SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

                   Annual Report Pursuant to Section 13 of the
                   Securities Exchange Act of 1934, as amended

                   For the fiscal year ended December 31, 1999

                          Commission File No.: 0-26681


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

              United States                                22-3652847
         (State or other jurisdiction of              (I.R.S. Employer I.D. No.)
         incorporation or organization)


               130 Mountain Avenue, Springfield, New Jersey 07081
                    (Address of principal executive offices)


       Registrant's telephone number, including area code: (973) 564-9000
        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:

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

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

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

        The aggregate market value of the voting stock held by non-affiliates of
the issuer,  based upon the closing  price of its Common Stock on March 1, 2000,
as quoted on the Nasdaq SmallCap Market,  was approximately  $5,909,000.  Solely
for purposes of this  calculation,  the shares held by directors  and  executive
officers of the registrant are deemed to be shares held by affiliates.

         The number of shares of Common  Stock  outstanding  as of March 1, 2000
is: 1,980,588.

                       DOCUMENTS INCORPORATED BY REFERENCE

        Portions  of the  Annual  Report  to  Stockholders  for the  year  ended
December 31, 1999 are incorporated by reference into Part II of this Form 10-K.

        Portions  of  the  Proxy  Statement  for  the  2000  Annual  Meeting  of
Stockholders are incorporated by reference into Part III of this Form 10-K.
<PAGE>

                                      INDEX


PART I                                                                      PAGE
                                                                            ----

         Item 1.     Description of Business.................................1

         Additional Item.  Executive Officers of the Registrant..............34

         Item 2.     Properties..............................................35

         Item 3.     Legal Proceedings.......................................36

         Item 4.     Submission of Matters to a Vote of Security Holders.....36


PART II

         Item 5.     Market for Common Equity and Related Stockholders
                     Matters.................................................36

         Item 6.     Selected Financial Data.................................36

         Item 7.     Management's Discussion and Analysis of Financial
                     Condition and Results of Operations.....................36

         Item 7A.    Quantitative and Qualitative Disclosures About
                     Market Risk.............................................36

         Item 8.     Financial Statements and Supplementary Data.............36

         Item 9.     Changes in and Disagreements With Accountants
                     on Accounting and Financial Disclosure..................36

PART III

         Item 10.    Directors and Executive Officers of the Registrant......37

         Item 11.    Executive Compensation..................................37

         Item 12.    Security Ownership of Certain Beneficial Owners
                     and Management..........................................37

         Item 13.    Certain Relationships and Related Transactions..........37

PART IV

         Item 14.    Exhibits, Financial Statement Schedules and Reports
                     on Form 8-K.............................................37

SIGNATURES...................................................................39


<PAGE>
                                     PART I

Item 1.  Description of Business

General

         On July 12, 1999, Pulaski Savings Bank (the "Bank")  reorganized into a
two-tier mutual holding company  structure  pursuant to an Agreement and Plan of
Reorganization  which was  unanimously  adopted by the Board of Directors of the
Bank on  January  28,  1999  ("Plan  of  Reorganization")  and  approved  by the
shareholders  of the Bank on April 23,  1999.  Under the Plan of  Reorganization
(the  "Reorganization"),  the Bank became a wholly owned  subsidiary  of Pulaski
Bancorp,  Inc. (the "Company"),  a federally  chartered stock holding company, a
majority  of the  Common  Stock of which is now  owned by the  Pulaski  Bancorp,
M.H.C.  (the  "MHC"),   the  Bank's  parent  mutual  holding  company.   In  the
Reorganization,  each outstanding  share of Bank common stock was converted into
one share of Company  common  stock and the holders of Bank common  stock became
the  holders  of  all  of  the  outstanding  shares  of  Company  common  stock.
Accordingly,   as  a  result  of  the   Reorganization,   the  Bank's   minority
stockholders,  became  minority  stockholders  of the  Company  and  the  Bank's
majority stockholder, the MHC, became the majority stockholder of the Company.

         The Company, the Bank and the MHC are regulated by the Office of Thrift
Supervision (the "OTS").  The Bank is a federally  chartered savings bank and is
wholly owned by the Company.  The Company is a savings and loan holding  company
and is  subject  to  regulation  by  the  OTS,  the  Federal  Deposit  Insurance
Corporation  ("FDIC") and the  Securities and Exchange  Commission  (the "SEC").
Currently,  other than  investing  in various  securities,  the Company does not
directly   transact  any  material   business   other  than  through  the  Bank.
Accordingly,  the discussion  herein  addresses the operations of the Company as
they are conducted through the Bank. At December 31, 1999, the Company had total
assets  of  $236.6   million,   total  deposits  of  $169.0  million  and  total
stockholders' equity of $23.8 million.

         The Bank was  originally  organized  in 1943 as a New  Jersey-chartered
savings and loan association and, in 1995, became a federally-chartered  savings
bank. The Bank conducts business from its  administrative/branch  office located
in  Springfield,  New Jersey and its five other  branch  offices  located in the
municipalities of Bayville,  Irvington,  Milltown, Spotswood and Toms River, New
Jersey.  The Bank is a  community-oriented  savings  institution  whose business
primarily  consists of accepting  deposits from  customers  and investing  those
funds  primarily in mortgage  loans  secured by one- to  four-family  residences
located within its primary market area. To a  significantly  lesser extent,  the
Bank invests in home equity, multi-family,  commercial real estate, construction
and  development,  and  consumer  loans.  The  Bank  generally  retains  for its
portfolio all one- to four-family mortgage loans which it originates.

         The  Company's and Bank's  executive  office is located at 130 Mountain
Avenue,  Springfield,  New  Jersey  07081  and its  telephone  number  is  (973)
564-9000.

Market Area and Competition

         The Bank has been, and intends to continue to be, a  community-oriented
financial institution, offering a wide variety of financial services to meet the
needs of the communities it serves.  The Bank conducts its business  through its
administrative  and branch office located in Springfield,  New Jersey,  and five
branch  offices  located in Bayville,  Irvington,  Milltown,  Spotswood and Toms
River,  New Jersey.  The Bank's deposit  gathering base is  concentrated  in the
communities  surrounding its offices.  While its lending area extends throughout
New Jersey, most of the Bank's mortgage loans are secured by properties located

                                       1
<PAGE>
in Essex, Union, Middlesex,  Monmouth and Ocean Counties and a portion of Hudson
County consisting of the municipalities of East Newark, Kearny and Harrison, New
Jersey.

         The economy in the Bank's  primary  market area is based upon a mixture
of service  and retail  trade.  Other  employment  is  provided  by a variety of
wholesale trade, manufacturing,  federal, state and local government,  hospitals
and  utilities.  The area is also home to  commuters  working in the greater New
York City metropolitan area.

         The Bank  faces  significant  competition  both in making  loans and in
attracting  deposits.  The State of New Jersey has a high  density of  financial
institutions,  many of which are branches of significantly  larger  institutions
which  have  greater  financial  resources  than  the  Bank,  all of  which  are
competitors of the Bank to varying  degrees.  The Bank's  competition  for loans
comes  principally  from  commercial  banks,  savings  banks,  savings  and loan
associations, credit unions, mortgage banking companies and insurance companies.
Its most direct  competition for deposits has historically  come from commercial
banks,  savings banks, savings and loan associations and credit unions. The Bank
faces  additional  competition for deposits from short-term  money market funds,
other corporate and government securities funds and from other financial service
institutions such as brokerage firms and insurance companies.

Analysis of Net Interest Income

         Net interest income  represents the difference  between interest income
on interest-earning assets and interest expense on interest-bearing liabilities.
Net interest income also depends upon the relative  amounts of  interest-earning
assets and interest-bearing liabilities and the interest rates earned or paid on
them.



                                        2

<PAGE>
         Average   Balance  Sheet.   The  following  table  sets  forth  certain
information relating to the Bank for the years ended December 31, 1999, 1998 and
1997. The average yields and costs are derived by dividing  income or expense by
the average balance of interest-earning assets or interest-bearing  liabilities,
respectively,  for the periods  shown except where noted  otherwise  and reflect
annualized yields and costs. Average balances are derived from average month-end
balances.  Management does not believe that the use of average monthly  balances
instead of average  daily  balances has caused any material  differences  in the
information  presented.  The yields and costs include fees which are  considered
adjustments to yields.
<PAGE>
<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                             ---------------------------------------------------------------------------------------
                                                          1999                           1998                           1997
                                             -----------------------------    -------------------------   --------------------------
                                             Average                Yield/    Average            Yield/   Average             Yield/
                                             Balance    Interest     Cost     Balance Interest    Cost    Balance   Interest   Cost
                                             -------    --------     ----     ------- --------    ----    -------   --------   ----
                                                          (Dollars in thousands)
<S>                                          <C>        <C>          <C>     <C>       <C>        <C>     <C>      <C>         <C>
Assets:
   Interest-earning assets:
      Loans receivable ............          $117,064   $  9,188     7.85%   $100,748  $ 8,539    8.48%   $99,617  $  8,337    8.37%
      Investment securities (1)....            12,259        716     5.84      13,369      760    5.68     13,520       839    6.21
      Mortgage-backed securities...            65,326      3,832     5.87      53,588    3,219    6.01     45,573     2,974    6.53
      Other interest-earning assets (2)        11,657        655     5.62      14,991      908    6.06      9,766       552    5.65
                                             --------   --------             --------  -------            -------  --------
         Total interest-earning assets        206,306     14,391     6.98     182,696   13,426    7.35    168,476    12,702    7.54

      Noninterest-earning assets...             7,576                6.97       7,853                       6,672
                                             --------                        --------                    --------
         Total assets..............          $213,882                        $190,549                    $175,148
                                             ========                        ========                    ========

Liabilities and Stockholders' Equity:
   Interest-bearing liabilities:
      Interest-bearing deposits:
         Demand deposits...........         $  23,538   $   728      3.09    $ 16,724     496    2.97    $ 11,573       279    2.41
         Savings and club accounts.            26,432       606      2.29      25,942     585    2.26      27,127       653    2.41
         Certificates of deposit...           120,312     6,137      5.10     118,406   6,550    5.53     112,617     6,158    5.47
                                             --------   --------             --------  -------            -------  --------
            Total interest-bearing deposits   170,282     7,471      4.39     161,072   7,631    4.74     151,317   $ 7,090    4.69
      Borrowed money...............            15,268       846      5.54       2,480     159    6.41       3,565       257    7.21
                                             --------   --------             --------  -------            -------  --------
         Total interest-bearing liabilities   185,550     8,317      4.48     163,552   7,790    4.76     154,882     7,347    4.74

   Non-interest-bearing liabilities             5,125                           4,726                       1,625
         Total liabilities.........           190,675                         168,278                     156,507
   Stockholders' equity............            23,207                          22,271                      18,641
                                             --------                        --------                    --------
       Total liabilities and stockholders'
          equity....................         $213,882                        $190,549                    $175,148
                                             ========                        ========                    ========
   Net interest income/interest
      rate spread..................                    $  6,074      2.49%           $  5,636     2.59%            $  5,355    2.80%
                                                       ========      ====            ========     ====             ========    ====
   Net interest-earning assets/net yield
       on interest-earning assets...         $ 20,756                         19,144                       13,594             3.18%
                                             ========                         ======                       ======             ====
   Ratio of average interest-earning
      assets to average interest-
      interest-bearing liabilities.              1.11x                          1.12x                        1.09x
                                                 ====                           ====                         ====
</TABLE>
----------------------------
(1)  Includes  securities  available for sale and investment  securities held to
     maturity.
(2)  Includes  interest-earning  deposits in other banks,  investments  held for
     sale, Federal funds sold and FHLB-NY stock.


                                        3
<PAGE>
         Rate/Volume Analysis.  The following table presents the extent to which
changes in interest rates and changes in the volume of  interest-earning  assets
and  interest-bearing  liabilities  have affected the Bank's interest income and
interest expense during the periods  indicated.  Information is provided in each
category with respect to: (i) changes attributable to changes in volume (changes
in volume  multiplied by prior rate);  (ii) changes  attributable  to changes in
rate  (changes in rate  multiplied  by prior  volume);  and the net change.  The
changes  attributable  to the  combined  impact  of  volume  and rate  have been
allocated on a proportional basis between changes in volume and rate.

