified as available-for-sale  and 93.4%
were  classified  as   held-to-maturity.   Of  the  Company's  total  investment
securities and mortgage-backed  securities  portfolio,  the Company's securities
classified as  held-to-maturity  had an aggregate market value of $157.7 million
and an amortized cost of $162.8 million. The Company's securities  classified as
available-for-sale  had  an  aggregate  market  value  of  $2.9  million  and an
amortized cost of $3.0 million at December 31, 1999.
<PAGE>
         Mortgage-Backed   Securities.   The  Bank   purchases   mortgage-backed
securities in order to: (i) generate positive interest rate spreads with minimal
administrative expense; (ii) reduce its credit risk as a result of the guarantee
provided by FHLMC,  FNMA and GNMA;  (iii) utilize these securities as collateral
for  borrowings;  and (iv)  increase  the  liquidity  of the Bank.  The Bank has
primarily  invested in  mortgage-backed  securities issued or sponsored by FNMA,
FHLMC and GNMA and  private  issuers.  At  December  31,  1999,  mortgage-backed
securities  totalled $121.2 million, or 34.8% of total assets and 36.8% of total
interest-earning

                                       17
<PAGE>
assets, and all were classified as held-to-maturity. At December 31, 1999, 49.2%
of  the   mortgage-backed   securities  were   adjustable-rate  and  50.8%  were
fixed-rate.  The mortgage-backed  securities  portfolio had coupon rates ranging
from 4.97% to 15.00% and had a weighted  average  yield of 6.55% at December 31,
1999. The estimated fair value of the Bank's mortgage-backed  securities held to
maturity at December 31, 1999,  was $118.8  million,  which is $2.4 million less
than the amortized cost of $121.2 million.

         Mortgage-backed  securities are created by the pooling of mortgages and
issuance  of a security  with an interest  rate which is less than the  interest
rate on the underlying mortgage.  Mortgage-backed securities typically represent
a participation  interest in a pool of single-family or multi-family  mortgages,
although the Bank focuses its investments on  mortgage-backed  securities backed
by  single-family  mortgages.  The issuers of such  securities  (generally  U.S.
Government agencies and government sponsored enterprises,  including FNMA, FHLMC
and GNMA) pool and resell the participation  interests in the form of securities
to  investors  such as the Bank and  guarantee  the  payment  of  principal  and
interest to investors.  Mortgage-backed securities generally yield less than the
loans that underlie such  securities  because of the cost of loan  servicing and
payment  guarantees.  In addition,  mortgage-backed  securities are usually more
liquid than individual  mortgage loans and may be used to collateralize  certain
liabilities  and  obligations  of  the  Bank.   Investments  in  mortgage-backed
securities  involve a risk that actual  prepayments  will differ from  estimated
prepayments  used in pricing  the  security at the time of  purchase,  which may
require  adjustments  to the  amortization  of any premium or  accretion  of any
discount  relating to such  instruments  thereby  changing the net yield on such
securities.  There is also reinvestment risk associated with the cash flows from
such securities on in the event such  securities are redeemed by the issuer.  In
addition,  the market  value of such  securities  may be  adversely  affected by
changes  in   interest   rates.   The  Bank   estimates   prepayments   for  its
mortgage-backed securities at purchase to ensure that prepayment assumptions are
reasonable   considering  the  underlying  collateral  for  the  mortgage-backed
securities  at issue and current  mortgage  interest  rates and to determine the
yield and estimated maturity of its mortgage-backed  security portfolio.  Of the
Bank's $121.2 million mortgage-backed securities portfolio at December 31, 1999,
$2.5 million with a weighted  average yield of 6.64% had contractual  maturities
within five years and $118.7 million with a weighted  average yield of 6.55% had
contractual  maturities  over five  years.  However,  the actual  maturity  of a
mortgage-backed security may be less than its stated maturity due to prepayments
of the underlying  mortgages.  Prepayments  that are faster than anticipated may
shorten the life of the security  and may result in a loss of any premiums  paid
and thereby  reduce the net yield on such  securities.  Although  prepayments of
underlying mortgages depend on many factors, the difference between the interest
rates on the  underlying  mortgages and the prevailing  mortgage  interest rates
generally is the most significant determinant of the rate of prepayments. During
periods of declining mortgage interest rates,  refinancing  generally  increases
and  accelerates  the  prepayment  of the  underlying  mortgages and the related
security. Under such circumstances, the Bank may be subject to reinvestment risk
because, to the extent that the Bank's mortgage-backed  securities prepay faster
than  anticipated,  the Bank may not be able to  reinvest  the  proceeds of such
repayments and prepayments at a comparable rate.

         U.S.  Government and Agency  Obligations  and Obligations of States and
Municipalities.  At December 31, 1999, the U.S. Government and Agency securities
portfolio  totalled  $33.8  million,  or 9.7% of total assets,  $30.9 million of
which were classified as held-to-maturity.  In addition,  the Bank held $733,000
in obligations of a New Jersey municipal subdivision.
<PAGE>
         Trust  Preferred  Securities.  At December  31,  1999,  the  investment
portfolio  included $10.0 million,  or 2.9% of total assets,  in trust preferred
securities,  all of which were purchased in 1998. Trust preferred securities are
non-perpetual  cumulative preferred stock issued by a wholly owned subsidiary of
a bank and are classified as debt securities under generally accepted accounting
principles.  Securities of this nature are permissible investments for banks and
thrifts  provided they are of investment  grade quality and are rated as such by
any of the top rating services.  Before purchasing these  investments,  the Bank
researched  extensively

                                       18
<PAGE>
the  permissibility  and suitability of these investments and whether they had a
place on the  balance  sheet of the Bank.  The Bank's  policy as approved by the
Board of Directors  allows for the purchase of investments  which are considered
investment  grade  and  are  permissible   investments  under  OTS  regulations.
Securities  considered investment grade must be rated in one of the four highest
categories by a nationally recognized  statistical rating agency.  Additionally,
the Board's  policy  limits  these type of  investments  to a maximum  aggregate
dollar amount of $10,000,000.  The Bank's  conclusion was that these investments
had a place on the  balance  sheet  and,  during  1998,  $10.0  million of trust
preferred  security  investments in five of the most well known large commercial
banks in the eastern United States was made. In addition to $8.9 million of such
securities  owned by the Bank,  the Company  owns one trust  preferred  security
which is carried at $1.1 million.

         During 1999, the OTS reviewed these  securities and concluded  that, in
its opinion,  three of the five  investments were not of a type suitable for the
Bank. Accordingly, the OTS mandated that the Bank liquidate these issues as soon
as possible  without  incurring a loss. The Company  determined that these three
securities should be retained and thus the Bank may transfer them to the Company
over a period of time. One of the three issues was transferred during the fourth
quarter of 1999.

         The $10.0 million in trust  preferred  securities  is a combination  of
$6.8 million in floating rate (spread to Libor)  investments and $3.2 million in
fixed rate  investments.  The adjustable  investments  offer quarterly  interest
adjustments,  uncapped  coupons and call  protection  unavailable  in most other
types of adjustable investments.  The fixed rate investments offer yield for the
balance  sheet and  presented a cost of funds  spread which was  unavailable  in
other types of alternative  investments.  These  investments  present the normal
type of risk to the Company and the Bank that is associated  with other forms of
marketable debt securities.  These include credit risk, which is associated with
the  underlying  creditworthiness  of  the  issuer,  liquidity  risk,  which  is
associated with the ability to dispose of a security in a reasonable time period
at a reasonable  price, and call risk, which is associated with these securities
having call provisions after 10 years.


                                       19
<PAGE>
         The  following  table  sets forth  certain  information  regarding  the
amortized cost and fair value of securities at the dates indicated.
<TABLE>
<CAPTION>
                                                                           At December 31,
                                                -------------------------------------------------------------------------
                                                          1999                    1998                      1997
                                                -------------------      -------------------       ----------------------
                                                Amortized     Fair       Amortized     Fair        Amortized       Fair
                                                  Cost        Value         Cost       Value          Cost         Value
                                                  ----        -----         ----       -----          ----         -----
                                                                              (In thousands)
<S>                                              <C>          <C>          <C>          <C>          <C>          <C>
Investment securities
available-for-sale(1):
   U.S. Government and Agency
        obligations .......................      $ 2,998      $ 2,924      $ 7,983      $ 8,282      $ 6,980      $ 7,081
Investment securities held-to-maturity (1):
   U.S. Government and
     Agency obligations ...................       30,856       28,904       25,582       25,884       22,929       23,339
   Trust preferred securities .............        9,993        9,286       10,903       10,619         --           --
   Obligations of states and
     municipal subdivisions ...............          733          679          388          388         --           --
                                                 -------      -------      -------      -------      -------      -------
                                                  41,582       38,869       36,873       36,891       22,929       23,339
                                                 -------      -------      -------      -------      -------      -------
Federal Home Loan Bank of
   New York stock (2) .....................        3,273        3,273        2,607        2,607        2,184        2,184
                                                 -------      -------      -------      -------      -------      -------

     Total ................................      $47,853      $45,066      $47,463      $47,780      $32,093      $32,604
                                                 =======      =======      =======      =======      =======      =======
</TABLE>
(1)   Available-for-sale   securities   are   carried   at  fair   value   while
      held-to-maturity securities are carried at amortized cost.
(2)  Investment  is  required  by  regulation.  As the  security  is not readily
     marketable, its cost approximates fair value.

