SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ________________

                                    FORM 10-K

(Mark One)
         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the fiscal year ended       December 31, 1998             
                          ----------------------------------------------

                                     - or -
 _
|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from __________________ to ___________________ 

Commission Number:  0-27010

                           LITTLE FALLS BANCORP, INC.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)

             New Jersey                                         22-3402073  
_______________________________________                   ______________________
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

86 Main Street                                                     07424   
----------------------------------------                  ----------------------
(Address of principal executive offices)                         Zip Code

Registrant's telephone number, including area code:  (973) 256-6100  
                                                    -----------------   
Securities registered pursuant to Section 12(b) of the Act:   None
                                                            ---------
Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, $0.10 par value 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 (ss.229.405 of this chapter) is not contained herein,
and will not be contained,  to the best of registrant's knowledge, in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]

         The aggregate  market value of the voting stock held by  non-affiliates
of the Registrant,  based on the closing price of the Registrant's  Common Stock
as quoted on the Nasdaq Stock Market, on March 11, was $40.0 million (2,023,824)
shares at $19.75 per share).

         As of March 11,  1999  there  were  issued  3,041,750  and  outstanding
2,470,551 shares of the Registrant's Common Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.       Portions of the Annual Report to Stockholders for the Fiscal Year Ended
         December 31, 1998. (Parts I, II and IV)

<PAGE>


                                      INDEX

PART I                                                                      Page
                                                                            ----
Item 1.     Business......................................................     1

Item 2.     Properties...................................................     25

Item 3.     Legal Proceedings............................................     25

Item 4.     Submission of Matters to a Vote of Security-Holders..........     26

PART II

Item 5.     Market for Registrant's Common Equity and Related
              Stockholder Matters........................................     26

Item 6.     Selected Financial Data......................................     26

Item 7.     Management's Discussion and Analysis of Financial
              Condition and Results of Operations........................     26

Item 8.     Financial Statements and Supplementary Data..................     26

Item 9.     Changes In and Disagreements with Accountants
              on Accounting and Financial Disclosure.....................     26

PART III

Item 10.    Directors and Executive Officers of the Registrant...........     27

Item 11.    Executive Compensation.......................................     30

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

Item 13.    Certain Relationships and Related Transactions...............     38

PART IV

Item 14.    Exhibits, Financial Statement Schedules and Reports
              on Form 8-K................................................     38


<PAGE>



PART I

         Little Falls Bancorp,  Inc. (the  "Company") may from time to time make
written or oral "forward- looking statements", including statements contained in
the Company's  filings with the  Securities and Exchange  Commission  (including
this Annual  Report on Form 10-K and the  exhibits  thereto),  in its reports to
stockholders and in other communications by the Company,  which are made in good
faith by the Company  pursuant to the "safe  harbor"  provisions  of the Private
Securities Litigation Reform Act of 1995.

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

         The Company  cautions that the listed  factors are not  exclusive.  The
Company does not  undertake  to update any  forward-looking  statement,  whether
written  or oral,  that may be made  from  time to time by or on  behalf  of the
Company.

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

General

         Little Falls Bancorp,  Inc. (the "Company") is a New Jersey corporation
organized in August 1995 at the  direction of Little Falls Bank (the "Bank") for
the purpose of becoming a savings and loan holding company and to acquire all of
the capital stock issued by the Bank in its conversion  from the mutual to stock
form of ownership (the  "Conversion").  On January 5, 1996, the Registrant  sold
3,041,750  shares of its common  stock,  par value $0.10 per share (the  "Common
Stock") in a subscription  offering as part of the Conversion.  The Company is a
unitary savings and loan holding company which,  under existing laws,  generally
is not  restricted  in the types of business  activities  in which it may engage
provided   that  the  Bank   retains  a  specified   amount  of  its  assets  in
housing-related investments. References to the "Bank" herein, unless the context
required  otherwise,  refer to the  Company  on a  consolidated  basis.  The net
conversion  proceeds totaled  approximately $26.8 million of which $14.6 million
was invested in the Bank.

                                        1

<PAGE>



         On  November  5,  1998,  Little  Falls  and  Skylands   Community  Bank
terminated  the  proposed  merger  between  the two  companies,  which  had been
announced on August 12, 1998. This merger was terminated by mutual  agreement as
both companies recognized the possibility that certain conditions to the closing
of the merger might not be  satisfied.  Accordingly,  the boards of directors of
both companies concluded that it was in the mutual interest of both companies to
terminate the merger, and avoid any additional expense.

         The Bank is a federally  chartered stock savings bank  headquartered in
Little  Falls,  New Jersey.  The Bank was  originally  chartered  in 1887 as the
Little  Falls  Building  and Loan  Association.  On December  2, 1993,  the Bank
converted its mutual charter from a federally chartered savings association to a
New Jersey  chartered  savings  bank,  changing its name to Little Falls Savings
Bank.  Effective  October 1995, the Bank converted its New Jersey mutual charter
to a federal  mutual  charter and changed its name to "Little  Falls  Bank." The
Bank's  deposits are  federally  insured and the Bank is a member of the Federal
Home Loan Bank ("FHLB") System.

         The  Company and the Bank are  subject to  regulation  by the Office of
Thrift Supervision ("OTS"),  the Federal Deposit Insurance  Corporation ("FDIC")
and the Securities and Exchange Commission ("SEC").

         The Bank is a community oriented savings institution offering a variety
of financial  services to meet the needs of the communities it serves.  The Bank
conducts its business from its main office in Little Falls,  New Jersey and five
branch offices located in Passaic and Hunterdon  Counties,  New Jersey. The Bank
attracts  deposits  from the  general  public  and has  historically  used  such
deposits   primarily  to  originate   loans   secured  by  first   mortgages  on
owner-occupied one- to four-family residences in its market area and to purchase
mortgage-backed  securities.  To a lesser  extent,  the Bank also  originates  a
limited number of commercial real estate,  residential construction and consumer
loans,  which mainly consist of home equity lines of credit.  Further,  the Bank
also invests in mortgage-backed securities and investment securities.

         The principal  sources of funds for the Bank's  lending  activities are
deposits,  the  amortization,  repayment and maturity of loans,  mortgage-backed
securities and investment  securities.  Principal sources of income are interest
and fees on loans,  mortgage-backed  securities and investment  securities.  The
Bank's principal expense is interest paid on deposits.

Market Area and Competition

         The Bank  focuses on serving  its  customers  located in the New Jersey
community of Little Falls and  surrounding  communities in Passaic and Hunterdon
Counties,  New  Jersey.  Economic  growth  in the  Bank's  market  area  remains
dependent upon the local economy. The economy of the greater New York -
 New Jersey  market has  historically  benefitted  from having a large number of
corporate   headquarters  and   concentration   of  financial   services-related
industries.  It also has a  well-educated  employment base and a large number of
industrial, service and high technology businesses. Over the past few years, New
Jersey's  economy  has slowly  begun to recover  from the effects of a prolonged
decline in the national and regional economy,  layoffs in the financial services
industry and corporate relocations. Employment levels and real estate markets in
the Bank's market area have  stabilized and in some instances  begun to improve.
Whether such  improvement  will continue is dependent,  in large part,  upon the
general economic health of the United States and other factors beyond the Bank's
control and, therefore,  cannot be estimated.  In addition, the deposit and loan
activity of the Bank is significantly affected by economic conditions in its

                                        2

<PAGE>



market area. The Bank's  principal  competitors are financial  institutions  and
mortgage  banking  companies,  many of which are  significantly  larger and have
greater financial resources than the Bank. The Bank's competition for loans on a
retail and wholesale basis comes  principally  from commercial  banks,  mortgage
brokers,  banking and insurance  companies.  The Bank's competition for deposits
has  historically  come from commercial  banks,  thrift  institutions and credit
unions.  In addition,  the Bank faces  increasing  competition for deposits from
non-bank  institutions,  such as brokerage firms and insurance companies in such
areas as short-term  money market funds,  corporate  and  government  securities
funds, mutual funds and annuities.

Lending Activities

         Analysis of Loan Portfolio.  The following table sets forth information
concerning the composition of the Bank's loan portfolio in dollar amounts and in
percentages of the loan portfolio as of the dates indicated.

<TABLE>
<CAPTION>


                                                                            At December 31,
                               -----------------------------------------------------------------------------------------------------
                                     1998                  1997                  1996               1995                1994
                               ------------------   -------------------   -------------------  -----------------  ------------------
                                         Percent               Percent               Percent            Percent             Percent
                               Amount    of Total    Amount    of Total   Amount     of Total  Amount   of Total  Amount    of Total
                               ------    --------    ------    --------   ------     --------  ------   --------  ------    --------
                                                                       (Dollars in Thousands)
<S>                          <C>         <C>      <C>          <C>     <C>          <C>     <C>         <C>     <C>        <C>   
Type of Loans:
One- to four-family.........  $117,417     78.77%   $118,254     80.42%  $108,367     92.53%  $88,828     92.31%  $87,851    92.71%
Multi-family and commercial                        
  real estate...............    17,251     11.57      17,362     11.81      3,659      3.13     4,639      4.82     4,463     4.71
Residential construction....        --                   350      0.24        525      0.45     1,098      1.14       521     0.55
Consumer:                                          
Savings account.............       752      0.50         807      0.55        889      0.76       824      0.86       866      .91
Second mortgages............    14,811      9.94      11,630      7.91      5,028      4.29     2,540      2.64     2,694     2.84
Other.......................        14      0.01          12      0.01         25      0.02        42      0.04        52      .05
                               -------    ------     -------    ------    -------    ------     -----      ----   -------   ------
Total loans  receivable                            
  (gross)...................   150,245    100.79     148,415    100.94    118,493    101.18    97,971    101.81    96,447   101.77
Less:                                              
  Loans in process..........        --        --         233      0.16        150     (0.13)      450     (0.47)      186     (.18)
  Deferred loan origination                        
   fees and costs...........      (146)     0.10         (19)    (0.01)       138     (0.12)      333     (0.35)      338     (.36)
  Allowance for loan losses.     1,329     (0.89)      1,168      0.79      1,090     (0.93)      958     (0.99)    1,169    (1.23)
                               -------    ------     -------    ------   --------    ------    ------    ------   -------   ------
Total loans, net............  $149,062    100.00%   $147,033    100.00%  $117,115    100.00%  $96,230    100.00%  $94,754   100.00%
                               =======    ======     =======    ======    =======    ======    ======    ======   =======   ======

</TABLE>
                                                 
                                        3

<PAGE>



Loan Maturity Tables

         The following table sets forth the  contractual  maturity of the Bank's
loan portfolio at December 31, 1998.  The table does not include  prepayments or
scheduled principal  repayments.  Prepayments and scheduled principal repayments
on  loans  totaled  $______  million  for the  year  ended  December  31,  1998.
Adjustable-rate  mortgage  loans  are  shown as  maturing  based on  contractual
maturities  rather than the period in which interest rates are next scheduled to
adjust.