<TABLE>
<CAPTION>

                                                                     Year Ended December 31,
                                           ------------------------------------------------------------------------
                                                     1999 vs. 1998                           1998 vs. 1997
                                           --------------------------------        --------------------------------
                                              Increase/(Decrease) Due to              Increase/(Decrease) Due to
                                           --------------------------------        --------------------------------
                                           Volume        Rate         Total        Volume        Rate         Total
                                           ------        ----         -----        ------        ----         -----
                                                                         (In thousands)
<S>                                        <C>           <C>          <C>          <C>           <C>           <C>
Interest income:
   Loans receivable.................       $1,315        $(666)       $ 649        $  94         $108          $202
   Investment securities............          (65)          21          (44)          (9)         (79)          (79)
   Mortgage-backed securities.......          690          (77)         613          495         (250)          245
   Other interest-earning assets....         (191)         (62)        (253)         313           43           356
                                         ---------     --------      -------        ----       ------          ----
      Total.........................        1,749         (784)         965          893         (178)          724
                                          -------       -------      ------         ----        ------         ----

Interest expense:
   Demand deposits..................          211           21          232          143           74           217
   Savings and club accounts........           12            9           21          (28)         (40)          (68)
   Certificates of deposit..........          104         (517)        (413)         323           69           392
   Borrowed money...................          711          (24)         687          (72)         (26)          (98)
                                         --------      --------      ------       -------      -------        ------
      Total.........................        1,038         (511)         527          366           77           443
                                          -------       -------      ------        -----      -------          ----

Net change in net interest income...      $   711        $(273)       $ 438         $527        $(255)         $281
                                          =======        =====        =====         ====        ======         ====
</TABLE>
Lending Activities

         Loan  Portfolio   Composition.   The  Bank's  loan  portfolio  consists
primarily of first mortgage loans secured by one- to four-family residences.  At
December 31, 1999,  the Bank had total loans  receivable of $156.2  million,  of
which  $100.1  million were one- to  four-family,  residential  mortgage  loans,
equaling 64.1% of the Bank's total loans receivable. At such date, the remainder
of the Bank's  loan  portfolio  consisted  of: $6.6  million of second  mortgage
loans,  or 4.2% of total  loans  receivable;  $3.0  million  of equity  lines of
credit,  or 1.9%  of  total  loans  receivable;  $2.5  million  of  multi-family
residential loans, or 1.6% of total loans receivable; $7.0 million of commercial
real  estate  loans,  or  4.5% of  total  loans  receivable;  $36.9  million  of
construction  and  development  loans, or 23.6% of total loans  receivable;  and
$127,000 of consumer  loans,  or 0.1% of total loans  receivable,  consisting of
loans on deposit  accounts.  At December 31, 1999,  35.7% of the Bank's mortgage
loans had adjustable  interest rates,  most of which are indexed to the one-year
Constant Maturity Treasury ("CMT") Index.
<PAGE>
         The types of loans that the Bank may  originate  are subject to federal
and state laws and regulations.  Interest rates charged by the Bank on loans are
affected  by the demand for such  loans and the  supply of money  available  for
lending  purposes and the rates  offered by  competitors.  These factors are, in
turn, affected by, among other things, economic conditions, monetary policies of
the  federal  government,  including  the Federal  Reserve  Board  ("FRB"),  and
legislative tax policies.




                                        4

<PAGE>
         The  following  table sets  forth the  composition  of the Bank's  loan
portfolio in dollar  amounts and as a percentage  of the  portfolio at the dates
indicated.
<TABLE>
<CAPTION>
                                                                                At December 31,
                                         -------------------------------------------------------------------------------------------
                                                 1999                    1998                   1997                     1996
                                         ---------------------   ---------------------  ---------------------   --------------------
                                                      Percent                Percent                 Percent                Percent
                                           Amount    of Total     Amount     of Total     Amount     of Total    Amount     of Total
                                         ----------  ---------   ---------  ----------  ----------  ---------   -----------  -------
                                                                                         (Dollars in thousands)
<S>                                        <C>          <C>       <C>           <C>      <C>           <C>       <C>         <C>
Mortgage Loans:
  Residential:
    One- to four-family................    $100,110     64.09%    $ 78,110      67.40%   $  84,006     74.93%    $87,506     85.03%
    Multi-family.......................       2,501       1.60       2,903        2.51       2,726       2.43      2,510       2.44
    Second mortgage....................       6,576       4.21       4,831        4.17       3,798       3.39      3,164       3.07
    Home equity lines..................       3,028       1.94       2,168        1.87       1,275       1.14      1,865       1.81
  Commercial real estate...............       6,968       4.46       3,689        3.18       3,811       3.40        991       0.96
  Construction and development.........      36,901      23.62      23,898       20.62      16,408      14.63      6,757       6,57
                                         ----------    -------   ---------     -------    --------      -----  ---------     ------
      Total mortgage loans.............     156,084      99.92     115,599       99.75     112,024      99.92    102,793      99.88
                                          ---------    -------    --------     -------     -------      -----    -------      -----
Consumer Loans:
    Passbook or account................         127       0.08         286        0.25          91       0.08        124       0.12
                                         ------------ --------   -----------   -------  -----------   -------  ---------    -------
  Total loans receivable...............     156,211     100.00%    115,885      100.00%    112,115     100.00%   102,917     100.00%
                                                        ======                  ======                 ======                ======
  Less:
    Allowance for loan losses..........       1,135                  1,022                      913                  844
    Loans in process...................      19,760                 13,143                    7,823                4,599
    Deferred loan fees.................         794                    826                    1,167                1,216
                                         ------------            ------------             ---------             ---------
  Loans receivable, net................    $134,522               $100,894                 $102,212              $96,258
                                           ========               ========                 ========              =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                               -----------------------
                                                        1995
                                               -----------------------
                                                             Percent
                                                 Amount      of Total
                                               -----------  ----------
<S>                                             <C>            <C>
Mortgage Loans:
  Residential:
    One- to four-family................         $ 91,469       92.16%
    Multi-family.......................              772        0.78
    Second mortgage....................            1,810        1.82
    Home equity lines..................            1,741        1.75
  Commercial real estate...............            1,351        1.36
  Construction and development.........            1,933        1.95
                                                --------      ------
      Total mortgage loans.............           99,076       99.82
                                                --------      ------
Consumer Loans:
    Passbook or account................              178        0.18
                                                --------     -------
  Total loans receivable...............           99,254      100.00%
                                                              ======
  Less:
    Allowance for loan losses..........              846
    Loans in process...................            1,597
    Deferred loan fees.................            1,206
                                                --------
  Loans receivable, net................         $ 95,605
                                                ========

</TABLE>



                                        5

<PAGE>
         Loan  Maturity.  The following  table shows the  remaining  contractual
maturity of the Bank's loans at December  31,  1999.  The table does not include
the effect of future principal prepayments.
<TABLE>
<CAPTION>
                                                                                At December 31, 1999
                                               ------------------------------------------------------------------------------------
                                                 One- to                                              Construction
                                                 Four-      Multi-   Second      Equity   Commercial     and                   Total
                                                 Family     Family   Mortgages   Lines    Real Estate Development  Consumer    Loans
                                                 ------     ------   ---------   -----    -----------------------  --------    -----
                                                                                  (In thousands)
<S>                                            <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Amounts due:
    One year or less .......................   $     70   $   --     $     13   $   --     $   --     $ 22,146   $    127   $ 22,356
    After one year:
       More than one year to three years ...        717        147        123         53        408     14,755       --       16,203
       More than three years to five years .      1,908       --          879        148       --         --         --        2,935
       More than five years to 10 years ....     13,336        342      2,039        217      4,375       --         --       20,309
       More than 10 years to 20 years ......     20,056        788      3,522       --        2,185       --         --       26,551
       More than 20 years ..................     64,023      1,224       --        2,610       --         --         --       67,857
                                               --------   --------   --------   --------   --------   --------   --------   --------

    Total due after one year ...............    100,040      2,501      6,563      3,028      6,968     14,755       --      133,855
                                               --------   --------   --------   --------   --------   --------   --------   --------

    Total due ..............................   $100,110   $  2,501   $  6,576   $  3,028   $  6,968   $ 36,901   $    127    156,211
                                               ========   ========   ========   ========   ========   ========   ========   ========
          Less:
              Loans in process..............                                                                                  19,760
              Deferred loan fees............                                                                                     794
              Allowance for loan losses.....                                                                                   1,135
                                                                                                                             -------

       Loans receivable, net..................                                                                              $134,522
                                                                                                                            ========
</TABLE>

                                        6

<PAGE>
         The following  table sets forth at December 31, 1999, the dollar amount
of all loans  contractually  due after December 31, 2000, and whether such loans
have fixed or adjustable interest rates.
<TABLE>
<CAPTION>
                                                  Due after December 31, 2000
                                            ------------------------------------
                                             Fixed       Adjustable       Total
                                            --------      --------     ---------
                                                      (In thousands)
<S>                                         <C>           <C>           <C>
Mortgage loans:
   One- to four-family ...............      $ 87,085      $ 12,955      $100,040
   Multi-family ......................           974         1,527         2,501
   Second mortgages ..................         6,563          --           6,563
   Equity lines ......................          --           3,028         3,028
   Commercial real estate ............         4,080         2,888         6,968
   Construction and development ......          --          14,755        14,755
                                            --------      --------      --------
     Total mortgage loans ............        98,702        35,153       133,855
Consumer loans .......................          --            --            --
                                            --------      --------      --------
       Total loans ...................      $ 98,702      $ 35,153      $133,855
                                            ========      ========      ========
</TABLE>
         Origination,  Sale and Servicing of Loans.  The Bank's mortgage lending
activities  are  conducted  primarily  by its loan  personnel  operating  at its
administrative  and  branch  office  in  Springfield,   New  Jersey.  All  loans
originated  by the  Bank,  either  through  internal  sources  or  through  loan
correspondents  are underwritten by the Bank pursuant to the Bank's policies and
procedures.  Although  the Bank is not an  approved  FNMA or FHLMC  lender,  the
Bank's  internal  underwriting  policies,  guidelines and procedures are modeled
after those of FNMA and FHLMC.  The Bank  originates  both  adjustable-rate  and
fixed-rate  loans.  The Bank's  ability to originate  fixed- or  adjustable-rate
loans is dependent upon the relative  customer  demand for such loans,  which is
affected by the current and expected  future level of interest  rates. It is the
general policy of the Bank to retain all loans originated in its portfolio.

         During the years ended December 31, 1999 and 1998, the Bank  originated
$32.3 million and $10.6 million, respectively, of fixed-rate and adjustable-rate
one- to four-family  loans,  all of which were retained by the Bank.  Based upon
the Bank's investment needs and market opportunities, the Bank has, on occasion,
purchased loans or participated in loans,  primarily multi-family and commercial
real estate  mortgage  loans.  During the year ended December 31, 1999, the Bank
purchased or acquired new  participations  in the amount of $12.2  million.  The
Bank has purchased loans from  correspondent  financial  institutions which were
underwritten  pursuant  to the  Bank's  policies,  and  closed  in the  name  of
correspondent  financial  institution  but  assigned  to the  Bank  for  its own
portfolio.

                                        7

<PAGE>
         The following table sets forth the Bank's loan originations,  purchases
and  principal  repayments  for the  periods  indicated.  The Bank sold no loans
during the periods indicated.

<TABLE>
<CAPTION>
                                                     Years Ended December 31,
                                              ----------------------------------
                                                1999        1998          1997
                                              --------     ---------    --------
                                                       (In thousands)
<S>                                           <C>          <C>          <C>
Beginning balance .......................     $115,885     $112,115     $102,917
   Loans originated(1):
    Mortgage loans:
       One- to four-family ..............       32,332       10,647        7,998
       Multi-family .....................          373          216          248
       Second mortgages .................        2,834        2,207        1,427
       Equity lines .....................        2,835        3,300          899
       Commercial real estate ...........        4,093          625        2,887
       Construction and development .....       19,328       15,078       12,900
                                              --------     --------     --------
           Total mortgage loans .........       61,795       32,073       26,359
    Consumer loans:
       Passbook loans ...................           78          360          142
                                              --------     --------     --------
    Total loans originated ..............       61,873       32,433       26,501
                                              --------     --------     --------
           Total ........................      177,758      144,548      129,418

Less:
    Principal repayments and other, net .       21,514       28,535       17,236
    Transfer of mortgage loans to REO ...           33          128           67
                                              --------     --------     --------
Ending balance ..........................     $156,211     $115,885     $112,115
                                              ========     ========     ========
</TABLE>
--------

(1)    Includes loan participations purchased.