<PAGE>
         The following table sets forth investment securities activities for the
periods indicated.
<TABLE>
<CAPTION>
                                                              At December 31,
                                                   --------------------------------------
                                                    1999            1998           1997
                                                   --------       --------       --------
                                                                (In thousands)
<S>                                                <C>            <C>            <C>
Investment securities:
Investment securities, beginning of period(1)      $ 45,156       $ 30,009       $ 24,124
                                                   --------       --------       --------
Purchases:
   Investment securities--held-to-maturity ..        21,045         23,640         10,400
   Investment securities--available-for-sale           --            1,000          7,034
Calls:
   Investment securities--held-to-maturity ..       (14,550)        (7,740)       (10,000)
   Investment securities--available-for-sale           --             --             --
Maturities:
   Investment securities--held-to-maturity ..        (1,150)        (2,150)          --
   Investment securities--available-for-sale           --             --             (115)
Sales:
   Investment securities--held-to-maturity ..          (908)          --             --
   Investment securities--available-for-sale         (4,987)          --           (1,608)
Amortization of premiums and discounts ......           274            199             52
Unrealized gain (loss) ......................          (374)           198            122
                                                   --------       --------       --------
    Net increase in investment securities ...          (650)        15,147          5,885
                                                   --------       --------       --------

Investment securities, end of period ........      $ 44,506       $ 45,156       $ 30,009
                                                   ========       ========       ========
</TABLE>

(1)  Includes investment securities available-for-sale.

                                       20
<PAGE>
         The  following  table  sets forth  certain  information  regarding  the
amortized cost and fair values of the Bank's mortgage-backed  securities, all of
which are held-to-maturity, at the dates indicated.
<TABLE>
<CAPTION>
                                                                     At December 31,
                                 ----------------------------------------------------------------------------------------
                                              1999                           1998                          1997
                                 ----------------------------   ---------------------------  ----------------------------
                                             Percent                        Percent                      Percent
                                 Amortized      of      Fair    Amortized     of      Fair   Amortized      of      Fair
                                   Cost      Total(1)   Value     Cost      Total(1)  Value    Cost      Total(1)   Value
                                   ----      --------   -----     ----      --------  -----    ----      --------   -----
                                                                 (Dollars in thousands)
<S>                               <C>         <C>      <C>       <C>        <C>      <C>      <C>         <C>     <C>
By Issuer:
   GNMA......................     $51,616     42.58%   $51,762   $58,816    53.29%   $59,500  $ 78,657    60.42%  $ 79,775
   FHLMC.....................      18,781      15.49    18,576    26,699     24.19    27,019    26,551     20.40    26,749
   FNMA......................      16,894      13.94    16,787    20,101     18.21    20,267    24,959     19.17    25,150
   Other.....................      33,932      27.99    31,682     4,760      4.31     4,727         7      0.01         7
                                 --------    ------   --------  --------   ------   --------  --------   ------   --------
      Total mortgage-backed
         securities (1)(2)...    $121,223    100.00%  $118,807  $110,376   100.00%  $111,513  $130,174   100.00%  $131,681
                                 ========    ======   ========  ========   ======   ========  ========   ======   ========
By Coupon Type:
   Adjustable-rate...........     $59,667     49.22%   $59,764   $70,919    64.25%   $71,390  $ 82,938    63.71%  $ 83,740
   Fixed-rate................      61,556      50.78    59,043    39,457    35.75     40,123    47,236    36.29     47,941
                                 --------    ------   --------  --------   ------   --------  --------   ------   --------
      Total mortgage-backed
         securities (1)(2)...    $121,223    100.00%  $118,807  $110,376   100.00%  $111,513  $130,174   100.00%  $131,681
                                 ========    ======   ========  ========   ======   ========  ========   ======   ========
</TABLE>
(1)  Based on amortized cost.
(2)  Includes net  unamortized  (discount)  premiums of $(37),  $206 and $243 at
     December 31, 1999, 1998 and 1997, respectively.

         The following  table sets forth the Bank's  mortgage-backed  securities
activities for the periods indicated.
<TABLE>
<CAPTION>
                                                                  For the Years
                                                                Ended December 31,
                                                       --------------------------------------
                                                         1999          1998            1997
                                                       --------      --------        --------
                                                                 (In thousands)
<S>                                                    <C>           <C>             <C>
Beginning balance .............................        $110,376      $130,174        $113,254
   Purchases...................................          46,531        21,892          37,026
   Principal repayments........................         (35,580)      (41,587)        (20,084)
   Net amortization and accretion of
      discounts and premiums...................           (104)          (103)            (22)
                                                       --------      --------        --------
Ending balance.................................        $121,223      $110,376        $130,174
                                                       ========      ========        ========
</TABLE>
                                       21
<PAGE>
    The table below sets forth certain information regarding the carrying value,
weighted  average  yields and  contractual  maturities of investment  securities
available-for-sale   and   held-to-maturity   and   mortgage-backed   securities
held-to-maturity as of December 31, 1999.
<TABLE>
<CAPTION>
                                                                            At December 31, 1999
                                              --------------------------------------------------------------------------------------

                                                                      More than One        More than Five
                                                One Year or Less   Year to Five Years    Years to Ten Years    More than Ten Years
                                              -------------------- -------------------   -------------------   -------------------
                                                          Weighted            Weighted              Weighted              Weighted
                                              Carrying    Average  Carrying   Average    Carrying   Average    Carrying    Average
                                                Value       Yield    Value     Yield      Value     Yield       Value      Yield
                                                -----       -----    -----     -----      -----     -----       -----      -----
                                                                                       (Dollars in thousands)
<S>                                              <C>         <C>    <C>        <C>        <C>        <C>       <C>          <C>
Investment securities available-for-sale:
       U.S. Treasury and Government
          agency obligations..................   $ --         --%   $2,015      6.67%     $   --        --%     $   909      7.00%
                                                 =====              ======                ======                =======
Investment securities held-to-maturity:
       U.S. Treasury and Government
          agency obligations..................   $ --         --       $--        --      $8,000      6.83      $22,856      6.84
       Municipal obligations..................    150       3.65        --        --          --        --          583      4.47
       Trust preferred securities.............     --         --        --        --          --        --        9,993      7.02
                                                 -----                 ------             ------                -------
          Total investment securities held
            to maturity.......................   $150       3.65       $--        --      $8,000      6.83      $33,432      6.85
                                                 =====                 ======             ======                =======
Mortgage-backed securities held-to-maturity:
       Adjustable-rate:
          GNMA................................   $ --        --       $--        --        $ --        --      $44,060      6.21
          FHLMC...............................     --         --        --        --         547      6.63        3,684      6.82
          FNMA................................     --         --        --        --          --        --       11,376      6.24
                                                 -----                ------              ------                -------

                 Total........................     --         --        --        --         547      6.63       59,120      6.25
                                                 -----                ------              ------                -------
       Fixed-rate:
          GNMA................................     --         --         2      8.00       6,073      7.38        1,481      8.43
          FHLMC...............................     --         --     2,528      6.64       6,145      6.72        5,877      7.17
          FNMA................................     --         --        --        --         511      7.00        5,007      7.05
          Other...............................     --         --        --        --          --        --       33,932      6.61
                                                 -----              ------                ------                -------

                 Total........................     --         --     2,530      6.64      12,729      7.05       46,297      6.79
                                                 -----              ------                ------                -------
   Total mortgage-backed securities
       held-to-maturity.......................   $ --         --    $2,530      6.64     $13,276      7.03     $105,417      6.49
                                                 =====              ======                ======                =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    -------------------
                                                         Total
                                                    ------------------
                                                              Weighted
                                                    Carrying   Average
                                                     Value      Yield
                                                     -----      -----
<S>                                                   <C>          <C>
Investment securities available-for-sale:
       U.S. Treasury and Government
          agency obligations..................        $ 2,924      6.78%
                                                      =======
Investment securities held-to-maturity:
       U.S. Treasury and Government
          agency obligations..................        $30,856      6.83
       Municipal obligations..................            733      4.30
       Trust preferred securities.............          9,993      7.02
                                                      -------

          Total investment securities held
            to maturity.......................        $41,582      6.83
                                                      =======

Mortgage-backed securities held-to-maturity:
       Adjustable-rate:
          GNMA................................        $44,060      6.21
          FHLMC...............................          4,231      6.80
          FNMA................................         11,376      6.24
                                                      -------
                 Total........................         59,667      6.26
                                                      -------
       Fixed-rate:
          GNMA................................          7,556      7.59
          FHLMC...............................         14,550      6.89
          FNMA................................          5,518      7.04
          Other...............................         33,932      6.61
                                                      -------

                 Total........................         61,556      6.84
                                                      -------
   Total mortgage-backed securities
       held-to-maturity.......................       $121,223      6.55
                                                     ========

</TABLE>
                                       22

<PAGE>
Sources of Funds

         General.   Deposits,   loan   repayments  and   prepayments,   security
maturities,  cash flows  generated from  operations and FHLB  borrowings are the
primary sources of the Bank's funds for use in lending,  investing and for other
general purposes.

