SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

(Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE
     ACT OF 1934

For the Fiscal Year Ended December 31, 2000

[ ]  TRANSITIONAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from _________________ to _______________

Commission File Number: 0-17353

                            FMS FINANCIAL CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                  New Jersey                             22-2916440
---------------------------------------------  ---------------------------------
(State or other jurisdiction of incorporation  (I.R.S. Employer or organization)
                                                       Identification No.)

   3 Sunset Road, Burlington, New Jersey                   08016
---------------------------------------------  ---------------------------------
(Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code:     (609) 386-2400
                                                        --------------

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 $.10 per share
             ------------------------------------------------------
                                (Title of Class)

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

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  Registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.[X]

         Based on the closing sales price of $8.84 per share of the registrant's
common stock on March 1, 2001, as reported on the Nasdaq  National Market System
the  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
registrant was approximately $59.5 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

     1.   Portions of 2000 Annual Report to Stockholders (Parts II and IV)
     2.   Portions  of  Proxy   Statement   for  the  2001  Annual   Meeting  of
          Stockholders. (Part III)

<PAGE>

                                     PART I

Forward-Looking Statements

         FMS Financial  Corporation (the "Corporation" or "Registrant") may from
time to  time  make  written  or oral  "forward-looking  statements,"  including
statements  contained  in the  Corporation's  filings  with the  Securities  and
Exchange Commission  (including this Annual Report on Form 10-K and the exhibits
thereto),  in its reports to  stockholders  and in other  communications  by the
Corporation,  which are made in good faith by the  Corporation  pursuant  to the
"safe harbor"  provisions  of the private  securities  litigation  reform act of
1995.

         These forward-looking statements involve risks and uncertainties,  such
as statements of the Corporation's plans,  objectives,  expectations,  estimates
and intentions,  that are subject to change based on various  important  factors
(some of which are beyond the  Corporation's  control).  The following  factors,
among others,  could cause the  Corporation's  financial  performance  to differ
materially from the plans,  objectives,  expectations,  estimates and intentions
expressed in such forward-looking  statements: the strength of the United States
economy  in  general  and the  strength  of the  local  economies  in which  the
Corporation conducts operations; the effects of, and changes in, trade, monetary
and fiscal policies and laws,  including  interest rate policies of the board of
governors of the federal reserve system,  inflation,  interest rate,  market and
monetary fluctuations;  the timely development of and acceptance of new products
and  services  of the  Corporation  and the  perceived  overall  value  of these
products  and services by users,  including  the  features,  pricing and quality
compared to  competitors'  products and services;  the  willingness  of users to
substitute competitors' products and services for the Corporation's products and
services;  the success of the Corporation in gaining regulatory  approval of its
products  and  services,  when  required;  the impact of  changes  in  financial
services'  laws and  regulations  (including  laws  concerning  taxes,  banking,
securities  and  insurance);  technological  changes,  acquisitions;  changes in
consumer  spending  and saving  habits;  and the success of the  Corporation  at
managing the risks involved in the foregoing.

         The Corporation  cautions that the foregoing list of important  factors
is  not   exclusive.   The   Corporation   does  not  undertake  to  update  any
forward-looking  statement,  whether written or oral, that may be made from time
to time by or on behalf of the Corporation.

Item 1.  Business
-----------------

General

         FMS Financial Corporation,  a New Jersey corporation,  headquartered in
Burlington,  New Jersey,  is the holding  company for Farmers and Mechanics Bank
(the "Bank").  The Corporation conducts no significant business or operations of
its own other than holding all of the outstanding common stock of the Bank. As a
result,  references to the  Corporation  or Registrant  generally  refers to the
consolidated entity which includes the main operating company,  the Bank, unless
the context indicates otherwise.

         The  Registrant  principally  operates  through its  thirty-one  branch
offices located  throughout  Burlington  County,  New Jersey.  The Registrant is
primarily engaged in the business of attracting deposits from the general public
and originating  loans which are secured by residential real estate. To a lesser
extent, the Registrant also originates  consumer,  commercial business loans and
construction   loans   and   invests   in   U.S.   government   securities   and
mortgage-related securities.

<PAGE>

         On January 25, 2001, the Corporation  announced that it entered into an
Agreement  and Plan of Merger  Conversion  with  CloverBank of  Pennsauken,  New
Jersey,  whereby  CloverBank will convert to the stock form of organization  and
simultaneously merge with and into Farmers and Mechanics Bank.

         Because  CloverBank is undertaking a Voluntary  Supervisory  Conversion
under the applicable regulations of the Office of Thrift Supervision ("OTS"), no
stock will be issued to depositors or other members of CloverBank.

         The  Agreement,  which does not  require  stockholder  approval  of the
Corporation,  nor  approval  of the  depositors  of  CloverBank,  is  subject to
regulatory approval of the transaction, among other conditions. If approved, the
merger is expected to be consummated by June, 2001.

Competition

         The Registrant's primary market area consists of Burlington County, New
Jersey, and is one of many financial  institutions serving this market area. The
competition for deposit products comes from other insured financial institutions
such  as  commercial  banks,  thrift  institutions  and  credit  unions  in  the
Registrant's  market  area.  Deposit  competition  also  includes  a  number  of
insurance  products sold by local agents and investment  products such as mutual
funds and other securities sold by local and regional brokers.  Loan competition
comes from other insured financial institutions such as commercial banks, thrift
institutions and credit unions.

Lending Activities

Analysis of Loan Portfolio

         The following table sets forth the composition of the Registrant's loan
portfolio in dollar amounts and in  percentages of the respective  portfolios at
the dates indicated.

<TABLE>
<CAPTION>
                                                                          December 31,
                               -------------------------------------------------------------------------------------------------
                                       2000               1999                 1998               1997                1996
                               -----------------   -----------------   ------------------   ----------------   -----------------
                               Carrying   Percent  Carrying  Percent   Carrying   Percent  Carrying  Percent   Carrying  Percent
                                Value     of Total   Value   of Total    Value    of Total  Value    of Total   Value    of Total
                               --------   ------   --------   ------   --------    ------   -------   ------   -------    ------
                                                                         (In thousands)
<S>                           <C>        <C>      <C>        <C>      <C>         <C>     <C>        <C>     <C>        <C>
Mortgage loans:
  One-to-four family......     $228,428    77.47%  $236,912    77.82%  $245,415     81.07% $253,001    82.43% $257,451     82.89%
  Commercial real estate..       52,763    17.90     52,544    17.26     45,938     15.18    42,974    14.00    39,177     12.61
  Commercial construction.        1,062      .36      3,935     1.29      2,609       .86     2,385      .78     4,395      1.42
  Construction............          163      .06        973      .32      1,390       .46     3,258     1.06     3,712      1.20
                               --------   ------   --------   ------   --------    ------   -------   ------   -------    ------
      Total mortgage loans      282,416    95.79    294,364    96.69    295,352     97.57   301,618    98.27   304,735     98.12
                               --------   ------   --------   ------   --------    ------   -------   ------   -------    ------
Consumer and other
loans:
  Consumer................        3,900     1.32      3,274     1.08      3,237      1.07     3,609     1.17     4,015      1.29
  Commercial business.....        8,522     2.89      6,790     2.23      4,121      1.36     1,712      .56     1,830       .59
                               --------   ------   --------   ------   --------    ------   -------   ------   -------    ------
   Total consumer and other
        loans.............       12,422     4.21     10,064     3.31      7,358      2.43     5,321     1.73     5,845      1.88
                               --------   ------   --------   ------   --------    ------   -------   ------   -------    ------
      Total loans.........     $294,838   100.00%  $304,428   100.00%  $302,710    100.00% $306,939   100.00% $310,580    100.00%
                               ========   ======   ========   ======   ========    ======  ========   ======  ========    ======
</TABLE>

