<TABLE>
Interchange Financial Services Corporation
---------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
<CAPTION>

                                                                                            June 30,         December 31,
                                                                                              1999               1998
                                                                                          --------------     --------------
                                                                                          (unaudited)
<S>                                                                                       <C>                 <C>

Assets
Cash and due from banks                                                                        $ 18,943           $ 20,109
Federal funds sold                                                                                2,800             23,175
                                                                                          --------------     --------------
Total cash and cash equivalents                                                                  21,743             43,284
                                                                                          --------------     --------------

Securities held to maturity at amortized cost (estimated market value of
      $47,101 and $54,761 at June 30, 1999 and December 31, 1998, respectively)                  47,410             54,159
                                                                                          --------------     --------------
Securities available for sale at estimated market value (amortized cost of
     $106,348 and $93,872 at June 30, 1999 and December 31, 1998, respectively)                 106,224             95,771
                                                                                          --------------     --------------

Loans                                                                                           502,649            478,717
Less:  Allowance for loan losses                                                                  5,498              5,645
                                                                                          --------------     --------------
Net loans                                                                                       497,151            473,072
                                                                                          --------------     --------------

Premises and equipment, net                                                                       9,625              9,871
Foreclosed real estate                                                                                -                 84
Accrued interest receivable and other assets                                                      8,693              9,123
                                                                                          ==============     ==============
Total assets                                                                                   $690,846           $685,364
                                                                                          ==============     ==============


Liabilities
Deposits
    Non-interest bearing                                                                       $106,128           $107,408
    Interest bearing                                                                            497,708            491,324
                                                                                          --------------     --------------
Total deposits                                                                                  603,836            598,732
                                                                                          --------------     --------------

Securities sold under agreements to repurchase                                                    7,250              8,780
Short-term borrowings                                                                             9,710              9,768
Accrued interest payable and other liabilities                                                    6,294              5,712
                                                                                          --------------     --------------
Total liabilities                                                                               627,090            622,992
                                                                                          --------------     --------------

Commitments and contingent liabilities

Stockholders' equity:
Common stock, without par value; 15,000,000 shares authorized;
    7,179,076 and 7,200,133 shares issued and outstanding at June 30, 1999
    and December 31, 1998, respectively                                                           5,397              5,397
Capital surplus                                                                                  21,304             21,256
Retained earnings                                                                                38,516             35,482
Accumulated other comprehensive income (loss)                                                       (85)             1,192
                                                                                          --------------     --------------
                                                                                                 65,132             63,327
Less:  Treasury stock                                                                             1,376                955
                                                                                          --------------     --------------
Total stockholders' equity                                                                       63,756             62,372
                                                                                          ==============     ==============
Total liabilities and stockholders' equity                                                     $690,846           $685,364
                                                                                          ==============     ==============

---------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>

Interchange Financial Services Corporation
------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except per share data) (unaudited)
<CAPTION>

                                                                       Three Months Ended               Six Months Ended
                                                                            June 30,                        June 30,
                                                                    -------------------------       --------------------------
                                                                       1999          1998              1999          1998
                                                                    ------------  -----------       ------------  ------------
<S>                                                                <C>            <C>               <C>           <C>

Interest income
Interest and fees on loans                                               $9,851       $9,702            $19,358       $19,150
Interest on federal funds sold                                              195          422                414           803
Interest on interest bearing deposits                                         -           25                  -            49
Interest and dividends on securities
    Taxable interest income                                               2,034        2,004              3,978         3,982
    Interest income exempt from federal income taxes                         88           21                197            50
    Dividends                                                                60           68                131           131
                                                                    ------------  -----------       ------------  ------------
Total interest income                                                    12,228       12,242             24,078        24,165
                                                                    ------------  -----------       ------------  ------------

Interest expense
Interest on deposits                                                      4,351        4,657              8,626         9,217
Interest on short-term borrowings                                           229          250                466           458
Interest on long-term borrowings                                              -          147                  -           294
                                                                    ------------  -----------       ------------  ------------
Total interest expense                                                    4,580        5,054              9,092         9,969
                                                                    ------------  -----------       ------------  ------------

Net interest income                                                       7,648        7,188             14,986        14,196
Provision for loan losses                                                   300          212                600           431
                                                                    ------------  -----------       ------------  ------------
Net interest income after provision
 for loan losses                                                          7,348        6,976             14,386        13,765
                                                                    ------------  -----------       ------------  ------------

Noninterest income
Service fees on deposit accounts                                            571          650              1,141         1,274
Net gain on sale of securities                                              329            -                856             -
Other                                                                       621          235                872           568
                                                                    ------------  -----------       ------------  ------------
Total noninterest income                                                  1,521          885              2,869         1,842
                                                                    ------------  -----------       ------------  ------------

Noninterest expenses
Salaries and benefits                                                     2,569        2,243              5,109         4,727
Net occupancy                                                               671          572              1,330         1,136
Furniture and equipment                                                     256          253                507           511
Advertising and promotion                                                   273          236                519           435
Federal Deposit Insurance Corporation assessment                             20           19                 40            37
Acquisition                                                                   -        1,278                  -         1,389
Other                                                                     1,319        1,022              2,529         2,066
                                                                    ------------  -----------       ------------  ------------
Total noninterest expenses                                                5,108        5,623             10,034        10,301
                                                                    ------------  -----------       ------------  ------------

Income before  income taxes                                               3,761        2,238              7,221         5,306

