UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549

                                -----------------
                                    FORM 10-Q
                                -----------------



[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED, MARCH 31, 2001

                                       or

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM____ TO ____


                         Commission File number 1-10518


                   INTERCHANGE FINANCIAL SERVICES CORPORATION
             (Exact name of registrant as specified in its charter)

       New Jersey                                               22-2553159
--------------------------------                              --------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation  or organization)                              Identification No.)

Park 80 West/Plaza Two, Saddle Brook, NJ                         07663
-----------------------------------------                        -----
(Address of principal executive offices)                       (Zip Code)


      Registrant's telephone number, including area code: (201) 703-2265

                                      None
-------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report


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

     The number of outstanding  shares of the Registrant's  common stock, no par
value per share, as of April 30, 2001, was 6,545,378 shares.


<PAGE>
               INTERCHANGE FINANCIAL SERVICES CORPORATION


                                   INDEX


PART I            FINANCIAL INFORMATION
                                                                        Page No.
         Item 1   Financial Statements
                   Consolidated Balance Sheets as of
                   March 31, 2001 and December 31, 2000 . . . . . . .         1

                   Consolidated Statements of Income for the three months
                   ended March 31, 2001 and 2000 . . . . . . . . . .          2

                   Consolidated Statements of Changes in
                   Stockholders' Equity for the three months ended
                   March 31, 2001 and 2000 . . . . . . . . . . . . .          3

                   Consolidated Statements of Cash Flows for the
                   three months ended March 31, 2001 and 2000 . . . .         4

                   Notes to Consolidated Financial Statements . . . .         5

         Item 2    Management's Discussion and Analysis of Financial
                   Condition and Results of Operations . . . . . . ..         7

         Item 3    Quantitative and Qualitative Disclosures About Market Risk
                   (Disclosures about quantitative and qualitative market risk
                   are located in Management's Discussion and Analysis of
                   Financial Condition and Results of Operation in the section
                   on Market Risk). . . . . . . . . . . . . . . . .          14



PART II   OTHER INFORMATION

         Item 1    Legal Proceedings . . . . . . . . . . . . . . . .         18

         Item 2    Changes in Securities and Use of Proceeds.  . . .         18

         Item 3    Defaults upon Senior Securities . . . . . . . . .         18

         Item 4    Submission of Matters to a Vote of Security Holders       18

         Item 5    Other Information . . . . . . . . . . . . . . . .         18

         Item 6    Exhibits and Reports on Form 8-K . . . . . . . ..         18

                   Signatures . . . . . . . . . . . . . . .  . . . .         19




<PAGE>
<TABLE>


Interchange Financial Services Corporation
------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------------------------------
(dollars in thousands)
<CAPTION>
                                                                             March 31,   December 31,
                                                                                2001           2000
                                                                           ------------  -------------
<S>                                                                        <C>           <C>
Assets
Cash and due from banks                                                       $ 18,682       $ 22,100
Federal funds sold                                                              26,850         11,050
                                                                           ------------    ------------
Total cash and cash equivalents                                                 45,532         33,150
                                                                           ------------    ------------

Securities held to maturity at amortized cost (estimated market value
  of $44,240 and $41,400 for March 31, 2001 and December 31, 2000,
  respectively)                                                                43,604         41,042
                                                                            ------------   ------------
Securities available for sale at estimated market value (amortized cost
  of $124,280 and $119,306 for March 31, 2001 and December 31, 2000,
  respectively)                                                                126,179        120,312
                                                                           ------------    ------------

Loans                                                                          570,371        560,879
Less:  Allowance for loan and lease losses                                       6,375          6,154
                                                                            ------------   ------------
Net loans                                                                      563,996        554,725
                                                                            ------------   ------------

Premises and equipment, net                                                     11,093         11,239
Foreclosed real estate and other repossesed assets                                 260            250
Accrued interest receivable and other assets                                     8,480          9,526
                                                                            ------------   ------------
Total assets                                                                  $799,144       $770,244
                                                                            ============   ============


Liabilities
Deposits
  Non-interest bearing                                                        $114,235       $107,702
  Interest bearing                                                             585,831        561,158
                                                                            ------------   ------------
Total deposits                                                                 700,066        668,860
                                                                            ------------   ------------

Securities sold under agreements to repurchase                                  14,000         18,500
Short-term borrowings                                                           13,000         13,000
Accrued interest payable and other liabilities                                   7,890          7,900
                                                                            ------------   ------------
Total liabilities                                                              734,956        708,260
                                                                            ------------   ------------

