<TABLE>
Interchange Financial Services Corporation
-----------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------------------------------
(dollars in thousands)
<CAPTION>
                                                                           March 31,   December 31,
                                                                             2000          1999
                                                                          ------------ --------------
                                                                          (unaudited)
<S>                                                                       <C>          <C>

Assets
Cash and due from banks                                                      $ 19,184       $ 17,669
Federal funds sold                                                             11,400              -
                                                                          ------------ --------------
Total cash and cash equivalents                                                30,584         17,669
                                                                          ------------ --------------

Securities held to maturity at amortized cost (estimated market value
      of $50,526 and $53,784 for March 31, 2000 and December 31, 1999,
      respectively)                                                            51,318         54,540
                                                                          ------------ --------------
Securities available for sale at estimated market value (amortized cost
     of $110,078 and $108,399 for March 31, 2000 and December 31, 1999,
      respectively)                                                           108,503        107,349
                                                                          ------------ --------------

Loans                                                                         516,876        511,976
Less:  Allowance for loan losses                                                5,766          5,476
                                                                          ------------ --------------
Net loans                                                                     511,110        506,500
                                                                          ------------ --------------

Premises and equipment, net                                                    10,577         10,289
Foreclosed real estate                                                            250            250
Accrued interest receivable and other assets                                    9,754          9,528
                                                                          ------------ --------------
Total assets                                                                 $722,096       $706,125
                                                                          ============ ==============


Liabilities
Deposits
    Non-interest bearing                                                     $107,295       $102,392
    Interest bearing                                                          523,795        496,600
                                                                          ------------ --------------
Total deposits                                                               $631,090       $598,992
                                                                          ------------ --------------

Securities sold under agreements to repurchase                                 16,481         16,431
Short-term borrowings                                                               -         13,975
Long-term borrowings                                                           13,000         13,000
Accrued interest payable and other liabilities                                  6,069          5,451
                                                                          ------------ --------------
Total liabilities                                                            $666,640       $647,849
                                                                          ------------ --------------

Commitments and contingent liabilities

Stockholders' equity:
Common stock, without par value; 15,000,000 shares authorized;
    6,513,864 and 6,728,098 shares issued and outstanding at
    March 31, 2000 and December 31, 1999, respectively                          5,397          5,397
Capital surplus                                                                21,201         21,244
Retained earnings                                                              42,816         41,741
Accumulated other comprehensive (loss)                                           (993)          (675)
                                                                          ------------ --------------
                                                                               68,421         67,707
Less:  Treasury stock                                                          12,965          9,431
                                                                          ------------ --------------
Total stockholders' equity                                                     55,456         58,276
                                                                          ------------ --------------
Total liabilities and stockholders' equity                                   $722,096       $706,125
                                                                          ============ ==============

-----------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.

                                       1

</TABLE>
<PAGE>
<TABLE>
Interchange Financial Services Corporation
----------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31,
----------------------------------------------------------------------------------------------------------------------
(dollars in thousands except per share data)
(unaudited)
<CAPTION>

                                                                                          2000               1999
                                                                                      -------------      -------------
<S>                                                                                   <C>                <C>
Interest income
Interest and fees on loans                                                                $ 10,384            $ 9,507
Interest on federal funds sold                                                                 100                219
Interest and dividends on securities
    Taxable interest income                                                                  2,222              1,944
    Interest income exempt from federal income taxes                                           159                109
    Dividends                                                                                   61                 71
                                                                                      -------------      -------------
Total interest income                                                                       12,926             11,850
                                                                                      -------------      -------------

Interest expense
Interest on deposits                                                                         4,822              4,275
Interest on securities sold under agreements to repurchase                                     221                 92
Interest on short-term borrowings                                                               76                145
Interest on long-term borrowings                                                               207                  -
                                                                                      -------------      -------------
Total interest expense                                                                       5,326              4,512
                                                                                      -------------      -------------

Net interest income                                                                          7,600              7,338
Provision for loan losses                                                                      300                300
                                                                                      -------------      -------------
Net interest income after provision for loan losses                                          7,300              7,038
                                                                                      -------------      -------------

Non-interest income
Service fees on deposit accounts                                                               547                569
Net gain on sale of securities                                                                  97                527
Other                                                                                          303                251
                                                                                      -------------      -------------
Total non-interest income                                                                      947              1,347
                                                                                      -------------      -------------

Non-interest expenses
Salaries and benefits                                                                        2,759              2,540
Occupancy                                                                                      740                659
Furniture and equipment                                                                        282                250
Advertising and promotion                                                                      295                246
Federal Deposit Insurance Corporation assessment                                                32                 20
Foreclosed real estate                                                                           6                  1
Other                                                                                        1,300              1,209
                                                                                      -------------      -------------
Total non-interest expenses                                                                  5,414              4,925
                                                                                      -------------      -------------

Income before income taxes                                                                   2,833              3,460
Income taxes                                                                                   943              1,174
                                                                                      -------------      -------------
Net income                                                                                 $ 1,890            $ 2,286
                                                                                      =============      =============

Basic earnings per common share                                                             $0.29              $0.32

Diluted earnings per common share                                                           $0.29              $0.32

----------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.