                                        2

<PAGE>

         One-to-Four  Family Loans.  The  Registrant's  primary lending activity
consists of the  origination of one-to-four  family  residential  mortgage loans
("residential  loans") secured by the property in the Registrant's  market area.
The Registrant's  residential loan portfolio also includes second mortgage loans
and home  equity  loans  (including  home  equity  lines of credit  loans).  The
Registrant  generally  originates  mortgage  loans with terms of 15 to 30 years,
amortized  on a monthly  basis,  with  principal  and  interest  due each month.
Typically,  residential  loans  remain  outstanding  for  significantly  shorter
periods than their  contractual  terms because borrowers may refinance or prepay
loans at their option.

         The Registrant  presently  offers  residential  loans that adjust every
year  after an  initial  fixed  term of one,  two,  five or seven  years,  at an
interest  rate indexed  higher than the  corresponding  U.S.  Treasury  security
index. The interest rates on these mortgages adjust annually after the one, two,
five or seven year anniversary date of the loan with an interest rate adjustment
cap of 1.5% per year and  presently  not to exceed a rate of 11.5% over the life
of the loan. At December 31, 2000,  adjustable-rate  residential  first mortgage
loans  amounted  to $47.4  million  or  16.09%  of the  total  residential  loan
portfolio.  These loans are generally not originated under terms, conditions and
documentation  which  permit  their  sale in the  secondary  mortgage  market to
Federal Home Loan Mortgage  Corporation  ("FHLMC") and Federal National Mortgage
Association ("FNMA").

         Fixed-rate mortgage loans are generally underwritten according to FHLMC
and FNMA  guidelines.  The Registrant  periodically  sells  selected  fixed-rate
residential loans, without recourse, to provide additional funds for lending and
to restructure the loan portfolio to improve interest rate risk.  Generally,  if
the property is not owner-occupied, a higher rate of interest is charged on such
loans. At December 31, 2000, $161.0 million, or 54.60%, of the total residential
loan portfolio, consisted of long-term fixed-rate first mortgage loans, of which
none were classified as held for sale.

         The  Registrant's   lending   policies   generally  limit  the  maximum
loan-to-value  ratio on owner- occupied  residential first mortgage loans to 95%
of the lesser of the appraised value or purchase price,  with the condition that
private  mortgage  insurance is required on loans with  loan-to-value  ratios in
excess of 80%. Mortgage loans on investment properties are made at loan-to-value
ratios up to 70%. The loan-to- value ratio, maturity and other provisions of the
loans made by the Registrant have generally  reflected the policy of making less
than the maximum loan permissible  under applicable  regulations,  in accordance
with established lending practices, market conditions and underwriting standards
maintained  by  the  Registrant.  The  Registrant  requires  fire  and  casualty
insurance on all  properties  securing real estate loans and also performs title
searches to ensure its lien position.

         The Registrant  actively  solicits and originates home equity loans and
home  equity  lines of credit  secured by the equity in the  borrower's  primary
residence. These loans generally have terms of 10 to 15 years, some of which are
fixed rates and some of which have rates that adjust  based upon the prime rate.
At December  31,  2000,  the  Registrant  had home equity loans in the amount of
$20.0 million,  or 6.79%, of its  residential  loan portfolio and approved $19.2
million in home equity lines of credit, of which $7.4 million was outstanding.

         Commercial  Real Estate Loans.  Commercial  real estate loans are loans
secured by commercial real estate (e.g.,  shopping centers,  medical  buildings,
retail offices) and multi-family  dwelling units (e.g.,  apartment projects with
more than four units), in the Registrant's  market area.  Commercial real estate
loans and  multi-family  residential  loans have been made in amounts up to $3.8
million, with most of such

                                        3
<PAGE>

loans  ranging  in size  from  $100,000  to $1.0  million.  Loans on  commercial
properties are generally  originated in amounts up to 75% of the appraised value
of the property. Commercial real estate loans and multi-family residential loans
are  generally  made at  rates  which  adjust  above  the  prime  interest  rate
(generally  1% to 2%) or a specified  treasury  index or are balloon  loans with
fixed  interest  rates  which  mature  in three  to five  years  with  principal
amortization  for a  period  of up  to 25  years.  At  December  31,  2000,  the
Registrant's commercial real estate loan portfolio consisted of $49.7 million of
commercial real estate and $3.0 million of multi-family loans.

         Loans  secured  by  commercial  real  estate are  generally  larger and
involve a greater degree of risk than one-to-four  family  residential  mortgage
loans. Of primary concern,  in commercial and multi-family  real estate lending,
is the borrower's  creditworthiness  and the feasibility and cash flow potential
of the project.  Loans secured by income  properties  are  generally  larger and
involve greater risks than residential  mortgage loans because payments on loans
secured by income  properties  are often  dependent on  successful  operation or
management  of the  properties.  As a  result,  repayment  of such  loans may be
subject  to a greater  extent  than  residential  real  estate  loans to adverse
conditions in the real estate market or the economy.

         Construction  Loans.  The  Registrant  originates  loans to finance the
construction  of one-to-four  family  dwellings  and/or  commercial real estate.
Construction  loans to builders are generally made only if the Registrant  makes
the  permanent  mortgage  loan or if the builder has a contract for sale and the
purchaser has received a permanent  mortgage  commitment.  Interim  construction
loans to builders  generally  have terms of up to nine months and interest rates
which adjust above the prime interest rate (generally 1% to 2%).

         Construction  financing  is  generally  considered  to involve a higher
degree of risk of loss than long- term  financing  on  improved,  occupied  real
estate.  Risk of loss on a  construction  loan is  dependent  largely  upon  the
accuracy  of the initial  estimate  of the  property's  value at  completion  of
construction  and  development  and the estimated cost  (including  interest) of
construction. During the construction phase, a number of factors could result in
delays and cost  overruns.  If the estimate of  construction  costs proves to be
inaccurate,  the  Registrant  may be required to advance funds beyond the amount
originally committed to permit completion of the development. If the estimate of
value proves to be inaccurate,  the Registrant may be confronted, at or prior to
the maturity of the loan, with a project having a value which is insufficient to
assure full repayment.

         Consumer  Loans.   Regulations   permit   federally   chartered  thrift
institutions  to make  secured  and  unsecured  consumer  loans up to 35% of the
institution's  assets.  The  Registrant  makes  various  types  of  secured  and
unsecured consumer loans including education loans, lines of credit,  automobile
loans  (new and used) and loans  secured  by deposit  accounts.  Consumer  loans
generally  have  terms of six months to five  years,  some of which are at fixed
rates and some of which have rates that adjust periodically.