Commitments and contingent liabilities

Stockholders' equity:
Common stock, without par value; 15,000,000 shares authorized;
  6,545,378 and 6,530,498 shares issued and outstanding at
  March 31, 2001 and December 31, 2000, respectively                             5,397          5,397
Capital surplus                                                                 21,063         21,077
Retained earnings                                                               49,183         47,735
Accumulated other comprehensive income                                           1,041            526
                                                                            ------------   ------------
                                                                                76,684         74,735
Less:  Treasury stock                                                           12,496         12,751
                                                                            ------------   ------------
Total stockholders' equity                                                      64,188         61,984
                                                                            ------------   ------------
Total liabilities and stockholders' equity                                    $799,144       $770,244
                                                                            ============   ============

--------------------------------------------------------------------------------------------------------
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>

                                                                          2001             2000
                                                                      ------------     ------------
<S>                                                                    <C>            <C>

Interest income
Interest and fees on loans                                              $ 11,685       $ 10,364
Interest on federal funds sold                                               305            100
Interest and dividends on securities
  Taxable interest income                                                  2,395          2,222
  Interest income exempt from federal income taxes                           145            159
  Dividends                                                                   72             61
                                                                      ------------     ------------
Total interest income                                                     14,602         12,906
                                                                      ------------     ------------

Interest expense
Interest on deposits                                                       6,066          4,822
Interest on securities sold under agreements to repurchase                   215            221
Interest on short-term borrowings                                            205             76
Interest on long-term borrowings                                               -            207
                                                                      ------------    ------------
Total interest expense                                                     6,486          5,326
                                                                      ------------    ------------

Net interest income                                                        8,116          7,580
Provision for loan and lease losses                                          180            300
                                                                      ------------    ------------
Net interest income after provision for loan losses                        7,936          7,280
                                                                      ------------    ------------

Non-interest income
Service fees on deposit accounts                                             598            547
Net gain on sale of securities                                                65             97
Other                                                                        561            323
                                                                      ------------    ------------
Total non-interest income                                                  1,224            967
                                                                      ------------    ------------

Non-interest expenses
Salaries and benefits                                                      3,072          2,759
Occupancy                                                                    842            740
Furniture and equipment                                                      279            282
Advertising and promotion                                                    178            295
Federal Deposit Insurance Corporation assessment                              33             32
Foreclosed real estate                                                         9              6
Other                                                                      1,273          1,300
                                                                      ------------    ------------
Total non-interest expenses                                                5,686          5,414
                                                                      ------------    ------------

Income before income taxes                                                 3,474          2,833
Income taxes                                                               1,143            943
                                                                      ------------    ------------
Net income                                                               $ 2,331        $ 1,890
                                                                      ============    ============

Basic earnings per common share                                            $0.36          $0.29
                                                                      ============    ============
Diluted earnings per common share                                          $0.36          $0.29
                                                                      ============    ============
-------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
                                       2
</TABLE>
<PAGE>

<TABLE>
Interchange Financial Services Corporation
------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Three Months Ended March 31,
------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)
(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, 2000                                            $41,741     $(675)     $5,397     $21,244    $(9,431) $58,276
Comprehensive income
  Net Income                                              1,890         1,890                                                 1,890
  Other comprehensive income, net of taxes
  Unrealized  losses on debt securities                    (257)
  Less: gains on disposition of equity 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
Issued 11,406 shares of common stock in connection with
  Executive Compensation Plan                                                                               (37)        67       30
Exercise of 4,134 option shares
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

Comprehensive income
  Net Income                                             $7,366         7,366                                                 7,366
  Other comprehensive income, net of taxes
  Unrealized gains on AFS debt securities                 1,519
                                                         -------
  Other comprehensive income                              1,519                   1,519                                       1,519
                                                         -------

Comprehensive income                                     $8,885
                                                         ========

Dividends on common stock                                              (2,447)                                               (2,447)
Exercised 12,500 option shares                                                                             (124)       214       90

                                                                     ---------- ---------- --------    --------    --------   ------
Balance at December 31, 2000                                           47,735       526       5,397      21,077    (12,751)  61,984


    Net Income                                           $2,331         2,331                                                 2,331
    Other comprehensive income, net of taxes
      Unrealized gains on AFS debt securities               515
                                                         --------
    Other comprehensive income                              515                     515                                         515
                                                         --------

Comprehensive income                                     $2,846
                                                         ========

Dividends on common stock                                                (883)                                                 (883)
Issued 14,880 shares of common stock in connection
  with Executive Compensation Plan                                                                          (14)       255      241


                                                                     ---------- ---------- ---------   --------   --------  --------
Balance at March 31, 2001                                             $49,183    $1,041      $5,397     $21,063   $(12,496) $64,188
                                                                     ========== ========== =========   ========  ========== ========