                                       2
</TABLE>
<PAGE>
<TABLE>

Interchange Financial Services Corporation
------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except share data)
<CAPTION>

                                                                                   Accumulated
                                                                                     Other
                                                          Comprehensive Retained  Comprehensive Common   Capital  Treasury
                                                             Income      Earnings    Income      Stock   Surplus    Stock    Total
                                                          ------------- --------- ------------ --------- -------- --------- -------
<S>                                                       <C>           <C>       <C>          <C>       <C>      <C>       <C>

Balance at January 1, 1999                                                $35,482     $1,192    $5,397   $21,256   $ (955)  $62,372
Comprehensive income
  Net Income                                                    $2,286      2,286                                             2,286
   Other comprehensive income, net of taxes
      Unrealized losses on AFS debt securities                     (97)
      Unrealized gains securities transferred from held to
        maturity to available to sale - Acquisition                 32
      Unrealized loss on equity securities                         (29)
      Less: gains on disposition of equity securities             (316)
                                                            -----------
   Other comprehensive loss                                       (410)                 (410)                                  (410)
                                                            -----------
Comprehensive income                                            $1,876
                                                            ===========

Dividends on common stock                                                    (866)                                             (866)
Issued 14,489 shares of common stock in connection
  with Executive Compensation Plan                                                                            60      176       236

                                                                        --------- ------------ --------- -------- --------- -------
 Balance at March 31, 1999                                                 36,902        782     5,397    21,316     (779)   63,618


  Net Income                                                    $7,349      7,349                                             7,349
  Other comprehensive income, net of taxes
      Unrealized losses on AFS debt securities                  (1,257)
      Less:  gains on disposition of securities (excludes equities)(90)
      Unrealized gains securities transferred from held to
        maturity to available to sale - Acquisition                 (9)
      Unrealized loss on equity securities                          11
      Less:  gains on disposition of equity securities            (112)
                                                            -----------
  Other comprehensive loss                                      (1,457)               (1,457)                                (1,457)
                                                            -----------
Comprehensive income                                            $5,892
                                                            ===========

Dividends on common stock                                                  (2,510)                                           (2,510)
Issued 620 shares of common stock in connection
  with Executive Compensation Plan                                                                             2        8        10
Exercised 7,836 option shares                                                                                (74)     121        47
Purchased 494,360 shares of common stock                                                                           (8,781)   (8,781)
                                                                        --------- ------------ --------- -------- --------- -------
Balance at December 31, 1999                                               41,741       (675)    5,397    21,244   (9,431)   58,276


  Net Income                                                    $1,890      1,890                                             1,890
   Other comprehensive income, net of taxes
      Unrealized losses on AFS debt securities                    (257)
      Less:  gains on disposition of securities                    (61)

                                                            -----------
  Other comprehensive loss                                        (318)                 (318)                                  (318)
                                                            -----------
Comprehensive income                                            $1,572
                                                            ===========

Dividends on common stock                                                    (815)                                             (815)
Issued 11,406 shares of common stock in connection
     with Executive Compensation Plan                                                                         (6)     196       190
Exercised 4,134 option shares                                                                                (37)      67        30
Purchased 225,640 shares of common stock                                                                           (3,797)   (3,797)
                                                                         -------- ------------ --------- -------- --------- -------
Balance at March 31, 2000                                                 $42,816     $ (993)   $5,397   $21,201 $(12,965)  $55,456
                                                                         ======== ============ ========= ======== ========= =======


                                       3

</TABLE>
<PAGE>

<TABLE>

Interchange Financial Services Corporation
-----------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
-----------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
(unaudited)
<CAPTION>
                                                                                               2000           1999
                                                                                           -------------   ------------
<S>                                                                                        <C>             <C>

Cash flows from operating activities
Net income                                                                                      $ 1,890        $ 2,286
Adjustments to reconcile net income to net cash provided by operating activities
    Depreciation and amortization                                                                   349            366
    Amortization of securities premiums                                                              91            244
    Accretion of securities discounts                                                               (54)           (40)
    Amortization of premiums in connection with acquisition                                          78             78
    Provision for loan losses                                                                       300            300
    Net gain on sale of securities                                                                  (97)          (527)
    Net loss on disposal of fixed assets                                                              -              2
Decrease (increase) in operating assets
    Accrued interest receivable                                                                     140            151
    Other                                                                                          (357)           624
(Decrease) increase in operating liabilities
    Accrued interest payable                                                                        298            (45)
    Other                                                                                           320            112
                                                                                           -------------   ------------
Cash provided by operating activities                                                             2,958          3,551
                                                                                           -------------   ------------