         Deposits. The Bank offers a variety of deposit accounts with a range of
interest  rates and terms.  The Bank's  deposits  consist of  savings,  checking
accounts, NOW accounts,  money market and club accounts,  certificate of deposit
accounts and  Individual  Retirement  Accounts.  For the year ended December 31,
1999,  average  core  deposits,  which  include  all  non-certificate  deposits,
represented 40.2% of total average deposits.  The flow of deposits is influenced
significantly  by general  economic  conditions,  changes in money market rates,
prevailing  interest  rates and  competition.  The Bank's  deposits are obtained
predominantly  from the areas in which its branch offices are located.  The Bank
has  historically   relied  primarily  on  customer  service  and  long-standing
relationships  with  customers  to attract and retain these  deposits;  however,
market  interest  rates and rates  offered by competing  financial  institutions
significantly affect the Bank's ability to attract and retain deposits. The Bank
uses  traditional  means of advertising its deposit products through print media
and generally  does not solicit  deposits from outside its market area. The Bank
does not  actively  solicit  certificate  accounts  in excess of $100,000 or use
brokers  to  obtain  deposits.  At  December  31,  1999,  79.8%  of  the  Bank's
certificate of deposit accounts had terms of less than twelve months.

         The following  table presents the deposit  activity of the Bank for the
periods indicated.
<TABLE>
<CAPTION>
                                                             For the Years Ended December 31,
                                                          -----------------------------------------
                                                             1999            1998            1997
                                                          ---------       ---------       ---------
                                                                        (In thousands)
<S>                                                       <C>             <C>             <C>
Beginning balance ..................................      $ 238,313       $ 238,192       $ 179,946
                                                          ---------       ---------       ---------
   Purchase of deposits from another ...............           --              --            51,007
      institution
   Net deposits (withdrawals) ......................        (11,919)         (9,626)           (850)
   Interest credited ...............................          8,584           9,747           8,089
                                                          ---------       ---------       ---------
Increase in deposit accounts .......................         (3,335)            121          58,246
                                                          ---------       ---------       ---------
Ending balance .....................................      $ 234,978       $ 238,313       $ 238,192
                                                          =========       =========       =========
</TABLE>
         At  December  31,  1999,  the Bank had  $18.2  million  in  certificate
accounts in amounts of $100,000 or more maturing as follows.
<PAGE>
<TABLE>
<CAPTION>
                                                                       Weighted
Maturity Period                                           Amount     Average Rate
---------------                                           --------   ------------
                                                          (Dollars in thousands)
<S>                                                        <C>             <C>
Three months or less                                       $6,330          5.11%
Over 3 through 6 months                                     3,344           5.19
Over 6 through 12 months                                    5,849           5.21
Over 12 months.                                             2,633           5.60
                                                          -------
Total..........                                           $18,156          5.23%
                                                          =======

</TABLE>
                                       23
<PAGE>
         The following  table sets forth the  distribution of the Bank's average
deposit  accounts for the periods  indicated and the weighted  average  interest
rates on each category of deposits presented. Averages for the periods presented
utilize month-end balances.
<TABLE>
<CAPTION>
                                                                 For the Years Ended December 31,
                                      -------------------------------------------------------------------------------------------
                                                   1999                           1998                           1997
                                      -----------------------------   ----------------------------- -----------------------------
                                                 Percent                         Percent                        Percent
                                                 of Total  Weighted             of Total   Weighted            of Total  Weighted
                                      Average    Average   Average    Average    Average   Average   Average    Average   Average
                                      Balance   Deposits     Rate     Balance   Deposits    Rate     Balance   Deposits    Rate
                                      -------   --------     ----     -------   --------    ----    -------   --------     ----
                                                                      (Dollars in thousands)
<S>                                  <C>        <C>         <C>     <C>         <C>        <C>     <C>         <C>        <C>
Demand accounts.....................  $36,308    15.35%      0.78%   $33,631     14.10%     1.01%   $ 24,863    12.60%     1.18%
Savings and Club accounts...........   58,727     24.84      2.06     62,120      26.05      2.69     53,221     26.97      2.55
Certificates of deposit.............  141,432     59.81      5.01    142,714      59,85      5.42    119,272     60.43      5.40
                                     --------   ------              --------    ------              --------   ------
         Total...................... $236,467   100.00%      3.98   $238,465    100.00%     4.09%   $197,356   100.00%     4.10%
                                     ========   ======              ========    ======              ========   ======
Certificate accounts(1):
   Less than six months.............  $71,619     51.11%     4.84%    $70,208     49.74%     5.15%  $ 70,186    49.32%     5.24%
   Over six through 12 months.......   40,181     28.67      5.11     48,109      34.08      5.32     44,047     30.95     5.59
   Over 12 months through 36 months.   24,400     17.41      5.49     19,572      13.86      5.46     25,309     17.78     5.96
   Over 36 months...................    3,940      2.81      5.81      3,280       2.32      5.75      2,782      1.95     6.96
                                     --------   ------              --------    ------              --------   ------

         Total certificate accounts. $140,140   100.00%      5.05   $141,169    100.00%      5.26   $142,324   100.00%     5.51%
                                     ========   ======              ========    ======              ========   ======

</TABLE>

(1)  Based on remaining maturity of certificates calculated as of the end of the
     period.


                                       24
<PAGE>
         The following table presents, by various rate categories, the amount of
certificate  accounts  outstanding  at the dates  indicated  and the  periods to
maturity of the certificate accounts outstanding at December 31, 1999.

<TABLE>
<CAPTION>

                                                       Period to Maturity from December 31, 1999
                                   -----------------------------------------------------------------------
                                   Less than     One to       Two to     Three to    Four to      After
                                   One Year    Two years   Three years Four years   Five years  Five Years
                                   --------    ---------   ----------- ----------   ----------  ----------
                                                                                (In thousands)
<S>                                 <C>         <C>          <C>         <C>         <C>         <C>
Certificate accounts:
   4.00% and below.............     $ 2,808      $  --         $  --       $  --       $  --       $  --
   4.01 to 5.00%...............      59,560       5,153          851         143         177         165
   5.01 to 6.00%...............      42,420      13,756        1,967       1,108         981          50
   6.01 to 7.00%...............       6,314       1,942          731         276         890         150
   7.01 to 8.00%...............         424          --           --          --          --          --
    Over 9.00%..................         21          --           --          --          --          --
                                   --------     -------      -------     -------     -------     -------
                                   $111,547     $20,851       $3,549      $1,527      $2,048       $ 365
                                   ========     =======       ======      ======      ======       =====
Accrued interest payable.......

   Total.......................

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                               December 31,
                                   ----------------------------------
                                     1999           1998        1997
                                   --------       --------    -------
<S>                                <C>            <C>         <C>
Certificate accounts:
   4.00% and below.............    $ 2,808        $ 4,851     $ 2,538
   4.01 to 5.00%...............      66,049        45,485      33,593
   5.01 to 6.00%...............      60,282        77,729      88,877
   6.01 to 7.00%...............      10,303        10,741      14,451
   7.01 to 8.00%...............         424         2,129       2,069
   Over 9.00%..................          21            --         536
                                    -------       --------    -------
                                    139,887       140,935     142,064
Accrued interest payable.......         253           234         260
                                    -------       --------    -------
   Total.......................    $140,140      $141,169    $142,324
                                   ========      ========    ========

</TABLE>
                                       25
<PAGE>
         Borrowings.   The  Bank  utilizes   borrowings  from  the  FHLB  as  an
alternative  to retail  deposits to fund its operations as part of its operating
strategy.  These FHLB borrowings are collateralized  primarily by certain of the
Bank's  mortgage-related  securities and secondarily by the Bank's investment in
capital  stock of the  FHLB.  FHLB  borrowings  are  made  pursuant  to  several
different credit programs,  each of which has its own interest rate and range of
maturities.   The  maximum   amount  that  the  FHLB  will   advance  to  member
institutions,  including  the Bank,  fluctuates  from time to time in accordance
with the policies of the FHLB. See  "Regulation  and  Supervision--Federal  Home
Loan  Bank  System."  At  December  31,  1999,  the Bank had  $64.3  million  in
outstanding FHLB borrowings, compared to $42.0 million at December 31, 1998.