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

                                       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>
                                                                                           2001           2000
                                                                                       ------------   ------------
<S>                                                                                    <C>             <C>
Cash flows from operating activities
Net income                                                                               $ 2,331        $ 1,890
Adjustments to reconcile net income to net cash provided by operating activities
  Depreciation and amortization                                                              368            349
  Amortization of securities premiums                                                        148             91
  Accretion of securities discounts                                                          (83)           (54)
  Amortization of premiums in connection with acquisition                                     58             78
  Provision for loan losses                                                                  180            300
  Net gain on sale of securities                                                             (65)           (97)
  Net gain on sale of loans                                                                  (23)             -
Decrease (increase) in operating assets
  Accrued interest receivable                                                                307            140
  Other                                                                                      281           (357)
(Decrease) increase in operating liabilities
  Accrued interest payable                                                                   (13)           298
  Other                                                                                        3            320
                                                                                       ------------   ------------
Cash provided by operating activities                                                      3,492          2,958
                                                                                       ------------   ------------

Cash flows from investing activities
(Payments for) proceeds from
  Purchase of loans                                                                       (9,658)             -
  Net originations of loans                                                                 (354)        (4,910)
  Sale of loans                                                                              574              -
  Purchase of securities available for sale                                              (10,805)       (21,325)
  Maturities of securities available for sale                                              5,846          2,020
  Sale of securities available for sale                                                        -         17,696
  Purchase of securities held to maturity                                                 (9,367)          (523)
  Maturities of securities held to maturity                                                6,789          1,733
  Sale of securities held to maturity                                                          -          2,002
  Purchase of fixed assets                                                                  (199)          (517)
  Sale of fixed assets                                                                         -              -
                                                                                       ------------   ------------
Cash used in investing activities                                                        (17,174)        (3,824)
                                                                                       ------------   ------------

Cash flows from financing activities
Proceeds from (payments for)
  Deposits less than/in excess of withdrawals                                             31,206         32,098
  Securities sold under agreements to repurchase and other borrowings                     15,000             50
  Retirement of securities sold under agreement to repurchase and
    other borrowings                                                                     (19,500)       (13,975)
  Dividends                                                                                 (883)          (815)
  Treasury stock                                                                               -         (3,797)
  Common stock issued from treasury                                                          255            190
  Exercise of option shares                                                                  (14)            30
                                                                                       ------------   ------------
Cash provided by (used in) financing activities                                           26,064         13,781
                                                                                       ------------   ------------

Increase (Decrease) in cash and cash equivalents                                          12,382         12,915
Cash and cash equivalents, beginning of year                                              33,150         17,669
                                                                                       ------------   ------------
Cash and cash equivalents, end of period                                                 $45,532        $30,584
                                                                                       ============   ============

Supplemental disclosure of cash flow information:
Cash paid for:
  Interest                                                                                $5,761         $5,028
  Income taxes                                                                                82              3

Supplemental disclosure of non-cash investing activities:
  Loans transferred to foreclosed real estated and other
    repossessed assets                                                                        10              -
  Decrease (increase) - market valuation of securities available for sale                   (515)           318

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

                                       4
</TABLE>

<PAGE>





                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2001
                                   (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
accounting  principles generally accepted in the United States of America within
the banking  industry 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
accounting  principles generally accepted in the United States of America within
the  banking  industry  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, 2000.

     The  consolidated  financial data for the three months ended March 31, 2001
and 2000,  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>


4. New Accounting Pronouncement

     On  December  31,  2000,  the Company  adopted  SFAS 140,  "Accounting  for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
SFAS 140 requires the reclassification of certain pledged assets and disclosures
regarding  collateral for the December 31, 2000 Consolidated  Balance Sheet. The
Company's pledged assets to secured parties cannot be sold or repledged by those
parties,  therefore,  no  reclassification of pledged assets on the consolidated
balance sheet was necessary for such transactions.  Other provisions of SFAS 140
are not required to be implemented  until after March 31, 2001. The Company does
not  anticipate a  significant  impact on its  financial  position or results of
operations from the full adoption of this standard.

5. Cash Dividend

     The Company declared a cash dividend of $0.135 per share,  payable on April
13, 2001 to shareholders of record as of February 22, 2001.

                                       6

<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, 2001 and 2000, 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  statements
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  other  similar
expressions are generally intended to identify such forward-looking  statements.
Such  statements  are intended to be covered by the safe harbor  provisions  for
forward  looking  statements  contained  in such Act and we are  including  this
statement for purposes of invoking these safe harbor provisions.  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 prospects of continued loan and
deposit growth and improved credit quality.  The  forward-looking  statements in
this report involve certain  estimates or  assumptions,  known and unknown risks
and  uncertainties,  many of which are beyond the  control of the  Company,  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.