         Consumer  loans  may  entail  greater  risk  than  residential   loans,
particularly  in the case of  consumer  loans that are  unsecured  or secured by
assets that depreciate rapidly.  Repossessed collateral for a defaulted consumer
loan may not be  sufficient  for  repayment  of the  outstanding  loan,  and the
remaining deficiency may not be collectible.

                                        4
<PAGE>

         Commercial  Business Loans.  Commercial business loans are underwritten
on the basis of the borrower's  ability to service such debt from income and are
generally made to small and mid-sized  companies located within the Registrant's
primary lending area.  Generally,  the Registrant requires additional collateral
of equipment, chattel or other assets before making a commercial business loan.

         Loan Commitments. The Registrant issues loan origination commitments to
real estate developers and qualified  borrowers  primarily for the construction,
purchase and refinancing of residential  real estate and commercial real estate.
Such  commitments are made on specified terms and conditions,  including in most
cases, the payment of a  non-refundable  commitment fee based on a percentage of
the amount of committed funds.  Generally,  the commitment  requires  acceptance
within 15 days of the date of issuance. At December 31, 2000, the Registrant had
$7.9  million  of  commitments  to  cover  originations  and  $14.6  million  in
undisbursed  funds on  outstanding  lines of credit.  Management  believes  that
virtually all of the Registrant's commitment will be funded.

Origination of Loans

         Commercial loan origination comes from a variety of sources,  including
the  Registrant's  existing  customer base,  referrals from real estate offices,
accountants,  financial  advisers,  attorneys,  builders and walk in business as
well  as  solicitations  by  the  Registrant's  business  development  officers.
Residential  mortgage loan customers are derived in a similar  manner.  Consumer
loans are directly  obtained through the Registrant's  network of branch offices
and advertising.

         All applications are processed in accordance with established  policies
of the Registrant,  including the review of credit  references,  verification of
information  provided  and,  where  real  estate is  involved,  the review of an
appraisal  completed  by an  independent  third party  appraiser  from a list of
approved appraisers that the Registrant maintains.

         Loan   approvals   may  be  approved  by  loan  officers  up  to  their
individually   assigned  lending  limit,  which  are  established  and  modified
periodically to reflect the officer's expertise and experience. Certain officers
have joint lending  authorities  that exceed their individual  authorities.  The
Board of Directors  approves loans above the individual and joint authorities of
the  officers.   The  Board  reviews  on  an  annual  basis  the  loan  approval
authorities.

Non-Performing and Problems Assets

         When a loan is  more  than 30 days  delinquent,  the  borrower  will be
contacted by mail or phone and payment requested.  If the delinquency continues,
subsequent efforts will be made to contact the delinquent  borrower.  In certain
instances,  the Registrant may modify the loan or grant a limited  moratorium on
loan payments to enable the borrower to reorganize his financial affairs. If the
loan  continues  in a  delinquent  status  for 90 days or more,  the  Registrant
generally will initiate foreclosure proceedings.

         Loans are generally placed on non-accrual  status when either principal
or interest is 90 days or more past due. Interest accrued and unpaid at the time
a loan is placed on non-accrual status is charged against interest income by the
establishment  of  a  reserve  on  uncollected  interest.  Such  interest,  when
ultimately collected, is credited to the income in the period received.

                                        5
<PAGE>

         Non-Performing  Assets.  The  following  table sets  forth  information
regarding  impaired  loans,  troubled  debt  restructured  and real estate owned
assets by the Registrant at the dates indicated.

<TABLE>
<CAPTION>
                                                              At December 31,
                                              ----------------------------------------------
                                               2000      1999      1998      1997      1996
                                              ------    ------    ------    ------    ------
                                                            (Dollars in Thousands)
<S>                                         <C>       <C>       <C>       <C>       <C>
Loans accounted for on a non-accrual basis:
Mortgage loans:
  One-to-four family                          $  778    $1,386    $1,733    $2,394    $2,413
  Commercial real estate                       1,409     1,510     1,205     1,163     1,663
  Consumer and other                              24       237       282        80        15
                                              ------    ------    ------    ------    ------
    Total mortgage non-accrual loans          $2,211    $3,133    $3,220    $3,637    $4,091
                                              ------    ------    ------    ------    ------

Other non-accrual loans                           --        --        --        --        --
Troubled debt restructuring                   $  790    $  462    $  477    $  684    $  560(1)
Real estate owned, net                           355       449       168       446       622
Other non-performing assets                       88        88       644       644     1,228
                                              ------    ------    ------    ------    ------
Total non-performing assets                   $3,444    $4,132    $4,509    $5,411    $6,501
                                              ======    ======    ======    ======    ======

Total non-accrual loans to net loans             .76%     1.05%     1.08%     1.20%     1.33%
                                              ======    ======    ======    ======    ======
Total non-accrual loans to total assets          .26%      .41%      .47%      .58%      .76%
                                              ======    ======    ======    ======    ======
Total non-performing assets to total assets      .41%      .53%      .65%      .86%     1.20%
                                              ======    ======    ======    ======    ======
</TABLE>

--------------
(1)  Loans  restructured  prior  to SFAS  Nos.  114 and 118  effective  date and
     performing in accordance with the terms of the restructuring agreement.


         Classified Assets. OTS regulations provide for a classification  system
for problem  assets of insured  institutions  which  covers all problem  assets.
Under this  classification  system,  problem assets of insured  institutions are
classified  as  "substandard,"  "doubtful,"  or "loss."  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.  Assets may be  designated  "special
mention"  because  of  potential   weaknesses  that  do  not  currently  warrant
classification in one of the aforementioned categories.

         When  an  insured  institution  classifies  problem  assets  as  either
substandard or doubtful,  it may establish general allowances for loan losses in
an amount  deemed  prudent by  management.  General  allowances  represent  loss
allowances which have been established to recognize the inherent risk associated
with lending activities,  but which, unlike specific  allowances,  have not been
allocated to particular problem assets. When an insured  institution  classifies
problem assets as loss, it is required either to establish a specific  allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. An institution's  determination as to the classification of its
assets and the amount of its valuation

                                        6
<PAGE>

allowances is subject to review by the OTS, which may order the establishment of
additional  general or  specific  loss  allowances.  A portion  of general  loss
allowances  established to cover possible losses related to assets classified as
substandard  or  doubtful  may  be  included  in  determining  an  institution's
regulatory  capital,   which  specific  valuation  allowances  for  loan  losses
generally do not qualify as regulatory capital.

         Management's  evaluation  of  the  classification  of  assets  and  the
adequacy  of the  reserve  for loan losses is reviewed by the Board on a regular
basis and by the regulatory agencies as part of their examination process.

         The following table sets forth the  Registrant's  classified  assets in
accordance with its classification system.