<TABLE>
<CAPTION>

                                                          Multi-Family
                                                              and
                                     One- to Four-         Commercial      Residential
                                        Family            Real Estate      Construction     Consumer            Total
                                     -------------        ------------     ------------     --------            -----

                                                                      (In Thousands)
<S>                                    <C>               <C>             <C>            <C>                 <C>     
Amounts Due:
Within 1 year..................          $     54          $   250          $      --      $    741           $  1,045

  1 to 5 years.................             2,432              495                 --         1,049              3,976
  5 to 10 years................             5,127              200                 --         2,849              8,176
  Over 10 years................           109,804           16,306                 --        10,938            137,048
                                          -------           ------                           ------            -------

Total amount due...............          $117,417          $17,251                          $15,577           $150,245
Less:
Allowance for loan and
  lease loss...................               956              274                 --            99              1,329

Loans in process...............                --               --                 --            --                 --
Deferred loan fees (costs).....              (124)              --                 --           (22)             (146)
                                          -------          -------           --------        ------            ------
 Loans receivable, net.........          $116,585         $ 16,977          $      --       $15,500           $149,062
                                          =======          =======                           ======            =======

</TABLE>

         The  following  table sets forth the dollar amount at December 31, 1998
of all loans due after  December 31, 1999,  which have  pre-determined  interest
rates and which have floating or adjustable interest rates.

                                                        Floating or
                                         Fixed Rates  Adjustable Rates   Total
                                         -----------  ----------------   -----
                                                      (In Thousands)
One- to four-family................       $45,201       $72,162       $117,363
Multi-family and
  commercial real estate...........         1,600        15,401         17,001
Consumer...........................        12,265         2,571         14,836
                                           ------        ------        -------
  Total............................       $59,066       $17,972       $149,200
                                           ======        ======        =======


                                        4

<PAGE>



         One- to  Four-Family  Residential  Loans.  The Bank's  primary  lending
activity consists of the origination of single-family residential mortgage loans
secured by  owner-occupied  property.  The Bank  originates  one- to four-family
residential  mortgage  loans in amounts up to 80% of the appraised  value of the
mortgaged  property  and in  amounts up to 70% of the  appraised  value on loans
which exceed $200,000.  No private mortgage  insurance is obtained since loan to
value ratios do not exceed 80%. All loans are held in the Bank's portfolio.

         The Bank has an agreement with a mortgage solicitation firm pursuant to
which  the  Bank  receives  one-  to  four-family  mortgage  applications  on  a
state-wide  basis.  The Bank then submits bids on the mortgage  applications  on
which it is interested  prior to making the final loan.  The submission of a bid
to provide the mortgage loan is not a firm commitment on the Bank's part, as the
Bank applies its own underwriting  standards before  committing to the loan. All
loans must be documented,  including an original  appraisal.  This agreement has
provided  the  majority  of loan  applications  received by the Bank in the past
year.

         Loan  referrals  are also  obtained  from local  realtors or  builders,
existing or past  customers and members of the local  community.  Mortgage loans
generally   include  due-on  sale  clauses  which  provide  the  Bank  with  the
contractual right to deem the loan immediately due and payable in the event that
the borrower transfers ownership of the property without the Bank's consent.

         The Bank  primarily  originates  adjustable-rate  mortgage loans with a
guaranteed  renewal for a thirty-year term. These loans adjust after one, three,
five or ten years.  The Bank's ARM loans are originated for its portfolio and do
not conform to FNMA or FHLMC standards.  Although the Bank's ARM loans have a 6%
lifetime cap, at the adjustment period, interest rate changes are discretionary.
Generally,  ARM loans pose credit risks somewhat  greater than the risk inherent
in fixed-rate  loans primarily  because,  as interest rates rise, the underlying
payments of the borrower rise,  increasing  the potential for default.  The Bank
also  offers  fixed-rate  loans with terms of 15 and 30 years.  The Bank  offers
various  loan  programs  with  varying   interest   rates  and  fees  which  are
competitively priced based on market conditions and the Bank's cost of funds.

         Multi-Family and Commercial Real Estate Loans. The Bank also originates
and purchases  multi-family  and commercial  real estate loans.  These loans are
generally  adjustable-rate  loans with maturities up to 25 years and are made in
amounts  up to  75%  of the  appraised  value  of  the  mortgaged  property.  In
purchasing  such loans,  the Bank  evaluates  the mortgage  primarily on the net
operating income  generated by the real estate to support the debt service.  The
Bank also  considers the  financial  resources and income level of the borrower,
the  borrower's   experience  in  owning  or  managing  similar  property,   the
marketability  of the property and the Bank's prior lending  experience with the
borrower.  The typical multi-family  property in the Bank's multi-family lending
portfolio has between 11 and 110 dwelling  units with an average loan balance of
approximately  $550,000.  Most loans  originated or purchased are located in New
Jersey and New York.

         To a lesser extent, the Bank's policy has been to originate  commercial
real  estate  loans.  The loans are  generally  made in amounts up to 65% of the
appraised  value of the  property.  The  Bank's  commercial  real  estate  loans
primarily  have  rates  equal to the prime  rate plus a margin.  In making  such
loans,  the Bank primarily  considers the net operating  income generated by the
real estate to support the debt  service,  the  financial  resources  and income
level  and  managerial  resources  of the  borrower,  the  marketability  of the
property and the Bank's lending experience with the borrower.

         The Bank's  commercial  real  estate  loans  typically  are  secured by
properties such as mixed-use  properties,  retail stores,  office  buildings and
strip shopping centers. The Bank's commercial real estate

                                        5

<PAGE>


portfolio  includes  multi-family  loans. For a discussion of the Bank's largest
commercial real estate loan, see "- Loans to One Borrower."

         Loans secured by  multi-family  and  commercial  real estate  generally
involve a greater degree of risk than one- to four-family  residential  mortgage
loans and carry larger loan balances.  This increased credit risk is a result of
several factors, including the concentration of principal in a limited number of
loans and  borrowers,  the  effects of  general  economic  conditions  on income
producing properties,  and the increased difficulty of evaluating and monitoring
these types of loans. Furthermore,  the repayment of loans secured by commercial
real estate is typically dependent upon the successful  operation of the related
real  estate.  If the cash flow from the  property  is reduced,  the  borrower's
ability to repay the loan may be impaired.

         Residential Construction Loans. The Bank's policy has been to originate
residential construction loans to a lesser extent than other types of mortgages.
Residential  construction loans are made up to a maximum of 80% of the appraised
value of the home, based upon the builder's plans. The rate charged is generally
the prime rate plus 1% and one point. The loan proceeds are disbursed based upon
work completed.

         Consumer Loans.  The Bank's  consumer loans  primarily  consist of home
equity loans,  and, to a much lesser extent,  student loans,  personal loans and
loans secured by savings deposits. The home equity lines of credit are made with
loan to value ratios of up to 80% on either a fixed or adjustable rate basis.

         The  underwriting  standards  employed by the Bank for  consumer  loans
include a determination of the applicant's payment history on other debts and an
assessment of the  borrower's  ability to make payments on the proposed loan and
other indebtedness.  In addition to the  creditworthiness of the applicant,  the
underwriting process also includes a comparison of the value of the security, if
any, in relation to the proposed loan amount.  The Bank's consumer loans tend to
have higher  interest  rates and  shorter  maturities  than one- to  four-family
mortgage  loans,  but are  considered  to entail a greater  risk of default than
mortgage loans.

         Loan  Approval  Authority  and  Underwriting.  The  Board of  Directors
generally  approves all mortgage  loans  although the Bank's  President  has the
authority to approve loans up to $500,000.  Any loans exceeding that amount must
be approved by the Board of Directors.

         The Bank uses board approved  independent fee appraisers on real estate
loans.  It is the Bank's  policy to obtain  title  insurance  on all  properties
securing real estate loans and to obtain fire,  flood and casualty  insurance on
all loans that require security.

         Loan  Commitments.  The Bank issues written  commitments to prospective
borrowers on all real estate approved loans. Generally,  the commitment requires
the loan to be closed within sixty days of issuance.  At December 31, 1998,  the
Bank had $5.1 million of commitments to fund new mortgage loans and  commitments
on unused lines of credit relating to home equity loans of $4.6 million.

         Loan  Purchases.  The Bank has  purchased  and  participated  in loans,
primarily in its market area. At December 31, 1998, the Bank had $3.9 million of
purchased loans and $15.4 million in loan participations. The Bank purchases and
participates in loans after applying its own  underwriting  standards.  The Bank
typically does not service the loans that it purchases or  participates  in with
other financial institutions.


                                        6

<PAGE>


         Loans to One  Borrower.  Savings  associations  are subject to the same
limits as those  applicable to national banks,  which under current  regulations
limit loans-to-one  borrower in an amount equal to 15% of unimpaired capital and
retained income on an unsecured  basis and an additional  amount equal to 10% of
unimpaired  capital  and  retained  income  if the loan is  secured  by  readily
marketable collateral  (generally,  financial  instruments,  not real estate) or
$500,000, whichever is higher. The Bank's maximum loan-to-one borrower limit was
approximately $4.5 million as of December 31, 1998.