                                       7



<PAGE>
              THREE MONTHS ENDED MARCH 31, 2001 AND MARCH 31, 2000

Earnings Summary

     For the first  quarter of 2001,  the  Company  reported  net income of $2.3
million,  an increase of $441 thousand over the same period last year.  Earnings
per diluted common share increased 24.1% to $0.36 from $0.29 for the same period
in 2000, an increase of $0.07.  The earnings growth was driven largely by a $656
thousand,  or 9.0%,  increase in net interest  income after  provision  for loan
losses.  The increase in net interest  income was  attributable to the Company's
loan production,  which resulted in $49.0 million of growth in average loans. In
addition,  non-interest income increased $257 thousand,  or 26.6%, over the same
period last year, which  contributed to the increase in earnings.  The growth in
revenues was partly offset by a $272 thousand, or 5.0%, increase in non-interest
expenses, which largely reflect the costs associated with two branches opened in
the past nine months as well as the growth of Interchange  Capital Company,  LLC
("ICC"), the Bank's equipment lease financing subsidiary.

                              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 $562
thousand,  or 7.4%,  to $8.2  million  for the  quarter  ended March 31, 2001 as
compared to the same quarter of 2000. The increase in net interest income is due
primarily to the growth in interest  earning assets,  particularly  loans.  This
asset  growth was funded  predominately  by deposit  liabilities.  The growth in
earning assets  contributed  to the increase in earnings  despite an unfavorable
interest  rate  environment  leading  into this  first  quarter  that was partly
responsible  for the  compression  in the net interest  margin  ("margin").  The
margin  decreased  10 basis  points to 4.37% for the  first  quarter  of 2001 as
compared to the same quarter in 2000.

     Interest income, on a tax-equivalent  basis,  totaled $14.7 million for the
first quarter of 2001, an increase of $1.7 million, or 13.2%, as compared to the
same  quarter  in  2000.   A  $67.6   million,   or  9.9%,   growth  in  average
interest-earning  assets,  driven by a $49.0 million, or 9.5%, growth in average
loans,  was  principally  responsible  for  the  increase  in  interest  income.
Temporary  investments,  which increased  $15.2 million also  contributed to the
growth.  Further,  interest income was aided by an increase in the average yield
on  interest-earning  assets of 24 basis point to 7.83% for the first quarter of
2001 as compared to the same period in 2000.

                                       8

<PAGE>

     Interest expense totaled $6.5 million in 2001, an increase of $1.2 million,
or 21.8%,  as compared to the same period in 2000. The increase is  attributable
mostly to the growth in average  interest-bearing  liabilities  of $57.0 million
for the first  quarter of 2001 as  compared  to the first  quarter  of 2000.  An
increase in the average rates paid on  interest-bearing  liabilities of 31 basis
point to 4.27% over the prior  comparable  period was also  instrumental  to the
growth  in  interest   expense.   This   increase  in  average   rates  paid  on
interest-bearing  liabilities  can be ascribed to  unfavorable  market  interest
rates during most of 2000, which increased the Company's funding cost.

Non-interest Income

     For the quarter ended March 31, 2001,  non-interest income amounted to $1.2
million, an increase of $257 thousand,  or 26.6%, as compared to the same period
in 2000.  The growth is  attributable,  in part,  to service  fees  received  on
deposit  accounts,  which  increased  $51 thousand,  or 9.3%. In addition,  fees
collected on loans and lease  syndication  income,  which increased $69 thousand
and $19 thousand, respectively, also contributed to the advance.

Non-interest Expenses

     For the quarter  ended March 31, 2001,  non-interest  expenses  amounted to
$5.7  million,  an increase of $272  thousand,  or 5.0%, as compared to the same
period in 2000. The increase in non-interest expenses largely reflects the costs
associated with the opening of two branches in the second half of the year 2000,
which  contributed  approximately  $195 thousand to the increase in non-interest
expenses.  In addition,  approximately  $123 thousand of the expense increase is
directly  attributable to the continued growth of ICC. Advertising and promotion
expense, which decreased $117 thousand for the first quarter of 2001 as compared
to the same  quarter  in 2000  served to  offset  the  aforementioned  growth in
non-interest   expenses.   Further,  the  non-interest  expense  comparison  was
favorably impacted by a non-recurring expenditure that was incurred in the first
quarter of 2000 of $118  thousand for a legal  settlement  relating to past rent
adjustments to a branch office.

Income Taxes

     Income tax  expense  as a  percentage  of pre-tax  income was 32.9% for the
three months ended March 31, 2001 as compared to 33.3% for the first  quarter of
2000. The improvement was largely due to increased  investment in loans that are
exempt from federal income tax.