                                                  At December 31, 2000
                                                      (In thousands)
           Special mention..................               $1,080
           Substandard......................                5,469
           Doubtful.........................                    0
           Loss.............................                    0
                                                           ------
                    Total...................               $6,549
                                                           ======

         Allowances for Loan Losses.  It is  management's  policy to provide for
losses on unidentified loans in its loan portfolio.  A provision for loan losses
is charged to  operations  based on  management's  evaluation  of the  potential
losses that may be incurred in the Registrant's loan portfolio. Such evaluation,
which  includes a review of all loans of which full  collectibility  of interest
and principal may not be reasonably  assured,  considers the  Registrant's  past
loan  loss  experience,  known  and  inherent  risks in the  portfolio,  adverse
situations that may affect the borrower's  ability to repay,  estimated value of
any underlying collateral, and current economic conditions.

         Management  will  continue  to review  the  entire  loan  portfolio  to
determine the extent, if any, to which further additional loss provisions may be
deemed  necessary.  There can be no assurance that the allowance for losses will
be adequate to cover losses which may in fact be realized in the future and that
additional provisions for losses will not be required.


                                                         7

<PAGE>

         The  following  table  sets  forth  an  analysis  of  the  Registrant's
allowance for loan losses for the periods indicated.

<TABLE>
<CAPTION>
                                                           For the Year Ended December 31,
                                            -------------------------------------------------------
                                              2000        1999        1998        1997        1996
                                            -------     -------     -------     -------     -------
                                                              (Dollars in Thousands)
<S>                                        <C>         <C>         <C>         <C>         <C>
Balance at beginning of period.......       $ 3,841     $ 3,342     $ 3,138     $ 2,782     $ 2,767
Loans charged-off:
  One-to-four family.................           (40)        (77)        (37)         (8)       (114)
  Commercial real estate.............           (83)         --          --          --          --
  Construction.......................            --        (128)         --          --          --
  Consumer...........................            (9)         --          (1)        (40)         (1)
  Commercial business................            --         (28)         --          (1)         --
                                            -------     -------     -------     -------     -------
    Total charge-offs................          (132)       (233)        (38)        (49)       (115)
Recoveries...........................            31          78           2           5          10
                                            -------     -------     -------     -------     -------
Net loans charged-off................          (101)       (155)        (36)        (44)       (105)
                                            -------     -------     -------     -------     -------
Provision for possible loan losses...           240         654         240         400         120
                                            -------     -------     -------     -------     -------
Balance at end of period.............       $ 3,980     $ 3,841     $ 3,342     $ 3,138     $ 2,782
                                            =======     =======     =======     =======     =======
Ratio of net charge-offs to average
  loans outstanding during the
  period.............................          .034%       .051%       .012%       .014%       .035%
                                            =======     =======     =======     =======     =======

</TABLE>
                                        8
<PAGE>

Analysis of the Allowance for Loan Losses

        The  following  table sets forth the breakdown of the allowance for loan
losses by loan category and the percent of loans in each category to total loans
receivable  for the periods  indicated.  The allocation of the allowance to each
category is not  necessarily  indicative  of future losses and does not restrict
the use of the allowances to absorb losses in any category.

<TABLE>
<CAPTION>
                                                                       At December 31,
                          ---------------------------------------------------------------------------------------------------------
                                 2000                1999                  1998                1997               1996
                          -------------------   ------------------   -------------------   ------------------   -------------------
                                  Percent of           Percent of            Percent of           Percent of            Percent of
                                   Loans to             Loans to              Loans to             Loans to              Loans to
                          Amount  Total Loans   Amount Total Loans   Amount  Total Loans   Amount Total Loans   Amount  Total Loans
                          ------  -----------   ------ -----------   ------  -----------   ------ -----------   ------  -----------
                                                            (Dollar s in Thousands)
<S>                     <C>        <C>        <C>       <C>        <C>         <C>       <C>       <C>        <C>        <C>
Loans:
One-to-four family....... $2,912     77.48%     $2,506    77.82%     $1,929      81.11%    $2,016    82.43%     $1,716     82.89%
Commercial real estate...    887     17.90       1,063    17.26       1,232      15.14        954    14.00         877     12.61
Commercial construction..      9       .36          39     1.29          26        .86         24      .78          44      1.42
Construction.............      5       .05          10      .32          14        .46         32     1.06          37      1.20
Consumer and other.......     31      1.32          65     1.08          65       1.07         62     1.17          76      1.29
Commercial business......    136      2.89         158     2.23          76       1.36         50      .56          32       .59
                          ------    ------      ------   ------      ------     ------     ------   ------      ------    ------
   Total allowance for
     loan losses......... $3,980    100.00%     $3,841   100.00%     $3,342     100.00%    $3,138   100.00%     $2,782    100.00%
                          ======    ======      ======   ======      ======     ======     ======   ======      ======    ======
</TABLE>


                                        9
<PAGE>

Investment Activities

        The  Registrant  is required  under  federal  regulations  to maintain a
minimum  amount of liquid  assets which may be invested in specified  short-term
securities  and certain  other  investments.  The level of liquid  assets varies
depending  upon  several  factors,  including:  (i)  the  yields  on  investment
alternatives,  (ii) management's judgment as to the attractiveness of the yields
then available in relation to other  opportunities,  (iii) expectation of future
yield levels, and (iv) management's  projections as to the short-term demand for
funds  to  be  used  in  loan  origination  and  other  activities.   Investment
securities,  including mortgage-backed securities, are classified at the time of
purchase,  based upon management's  intentions and abilities, as securities held
to maturity or securities  available for sale. Debt securities acquired with the
intent and ability to hold to maturity  are  classified  as held to maturity and
are stated at cost and adjusted  for  amortization  of premium and  accretion of
discount,  which are  computed  using the level yield method and  recognized  as
adjustments  of interest  income.  All other debt  securities  are classified as
available for sale to serve principally as a source of liquidity.

        Current  regulatory  and  accounting   guidelines  regarding  investment
securities  (including  mortgage  backed  securities)  require the Registrant to
categorize  securities as "held to maturity," "available for sale" or "trading."
As of December  31,  2000,  Registrant  had  securities  classified  as "held to
maturity"  and  "available  for sale" in the amount of $419.9  million and $40.9
million,  respectively and had no securities classified as "trading." Securities
classified as "available for sale" are reported for financial reporting purposes
at the fair  market  value with net  changes in the market  value from period to
period included as a separate  component of stockholders'  equity, net of income
taxes. At December 31, 2000, the Registrant's  securities available for sale had
an amortized cost of $41.4 million and market value of $40.9 million (unrealized
loss of $358  thousand,  net of deferred  income  taxes).  The changes in market
value in the  Registrant's  available for sale  portfolio  reflect normal market
conditions and vary, either positively or negatively, based primarily on changes
in  general  levels of  market  interest  rates  relative  to the  yields of the
portfolio. Additionally, changes in the market value of securities available for
sale do not  affect  the  Corporation's  income  nor does it affect  the  Bank's
regulatory capital requirements or its loan-to-one borrower limit.

        At December 31,  2000,  the  Registrant's  investment  portfolio  policy
allowed investments in instruments such as: (i) U.S. Treasury obligations,  (ii)
U.S.  federal  agency or federally  sponsored  agency  obligations,  (iii) local
municipal   obligations,   (iv)   mortgage-backed   securities,   (v)   banker's
acceptances,  (vi) certificates of deposit, and (vii) investment grade corporate
bonds,  and commercial  paper.  The board of directors may authorize  additional
investments.