         The following table sets forth certain information regarding the Bank's
borrowed funds at or for the periods ended on the dates indicated.
<TABLE>
<CAPTION>
                                                           At or For the Years
                                                             Ended December 31,
                                                    ---------------------------------
                                                    1999           1998         1997
                                                   -------       -------      -------
                                                       (Dollars in thousands)
<S>                                                <C>           <C>          <C>
Average balance outstanding....................    $57,756       $42,364      $26,223
Maximum amount outstanding at any
    month-end during the period................     65,453        52,145       43,675
Balance outstanding at end of period...........     64,340        42,010       30,300
Weighted average interest rate
   during the period...........................      5.67%         5.83%        5.97%
Weighted average interest rate at
   end of period...............................      5.66%         5.69%        6.08%
</TABLE>

Subsidiary Activities

         The Company is the parent corporation of two wholly owned subsidiaries,
the Bank and West Essex  Property  Company ("West Essex  Property").  West Essex
Property was formed in April 1999 to purchase a parcel of land located in Sussex
County,  New Jersey from the Company.  Upon the purchase of this parcel of land,
West  Essex  Property  was to have  entered  into an  arrangement  to lease  the
property to a restaurant chain. As of December 31, 1999, West Essex Property has
neither purchased the parcel of land nor entered into a lease arrangement. As of
December  31,  1999 and for the year then  ended,  West  Essex  Property  had no
operations,  assets,  liabilities or equity. In addition, the Bank is the parent
corporation of one wholly owned  subsidiary  corporation,  West Essex  Insurance
Agency  ("WEIA").  WEIA was formed in December 1982 to offer insurance  products
and tax-deferred  annuities  through an agent.  Originally,  these products were
sold at one of the Bank's  branches.  Commencing  in 1993,  customers  have been
referred to Anthony R. Davis Agency at an off-site location. WEIA receives a fee
for each  customer  referral  resulting in the  purchase of an insurance  and/or
annuity product.  Sales of annuity products totalled $612,894 for the year ended
December  31, 1999.  WEIA's  earnings  are at a nominal  level since  management
decided in early 1994 to  de-emphasize  this  activity due to the lack of demand
and controversial publicity associated with uninsured annuity products.

<PAGE>
Personnel

         As of  December  31,  1999,  the Company  had 49  authorized  full-time
employee  positions  and three  authorized  part-time  employee  positions.  The
employees  are not  represented  by a  collective  bargaining  unit and the Bank
considers its relationship with its employees to be good.


                                       26
<PAGE>
                           REGULATION AND SUPERVISION

General

         The  Bank  is  subject  to  extensive   regulation,   examination   and
supervision by the OTS, as its chartering  agency,  and the FDIC, as the deposit
insurer.  The Bank is a member of the FHLB System.  The Bank's deposit  accounts
are insured up to applicable  limits by the Savings  Association  Insurance Fund
("SAIF")  managed by the FDIC.  The Bank must file  reports with the OTS and the
FDIC concerning its activities and financial  condition in addition to obtaining
regulatory approvals prior to entering into certain transactions such as mergers
with,  or  acquisitions  of, other  financial  institutions.  There are periodic
examinations by the OTS and the FDIC to test the Bank's  compliance with various
regulatory   requirements.   This  regulation  and  supervision   establishes  a
comprehensive  framework of activities in which an institution can engage and is
intended primarily for the protection of the insurance fund and depositors.  The
regulatory structure also gives the regulatory  authorities extensive discretion
in connection with their supervisory and enforcement  activities and examination
policies,  including  policies with respect to the  classification of assets and
the  establishment of adequate loan loss reserves for regulatory  purposes.  Any
change in such  policies,  whether by the OTS, the FDIC or the  Congress,  could
have a material  adverse  impact on the Company,  the MHC and the Bank and their
operations.  The MHC, as a federal mutual holding company and the Company,  as a
federal  corporation,  will also be required to file certain  reports with,  and
otherwise comply with the rules and regulations of the OTS.

         The following  summary of the  regulation  and  supervision  of savings
associations  and their  holding  companies  does not  purport  to be a complete
description of the applicable  statutes and  regulations and is qualified in its
entirety by reference to such statutes and regulations.

Federal Savings Institution Regulation

         Business Activities. The activities of federal savings institutions are
governed by the Home Owners Loan Act (the "HOLA") and, in certain respects,  the
Federal Deposit Insurance Act (the "FDI Act") and the regulations  issued by the
agencies to implement these statutes.  These laws and regulations  delineate the
nature and extent of the activities in which federal associations may engage. In
particular,  many types of lending  authority  for federal  associations,  e.g.,
commercial,  non-residential real property loans and consumer loans, are limited
to a specified percentage of the institution's capital or assets.

         Loans-to-One  Borrower.   Under  the  HOLA,  savings  institutions  are
generally  subject  to  the  national  bank  limit  on  loans-to-one   borrower.
Generally,  this limit is 15% of the Bank's unimpaired capital and surplus, plus
an additional 10% of unimpaired capital and surplus,  if such loan is secured by
<PAGE>
readily-marketable  collateral,  which is defined to include  certain  financial
instruments and bullion.  At December 31, 1999, the Bank's  regulatory  limit on
loans-to-one borrower was $5.7 million. At December 31, 1999, the Bank's largest
aggregate  amount of loans-to-one  borrower was $1.6 million,  consisting of two
commercial real estate loans.

         QTL Test. The HOLA requires  savings  institutions  to meet a qualified
thrift  lender  ("QTL")  test.  Under the QTL test,  a  savings  association  is
required to qualify as a "domestic  building and loan  association" as that term
is defined in the Code or maintain at least 65% of its "portfolio assets" (total
assets  less:  (i)  specified  liquid  assets  up to 20% of total  assets;  (ii)
intangibles, including goodwill; and (iii) the value of property used to conduct
business)  in certain  "qualified  thrift  investments"  (primarily  residential
mortgages and related investments, including certain mortgage-backed and related
securities)  in at least  nine  months  out of each 12 month  period.  A savings
association  that fails the QTL test must  either  convert to a bank  charter or
operate under certain restrictions. As of December 31, 1999, the Bank maintained
81.5% of its portfolio  assets in qualified thrift  investments and,  therefore,
met the QTL test.

         Limitation on Capital Distributions. OTS regulations impose limitations
upon  all  capital  distributions  by  a  savings  institution,  including  cash
dividends,  payments to repurchase  its shares and payments to  shareholders  of
another  institution in a cash-out merger.  The rule effective through the first
quarter of 1999  established  three tiers of

                                       27


<PAGE>
institutions  based primarily on an institution's  capital level. An institution
that  exceeded  all  capital  requirements  before and after a proposed  capital
distribution  ("Tier 1 Association") and had not been advised by the OTS that it
was in need of more than  normal  supervision,  could,  after  prior  notice but
without  obtaining  approval of the OTS, make capital  distributions  during the
calendar  year  equal to the  greater  of (i) 100% of its net  earnings  to date
during the  calendar  year plus the amount  that would  reduce by  one-half  the
excess  capital over its capital  requirements  at the beginning of the calendar
year  or  (ii)  75% of its  net  income  for the  previous  four  quarters.  Any
additional capital distributions required prior regulatory approval. At December
31, 1999, the Bank was a Tier 1 Association.

         Effective  April 1, 1999,  the OTS's  capital  distribution  regulation
changed.  Under the new regulation,  an application to and the prior approval of
the OTS is required prior to any capital  distribution if the  institution  does
not meet the  criteria  for  "expedited  treatment"  of  applications  under OTS
regulations (i.e.,  generally,  examination  ratings in the two top categories),
the total capital distributions for the calendar year exceed net income for that
year plus the amount of retained  net income for the  preceding  two years,  the
institution  would  be  undercapitalized   following  the  distribution  or  the
distribution  would otherwise be contrary to a statute,  regulation or agreement
with OTS. If an application is not required,  the institution must still provide
prior notice to OTS of the capital distribution. In the event the Bank's capital
fell below its  regulatory  requirements  or the OTS  notified it that it was in
need of more  than  normal  supervision,  the  Bank's  ability  to make  capital
distributions  could be  restricted.  In  addition,  the OTS  could  prohibit  a
proposed  capital  distribution  by any  institution,  which would  otherwise be
permitted by the regulation,  if the OTS determines that such distribution would
constitute an unsafe or unsound practice.

         Liquidity. The Bank is required to maintain an average daily balance of
specified  liquid assets equal to a monthly average of not less than a specified
percentage  (currently  4%)  of  its  net  withdrawable  deposit  accounts  plus
short-term  borrowings.  Monetary  penalties  may be imposed for failure to meet
these liquidity  requirements.  The Bank's average  liquidity ratio for December
31, 1999 was 25.4%,  which  exceeded the applicable  requirements.  The Bank has
never been  subject to  monetary  penalties  for  failure to meet its  liquidity
requirements.