Income taxes                                                              1,283          811              2,457         1,901
                                                                    ------------  -----------       ------------  ------------

Net income                                                              $ 2,478      $ 1,427            $ 4,764       $ 3,405
                                                                    ============  ===========       ============  ============

Basic earnings per common share                                           $0.34        $0.20              $0.66         $0.47
                                                                    ============  ===========       ============  ============

Diluted earnings per common share                                         $0.34        $0.20              $0.66         $0.47
                                                                    ============  ===========       ============  ============

------------------------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>

Interchange Financial Services Corporation
------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands, except share data) (unaudited)
<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, 1998                                          $29,698      $1,185    $5,396     $21,557   $(1,706)    $56,130
Comprehensive income
  Net Income                                             $3,405       3,405                                                   3,405
  Other comprehensive income, net of taxes
    Unrealized  gains on debt securities                     91
    Unrealized losses securities transferred from held to
     maturity to available for sale - Acquisition           (40)
    Unrealized lossess on equity securities                (369)
                                                      -----------
    Other comprehensive loss                               (318)                   (318)                                       (318)
                                                      -----------
                                                      ===========
Comprehensive income                                     $3,087
                                                      ===========
Dividends on common stock                                            (1,385)                                                 (1,385)
Fractional shares on 3 for 2 stock split and merger shares                                                 (6)                   (6)
Issued 12,769 shares of common stock in connection with
  Executive Compensation Plan                                                                              70       162         232
Exercise of 44,680 option shares                                                                         (330)      556         226
                                                                    ---------  ------------ ---------  ---------- ---------  -------

Balance at June 30, 1998                                             31,718         867     5,396      21,291      (988)     58,284
Comprehensive income
  Net Income                                             $5,204       5,204                                                   5,204
  Other comprehensive income, net of taxes
    Unrealized gains on debt securities                     116
    Unrealized gains securities transferred from held to
     maturity to available for sale - Acquisition            23
    Unrealized gains on equity securities                   712
    Less:  gains on disposition of equity securities       (526)
                                                       -----------
    Other comprehensive income                              325                     325                                         325
                                                       -----------
                                                       ===========
Comprehensive income                                     $5,529
                                                       ===========
Dividends on common stock                                             (1,440)                                                (1,440)
Fractional shares on 3 for 2 stock split and merger shares                                                                        -
Forfeiture of bonus stock                                                                                           (49)        (49)
Exercised 13,789 option shares                                                                  1         (35)       82          48

                                                                    ---------  ------------ ---------  ---------- ---------  -------
Balance at December 31, 1998                                          35,482       1,192    5,397      21,256      (955)     62,372
Comprehensive income
    Net Income                                             $4,764      4,764                                                  4,764
    Other comprehensive income, net of taxes
    Unrealized losses on debt securities                     (764)
    Less:  gains on disposition of securities
           (excludes equities)                                (90)
    Unrealized gains securities transferred from held to
      maturity to available to sale - Acquisition              23
    Unrealized loss on equity securities                      (18)
    Less:  gains on disposition of equity securities         (428)
                                                       -----------
    Other comprehensive loss                               (1,277)                (1,277)                                    (1,277)
                                                       -----------
                                                       ===========
Comprehensive income                                       $3,487
                                                       ===========

Dividends on common stock                                             (1,730)                                                (1,730)
Issued 14,489 shares of common stock in connection
    with Executive Compensation Plan                                                                       62       184         246
Exercised 2,954 option shares                                                                             (14)       37          23
Buy-back of stock                                                                                                  (642)       (642)
                                                                    =========  ============ ========= ========== =========  ========
Balance at June 30, 1999                                             $38,516       $ (85)   $5,397    $21,304   $(1,376)    $63,756
                                                                    =========  ============ ========= ========== =========  ========

------------------------------------------------------------------------------------------------------------------------------------
All share data has been adjusted for the effects of the 3 for 2 stock split issued on
April 17, 1998 to shareholders of record on March 20, 1998.
</TABLE>
<PAGE>

<TABLE>
INTERCHANGE FINANCIAL SERVICES CORPORATION
------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30,
------------------------------------------------------------------------------------------------------------
(dollars in thousands) (unaudited)
<CAPTION>

                                                                                      1999          1998
                                                                                   -----------   -----------
<S>                                                                                <C>           <C>
Cash flows from operating activities
Net income                                                                            $ 4,764       $ 3,405
Adjustments to reconcile net income to net cash provided by operating activities
    Depreciation and amortization                                                         775           671
    Amortization of securities premiums                                                   447           454
    Accretion of securities discounts                                                     (84)          (91)
    Amortization of premiums in connection with acquisition                               156           222
    Provision for loan losses                                                             600           431
    Net gain on sale of securities                                                       (856)            -
    Net gain on sale of foreclosed real estate                                            (36)            -
    Net loss on disposal of fixed assets                                                    2             -
Decrease (increase) in operating assets
    Accrued interest receivable                                                           260          (252)
    Other                                                                                  11         1,405
(Decrease) increase in operating liabilities
    Accrued interest payable                                                              (81)          138
    Other                                                                                 662        (1,027)
                                                                                   -----------   -----------
Cash provided by operating activities                                                   6,620         5,356
                                                                                   -----------   -----------