                                       9

<PAGE>

                               FINANCIAL CONDITION

     At March 31,  2001,  the  Company's  total assets were $799.1  million,  an
increase of $28.9  million,  or 3.8%,  from $770.2 million at December 31, 2000.
The growth was largely in cash and cash equivalents and loans,  which grew $12.4
million  and $9.5  million,  respectively,  for March 31,  2001 as  compared  to
December 31, 2000. In addition,  the investment  portfolio grew $8.4 million for
March 31, 2001 as compared to December  31,  2000.  The asset  growth was funded
principally  by growth in deposit  liabilities,  which  occurred  mostly in time
deposits and non-interest bearing demand deposits.

Cash and Cash Equivalents

     At March 31, 2001,  cash and cash  equivalents  increased  $12.4 million to
$45.5  million as compared to December 31,  2000.  This is largely 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.

Securities Portfolio

     Under Statement of Financial  Accounting  Standards No. 115 "Accounting for
Certain  Investments in Debt and Equity  Securities" ("SFAS 115"), each security
is classified as either trading, available for sale ("AFS"), or held to maturity
("HTM").  The  Company  has no  securities  held in a trading  account.  The AFS
securities are recorded at their fair value.  The after-tax  difference  between
amortized  cost and fair value of AFS  securities  is recorded  as  "accumulated
other comprehensive  income" in the equity section of the balance sheet. The tax
impact of such  adjustment  is  recorded as an  adjustment  to the amount of the
deferred tax liability.  The HTM securities are carried at cost adjusted for the
amortization of premiums and accretion of discounts,  which are recognized as an
adjustment to income. Under SFAS No. 115, HTM securities,  with some exceptions,
may only be sold within three months of maturity.

     The Company uses its securities portfolio to ensure liquidity for cash flow
requirements,  to manage  interest rate risk, to provide a source of income,  to
ensure  collateral  is available for pledging  requirements  and to manage asset
quality diversification. At March 31, 2001, investment securities totaled $169.8
million and represented 21.2% of total assets, as compared to $161.4 million and
20.9%, respectively, at December 31, 2000. AFS securities comprised 74.3% of the
total  securities  portfolio  at March 31, 2001 as compared to 74.6% at December
31, 2000. During

                                       10
<PAGE>



the first quarter of 2001, the Company  recognized $65 thousand in security
gains from the call of two securities before their maturity.  The securities had
a book value of approximately $4.8 million.


<TABLE>
     The following table reflects the composition of the securities portfolio: (dollars in thousands)
<CAPTION>
                                                            -----------------------------------------------------------------
                                                                                     March 31, 2001
                                                            -----------------------------------------------------------------
                                                                                  Gross           Gross         Estimated
                                                               Amortized       Unrealized       Unrealized        Market
                                                                 Cost             Gains           Losses          Value
                                                            ----------------  --------------   -------------  ---------------
<S>                                                         <C>               <C>              <C>            <C>

Securities held to maturity
  Mortgage-backed securities                                      $17,918            $148             $21         $ 18,045
  Obligations of U.S. agencies                                     13,228             255               -           13,483
  Obligations of states & political subdivisions                   12,082             269              16           12,335
  Other debt securities                                               376               1                              377
                                                            ----------------  --------------   -------------  ---------------
                                                                   43,604             673              37           44,240
                                                            ----------------  --------------   -------------  ---------------

Securities available for sale
  Obligations of U.S. Treasury                                      1,997              38               -            2,035
  Mortgage-backed securities                                       83,657           1,154              21           84,790
  Obligations of U.S. agencies                                     19,940             292               -           20,232
  Obligations of states & political subdivisions                   14,110             421               -           14,531
  Other debt securities                                               578              15               -              593
  Equity securities                                                 3,998               -               -            3,998
                                                            ----------------  --------------   -------------  ---------------
                                                                  124,280           1,920              21          126,179
                                                            ----------------  --------------   -------------  ---------------

    Total securities                                             $167,884          $2,593             $58         $170,419
                                                            ================  ==============   =============  ===============


                                                            -----------------------------------------------------------------
                                                                                   December 31, 2000
                                                            -----------------------------------------------------------------
                                                                                  Gross           Gross         Estimated
                                                               Amortized       Unrealized       Unrealized        Market
                                                                 Cost             Gains           Losses          Value
                                                            ----------------  --------------   -------------  ---------------
Securities held to maturity
  Mortgage-backed securities                                     $ 12,646            $ 96            $ 48         $ 12,694
  Obligations of U.S. agencies                                     15,161             244               8           15,397
  Obligations of states & political subdivisions                   12,813             137              64           12,886
  Other debt securities                                               422               1               -              423
                                                            ----------------  --------------   -------------  ---------------

                                                                   41,042             478             120           41,400
                                                            ----------------  --------------   -------------  ---------------