         Assessments.  Savings  institutions  are required by  regulation to pay
assessments to the OTS to fund the agency's operations.  The general assessment,
paid on a  semi-annual  basis,  is based upon the  savings  institution's  total
assets,  including consolidated  subsidiaries,  as reported in the Bank's latest
quarterly Thrift Financial Report. The assessments paid by the Bank for the year
ended December 31, 1999 totaled $74,000.

         Branching.   OTS  regulations   permit  federally   chartered   savings
associations to branch nationwide under certain conditions.  Generally,  federal
savings  associations  may  establish  interstate  networks  and  geographically
diversify  their  loan  portfolios  and  lines of  business.  The OTS  authority
preempts  any state law  purporting  to regulate  branching  by federal  savings
associations.
<PAGE>
         Transactions  with Related  Parties.  The Bank's authority to engage in
transactions  with  related  parties or  "affiliates"  (i.e.,  any company  that
controls or is under common control with an  institution,  including the Company
and any non-savings institution  subsidiaries that the Company may establish) is
limited by Sections 23A and 23B of the Federal Reserve Act ("FRA").  Section 23A
restricts  the  aggregate  amount of covered  transactions  with any  individual
affiliate to 10% of the capital and surplus of the savings  institution and also
limits the aggregate  amount of  transactions  with all affiliates to 20% of the
savings institution's capital and surplus.  Certain transactions with affiliates
are required to be secured by collateral in an amount and of a type described in
Section 23A and the purchase of low quality assets from  affiliates is generally
prohibited.  Section 23B  generally  requires  that  certain  transactions  with
affiliates,  including  loans  and asset  purchases,  must be on terms and under
circumstances, including credit standards, that are substantially the same or at
least  as  favorable  to the  institution  as those  prevailing  at the time for
comparable  transactions with  non-affiliated  companies.  A savings association
also is prohibited from extending credit to any affiliate  engaged in activities
not permitted for a bank holding  company and may not purchase the securities of
an affiliate (other than a subsidiary).

                                       28


<PAGE>
         The Bank's authority to extend credit to executive officers,  directors
and 10% shareholders ("insiders"),  as well as entities such persons control, is
also  governed  by  federal  law.  Such loans are  required  to be made on terms
substantially  the same as those  offered to  unaffiliated  individuals  and not
involve more than the normal risk of repayment.  Recent  legislation  created an
exception for loans made pursuant to a benefit or  compensation  program that is
widely  available  to all  employees  of  the  institution  and  does  not  give
preference to insiders over other employees.  The law limits both the individual
and aggregate  amount of loans the Bank may make to insiders  based, in part, on
the Bank's capital position and requires certain board approval procedures to be
followed.

         Enforcement.  Under  the  FDI  Act,  the OTS  has  primary  enforcement
responsibility  over savings  institutions and has the authority to bring action
against all  "institution-affiliated  parties," including stockholders,  and any
attorneys, appraisers and accountants who knowingly or recklessly participate in
wrongful  action  likely to have an adverse  effect on an  insured  institution.
Formal  enforcement action may range from the issuance of a capital directive or
cease and desist  order to  removal  of  officers  or  directors,  receivership,
conservatorship  or termination of deposit  insurance.  Civil  penalties cover a
wide range of violations  and can amount to $25,000 per day, or $1.0 million per
day in especially egregious cases. Under the FDI Act, the FDIC has the authority
to recommend to the  Director of the OTS that  enforcement  action be taken with
respect  to a  particular  savings  institution.  If  action is not taken by the
Director,   the  FDIC  has   authority  to  take  such  action   under   certain
circumstances.  Federal and state law also  establishes  criminal  penalties for
certain violations.

         Standards for Safety and  Soundness.  The FDI Act requires each federal
banking agency to prescribe for all insured  depository  institutions  standards
relating to, among other  things,  internal  controls,  information  systems and
audit  systems,  loan  documentation,  credit  underwriting,  interest rate risk
exposure,  asset  growth,  and  compensation,  fees and  benefits and such other
operational  and  managerial  standards  as the agency  deems  appropriate.  The
federal  banking  agencies  have  adopted  final   regulations  and  Interagency
Guidelines  Establishing  Standards for Safety and Soundness  ("Guidelines")  to
implement  these safety and  soundness  standards.  If the  appropriate  federal
banking  agency  determines  that an  institution  fails  to meet  any  standard
prescribed by the  Guidelines,  the agency may require the institution to submit
to the agency an acceptable  plan to achieve  compliance  with the standard,  as
required  by the FDI Act.  The final  regulations  establish  deadlines  for the
submission and review of such safety and soundness compliance plans.

         Capital  Requirements.  The OTS  capital  regulations  require  savings
institutions to meet three minimum capital  standards:  a 1.5% tangible  capital
ratio, a 3% leverage ratio and an 8% risk-based  capital ratio.  Effective April
1,  1999,  however,   the  minimum  leverage  ratio  increased  to  4%  for  all
institutions  except  those  with the  highest  rating on the  CAMELS  financial
institution  rating system. In addition,  the prompt corrective action standards
discussed  below also  establish,  in  effect,  a minimum  2%  tangible  capital
standard, a 4% leverage ratio (3% for institutions  receiving the highest rating
on the CAMEL  financial  institution  rating  system),  and,  together  with the
risk-based capital standard itself, a 4% Tier 1 risk-based capital standard. The
OTS  regulations  also  require  that,  in meeting the  tangible,  leverage  and
risk-based capital standards,  institutions must generally deduct investments in
and loans to  subsidiaries  engaged  in  activities  as  principal  that are not
permissible for a national bank.
<PAGE>
         The risk-based capital standard for savings  institutions  requires the
maintenance of Tier 1 (core) and total capital (which is defined as core capital
and  supplementary  capital)  to  risk-weighted  assets  of at  least 4% and 8%,
respectively.  In determining the amount of  risk-weighted  assets,  all assets,
including  certain  off-balance  sheet assets,  are  multiplied by a risk-weight
factor of 0% to 100%,  assigned by the OTS capital regulation based on the risks
believed  inherent  in the type of asset.  Core  (Tier 1)  capital is defined as
common stockholders' equity (including retained earnings), certain noncumulative
perpetual preferred stock and related surplus,  and minority interests in equity
accounts  of  consolidated  subsidiaries  less  intangibles  other than  certain
mortgage  servicing  rights and credit card  relationships.  The  components  of
supplementary  capital currently include cumulative  preferred stock,  long-term


                                       29
<PAGE>
perpetual preferred stock, mandatory convertible  securities,  subordinated debt
and  intermediate  preferred  stock and the  allowance for loan and lease losses
limited to a maximum of 1.25% of risk-weighted  assets.  Overall,  the amount of
supplementary  capital  included as part of total capital  cannot exceed 100% of
core capital.

         The  capital   regulations  also  incorporate  an  interest  rate  risk
component.  Savings institutions with "above normal" interest rate risk exposure
are subject to a deduction from total capital for purposes of calculating  their
risk-based  capital  requirements.  For the present  time,  the OTS has deferred
implementation  of the interest rate risk  component.  At December 31, 1999, the
Bank met each of its capital requirements.

         The following  table presents the Bank's  capital  position at December
31, 1999.
<TABLE>
<CAPTION>
                                                                                             Capital
                                                                                     -------------------------
                              Actual           Required           Excess             Actual           Required
                              Capital           Capital           Amount             Percent           Percent
                              -------           -------           ------             -------           -------
                                                           (Dollars in thousands)
<S>                           <C>              <C>                <C>                <C>                 <C>
Tangible............          $36,592          $5,135             $31,457            10.69%              1.5%
Core (Leverage).....           36,592          13,693              22,899            10.69%              4.0%
Risk-based..........           37,992          10,645              27,347            28.55%              8.0%
</TABLE>


         Prompt Corrective  Regulatory  Action.  Under the OTS prompt corrective
action  regulations,  the OTS is required to take  certain  supervisory  actions
against  undercapitalized  institutions,  the severity of which depends upon the
institution's  degree of capitalization.  Generally,  a savings institution that
has a total  risk-based  capital of less than 8% or a leverage ratio or a Tier 1
capital  ratio  that is less than 4% is  considered  to be  undercapitalized.  A
savings  institution that has a total risk-based  capital less than 6%, a Tier 1
risk-based  capital ratio of less than 3% or a leverage  ratio that is less than
3%  is  considered  to  be  "significantly   undercapitalized"   and  a  savings
institution that has a tangible capital to assets ratio equal to or less than 2%
is deemed to be "critically  undercapitalized."  Subject to a narrow  exception,
the banking  regulator is required to appoint a receiver or  conservator  for an
institution  that is critically  undercapitalized.  The regulation also provides
that a capital restoration plan must be filed with the OTS within 45 days of the
date  an   association   receives   notice   that   it  is   "undercapitalized,"
"significantly  undercapitalized" or "critically  undercapitalized."  Compliance
with the plan must be guaranteed  by any parent  holding  company.  In addition,
numerous mandatory supervisory actions may become immediately  applicable to the
institution  depending  upon  its  category,  including,  but  not  limited  to,
increased  monitoring  by  regulators,   restrictions  on  growth,  and  capital
distributions and limitations on expansion. The OTS could also take any one of a
number of discretionary supervisory actions, including the issuance of a capital
directive and the replacement of senior executive officers and directors.