Cash flows from investing activities
(Payments for) proceeds from
    Net originations of loans                                                         (15,459)      (22,415)
    Purchase of loans                                                                 (13,522)       (3,626)
    Sale of loans                                                                           -           409
    Purchase of term federal funds                                                          -        (7,500)
    Repayment of term federal funds                                                     5,000             -
    Purchase of securities available for sale                                         (47,530)      (10,546)
    Maturities of securities available for sale                                         7,116         5,717
    Sale of securities available for sale                                              25,590             -
    Sale of foreclosed real estate                                                        121             -
    Purchase of securities held to maturity                                            (6,226)      (11,716)
    Maturities of securities held to maturity                                          13,811        10,574
    Sale of securities held to maturity                                                 2,003             -
    Purchase of fixed assets                                                             (480)         (916)
    Sale of fixed assets                                                                    2             4
                                                                                   -----------   -----------
Cash used in investing activities                                                     (29,574)      (40,015)
                                                                                   -----------   -----------

Cash flows from financing activities
Proceeds from (payments for)
    Deposits in excess of withdrawals                                                   5,104        35,108
    Securities sold under agreements to repurchase and other borrowings                 6,250         8,020
    Retirement of securities sold under agreement to repurchase and
       other borrowings                                                                (7,838)       (2,652)
    Dividends                                                                          (1,730)       (1,385)
    Common stock issued from treasury                                                     246           226
    Treasury stock acquired                                                              (642)            -
    Exercise of option shares                                                              23           227
                                                                                   -----------   -----------
Cash provided by financing activities                                                   1,413        39,544
                                                                                   -----------   -----------

(Decrease) increase in cash and cash equivalents                                      (21,541)        4,885
Cash and cash equivalents, beginning of year                                           43,284        36,583
                                                                                   ===========   ===========
Cash and cash equivalents, end of year                                                $21,743       $41,468
                                                                                   ===========   ===========

Supplemental disclosure of cash flow information:
Cash paid for:
    Interest                                                                           $9,173        $9,826
    Income taxes                                                                        1,663         2,826

Supplemental disclosure of non-cash investing activities:
    Decrease - market valuation of securities available for sale                        2,023           541
Securities transferred from held to maturity to available for sale                          -         8,187

------------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     FOR THE SIX MONTHS ENDED JUNE 30, 1999
                                   (Unaudited)

1.       Basis of Presentation
     The  accompanying  unaudited  consolidated  financial  statements 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  Interchange
Financial  Services  Corporation (the "Company") for the year ended December 31,
1998.

     The consolidated  financial data for the six months ended June 30, 1999 and
1998,  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.

     Effective  May 31, 1998,  the Company  acquired The Jersey Bank for Savings
("Jersey").    The    acquisition    has   been    accounted   for   under   the
pooling-of-interests method of accounting, accordingly, the financial statements
have been  restated  to  include  the  consolidated  accounts  of Jersey for all
periods presented prior to the date of acquisition.  The transaction resulted in
the issuance of 780,198 shares of the Company's common stock.

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.
<PAGE>


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.
<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 and six month
periods ended June 30, 1999 and 1998, and should be read in conjunction with the
consolidated financial statements and notes thereto included in Item 1 hereof.

     Effective  May 31, 1998,  the Company  acquired The Jersey Bank for Savings
("Jersey").  The  acquisition  has been  accounted  for  under  the  pooling  of
interests method of accounting,  accordingly the financial  statements have been
restated  to  include  the  consolidated  accounts  of  Jersey  for all  periods
presented prior to the date of acquisition.

Forward Looking  Information

     In  addition  to  discussing  historical  information,  we discuss  certain
matters in this report regarding the financial condition,  results of operations
and  business  of the  Company  which are not  historical  facts,  but which are
"forward looking  statements." These "forward looking statements"  include,  but
are not limited to, estimates of capital expenditures  relating to the Year 2000
issue,  costs of remediation  and testing,  the timetable for  implementing  the
remediation  and testing  phases of Year 2000 planning,  the possible  impact of
third  parties'  Year 2000 issues on the  Company,  management's  assessment  of
contingencies  and possible  scenarios in its Year 2000  planning.  The "forward
looking  statements" in this report involve 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. We are not promising to
make any public  announcement when we think "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.

<PAGE>


               THREE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998

Earnings Summary
     For the second  quarter of 1999,  the Company  reported  net income of $2.5
million or $0.34  diluted  earnings  per common  share,  as  compared  with $1.4
million or $0.20 diluted  earnings per common share for the same period in 1998,
an increase of $1.1 million or 73.7%.  The increase was due, in part,  to a $483
thousand  improvement  in  net  interest  income,  on a  tax  equivalent  basis,
resulting largely from a 6.8% growth in average loans outstanding for the second
quarter of 1999 as compared to the same period in 1998. In addition,  net income
was positively  affected by improved  noninterest  income,  which increased $637
thousand  or 72.1% as  compared  to the same  period in 1998 due mostly to gains
from the sale of securities.  Earnings  during the quarter also benefited from a
decrease  of $515  thousand or 9.2% in  noninterest  expenses as compared to the
same period in 1998. The decrease was  principally due to $1.3 million of merger
related  charges  incurred  in 1998  related  to the Jersey  acquisition,  which
charges did not recur 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 $483
thousand to $7.7 million for the quarter  ended June 30, 1999 as compared to the
same  quarter of 1998.  The  increase  in net  interest  income is due to higher
levels of interest earning assets,  particularly loans,  coupled with a decrease
in interest  expense  resulting  from a favorable  shift in the  composition  of
deposits ("mix") and lower short-term market interest rates.