        As  a  source  of  liquidity  and  to  supplement  Registrant's  lending
activities,   the  Registrant   has  invested  in  residential   mortgage-backed
securities.  Mortgage-backed  securities  can serve as collateral for borrowings
and, through repayments,  as a source of liquidity.  Mortgage-backed  securities
represent a participation  interest in a pool of  single-family or other type of
mortgages.  Principal  and  interest  payments  are  passed  from  the  mortgage
originators, through intermediaries (generally quasi-governmental agencies) that
pool and repackage the  participation  interests in the form of  securities,  to
investors,  like us. The  quasi-governmental  agencies  guarantee the payment of
principal  and interest to investors  and include the Federal Home Loan Mortgage
Corporation  ("FHLMC"),  Government National Mortgage Association ("GNMA"),  and
Federal National Mortgage Association ("FNMA").

                                       10
<PAGE>

        Mortgage-backed  securities  typically are issued with stated  principal
amounts.  The  securities  are backed by pools of mortgages that have loans with
interest  rates that are  within a set range and have  varying  maturities.  The
underlying  pool of mortgages can be composed of either fixed rate or adjustable
rate mortgage  loans.  Mortgage-backed  securities are generally  referred to as
mortgage participation certificates or pass-through  certificates.  The interest
rate risk  characteristics of the underlying pool of mortgages (i.e., fixed rate
or adjustable  rate) and the prepayment  risk, are passed on to the  certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying  mortgages.  Expected  maturities will differ from contractual
maturities due to scheduled  repayments and because borrowers may have the right
to  call  or  prepay   obligations   with  or  without   prepayment   penalties.
Mortgage-backed securities issued by FHLMC, GNMA, and FNMA make up a majority of
the pass- through certificates market.

        The Registrant also invests in  mortgage-related  securities,  primarily
collateralized mortgage obligations ("CMOs"), issued or sponsored by GNMA, FNMA,
FHLMC,  as well as  private  issuers.  CMOs  are a type  of debt  security  that
aggregates  pools  of  mortgages  and  mortgage-backed  securities  and  creates
different  classes of CMO securities  with varying  maturities and  amortization
schedules as well as a residual  interest with each class having  different risk
characteristics.  The cash  flows from the  underlying  collateral  are  usually
divided into "tranches" or classes whereby  tranches have descending  priorities
with  respect to the  distribution  of principal  and interest  repayment of the
underlying  mortgages and mortgage backed  securities as opposed to pass through
mortgage  backed  securities  where cash flows are  distributed  pro rata to all
security  holders.  Unlike  mortgage  backed-securities  from which cash flow is
received and prepayment risk is shared pro rata by all securities holders,  cash
flows from the mortgages and mortgage backed securities underlying CMOs are paid
in  accordance  with a  predetermined  priority  to  investors  holding  various
tranches of such  securities or obligations.  A particular  tranche or class may
carry  prepayment  risk  which  may be  different  from  that of the  underlying
collateral  and other  tranches.  CMOs  attempt to  moderate  reinvestment  risk
associated  with   conventional   mortgage-backed   securities   resulting  from
unexpected  prepayment activity.  Management believes these securities represent
attractive alternatives relative to other investments due to the wide variety of
maturity, repayment and interest rate options available.

                                       11
<PAGE>

        The following  table sets forth the carrying  value of the  Registrant's
investment  securities  held to maturity,  securities  available for sale,  FHLB
stock,  and interest  bearing  deposits and overnight  investments  at the dates
indicated.

                                                           At December 31,
                                                  -----------------------------
                                                    2000       1999      1998
                                                  --------   --------  --------
                                                          (In Thousands)
Investment securities held to maturity:
  U.S. government and agency securities........   $167,923   $170,611  $ 78,292
  Reverse repurchase agreements................     60,342         --        --
  Municipal bonds..............................      3,888      1,509     3,824
  U.S. treasuries..............................         --         --        --
  CMO's........................................     43,954     48,187    47,302
  Mortgage-backed securities...................    143,752    121,424    90,593
Investment securities available for sale:
  U.S. government and agency securities........     10,206      9,725    18,501
  CMO's........................................     28,156     36,817    91,332
  Mortgage-backed securities...................      2,517      2,766        --
                                                  --------   --------  --------
      Total investment securities..............    460,738    391,039   329,844
 FHLB stock....................................      6,315      4,861     4,861
 Interest bearing deposits and
  overnight investments........................     14,862     25,786        --
                                                  --------   --------  --------
  Total investments............................   $481,915   $421,686  $334,705
                                                  ========   ========  ========


                                       12
<PAGE>

        The  following  table  sets  forth the  scheduled  maturities,  carrying
values,  market  values  and  average  yields  for the  Registrant's  investment
securities  at  December  31,  2000.  The  following  table  does not take  into
consideration  the effects of  scheduled  repayments  or the effects of possible
repayments.

<TABLE>
<CAPTION>
                                                                    Five to           More than
                            One Year or Less   One to Five Years    Ten Years         Ten Years       Total Investment Securities
                            -----------------  ----------------- ----------------  ------------------ ---------------------------
                            Carrying  Average  Carrying Average  Carrying Average  Carrying   Average Carrying    Market  Average
                             Value     Yield    Value    Yield    Value    Yield     Value     Yield    Value     Value    Yield
                             -----     -----    -----    -----    -----    -----     -----     -----    -----     -----    -----
                                                              (Dollars in Thousands)
<S>                        <C>       <C>    <C>        <C>    <C>        <C>    <C>        <C>     <C>        <C>        <C>
Investment securities
held to maturity:
 U.S. government and
 agency obligations.......   $    --     --%  $27,139    6.41% $ 94,278    6.61%  $ 46,506    7.52%   $167,923  $166,379    6.83%
 Reverse Repurchase
 Agreements...............    60,342   6.58        --      --        --      --         --      --      60,342    60,342    6.58
 Municipal bonds..........     3,658   4.70        --      --        --      --        230    5.60       3,888     3,896    4.76
 CMO's....................        --     --        --      --     3,722    6.54     40,232    6.68      43,954    43,461    6.67
 Mortgage-backed
   securities.............        73   8.93     1,004    8.12     8,384    7.34    134,291    7.11     143,752   145,204    7.13
Investment securities
  available for sale:
 U.S. government and
   agency obligations.....        --     --     5,295    6.06     2,997    6.57      2,000    6.94      10,206    10,206    6.38
 CMO's....................        18   6.80       598    7.18     3,710    6.10     24,332    6.69      28,156    28,156    6.62
 Mortgage-backed
   securities.............        --     --        --      --        --      --      2,491    7.50       2,517     2,517    7.50
 FHLB stock...............        --     --        --      --        --      --      6,315    7.30       6,315     6,315    7.30
 Interest-bearing
   deposits and
   overnight
   investments............    14,862   6.25        --      --        --      --         --      --      14,862    14,862    6.25
                             -------          -------          --------           --------            --------  --------
   Total..................   $78,953   6.43%  $34,036    6.42% $113,091    6.64%  $256,397    7.08%   $481,915  $481,338    6.83%
                             =======   ====   =======    ====  ========    ====   ========    ====    ========  ========    ====

</TABLE>

                                       13
<PAGE>

Sources of Funds

        General.  Deposits  are the major  external  source of the  Registrant's
funds for  lending  and  other  investment  purposes.  Funds  are  derived  from
amortization  and  prepayment  of loans and, to a lesser  extent,  maturities of
investment securities,  borrowings,  mortgage-backed  securities and operations.
Scheduled  loan principal  repayments  are a relatively  stable source of funds,
while  deposit  inflows and  outflows  and loan  prepayments  are  significantly
influenced by general interest rates and market conditions.