         Insurance of Deposit  Accounts.  The Bank is a member of the SAIF.  The
FDIC maintains a risk-based assessment system by which institutions are assigned
to one of  three  categories  based  on  their  capitalization  and one of three
<PAGE>
subcategories based on examination ratings and other supervisory information. An
institution's  assessment  rate  depends  upon  the  categories  to  which it is
assigned.   Assessment  rates  for  SAIF  member   institutions  are  determined
semiannually  by the FDIC and  currently  range from zero  basis  points for the
healthiest institutions to 27 basis points for the riskiest.

         In addition to the assessment for deposit  insurance,  institutions are
required  to make  payments on bonds  issued in the late 1980s by the  Financing
Corporation  ("FICO") to recapitalize the predecessor to the SAIF.  During 1999,
FICO  payments  for SAIF  members  approximated  six basis  points,  while  Bank
Insurance Fund ("BIF") members paid

                                       30

<PAGE>
approximately  one basis point. By law, there was equal sharing of FICO payments
between SAIF and BIF members on January 1, 2000.

         The Bank's assessment rate for fiscal 1999 was zero basis points and no
premium was paid for this  period.  Payments  toward the FICO bonds  amounted to
$142,000.  The  FDIC  has  authority  to  increase  insurance   assessments.   A
significant  increase in SAIF  insurance  premiums  would likely have an adverse
effect on the operating  expenses and results of operations of the  Association.
Management cannot predict what insurance assessment rates will be in the future.

         Insurance of deposits may be terminated by the FDIC upon a finding that
the institution has engaged in unsafe or unsound  practices,  is in an unsafe or
unsound  condition to continue  operations or has violated any  applicable  law,
regulation,  rule,  order or  condition  imposed  by the  FDIC or the  OTS.  The
management  of the Bank does not know of any  practice,  condition  or violation
that might lead to termination of deposit insurance.

         Community  Reinvestment  Act. Under the Community  Reinvestment Act, as
amended ("CRA"), as implemented by OTS regulations,  a savings association has a
continuing  and  affirmative  obligation  consistent  with its  safe  and  sound
operation to help meet the credit needs of its entire  community,  including low
and moderate income  neighborhoods.  The CRA does not establish specific lending
requirements  or  programs  for  financial  institutions  nor  does it  limit an
institution's  discretion  to develop the types of products and services that it
believes are best suited to its particular  community,  consistent with the CRA.
The CRA  requires  the OTS,  in  connection  with its  examination  of a savings
institution,  to assess the institution's  record of meeting the credit needs of
its community and to take such record into account in its  evaluation of certain
applications by such institution.  The FIRREA amended the CRA to require the OTS
to provide a written evaluation of an institution's CRA performance  utilizing a
four-tiered  descriptive rating system, which replaced the five-tiered numerical
rating  system.  The  Bank's  latest  CRA  rating  received  from  the  OTS  was
"Satisfactory."

Federal Home Loan Bank System

         The Bank is a member of the FHLB System,  which consists of 12 regional
FHLBs.  The FHLB  provides  a  central  credit  facility  primarily  for  member
institutions.  The Bank,  as a member of the FHLB of New York,  is  required  to
acquire and hold shares of capital stock in the FHLB in an amount at least equal
to 1% of the aggregate principal amount of its unpaid residential mortgage loans
and similar  obligations  at the beginning of each year, or 1/20 of its advances
(borrowings)  from the FHLB,  whichever is greater.  The Bank was in  compliance
with this  requirement  with an investment in FHLB stock at December 31, 1999 of
$3.3 million.  FHLB  borrowings must be secured by specified types of collateral
and all long-term  borrowings  may only be obtained for the purpose of providing
funds for residential housing finance.

         The FHLBs are required to provide funds for the resolution of insolvent
thrifts  and  to  contribute  funds  for  affordable  housing  programs.   These
requirements  could reduce the amount of  dividends  that the FHLBs pay to their
members and could also result in the FHLBs imposing a higher rate of interest on
advances to their members. For the years ended December 31, 1999, 1998 and 1997,
dividends from the FHLB to the Bank amounted to approximately $207,000, $180,000
and $126,000,  respectively.  If dividends were reduced, the Bank's net interest
income would likely also be reduced. Further, there can be no assurance that the
impact  of  recent or future  legislation  on the  FHLBs  will not also  cause a
decrease in the value of FHLB stock held by the Bank, if any.
<PAGE>
Federal Reserve System

         The Federal Reserve Board regulations  require savings  institutions to
maintain  non-interest-earning  reserves against their transaction accounts. The
Federal Reserve Board regulations  generally require that reserves be maintained


                                       31
<PAGE>
against  aggregate  transaction  accounts as follows:  for accounts  aggregating
$44.3 million or less (subject to adjustment by the Federal  Reserve  Board) the
reserve  requirement  is 3%; and for accounts  greater than $44.3  million,  the
reserve  requirement  is $1.329  million plus 10% (subject to  adjustment by the
Federal  Reserve  Board  between  8% and  14%)  against  that  portion  of total
transaction  accounts  in excess of $44.3  million.  The first  $5.0  million of
otherwise  reservable  balances  (subject to adjustment  by the Federal  Reserve
Board) are exempted  from the reserve  requirements.  The Bank is in  compliance
with the foregoing requirements. Because required reserves must be maintained in
the form of either  vault  cash,  a  non-interest-bearing  account  at a Federal
Reserve Bank or a pass-through  account as defined by the Federal Reserve Board,
the effect of this reserve requirement is to reduce the Bank's  interest-earning
assets.  FHLB  System  members  are also  authorized  to borrow from the Federal
Reserve  "discount  window,"  but  Federal  Reserve  Board  regulations  require
institutions to exhaust all FHLB sources before borrowing from a Federal Reserve
Bank.

Holding Company Regulation

         General.  The  Company is a federal  savings and loan  holding  company
within the meaning of the HOLA. As such, the Company is registered  with the OTS
and is subject  to OTS  regulations,  examinations,  supervision  and  reporting
requirements.  In addition,  the OTS has enforcement  authority over the Company
and its non-savings institution subsidiaries. Among other things, this authority
permits the OTS to restrict or prohibit  activities  that are determined to be a
serious risk to the subsidiary savings institution. The Bank must notify the OTS
30 days before declaring any dividend to the Company.

         Restrictions  Applicable  to  Mutual  Holding  Companies.  Pursuant  to
Section 10(o) of the HOLA and the Regulations, a mutual holding company, such as
the MHC, may engage in the following activities: (i) investing in the stock of a
savings  association;  (ii) acquiring a mutual association through the merger of
such association into a savings  association  subsidiary of such holding company
or an interim  savings  association  subsidiary of such holding  company;  (iii)
merging with or acquiring another holding company,  one of whose subsidiaries is
a savings  association;  (iv) investing in a  corporation,  the capital stock of
which is available  for purchase by a savings  association  under federal law or
under  the  law of  any  state  where  the  subsidiary  savings  association  or
associations share their home offices;  (v) furnishing or performing  management
services for a savings  association  subsidiary of such  company;  (vi) holding,
managing or  liquidating  assets owned or acquired from a savings  subsidiary of
such company; (vii) holding or managing properties used or occupied by a savings
association  subsidiary of such company properties used or occupied by a savings
association subsidiary of such company;  (viii) acting as trustee under deeds of
trust;  (ix)  any  other  activity  (A)  that  the  Federal  Reserve  Board,  by
regulation,  has determined to be permissible  for bank holding  companies under
Section  4(c) of the Bank  Holding  Company  Act (the  "BHC  Act"),  unless  the
Director,  by regulation,  prohibits or limits any such activity for savings and
loan  holding  companies;  or (B) in which  multiple  savings  and loan  holding
companies were  authorized (by  regulation) to directly engage on March 5, 1987;
and (x) purchasing, holding, or disposing of stock acquired in connection with a
qualified  stock issuance if the purchase of such stock by such savings and loan
holding company is approved by the Director.

         Financial  Institution  Modernization  Legislation.   Recently  enacted
federal  legislation  designed to  modernize  the  regulation  of the  financial
services  industry  expands the ability of bank  holding  companies to affiliate
<PAGE>
with other types of financial services companies such as insurance companies and
investment  banking  companies.  The  legislation  also expanded the  activities
permitted  for mutual  savings and loan  holding  companies  to also include any
activity   permitted  a  "financial  holding  company"  under  the  legislation,
including a broad array of insurance and securities activities.