     For the quarter ended June 30, 1999,  average loans increased $31.0 million
or 6.8% over the same  period in 1998,  which  facilitated  a growth in  average
earning assets of $28.5 million or 4.5%. The loan growth was funded largely by a
$34.1 million or 6.0% growth in average  deposits for the second quarter 1999 as
compared  to the same period in 1998.  During the  comparative  period,  average
non-interest  bearing  and  interest-bearing  demand  deposits  increased  $10.1
million or 10.9% and $24.0 million or 5.1%, respectively,  while higher yielding
certificates  of  deposits  greater  than  $100  thousand  remained   relatively
unchanged.  The favorable  change in the retail  deposit mix combined with lower
short-term  market  interest rates served to reduce the yield on total deposits,
resulting in a favorable impact on net interest  income.  For the second quarter
of 1999,  the yield on total deposits was 2.9 % as compared to 3.3% for the same
quarter in 1998.  The benefit  derived  from the lower  funding  cost was partly
offset by a decline in yields on average interest  earning assets,  particularly
loans.  For the  quarter  ended June 30,  1999,  the yield on  average  interest
earning assets was 7.48% as compared to 7.83% for the same period in 1998.

Non-interest Income
     For the quarter ended June 30, 1999,  non-interest  income amounted to $1.5
million, an increase of $637 thousand or 72.1% as compared to the same period in
1998. The increase was  principally  due to the  recognition of $329 thousand of
gains  (pre-tax) from the sale of debt and equity  securities.  The Company sold
the equity  securities  to eliminate  the  market-risk  exposure  following  the
announcement  by the issuing  company  that it had agreed to merge with  another
organization.  The debt  securities  were  sold as part of a  limited  portfolio
restructuring  aimed  at  improving  the  risk/reward   characteristics  of  the
securities portfolio. In addition, noninterest income was positively affected by
the  recognition  of $284 thousand of income arising from the early pay-off of a
commercial loan purchased at a discount.

     These gains were partially  offset by a decrease in service fees on deposit
accounts of $78 thousand or 12.0% for the second quarter of 1999 compared to the
same period in 1998.

Non-interest Expenses
     For the quarter ended June 30, 1999, non-interest expenses amounted to $5.1
million,  a decrease of $515  thousand or 9.2% as compared to the same period in
1998. The decrease was principally due to $1.3 million of merger-related charges
incurred in 1998  associated  with the Jersey  acquisition.  The  merger-related
charges  were  not  repeated  in the  second  quarter  of  1999.  Excluding  the
merger-related  charges,  noninterest  expenses,  for the second quarter of 1999
increased $763 thousand or 17.6%.

     Salaries and  benefits,  the largest  component of  non-interest  expenses,
increased  $326  thousand or 14.5% when compared to the same quarter in 1998 due
to normal  promotions,  salary  increases and the additions to staff  associated
with  the new  branch  opening.  At June  30,  1999,  the  number  of  full-time
equivalent  employees  were 204 as compared to 192 at June 30,  1998.  Occupancy
expense  increased  $99  thousand,  when compared to the same quarter in 1998 of
which  approximately  $45  thousand  can be  attributed  to the opening of a new
branch in  Paramus,  New Jersey  during the fourth  quarter of 1998.  Directors'
expense  increased $108 thousand and was attributable to the recognition of $119
thousand of cash surrender value from the Directors life insurance in the second
quarter of 1998,  which served to reduce the Directors'  expense in that period.
Furthermore,  expenses associated with modifying computer systems to address the
Year 2000 Issue totaled $27 thousand for the quarter ended June 30, 1999.  There
were no expenses related to the Year 2000 Issue during the same period in 1998.

Income Taxes
     Income tax  expense  as a  percentage  of pre-tax  income was 34.1% for the
three months ended June 30, 1999 as compared to 36.2% for the second  quarter of
1998.  The  decrease  is  attributable  to the  establishment  of a Real  Estate
Investment  Trust ("REIT") in the second half of 1998.  The REIT,  which manages
certain real estate assets of the Company,  was established in an effort to take
advantage of certain tax benefits.

                SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998

Earnings Summary
     For the six months ended June 30, 1999, the Company  reported net income of
$4.8 million or $0.66 diluted  earnings per common share,  as compared with $3.4
million or $0.47 diluted  earnings per common share for the same period of 1998,
an increase of $1.4 million or 39.9%.  The increase was due, in part,  to a $839
thousand  improvement  in  net  interest  income,  on a  tax  equivalent  basis,
resulting  largely from a 6.7% growth in average loans outstanding for the first
six months of 1999 as  compared  to the same period in 1998.  In  addition,  net
income was positively affected by improved  non-interest income, which increased
$1.0 million or 55.8% due mostly to gains from the sale of securities.  Earnings
also  benefited  from a  decrease  of $267  thousand  or  2.6%  in  non-interest
expenses.  The decrease was  principally  due to $1.4 million of  merger-related
charges incurred in 1998 related to the Jersey acquisition,  which did not recur
in 1999.

<PAGE>

                              RESULTS OF OPERATIONS

Net Interest Income
     Net interest  income on a tax equivalent  basis  increased $839 thousand to
$15.0  million  for the six months  ended June 30,  1999 as compared to the same
quarter of 1998. The increase in net interest  income is due to higher levels of
interest earning assets, particularly loans, coupled with a decrease in interest
expense  resulting from a favorable shift in the composition of deposits ("mix")
and lower short-term interest rates.