         At December 31, 1998,  the Bank's three largest  lending  relationships
ranged  from $1.0  million to $1.1  million.  They are all  performing  loans on
apartment  buildings  in New  Jersey  and  New  York in  which  the  Bank  has a
participating interest. See also "-- Multi-Family and Commercial Real Estate."

Non-Performing Loans and Classified Assets

         Loan Delinquencies.  The Bank's collection procedures provide that when
a mortgage  loan is 15 days past due, a notice of nonpayment is sent. If payment
is still  delinquent  after 30 days past due, the customer will receive a letter
from the Bank. If the delinquency continues, similar subsequent efforts are made
to eliminate the delinquency.  If the loan continues in a delinquent  status for
60 days or more and no repayment  plan is in effect,  the Bank's  attorney  will
send a letter to the  customer.  After 90 days past due,  the Board of Directors
typically  approves  the  initiation  of  foreclosure  proceedings  as  soon  as
possible.  Loans are reviewed on a monthly basis and are placed on a non-accrual
and non-performing status when the loan becomes more than 90 days delinquent.

         The following  table sets forth  information  regarding  non-performing
loans and real  estate  owned.  During the  periods  indicated,  the Bank had no
restructured loans within the meaning of SFAS No. 15.

<TABLE>
<CAPTION>

                                                                               At December 31,
                                                       1998             1997            1996           1995            1994
                                                       ----             ----            ----           ----            ----
                                                                           (Dollars in Thousands)
<S>                                                    <C>            <C>             <C>             <C>            <C>   
Non-performing loans:
   Nonaccrual loans:
   One- to four-family residential...........           $1,003         $ 1,036         $   989         $1,059          $4,182

   Multi-family and commercial real estate...               --             248             860            860              --
   Consumer loans............................               --              --              52             23              20
                                                         -----         -------         -------         ------          ------
Total nonaccrual loans.......................            1,003           1,284           1,901          1,942           4,202
   Accruing one- to four-family residential..               --              --              --            505              --
                                                         -----         -------        --------         ------         -------
Total non-performing loans...................            1,003           1,284           1,901          2,447           4,202
                                                         -----          ------         -------         ------          ------

Real estate owned............................              297             604             857          1,501           1,765
                                                         -----          ------         -------          -----           -----
Total non-performing assets                                              1,888         $ 2,758         $3,948          $5,967
                                                                                        ======          =====           =====

Total non-performing loans to net loans.....              .67%             .87%          1.62%          2.54%           4.43%
                                                        =====            =====          =====          =====           =====
Total non-performing loans to total assets...             .29%             .39%           .63%           .79%           2.17%
                                                        =====            =====          =====          =====           =====
Total non-performing assets to total assets..             .37%             .57%           .91%          1.27%           3.09%
                                                        =====            =====          =====          =====           =====
</TABLE>


         Interest  income that would have been recorded on nonaccrual  loans had
they been  current  under the  original  terms of such  loans was  approximately
$89,000  and  $111,000  for  the  years  ended   December  31,  1998  and  1997,
respectively.  Amounts  included in the Bank's interest  income  attributable to
non-performing  loans  for the  years  ended  December  31,  1998 and 1997  were
approximately $60,000 and $50,000, respectively.

                                        7

<PAGE>


         Classified  and  Criticized  Assets.  OTS  regulations  provide  for  a
classification  system for problem assets of insured  institutions  which covers
all problem assets. Under this classification  system, problem assets of insured
institutions are classified as "substandard," "doubtful," or "loss." An asset is
considered  substandard if it is inadequately protected by the current net worth
and  paying  capacity  of the  obligor  or of the  collateral  pledged,  if any.
Substandard  assets include those  characterized  by the "distinct  possibility"
that the insured institution may sustain "some loss" if the deficiencies are not
corrected. Loans classified as substandard may or may not be considered impaired
under generally accepted  accounting  principals.  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 as such,  are charged  off by the Bank.  Assets
which  do  not  currently   expose  the  Bank  to  sufficient  risk  to  warrant
classification in one of the  aforementioned  categories but possess  weaknesses
are designated "special mention" by management.

         When the Bank  classifies  problem  assets  as  either  substandard  or
doubtful,  it may establish  general  allowances for loan and lease losses in an
amount  deemed  prudent  by  management.   General  allowances   represent  loss
allowances which have been established to recognize the inherent risk associated
with lending activities.  When the Bank classifies problem assets as loss, it is
considered  uncollectible  and the Bank  charges  off such  amount.  The  Bank's
determination  as to the  classification  of its  assets  and the  amount of its
valuation  allowances  is  subject  to  review  by the OTS,  which may order the
establishment of additional  general or specific loss  allowances.  A portion of
general loss  allowances  established to cover possible losses related to assets
classified  as  substandard  or  doubtful  may be  included  in  determining  an
institution's  regulatory capital,  while specific valuation allowances for loan
losses generally do not qualify as regulatory capital.

         The  following  table  provides  further  information  about the Bank's
classified assets as of the dates indicated.

                                              At December 31,
                             --------------------------------------------------
                              1998        1997       1996       1995     1994
                             ------      ------     ------     ------   -------
                                              (In Thousands)
Criticized:
  Special Mention........    $1,573      $3,912     $2,931     $2,639    $2,094
Classified:
  Substandard............     1,645       1,637      3,665      3,925     5,901
  Doubtful...............        --          --         --         --        --
  Loss...................        --          --         --         --       123
                             ------      ------     ------     ------    ------
                             $3,218      $5,549     $6,596     $6,564    $8,118
                              =====       =====      =====      =====     =====


         Real  Estate  Owned.  Real  estate  acquired by the Bank as a result of
foreclosure or by deed in lieu of foreclosure is classified as real estate owned
until it is sold.  When  property  is acquired it is carried at the lower of the
cost or fair value less selling costs. It is the policy of the Bank to obtain an
appraisal on all real estate acquired through foreclosure as soon as practicable
after it takes  possession of the property.  The Bank  generally  reassesses the
value of real estate owned at least every eighteen months.  These properties are
subsequently  evaluated and carried at the lower of the "new" cost or fair value
minus selling costs of the underlying  collateral.  The Bank's real estate owned
totaled approximately $297,000 at December 31, 1998.


                                        8

<PAGE>



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

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

         As a result of the declines in regional  real estate  market values and
the significant  losses  experienced by many financial  institutions,  there has
been a  greater  level  of  scrutiny  by  regulatory  authorities  of  the  loan
portfolios of financial  institutions  undertaken as part of the  examination of
the institution by the FDIC, OTS or other federal or state  regulators.  Results
of recent  examinations  indicate  that these  regulators  may be applying  more
conservative  criteria  in  evaluating  real  estate  market  values,  requiring
significantly  increased  provisions for potential  loan losses.  While the Bank
believes it has established an adequate allowance for loan losses,  there can be
no assurance that regulators,  in reviewing the Bank's loan portfolio,  will not
request  the Bank to  significantly  increase  its  allowance  for loan  losses,
thereby negatively affecting the Bank's financial condition and earnings or that
the Bank may not have to  increase  its  level  of loan  loss  allowance  in the
future.


                                        9

<PAGE>



         Analysis of the  Allowance for Loan Losses.  The  following  table sets
forth  information  with respect to the Bank's  allowance for loan losses at the
dates indicated.

<TABLE>
<CAPTION>
                                                                           At December 31,
                                              ------------------------------------------------------------------------
                                                1998            1997               1996            1995         1994
                                                ----            ----               ----            ----         ----
                                                                        (Dollars in Thousands)
<S>                                          <C>             <C>                <C>             <C>          <C>    
Total loans outstanding...............        $150,245        $148,415           $118,493        $97,971      $96,447
                                               =======         =======            =======         ======       ======


Allowance balances (at beginning
 of period)...........................        $  1,168        $  1,090           $    958        $ 1,169      $   818

Provision:
  One- to four-family.................              79             168                136             87          340
  Multi-family and commercial
    real estate(1)....................              39              35                 38             35           13
  Consumer............................              43              37                  9              9            3
                                               -------         -------            -------          -----       ------
Total provision for loan losses.......             161             240                183            131          356
                                               -------         -------            -------          -----       ------
Charge-offs net of recoveries:
  One- to four-family.................              --             154                 51            342            5
  Multi-family and commercial
    real estate.......................              --              --                 --             --           --
Consumer..............................              --               8                 --             --           --
                                               -------         -------            -------         ------       ------
Total charge-offs.....................              --             162                 51            342            5
                                               -------         -------            -------         ------       ------
Allowance balance (at end of
  period).............................        $  1,329        $  1,168           $  1,090        $   958      $ 1,169
                                               =======         =======            =======         ======       ======

Allowance for loan losses as
  a percent of total loans
  outstanding.........................            0.88%           0.79%              0.92%          0.98%        1.21%
                                               =======         =======            =======         ======       ======
</TABLE>

------------------------
(1)  Includes residential construction loans.


                                       10

<PAGE>



         Allocation of Allowance for Loan Losses. The following table sets forth
the  allocation  of the  Bank's  allowance  for loan and  lease  losses  by loan
category and the percentage of loans in each category to net loans receivable at
the dates  indicated.  The portion of the loan loss allowance  allocated to each
loan category does not represent the total available for future losses which may
occur  within  the loan  category  since the  total  loan  loss  allowance  is a
valuation reserve applicable to the entire loan portfolio.