Cash flows from investing activities
(Payments for) proceeds from
    Net originations of loans                                                                    (4,910)        (5,856)
    Repayment of term federal funds                                                                   -          5,000
    Purchase of securities available for sale                                                   (21,325)       (13,812)
    Maturities of securities available for sale                                                   2,020          5,331
    Sale of securities available for sale                                                        17,696            955
    Purchase of securities held to maturity                                                        (523)          (622)
    Maturities of securities held to maturity                                                     1,733          5,816
    Sale of securities held to maturity                                                           2,002              -
    Purchase of fixed assets                                                                       (517)          (217)
    Sale of fixed assets                                                                              -              2
                                                                                           -------------   ------------
Cash used in investing activities                                                                (3,824)        (3,403)
                                                                                           -------------   ------------

Cash flows from financing activities
Proceeds from (payments for)
    Deposits less than/in excess of withdrawals                                                  32,098         (9,332)
    Securities sold under agreements to repurchase and other borrowings                              50          6,250
    Retirement of securities sold under agreement to repurchase and
       other borrowings                                                                         (13,975)        (7,809)
    Dividends                                                                                      (815)          (866)
    Treasury stock                                                                               (3,797)             -
    Common stock issued from treasury                                                               190            236
    Exercise of option shares                                                                        30              -
                                                                                           -------------   ------------
Cash provided by (used in) financing activities                                                  13,781        (11,521)
                                                                                           -------------   ------------

Increase (Decrease) in cash and cash equivalents                                                 12,915        (11,373)
Cash and cash equivalents, beginning of year                                                     17,669         43,284
                                                                                           -------------   ------------
Cash and cash equivalents, end of period                                                        $30,584        $31,911
                                                                                           =============   ============

Supplemental disclosure of cash flow information:
Cash paid for:
    Interest                                                                                     $5,028         $4,557
    Income taxes                                                                                      3          1,335

Supplemental disclosure of non-cash investing activities:
    Decrease - market valuation of securities available for sale                                    318            675

-----------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.

                                       4

</TABLE>
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2000
                                   (Unaudited)

1.   Basis of Presentation

     The accompanying  unaudited  consolidated  financial statements include the
accounts of  Interchange  Financial  Services  Corporation  and its wholly owned
subsidiaries  (the "Company")  including  its principal  operating  subsidiary,
Interchange  Bank  (the "Bank")  and have  been  prepared  in  conformity  with
generally  accepted  accounting  principles and in accordance with the rules and
regulations of the Securities  and Exchange  Commission.  Pursuant to such rules
and  regulations  certain  information  or  footnotes  necessary  for a complete
presentation  of financial  condition,  results of operations  and cash flows in
conformity with generally accepted accounting  principles have been condensed or
omitted.  These consolidated  financial statements should be read in conjunction
with the  financial  statements  and  schedules  thereto  included in the annual
report on Form 10-K of the Company for the year ended December 31, 1999.


     The  consolidated  financial data for the three months ended March 31, 2000
and 1999,  are unaudited but reflect all  adjustments  consisting of only normal
recurring  adjustments  which  are,  in the  opinion of  management,  considered
necessary  for a fair  presentation  of the  financial  condition and results of
operations  for the  interim  periods.  The  results of  operations  for interim
periods are not  necessarily  indicative of results to be expected for any other
period or the full year.

2.   Earnings Per Common Share

     Basic  earnings  per common share is computed by dividing net income by the
weighted average number of shares of common stock outstanding.  Diluted earnings
per common  share is similar to the  computation  of basic  earnings  per common
share  except  that the  denominator  is  increased  to  include  the  number of
additional  common  shares  that would  have been  outstanding  if the  dilutive
potential common shares had been issued.

3.   Legal Proceedings

     The Company is a party to routine  litigation  involving various aspects of
its business, none of which, in the opinion of management and its legal counsel,
is  expected to have a material  adverse  impact on the  consolidated  financial
condition, results of operations or liquidity of the Company.


                                       5
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The  following  discussion  is an  analysis of the  consolidated  financial
condition  and results of  operations  of the Company for the three months ended
March 31, 2000 and 1999, and should be read in conjunction with the consolidated
financial statements and notes thereto included in Item 1 hereof.