     For the six months  ended June 30,  1999,  average  loans  increased  $30.2
million  or 6.7% over the same  period in 1998,  which  facilitated  a growth in
earning assets of $28.4 million or 4.4%. The loan growth was funded largely by a
$34.6  million or 6.2% growth in average  deposits for the six months of 1999 as
compared  to the same period in 1998.  During the  comparative  period,  average
non-interest  bearing and  interest-bearing  deposits increased $10.8 million or
12.0%  and  $23.8  million  or  5.1%,   respectively,   while  higher   yielding
certificates of deposits greater than $100 thousand decreased approximately $2.8
million on average. The favorable change in the retail deposit mix combined with
lower  short-term  market  interest  rates  served to reduce  the yield on total
deposits,  resulting in a favorable impact on net interest  income.  For the six
months ended June 30, 1999, the yield on total deposits was 2.9 % as compared to
3.3% for the same period in 1998.  The benefit  derived  from the lower  funding
cost was  partly  offset by a decline  in yields  on  average  interest  earning
assets, particularly loans. For the six months ended June 30, 1999, the yield on
average  interest  earning  assets was 7.44% as  compared  to 7.83% for the same
period in 1998.


Non-interest Income
     For the six months ended June 30,  1999,  non-interest  income  amounted to
$2.9  million,  an  increase  of $1.0  thousand or 55.8% as compared to the same
period in 1998.  The increase was  principally  due to the  recognition  of $856
thousand of gains  (pre-tax)  from the sale of debt and equity  securities.  The
Company  sold the  equity  securities  to  eliminate  the  market-risk  exposure
following the  announcement  by the issuing  company that it had agreed to merge
with another  organization.  The debt  securities were sold as part of a limited
portfolio  restructuring  aimed at improving the risk/reward  characteristics of
the  securities  portfolio.  In  addition,  noninterest  income  was  positively
affected by the  recognition  of $284 thousand of income  arising from the early
pay-off of a commercial loan purchased at a discount.

     These gains were partially  offset by a decrease in service fees on deposit
accounts  of $133  thousand  or 10.4% for the six  months  ended  June 30,  1999
compared to the same period in 1998.

Non-interest Expenses
     For the six months ended June 30, 1999,  non-interest  expenses amounted to
$10.0  million,  a decrease  of $267  thousand  or 2.6% as  compared to the same
period  in  1998.  The  decrease  was   principally   due  to  $1.4  million  of
merger-related  charges incurred in 1998 associated with the Jersey  acquisition
that did not recur in 1999. Excluding the merger-related  charges,  non-interest
expenses for the six months ended June 30, 1999  increased $1.1 million or 12.6%
as compared to the same period in 1998.

     Salaries and  benefits,  the largest  component of  non-interest  expenses,
increased  $382 thousand or 8.1% when compared to the same period in 1998 due to
normal  promotions,  salary increases and the additions to staff associated with
the new branch opening. At June 30, 1999,  full-time equivalent staff was 204 as
compared to 192 at June 30, 1998. Occupancy expense increased $194 thousand when
compared to the same period in 1998 of which  approximately  $90 thousand of the
increase can be attributed to the opening of a new branch in Paramus, New Jersey
during the fourth quarter of 1998.  Directors'  expense  increased $263 thousand
and was attributable to the recognition of $238 thousand of cash surrender value
from the Directors  life  insurance  during the first six months of 1998,  which
served to reduce the Directors'  expense in that period.  Furthermore,  expenses
associated  with  modifying  computer  systems  to  address  the Year 2000 Issue
totaled  $84  thousand  for the six months  ended June 30,  1999.  There were no
expenses related to the Year 2000 Issue during the same period in 1998.

Income Taxes
     Income tax expense as a percentage of pre-tax  income was 34.0% for the six
months ended June 30, 1999 as compared to 35.8% for the same period in 1998. The
decrease is  attributable to the  establishment  of a REIT in the second half of
1998.  The REIT,  which manages  certain real estate assets of the Company,  was
established in an effort to take advantage of certain tax benefits.
<PAGE>


                               FINANCIAL CONDITION

     At June 30,  1999,  the  Company's  total  assets were $690.8  million,  an
increase of $5.5 million or .8% from $685.4  million at December  31,  1998.  At
June 30, 1999, cash and cash equivalents  decreased $21.5 million as compared to
December 31, 1998. The decrease in cash is  principally  the result of investing
activities  (funding  loans and investment  growth)  utilizing cash more rapidly
than financing activities (reflecting mostly changes in deposits and borrowings)
and operating activities (reflecting net income and changes in other assets) can
provide it. This can be seen more  completely on the  accompanying  Consolidated
Statements of Cash Flows.