Securities available for sale
  Obligations of U.S. Treasury                                      1,996              26               -            2,022
  Mortgage-backed securities                                       79,242             758             155           79,845
  Obligations of U.S. agencies                                     19,924             194               4           20,114
  Obligations of states & political subdivisions                   13,562             237              58           13,741
  Other debt securities                                               612               8               -              620
  Equity securities                                                 3,970               -               -            3,970
                                                            ----------------  --------------   -------------  ---------------
                                                                  119,306           1,223             217          120,312
                                                            ----------------  --------------   -------------  ---------------

    Total securities                                             $160,348          $1,701            $337         $161,712
                                                            ================  ==============   =============  ===============




                                       11
</TABLE>

<PAGE>
<TABLE>
     At March  31,  2001,  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                 $ 10,599      $ 10,645           $ 23,231        $ 23,340
After 1 but within 5 years      11,730        12,026             51,136          52,111
After 5 but within 10 years     10,140        10,310             12,085          12,310
After 10 years                  11,135        11,259             33,830          34,420
Equity securities                    -             -              3,998           3,998
                              -----------------------          -------------------------
                      Total   $ 43,604      $ 44,240           $124,280       $ 126,179
                              =======================          =========================
</TABLE>
Loans

     Total loans  amounted to $570.4  million at March 31, 2001,  an increase of
$9.5  million  from  $560.9  million  at  December  31,  2000.  The  growth  was
predominately in commercial mortgage loans and lease financing,  which increased
$10.8 million and $10.6 million,  respectively,  while  commercial and financial
loans decreased $6.3 million. During the first three months of 2001, the Company
purchased  $9.6 million of consumer auto leases.  These leases were subjected to
the Company's  independent  credit  analysis prior to purchase and were, in some
cases, purchased with a limited buy-back obligation or other financial assurance
from the sellers.
<TABLE>
     The  following  table  reflects  the  composition  of the  loan  and  lease
portfolio: (dollars in thousands)
<CAPTION>
                                                  --------------------   -------------------
                                                         March 31,            December 31,
                                                           2001                   2000
                                                  --------------------   -------------------
<S>                                              <C>                    <C>
Amount of loans by type (dollars in thousands)
  Real estate-mortgage
      Commercial                                         $192,482              $181,722
      1-4 family residential
            First liens                                   108,074               110,369
            Junior liens                                   10,396                11,195
            Home equity                                   140,142               142,610
  Commercial and financial                                 70,372                76,702
  Real estate-construction                                  3,827                 3,755
  Installment                                               5,791                 5,803
  Lease financing                                          39,287                28,723
                                                  --------------------   -------------------
            Total                                        $570,371              $560,879
                                                  ====================   ===================

                                       12
</TABLE>
<PAGE>
Deposits

     Deposits,    which   include    non-interest-bearing    demand    deposits,
interest-bearing  demand deposits,  savings and time deposits,  are an essential
and  cost-effective  funding source for the Company.  The Company attributes its
success in growing  deposits to the emphasis it places on building core customer
relationships.

     At March 31, 2001,  total deposits  increased  $31.2  million,  or 4.7%, to
$700.1  million  from $668.9  million at December  31,  2000.  The growth in the
deposit base occurred  mostly in time deposits and  non-interest-bearing  demand
deposits, which increased $19.6 million and $6.5 million, respectively, at March
31, 2001 as compared to December  31,  2000.  For the first  quarter  2001,  the
Company's  overall yield on deposits  increased by 41 basis points from the same
period last year. The increase is attributed  predominately to changes in market
interest rates and a change in the composition of deposit liabilities.

     Time deposits  amounted to $228.1 million at March 31, 2001, an increase of
$19.6 million, or 9.4%, from December 31, 2000. Time deposits  represented 32.6%
of total  deposits at March 31, 2001  compared  to 31.2% at December  31,  2000.
Other interest-bearing  deposits,  which include  interest-bearing demand, money
market and savings accounts, comprise the largest segment of the Company's total
deposits.  At March 31,  2001,  such  deposits  amounted to $357.8  million,  an
increase of $5.2 million, or 1.5%, from December 31, 2000.  Non-interest bearing
demand,  which  increased $6.5 million,  or 6.1%, to $114.2 million at March 31,
2001 as compared to December 31, 2000  contributed to the growth in deposits and
had a positive impact on the overall yield on deposit liabilities.

Nonperforming Assets

     Nonperforming assets are comprised of nonaccrual loans,  restructured loans
and foreclosed real estate. At March 31, 2001,  nonperforming assets amounted to
$2.0  million,  an increase of $259  thousand,  or 15.0%,  from $1.7  million at
December  31,  2000.  The  increase  in  nonperforming  assets  is due to a $423
thousand increase in nonaccrual leases in the Company's  equipment lease finance
portfolio.  The ratio of nonperforming assets to total loans and foreclosed real
estate increased to 0.35% at March 31, 2001 from 0.31% at December 31, 2000.