Forward Looking Information

     In addition to discussing historical information,  certain matters included
in or incorporated into this report relate to the financial  condition,  results
of operations  and business of the Company which are not historical  facts,  but
which are  "forward  looking  statements"  within  the  meaning  of the  Private
Securities   Litigation  Reform  Act  of  1995.  When  used  herein,  the  words
"anticipate,"  "believe,"  "estimate,"  "expect," "will" and similar expressions
are generally  intended to identify  forward looking  statements.  These forward
looking  statements  include,  but are not  limited  to,  statements  about  the
operations of the Company,  the adequacy of the  Company's  allowance for future
losses  associated  with the loan portfolio.  The forward looking  statements in
this report involve known and unknown risks and  uncertainties  and reflect what
we currently  anticipate will happen in each case.  What actually  happens could
differ materially from what we currently anticipate will happen due to a variety
of factors,  including,  among others, (i) increased competitive pressures among
financial  services  companies;  (ii) changes in the interest rate  environment;
(iii) general economic conditions, internationally,  nationally, or in the State
of New  Jersey;  and (iv)  legislation  or  regulatory  requirements  or changes
adversely affecting the business of the Company.  Readers should not place undue
expectations on any "forward  looking  statements." We are not promising to make
any public  announcement when we consider  "forward looking  statements" in this
document are no longer accurate,  whether as a result of new  information,  what
actually happens in the future or for any other reason.

                                       6
<PAGE>


              THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999

Earnings Summary

     For the first  quarter of 2000,  the  Company  reported  net income of $1.9
million or $0.29  diluted  earnings  per common  share,  as  compared  with $2.3
million or $0.32 diluted  earnings per common share for the same period in 1999,
a decrease of $396 thousand or 17.3%.  The decrease was due largely to a decline
of $400 thousand or 29.7% in non-interest  income,  which was  precipitated by a
$430  thousand  decrease in net gain on sale of  securities.  In  addition,  net
income was  affected  by an increase  of $489  thousand or 9.9% in  non-interest
expenses of which $329 thousand can be attributed  to  expansionary  growth (new
lease financing  subsidiary and call center - see  Non-interest  Expenses) and a
legal settlement  relating to the interpretation of past rental adjustments on a
branch  office.  Net  interest  income,  which  grew  $283  thousand,  on a  tax
equivalent  basis,  helped  offset the  effects of the  decline in  non-interest
income and the increase in non-interest expenses.

     Adjusting  for  the  net  change  in  gain  on  sale  of  securities,   the
expansionary  growth and the legal settlement,  net income for the first quarter
of 2000  increased  $82  thousand or 4.2% and diluted  earnings per common share
increased $.04 per share or 14.3% as compared to the same period in 1999.

                              RESULTS OF OPERATIONS

Net Interest Income

     Net  interest  income  is the  most  significant  source  of the  Company's
operating  income.  Net interest income on a tax equivalent basis increased $283
thousand to $7.7 million for the quarter ended March 31, 2000 as compared to the
same  quarter of 1999.  The  increase  in net  interest  income is due to higher
levels of interest  earning assets,  particularly  loans.  The earnings  benefit
associated  with the  growth in loans was offset in part by a decline in the net
interest margin ("margin").

     For the quarter ended March 31, 2000, average loans increased $40.3 million
or 8.5% over the same  period in 1999,  which  facilitated  a growth in  average
earning assets of $40.5

                                       7

<PAGE>

million or 6.3%.  The loan growth was funded  largely by a $29.9 million or 5.1%
growth in average  deposits  for the first  quarter 2000 as compared to the same
period in 1999.  Furthermore,  a portion  of the  growth in  earning  assets was
funded by  borrowings,  which  increased  $18.6  million or 107.5% for the first
quarter  2000 as  compared to the same period in 1999.  Higher  market  interest
rates and a growth in borrowings  resulted in a 28 basis points  increase in the
Company's  cost of funds to 3.27% for the first  quarter of 2000 as  compared to
the same period in 1999 and was  principally  responsible for the decline in the
margin.  The margin was 4.49% for the first quarter of 2000 as compared to 4.59%
for the same quarter in 1999.

Non-interest Income

     For the quarter ended March 31, 2000,  non-interest income amounted to $947
thousand, a decrease of $400 thousand or 29.7% as compared to the same period in
1999. The decline was largely due to a $430 thousand decrease in net gain on the
sale of securities. In addition,  service fees on deposits for the first quarter
of 2000  decreased  $22 thousand or 3.9% as compared to the same period in 1999.
The decrease in service fees on deposits was more than offset by a growth of $65
thousand in fee income from the sale of mutual funds and annuities.