<PAGE>

<TABLE>
Securities

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

                                                               -------------------------------------------------------------------
                                                                                         June 30, 1999
                                                               -------------------------------------------------------------------
                                                                                     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                                      $9,995              $24               $ 2         $ 10,017
     Mortgage-backed securities                                        19,280               94               160           19,214
     Obligations of U.S. agencies                                       7,989               42                39            7,992
     Obligations of states & political subdivisions                    10,022                -               269            9,753
     Other debt securities                                                124                1                 -              125
                                                               ---------------   --------------    --------------   --------------
                                                                       47,410              161               470           47,101
                                                               ---------------   --------------    --------------   --------------

Securities available for sale
     Obligations of U.S. Treasury                                       6,022              161                 -            6,183
     Mortgage-backed securities                                        72,253              215               465           72,003
     Obligations of U.S. agencies                                      21,152              122                47           21,227
     Obligations of states & political subdivisions                     3,149                -               110            3,039
     Equity securities                                                  3,772                -                 -            3,772
                                                               ---------------   --------------    --------------   --------------
                                                                      106,348              498               622          106,224
                                                               ---------------   --------------    --------------   --------------

        Total securities                                             $153,758             $659            $1,092         $153,325
                                                               ===============   ==============    ==============   ==============


                                                               -------------------------------------------------------------------
                                                                                       December 31, 1998
                                                               -------------------------------------------------------------------
                                                                                     Gross             Gross          Estimated
                                                                 Amortized        Unrealized        Unrealized         Market
                                                                    Cost             Gains            Losses            Value
                                                               ---------------   --------------    --------------   --------------
Securities held to maturity
     Obligations of U.S. Treasury                                    $ 15,992            $ 180                 -         $ 16,172
     Mortgage-backed securities                                        18,921              227              $ 23           19,125
     Obligations of U.S. agencies                                       7,986              175                 -            8,161
     Obligations of states & political subdivisions                    11,111               48                 6           11,153
     Other debt securities                                                149                1                 -              150
                                                               ---------------   --------------    --------------   --------------
                                                                       54,159              631                29           54,761
                                                               ---------------   --------------    --------------   --------------

Securities available for sale
     Obligations of U.S. Treasury                                      33,264              777                 -           34,041
     Mortgage-backed securities                                        42,824              398               156           43,066
     Obligations of U.S. agencies                                      13,687              190                53           13,824
     Equity securities                                                  4,097              743                 -            4,840
                                                               ---------------   --------------    --------------   --------------
                                                                       93,872            2,108               209           95,771
                                                               ---------------   --------------    --------------   --------------
        Total securities
                                                                     $148,031           $2,739              $238         $150,532
                                                               ===============   ==============    ==============   ==============

</TABLE>
<PAGE>
<TABLE>
       At June 30, 1999, 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                                       $11,688         $ 11,712                     -                 -
After 1 but within 5 years                           11,492           11,484              $ 25,456          $ 25,627
After 5 but within 10 years                          12,010           12,001                26,159            25,822
After 10 years                                       12,220           11,904                50,961            51,003
Equity securities                                         -                -                 3,772             3,772
                                               -------------    -------------       ---------------   ---------------

                        Total                       $47,410         $ 47,101             $ 106,348         $ 106,224
                                               =============    =============       ===============   ===============

</TABLE>




     During  the  second  quarter  of 1999,  the  Company  performed  a  limited
securities   portfolio   restructuring   aimed  at  improving  the   risk/reward
characteristics  of  the  securities   portfolio.   Available-for-sale   ("AFS")
securities with a book value of $24.2 million were sold.  Gains of $143 thousand
and losses of $4 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 $3
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 $502.6 million and $478.7 million at June 30, 1999
and December 31, 1998, respectively.  Total loans at December 31, 1998, included
$5.0 million of term federal  funds sold,  which for  accounting  purposes  were
classified as a loan. Excluding the term federal funds sold, total loans at June
30, 1999 increased $28.9 million or 6.1% as compared to December 31, 1998.
<PAGE>

The following table reflects the composition of the loan portfolio:

<TABLE>
<CAPTION>
                                                   ---------------    ----------------
                                                      June 30,         December 31,
                                                        1999                1998
                                                   ---------------    ----------------
<S>                                                <C>                <C>

Amount of loans by type (dollars in thousands)
      Real estate-mortgage
         Commercial                                      $160,155            $148,875
         1-4 family residential
               First liens                                109,030              89,852
               Junior liens                                11,438              14,322
               Home equity                                143,909             142,781
      Commercial and financial                             63,557              64,067
      Real estate-construction                              1,840                 974
      Installment
         Credit cards and related plans                     1,944               2,033
         Other                                              2,022               1,200
      Lease financing                                       8,754               9,613
      Term Fed Funds                                            -               5,000
                                                   ===============    ================
               Total                                     $502,649            $478,717
                                                   ===============    ================

</TABLE>


Deposits
     At June 30, 1999,  total deposits  increased $5.1 million or 0.9% to $603.8
million from $598.7 million at December 31, 1998. The growth was  principally in
interest bearing demand deposits, which grew $3.5 million or 1.8%. Time deposits
grew $2.6  million and  represent  28.7% of all  deposits at June 30,  1999,  as
compared to 28.5% at December 31, 1998.

Nonperforming Assets
     Nonperforming assets are comprised of nonaccrual loans,  restructured loans
and foreclosed real estate. At June 30, 1999,  nonperforming  assets totalled to
$2.2  million,  an increase of $413  thousand or 23.0% from $1.8 million at June
30, 1998. The ratio of  nonperforming  assets to total loans and foreclosed real
estate  increased to 0.44% at June 30, 1999 from 0.38% at June 30, 1998. At June
30,  1999,  nonperforming  assets  increased  $399  thousand  or 22.0% from $1.8
million at December 31, 1998. The ratio of  nonperforming  assets to total loans
and  foreclosed  real estate  increased  to 0.44% at June 30, 1999 from 0.38% at
December  31,  1998.  The  increase in  nonperforming  assets  consisted  almost
entirely of one commercial  loan amounting to $1.2 million,  which was placed on
nonaccrual  status  during the first  quarter  of 1999.  $600  thousand  of this
commercial loan was charged-off in the second quarter of 1999.
<PAGE>

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   subjective  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 $5.5 million at June 30, 1999,  and $5.6
million at December 31, 1998,  representing  248.9% and 300.2% of  nonperforming
loans at those dates, respectively. In the second quarter of 1999, the Company's
provision  for loan losses was $300  thousand,  an increase of $88 thousand from
the same period a year ago.  The  increase  was largely  due to  continued  loan
growth and an increase in nonperforming loans.