<TABLE>
<CAPTION>

                                                                          At December 31,
                                -------------------------------------------------------------------------------------------------
                                               1998        1997               1996               1995                1994
                                -------------------  -----------------  -----------------  -----------------   ------------------
                                          Percent            Percent            Percent            Percent              Percent
                                          of Loans           of Loans           of Loans           of Loans             of Loans
                                          to Loan            to Loan            to Loan            to Loan              to Loan     
                                 Amount   Portfolio  Amount  Portfolio  Amount  Portfolio  Amount  Portfolio   Amount   Portfolio
                                 ------   ---------  ------  ---------  ------  ---------  ------  ---------   ------   ---------
                                                                     (Dollars in Thousands)
<S>                             <C>        <C>        <C>    <C>       <C>        <C>       <C>     <C>        <C>        <C>    
At end of period allocated to:
One-to four-family..........    $  956      71.39%   $  877   79.68%    $ 863      91.66%   $778     92.31%    $1,033      92.71%
Multi-family and
  commercial real
   estate(1)................       274      20.62       235   11.93       200       3.27     162      4.82        127       4.71
Consumer ...................        99       7.45        56    8.39        27       5.07      18      3.54          9       3.80
                                ------     ------     -----  ------    ------     ------    ----    ------     ------     ------
Total allowance.............    $1,329     100.00%   $1,168  100.00%   $1,090     100.00%   $958    100.00%    $1,169     100.00%
                                 =====     ======     =====  ======     =====     ======     ===    ======      =====     ======
</TABLE>


(1)  Includes residential construction loans.



                                                        11

<PAGE>


Investment Activities

         General.  The investment  policy of the Bank,  which is approved by the
Board of Directors  and  implemented  by certain  officers as  authorized by the
Board, is designed primarily to provide and maintain liquidity and to manage the
interest rate sensitivity of its overall assets and  liabilities,  to generate a
favorable  return  without  incurring  undue  interest  rate and credit risk, to
provide a flow of earnings  and a  countercyclical  balance to  earnings  and to
provide a balance of  quality  and  diversification  of the  Bank's  assets.  In
establishing  its  investment  strategies,  the Bank  considers its business and
growth plans, the economic environment,  its interest rate sensitivity position,
the types of  securities  to be held,  and other  factors.  Federally  chartered
savings  institutions  have  authority  to invest in  various  types of  assets,
including U.S.  Treasury  obligations,  securities of various federal  agencies,
mortgage-backed and mortgage-related securities, certain certificates of deposit
of  insured  banks  and  savings  institutions,   certain  bankers  acceptances,
repurchase  agreements,  loans of federal funds, and, subject to certain limits,
corporate securities, commercial paper and mutual funds.

         Current  regulatory  and  accounting  guidelines  regarding  investment
portfolio policy require insured  institutions to categorize  securities as held
for  "investment,"  "sale," or "trading." At December 31, 1998,  the Bank had no
securities held available for sale or trading. The Bank's securities  portfolio,
which the Bank has the ability and intent to hold to maturity, are accounted for
on an amortized cost basis. The Bank may purchase securities in the future to be
held available for sale or trading.

         At  December  31,  1998,  the Bank's  investment  securities  portfolio
primarily  consisted  primarily  of short and  medium  term  agency  securities,
corporate bonds, trust preferred securities and preferred stock. In addition, at
December 31, 1998, the Bank had federal funds sold of $23.0 million,  repurchase
agreements of $4.0 million and FHLB stock of $3.8 million.

         To supplement lending  activities and to utilize excess liquidity,  the
Bank  invests  in  residential   mortgage-backed   securities.   Mortgage-backed
securities can serve as collateral for borrowings and, through repayments,  as a
source of liquidity.  The mortgage-backed  securities  portfolio at December 31,
1998 consisted of both fixed-rate and adjustable rate certificates issued by the
FHLMC, GNMA and FNMA. The fixed rate certificates provide the certificate holder
principal  payments  while the adjustable  rate  securities  provide  protection
against rising interest rates.

         Mortgage-backed securities represent a participation interest in a pool
of single-family or multi-family mortgages,  the principal and interest payments
on which  are  passed  from the  mortgage  originators,  through  intermediaries
(generally   quasi-governmental   agencies)   that   pool  and   repackage   the
participation  interests in the form of  securities,  to  investors  such as the
Bank. Such quasi-governmental agencies, which guarantee the payment of principal
and interest to investors, primarily include FHLMC, FNMA, and GNMA.

         Mortgage-backed  securities  typically are issued with stated principal
amounts,  and the  securities  are backed by pools of mortgages  that have loans
with  interest  rates that are within a range and have varying  maturities.  The
underlying pool of mortgages can be composed of either  fixed-rate  mortgages or
adjustable-rate  mortgage  loans.   Mortgage-backed   securities  are  generally
referred to as mortgage participation certificates or pass-through certificates.
As a result,  the interest rate risk  characteristics  of the underlying pool of
mortgages, fixed rate or adjustable rate, as well as prepayment risk, are passed
on to  the  certificate  holder.  The  life  of a  mortgage-backed  pass-through
security is equal to the life of the underlying mortgages.


                                       12

<PAGE>


         All of the securities  have a cap rate of either 9.0%, or 10.0% and all
of the products meet the current  FFIEC tests.  The  securities  are tested on a
quarterly basis.

         Investment  and  Mortgage-backed  Securities  Portfolio.  The following
table sets forth the carrying value of the Bank's investment and mortgage-backed
securities portfolio.

                                                    At December 31,
                                   ---------------------------------------------
                                     1998(1)             1997           1996
                                   ----------         -----------    -----------
                                                    (In Thousands)

Investment Securities:           
 U.S. Government
   securities.................      $     --             $    --        $ 6,006

 U.S. Agency securities.......        53,419              57,988         45,022
 Corporate bonds..............         1,990                  --             --
 Trust preferred securities...        11,496                  --             --
 Preferred stock..............        13,095                  --             --
 Other securities.............            --                  --            342
                                     -------              ------         ------
   Total investment
     securities...............        80,000              57,988         51,370
                                     -------              ------         ------
Federal funds sold............        23,000               3,500          5,000
Repurchase agreements.........         4,000                  --             --
FHLB Stock....................         3,768               2,518          2,076
                                     -------              ------         ------
   Total investment
     securities, federal
     funds sold and FHLB
      stock...................      $110,768             $64,006        $58,446
                                     =======              ======         ======



--------------------
(1)      Includes held to maturity and available  for sale  (available  for sale
         issues  are  reflected  net  of an  unrealized  loss  of  approximately
         $493,000).


                                                   At December 31,
                                      ---------------------------------------
                                       1998(2)        1997(2)          1996
                                      --------       --------        --------
                                              (Dollars in Thousands)
Mortgage-backed securities:
  GNMA...........................     $17,293        $ 26,337        $ 33,675
  FNMA...........................      36,953          42,393          49,434
  FHLMC..........................      20,158          34,932          28,297
                                       ------         -------         -------
      Total......................      74,404         103,662         111,406
  Net premiums...................         941           1,224           1,067
                                      -------        --------         -------
Net mortgage-backed
  securities.....................     $75,345        $104,886        $112,473
                                       ======         =======         =======


---------------------
(2)      Includes held to maturity and available  for sale  (available  for sale
         issues are reflected  net of unrealized  losses of $16,600 and $111,500
         for 1998 and 1997, respectively).

                                       13

<PAGE>


         Investment and Mortgage-backed  Securities' Portfolios Maturities.  The
following table sets forth certain  information  regarding the carrying  values,
weighted   average   yields  and   maturities  of  the  Bank's   investment  and
mortgage-backed securities portfolios at December 31, 1998.

<TABLE>
<CAPTION>


                                                                                                           Total Investment and
                                         One Year or Less    One to Five Years   More Than Five Years    Mortgage-backed Securities
                                        ------------------  -------------------  --------------------  -----------------------------
                                                  Weighted             Weighted              Weighted            Weighted  Estimated
                                        Carrying  Average   Carrying   Average    Carrying   Average   Carrying  Average     Fair
                                         Value     Yield     Value      Yield      Value      Yield     Value     Yield      Value
                                        --------  --------  --------   --------   --------   --------  --------  --------  ---------
                                                                            (Dollars in Thousands)
<S>                                    <C>         <C>      <C>         <C>      <C>         <C>       <C>        <C>      <C>    
U.S. Agency securities(1)..........     $   --        --%    $ 2,000     6.74%    $51,419     6.20%     $53,419    6.22%    $53,200
Corporate Bonds(1).................         --        --%         --       --       1,990     7.00        1,990    7.00       1,990
Trust preferred securities(1)......                                                11,496     6.60       11,496    6.60      11,496
Preferred stock(1).................     $                      8,910     5.00       4,185     6.26        8,910    5.00      13,095
                                         -----      ----      ------     ----      ------     ----       ------    ----      ------
   Total investment securities(1)..     $   --        --%    $10,910     5.32%    $69,090     6.29%     $80,000    6.16%    $79,781
                                         =====      ====      ======     ====      ======     ====       ======    ====      ======
                                                                                                                  
GNMA...............................     $   --        --%    $   155     8.25%    $17,488     7.04%     $17,643    7.05%    $17,498
FNMA(1)............................        119      7.00       1,248     7.00      36,052     6.55       37,419    6.57      37,427
FHLMC(1)...........................      1,523      5.92       3,412     6.79      15,347     6.70       20,282    6.65      20,353
                                         -----      ----      ------     ----      ------     ----       ------    ----      ------
   Total mortgage-backed                $1,642      6.00%    $ 4,815     6.89%    $68,887     6.71%     $75,344    6.70%    $75,278
   securities......................      =====      ====      ======     ====      ======     ====       ======    ====      ======

</TABLE>

----------------------
(1) Includes securities held to maturity and available for sale.

                                       14

<PAGE>



Sources of Funds

         General.  Deposits are the major source of the Bank's funds for lending
and other  investment  purposes.  The Bank derives funds from  amortization  and
prepayment of loans and  maturities of  investment  securities,  mortgage-backed
securities and operations.  Scheduled loan principal repayments are a relatively
stable source of funds,  while deposit inflows and outflows and loan prepayments
are  significantly  influenced by general interest rates and market  conditions.
The Bank can obtain  advances from the FHLB as an  alternative to retail deposit
funds.  FHLB advances may also be used to acquire certain other assets as may be
deemed appropriate for investment purposes. These advances are collateralized by
the  capital  stock of the FHLB held by the Bank and by  certain  of the  Bank's
mortgage loans and mortgage-backed securities.