Non-interest Expenses


     For the quarter  ended March 31, 2000,  non-interest  expenses  amounted to
$5.4  million,  an  increase  of $489  thousand  or 9.9% as compared to the same
period in 1999 due largely to expansionary growth.  Interchange Capital Company,
LLC ("ICC"), a wholly owned equipment lease financing  subsidiary of the Company
and the Company's new Bank-line  Center,  a fully staffed in-bound and out-bound
call center,  began operations in the fourth quarter of 1999. Expenses necessary
to start and operate ICC and the  Bank-line  Center  during the first quarter of
2000 amounted to approximately $166 thousand and $45 thousand,  respectively. In
addition,  in the first  quarter of 2000,  the Company paid $118  thousand for a
legal settlement  relating to the interpretation of past rental adjustments on a
branch office.  Excluding the start-up costs and operating  expenses  associated
with  ICC and  the  Bank-line  Center  and the  legal  settlement,  non-interest
expenses increased $160 thousand or 3.2% as compared to the same period in 1999,
which can be attributed to normal corporate growth.

                                       8
<PAGE>

Income Taxes


     Income tax  expense  as a  percentage  of pre-tax  income was 33.3% for the
three months ended March 31, 2000 as compared to 33.9% for the first  quarter of
1999.

                               FINANCIAL CONDITION

     At March 31,  2000,  the  Company's  total assets were $722.1  million,  an
increase of $16.0  million or 2.3% from $706.1  million at December 31, 1999. At
March 31, 2000, cash and cash equivalents increased $12.9 million as compared to
December  31,  1999.  This is  principally  the result of  financing  activities
(reflecting  principally  deposit  growth less  repayments  of  borrowings)  and
operating  activities  (reflecting  net  income  and  changes  in other  assets)
generating  cash more rapidly than the investing  activities  (funding loans and
investment  growth)  can utilize  it.  This can be seen more  completely  on the
accompanying unaudited Statements of Cash Flows.

                                       9

<PAGE>

<TABLE>

     At March  31,  2000,  the  contractual  maturities  of  securities  held to maturity  and  securities  available  for  sale
are  as  follows:  (dollars  in thousands)
<CAPTION>

Securities

    Securities held to maturity and securities available for sale consist of the following: (dollars in thousands)

                                                                  ----------------------------------------------------------
                                                                                       March 31, 2000
                                                                  ----------------------------------------------------------
                                                                                     Gross         Gross        Estimated
                                                                    Amortized      Unrealized   Unrealized       Market
                                                                      Cost           Gains        Losses          Value
                                                                  --------------   -----------  ------------  --------------
<S>                                                               <C>              <C>          <C>           <C>
Securities held to maturity
    Obligations of U.S. Treasury                                         $7,998             -            $8         $ 7,990
    Mortgage-backed securities                                           13,189           $41           265          12,965
    Obligations of U.S. agencies                                         12,983             -           165          12,818
    Obligations of states & political subdivisions                       16,583             9           412          16,180
    Other debt securities                                                   565             8             -             573
                                                                  --------------   -----------  ------------  --------------
                                                                         51,318            58           850          50,526
                                                                  --------------   -----------  ------------  --------------

Securities available for sale
    Obligations of U.S. Treasury                                          1,994             -             2           1,992
    Mortgage-backed securities                                           65,674            43         1,250          64,467
    Obligations of U.S. agencies                                         29,921             5           144          29,782
    Obligations of states & political subdivisions                        7,799             -           238           7,561
    Other debt securities                                                   735            11             -             746
    Equity securities                                                     3,955             -             -           3,955
                                                                  --------------   -----------  ------------  --------------
                                                                        110,078            59         1,634         108,503
                                                                  --------------   -----------  ------------  --------------

      Total securities                                                 $161,396          $117        $2,484        $159,029
                                                                  ==============   ===========  ============  ==============


                                                                  ----------------------------------------------------------
                                                                                      December 31, 1999
                                                                  ----------------------------------------------------------
                                                                                     Gross         Gross        Estimated
                                                                    Amortized      Unrealized   Unrealized       Market
                                                                      Cost           Gains        Losses          Value
                                                                  --------------   -----------  ------------  --------------
Securities held to maturity
    Obligations of U.S. Treasury                                        $ 9,997           $ 5           $ 8         $ 9,994
    Mortgage-backed securities                                           20,232            60           289          20,003
    Obligations of U.S. agencies                                          7,992             8            51           7,949
    Obligations of states & political subdivisions                       16,195             -           481          15,714
    Other debt securities                                                   124             -             -             124
                                                                  --------------   -----------  ------------  --------------
                                                                         54,540            73           829          53,784
                                                                  --------------   -----------  ------------  --------------