         One- to Four-Family  Mortgage Lending.  The Bank offers both fixed-rate
and  adjustable-rate  mortgage  loans  ("ARM")  secured  by one- to  four-family
residences  with maturities of up to 30 years.  Substantially  all of such loans
are  secured by  property  located  in the  Bank's  primary  market  area.  Loan
originations   are   generally   obtained   from  the   Bank's   in-house   loan
representatives,  correspondent  banking relationships and wholesale brokers and
their contacts with the local real estate industry,  existing or past customers,
and members of the local communities.  At December 31, 1999, one- to four-family
mortgage  loans  totalled  $109.7  million,  or 70.2% of the Bank's  total loans
receivable,  which includes $6.6 million of fixed rate second mortgage loans and
$3.0  million of  adjustable  rate home  equity  lines of credit.  Of the Bank's
mortgage loans secured by one- to  four-family  residences,  $93.6  million,  or
85.3%, were fixed-rate loans.
<PAGE>
         The Bank  originates  all  mortgage  loans for its own  portfolio.  The
Bank's  fixed-rate  mortgage  loans  currently  are made for terms from 10 to 30
years.  The Bank also offers ARM loan programs with interest  rates which adjust
every one or three years.  The Bank's ARM loans  generally  provide for periodic
(not  more than 2%) and  overall  (not  more  than 6%) caps on the  increase  or
decrease in the interest  rate at any  adjustment  date and over the life of the
loan.  The interest rate  adjustment on these loans is indexed to the applicable
one- or  three-year  U.S.  Treasury  CMT Index with a repricing  margin of 2.75%
above the index.

                                        8

<PAGE>
The Bank  also  offers a  one-year  ARM  program  that can be  converted  into a
fixed-rate  loan one time during the second through fifth years of the loan. The
Bank charges a fee if such conversion feature is exercised.

         The  Bank's  policy is to  originate  one- to  four-family  residential
mortgage  loans in amounts up to 80% of the lower of the appraised  value or the
selling  price of the property  securing the loan and up to 90% of the appraised
value or selling  price if private  mortgage  insurance  is  obtained,  with the
exception of certain loans  secured by  condominium  units (which  require a 65%
loan-to-value  ("LTV")  ratio)  and  loans  originated  pursuant  to the  Bank's
Affordable Housing Program and first-time  homebuyers program (which allow for a
95% LTV  ratio).  Mortgage  loans  originated  by the Bank  include  due-on-sale
clauses  which  provide  the Bank  with the  contractual  right to deem the loan
immediately due and payable in the event the borrower transfers ownership of the
property without the Bank's consent.  Due-on-sale clauses are an important means
of adjusting the rates on the Bank's fixed-rate  mortgage loan portfolio and the
Bank has generally exercised its rights under these clauses.

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

         In an effort to provide  financing for moderate  income and  first-time
home buyers,  the Bank offers its own Affordable  Housing Program and first-time
home buyers program.  These programs offer single- family  residential  mortgage
loans to  qualified  individuals.  These loans are  offered  with fixed rates of
interest and with terms of up to 30 years.  Such loans must be secured by a one-
to four-family  owner-occupied  unit.  These loans are originated using modified
underwriting  guidelines  with reduced  interest rates and loan fees. Such loans
are  originated  in amounts up to 95% of the lower of the  property's  appraised
value or the sale price.  Private mortgage insurance is normally required.  With
respect to loans  originated  under these  programs,  because the Bank typically
charges a lower rate of interest,  lower mortgage origination fees or a discount
on closing costs on such loan programs, the Bank expects to achieve a lower rate
of return on such loans, as compared to other residential mortgage loans.

         Equity  Lines of Credit  and Second  Mortgage  Loans.  The Bank  offers
equity lines of credit and second  mortgage  loans in amounts of up to $300,000.
The  Bank's  second  mortgage  loans  are  secured  by  second  liens on one- to
four-family  residences  located in the Bank's primary market area.  These loans
are typically shorter term and generally have higher interest rates than one- to
four-family first mortgage loans.  Generally,  the maximum combined LTV ratio on
second  mortgage  loans  is 80%;  however,  with  respect  to loans  secured  by
condominium  units, the Bank will allow a combined LTV ratio of only 65%. Second
mortgage loans are generally  offered with terms of up to 15 years and only with
fixed-rates  of interest  which rates will vary  depending  on the  amortization
period chosen by the  borrowers.  At December 31, 1999,  second  mortgage  loans
secured by one- to four-family  residential properties totalled $6.6 million, or
4.2% of the Bank's total loans receivable. Equity lines of credit generally have
adjustable-rates   of   interest   which   adjust  on  a  monthly   basis.   The
adjustable-rate  of interest  charged on such loans is indexed to the prime rate

<PAGE>

as  published  in The Wall Street  Journal.  These loans  generally  have an 18%
lifetime  limit on interest  rates.  At  December  31,  1999,  the Bank had $7.1
million of equity  lines of credit,  of which $3.0  million  was drawn upon such
loans at such date.  The  underwriting  standards  employed by the Bank for home
equity loans include a determination  of the  applicant's  credit history and an
assessment of the applicant's ability to meet existing  obligations and payments
on the proposed  loan and the value of the  collateral  securing  the loan.  The
stability of the applicant's monthly income may be determined by verification of
gross monthly income from

                                        9
<PAGE>
primary  employment and,  additionally,  from any verifiable  secondary  income.
Creditworthiness  of the  applicant and value of  underlying  collateral  are of
primary considerations.

         Multi-Family  and  Commercial  Real  Estate  Lending.   The  Bank  also
originates  multi-family  and  commercial  real estate loans that are  generally
secured  by five or more  unit  apartment  buildings  and  properties  used  for
business purposes such as small office buildings or retail facilities located in
the Bank's  primary  market area. The Bank's  multi-family  and commercial  real
estate  underwriting  policy provides that such real estate loans may be made in
amounts  up  to  75%  of  the  appraised  value  of  the  property.  The  Bank's
multi-family  and  commercial  real estate  lending is limited by the regulatory
loans-to-one  borrower  limit which at December 31, 1999 was $3.6  million.  The
Bank  currently  originates  multi-family  and  commercial  real  estate  loans,
generally with terms of up to 25 years.  The Bank's  multi-family and commercial
real  estate  loans have fixed and  adjustable  rates of  interest  that  adjust
periodically  and are indexed to either the prime rate as  published in The Wall
Street Journal or the U.S. Treasury Bill. In reaching its decision on whether to
make a multi-family  or commercial  real estate loan, the Bank considers the net
operating income of the property,  the borrower's expertise,  credit history and
profitability and the value of the underlying  property.  The Bank has generally
required that the properties  securing these real estate loans have debt service
coverage  ratios (the ratio of earnings  before debt service to debt service) of
at least 120%. In addition,  environmental  impact  surveys are required for all
multi-family and commercial real estate loans.  Generally,  all multi-family and
commercial  real  estate  loans  made to  corporations,  partnerships  and other
business entities require personal guarantees by the principals. On an exception
basis, the Bank may not require a personal  guarantee on such loans depending on
the  creditworthiness  of the  borrower  and the amount of the down  payment and
other mitigating  circumstances.  In order to meet diversification  needs in its
portfolio and to take  advantage of market  opportunities,  the Bank will,  from
time to time,  participate in loans  originated and serviced by other  financial
institutions.  When  determining  whether to participate in such loans, the Bank
will underwrite its  participation  interest  according to its own  underwriting
standards.  The Bank's multi- family real estate loan  portfolio at December 31,
1999 was  $2.5  million,  or 1.6%,  of total  loans  receivable  and the  Bank's
commercial real estate loan portfolio at such date was $7.0 million,  or 4.5% of
total loans receivable.  The largest multi-family or commercial real estate loan
in the Bank's  portfolio  at  December  31, 1999 was a $1.8  million  loan on an
office building located in Springfield, New Jersey.

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

         Construction and Development Lending. The Bank originates  construction
and  development  loans  exclusively  for the development of one- to four-family
residences  and  multi-family  real  estate  properties.  Such  loans  are  made
principally to individuals  building their primary residence and to licensed and
experienced  developers  known to the Bank in its  primary  market  area for the
construction of single and  multi-family  developments.  The Bank generally does
not originate loans secured by undeveloped  land.  Construction  and development

<PAGE>

loans are  originated in amounts up to 80% of the lesser of the appraised  value
of the property,  as improved,  or the sales price.  Such loans are offered with
one to two year terms and  adjustable  interest  rates which adjust  monthly and
float at margins which are generally 1% to 2% above the Citibank, New York prime
rate.  Proceeds of construction and development loans are dispersed as phases of
the  construction  are completed.  Generally,  if the borrower is a corporation,
partnership or other business

                                       10
<PAGE>
entity,  personal guarantees by the principals are required.  The Bank's largest
construction  and  development  loan at December 31, 1999 was a performing  loan
with a gross loan amount of $3.1 million with a carrying balance of $2.9 million
secured by an 18 unit residential development tract located in Chester Township,
Morris County,  New Jersey.  At December 31, 1999, the Bank had $36.9 million of
construction  and development  loans which amounted to 23.6% of the Bank's total
loans receivable.

         Construction  and  development  financing  is generally  considered  to
involve a higher  degree of credit risk than  long-term  financing  on improved,
owner-occupied  real estate.  Risk of loss on a  construction  loan is dependent
largely upon the  accuracy of the initial  estimate of the  property's  value at
completion  of  construction  or  development  compared  to the  estimated  cost
(including  interest)  of  construction.  If the  estimate of value proves to be
inaccurate, the Bank may be confronted with a project, when completed,  having a
value which is insufficient to assure full repayment.

         Consumer  Lending.  Consumer  loans at December  31,  1999  amounted to
$127,000, or 0.08% of the Bank's total loans receivable, and consisted solely of
passbook or account  loans.  Such loans are  generally  originated in the Bank's
primary market area and generally are secured by deposit accounts.

         Loan  Approval  Procedures  and  Authority.   The  Board  of  Directors
establishes the lending  policies and loan approval limits of the Bank. With the
exception of equity  lines of credit,  second  mortgage  and  consumer  loans in
amounts which do not exceed  $75,000,  all loans  originated by the Bank require
the approval of the Board of Directors.  Equity lines of credit, second mortgage
and consumer  loans in amounts up to $75,000 may be approved by the Bank's Chief
Executive Officer, Chief Lending Officer or Senior Lending Officer.  Pursuant to
OTS  regulations,  loans  to one  borrower  cannot  exceed  15%  of  the  Bank's
unimpaired  capital and  surplus.  The Bank will not make loans to one  borrower
that are in excess of the regulatory limits.

Delinquent Loans, Classified Assets and Real Estate Owned

         Delinquencies  and Classified  Assets.  Reports  listing all delinquent
loans are  generated and reviewed by management on a monthly basis and the loans
delinquent in excess of 90 days,  special mention loans and all REO are reported
to the Board of Directors for their  review.  The  procedures  taken by the Bank
with respect to delinquencies  vary depending on the nature of the loan,  period
and cause of delinquency and whether the borrower is habitually delinquent. When
a borrower  fails to make a required  payment on a loan, the Bank takes a number
of steps to have the  borrower  cure the  delinquency  and  restore  the loan to
current  status.  The Bank  generally  sends the  borrower  a written  notice of
non-payment  after the loan is first delinquent.  The Bank's guidelines  provide
that  telephone,  written  correspondence  and/or  face-to-face  contact will be
attempted  to  ascertain  the  reasons  for  delinquency  and the  prospects  of
repayment.  When  contact  is made  with  the  borrower  at any  time  prior  to
foreclosure,  the Bank will attempt to obtain full payment,  offer to work out a
repayment schedule with the borrower to avoid foreclosure or, in some instances,
accept a deed in lieu of foreclosure.  In the event payment is not then received
or the loan not otherwise  satisfied,  additional  letters and  telephone  calls
generally are made. If the loan is still not brought current or satisfied and it
becomes  necessary for the Bank to take legal  action,  which  typically  occurs
after a loan is 90 days or more delinquent,  the Bank will commence  foreclosure
proceedings  against any real  property  that secures the loan. If a foreclosure
action is  instituted  and the loan is not  brought  current,  paid in full,  or
refinanced before the foreclosure sale, the property securing the loan generally
is sold at foreclosure and, if purchased by the Bank, becomes real estate owned.