         Deposits.  The Bank currently offers NOW Accounts,  Super NOW accounts,
regular passbook  statement savings accounts and savings accounts,  money market
deposit  accounts and term certificate  accounts,  primarily to consumers within
its primary  market area.  Deposit  account terms vary  according to the minimum
balance  required,  the time  period  the funds must  remain on deposit  and the
interest rate, among other factors.

         Although   the  Bank   partially   relies  on   customer   service  and
relationships  with customers to attract and retain  deposits,  market  interest
rates and rates offered by competing financial institutions significantly affect
the Bank's ability to attract and retain deposits.

         The interest rates paid by the Bank on deposits are monitored regularly
and are set as needed at the direction of the Board of  Directors.  The interest
rates on deposit  account  products are  determined by  evaluating  the interest
rates offered by other local  institutions,  and the degree of  competition  the
Bank wishes to maintain;  the Bank's anticipated need for cash and the timing of
that desired cash flow; the cost of borrowing from other sources versus the cost
of acquiring funds through  customer  deposits;  and the Bank's  anticipation of
future economic conditions and related interest rates. The Bank's interest rates
typically  are  competitive  with  those  offered by  competitors  in the Bank's
primary market area.

         Regular  savings  accounts,  money  market  accounts  and NOW  accounts
including  non-interest bearing deposits constituted $41.4 million, $7.0 million
and $29.1 million,  respectively,  or 17.05%,  2.87%, and 11.98%,  respectively.
Certificates  of deposit  constituted  $165.5  million or 68.10% of the  deposit
portfolio. As of December 31, 1998, the Bank had no brokered deposits.

         Jumbo Certificate Accounts. The following table indicates the amount of
the Bank's  certificates  of deposit of greater than $100,000 by time  remaining
until maturity as of December 31, 1998.

                                                       Certificates
Maturity Period                                        of Deposits
---------------                                       --------------
                                                      (In Thousands)
Within three months.................................    $ 1,971
Three through six months............................      2,684
Six through twelve months...........................      6,468
Over twelve months..................................      3,419
                                                         ------
                                                        $14,542



                                       15

<PAGE>



         Savings  Deposit  Activity.  The following table sets forth the savings
activities of the Bank for the periods indicated.

                                                   Year Ended December 31,
                                            ------------------------------------
                                              1998          1997          1996
                                              ----          ----          ----
                                                       (In Thousands)
Net increase (decrease)
  before interest credited, deposits
  purchased and deposits sold............    $ 2,411      $(8,507)    $ (21,401)
Deposits purchased.......................         --           --            --
Deposits sold............................         --           --        (9,221)
Interest credited........................     10,504       10,328        11,083
                                              ------       ------      --------
Net increase (decrease) in
  savings deposits.......................    $12,915      $ 1,821     $ (19,539)
                                              ======       ======      ========


Borrowings

         At December 31, 1998, the Bank had $68.5 million of borrowings with the
Federal Home Loan Bank. These consist of the following:

                  (a)      $9.0  million  repurchase  agreement  with a rate  of
                           5.82%,  maturing  December,   1999  and  is  callable
                           quarterly on interest  payment dates.  As of March 6,
                           the borrowing was still in place.

                  (b)      $25.0 million advance maturing March 2008, and with a
                           rate of  5.35%.  On  March  12,  2001  and  quarterly
                           thereafter,  the  borrowing  can be called  with four
                           days notice.

                  (c)      $25.0 million  advance  maturing  November  2003, and
                           with a rate  of  4.93%.  On  November  19,  2001  and
                           quarterly  thereafter,  the  borrowing  can be called
                           with four days notice.

                  (d)      $9.5 million, 30 day repurchase agreement with a rate
                           of 5.29%. This repurchase  agreement was subsequently
                           rolled  over in January  1999 at a rate of 4.95%.  In
                           February,  the repurchase  agreement was paid down to
                           $9.0 million and the rate became 4.92%.

Subsidiary Activities

         As of  December  31,  1998,  the Bank was the  sole  subsidiary  of the
Company. The Bank has no active subsidiaries.

Personnel

         As of December  31, 1998,  the Bank had 37  full-time  and 12 part-time
employees.  None  of  the  Bank's  employees  are  represented  by a  collective
bargaining  group. The Bank believes that its relationship with its employees is
good.


                                       16

<PAGE>


Regulation

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

Company Regulation

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

         Qualified  Thrift  Lender Test.  As a unitary  savings and loan holding
company, the Company generally is not subject to activity restrictions, provided
the Bank  satisfies  the Qualified  Thrift  Lender  ("QTL") test. If the Company
acquires  control of another savings  association as a separate  subsidiary,  it
would become a multiple savings and loan holding company,  and the activities of
the  Company  and any of its  subsidiaries  (other  than the  Bank or any  other
Savings Association  Insurance Fund ("SAIF") insured savings  association) would
become subject to restrictions  applicable to bank holding companies unless such
other associations each also qualify as a QTL and were acquired in a supervisory
acquisition. See "Regulation of the Bank -- Qualified Thrift Lender Test."

         Restrictions on Acquisitions. The Company must obtain approval from the
OTS  before  acquiring  control  of any  other  SAIF-insured  association.  Such
acquisitions  are generally  prohibited if they result in a multiple savings and
loan holding company  controlling  savings  associations in more than one state.
However,  such  interstate  acquisitions  are permitted  based on specific state
authorization or in a supervisory acquisition of a failing savings association.

         Federal law  generally  provides that no "person,"  acting  directly or
indirectly or through or in concert with one or more other persons,  may acquire
"control," as that term is defined in OTS  regulations,  of a federally  insured
savings  institution  without giving at least 60 days' written notice to the OTS
and providing the OTS an opportunity to disapprove the proposed acquisition.  In
addition,  no company may acquire  control of such an institution  without prior
OTS approval.

         Federal  Securities Law. The Company is subject to filing and reporting
requirements  by  virtue  of  having  its  common  stock  registered  under  the
Securities Exchange Act of 1934. Furthermore,  Company stock held by persons who
are affiliates (generally officers, directors and principal stockholders) of the
Company may not be resold without registration or unless sold in accordance with
certain  resale  restrictions.  If the Company meets  specified  current  public
information  requirements,  each affiliate of the Company is able to sell in the
public  market,  without  registration,  a  limited  number  of  shares  in  any
three-month period.


                                       17

<PAGE>



Regulation of the Bank

         General. As a federally  chartered,  SAIF-insured  savings association,
the Bank is subject to  extensive  regulation  by the OTS and the FDIC.  Lending
activities and other  investments must comply with various federal statutory and
regulatory   requirements.   The  Bank  is  also  subject  to  certain   reserve
requirements promulgated by the Federal Reserve Board.

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

         The Bank must file  reports  with the OTS and the FDIC  concerning  its
activities  and  financial  condition,   in  addition  to  obtaining  regulatory
approvals  prior to entering into certain  transactions  such as mergers with or
acquisitions  of other savings  institutions.  This  regulation and  supervision
establishes a comprehensive  framework of activities in which an institution can
engage and is intended  primarily for the protection of the SAIF and depositors.
The  regulatory  structure  also  gives  the  regulatory  authorities  extensive
discretion in connection with their  supervisory and enforcement  activities and
examination  policies,  including policies with respect to the classification of
assets and the  establishment  of adequate  loan loss  reserves  for  regulatory
purposes.  Any change in such  regulations,  whether by the OTS, the FDIC or the
Congress could have a material adverse impact on the Company, the Bank and their
operations.

         Deposit  Insurance.  The FDIC is an  independent  federal  agency  that
insures the deposits,  up to prescribed  statutory  limits, of federally insured
banks and savings  institutions  and  safeguards the safety and soundness of the
banking and savings industries. Two separate insurance funds, the Bank Insurance
Fund ("BIF") for commercial banks,  state savings banks and some federal savings
banks, and the SAIF for savings associations, are maintained and administered by
the FDIC. The Bank is a member of the SAIF and its deposit  accounts are insured
by the FDIC, up to the prescribed  limits.  The FDIC has  examination  authority
over all insured  depository  institutions,  including  the Bank,  and has under
certain  circumstances,   authority  to  initiate  enforcement  actions  against
federally insured savings institutions to safeguard safety and soundness and the
deposit insurance fund.

         Assessments.  The  FDIC is  authorized  to  establish  separate  annual
assessment rates for deposit  insurance for members of the BIF and the SAIF. The
FDIC may increase  assessment  rates for either fund if necessary to restore the
fund's  ratio of  reserves  to insured  deposits  to its target  level  within a
reasonable time and may decrease such assessment  rates if such target level has
been met. The FDIC has established a risk-based  assessment system for both SAIF
and BIF members. Under this system, assessments are set within a range, based on
the risk the institution poses to its deposit insurance fund. This risk level is
determined  based on the  institution's  capital  level and the FDIC's  level of
supervisory concern about the institution.

         FDIC  assessments  on SAIF  institutions  currently  range from 0 to 27
basis  points.  In  addition,  legislation  requires  the cost of  prior  thrift
failures to be shared by both the SAIF and the Bank Insurance Fund ("BIF") (Fico
Bond payments).  The Fico Bond  assessment for savings  institutions in 1998 was
approximately $0.61 per $100 in deposits.

         Examination  Fees. In addition to federal deposit  insurance  premiums,
savings  institutions  like the  Bank are  required  by OTS  regulations  to pay
assessments to the OTS to fund the operations of the

                                       18

<PAGE>


OTS. The general assessment is paid on a semi-annual basis and is computed based
on total assets of the institution, including subsidiaries.