Securities available for sale
    Obligations of U.S. Treasury                                          6,016            87             -           6,103
    Mortgage-backed securities                                           68,331           104           982          67,453
    Obligations of U.S. agencies                                         27,141            51           112          27,080
    Obligations of states & political subdivisions                        3,139             -           198           2,941
    Equity securities                                                     3,772             -             -           3,772
                                                                  --------------   -----------  ------------  --------------
                                                                        108,399           242         1,292         107,349
                                                                  --------------   -----------  ------------  --------------

      Total securities                                                 $162,939          $315        $2,121        $161,133
                                                                  ==============   ===========  ============  ==============

                                       10

</TABLE>
<PAGE>

<TABLE>

     At March  31,  2000,  the  contractual  maturities  of  securities  held to
maturity  and  securities  available  for  sale  are  as  follows:  (dollars  in
thousands)
<CAPTION>

                                    Securities              Securities
                                 Held to Maturity      Available for Sale
                              --------------------   -------------------------
                              Amortized    Market      Amortized      Market
                                 Cost      Value         Cost         Value
                              --------------------   -------------------------
<S>                           <C>         <C>        <C>             <C>
Within 1 year                 $ 19,108    $ 19,087            -             -
After 1 but within 5 years      10,065       9,887     $ 38,195      $ 38,020
After 5 but within 10 years      9,523       9,382       26,303        25,517
After 10 years                  12,622      12,170       41,625        41,011
Equity securities                    -           -        3,955         3,955
                              --------------------   -------------------------
                    Total     $ 51,318    $ 50,526     $110,078      $108,503
                              ====================   =========================
</TABLE>


     During the first quarter of 2000, the Company sold certain securities in an
effort to improve the risk/reward  characteristics of the securities  portfolio.
Available-for-sale  ("AFS")  securities  with a book value of $17.6 million were
sold. Gains of $126 thousand and losses of $31 thousand were recognized from the
sale. One  held-to-maturity  ("HTM")  security with a book value of $2.0 million
was sold. A gain of $2 thousand was  recognized  from the sale. The HTM security
had a remaining maturity of less than two months, therefore, it is considered as
a "maturity" for purposes of  classification  of securities  under  Statement of
Financial  Accounting  Standard No. 115,  Accounting for Certain  Investments in
Debt and Equity Securities.

Loans

     Total loans amounted to $516.9 million and $512.0 million at March 31, 2000
and  December 31, 1999,  respectively.  Total loans at March 31, 2000  increased
$4.9  million  or  1.0% as  compared  to  December  31,  1999.  The  growth  was
predominately in commercial and financial loans, which increased $3.8 million.

                                       11

<PAGE>

<TABLE>

The following table reflects the composition of the loan portfolio:
<CAPTION>



                                              --------------------    ------------------
                                                   March 31,            December 31,
                                                     2000                    1999
                                              --------------------    ------------------
<S>                                           <C>                     <C>
Amount of loans by type (dollars in thousands)
     Real estate-mortgage
         Commercial                                      $166,613              $166,354
         1-4 family residential
               First liens                                110,712               110,269
               Junior liens                                 9,100                 9,829
               Home equity                                144,016               144,747
     Commercial and financial                              67,448                63,684
     Real estate-construction                               4,436                 4,008
     Installment
         Credit cards and related plans                       860                   947
         Other                                              2,763                 2,756
     Lease financing                                       10,928                 9,382
                                              --------------------    ------------------
               Total                                     $516,876              $511,976
                                              ====================    ==================
</TABLE>

Deposits

     At March 31, 2000, total deposits increased $32.1 million or 5.4% to $631.1
million from $599.0 million at December 31, 1999. The growth was  principally in
time  deposits,  which  grew $13.6  million  or 8.4% as a result of  promotional
campaigns.  Money market savings accounts and  interest-bearing  demand deposits
grew $13.6 million or 5.2%. Non-interest bearing deposits increased $4.9 million
or 4.8%. At March 31, 2000, time deposits  represent  27.9% of all deposits,  as
compared to 27.1% at December 31, 1999.

Nonperforming Assets

     Nonperforming assets are comprised of nonaccrual loans,  restructured loans
and foreclosed real estate. At March 31, 2000,  nonperforming assets amounted to
$1.4 million,  a decrease of $149 thousand or 9.4% from $1.6 million at December
31,  1999.  Nonperforming  assets  decreased  by $1.5 million or 50.3% from $2.9
million at March 31, 1999. The ratio of nonperforming  assets to total loans and
foreclosed real estate decreased to 0.28% at March 31, 2000 from 0.31% and 0.60%
at  December  31,  1999 and  March  31,  1999,  respectively.