                                       11
<PAGE>
         Federal regulations and the Bank's Asset Classification  Policy require
that the Bank  utilize an  internal  asset  classification  system as a means of
reporting  problem and potential  problem assets.  The Bank has incorporated the
OTS internal asset  classifications  as a part of its credit monitoring  system.
The  Bank  currently   classifies   problem  and  potential  problem  assets  as
"Substandard," "Doubtful" or "Loss" assets. An asset is considered "Substandard"
if it is inadequately  protected by the current net worth and paying capacity of
the obligor or of the collateral pledged, if any.  "Substandard"  assets include
those  characterized by the "distinct  possibility" that the insured institution
will  sustain  "some  loss"  if  the  deficiencies  are  not  corrected.  Assets
classified as "Doubtful" have all of the weaknesses inherent in those classified
"Substandard"  with the added  characteristic  that the weaknesses  present make
"collection or liquidation in full," on the basis of currently  existing  facts,
conditions,  and values, "highly questionable and improbable." Assets classified
as "Loss" are those  considered  "uncollectible"  and of such little  value that
their continuance as assets without the establishment of a specific loss reserve
is not warranted.  Assets which do not currently expose the insured  institution
to  sufficient  risk  to  warrant  classification  in one of the  aforementioned
categories  but  possess  weaknesses  are  required  to be  designated  "Special
Mention."

         When an insured institution  classifies one or more assets, or portions
thereof,  as  Substandard  or  Doubtful,  it is required to  establish a general
valuation  allowance for loan losses in an amount deemed  prudent by management.
General  valuation   allowances   represent  loss  allowances  which  have  been
established to recognize the inherent risk associated  with lending  activities,
but which,  unlike  specific  allowances,  have not been allocated to particular
problem assets.  When an insured  institution  classifies one or more assets, or
portions  thereof,  as "Loss," it is  required  either to  establish  a specific
allowance  for losses equal to 100% of the amount of the asset so  classified or
to charge off such amount.

         A savings  institution's  determination as to the classification of its
assets and the amount of its  valuation  allowances  is subject to review by the
OTS which can order the  establishment  of  additional  general or specific loss
allowances. The OTS, in conjunction with the other federal banking agencies, has
adopted an  interagency  policy  statement on the  allowance  for loan and lease
losses.  The policy statement  provides  guidance for financial  institutions on
both the  responsibilities of management for the assessment and establishment of
adequate  allowances  and  guidance  for  banking  agency  examiners  to  use in
determining the adequacy of general valuation guidelines.  Generally, the policy
statement  recommends that  institutions  have effective systems and controls to
identify,  monitor and address  asset  quality  problems;  that  management  has
analyzed all significant factors that affect the collectibility of the portfolio
in a reasonable manner; and that management has established acceptable allowance
evaluation processes that meet the objectives set forth in the policy statement.
Although management  believes that, based on information  currently available to
it at this time,  its allowance  for loan losses is adequate,  actual losses are
dependent  upon future  events and, as such,  further  additions to the level of
allowances for loan losses may become necessary.

         The Bank reviews and  classifies its assets on an ongoing basis and the
Board of Directors  reviews the results of the reports on a monthly  basis.  The
Bank classifies  assets in accordance with the management  guidelines  described
above.  At December 31,  1999,  the Bank had  $890,000 of assets  designated  as
Substandard, and no assets designated as Doubtful or Loss. At December 31, 1999,
the largest loan  designated as Substandard  had a carrying  balance of $225,000
and was secured by a one-to-four-family property.

                                       12
<PAGE>
         At December 31, 1999, 1998 and 1997,  delinquencies  in the Bank's loan
portfolio were as follows:
<TABLE>
<CAPTION>


                                              At December 31, 1999                    At December 31, 1998
                                     ---------------------------------------  ----------------------------------------
                                      60-89 Days           90 Days or More        60-89 Days         90 Days or More
                                     -------------------  ------------------  ------------------  --------------------
                                     Number    Principal  Number    Principal  Number   Principal  Number    Principal
                                     of Loans  Balance    of Loans   Balance   of Loans  Balance   of Loans  Balance
                                     --------  -------    --------  --------  --------  --------  -------- -----------
                                                                                    (Dollars in thousands)
<S>                                     <C>     <C>         <C>    <C>         <C>      <C>        <C>       <C>
Loans:
   One- to four-family..........          2     $138         8      $676         3      $199         9       $930
   Construction and development.         --       --        --        --        --        --        --         --
    Total loans                           2     $138         8      $676         3      $199         9       $930
                                        ===     ====        ==      ====       ===      ====       ===       ====
Delinquent loans to total
    loans.......................                0.09%              0.43%                .17%                 .80%
                                                ----               ----                 ---                  ---

<CAPTION>
                                            At December 31, 1997
                                   -----------------------------------------
                                        60-89 Days          90 Days or More
                                   -------------------   -------------------
                                   Number    Principal   Number    Principal
                                   of Loans   Balance    of Loans   Balance
                                   --------   --------   --------   --------

<S>                                     <C>      <C>         <C>       <C>
Loans:
   One- to four-family..........         9       $578         12       $891
   Construction and development.        --        ---        ---         --
   Total loans                           9       $578         12       $891
                                        ==       ====         ==       ====
Delinquent loans to total
    loans.......................                  .52%                  .79%
                                                  ===                   ===

</TABLE>
<PAGE>
         Non-Performing  Assets and Impaired  Loans.  The  following  table sets
forth information regarding non-accrual loans and REO. At December 31, 1999, REO
totalled $50,000 and consisted of one residential  property. It is the policy of
the Bank to cease  accruing  interest  on loans 90 days or more  past due and to
fully reserve for all previously  accrued  interest.  For the fiscal years ended
December 31, 1999, 1998 and 1997, the amount of additional  interest income that
would have been  recognized on non-accrual  loans if such loans had continued to
perform in  accordance  with their  contractual  terms was $51,000,  $54,000 and
$57,000, respectively.
<TABLE>
<CAPTION>
                                                                            At December 31,
                                                    ---------------------------------------------------------------
                                                     1999          1998          1997          1996          1995
                                                     ----          ----          ----          ----          ----
                                                                    (Dollars in thousands)
<S>                                                   <C>          <C>            <C>          <C>           <C>
Non-accrual loans:
  Mortgage loans:
    One- to four-family.....................          $676         $  930         $891         $1,169        $1,146
    Construction and development............            --             --           --            159           158
    Other loans.............................            --             --           --             --            --
                                                    ------       --------       ------      ---------       -------
      Total mortgage loans..................           676            930          891          1,328         1,304
    Real estate owned, net(1)...............            50            131           69            145            77
                                                    ------       --------       ------       --------        ------
    Total non-performing assets.............          $726         $1,061         $960         $1,473        $1,381
                                                      ====         ======         ====         ======        ======
Allowance for loan losses as a
  percent of total loans....................         0.73%          0.88%        0.81%          0.82%         0.85%
Allowance for loan losses as a
  percent of non-performing loans(2)........       167.90%        109.89%      102.47%         63.55%        64.88%
Non-performing loans as a
  percent of total loans(2).................         0.43%          0.80%        0.79%          1.29%         1.31%
Non-performing assets as                             0.31%          0.53%        0.53%          0.92%         0.82%
  a percent of total assets(3)..............
</TABLE>

(1)   REO balances are shown net of related valuation allowances.
(2)   Non-performing  loans  consist  of all 90 days or more  past due and other
      loans which have been  identified  by the Bank as  presenting  uncertainty
      with respect to the collectibility of interest or principal.
(3)   Non-performing assets consist of non-performing loans and REO.


         At  December  31,  1999,  1998 and  1997,  total  impaired  loans  were
$460,000,  $782,000 and $566,000,  respectively,  and the related  allowance for
loan losses amounted to $41,000, $54,000 and $45,000, respectively. All impaired
loans are real estate  mortgage  loans which have been  measured for  impairment
using the fair value of the  collateral  method.  During the fiscal  years 1999,
1998 and 1997,  the  average  recorded  value of  impaired  loans was  $465,000,
$596,000  and  $522,000,  respectively.  For these  loans  $28,000,  $42,000 and
$63,000 of interest income was recognized.

         Allowance for Loan Losses. The allowance for loan losses is established
through a provision  for loan losses  based on  management's  evaluation  of the
risks inherent in its loan portfolio and the general economy.  The allowance for
loan losses is maintained at an amount  management  considers  adequate to cover

<PAGE>

estimated  losses in loans  receivable  which are deemed  probable and estimable
based on information currently known to management.  The allowance is based upon
a  number  of  factors,  including  current  economic  conditions,  actual  loss
experience and industry trends. In addition,  various regulatory agencies, as an
integral  part of their  examination  process,  periodically  review  the Bank's
allowance for loan losses. Such agencies may require the Bank to make additional
provisions for estimated  loan losses based upon judgments  different from those
of management. As of December 31, 1999, and 1998, the Bank's allowance

                                       14

<PAGE>
for loan losses was 0.73% and 0.88%,  respectively,  of total loans  receivable.
The Bank had  non-accrual  loans of $676,000 at December 31, 1999. The Bank will
continue to monitor  and modify its  allowances  for loan  losses as  conditions
dictate.  While  management  believes  the Bank's  allowance  for loan losses is
sufficient  to cover  losses  inherent in its loan  portfolio  at this time,  no
assurances  can be given that the Bank's level of allowance for loan losses will
be  sufficient  to cover future loan losses  incurred by the Bank or that future
adjustments  to the  allowance for loan losses will not be necessary if economic
and other conditions differ substantially from the economic and other conditions
used by  management  to determine  the current  level of the  allowance for loan
losses.

         The following table sets forth the Bank's  allowance for loan losses at
the dates indicated:
<TABLE>
<CAPTION>
                                                           At or For the Years Ended December 31,
                                         --------------------------------------------------------------------------
                                             1999            1998            1997           1996            1995
                                             ----            ----            ----           ----            ----
                                                                      (In thousands)
<S>                                          <C>             <C>               <C>            <C>              <C>
Balance at beginning of period......         $1,022          $  913            $844           $846             $903
Provision for loan losses...........            113             114             168            107               87
Charge-offs:
  Mortgage loans:
   One -to-four-family..............             --               5             125            114              131
   Other loans......................             --              --              --             --               13
                                             ------          ------            ----           ----             ----
   Total charge-offs................             --               5             125            114              144
Recoveries..........................             --              --              26              5               --
                                             ------          ------            ----           ----             ----
Balance at end of period............         $1,135          $1,022            $913           $844             $846
                                             ======          ======            ====           ====             ====
Ratio of net charge-offs during
  the period to average loans
  outstanding during the
  period............................             --            0.01%           0.13%          0.12%            0.14%