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

         Savings  associations  with a greater than  "normal"  level of interest
rate  exposure  will,  in the future,  be subject to a deduction for an interest
rate  risk  ("IRR")  component  which  may  be  from  capital  for  purposes  of
calculating their risk-based  capital  requirement.  See "-- Net Portfolio Value
Analysis."

         Tangible capital is defined as core capital less all intangible  assets
(including  supervisory  goodwill),  plus purchased  mortgage  servicing  rights
valued  at the lower of the  maximum  percentage  established  by the OTS or the
amount   includable  in  core  capital.   Core  capital  is  defined  as  common
stockholders'  equity (including  retained  earnings),  noncumulative  perpetual
preferred  stock and minority  interests in the equity  accounts of consolidated
subsidiaries, and qualifying supervisory goodwill, less nonqualifying intangible
assets.

         The OTS requires a core capital  ratio of at least 3% for those savings
associations  in the strongest  financial and  managerial  condition.  All other
savings  associations  are required to maintain minimum core capital of at least
4% of total adjusted  assets,  with a maximum core capital ratio  requirement of
5%. In determining the required minimum core capital ratio, the OTS assesses the
quality of risk management and the level of risk in each savings  association on
a case-by-case basis.

         The risk-based capital standard for savings  institutions  requires the
maintenance of total  risk-based  capital (which is defined as core capital plus
supplementary  capital)  of  8%  of  risk-weighted  assets.  The  components  of
supplementary capital include, among other items, cumulative perpetual preferred
stock,  perpetual  subordinated debt, mandatory  convertible  subordinated debt,
intermediate-term  preferred  stock and the  portion of the  allowance  for loan
losses not designated for specific loan losses. The portion of the allowance for
loan and lease  losses  includable  in  supplementary  capital  is  limited to a
maximum of 1.25% of  risk-weighted  assets.  Overall,  supplementary  capital is
limited  to 100% of core  capital.  A savings  association  must  calculate  its
risk-weighted  assets by multiplying  each asset and  off-balance  sheet item by
various risk factors as determined  by the OTS,  which range from 0% for cash to
100% for delinquent  loans,  property acquired through  foreclosure,  commercial
loans and other assets.


                                       19

<PAGE>



         As shown  below,  the Bank's  regulatory  capital  exceeded all minimum
regulatory capital requirements applicable to it as of December 31, 1998:

                                                                    Percent of
                                                                     Adjusted
                                                  Amount              Assets
                                                  ------            ----------
                                                    (Dollars in Thousands)
Tangible Capital:
Actual capital................................    $28,740              8.33%
Regulatory requirement........................      5,176              1.50
                                                  -------              ----
  Excess......................................    $23,564              6.83%
                                                   ======              ====

Core Capital:
Actual capital................................    $28,740              8.33%
Regulatory requirement........................     13,801              4.00
                                                   ------              ----
  Excess......................................    $14,939              4.33%
                                                   ======              ====

Risk-Based Capital:
Actual capital................................    $29,988             20.45%
Regulatory requirement........................     11,729              8.00
                                                   ------             -----
  Excess......................................    $18,259             12.45%
                                                   ======             =====


         The Bank is not under any agreement with regulatory  authorities nor is
it aware of any current  recommendations by the regulatory authorities which, if
they were to be implemented,  would have a material effect on liquidity, capital
resources or operations of the Bank or the Company.

         Prompt  Corrective  Action.  The FDICIA  also  established  a system of
prompt   corrective   action  to  resolve  the   problems  of   undercapitalized
institutions.  Under this system,  which became effective December 19, 1992, the
banking  regulators  are required to take certain  supervisory  actions  against
undercapitalized   institutions,   the  severity  of  which   depends  upon  the
institution's  degree of  capitalization.  Under the OTS final rule implementing
the prompt  corrective  action  provisions,  an  institution is deemed to be (i)
"well capitalized",  (ii) "adequately  capitalized",  (iii)  "undercapitalized",
(iv) "significantly undercapitalized",  or (v) "critically undercapitalized". In
addition, under certain circumstances, a federal banking agency may reclassify a
well  capitalized  institution  as  adequately  capitalized  and may  require an
adequately capitalized institution or an undercapitalized  institution to comply
with  supervisory  actions as if it were in the next lower category (except that
the FDIC may not  reclassify a  significantly  undercapitalized  institution  as
critically  undercapitalized).  Immediately upon becoming  undercapitalized,  an
institution shall become subject to various restrictions and could be subject to
additional supervisory actions.

         As of December 31, 1998, the Bank was a "well capitalized  institution"
as  defined  in the  prompt  corrective  action  regulations  and as such is not
subject to any prompt corrective action measures.

         Dividend  and  Other  Capital  Distribution  Limitations.  Federal  law
requires  the Bank to give  the OTS 30  days'  advance  notice  of any  proposed
declaration of dividends to the Company, and the OTS has the authority under its
supervisory  powers to prohibit  the payment of  dividends  to the  Company.  In
addition,  the Bank may not declare or pay a cash  dividend on its capital stock
if the effect thereof would

                                       20

<PAGE>


be to reduce the  regulatory  capital of the Bank below the amount  required for
the liquidation account to be established in connection with the Conversion.

         Finally,  a savings  association  is  prohibited  from making a capital
distribution if, after making the distribution, the savings association would be
"undercapitalized"   (not  meet  any  one  of  its  minimum  regulatory  capital
requirements).  OTS regulations  also prohibit the Bank from declaring or paying
any  dividends  or from  repurchasing  any of its stock  if,  as a  result,  the
regulatory  (or total)  capital  of the Bank  would be reduced  below the amount
required to be maintained  for the  liquidation  account  established  by it for
certain  depositors in connection with its conversion from mutual to stock form.
In addition,  such regulations  prohibit an institution from repurchasing any of
its stock  for a period  of at least  one year  from the date of its  conversion
without a waiver of such prohibition by the OTS.

         Qualified  Thrift Lender Test.  Savings  institutions are to meet a QTL
test. If the Bank maintains an appropriate level of Qualified Thrift Investments
(primarily  residential  mortgages and related  investments,  including  certain
mortgage-backed  securities)  ("QTIs") and otherwise qualifies as a QTL, it will
continue  to enjoy  full  borrowing  privileges  from the FHLB of New York.  The
required  percentage of QTIs is 65% of portfolio  assets  (defined as all assets
minus  intangible  assets,  property used by the  institution  in conducting its
business and liquid  assets equal to 10% of total  assets).  Certain  assets are
subject to a  percentage  limitation  of 20% of portfolio  assets.  In addition,
savings associations may include shares of stock of the FHLBs, FNMA and FHLMC as
qualifying  QTIs. The method for measuring  compliance with the QTL test is on a
monthly basis in nine out of every 12 months.  As of December 31, 1998, the Bank
was in compliance with its QTL requirement.

         A savings association that does not meet a QTL test must either convert
to a bank charter or comply with the following  restrictions  on its operations:
(i) the savings  association  may not engage in any new activity or make any new
investment,  directly or  indirectly,  unless such  activity  or  investment  is
permissible  for a  national  bank;  (ii) the  branching  powers of the  savings
association  shall be restricted to those of a national bank;  (iii) the savings
association shall not be eligible to obtain any advances from its FHLB; and (iv)
payment of  dividends by the savings  association  shall be subject to the rules
regarding  payment of dividends by a national bank. Upon the expiration of three
years from the date the  savings  association  ceases to be a QTL, it must cease
any activity and not retain any investment not  permissible  for a national bank
and  immediately  repay any  outstanding  FHLB  advances  (subject to safety and
soundness considerations).

         Loans-to-One   Borrower.   See  "Business  --  Lending   Activities  --
Loans-to-One Borrower."

         Community  Reinvestment.  Under the Community Reinvestment Act ("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.  Current law requires public disclosure of an institution's
CRA  rating  and  requires  the  OTS  to  provide  a  written  evaluation  of an
institution's CRA performance utilizing a four-tiered  descriptive rating system
in lieu of the existing five-tiered numerical rating system. The Bank received a
satisfactory rating as a result of its last evaluation in March, 1998.


                                       21

<PAGE>



         Transactions With Affiliates.  Generally,  restrictions on transactions
with affiliates require that transactions  between a savings  association or its
subsidiaries  and  its  affiliates  be on  terms  as  favorable  to the  Bank as
comparable  transactions  with  non-affiliates.  In  addition,  certain of these
transactions  are restricted to an aggregate  percentage of the Bank's  capital;
collateral  in  specified  amounts  must  usually be provided by  affiliates  to
receive loans from the Bank.  Affiliates of the Bank include the Company and any
company  which would be under  common  control  with the Bank.  In  addition,  a
savings  association  may not lend to any affiliate  engaged in  activities  not
permissible  for a  bank  holding  company  or  acquire  the  securities  of any
affiliate  which  is not a  subsidiary.  The  OTS has the  discretion  to  treat
subsidiaries of savings associations as affiliates on a case-by-case basis.

         The Bank's  authority to extend credit to its  officers,  directors and
10% shareholders,  as well as to entities that such persons control is currently
governed by Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O
promulgated by the Federal Reserve Board. Among other things,  these regulations
require such loans to be made on terms substantially similar to those offered to
unaffiliated individuals,  place limits on the amount of loans the Bank may make
to such persons  based,  in part, on the Bank's  capital  position,  and require
certain approval  procedures to be followed.  Recent legislation permits savings
institutions  to make  loans  to  executive  officers,  trustees  and  principal
shareholders  ("insiders")  on  preferential  terms,  provided the  extension of
credit is made pursuant to a benefit or compensation program of the Bank that is
widely  available to employees of the Bank or its  affiliates  and does not give
preference to any insider over other employees of the Bank or affiliate.

         Liquidity  Requirements.  All  savings  associations  are  required  to
maintain an average daily balance of liquid assets equal to a certain percentage
of the sum of its average daily balance of net withdrawable deposit accounts and
borrowings payable in one year or less. The liquidity  requirement may vary from
time to time (between 4% and 10%) depending upon economic conditions and savings
flows of all savings  associations.  At the present  time,  the required  liquid
asset ratio is 4%. At December 31, 1998 the Bank's liquidity ratio was 36.11%.