         The HOLA  prohibits a savings  and loan  holding  company,  including a
federal mutual holding company,  directly or indirectly,  or through one or more
subsidiaries, from acquiring more than 5% of the voting stock of another savings
institution,  or holding company thereof,  without prior written approval of the
OTS; from  acquiring or retaining,  with certain  exceptions,  more than 5% of a
non-subsidiary holding company or savings association. The HOLA also prohibits a
savings  and loan  holding  company  from  acquiring  more  than 5% of a company
engaged in activities  other

                                       32
<PAGE>
than those  authorized  for savings and loan holding  companies by the HOLA;  or
acquiring or retaining  control of a depository  institution that is not insured
by the FDIC. In evaluating  applications by holding companies to acquire savings
institutions,  the OTS must consider the financial and managerial  resources and
future  prospects  of the company and  institution  involved,  the effect of the
acquisition on the risk to the insurance funds, the convenience and needs of the
community and competitive factors.

         The OTS is prohibited from approving any acquisition  that would result
in a multiple savings and loan holding company controlling savings  institutions
in more than one state,  except:  (i) the  approval  of  interstate  supervisory
acquisitions by savings and loan holding companies,  and (ii) the acquisition of
a savings  institution  in another  state if the laws of the state of the target
savings institution  specifically  permit such acquisitions.  The states vary in
the extent to which they  permit  interstate  savings and loan  holding  company
acquisitions.

         If the savings  institution  subsidiary  of a savings and loan  holding
company  fails to meet the QTL test set forth in  Section  10(m) of the HOLA and
the  regulations of the OTS, the holding  company must register with the Federal
Reserve  Board  as a Bank  Holding  Company  within  one  year  of  the  savings
institution's failure to so qualify.

         Stock  Holding  Company  Subsidiary  Regulation.  The OTS  has  adopted
regulations  governing the two-tier  mutual holding company form of organization
and mid-tier  stock holding  companies  that are  controlled  by mutual  holding
companies. Under these rules, the stock holding company subsidiary holds all the
shares of the mutual holding company's savings association subsidiary and issues
the  majority  of its own  shares  to the  mutual  holding  company  parent.  In
addition,  the  stock  holding  company  subsidiary  is  permitted  to engage in
activities  that are permitted for its mutual holding company parent and to have
the same  indemnification and employment contract  restrictions imposed that are
on the mutual holding company parent. Finally, OTS regulations maintain that the
stock holding  company  subsidiary  must be federally  chartered for supervisory
controls.


                                       33
<PAGE>
                           FEDERAL AND STATE TAXATION


Federal Taxation

         General.  The Bank, the Company and the MHC will report their income on
a calendar year basis using the accrual method of accounting and will be subject
to federal income  taxation in the same manner as other  corporations  with some
exceptions,  including  particularly  the Bank's reserve for bad debts discussed
below. The following discussion of tax matters is intended only as a summary and
does not purport to be a comprehensive  description of the tax rules  applicable
to the Bank, the Company and the MHC.

         Bad Debt Reserve.  Historically,  savings institutions such as the Bank
which met certain  definitional  tests primarily related to their assets and the
nature of their  business  ("qualifying  thrifts") were permitted to establish a
reserve for bad debts and to make annual additions thereto,  which may have been
deducted in arriving at their taxable income. The Bank's deductions with respect
to  "qualifying  real  property  loans,"  which are  generally  loans secured by
certain  interest in real  property,  were computed using an amount based on the
Bank's actual loss experience, or a percentage equal to 8% of the Bank's taxable
income,  computed  with certain  modifications  and reduced by the amount of any
permitted  addition  to the  non-qualifying  reserve.  Due to  the  Bank's  loss
experience,  the Bank generally  recognized a bad debt deduction  equal to 8% of
taxable income.

         In August  1996,  the  provisions  repealing  the above thrift bad debt
rules were passed by Congress as part of "The Small  Business Job Protection Act
of 1996." The new rules  eliminate the 8% of taxable income method for deducting
additions to the tax bad debt  reserves for all thrifts for tax years  beginning
after December 31, 1995.  These rules also require that all thrift  institutions
recapture all or a portion of their bad debt reserves  added since the base year
(last taxable year beginning  before  January 1, 1988).  The Bank has previously
recorded a deferred tax liability  equal to the bad debt  recapture and as such,
the new rules will have no effect on net income or federal  income tax  expense.
For  taxable  years  beginning  after  December  31,  1995,  the Bank's bad debt
deduction will be equal to net  charge-offs.  The new rules allow an institution
to suspend the bad debt reserve recapture for the 1996 and 1997 tax years if the
institution's  lending  activity for those years is equal to or greater than the
institution's  average  mortgage  lending  activity  for the six  taxable  years
preceding 1996. For this purpose,  only home purchase and home improvement loans
are  included  and the  institution  can  elect to have the tax  years  with the
highest and lowest lending activity removed from the average calculation.  If an
institution  is permitted to postpone the reserve  recapture,  it must begin its
six year recapture no later than the 1998 tax year. The  unrecaptured  base year
reserves will not be subject to recapture as long as the  institution  continues
to carry on the business of banking.  In  addition,  the balance of the pre-1988
bad debt reserves  continue to be subject to a provision of present law referred
to below that require  recapture in the case of certain excess  distributions to
shareholders.

         Distributions.   To  the  extent  that  the  Bank  makes  "non-dividend
distributions"  to the Company that are  considered as made (i) from the reserve
for losses on qualifying real property loans, to the extent the reserve for such
losses  exceeds the amount  that would have been  allowed  under the  experience
method,  or (ii) from the  supplemental  reserve  for  losses on loans  ("Excess
<PAGE>
Distributions"), then an amount based on the amount distributed will be included
in the Bank's taxable income.  Non-dividend  distributions include distributions
in  excess  of  the  Bank's  current  and  accumulated   earnings  and  profits,
distributions in redemption of stock,  and  distributions in partial or complete
liquidation.  However,  dividends  paid out of the Bank's current or accumulated
earnings and profits, as calculated for federal income tax purposes, will not be
considered to result in a distribution  from the Bank's bad debt reserve.  Thus,
any  dividends  to the Company  that would reduce  amounts  appropriated  to the
Bank's bad debt  reserve and  deducted  for federal  income tax  purposes  would
create a tax liability for the Bank.  The amount of  additional  taxable  income
created from an Excess  Distribution  is an amount that, when reduced by the tax
attributable to the income, is equal to the amount of the distribution.

                                       34
<PAGE>
         Corporate  Alternative  Minimum Tax. The Internal Revenue Code of 1986,
as amended (the "Code")  imposes a tax on  alternative  minimum  taxable  income
("AMTI") at a rate of 20%.  The excess of the bad debt reserve  deduction  using
the  percentage of taxable income method over the deduction that would have been
allowable  under the  experience  method is  treated  as a  preference  item for
purposes of computing the AMTI.  Only 90% of AMTI can be offset by net operating
loss  carryovers.  AMTI is  increased by an amount equal to 75% of the amount by
which the Bank's adjusted current earnings exceeds its AMTI (determined  without
regard to this preference and prior to reduction for net operating losses).

         Dividends Received Deduction and Other Matters. The Company may exclude
from its income 80% of dividends  received from the Bank as long as it maintains
ownership in the Bank of at least 20%.

         Audits.  The Bank was last  audited by the IRS in 1995 and has not been
audited by the New Jersey Department of Revenue ("DOR") in the past five years.

State and Local Taxation

         State of New Jersey.  The Bank, the Company and the MHC file New Jersey
income tax returns. For New Jersey income tax purposes, savings institutions are
presently  taxed at a rate  equal to 3% of  taxable  income.  For this  purpose,
"taxable  income"  generally means federal  taxable  income,  subject to certain
adjustments  (including  addition  of  interest  income on state  and  municipal
obligations).  For New Jersey tax purposes,  regular  corporations are presently
taxed at a rate equal to 9% of taxable income.



                                       35
<PAGE>

Item 2.  Properties.
--------------------

         The Bank currently  conducts its business through an administrative and
full service branch office located in Caldwell,  New Jersey and seven other full
service branch offices located in West Orange,  Franklin Lakes, River Vale, Pine
Brook, Old Tappan and Northvale, New Jersey. Management believes that the Bank's
facilities are adequate to meet the present and immediately foreseeable needs of
the Bank and the Company.