Provision for Loan and Lease Losses and Loan Loss Experience

     The   provision   for  loan  and  lease  losses   represents   management's
determination  of the amount necessary to bring the allowance for loan and lease
losses  ("ALLL") to a level that  management  considers  adequate to reflect the
risk of future losses inherent in the Company's loan portfolio as of the balance
sheet date. In its evaluation of the adequacy of the ALLL, management

                                       13

<PAGE>
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 ALLL is  necessarily  subjective
and  affected by changes in external  conditions.  Accordingly,  there can be no
assurance  that existing  levels of the ALLL will  ultimately  prove adequate to
cover actual loan losses.

     The ALLL was $6.4 million at March 31,  2001,  and $6.2 million at December
31, 2000,  representing 369.5% and 416.9% of nonperforming loans at those dates,
respectively. In the first quarter of 2001 and 2000, the Company's provision for
loan and lease losses was $180 thousand and $300 thousand, respectively.

Market Risk

     The Company's primary exposure to market risk arises from changes in market
interest rates  ("interest rate risk").  The Company's  profitability 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  regular  basis  by the  Asset/Liability
Committee and the Board of Directors.  Tools used by management to evaluate risk
include an  asset/liability  simulation  model.  At March 31, 2001,  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,  the results did not  materially  change from  December 31, 2000. At
March 31, 2001, the Company was within policy limits established by the Board of
Directors  for  changes in net  interest  income and  future  economic  value of
equity.

     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 2001.

     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 degree

                                       14

<PAGE>
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  Company 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.

Capital Adequacy

     The  Company is subject to  capital  adequacy  requirements  imposed by the
Board of Governors of the Federal  Reserve System (the "Federal  Reserve");  and
the Bank is subject  to similar  capital  adequacy  requirements  imposed by the
Federal Deposit Insurance  Corporation (the "FDIC"). The Federal Reserve and the
FDIC have adopted  risk-based  capital  requirements  for assessing bank holding
company and bank capital adequacy.  These standards define capital and establish
minimum  capital  requirements  in  relation  to assets  and  off-balance  sheet
exposure,  adjusted for credit risk. The risk-based capital standards  currently
in effect are designed to make regulatory capital requirements more sensitive to
differences in risk profiles among bank holding  companies and banks, to account
for off-balance sheet exposure and to minimize  disincentives for holding liquid
assets.   Assets  and  off-balance  sheet  items  are  assigned  to  broad  risk
categories,  each with appropriate  relative risk weights. The resulting capital
ratios  represent  capital as a  percentage  of total  risk-weighted  assets and
off-balance sheet items.

     A banking  organization's total qualifying capital includes two components:
core capital (Tier 1 capital) and supplementary  capital (Tier 2 capital).  Core
capital,  which must comprise at least half of total  capital,  includes  common
shareholders'  equity,  qualifying  perpetual  preferred stock,  trust preferred
securities  (subject  to  certain  limitations)  and  minority  interests,  less
goodwill.  Supplementary capital includes the allowance for loan losses (subject
to  certain  limitations),other   perpetual  preferred  stock,  trust  preferred
securities,  certain other capital instruments and term subordinated debt. Total
capital is the sum of core and supplementary capital.

     At March 31,  2001,  the  minimum  risk-based  capital  requirements  to be
considered  adequately  capitalized  were 4% for Tier 1 capital and 8% for total
capital.

     Federal banking regulators have also adopted leverage capital guidelines to
supplement the risk-based measures. The leverage ratio is determined by dividing
Tier 1 capital as  defined  under the  risk-based  guidelines  by average  total
assets (non risk-adjusted) for the preceding quarter. At

                                       15
<PAGE>
March 21, 2001,  the minimum  leverage  ratio  requirement to be considered
adequately capitalized was 4%.
<TABLE>
     The capital  levels of the Company and the Bank at March 31, 2001,  and the
two highest capital adequacy levels recognized under the guidelines  established
by the Federal  banking  agencies  are  included  in the  following  table.  The
Company's  and the Bank's  ratios all exceeded the  well-capitalized  guidelines
shown in the table.
<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, 2001:
  Total Capital (to Risk Weighted Assets):
   The Company                                       $69,582        12.96 %        $42,947        8.00 %       $53,683       10.00 %
   The Bank                                           68,875        12.87           42,809        8.00          53,512       10.00
  Tier 1 Capital (to Risk Weighted Assets):
   The Company                                        63,208        11.77           21,473        4.00          32,210        6.00
   The Bank                                           62,501        11.68           21,405        4.00          32,107        6.00
  Tier 1 Capital (to Average Assets):
   The Company                                        63,208         8.04           31,458        4.00             N/A         N/A
   The Bank                                           62,501         7.99           31,287        4.00          39,109        5.00