         Federal Home Loan Bank System.  The Bank is a member of the FHLB of New
York,  which is one of 12  regional  FHLBs that  administer  the home  financing
credit  function  of  savings  associations.  Each FHLB  serves as a reserve  or
central bank for its members within its assigned region.  It is funded primarily
from  proceeds  derived from the sale of  consolidated  obligations  of the FHLB
System.  It makes loans to members (i.e.,  advances) in accordance with policies
and procedures established by the Board of Directors of the FHLB.

         As a member, the Bank is required to purchase and maintain stock in the
FHLB of New York in an  amount  equal to at  least  1% of its  aggregate  unpaid
residential  mortgage loans, home purchase contracts,  or similar obligations at
the beginning of each year.  As of December 31, 1998,  the Bank had $2.5 million
in FHLB stock,  which was in compliance  with this  requirement.  For the fiscal
year ended December 31, 1998, dividends paid by the FHLB of New York to the Bank
totaled $256,000.

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


                                       22

<PAGE>



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

         The Bank  operates  from its main  office  located  at 86 Main  Street,
Little Falls, New Jersey and five branch offices,  one of which is leased.  This
includes  three  branches  purchased  from an  unaffiliated  commercial  bank in
December 1996. The Bank's total  investment in office  property and equipment is
$4.2 million with a net book value of $2.6 million at December 31, 1998.

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

         Neither the Company nor its  subsidiaries  are  involved in any pending
legal  proceedings,  other than routine legal matters  occurring in the ordinary
course of business, which in the aggregate involve amounts which are believed by
management to be immaterial to the consolidated  financial  condition or results
of operations of the Company.

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

         Not applicable.

                                     PART II


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

         Information  relating to the market for Registrant's  common equity and
related  stockholder  matters  appears under "Stock Market  Information"  in the
Registrant's 1998 Annual Report to Stockholders ("Annual Report") on page 2, and
is incorporated herein by reference.

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

         The above-captioned information appears in the Annual Report on pages 3
and 4, and is incorporated herein by reference.

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

         The above-captioned  information appears under Management's  Discussion
and  Analysis of Financial  Condition  and Results of  Operations  in the Annual
Report on pages 5 through 10 and is incorporated herein by reference.

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

         The information contained in the Section captioned "Risk Management" in
the Annual Report on page 10 is incorporated herein by reference.

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

         The Financial  Statements of the Bank, together with the report thereon
by Radics & Co.,  LLC,  appear in  the Annual Report on  pages 18 through 58 and
are incorporated herein by reference.


                                       23

<PAGE>


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

         Not applicable.

                                    PART III

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

         The Certificate of  Incorporation  requires that the Board of Directors
be divided into three classes, each of which contains approximately one-third of
the members of the Board.  The directors are elected by the  stockholders of the
Company for staggered  three-year  terms, or until their  successors are elected
and qualified. The Board of Directors currently consists of seven members.

         The  following  table sets forth the  directors  continuing  in office,
their  name,  age,  the year they first  became a director of the Company or the
Bank,  the expiration  date of their current term as a director,  and the number
and percentage of shares of the Common Stock  beneficially owned as of the March
22,  1999.  Each  director  of the  Company  is also a  member  of the  Board of
Directors of the Bank.

<TABLE>
<CAPTION>

                                                                             Shares of
                                        Year First      Current             Common Stock
                                        Elected or      Term to             Beneficially             Percent
Name                        Age(1)      Appointed       Expire              Owned(2)(3)             of Class
----                        ------      ----------      -------         ---------------------       --------
<S>                          <C>         <C>             <C>           <C>                         <C>         
John P. Pullara               67          1995            1999           52,417(9)(10)                2.06%       
                                                                                                    
George Kuiken                 78          1954            1999           25,166(4)(5)(11)             0.99%
                                                                                                    
Raoul G. Barton               74          1970            2001           39,222(4)(5)(6)(7)           1.54%
                                                                                                    
Albert J. Weite               64          1976            2001           38,666(4)(5)(8)              1.52%
                                                                                                    
Norman A. Parker              85          1953            2000           34,366(4)(5)(6)(12)          1.35%
                                                                                                    
Edward J. Seugling            62          1970            2000           26,666(4)(5)(6)(13)          1.05%
                                                                                                    
All Directors and                                                                                   
Executive Officers as a                                                                             
Group (9 persons)                                                       268,296(14)(15)(16)          10.56%
                                                                                             
</TABLE>


                                       24

<PAGE>
------------------------
*        Less than 1.0%.
(1)      As of December 31, 1998.
(2)      As of the March 22, 1999.
(3)      Pursuant  to rules  promulgated  under the 1934 Act, an  individual  is
         considered  to  beneficially  own  shares of Common  Stock if he or she
         directly or indirectly  has or shares (1) voting power,  which includes
         the  power  to vote or to  direct  the  voting  of the  shares;  or (2)
         investment  power,  which  includes  the power to dispose or direct the
         disposition of the shares.  Unless otherwise indicated,  a director has
         sole  voting  power  and sole  investment  power  with  respect  to the
         indicated shares.
(4)      Includes  6,083 shares of Common Stock that have been awarded under the
         Management  Stock Bonus Plan  ("MSBP"),  3,500  shares of Common  Stock
         under the 1997  Directors  Stock  Compensation  Plan ("1997  DSCP") and
         3,500   shares  of  Common  Stock  under  the  1998   Directors   Stock
         Compensation  Plan ("1998 DSCP") which are subject to forfeiture  under
         certain circumstances. Shares awarded under the MSBP, 1997 DSCP and the
         1998 DSCP vest equally over five year periods  beginning  July 9, 1997,
         April 17, 1998 and April 21, 1999, respectively.
(5)      Includes  options to purchase  6,083 shares of Common Stock pursuant to
         the Little Falls  Bancorp,  Inc. 1996 Stock Option Plan Options  ("1996
         Stock Option Plan") which are immediately exercisable within 60 days of
         the Voting Record Date.  See "Item 12.  Director and Executive  Officer
         Compensation - Director Compensation - Stock awards."
(6)      Excludes 241,979 unallocated shares of Common Stock held under the ESOP
         for  which  such  individual  serves  as one of  three  ESOP  trustees.
         Beneficial  ownership  is  disclaimed  with respect to such ESOP shares
         held in a fiduciary capacity.
(7)      Includes  4,190 shares held by Mr.  Barton's IRA,  4,894 shares held by
         the IRA of Mr.  Barton's wife and 118 shares held by Mr. Barton's wife,
         which Mr. Barton may be deemed to beneficially own.
(8)      Includes  14,000 shares held jointly with Mr.  Weite's wife,  with whom
         voting and  dispositive  power is shared,  and 3,000 shares held by Mr.
         Weite's IRA and 2,500 shares held by the IRA of Mr. Weite's wife, which
         Mr. Weite may be deemed to  beneficially  own.  Does not include  6,000
         shares owned by DOB&K, LLC, a partnership between Mr. Weite's children,
         of which Mr. Weite disclaims beneficial ownership.
(9)      Includes  options to purchase 12,167 shares of Common Stock pursuant to
         the Little Falls  Bancorp,  Inc. 1996 Stock Option Plan Options  ("1996
         Stock Option Plan") which are immediately exercisable within 60 days of
         the Voting Record Date.  See "Item 12.  Director and Executive  Officer
         Compensation - Director Compensation - Stock Awards."
(10)     Includes 15,000 shares held jointly with Mr.  Pullara's wife, with whom
         voting and dispositive  power is shared.  Includes  options to purchase
         12,167  shares of Common  Stock  pursuant to the 1996 Stock Option Plan
         which are immediately  exercisable  within 60 days of the Voting Record
         Date. Also includes 18,250 and 3,500 shares of restricted stock awarded
         pursuant to the MSBP,  1997 DSCP and 1998 DSCP, and awards vest equally
         over five year periods beginning July 9, 1997, April 17, 1998 and April
         21, 1999, respectively.
(11)     Includes 1,000 shares owned by Mr. Kuiken's wife,  which Mr. Kuiken may
         be deemed to beneficially own.
(12)     Includes 15,000 shares held in trust, which Mr. Parker may be deemed to
         beneficially  own, and 200 shares held jointly with Mr.  Parker's wife,
         with whom voting and dispositive power is shared.
(13)     Includes 7,390 shares held by Mr. Seugling's IRA and 110 shares held by
         Custom  Graphics & Design,  Inc.,  which Mr.  Seugling may be deemed to
         beneficially own.
(14)     Includes  4,265  allocated  shares of Common Stock held for  individual
         employee  participants under the ESOP.  Excludes  unallocated shares of
         Common stock held under the ESOP. See note (6).
(15)     Includes  options to purchase  63,548  shares of Common Stock which are
         immediately exercisable within 60 days of the Voting Record Date.
(16)     Excludes 241,979 unallocated shares of Common Stock held under the ESOP
         for which such  individual  serves as two of three  members of the ESOP
         Committee. Beneficial ownership is disclaimed with respect to such ESOP
         shares held in a fiduciary capacity.

         The following table sets forth the non-director  executive  officers of
the  Company,  their  name,  age,  the year they first  became an officer of the
Company or the Bank, and their current position with

                                       25

<PAGE>



the Company.  Executive  officers serve for a one-year term at the determination
of the Board of Directors.



                                       Year First 
                                      Appointed as           Position with
Name of Individual         Age(1)       Officer(2)        the Company or Bank
------------------         ------     ------------       ----------------------
Leonard G. Romaine           52           1967            President and Chief
                                                           Executive Officer
Richard A. Capone            49           1995            Vice President, Chief
                                                           Financial Officer
Anne Bracchitta              59           1997            Corporate Secretary

------------------------
(1)      As of December 31, 1998.
(2)      Refers  to the year the  individual  first  became  an  officer  of the
         Company or the Bank.