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
economic value of equity 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  quarterly  basis by the  Asset/Liability
Committee.  Tools used by management to evaluate risk include an asset/liability
simulation  model.  At June 30, 1999,  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.  At June 30, 1999, 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 six
months ended June 30, 1999.

     The Company is, however,  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 financial 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 Company's subsidiary
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.

<PAGE>
<TABLE>
Capital Adequacy

The Company's and the Bank's capital amounts and ratios are as follows: (dollars in thousands)
<CAPTION>
                                                                                                                    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 June 30, 1999:
    Total Capital (to Risk Weighted Assets):
       The Company                                 $68,866        15.21 %        $36,219        8.00 %           N/A         N/A
       The Bank                                     68,156        15.06           36,214        8.00         $45,268      10.00%
    Tier 1 Capital (to Risk Weighted Assets):
       The Company                                  63,368        14.00           18,109        4.00             N/A         N/A
       The Bank                                     62,658        13.84           18,107        4.00          27,161        6.00
    Tier 1 Capital (to Average Assets):
       The Company                                  63,368         9.36           20,321        3.00             N/A         N/A
       The Bank                                     62,658         9.17           20,501        3.00          34,168        5.00

As of December 31, 1998:
    Total Capital (to Risk Weighted Assets):
       The Company                                 $66,474        15.12 %        $35,149        8.00 %           N/A         N/A
       The Bank                                     63,777        14.59           34,976        8.00         $43,721      10.00%
    Tier 1 Capital (to Risk Weighted Assets):
       The Company                                  60,646        13.80           17,575        4.00             N/A         N/A
       The Bank                                     58,312        13.34           17,488        4.00          26,232        6.00
    Tier 1 Capital (to Average Assets):
       The Company                                  60,646         9.08           20,041        3.00             N/A         N/A
       The Bank                                     58,312         8.76           19,979        3.00          33,299        5.00
</TABLE>
<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 June 30, 1999, total deposits amounted to $603.8 million, an increase of $5.1
million or 0.9% from  December 31, 1998. 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 June 30,  1999,  advances  from  the  FHLB and  REPOS
amounted to $9.7  million and $7.2  million,  respectively,  as compared to $9.8
million and $8.8 million, respectively, at December 31, 1998.

     In 1999,  despite  heightened  competition  for  loans and  increased  loan
prepayments,  loan production  continued to be the Company's principal investing
activity.  Net loans at June 30, 1999 amounted to $497.1 million, an increase of
$24.1 million or 5.1%,  from $473.1  million at December 31, 1998.  Net loans at
December 31, 1998,  included  $5.0 million in term federal  funds which  matured
during the second quarter of 1999. Adjusting for the matured term federal funds,
net loans  increased  $29.1 million at June 30, 1999 as compared to December 31,
1998.

     The  Company's  most liquid  assets are cash and due from banks and federal
funds sold. At June 30, 1999, the total of such assets amounted to $21.7 million
or 3.1% of total  assets,  compared to $43.3  million or 6.3% of total assets at
year-end  1998.  The decline was primarily due to a decrease of $20.4 million in
federal funds sold, which were used to fund the growth in loans and investments.

     Another  significant  liquidity source is the Company's  available-for-sale
("AFS") securities.  At June 30, 1999, AFS securities amounted to $106.2 million
or 69.1% of  total  securities,  compared  to  $95.8  million  or 63.9% of total
securities at year-end 1998.

     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  Company's
subsidiary  bank also has a $57.8 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.

<PAGE>

Preparation for the Year 2000
     Many of the world's  computers and software  applications  were designed to
read years in a two-digit format.  Thus, many of the world's information systems
and/or  computer  programs may not have the ability to recognize four digit date
code fields and,  accordingly,  may not have the ability to  distinguish  a year
that begins with "20"  instead of the  familiar  "19".  If not  corrected,  this
problem will render many computer  applications  incapable of interpreting dates
beyond the year 1999, which could significantly disrupt business.  This issue is
referred  to  herein  as  the  "Year  2000  issue".  A  company's   exposure  to
uncertainties  and costs associated with the Year 2000 issue depends on a number
of factors, including software, hardware, the industry in which it operates, and
other entities with which it electronically interacts.