</TABLE>

                                       15

<PAGE>
          The  following  table sets forth the Bank's  percent of allowance  for
loan losses to total allowance for loan losses and the percent of loans to total
loans in each of the categories listed at the dates indicated.
<TABLE>
<CAPTION>
                                                                         At December 31,
                              ----------------------------------------------------------------------------------------------
                                         1999                               1998                           1997
                              ------------------------------   ------------------------------   ----------------------------
                                                     Percent                         Percent                       Percent
                                                    of Loans                         of Loans                      of Loans
                                     Percent of     in Each              Percent of   in Each         Percent of   in Each
                                      Allowance     Category             Allowance  Category            Allowance  Category
                                       to Total     to Total              to Total   to Total           to Total    to Total
                              Amount  Allowance       Loans     Amount    Allowance   Loans     Amount  Allowance    Loans
                              ------  ---------       -----     ------    ---------   -----     ------  ---------    -----
                                                                              (Dollars in thousands)
<S>                          <C>          <C>         <C>       <C>         <C>       <C>      <C>          <C>       <C>
Mortgages:
    Residential (1)          $  602       53.04%      71.84%    $ 553       54.11%    75.95%   $  421       46.11%    81.89%
    Commercial real
       estate ........           93        8.19        4.46       108       10.57      3.18       153       16.76      3.40
    Construction and .
       Development ...          440       38.77       23.62       361       35.32     20.62       339       37.13     14.63
       Total .........        1,135      100.00       99.92     1,022      100.00     99.75       913      100.00     99.92
Consumer .............           --          --        0.08        --          --      0.25        --          --      0.08
    Total allowance
       for loan losses       $1,135      100.00%     100.00%   $1,022      100.00%   100.00%   $  913      100.00%   100.00%
                             ======      ======      ======    ======      ======    ======    ======      ======    ======
<CAPTION>
                            ------------------------------------------------------------
                                       1996                             1995
                            ----------------------------   ------------------------------
                                                 Percent                          Percent
                                                of Loans                         of Loans
                                    Percent of  in Each             Percent of   in Each
                                    Allowance  Category             Allowance   Category
                                    to Total    to Total            to Total     to Total
                             Amount  Allowance   Loans      Amount   Allowance    Loans
                             ------  ---------   -----      ------   ---------    -----
<S>                          <C>        <C>        <C>      <C>          <C>       <C>
Mortgages:
    Residential (1)          $  656     77.73%     92.35%   $  720       85.11%    96.51%
    Commercial real
       estate ........           59      6.99       0.96        97       11.47      1.36
    Construction and
       Development ...          129     15.28       6.57        29         3.42      1.95
       Total .........          844    100.00      99.88       846       100.00     99.82
Consumer .............          --         --       0.12        --           --      0.18
    Total allowance
       for loan losses       $  844    100.00%    100.00%   $  846       100.00%   100.00%
                             ======    ======     ======    ======       ======    ======
</TABLE>
-------------
(1) Includes  multi-family loans, second mortgage loans and home equity lines of
credit.
                                       16
<PAGE>
         Real Estate Owned.  At December 31, 1999,  the Bank had $50,000 of real
estate owned consisting of one residential  real estate property.  When the Bank
acquires  property  through  foreclosure or deed in lieu of  foreclosure,  it is
initially recorded at the lower of the recorded  investment in the corresponding
loan or the fair value of the related  assets at the date of  foreclosure,  less
costs to sell.  Thereafter,  if there is a further  deterioration  in value, the
Bank provides for a specific valuation  allowance and charges operations for the
diminution in value.  It is the policy of the Bank to have obtained an appraisal
on all real  estate  subject  to  foreclosure  proceedings  prior to the time of
foreclosure.  It is the Bank's policy to require  appraisals on a periodic basis
on foreclosed properties and conducts inspections on foreclosed properties.

Investment Activities

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

         The  investment  policy  of the  Bank,  as  approved  by the  Board  of
Directors,  requires  management  to  maintain  adequate  liquidity,  generate a
favorable return on investments without incurring undue interest rate and credit
risk and to  complement  the  Bank's  lending  activities.  The  Bank  primarily
utilizes  investments in securities for liquidity  management and as a method of
deploying  excess  funding not utilized for loan  originations.  Generally,  the
Bank's investment policy is more restrictive than the OTS regulations allow. The
Bank has invested  primarily in U.S.  Government  and agency  securities,  which
qualify  as liquid  assets  under the OTS  regulations,  federal  funds and U.S.
government sponsored agency issued  mortgage-backed  securities.  As required by
SFAS No. 115, the Bank has  established  an  investment  portfolio of securities
that  are  categorized  as held to  maturity,  available  for  sale or held  for
trading.  The substantial  majority of the Bank's investment and mortgage-backed
securities are held to maturity.  Such  securities  totalled  $78.3 million,  or
33.1% of assets,  at December 31, 1999.  At such date,  the  available  for sale
securities  portfolio  totalled $5.9 million,  or 2.5% of assets,  and consisted
entirely  of a mutual  fund that  invests  in  adjustable  rate  mortgage-backed
securities.

         At  December  31,  1999,   the  Bank  had  invested  $71.4  million  in
mortgage-backed  securities,  or 30.2% of total  assets,  of which $71.0 million
were guaranteed by GNMA or insured by either FNMA or FHLMC. All  mortgage-backed
securities  were  classified as held to maturity.  Of the $71.4  million,  $62.4
million were  adjustable-rate  with generally 1.0% to 2% maximum annual interest
rate  adjustments and lifetime  maximum  interest rate  adjustments of 5% to 6%.
Investments in mortgage-backed securities involve a risk that actual prepayments
which  differ from  estimated  prepayments  over the life of the  security,  may
require  adjustments  to the  amortization  of any premium or  accretion  of any
discount  relating to such  instruments  thereby  changing the net yield on such
securities.  There is also reinvestment risk associated with the cash flows from
such  securities.  In  addition,  the  market  value of such  securities  may be
adversely affected by changes in interest rates.
<PAGE>
         In an effort to increase assets and enhance earnings, and to supplement
loan demand in future periods,  the Bank  anticipates  increasing its investment
and  mortgage-backed  securities  portfolio.  The Bank may utilize borrowings to
fund the purchase of such securities.

                                       17

<PAGE>
         The  following  table  sets forth  certain  information  regarding  the
amortized cost and market value of the Bank's investment securities at the dates
indicated.
<TABLE>
<CAPTION>
                                                                          At December 31,
                                               --------------------------------------------------------------------
                                                     1999                    1998                    1997
                                               --------------------    ------------------      --------------------
                                               Amortized     Market    Amortized    Market     Amortized     Market
                                                 Cost        Value       Cost       Value        Cost        Value
                                                 ----        -----       ----       -----        ----        -----
                                                                        (In thousands)
<S>                                              <C>         <C>        <C>         <C>         <C>        <C>
Investment securities:
Held to maturity(1):
   U.S. Government and
     agency obligations...................       $6,000      $5,769     $ 6,000     $5,995      $10,000    $  9,996
    Other.................................          947         927         946        945           --          --
Federal Home Loan Bank stock(2)...........        2,100       2,100       1,446      1,446        1,446       1,446
Available for sale(3):
   Equity securities......................        5,988       5,906       5,678      5,642        5,369       5,367
                                                -------     -------     -------    -------      -------     -------
     Total investment securities..........      $15,035     $14,702     $14,070    $14,028      $16,815     $16,809
                                                =======     =======     =======    =======      =======     =======
</TABLE>
--------------
(1)  Held to maturity securities are carried at amortized cost.
(2)  Investment in FHLB-NY stock is required by regulations.  As the security is
     not readily marketable, its cost approximates fair value.
(3)  Available for sale securities are carried at fair value.


         The  following  table  sets forth  certain  information  regarding  the
carrying values and fair values of the Bank's mortgage-backed securities, all of
which are held to maturity, at the dates indicated.
<PAGE>
<TABLE>
<CAPTION>
                                                                            At December 31,
                              ---------------------------------------------------------------------------------------------------
                                             1999                                1998                             1997
                              --------------------------------      ----------------------------     ----------------------------
                                           Percent                             Percent                          Percent
                                             of                                   of                                of
                              Carrying    Carrying       Fair       Carrying  Carrying    Fair       Carrying   Carrying     Fair
                               Value        Value        Value        Value     Value     Value        Value      Value      Value
                               -----        -----        -----        -----     -----     -----        -----      -----      -----
                                                            (Dollars in thousands)
<S>                           <C>            <C>        <C>         <C>         <C>       <C>         <C>         <C>      <C>
By Issuer:
  GNMA ..................     $14,272        19.99%     $14,022     $10,427     18.71%    $10,597     $12,991     25.54%   $13,364
  FNMA ..................      20,034        28.06       19,646      29,874     53.61      30,013      22,546     44.33     22,633
  FHLMC .................      36,686        51.38       36,477      14,894     26.72      14,960      14,635     28.78     14,731
  SBA ...................         407         0.57          402         533      0.96         531         684      1.35        684
                              -------        -----      -------     -------     -----     -------     -------     -----    -------
    Total mortgage-backed
       securities .......     $71,399       100.00%     $70,547     $55,728    100.00%    $56,101     $50,856    100.00%   $51,412
                              =======       ======      =======     =======    ======     =======     =======    ======    =======

By Coupon Type:
  Adjustable-rate .......     $62,371        87.36%     $62,004     $48,481     87.00%    $48,804     $45,367     89.21%   $45,928
  Fixed-rate ............       9,028        12.64        8,543       7,247     13.00       7,297       5,489     10.79      5,484
                              -------        -----      -------     -------     -----     -------     -------     -----    -------
    Total mortgage-backed
      securities ........     $71,399       100.00%     $70,547     $55,728    100.00%    $56,101     $50,856    100.00%   $51,412
                              =======       ======      =======     =======    ======     =======     =======    ======    =======
</TABLE>


                                       18

<PAGE>
         The following  table sets forth the Bank's  mortgage-backed  securities
activities for the periods indicated.

<TABLE>
<CAPTION>

                                                                 For the Year
                                                              Ended December 31,
                                                    ------------------------------------
                                                      1999           1998         1997
                                                    --------      --------      --------
                                                         (Dollars in thousands)
<S>                                                 <C>           <C>           <C>
Beginning balance .............................     $ 55,728      $ 50,856      $ 42,281
    Purchases .................................       37,149        31,676        18,718
    Principal repayments ......................      (21,368)      (26,666)      (10,128)
    Net amortization and accretion of discounts
       (premiums) .............................         (110)         (138)          (15)
                                                    --------      --------      --------
Ending balance ................................     $ 71,399      $ 55,728      $ 50,856
                                                    ========      ========      ========

</TABLE>


                                       19

<PAGE>
         The table below sets forth certain  information  regarding the carrying
values,  weighted  average  yields  and  contractual  maturities  of the  Bank's
investment  securities held to maturity and  mortgage-backed  securities held to
maturity as of December 31, 1999. The Bank's investment securities available for
sale  consist  solely  of equity  securities  and,  as they have no  contractual
maturities, are not included in this table.

<TABLE>
<CAPTION>
                                                                      At December 31, 1999
                                              ---------------------------------------------------------------------
                                                                          More than One            More than Five
                                                 One Year or Less       Year to Five Years       Years to Ten Years
                                              --------------------     ---------------------    --------------------
                                                           Weighted                 Weighted               Weighted
                                               Carrying     Average      Carrying    Average     Carrying    Average
                                                Value        Yield         Value      Yield        Value      Yield
                                                -----        -----         -----      -----        -----      -----
                                                                      (Dollars in thousands)
<S>                                              <C>          <C>        <C>           <C>       <C>         <C>
Investment securities held to maturity:
  U.S. Government agency obligations .......     $ --          --%        $1,000        6.00%     $5,000     6.32%
  Other ....................................       --           --          --            --          --       --
                                                 ------                   ----                      ----
          Total ............................     $ --           --        $1,000        6.00%     $5,000      6.32
Mortgage-backed securities held to maturity:
  Adjustable-rate:
    GNMA ...................................     $ --           --        $ --            --        $ --       --
    FHLMC ..................................       --           --          --            --          --       --
    FNMA ...................................       --           --          --            --          --       --
    SBA ....................................       --           --          --            --          --       --
                                                 ------                   ----                      ----
         Total .............................       --           --          --            --          --       --
                                                 ------                   ----                      ----
   Fixed-rate:
    GNMA ...................................       --                       54          9.50          --       --
    FHLMC ..................................         34       6.00          --           --           --       --
    FNMA ...................................      1,194       5.50          --           --           --       --
         Total .............................      1,228       5.51          54         9.50           --       --
                                                 ------                   ----                      ----
Total mortgage-backed securities
   held to maturity ........................     $1,228       5.51%       $ 54         9.50%        $ --       --%
                                                 ======                   ====                      ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    More than Ten Years               Total
                                                   ---------------------        --------------------
                                                               Weighted                    Weighted
                                                   Carrying    Average         Carrying    Average
                                                     Value       Yield           Value       Yield
                                                     -----       -----           -----       -----
<S>                                                <C>              <C>         <C>             <C>
Investment securities held to maturity:
  U.S. Government agency obligations.......        $       --         --%       $  6,000        6.27%
  Other....................................               947       6.71             947        6.71
                                                   ----------                 ----------
         Total.............................        $     947        6.71        $  6,947        6.33
                                                   =========                    ========
Mortgage-backed securities held to maturity:
  Adjustable-rate:
    GNMA...................................          $10,404        5.64         $10,404        5.64
    FHLMC..................................           36,616        6.32          36,616        6.32
    FNMA...................................           14,944        6.56          14,944        6.56
    SBA....................................               407       6.38             407        6.38
                                                   ----------                 ----------
         Total.............................           62,371        6.26          62,371        6.26
                                                    --------                    --------
  Fixed-rate:
    GNMA...................................            3,814        6.95           3,868        6.99
    FHLMC..................................               36       10.00              70        8.06
    FNMA...................................            3,896        6.25           5,090        6.07
                                                   ---------                   ---------
         Total.............................            7,746        6.61           9,028        6.48
                                                   ---------                   ---------
Total mortgage-backed securities
   held to maturity........................          $70,117        6.30%        $71,399        6.29%
                                                     =======                     =======