<TABLE>
<CAPTION>
                                                         Original             Net Book Value
                                                           Year               of Property or
                                    Leased                Leased                 Leasehold
                                      or                    or                Improvements at
Location                            Owned                Acquired            December 31, 1999
--------                           ------                --------            -----------------
                                                       (In thousands)
<S>                                 <C>                    <C>                       <C>
Administrative/Corporate/
Branch Office:
417 Bloomfield Avenue               Owned                  1962                      $370
Caldwell, NJ 07006

Branch Offices:
216 Main Street                     Owned                  1987                       142
West Orange, NJ 07052

487 Pleasant Valley Way             Owned                  1987                       206
West Orange, NJ 07052

574 Franklin Avenue                 Leased                 1978                         1
Franklin Lakes, NJ 07417

653 Westwood Avenue                 Owned                  1997                       469
River Vale, NJ 07675

267 Changebridge Road               Owned                  1974                       236
Pine Brook, NJ 07058

207 Old Tappan Road                 Owned                  1997                       480
Old Tappan, NJ 07675

119 Paris Avenue                    Owned                  1997                       314
Northvale, NJ 07647

</TABLE>
<PAGE>

Item 3.   Legal Proceedings.
----------------------------

         The  Company  is  not  a  party  to  any  pending  legal   proceedings.
Periodically,  there have been various  claims and lawsuits  involving the Bank,
such as claims to enforce liens, condemnation proceedings on properties in which
the Bank holds security interests,  claims involving the making and servicing of
real property loans and other issues incident to the Bank's  business.  The Bank
is not a party to any pending legal  proceedings  that it believes  would have a
material adverse effect on the financial condition or operations of the Bank.

                                       36
<PAGE>
Item 4.   Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------

         None.


                                     PART II


Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.
-------------------------------------------------------------------------------

         Information  regarding the market for the  Company's  common equity and
related stockholder matters appears on the inside back cover of  the 1999 Annual
Report  under  the  caption   "Investor  and  Corporate   Information"   and  is
incorporated herein by reference.

Item 6.   Selected Financial Data.
----------------------------------

         Information  regarding selected financial data appears on pages 4 and 5
of the 1999 Annual Report under the caption "Selected Consolidated Financial and
Other Data" and is incorporated herein by this reference.

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

         Information regarding management's discussion and analysis of financial
condition  and results of  operations  appears on pages 6 through 19 of the 1999
Annual  Report  under the  caption  "Management's  Discussion  and  Analysis  of
Financial  Condition and Results of Operations"  and is  incorporated  herein by
this reference.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
--------------------------------------------------------------------

         Information  regarding  qualitative and quantitative  disclosures about
market risk are contained in the section captioned "Management's  Discussion and
Analysis of Financial Condition and Results of Operations-Management of Interest
Rate  Risk  and  Market  Risk  Analysis"  in  the  1999  Annual  Report  and  is
incorporated herein by this reference.

Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------

         Information  regarding the  financial  statements  and the  Independent
Auditors' Report appears on pages 20 through 59 of the 1999 Annual Report and is
incorporated herein by this reference.

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

         None.

<PAGE>
                                    PART III


Item 10.  Directors and Executive Officers of the Registrant.
------------------------------------------------------------

         The  information  relating to Directors and  Executive  Officers of the
Registrant  is  incorporated  herein  by  reference  to the  Registrant's  Proxy
Statement for the 2000 Annual  Meeting of  Stockholders  to be held on April 27,
2000, at pages 4 through 7.



                                       37
<PAGE>
Item 11.  Executive Compensation.
--------------------------------

         The  information  relating to directors'  compensation  and executives'
compensation  is  incorporated  herein by  reference to the  Registrant's  Proxy
Statement for the 2000 Annual  Meeting of  Stockholders  to be held on April 27,
2000,  at  pages 7  through  16 and 18  (excluding  the  Executive  Compensation
Committee Report and Stock Performance Graph).

Item 12.  Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------

         The information  relating to security  ownership of certain  beneficial
owners and management is  incorporated  herein by reference to the  Registrant's
Proxy  Statement for the 2000 Annual Meeting of Stockholders to be held on April
27, 2000, at pages 3 and 4.

Item 13.  Certain Relationships and Related Transactions.
---------------------------------------------------------

         The  information   relating  to  certain   relationships   and  related
transactions  is  incorporated  herein by  reference to the  Registrant's  Proxy
Statement for the 2000 Annual  Meeting of  Stockholders  to be held on April 27,
2000, at pages 17 through 18.

                                     PART IV

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

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

(1)     Consolidated  Financial  Statements of the Company are  incorporated  by
        reference to the following  indicated pages of the 1999 Annual Report to
        Stockholders.
                                                                           Page

       Report of Independent Auditors.......................................21

       Consolidated Statements of Financial Condition as of
          December 31, 1999 and 1998........................................22

       Consolidated Statements of Income for the
          Years Ended December 31, 1999, 1998 and 1997......................23

       Consolidated Statements of Comprehensive Income for the Years Ended
          December 31, 1999, 1998 and 1997..................................24

       Consolidated Statements of Changes in Stockholders' Equity
          for the Years Ended December 31, 1999, 1998 and 1997..............25

       Consolidated Statements of Cash Flows for the
          Years Ended December 31, 1999, 1998 and 1997......................26

       Notes to Consolidated Financial Statements for the
          Years Ended December 31, 1999, 1998 and 1997......................28


                                       38

<PAGE>
       The  remaining  information  appearing  in  the  1999  Annual  Report  to
Stockholders  is not  deemed  to be  filed  as part of this  report,  except  as
expressly provided herein.

(2)      All schedules are omitted  because they are not required or applicable,
         or the  required  information  is shown in the  consolidated  financial
         statements or the notes thereto.

(3)      Exhibits

         (a)     The following exhibits are filed as part of this report.
<TABLE>
<CAPTION>
<S>      <C>
3.1      Federal MHC Subsidiary Holding Company Charter of West Essex Bancorp, Inc.*
3.2      Bylaws of West Essex Bancorp, Inc.*
4.0      Draft Stock Certificate of West Essex Bancorp, Inc.*
10.1     West Essex Bank Employee Stock Ownership Plan**
10.2     West Essex Bank Employee Stock Ownership Plan Trust**
10.3     ESOP Loan Commitment Letter**
10.4     West Essex Bank Employee Stock Ownership Trust Loan and Security Agreement**
10.5     Employment Agreement between West Essex Bank and Leopold W. Montanaro**
10.6     Employment Agreement between West Essex Bancorp, Inc. and Leopold W. Montanaro**
10.7     Three Year Change in Control Agreement between West Essex Bank and Dennis A. Petrello**
10.8     Three Year Change in Control Agreement between West Essex Bank and Charles E. Filippo**
10.9     Three Year Change in Control Agreement between West Essex Bank and Craig L. Montanaro**
10.10    Three Year Change in Control Agreement between West Essex Bancorp, Inc. and Dennis A. Petrello**
10.11    Three Year Change in Control Agreement between West Essex Bancorp, Inc. and Charles E. Filippo**
10.12    Three Year Change in Control Agreement between West Essex Bancorp, Inc. and Craig L. Montanaro**
10.13    West Essex Bank Employee Severance Compensation Plan**
10.14    West Essex Bank Supplemental Executive Retirement Plan**
10.15    West Essex Bank Management Supplemental Executive Retirement Plan**
10.16    Restated Executive Supplemental Retirement Income Agreement for Leopold W. Montanaro*
10.17    Restated Executive Supplemental Retirement Income Agreement for Charles E. Filippo*
10.18    West Essex Bancorp, Inc. 1999 Stock-Based Incentive Plan
11.0     Computation of Earnings Per Share
13.0     Portions of the 1999 Annual Report to Shareholders
21.0     Subsidiary information is incorporated herein by reference to "Part I-Business-Subsidiary Activities"
23.0     Consent of Radics & Co., LLC
27.0     Financial Data Schedule

</TABLE>
         (b)     Reports on Form 8-K

                 None.
                 ----------------------------------
                 *    Incorporated  herein by reference  into this document from
                      the Exhibits to Form S-1, Registration Statement, filed on
                      June 12, 1998, as amended, Registration No. 333-56729.

                 **   Incorporated  herein by reference  into this document from
                      the Exhibits to the Form 10-K, filed on March 31, 1999.

                 ***  Incorporated  herein  by reference into this document from
                      the Proxy Statement dated March 17, 2000



                                       39
<PAGE>

                                   SIGNATURES

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

                                      WEST ESSEX BANCORP, INC.


                                      By:      /s/ Leopold W. Montanaro
                                               ------------------------
                                               Leopold W. Montanaro
                                               President, Chief Executive
                                               Officer and Director

                                               Date:    March 29, 2000

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this report has been signed by the following  persons in the  capacities  and on
the dates indicated.

Name                                 Title                              Date
----                                 -----                              ----
/s/ Leopold W. Montanaro       President, Chief Executive         March 29, 2000
------------------------       Officer and Director
Leopold W. Montanaro           (principal executive officer)

/s/ Dennis A. Petrello         Executive Vice President           March 29, 2000
----------------------         and Chief Financial Officer
Dennis A. Petrello             (principal accounting and
                               financial officer)

/s/ William J. Foody           Chairman of the Board              March 29, 2000
---------------------
William J. Foody

/s/ David F. Brandley          Director                           March 29, 2000
----------------------
David F. Brandley

/s/ Everett N. Leonard         Director                           March 29, 2000
----------------------
Everett N. Leonard

/s/ James P. Vreeland          Director                           March 29, 2000
---------------------
James P. Vreeland

/s/ John J. Burke              Director                           March 29, 2000
-----------------
John J. Burke