                                       12

<PAGE>


The  decrease  in  nonperforming  assets  is  comprised  almost  entirely  of  a
commercial  loan of which $1.1  million  was  charged-off  during the second and
third quarters of 1999.

Provision for Loan Losses and Loan Loss Experience

     The provision for loan losses represents management's  determination of the
amount  necessary  to bring  the  allowance  for  loan  losses  to a level  that
management  considers  adequate to reflect the risk of future losses inherent in
the Company's loan portfolio. In its evaluation of the adequacy of the allowance
for loan losses, management considers past loan loss experience,  changes in the
composition of performing and  nonperforming  loans,  the condition of borrowers
facing  financial  pressure,  the  relationship  of  the  current  level  of the
allowance  to the  credit  portfolio  and to  nonperforming  loans and  existing
economic  conditions.  However,  the process of determining  the adequacy of the
allowance  is  necessarily   judgmental  and  subject  to  changes  in  external
conditions.  Accordingly,  there can be no assurance that existing levels of the
allowance will ultimately prove adequate to cover actual loan losses.

     The allowance for loan losses was $5.8 million at March 31, 2000,  and $5.5
million at December 31, 1999,  representing  485.4% and 409.6% of  nonperforming
loans at those dates,  respectively.  In the first quarter of 2000 and 1999, the
Company's provision for loan losses was $300 thousand.

Market Risk

     The Company's primary source of market risk exposure arises from changes in
market interest rates ("interest rate risk").  The Company's  success is largely
dependent upon its ability to manage interest rate risk.  Interest rate risk can
be defined as the  exposure  of the  Company's  net  interest  income to adverse
movements in interest  rates.  Although the Company  manages other risks,  as in
credit and liquidity  risk,  in the normal  course of its  business,  management
considers  interest rate risk to be its most  significant  market risk and could
potentially  have  the  largest  material  effect  on  the  Company's  financial
condition. The primary objective of the asset/liability management process is to
measure the effect of changing  interest rates on net interest income and market
value and adjust the balance sheet (if  necessary) to minimize the inherent risk
and maximize  income.  The  Company's  exposure to market risk and interest rate
risk is  reviewed on a regular  basis by the  Asset/Liability  Committee  of the
Board of  Directors.  Tools  used by  management  to  evaluate  risk  include an
asset/liability  simulation  model. At March 31, 2000, the Company simulated the
effects on net interest income given an instantaneous  and parallel shift in the
yield curve of 200 basis points in either  direction.  Based on the  simulation,

                                       13

<PAGE>

the results did not materially change from December 31, 1999. At March 31, 2000,
the Company was within policy limits  established  by the Board of Directors for
changes in net interest income and future economic value.

     The  Company  does not have  any  material  exposure  to  foreign  currency
exchange rate risk or commodity  price risk.  The Company did not enter into any
market rate sensitive  instruments for trading purposes nor did it engage in any
hedging transactions utilizing derivative financial instruments during the first
quarter of 2000.

     The Company is, however, a party to financial  instruments with off-balance
sheet risk in the normal course of business to meet the  financing  needs of its
customers.  These  instruments,  which include  commitments to extend credit and
standby  letters of credit,  involve to varying  degrees  elements of credit and
interest  rate risk in  excess  of the  amount  recognized  in the  consolidated
statement of condition. Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any  condition  established  in the
contract.  Commitments  generally  have fixed  expiration  dates and may require
collateral from the borrower if deemed necessary by the Company. Standby letters
of  credit  are  conditional  commitments  issued by the Bank to  guarantee  the
performance  of a customer to a third party up to a  stipulated  amount and with
specified terms and conditions. Commitments to extend credit and standby letters
of credit are not recorded on the Company's consolidated balance sheet until the
instrument is exercised.

                                       14

<PAGE>

<TABLE>

Capital Adequacy
<CAPTION>

The Company's and the Bank's capital amounts and ratios are as follows: (dollars in thousands)
                                                                                                                     To Be Well
                                                                                                                 Capitalized Under
                                                                                       For Capital               Prompt Corrective
                                                            Actual                  Adequacy Purposes            Action Provisions
                                                  --------------------------    -------------------------    -----------------------
                                                     Amount        Ratio           Amount        Ratio          Amount       Ratio
                                                  ------------- ------------    ------------- -----------    ----------- -----------
<S>                                               <C>           <C>             <C>           <C>            <C>         <C>


As of March 31, 2000:
     Total Capital (to Risk Weighted Assets):
       The Company                                   $62,058        12.57 %        $39,500        8.00 %           N/A         N/A
       The Bank                                       61,095        12.66           38,592        8.00         $48,241      10.00%
     Tier 1 Capital (to Risk Weighted Assets):
       The Company                                    56,292        11.40           19,750        4.00             N/A         N/A
       The Bank                                       55,329        11.47           19,296        4.00          28,944        6.00
     Tier 1 Capital (to Average Assets):
       The Company                                    56,292         7.87           21,463        3.00             N/A         N/A
       The Bank                                       55,329         7.72           21,499        3.00          35,831        5.00