</TABLE>

                                       20

<PAGE>
Source of Funds

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

         Deposits.  The Bank has long focused on its deposit base as its primary
source of funds and a means of growth.  In this  regard,  management  previously
employed a strategy  of pricing its  deposit  products  among the highest in the
Bank's  market  area in order to attract  and retain  deposits.  In more  recent
periods, the Bank has reduced its rates paid on deposits to a level that is more
competitive  in the market  area,  and has strived to maintain  its  deposits by
other  means.  The Bank  offers a variety  of deposit  accounts  with a range of
interest rates and terms. The Bank's deposits consist of money market,  savings,
checking and certificate accounts. For the year ended December 31, 1999, average
core deposits represented 30.6% of total average deposits.  The flow of deposits
is influenced  significantly  by general economic  conditions,  changes in money
market rates, prevailing interest rates and competition. The Bank's deposits are
obtained  predominantly  from the areas in which its branch offices are located.
The Bank has historically relied primarily on customer service and long-standing
relationships  with  customers  to attract and retain these  deposits;  however,
market  interest  rates and rates  offered by competing  financial  institutions
significantly  affect the Bank's ability to attract and retain  deposits.  Total
deposits have decreased in the year ended December 31, 1999 by $5.8 million,  or
3.32%,  to  $169  million,  primarily  due to the  sale of the  Harrison  Branch
deposits.  In an effort to build its deposit  base,  the Bank has  increased the
types of deposit products offered, such as offering new transaction accounts, as
well as expanding the terms of deposit products offered,  such as certificate of
deposit accounts, which the Bank now offers with terms ranging from three months
to five years. At December 31, 1999, certificates of deposit comprised 68.01% of
the Bank's deposit base. Due to the predominance of certificate  accounts within
the deposit base, the Bank's liquidity could be reduced if a significant  amount
of  maturing  certificates  of  deposit  are not  renewed  in any given  period.
Management  believes that, based upon its experience and the Bank's deposit flow
history,  a significant  portion of such deposits will remain with the Bank. The
Bank generally does not solicit deposits from outside its market area. While the
Bank does not actively solicit certificate accounts in excess of $100,000 or use
brokers  to  obtain  deposits,  it may do so from time to time,  depending  upon
market conditions.



                                       21

<PAGE>
         The following  table sets forth the  distribution of the Bank's average
interest-bearing  deposit  accounts for the periods  indicated  and the weighted
average interest rates on each category of deposits presented.  Averages for the
periods presented utilize month-end balances.
<TABLE>
<CAPTION>
                                                           For the Years Ended December 31,
                            --------------------------------------------------------------------------------------------------
                                        1999                             1998                               1997
                            -----------------------------   ------------------------------  ----------------------------------
                                       Percent                         Percent                            Percent
                                       of Total  eighted               of Total    eighted                of Total    Weighted
                             Average   Average   Average    Average    Average    Wverage    Average      Average     Average
                             Balance   Deposits W Rate      Balance    Deposits   A Rate     Balance      Deposits       Rate
                            ---------  -------- ---------   --------   --------   --------  ---------     -------    ----------
                                                                (Dollars in thousands)
<S>                           <C>         <C>        <C>     <C>         <C>          <C>      <C>          <C>         <C>
Demand deposits...........    $20,509     12.04%     3.15%   $13,372       8.30%      2.47%    $   7,594      5.02%       2.26%
Money market savings......      3,029      1.78      2.71      3,352       2.08       2.76         3,979      2.63        2.71
Regular savings...........     26,432     15.52      2.29     25,942      16.11       2.43        27,127     17.93        2.43
Certificates of deposit...    120,312     70.66      5.10    118,406      73.51       5.51       112,617     74.42        5.47
                            ---------   -------             --------      -----                 --------    ------
         Total............   $170,282    100.00%     4.39%  $161,072     100.00%      4.66%     $151,317    100.00%       4.69%
                             ========    ======             ========     ======                 ========

<CAPTION>
                                                                    At December 31,
                            ------------------------------------------------------------------------------------------------
                                        1999                             1998                            1997
                            -----------------------------    ------------------------------  -------------------------------
                                       Percent                          Percent                         Percent
                                       of Total                         of Total                        of Total
                                       Balance    Weighted              Balance    Weighted             Balance    Weighted
                                          of      Average                  of      Average                 of      Average
                             Balance   Deposits    Rate       Balance   Deposits    Rate      Balance   Deposits    Rate
                             -------   --------    ----       -------   --------    ----      -------   --------    ----
                                                                 (Dollars in thousands)
<S>                          <C>           <C>        <C>      <C>           <C>       <C>      <C>            <C>        <C>
Certificate accounts(1):
Due within one year ....     $ 97,446      84.78%     4.97%    $ 99,669      79.96%    5.31%    $  92,847      81.02%     5.61%
One to three years .....       15,236      13.25      5.45       22,161      17.78      5.49       19,121      16.69      5.95
Three years and over ...        2,265       1.97      5.44        2,812       2.26      5.71        2,627       2.29      5.93
     Total certificate
       accounts ........     $114,947     100.00%     5.04%    $124,642     100.00%     5.35%    $114,595     100.00%     5.65%
</TABLE>
----------------------
(1)  Based on remaining maturity of certificates calculated as of the end of the
     period.


         The following  table presents the deposit  activity of the Bank for the
periods indicated:

<PAGE>
<TABLE>
<CAPTION>
                                                       Years Ended December 31,
                                               ---------------------------------------
                                                  1999           1998           1997
                                               ---------      ---------     ---------
                                                           (In thousands)
<S>                                            <C>            <C>           <C>
Beginning balance ........................     $ 174,808      $ 153,227     $ 147,209
                                               ---------      ---------     ---------
   Net (withdrawals) deposits ............        (7,603)        14,494        (1,074)
   Sale of deposits ......................        (5,668)          --            --
   Interest credited to accounts .........         7,471          7,087         7,092
                                               ---------      ---------     ---------
   Decrease (increase) in deposit accounts        (5,800)        21,581         6,018
                                               ---------      ---------     ---------
Ending balance ...........................     $ 169,008      $ 174,808     $ 153,227
                                               =========      =========     =========

</TABLE>



                                       22
<PAGE>
         The  following  table  presents  by various  categories,  the amount of
certificate  accounts  outstanding at December 31, 1999, 1998, and 1997, and the
time to maturity of the certificate accounts outstanding at December 31, 1999.

<TABLE>
<CAPTION>
                                         Period to Maturity from December 31, 1999                       At December 31,
                             ---------------------------------------------------------------      ------------------------------
                             Due Within    One to       Two to        Three to     Four to
                             One Year    Two years    Three years    Four years  Five years        1999        1998        1997
                             --------    ---------    -----------    ----------  ----------        ----        ----        ----
                                                                        (In thousands)
<S>                          <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
Certificate accounts:
Less than 4.00% .....        $   --       $   --       $   --       $   --       $   --       $   --       $   --       $   --
4.01 to 5.00% .......          67,258        3,600          133          100          498       71,589       22,814        1,657
5.01 to 6.00% .......          28,416        9,420        2,071        1,535          132       41,574       99,558      110,736
6.01 to 7.00% .......           1,272           12         --           --           --          1,284        1,584        1,561
Over 7.00% ..........            --           --           --           --           --           --           --           --
                             --------     --------     --------     --------     --------      -------      -------      -------
                             $ 96,946     $ 13,032     $  2,204     $  1,635     $    630      114,447      123,956      113,954
                             ========     ========     ========     ========     ========      =======      =======      =======

Accrued interest payable...
   Total...................                                                                        500          686          641
                                                                                              --------      -------     --------
                                                                                              $114,947     $124,642     $114,595
                                                                                              ========     ========     ========

</TABLE>
                                       23
<PAGE>
         At  December  31,  1999,  the Bank had  outstanding  $13.9  million  in
certificate accounts in amounts of $100,000 or more maturing as follows:

<TABLE>
<CAPTION>
                                                             Weighted
                                                             Average
             Maturity Period                  Amount           Rate
-----------------------------------------    ---------      ----------
                                                (Dollars in thousands)
<S>                                           <C>                 <C>
Three months or less.....................     $  3,255            4.88%
Over three to six months.................        3,577            4.95
Over six through 12 months...............        4,781            4.89
Over 12 months...........................        2,270            5.57
                                             ---------
                                               $13,883            5.01%
                                               =======
</TABLE>

Borrowings

         Although the Bank has not significantly utilized FHLB borrowings in the
past, it has done so as needed to fund its operations and meet liquidity  needs.
These  FHLB  advances  are  collateralized  primarily  by  certain of the Bank's
mortgage  loans and  mortgage-backed  securities  and  secondarily by the Bank's
investment  in capital  stock of the FHLB.  FHLB  advances are made  pursuant to
several  different credit programs,  each of which has its own interest rate and
range of  maturities.  The maximum  amount that the FHLB will  advance to member
institutions,  including  the Bank,  fluctuates  from time to time in accordance
with the policies of the OTS and the FHLB.  At December  31, 1999,  the Bank had
$42.0 million in outstanding advances from the FHLB-NY.

         The Bank increased its borrowings in order to use the funds to increase
its asset base and enhance  earnings  through the  purchase  of  investment  and
mortgage-backed  securities.  By so doing,  the Bank seeks to realize  increased
earnings  equal to the spread  between  the cost of the  borrowed  funds and the
yield on the investment and mortgage-backed securities.

         The following table sets forth certain information regarding the Bank's
borrowed funds for the dates indicated:

<TABLE>
<CAPTION>
                                                           At or For the Years Ended December 31,
                                                          ---------------------------------------
                                                              1999          1998         1997
                                                              ----          ----         ----
                                                                 (Dollars in thousands)
<S>                                                          <C>          <C>          <C>
FHLB advances:
  Average balance outstanding ....................           $15,038      $ 1,923      $ 3,077
  Maximum amount outstanding at any
    month-end during the period ..................            42,000        5,000        5,000
  Balance outstanding at end of period ...........            42,000         --          5,000
  Weighted average interest rate during the period              5.47%        6.25%        6.25%
  Weighted average interest rate at end of period               5.93%         --%         6.25%
ESOP loan:
  Average balance outstanding ....................           $   230      $   557      $   488
  Maximum amount outstanding at any month-end
    during the period ............................               455          630          762
  Balance outstanding at end of period ...........              --            455          636
  Weighted average interest rate during the period              8.25%        8.97%        9.00%
  Weighted average interest rate at end of period               --           8.25%        9.00%

</TABLE>
                                       24

<PAGE>
Personnel

         As of December 31,  1999,  the Bank had 53  full-time  employees  and 6
part-time  employees.   The  employees  are  not  represented  by  a  collective
bargaining unit, and the Bank considers its  relationship  with its employees to
be good.

Subsidiary Activities

         The  Company's   sole   subsidiary  is  the  Bank.   The  Bank  has  no
subsidiaries.

                           REGULATION AND SUPERVISION

General

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

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

Federal Savings Institution Regulation

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

         Loans-to-One  Borrower.   Under  the  HOLA,  savings  institutions  are
generally  subject  to  the  national  bank  limit  on  loans-to-one   borrower.
Generally,  this limit is 15% of the Bank's unimpaired capital and surplus, plus

<PAGE>

an additional 10% of unimpaired capital and surplus,  if such loan is secured by
readily-marketable  collateral,  which is defined to include  certain  financial
instruments and bullion.  At December 31, 1999, the Bank's  regulatory  limit on
loans-to-one borrower was $3.6 million. At December 31, 1999, the Bank's largest
aggregate disbursed amount of loans-to-one borrower was $3.2 million, consisting
of two construction loans.