        Deposits.  Deposits are attracted from within the  Registrant's  primary
market area of Burlington  County,  New Jersey,  through the offering of a broad
selection  of  deposit   instruments   including   regular  checking   accounts,
non-interest  checking  accounts,   money  market  accounts,   regular  passbook
accounts,  certificates of deposit and IRA accounts.  Deposit account terms vary
according  to the  minimum  balance  required,  the time  periods the funds must
remain on deposit and the interest  rate,  among other  factors.  The Registrant
regularly  evaluates  the  internal  cost of funds,  surveys  rates  offered  by
competing  institutions,  reviews the  Registrant's  cash flow  requirements for
lending and  liquidity and executes  rate changes when deemed  appropriate.  The
Registrant does not have any brokered  deposits and has no present  intention to
accept or solicit such deposits.

        Certificates  of  Deposit in Excess of  $100,000.  The  following  table
indicates the amount of the Registrant's  certificates of deposit of $100,000 or
more by time remaining until maturity as of December 31, 2000.


Maturity Period of Deposits                  Certificates of
---------------------------                  ---------------
                                                 Deposit
                                                 -------
                                              (In Thousands)

Three months or less......................        $18,163
Three through six months..................          3,897
Six through twelve months.................          5,232
Over twelve months........................          8,295
                                                  -------
     Total................................        $35,587
                                                  =======

                                       14
<PAGE>

        Deposit Rate.  The following  table sets forth the  distribution  of the
Registrant's  average balance of deposit accounts at the dates indicated and the
weighted average nominal interest rates on each category of deposits presented.

<TABLE>
<CAPTION>
                                                                        At December 31,
                                 ---------------------------------------------------------------------------------------------
                                            2000                             1999                         1998
                                 ----------------------------    --------------------------     ------------------------------
                                                       Weighted                       Weighted                        Weighted
                                           Percent of  Average            Percent of  Average            Percent of   Average
                                 Average     Total     Nominal   Average   Total      Nominal   Average    Total      Nominal
                                 Balance    Deposits    Rate     Balance   Deposits    Rate     Balance  Deposits      Rate
                                 -------    --------   -------   -------   --------   --------  -------  --------     --------
                                                            (Dollars In Thousands)
<S>                           <C>          <C>       <C>     <C>        <C>        <C>      <C>         <C>         <C>
Passbook and regular savings...  $102,960     16.56%    2.47%   $ 95,370    16.82%     2.43%   $ 84,480    16.31%      2.53%
Checking accounts..............   199,378     32.10     1.80     162,484    28.66      1.25     128,259    24.76        .99
Money market deposit accounts..    67,512     10.87     2.75      65,964    11.63      2.76      62,099    11.99       2.64
Certificates of deposit........   242,063     38.97     5.14     234,367    41.33      4.92     234,471    45.26       5.35
Surrogate statement............     9,314      1.50     5.30       8,816     1.56      5.33       8,714     1.68       5.80
                                 --------    ------     ----    --------   ------      ----    --------   ------       ----
  Total Deposits...............  $621,227    100.00%    3.36%   $567,001   100.00%     3.20%   $518,023   100.00%      3.49%
                                 ========    ======     ====    ========   ======      ====    ========   ======       ====
</TABLE>

                                       15
<PAGE>

Personnel

        As of December 31, 2000 the Registrant  had 286 full-time  employees and
210  part-time  employees.  The employees  are not  represented  by a collective
bargaining  unit.  Management  believes its  relationship  with its employees is
good.

Regulation

        Set forth below is a brief  description of certain laws which related to
the regulation of the Corporation and the Bank. The description does not purport
to be complete and is qualified in its entirety by reference to applicable  laws
and regulations.

        On  November  12,   1999,   President   Clinton   signed  into  law  the
Gramm-Leach-Bliley  Act (the "Act")  which,  effective  March 11, 2000,  permits
qualifying  bank holding  companies to become  financial  holding  companies and
thereby  affiliate with securities  firms and insurance  companies and engage in
other  activities  that are financial in nature.  The Act defines  "financial in
nature"  to  include  securities   underwriting,   dealing  and  market  making;
sponsoring  mutual funds and investment  companies;  insurance  underwriting and
agency;  merchant  banking  activities;  and activities that the Federal Reserve
Board has  determined to be closely  related to banking.  A qualifying  national
bank also may engage,  subject to limitations on investment,  in activities that
are financial in nature,  other than insurance  underwriting,  insurance company
portfolio  investment,  real estate  development,  and real  estate  investment,
through a financial subsidiary of the bank.

        The Act  also  prohibits  new  unitary  thrift  holding  companies  from
engaging in  nonfinancial  activities or from  affiliating  with a  nonfinancial
entity. As a grandfathered  unitary thrift holding company, the Corporation will
retain its authority to engage in nonfinancial activities.

Regulation of the Corporation

        General.  The  Corporation is a unitary savings and loan holding company
subject to regulatory oversight by the OTS. As such, the Corporation is required
to  register  and file  reports  with the OTS and is subject to  regulation  and
examination by the OTS. In addition,  the OTS has enforcement authority over the
Corporation  and  its   non-savings   association   subsidiaries,   should  such
subsidiaries  be formed,  which also  permits  the OTS to  restrict  or prohibit
activities  that are determined to be a serious risk to the  subsidiary  savings
association.  This  regulation  and  oversight  is  intended  primarily  for the
protection of the depositors of the Bank and not for the benefit of stockholders
of the Corporation.

        As a unitary savings and loan holding company, the Corporation generally
is not  subject  to  activity  restrictions,  provided  the Bank  satisfies  the
Qualified  Thrift Lender ("QTL") test.  The Act  terminated the "unitary  thrift
holding  company  exemption" for all companies  that applied to acquire  savings
associations  after May 4, 1999.  Since the Corporation is  grandfathered  under
this provision of the Act, its unitary  holding  company powers and  authorities
were not affected.  However,  if the  Corporation  were to acquire control of an
additional  savings  association,  its business  activities  would be subject to
restriction  under the Home Owners' Loan Act.  Furthermore,  if the  Corporation
were in the future to sell control of the Bank

                                       16
<PAGE>

to any other  company,  such  company  would not  succeed  to the  Corporation's
grandfathered  status  under the Act and would be subject  to the same  business
activity  restrictions.  See "- Regulation of the Bank - Qualified Thrift Lender
Test."