As of December 31, 1999:
     Total Capital (to Risk Weighted Assets):
       The Company                                   $64,209        13.91 %        $36,925        8.00 %           N/A         N/A
       The Bank                                       64,877        14.01           37,054        8.00         $46,318      10.00%
     Tier 1 Capital (to Risk Weighted Assets):
       The Company                                    58,733        12.72           18,463        4.00             N/A         N/A
       The Bank                                       59,401        12.82           18,527        4.00          27,791        6.00
     Tier 1 Capital (to Average Assets):
       The Company                                    58,733         8.32           21,167        3.00             N/A         N/A
       The Bank                                       59,401         8.45           21,080        3.00          35,133        5.00

</TABLE>

                                       15

<PAGE>

Liquidity

     Liquidity  is the  ability  to  provide  sufficient  resources  to meet all
financial obligations and finance prospective business opportunities.  Liquidity
levels over any given period of time are a product of the  Company's  operating,
financing  and investing  activities.  The extent of such  activities  are often
shaped by such  external  factors as  competition  for  deposits  and demand for
loans.

     Financing for the Company's loans and investments is derived primarily from
deposits,  along with interest and principal  payments on loans and investments.
At March 31, 2000,  total deposits  amounted to $631.1  million,  an increase of
$32.1  million  or 5.4%  from  December  31,  1999.  In  addition,  the  Company
supplemented  the more  traditional  funding  sources with  borrowings  from the
Federal  Home Loan Bank of New York  ("FHLB")  and with  securities  sold  under
agreements to repurchase  ("REPOS").  At March 31, 2000,  advances from the FHLB
and REPOS amounted to $13.0 million and $16.5 million, respectively, as compared
to $27.0  million and $16.4  million,  respectively,  at December 31, 1999.  The
decrease  in  advances  from  the  FHLB was due to the  repayment  of  overnight
borrowings resulting from the growth in deposit liabilities.

     In  2000,  despite  heightened   competition  for  loans,  loan  production
continued to be the Company's principal  investing activity.  Net loans at March
31, 2000  amounted to $511.1  million,  an increase of $4.6 million or 0.9% from
$506.5 million at December 31, 1999.

     The  Company's  most liquid  assets are cash and due from banks and federal
funds  sold.  At March 31,  2000,  the total of such  assets  amounted  to $30.6
million  or 4.2% of total  assets,  compared  to $17.7  million or 2.5% of total
assets at  year-end  1999.  The  increase in cash and cash  equivalents  was due
largely to the  deposit  growth.  This cash was  temporarily  in Federal  Funds,
awaiting investment in loans and securities.

     Another  significant  liquidity source is the Company's AFS securities.  At
March 31,  2000,  AFS  securities  amounted to $108.5  million or 67.9% of total
securities,  compared to $107.3 million or 66.3% of total securities at year-end
1999.

     In addition to the  aforementioned  sources of  liquidity,  the Company has
available various other sources of liquidity,  including federal funds purchased
from other banks and the Federal Reserve  discount  window.  The Bank also has a
$67.5 million line of credit available through its membership in the FHLB.

     Management  believes that the Company's  sources of funds are sufficient to
meet its funding requirements.

                                       16
<PAGE>


Year 2000

     The  Company  has  successfully  implemented  all  phases  of its Year 2000
Compliance Plan as scheduled. There were no known adverse effects from Year 2000
related issues on the Company,  including its systems and  operations,  nor does
management  expect any adverse  effects in the future.  However,  management has
decided to maintain a Year 2000  specific  contingency  in an effort to mitigate
the adverse effects of any unforeseen risks.


                                       17
<PAGE>

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings
         Reference is made to Note 3 of the Company's Consolidated Financial
         Statements of this Form 10-Q.

Item 5. Other Information
         None

Item 6.  Exhibits and Reports on Form 8-K
         (a) The following exhibits are furnished herewith:
             Exhibit No.

             11  Statement re computation of per share earnings
             27  Financial Data Schedule

         (b) Reports on Form 8-K
             None filed for the quarter ended March 31, 2000

                                       18

<PAGE>


                                   SIGNATURES

Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


Interchange Financial Services Corporation

By:      /s/ Anthony Labozzetta
         ______________________
         Anthony Labozzetta
         Executive Vice President & CFO
         (Duly Authorized Officer and Principal
         Financial and Accounting Officer)

Dated: May 12, 2000

                                       19