As of December 31, 2000:
  Total Capital (to Risk Weighted Assets):
   The Company                                       $67,632        12.92 %        $41,864        8.00 %       $52,331       10.00 %
   The Bank                                           67,165        12.83           41,865        8.00          52,331       10.00
  Tier 1 Capital (to Risk Weighted Assets):
    The Company                                       61,478        11.75           20,932        4.00          31,398        6.00
    The Bank                                          61,011        11.66           20,932        4.00          31,398        6.00
  Tier 1 Capital (to Average Assets):
    The Company                                       61,478         8.02           30,656        4.00             N/A         N/A
    The Bank                                          61,011         7.99           30,556        4.00          38,196        5.00

</TABLE>
Liquidity

     Liquidity  is the  ability  to  provide  sufficient  resources  to meet all
financial current  obligations and finance prospective  business  opportunities.
The Company's  liquidity  position over any given period of time is a product of
its operating, financing and investing activities. The extent of such activities
is 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, 2001,  total deposits  amounted to $700.1  million,  an increase of
$31.2  million,  or 4.7%,  from  December  31, 2000.  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

                                       16
<PAGE>
repurchase  ("REPOS").  At March 31, 2001, advances from the FHLB and REPOS
amounted to $13.0 million and $14.0 million,  respectively, as compared to $13.0
million and $18.5 million, respectively, at December 31, 2000.

     In  2001,  despite  heightened   competition  for  loans,  loan  production
continued to be the Company's principal  investing activity.  Net loans at March
31, 2001 amounted to $564.0 million,  an increase of $9.3 million, or 1.7%, from
$554.7 million at December 31, 2000.

     The  Company's  most liquid  assets are cash and due from banks and federal
funds  sold.  At March 31,  2001,  the total of such  assets  amounted  to $45.5
million, or 5.7%, of total assets,  compared to $33.1 million, or 4.3%, of total
assets at December 31, 2000. The increase in cash and cash  equivalents  was due
largely to deposit  growth,  which  produced funds that were placed in temporary
investments pending investment in loans and securities.

     Another  significant  liquidity source is the Company's AFS securities.  At
March 31, 2001, AFS securities  amounted to $126.2  million,  or 74.3%, of total
securities,  compared  to $120.3  million,  or  74.6%,  of total  securities  at
December 31, 2000.

     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 current funding requirements.












                                       17
<PAGE>

                           PART II - OTHER INFORMATION

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

Item 2.  Change in Securities and Use of Proceeds
         None

Item 3.  Defaults Upon Senior Securities
         None

Item 4.  Submission of Matters to a Vote of Security Holders
         None

Item 5.  Other Information
         None

Item 6.  Exhibits and Reports on Form 8-K
         (a) The following exhibits are furnished herewith:
             Exhibit.
            ---------
             11  Statement re computation of per share earnings

         (b) Reports on Form 8-K

             During the quarter  ended March 31, 2001,  the Company  filed the
             following Current Report of Form 8-K:

                 Form 8-K filed January 16, 2001 announcing thatInterchange
                 Financial Services Corporation's common stock would begin
                 trading on the NASDAQ National Market System.











                                       18

<PAGE>


                                   SIGNATURES

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

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 15, 2001

















                                       19
<PAGE>
<TABLE>
Exhibit 11. Statement re computation of per share earnings
(dollars in thousands, except per share amounts)
(unaudited)
<CAPTION>
                                  --------------------------------------------------------------------------------
                                                                Three Months Ended,
                                  --------------------------------------------------------------------------------
                                              March 31, 2001                           March 31, 2000
                                  ---------------------------------------   --------------------------------------
                                                 Weighted        Per                      Weighted        Per
                                                  Average       Share                      Average       Share
                                    Income        Shares       Amount         Income       Shares       Amount

                                  ------------ --------------------------   ----------- --------------------------
<S>                              <C>          <C>          <C>            <C>          <C>           <C>
Basic Earnings per
  Common Share
Income available to
  common shareholders              $2,331          6,540       $0.36        $1,890          6,583       $0.29
                                                            ==========                                =========

Effect of Dilutive Shares
Options issued to
  management                            -             22                         -             27
                                  ---------     ----------                 --------      ----------

Diluted Earnings per
  Common Share                     $2,331          6,562       $0.36        $1,890          6,610       $0.29
                                  =========     ==========  ==========    ==========     ===========  =========




















                                       20

</TABLE>