Regulation of the Bank

        General.  Set forth below is a brief  description  of certain  laws that
relate to the  regulation of the Bank.  The  description  does not purport to be
complete and is qualified  in its entirety by reference to  applicable  laws and
regulations.  As a federally chartered,  SAIF-insured  savings association,  the
Bank is  subject  to  extensive  regulation  by the OTS  and the  FDIC.  Lending
activities and other  investments must comply with various federal statutory and
regulatory   requirements.   The  Bank  is  also  subject  to  certain   reserve
requirements promulgated by the Federal Reserve Board.

        The OTS, in conjunction with the FDIC,  regularly  examines the Bank and
prepares  reports for the  consideration of the Bank's Board of Directors on any
deficiencies that are found in the Bank's  operations.  The Bank's  relationship
with its depositors and borrowers is also regulated to a great extent by federal
and state law,  especially in such matters as the ownership of savings  accounts
and the form and content of the Bank's mortgage documents.

        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 savings  institutions.  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 SAIF 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.

        Insurance of Deposit Accounts. The deposit accounts held by the Bank are
insured by the SAIF to a maximum of $100,000 for each insured member (as defined
by law and regulation). 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
institution's primary regulator.

        The Bank is required to pay insurance  premiums based on a percentage of
its insured  deposits to the FDIC for insurance of its deposits by the SAIF. The
FDIC also  maintains  another  insurance  fund, the Bank Insurance Fund ("BIF"),
which primarily insures  commercial bank deposits.  The FDIC has set the deposit
insurance assessment rates for SAIF-member institutions for the first six months
of 2001 at 0% to .027% of insured  deposits  on an  annualized  basis,  with the
assessment rate for most savings institutions set at 0%.

        In  addition,   all  FDIC-insured   institutions  are  required  to  pay
assessments  to the FDIC at an annual  rate of  approximately  .0212% of insured
deposits to fund interest payments on bonds issued by the Financing  Corporation
("FICO"),  an agency of the Federal  government  established to recapitalize the
predecessor to the SAIF.  These  assessments  will continue until the FICO bonds
mature in 2017.

                                       17
<PAGE>

        Regulatory Capital Requirements. OTS capital regulations require savings
institutions to meet three capital standards: (1) tangible capital equal to 1.5%
of total adjusted assets,  (2) a leverage ratio (core capital) equal to at least
4% of total adjusted assets, and (3) a risk-based  capital  requirement equal to
8.0% of total risk-weighted assets.

        Dividend and Other  Capital  Distribution  Limitations.  The OTS imposes
various  restrictions or requirements on the ability of savings  institutions to
make capital distributions, including cash dividends.

        A savings association that is a subsidiary of a savings and loan holding
company,  such as the Bank must file an  application or a notice with the OTS at
least 30 days before making a capital distribution. Savings associations are not
required to file an application  for  permission to make a capital  distribution
and need only file a notice if the  following  conditions  are met: (1) they are
eligible for expedited  treatment under OTS  regulations,  (2) they would remain
adequately capitalized after the distribution,  (3) the annual amount of capital
distribution  does not exceed net income for that year to date added to retained
net income for the two preceding years, and (4) the capital  distribution  would
not violate any  agreements  between the OTS and the savings  association or any
OTS regulations. Any other situation would require an application to the OTS.

        The OTS may disapprove an application or notice if the proposed  capital
distribution   would:  (i)  make  the  savings   association   undercapitalized,
significantly  undercapitalized,  or  critically  undercapitalized;  (ii)  raise
safety or  soundness  concerns;  or (iii)  violate  a  statute,  regulation,  or
agreement  with  the OTS (or  with  the  FDIC),  or a  condition  imposed  in an
OTS-approved application or notice. Further, a federal savings association, like
the  Bank,  cannot  distribute   regulatory  capital  that  is  needed  for  its
liquidation account.

        Qualified Thrift Lender Test. Federal savings institutions must meet one
of two Qualified  Thrift Lender  ("QTL")  tests.  To qualify as a QTL, a savings
institution must either (i) be deemed a "domestic building and loan association"
under the Internal  Revenue Code by maintaining at least 60% of its total assets
in specified types of assets,  including cash,  certain  government  securities,
loans  secured  by and  other  assets  related  to  residential  real  property,
educational loans and investments in premises of the institution or (ii) satisfy
the statutory QTL test set forth in the Home Owner's Loan Act by  maintaining at
least 65% of its "portfolio  assets" in  certain"Qualified  Thrift  Investments"
(defined  to include  residential  mortgages  and  related  equity  investments,
certain  mortgage-related  securities,  small business loans,  student loans and
credit card loans, and 50% of certain community development loans). For purposes
of the  statutory QTL test,  portfolio  assets are defined as total assets minus
intangible assets,  property used by the institution in conducting its business,
and liquid  assets  equal to 10% of total  assets.  A savings  institution  must
maintain its status as a QTL on a monthly basis in at least nine out of every 12
months.  A  failure  to  qualify  as a QTL  results  in a number  of  sanctions,
including the imposition of certain operating  restrictions and a restriction on
obtaining  additional advances from its FHLB. At December 31, 2000, the Bank was
in compliance  with its QTL  requirement,  with 75.39% of its assets invested in
Qualified Thrift Investments.

        Federal Home Loan Bank  System.  The Bank is a member of the FHLB of New
York,  which is one of 12 regional  FHLBs that  administers  the home  financing
credit  function  of  savings  associations.  Each FHLB  serves as a reserve  or
central bank for its members within its assigned region.  It is funded primarily
from  proceeds  derived from the sale of  consolidated  obligations  of the FHLB
System. It makes

                                       18
<PAGE>

loans to members  (i.e.,  advances) in accordance  with policies and  procedures
established by the Board of Directors of the FHLB.

        As a member,  the Bank is required to purchase and maintain stock in the
FHLB of New York in an  amount  equal to at  least  1% of its  aggregate  unpaid
residential  mortgage loans, home purchase  contracts or similar  obligations at
the beginning of each year.

        Liquidity  Requirements.   All  savings  associations  are  required  to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity  requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings associations. At December 31, 2000, the Bank's liquid asset
ratio was 49.85%.

        Federal  Reserve   System.   The  Federal  Reserve  Board  requires  all
depository  institutions to maintain  non-interest bearing reserves at specified
levels against their transaction  accounts (primarily  checking,  NOW, and Super
NOW checking accounts) and non-personal time deposits.  The balances  maintained
to meet the reserve  requirements  imposed by the Federal  Reserve  Board may be
used to satisfy  the  liquidity  requirements  that are  imposed by the OTS.  At
December 31, 2000, the Bank was in compliance  with these Federal  Reserve Board
requirements.

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

        The  Registrant  conducts  its business  through its two  administrative
offices  located  in  Burlington,  New  Jersey  and its 31 branch  locations  in
Burlington  County,  New  Jersey.  All of the  Registrant's  office  and  branch
facilities are owned by the Registrant, except for four branch office locations,
two located in Lumberton and two located in Medford,  New Jersey.  Management of
the  Registrant  considers  the physical  condition of each of the  Registrant's
administrative and branch offices to be good and adequate for the conduct of the
Registrant's business.