                                       25

<PAGE>
         QTL Test. The HOLA requires  savings  institutions  to meet a qualified
thrift  lender  ("QTL")  test.  Under the QTL test,  a  savings  association  is
required to qualify as a "domestic  building and loan  association" as that term
is  defined  in the  Internal  Revenue  Code or  maintain  at  least  65% of its
"portfolio  assets" (total assets less: (i) specified liquid assets up to 20% of
total  assets;  (ii)  intangibles,  including  goodwill;  and (iii) the value of
property used to conduct  business) in certain  "qualified  thrift  investments"
(primarily  residential  mortgages and related  investments,  including  certain
mortgage-backed  and related  securities) in at least nine months out of each 12
month period. A savings  association that fails the QTL test must either convert
to a bank  charter or operate  under  certain  restrictions.  As of December 31,
1999,  the Bank  maintained  94.7% of its portfolio  assets in qualified  thrift
investments and, therefore, met the QTL test.

         Limitation on Capital Distributions. OTS regulations impose limitations
upon  all  capital  distributions  by  a  savings  institution,  including  cash
dividends,  payments to repurchase  its shares and payments to  shareholders  of
another  institution in a cash-out merger.  The rule effective through the first
quarter of 1999  established  three tiers of institutions  based primarily on an
institution's   capital  level.   An  institution   that  exceeded  all  capital
requirements  before  and  after  a  proposed  capital   distribution  ("Tier  1
Association")  and had not been  advised  by the OTS that it was in need of more
than  normal  supervision,  could,  after  prior  notice but  without  obtaining
approval of the OTS, make capital  distributions  during the calendar year equal
to the greater of (i) 100% of its net earnings to date during the calendar  year
plus the amount  that would  reduce by  one-half  the  excess  capital  over its
capital  requirements  at the  beginning of the calendar year or (ii) 75% of its
net income for the previous four quarters.  Any additional capital distributions
required prior regulatory approval.  At December 31, 1999, the Bank was a Tier 1
Association.

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

         Liquidity. The Bank is required to maintain an average daily balance of
specified  liquid assets equal to a monthly average of not less than a specified
percentage  (currently  4%)  of  its  net  withdrawable  deposit  accounts  plus
short-term  borrowings.  Monetary  penalties  may be imposed for failure to meet
these liquidity  requirements.  The Bank's  liquidity ratio at December 31, 1999
was 28.5%, which exceeded the applicable  requirements.  The Bank has never been
subject to monetary penalties for failure to meet its liquidity requirements.
<PAGE>
         Assessments.  Savings  institutions  are required by  regulation to pay
assessments to the OTS to fund the agency's operations.  The general assessment,
paid on a  semi-annual  basis,  is based upon the  savings  institution's  total
assets,  including consolidated  subsidiaries,  as reported in the Bank's latest
quarterly Thrift Financial Report. The assessments paid by the Bank for the year
ended December 31, 1999 totaled $50,000.

         Branching.   OTS  regulations   permit  federally   chartered   savings
associations to branch nationwide under certain conditions.  Generally,  federal
savings  associations  may  establish  interstate  networks  and  geographically
diversify  their  loan  portfolios  and  lines of  business.  The OTS  authority
preempts  any state law  purporting  to regulate  branching  by federal  savings
associations.


                                       26

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

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

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

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

<PAGE>

prescribed by the  Guidelines,  the agency may require the institution to submit
to the agency an acceptable  plan to achieve  compliance  with the standard,  as
required  by the FDI Act.  The final  regulations  establish  deadlines  for the
submission and review of such safety and soundness compliance plans.

         Capital  Requirements.  The OTS  capital  regulations  require  savings
institutions to meet three minimum capital  standards:  a 1.5% tangible  capital
ratio, a 3% leverage ratio and an 8% risk-based  capital ratio.  Effective April
1,  1999,  however,   the  minimum  leverage  ratio  increased  to  4%  for  all
institutions  except  those  with the  highest  rating on the  CAMELS  financial
institution  rating system. In addition,  the prompt corrective action standards
discussed below also establish,  in effect, a minimum 2% tangible capital on the
CAMEL financial standard, a 4% leverage ratio (3% for institutions receiving the
highest rating  institution  rating system),  and,  together with the risk-based
capital  standard  itself,  a 4% Tier 1  risk-based  capital  standard.  The OTS
regulations also require that, in meeting the tangible,  leverage and risk-based
capital  standards,  institutions must generally deduct investments in and loans
to subsidiaries  engaged in activities as principal that are not permissible for
a national bank.
                                       27
<PAGE>

         The risk-based capital standard for savings  institutions  requires the
maintenance of Tier 1 (core) and total capital (which is defined as core capital
and  supplementary  capital)  to  risk-weighted  assets  of at  least 4% and 8%,
respectively.  In determining the amount of  risk-weighted  assets,  all assets,
including  certain  off-balance  sheet assets,  are  multiplied by a risk-weight
factor of 0% to 100%,  assigned by the OTS capital regulation based on the risks
believed  inherent  in the type of asset.  Core  (Tier 1)  capital is defined as
common stockholders' equity (including retained earnings), certain noncumulative
perpetual preferred stock and related surplus,  and minority interests in equity
accounts  of  consolidated  subsidiaries  less  intangibles  other than  certain
mortgage  servicing  rights and credit card  relationships.  The  components  of
supplementary  capital currently include cumulative  preferred stock,  long-term
perpetual preferred stock, mandatory convertible  securities,  subordinated debt
and  intermediate  preferred  stock and the  allowance for loan and lease losses
limited to a maximum of 1.25% of risk-weighted  assets.  Overall,  the amount of
supplementary  capital  included as part of total capital  cannot exceed 100% of
core capital.

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

         The following  table presents the Bank's  capital  position at December
31, 1999.
<TABLE>
<CAPTION>
                                                                                             Capital
                                                                  Excess           --------------------------
                              Actual         Required         (Deficiency)          Actual           Required
                              Capital         Capital            Amount            Percent            Percent
                              -------         -------            ------            -------            -------
                                                     (Dollars in thousands)
<S>                           <C>              <C>                <C>                 <C>                <C>
Tangible............          $22,880          $3,548             $19,332             9.67%              1.50%
Core (Leverage).....           22,880           9,462              13,418             9.67               4.00
Risk-based..........           23,948           9,146              14,802            20.95               8.00

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

                                       28
<PAGE>
number of discretionary supervisory actions, including the issuance of a capital
directive and the replacement of senior executive officers and directors.

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

         In addition to the assessment for deposit  insurance,  institutions are
required  to make  payments on bonds  issued in the late 1980s by the  Financing
Corporation  ("FICO") to recapitalize the predecessor to the SAIF.  During 1999,
FICO  payments  for SAIF  members  approximated  5.9 basis  points,  while  Bank
Insurance  Fund ("BIF")  members paid 1.2 basis  points.  By law,  there will be
equal sharing of FICO payments between SAIF and BIF members on January 1, 2000.

         The  Bank's  assessment  rate for  fiscal  1999 was 5.9  basis  points.
Payments  toward the FICO bonds amounted to $102,000.  The FDIC has authority to
increase  insurance  assessments.  A  significant  increase  in  SAIF  insurance
premiums  would  likely have an adverse  effect on the  operating  expenses  and
results  of  operations  of the  Association.  Management  cannot  predict  what
insurance assessment rates will be in the future.

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

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

Federal Home Loan Bank System

         The Bank is a member of the FHLB System,  which consists of 12 regional
FHLBs.  The FHLB  provides  a  central  credit  facility  primarily  for  member
institutions.  The Bank,  as a member of the FHLB of New York,  is  required  to
acquire and hold shares of capital stock in the FHLB in an amount at least equal
to 1% of the aggregate principal amount of its unpaid residential mortgage loans
and similar  obligations  at the beginning of each year, or 1/20 of its advances
(borrowings) from the FHLB, whichever is greater.

                                       29
<PAGE>
The Bank was in  compliance  with this  requirement  with an  investment in FHLB
stock at December 31, 1999 of $2.1 million.  FHLB  borrowings must be secured by
specified types of collateral and all long-term  borrowings may only be obtained
for the purpose of providing funds for residential housing finance.

         The FHLBs are required to provide funds for the resolution of insolvent
thrifts  and  to  contribute  funds  for  affordable  housing  programs.   These
requirements  could reduce the amount of  dividends  that the FHLBs pay to their
members and could also result in the FHLBs imposing a higher rate of interest on
advances to their members. For the years ended December 31, 1999, 1998 and 1997,
dividends from the FHLB to the Bank amounted to approximately $108,000, $105,000
and $95,000,  respectively.  If dividends were reduced,  the Bank's net interest
income would likely also be reduced. Further, there can be no assurance that the
impact  of  recent or future  legislation  on the  FHLBs  will not also  cause a
decrease in the value of FHLB stock held by the Bank, if any.

Federal Reserve System

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

Holding Company Regulation

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

         Restrictions  Applicable  to  Mutual  Holding  Companies.  Pursuant  to
Section 10(o) of the HOLA and the Regulations, a mutual holding company, such as
the MHC, may engage in the following activities: (i) investing in the stock of a
savings  association;  (ii) acquiring a mutual association through the merger of
such association into a savings  association  subsidiary of such holding company
or an interim  savings  association  subsidiary of such holding  company;  (iii)
merging with or acquiring another holding company,  one of whose subsidiaries is
a savings  association;  (iv) investing in a  corporation,  the capital stock of
which is available  for purchase by a savings  association  under federal law or
under  the  law of  any  state  where  the  subsidiary  savings  association  or
associations share their home offices; (v) furnishing or performing

                                       30
<PAGE>
management services for a savings association  subsidiary of such company;  (vi)
holding,  managing  or  liquidating  assets  owned or  acquired  from a  savings
subsidiary  of such  company;  (vii)  holding  or  managing  properties  used or
occupied by a savings association  subsidiary of such company properties used or
occupied by a savings association  subsidiary of such company;  (viii) acting as
trustee  under  deeds of trust;  (ix) any other  activity  (A) that the  Federal
Reserve Board, by regulation,  has determined to be permissible for bank holding
companies  under  Section 4(c) of the Bank Holding  Company Act (the "BHC Act"),
unless the Director,  by  regulation,  prohibits or limits any such activity for
savings and loan holding  companies;  or (B) in which multiple  savings and loan
holding companies were authorized (by regulation) to directly engage on March 5,
1987; and (x) purchasing,  holding, or disposing of stock acquired in connection
with a qualified  stock  issuance if the  purchase of such stock by such savings
and loan holding company is approved by the Director.

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

         The HOLA  prohibits a savings  and loan  holding  company,  including a
federal mutual holding company,  directly or indirectly,  or through one or more
subsidiaries, from acquiring more than 5% of the voting stock of another savings
institution,  or holding company thereof,  without prior written approval of the
OTS; from  acquiring or retaining,  with certain  exceptions,  more than 5% of a
non-subsidiary holding company or savings association. The HOLA also prohibits a
savings  and loan  holding  company  from  acquiring  more  than 5% of a company
engaged in activities  other than those  authorized for savings and loan holding
companies  by the HOLA;  or  acquiring  or  retaining  control  of a  depository
institution  that is not  insured by the FDIC.  In  evaluating  applications  by
holding  companies to acquire  savings  institutions,  the OTS must consider the
financial  and  managerial  resources  and future  prospects  of the company and
institution involved, the effect of the acquisition on the risk to the insurance
funds, the convenience and needs of the community and competitive factors.

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

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

         Stock  Holding  Company  Subsidiary  Regulation.  The OTS  has  adopted
regulations  governing the two-tier  mutual holding company form of organization

<PAGE>

and mid-tier  stock holding  companies  that are  controlled  by mutual  holding
companies. Under these rules, the stock holding company subsidiary holds all the
shares of the mutual holding company's savings association subsidiary and issues
the  majority  of its own  shares  to the  mutual  holding  company  parent.  In
addition, the stock holding company subsidiary is permitted

                                       31

<PAGE>
to engage in activities that are permitted for its mutual holding company parent
and to have  the  same  indemnification  and  employment  contract  restrictions
imposed that are on the mutual holding company parent.  Finally, OTS regulations
maintain that the stock holding company  subsidiary must be federally  chartered
for supervisory controls.