     The Company has  developed  and  adopted a Year 2000  Compliance  Plan (the
"Plan") and has established a Year 2000 Compliance  Committee (the  "Committee")
to address the Year 2000 issues and prepare the Company for the new  millennium.
As recommended by the Federal Financial  Institutions  Examination  Council, the
Plan  encompasses  the  following  phases:  Awareness,  Assessment,  Renovation,
Validation and Implementation.  These phases will enable the Company to identify
risks,  develop an action  plan,  and  perform  adequate  testing  and  complete
certification  that its  processing  systems  will be Year  2000  ready.  In the
Awareness phase, the Company defined the Year 2000 issues,  informed  management
and staff and obtained  executive  level support and funding.  In addition,  the
Company compiled a comprehensive  list of items that may be affected by the Year
2000   compliance   issues.   Such  items   include   facilities   and   related
non-information  technology  systems  (embedded  technology),  computer systems,
hardware, and services and products provided by third parties. In the Assessment
phase,  the Company  evaluated the items  identified  in the Awareness  phase to
assess  whether the items will  function  properly with the century date change.
The items were ranked in the order that they will need to be remediated based on
their  mission  critical  nature and the  potential  impact to the Company.  The
Renovation  phase  included an  analysis of the items that are  affected by Year
2000, the identification of problem areas and the repair of non-compliant items.
The Validation  (testing) phase included a thorough  testing and verification of
systems,  databases and  utilities,  including  present and forward date testing
which   consists  of  simulating   data   conditions  in  the  Year  2000.   The
Implementation  phase  consists  of  placing  all  the  systems,  databases  and
utilities  that have been renovated  into  production.  As of June 30, 1999, the
Company has  completed all of the phases of the Plan with respect to its mission
critical  applications.  The Company expects to continue testing  date-sensitive
applications  throughout  the  remainder  of the year.  A small  number of tasks
remain that are not  considered  mission  critical,  and the Company  expects to
complete them in the third quarter of 1999.

     The  Company  continues  to survey  and  communicate  with  counterparties,
intermediaries  and  vendors  ("Third  Parties")  with  whom  it  has  important
financial and  operational  relationships  to determine the extent to which they
are  vulnerable to Year 2000 issues and what impact,  if any, their efforts will
have on the Company's business and operations. In the event that a Third Party's
system will not be year 2000  compliant,  the Company will assess the  potential
risk and, to the extent it is  feasible,  transfer  its business to an alternate
vendor.  As of June 30, 1999,  the Company has received  sufficient  information
from its Third Parties to conclude that they are in the  Renovation,  Validation
and  Implementation  phases of their respective plans.  However,  as of June 30,
1999,  the Company has not yet received  conclusive  information  from all Third
Parties  related to the  Renovation,  Validation  and  Implementation  phases to
predict the outcome of their efforts.

     There are many risks  associated  with the Year 2000 issue,  including  the
possible failure of the Company's computer and non-financial technology systems.
Such failures could have a material  adverse effect on the Company and may cause
system malfunctions, incorrect or incomplete transaction processing resulting in
the inability to reconcile  accounting books and records.  In addition,  even if
the Company  successfully  remediates its Year 2000 issues,  it can be adversely
affected by failures of Third  Parties  with which the Company has  financial or
operational  relationships to remediate their own Year 2000 issues.  The failure
of Third  Parties to remediate  their Year 2000 issues in a timely  manner could
result in a material financial risk to the Company.  Such risks include business
interruption  or  shutdown,   financial  loss,   regulatory  actions  and  legal
liability.  The Company has developed a Year 2000 specific  contingency  plan as
part of its overall Plan in an effort to mitigate Year 2000 risk.

     Based on current  information,  the Company  does not  anticipate  that the
overall  costs related to the  implementation  of the Plan to be material in any
single year. The Company  estimates that the total external cost of implementing
its Plan will amount to approximately $170 thousand. The Year 2000 costs include
all  activities  undertaken  on Year 2000 related  matters,  including,  but not
limited to, renovation, validation, third party review and contingency planning.
However, costs for compensation and benefits of the Company's internal employees
have not yet been determined. The cost of Year 2000 compliance and the estimated
date of completion of necessary  modifications  are based on the Company's  best
estimates,  which  were  derived  from  various  assumptions  of future  events,
including  the  continued   availability  of  certain  resources,   third  party
modification  plans and other factors.  However,  there can be no guarantee that
these  estimates will be achieved,  and actual  results could differ  materially
from those  anticipated.  Through the first six months of 1999,  the Company has
expended  approximately  $84  thousand on the Year 2000  project.  All Year 2000
costs are expensed in the period incurred.

<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 2.  Changes in Securities
         None

Item 3.  Defaults upon Senior Securities
         None

Item 4.  Submission of Matters to a Vote of Security Holders
         (a) The Annual Meeting of Shareholders was held on April 22, 1999.
         (b) Each of the persons named in the Proxy Statement as a nominee for
             Director was elected and the selection of Deloitte & Touche, LLP
             as the Company's independent auditors for 1999 was ratified. The
             following are the voting results on each of these matters:


                                                         Against
                                                            or
                                             For         Withheld   Abstentions
                                             ___         ________   ___________

(1)      ELECTION OF DIRECTORS:
         Anthony S. Abbate                5,592,192       55,486        0
         Anthony R. Coscia                5,591,592       56,085        0
         John J. Eccleston                5,588,787       58,891        0
         Richard A. Gilsenan              5,582,058       65,620        0
         Eleanore S. Nissley              5,591,524       56,153        0

(2)      Ratification of the selection
         of the  selection of Deloitte
         & Touche, LLP as the Company's
         independent auditors for 1999.   5,535,262       12,024      100,392


Item 5. Other Information
         None
<PAGE>

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) The Company filed a Current Report on Form 8-K, dated June 3, 1999,
             covering Item 5 - Other Events - regarding the adoption of a Stock
             Repurchase Plan to repurchase up to 10% of the Company's
             outstanding common stock.
<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: August 13, 1999