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

        The Registrant is  periodically  involved as a plaintiff or defendant in
various  legal  actions,   such  as  actions  to  enforce  liens,   condemnation
proceedings  on properties in which the  Registrant  holds  mortgage  interests,
matters  involving the making and servicing of mortgage  loans and other matters
incident to the  Registrant's  business.  In the opinion of management,  none of
these actions individually or in the aggregate is believed to be material to the
financial condition or results of operations of the Registrant.

Item 4.  Submission of Matters to a Vote of Security Holders
------------------------------------------------------------

        No matters  were  submitted  to a vote of  security  holders  during the
fourth quarter of the fiscal year ended December 31, 2000.

                                       19
<PAGE>

                                     Part II

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

        The  information  contained  under the section  captioned  "Stock Market
Information"  in the  Corporation's  2000  Annual  Report to  Stockholders  (the
"Annual Report") is incorporated herein by reference.

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

        The information contained in the table captioned "Financial  Highlights"
in the Annual Report is incorporated herein by reference.

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

        The  information  contained  in  the  section  captioned   "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.

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

        The information  contained in the section captioned "Asset and Liability
Management" in the Annual Report is incorporated herein by reference.

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

        The  Registrant's  financial  statements  listed in Item 14  herein  are
incorporated herein by reference.

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

        None.

                                    Part III

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

        The information  contained under the sections  captioned  "Section 16(a)
Beneficial Ownership Reporting  Compliance" and "I - Information with Respect to
Nominee for Director,  Directors  Continuing in Office, and Executive Officers -
Election  of  Directors"  and "-  Biographical  Information"  in the 2001  Proxy
Statement are incorporated herein by reference.

                                       20
<PAGE>

Executive Officers of the Corporation Who Are Not Directors


Name and Title                                      Age as of December 31, 2000
--------------                                      ---------------------------

Channing L. Smith                                                57
Vice President and Chief Financial Officer

James E. Igo                                                     44
Senior Vice President and Chief Lending Officer

Thomas M. Topley                                                 40
Senior Vice President and Corporate Secretary


        Channing  L.  Smith has  served as Vice  President  and Chief  Financial
Officer of the Corporation and the Bank since October 1994. In this capacity, he
is responsible for the management of the accounting,  treasury,  and investments
of the  Corporation  and the Bank.  From April 1994 to October  1994,  Mr. Smith
served as controller of the Corporation and the Bank.

        James E. Igo has served as Senior  Vice  President  and Senior  Mortgage
Lending Officer of the Corporation and the Bank since November 1991.

        Thomas M. Topley has served as Senior Vice President of Operations since
April 1993 and as  Corporate  Secretary  of the  Corporation  and the Bank since
April 1992.  From June 1990 to April 1993,  Mr. Topley served as Vice  President
and Controller for the Bank.

Item 11.  Executive Compensation
--------------------------------

        The  information  contained under the section  captioned  "Proposal I --
Election of  Directors  -  Executive  Compensation"  in the Proxy  Statement  is
incorporated herein by reference.

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

        (a)      Security Ownership of Certain Beneficial Owners

                 Information  required  by this item is  incorporated  herein by
                 reference  to the  Section  captioned  "Voting  Securities  and
                 Principal Holders Thereof" of the Proxy Statement.

        (b)      Security Ownership of Management

                 Information  required  by this item is  incorporated  herein by
                 reference to the section  captioned  "Proposal I -- Election of
                 Directors" of the Proxy Statement.

        (c)      Management  of  the  Corporation   knows  of  no  arrangements,
                 including  any  pledge  by  any  person  of  securities  of the
                 Corporation,  the  operation of which may at a subsequent  date
                 result in a change in control of the registrant.

                                       21
<PAGE>

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

        The  information  required  by  this  item  is  incorporated  herein  by
reference to the section  captioned  "Proposal I -- Election of  Directors"  and
"Voting Securities and Principal Holders Thereof" of the Proxy Statement.

                                     Part IV

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

          (a)  Listed below are all financial  statements  and exhibits filed as
               part of this report, and are incorporated by reference.

                 1.       The consolidated  statements of financial condition of
                          FMS  Financial   Corporation   and  subsidiary  as  of
                          December   31,   2000  and  1999,   and  the   related
                          consolidated   statements   of   income,   changes  in
                          stockholders'  equity  and cash  flows for each of the
                          years in the three  year  period  ended  December  31,
                          2000,   together   with  the  related  notes  and  the
                          independent auditors' report of PricewaterhouseCoopers
                          LLP, independent accountants.

                 2.       Schedules omitted as they are not applicable.

                 3.       Exhibits

                          The  following  Exhibits  are  filed  as  part of this
                          report:
<TABLE>
<CAPTION>
                    <S>         <C>
                          3.1      Certificate of Incorporation*
                          3.2      Bylaws*
                          4        Agreement to furnish copy to  Securities  and Exchange Commission upon
                                   request of Indenture dated  July  28,   1994,   relating   to  10% Subordinated
                                   Debentures due 2004 in aggregate principal amount of $10 million**
                          10.1     Stock Option and Incentive Plan***
                          13       Portions of the 2000 Annual Report to Stockholders
                          21       Subsidiaries of the Registrant
                          23       Consent of Independent Accountants
</TABLE>

                 ---------------
                    *    Incorporate by reference to the  Registrant's  Form S-1
                         Registration Statement No. 33-24340.
                    **   Incorporated  by reference to the  Registrant's  Annual
                         Report on Form 10-K for the fiscal year ended  December
                         31, 1994.
                    ***  Incorporated by reference to the Registrant's  Form S-8
                         Registration Statement No. 33-24340.

          (b)  No Reports on Form 8-K were filed  during the last quarter of the
               fiscal year covered by this Report.

                                       22
<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 as of March 26, 2001.

                                        FMS FINANCIAL CORPORATION


                                        By:   /s/Craig W. Yates
                                              ----------------------------------
                                              Craig W. Yates, President and
                                              Chief Executive Officer
                                              (Duly Authorized Representative)


         Pursuant to the  requirement  of the  Securities  Exchange Act of 1934,
this report has been signed below on March 26, 2001 by the following  persons on
behalf of the registrant and in the capacities indicated.


/s/Craig W. Yates                                      /s/George J. Barber
-----------------------------------------------        -------------------------
Craig W. Yates                                         George J. Barber
President, Chief Executive Officer and Director        Director
(Principal Executive Officer)


/s/Channing L. Smith                                   /s/Edward J. Staats, Jr.,
-----------------------------------------------        -------------------------
Channing L. Smith                                      Edward J. Staats, Jr.,
Vice President and Chief Financial Officer             Chairman of the Board
(Principal Financial and Accounting Officer)


/s/Wayne H. Page                                       /s/James C. Lignana
-----------------------------------------------        -------------------------
Wayne H. Page                                          James C. Lignana
Director                                               Director



/s/Dominic W. Flamini                                  /s/Vincent R. Farias
-----------------------------------------------        -------------------------
Dominic W. Flamini                                     Vincent R. Farias
Director                                               Director


/s/Roy D. Yates                                        /s/Mary Wells
-----------------------------------------------        -------------------------
Roy D. Yates                                           Mary Wells
Director                                               Director



                                       23