                           FEDERAL AND STATE TAXATION


Federal Taxation

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

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

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

                                       32

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

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

         Dividends Received Deduction and Other Matters. The Company may exclude
from its income 100% of dividends  received  from the Bank.  The MHC may exclude
from  its  income  80% of  dividends  received  from the  Company  as long as it
maintains ownership in the Company of at least 20%. In addition,  the MHC waived
dividends  from both the Company and the Bank during the year ended December 31,
1999.

         Audits.  The Bank was last audited by the IRS in 1994. The Bank was not
audited by the New Jersey Department of Revenue ("DOR") in the past five years.


State and Local Taxation

         State of New Jersey.  The Bank, the Company and the MHC file New Jersey
income tax returns. For New Jersey income tax purposes, savings institutions are
presently  taxed at a rate  equal to 3% of  taxable  income.  For this  purpose,
"taxable  income"  generally means federal  taxable  income,  subject to certain
adjustments  (including  addition  of  interest  income on state  and  municipal
obligations).  For New Jersey tax purposes,  regular  corporations are presently
taxed  at a rate  equal to 9% of  taxable  income  (7.5% is the rate if  taxable
income is less than $100,000).


                                       33
<PAGE>
Additional Item.  Executive Officers of the Registrant.

         The  following  table  sets forth  certain  information  regarding  the
executive officers of the Company and the Bank who are not also directors.

<TABLE>
<CAPTION>

                                          Age at
             Name                        12/31/99                                 Position
-------------------------------         ----------        ---------------------------------------------------------
<S>                                         <C>           <C>
Lee Wagstaff...................             59            Vice President, Chief Financial Officer and Treasurer of
                                                             the Company and the Bank
Valerie Kaminski...............             61            Vice President, Chief Operating Officer and Secretary of
                                                             the Company and the Bank
Kevin Aylward..................             45            Vice President of the Company and Vice President and
                                                             Mortgage Lending Officer of the Bank
Patrick Paolella...............             56            Vice President of the Company and Vice President
                                                             and Human Resource Officer of the Bank
</TABLE>

         Lee Wagstaff,  a certified public accountant,  has been Vice President,
Treasurer and Chief Financial Officer of the Company and the Bank since 1999 and
1984,  respectively.  Mr.  Wagstaff  is a member of the  Bank's  Asset/Liability
Committee. Prior to joining the Bank, Mr. Wagstaff was a senior staff accountant
for Stephen P. Radics & Co., in Haledon, New Jersey.

         Valerie Kaminski has been Vice President, Secretary and Chief Operating
Officer  of the  Company  and the Bank since  1999 and 1984,  respectively.  Ms.
Kaminski  has been  employed  by the Bank  since  1956.  From 1956 to 1984,  Ms.
Kaminski held various positions with the Bank.

         Kevin Aylward  joined the Bank in 1990 and is the Bank's Vice President
and Mortgage  Lending  Officer.  Mr. Aylward has served as Vice President of the
Company  since 1999.  Mr.  Aylward is the Bank's CRA Officer and a member of the
Bank's Asset/Liability  Committee.  Prior to joining the Bank, Mr. Aylward was a
lending officer for Nassau Savings and Loan Association, Princeton, New Jersey.

         Patrick Paolella has been Vice President of the Company since July 1999
and Vice President and Human Resource  Officer of the Bank since 1997.  Prior to
becoming Vice President and Human Resource  Officer,  Mr.  Paolella  served as a
Consultant to the Banking  Industry and prior served as President of a financial
savings institution.

                                       34

<PAGE>
Item 2.  Properties
-------------------

         The Bank currently  conducts its business through an administrative and
full service  branch office  located in  Springfield,  New Jersey and five other
full service branch offices located in Bayville, Irvington,  Milltown, Spotswood
and Toms River, New Jersey.  Management  believes that the Bank's facilities are
adequate to meet the present and immediately  foreseeable  needs of the Bank and
the Holding Company.

<TABLE>
<CAPTION>

                                                      Original                                   Net Book Value
                                                        Year                                     of Property or
                                     Leased            Leased                Date of               Leasehold
                                       or                or                   Lease             Improvements at
            Location                 Owned            Acquired             Expiration          December 31, 1999
            --------                 -----            --------             ----------          -----------------
                                                                                                (In thousands)
<S>                                  <C>                       <C>         <C>                      <C>
Administrative/Corporate/
Branch Office:

130 Mountain Avenue                  Owned                     1990            --                   2,039
Springfield, NJ  07081

Branch Offices:

860 18th Avenue                      Owned                     1951            --                      76
Irvington, NJ  07111

520 Main Street                      Owned                     1979            --                     349
Spotswood, NJ  08884

827 Fischer Boulevard                Owned                     1980            --                     891
Toms River, NJ  08753

Route 9 and                          Leased                    1999         07/31/11                   56
Oceangate Drive
Bayville, NJ  08721

270 Ryders Lane                      Leased                    1999         05/31/11                   22
Milltown, NJ  08850

</TABLE>

         The Bank plans to open a branch office in Old Bridge, New Jersey during
the fourth quarter of 2000.

                                       35

<PAGE>
Item 3.  Legal Proceedings
--------------------------

         The Bank is not involved in any pending  legal  proceedings  other than
routine legal  proceedings  occurring in the ordinary  course of business.  Such
routine legal  proceedings,  in the aggregate,  are believed by management to be
immaterial  to the  Company's  or the Bank's  financial  condition or results of
operations.

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

         None.

                                     PART II

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

         The  information  contained  under the  section  captioned  "Market For
Common Stock and Related  Matters" in the 1999 Annual Report to  Stockholders on
page 54 is  incorporated  herein by reference.  At December 31, 1999,  2,080,488
shares  of the  Company's  outstanding  common  stock  was  held  of  record  by
approximately  301 persons or entities,  not  including the number of persons or
entities  holding  stock in  nominee or stock name  through  various  brokers or
banks.

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

         The  above-captioned  information  appears in the Company's 1999 Annual
Report to Stockholders  on the inside cover page and is  incorporated  herein by
reference.

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

         The above-captioned  information appears under "Management's Discussion
and Analysis of Financial  Condition and Results of Operations" in the Company's
1999 Annual  Report to  Stockholders  on pages 1 through 12 and is  incorporated
herein by reference.

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

         The  above-captioned  information appears under "Management of Interest
Rate Risk and Market Risk  Analysis"  in the  Company's  1999  Annual  Report to
Stockholders on pages 10 through 12 and is incorporated herein by reference.

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

         The Company's financial  statements listed in Item 14 herein,  together
with the  report  thereon  by Radics & Co.,  LLC,  are found in the 1999  Annual
Report to  Stockholders  on pages 13 through 52 and are  incorporated  herein by
reference.
<PAGE>

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

         None.

                                       36
<PAGE>
                                    PART III


Item 10.  Directors and Executive Officers
------------------------------------------

      The  information  relating  to  Directors  and  Executive  Officers of the
Company is incorporated herein by reference to the Company's Proxy Statement for
the Annual  Meeting of  Stockholders  to be held on April 28,  2000,  at pages 4
through 6 and 14.

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

      The  information  relating  to  directors'  compensation  and  executives'
compensation  is  incorporated  herein  by  reference  to  the  Company's  Proxy
Statement for the Annual Meeting of Stockholders to be held on April 28, 2000 at
pages 6 through 14 (excluding the Executive  Compensation  Committee  Report and
Stock Performance Graph).

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

      The  information  relating to  security  ownership  of certain  beneficial
owners and management is incorporated herein by reference to the Company's Proxy
Statement for the Annual Meeting of  Stockholders  to be held on April 28, 2000,
at pages 3 and 4.

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

      The information relating to certain relationships and related transactions
is  incorporated  herein by reference to the Company's  Proxy  Statement for the
Annual Meeting of Stockholders to be held on April 28, 2000, at page 14.

                                     PART IV

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

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

      (1)         Financial statements.

                  The Financial Statements and Independent  Auditors' Report for
                  the year  ended  December  31,  1999,  included  in the Annual
                  Report, listed below, are incorporated herein by reference.

                  Report of Independent Auditors (Annual Report - page 15)

                  Consolidated  Statements of Financial  Condition for the years
                  ended  December 31, 1999 and 1998  (Annual  Report - Page 17).
<PAGE>
                  Consolidated Statements of Income for the Years Ended December
                  31, 1999, 1998 and 1997 (Annual Report - Page 18).

                  Consolidated  Statements of Comprehensive Income for the Years
                  Ended  December 31, 1999,  1998 and 1997 (Annual Report - Page
                  19).

                  Consolidated Statements of Changes in Stockholders' Equity for
                  the Years  Ended  December  31,  1999,  1998 and 1997  (Annual
                  Report - Page 20).

                  Consolidated  Statements  of Cash  Flows for the  Years  Ended
                  December 31, 1999, 1998 and 1997 (Annual Report - pages 21 and
                  22.

                  Notes  to  Financial  Statements  (Annual  Report  - Pages  23
                  through 52).


                                       37

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

      (2)         Financial Statement Schedules.

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

      (3)         Exhibits.

                  (a)   The following exhibits are filed as part of this report.
<TABLE>
<CAPTION>

          Exhibit
          Number           Description                                                           Reference
-------------------------------------------------------------------------------------------------------------
<S>            <C>         <C<
               3.1         Charter of Pulaski Bancorp, Inc.*
               3.2         Bylaws of Pulaski Bancorp, Inc.*
               4.0         Form of Common Stock Certificate*
               10.1        Employment Agreement by and between Pulaski Bancorp, M.H.C., Pulaski Savings
                           Bank and Thomas Bentkowski*
               10.2        Employment Agreement by and between Pulaski Bancorp, M.H.C., Pulaski Savings
                           Bank and Lee Wagstaff*
               10.3        Change in Control Agreement by and between Pulaski Bancorp, M.H.C., Pulaski
                           Savings Bank and Kevin Aylward*
               10.4        Change in Control Agreement by and between Pulaski Bancorp, M.H.C., Pulaski
                           Savings Bank and Valerie Kaminski*
               10.5        Amended and Restated Pulaski Savings Bank 1997 Stock-Based Incentive Plan*
               10.6        Pulaski Savings Bank Employee Stock Ownership Plan Trust Agreement*
               11.0        Computation of Earnings Per Share
               13.0        Portions of the 1999 Annual Report to Shareholders
               21.0        Subsidiary information is incorporated herein by reference to "Part I - Business -
                           Subsidiary Activities"
               23.0        Consent of Radics & Co., LLC
               27.0        Financial Data Schedule
</TABLE>

               --------------------------
               *   Incorporated  herein by reference into this document from the
                   Exhibits  to the Current  Report on Form 8-K,  filed July 12,
                   1999.


                  (b)      Reports on Form 8-K.

                 None.


                                       38

<PAGE>

                                   SIGNATURES

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

Date:  March 29, 2000                              PULASKI SAVINGS BANK


                                                   /s/ Thomas Bentkowski
                                                   ---------------------
                                                   Thomas Bentkowski
                                                   President, Chief Executive
                                                   Officer and Director

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

Signature                    Title                                 Date
---------                    -----                                 ----

/s/ Thomas Bentkowski        President, Chief Executive
----------------------       Officer and Director               March 29, 2000
Thomas Bentkowski            (principal executive officer)


/s/ Edward J. Mizerski       Chairman of the Board and
-----------------------       Director                          March 29, 2000
Edward J. Mizerski


/s/ Peter C. Pietrucha       Vice Chairman of the Board         March 29, 2000
----------------------       and Director
Peter C. Pietrucha


/s/ Eugene J. Bogucki, M.D.  Director                           March 29, 2000
--------------------------
Eugene J. Bogucki, M.D.


/s/ Anthony C. Majeski       Director                           March 29, 2000
----------------------
Anthony C. Majeski


/s/ Walter F. Rusak          Director                           March 29, 2000
-------------------
Walter F. Rusak


/s/ Lee Wagstaff             Vice President, Chief Financial    March 29, 2000
----------------             Officer and Treasurer
Lee Wagstaff                 (principal financial and
                             accounting officer)


                                       39