Biographical Information

         The business  experience of each director and executive  officer of the
Company is set forth below.  All persons have held their  present  positions for
five years unless otherwise stated.

         Directors
         ---------

         Raoul G. Barton was elected  Director of the Bank in 1970 and served as
Chairman  from 1982 to 1994.  Mr. Barton is a member of the Little Falls Masonic
Lodge.  In 1990, Mr. Barton retired as owner of Barton Jewelers which he founded
in 1949.

         George Kuiken has served as Director of the Bank since 1954. Mr. Kuiken
retired as President of New Jersey Rental Equipment, Inc.

         Norman A. Parker has served as a Director  since 1953.  Mr.  Parker was
Chairman  of the Board of the Bank from 1973 to 1981 and  President  of the Bank
from 1965 to 1977. Mr. Parker is a retired funeral director.  Mr. Parker is also
past  President  of the  Passaic  County  Funeral  Directors  Association,  past
President and charter member of the Passaic  Valley Rotary Club,  past member of
the Passaic  Valley School Board,  Elder of the First Reformed  Church,  charter
member of the Little  Falls  Parking  Authority,  charter  member of the Mayor's
Committee for Senior Citizens and member of the Little Falls Masonic Lodge.

         John P.  Pullara  was with the Bank from  March  1955,  serving  as its
President  from 1977 until his  retirement on October 5, 1997.  Mr.  Pullara was
elected  Director of the Bank in June of 1995.  Mr. Pullara is also Director and
Treasurer of the Passaic County Historical Society, Director of the Garden State
Concert Band, Treasurer of the Little Falls Historical Society,  Chairman of the
Little  Falls  Parking  Authority  and a member  of the  Little  Falls  Business
Association.

         Edward J.  Seugling has served as a Director of the Bank since 1970 and
became the Vice  Chairman of the Board of Directors in 1994.  Mr.  Seugling is a
retired  teacher at Passaic  Valley High School and the sole owner of the Little
Falls  Journal.  He is a member of the Little Falls  Business  Association,  the
Little Falls Masonic Lodge,  the Little Falls  Historical  Society,  and the New
Jersey  Education  Association.  He is a member of the First Reformed  Church of
Little  Falls,  and he has served as an elder and  deacon of the First  Reformed
Church. He was formerly Chairman of the Little Falls Rent Leveling Board and was
an associate member of the Little Falls Main Street Development Corp.


                                       26

<PAGE>


         Albert J. Weite has served as Chairman of the Board of Directors of the
Bank  since  1994 and as a  Director  since  1976.  Mr.  Weite is a real  estate
investor.

         Executive Officers who are not Directors
         ----------------------------------------

         Leonard G. Romaine has been  employed by the Bank since 1967. He served
as  Treasurer  and  Secretary  of the  Company  and as  Senior  Vice  President,
Secretary and Treasurer of the Bank until he was appointed President of the Bank
and Company on October 6, 1997.  Mr.  Romaine is a member of the Passaic  County
Attorney Ethics Committee.

         Richard A. Capone  became  employed by the Bank and Company in November
1995 as Chief  Financial  Officer.  Prior to that,  Mr. Capone was controller or
Treasurer at four different local financial institutions over the past 20 years.

         Anne  Bracchitta  has been  employed  by the Bank since  1980.  She was
appointed Corporate Secretary in 1997.


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

Director Compensation

         Directors  Fees.  For  fiscal  year 1998,  each  member of the Board of
Directors  received an attendance fee of $1,450 per regular  meeting.  Committee
members  received  an  additional  $725 per  Asset-Liability  Committee  meeting
attended. No Committee fees are paid to Board members who are employees. For the
year ended  December  31,  1998,  total fees paid by the Company and the Bank to
directors  were  $141,000.  Directors  are  also  provided  with  broad  medical
insurance coverage.

         Directors  Retirement and Consultation Plan. The Bank's Board adopted a
Directors'  Consultation and Retirement Plan (the "Consultation Plan") on May 9,
1995.  Such  Consultation  Plan  provides   retirement  benefits  to  directors.
Management  believes the Consultation Plan will help to insure that the Bank has
the continued services of these persons as directors to assist in the conduct of
the Bank's  business  affairs  in the  future.  A  director  who has served as a
director for at least twenty years shall be a  participant  in the  Consultation
Plan. A consulting director shall be paid a monthly retirement benefit under the
Consultation  Plan  equal to half of the  director  fee in effect at the time of
such  retirement  until the month  following the date of death of the consulting
director.  At the expiration of the period for which the participant is entitled
to benefits,  his status as a  consulting  director  shall  cease.  All benefits
payable under the plan will be paid by the Bank from current  assets.  There are
no tax  consequences  to either  the  director  or the Bank  prior to payment of
benefits.  Upon receipt of payment of  benefits,  the  director  will  recognize
taxable ordinary income in the amount of such payment received and the Bank will
be entitled to recognize a tax-deductible compensation expense. In addition, the
Bank has a policy of continuing medical benefits for its retired directors.  For
the year ended  December 31, 1998, no benefits were paid under the  Consultation
Plan and  approximately  $45,000 was accrued as an expense for the  Consultation
Plan and the continuation of such medical benefits.

         Stock Awards. On July 9, 1996, the stockholders of the Company approved
the Little Falls  Bancorp 1996 Stock Option  ("1996 Stock Option  Plan") and the
Little Falls Bank Management Stock Bonus Plan ("MSBP"). Pursuant to the terms of
the 1996 Stock Option Plan, each non-employee  director received, on the date of
stockholder  approval  options to purchase 15,208 shares of Common Stock.  Under
the MSBP, the same  non-employee  directors  received 6,083 shares of restricted
stock on the date

                                       27

<PAGE>



of stockholder  approval.  The options granted to these  non-employee  directors
become  first  exercisable  at a rate of 20% one year from the date of grant and
20%  annually  thereafter.   Restricted  stock  granted  to  these  non-employee
directors  will vest 20% one year from the date  awarded and an  additional  20%
annually,  thereafter.  In April 1997,  the Company  adopted the 1997  Directors
Stock  Compensation  Plan  authorizing  the  granting of up to 24,500  shares of
Common  Stock  in the  aggregate  (representing  less  than 1% of  total  shares
outstanding  at such time).  Each  non-employee  director  (seven  persons)  was
awarded  3,500  shares of Common  Stock which shall vest over a five year period
beginning  April 17, 1997. In April 1998, the Company adopted the 1998 Directors
Stock  Compensation  Plan  authorizing  the  granting of up to 24,500  shares of
Common  Stock  in the  aggregate  (representing  less  than 1% of  total  shares
outstanding at such time). During 1998, all 24,500 shares were granted under the
plan (3,500 shares to each non-employee director).

Executive Compensation

 Summary  Compensation  Table.  The following table sets forth the  compensation
paid to the chief  executive  officer  during the fiscal year ended December 31,
1998. All compensation paid to directors,  officers and employees is paid by the
Bank.  Except  as  listed  below,  no  other  executive  officer  received  cash
compensation  in excess of $100,000  during the fiscal year ended  December  31,
1998.

<TABLE>
<CAPTION>

                                                                           
                                                                               Long Term Compensation         
                                   Annual Compensation(1)                             Awards                                 
                       -------------------------------------------------  --------------------------------
                                                                                             Securities
                                                                            Restricted       Underlying             All
Name and                                                 Other Annual         Stock           Options/             Other
Principal Position      Year        Salary      Bonus    Compensation(2)      Awards           SARs(#)          Compensation(6)
------------------      ----        ------      -----    ------------         ------           -------          ------------   
<S>                    <C>       <C>         <C>           <C>             <C>              <C>                   <C>   
Leonard G. Romaine,     1998      $125,400    $ 9,000       $17,400
President(3)            1997      $115,000    $15,000       $20,200              --            3,000(3)             42,660
                        1996      $ 89,420    $ 7,750       $15,000          $129,274(4)      30,417(5)             30,176

</TABLE>

------------------------
(1)      All compensation set forth above was paid by the Bank.
(2)      Consists of Board of Director's  fees. For fiscal year 1998, there were
         no (a)  perquisites  over the  lesser  of  $50,000  or 10% of the named
         executive officer's total salary and bonuses for the year; (b) payments
         of above-market  preferential  earnings on deferred  compensation;  (c)
         payments of earnings with respect to long term incentive plans prior to
         settlement  or  maturity:  (d)  tax  payment  reimbursements;   or  (e)
         preferential discounts on stock.
(3)      Options  vest  equally  over a five year period  beginning  December 9,
         1998.
(4)      Based upon 12,167  shares of restricted  stock granted  pursuant to the
         MSBP (fair market value on date of grant of $10.625).  Restricted stock
         vest equally over a five year period beginning July 9, 1997.  Dividends
         are paid on the  restricted  stock and are  accrued and held in arrears
         until the restricted stock for which dividends were paid become vested.
(5)      Options vest equally over a five year period beginning July 9, 1997.
(6)      Includes 1,472 and 2,133 shares of stock held by the ESOP and allocated
         to Mr. Romaine's account for 1996 and 1997, respectively.  Based on the
         closing  price of the Common  Stock  ($20.00 per share) at December 31,
         1998. As of the date of this proxy  statement,  shares had not yet been
         allocated for fiscal 1998.

         Employment  Agreement.  The Bank is a party to an employment  agreement
with President and Chief Executive  Officer  Leonard G. Romaine.  The employment
agreement  is for a term of three  years.  Under the  agreement,  Mr.  Romaine's
employment  is  terminable  by the Bank  for  "just  cause"  as  defined  in the
agreement.  If the Bank  terminates Mr. Romaine  without just cause,  he will be
entitled to a continuation  of his salary from the date of  termination  through
the remaining term of the agreement.  The agreement contains a provision stating
that in the event of  termination  of  employment or diminution of employment in
connection  with,  or within one year after,  any change in control of the Bank,
Mr.  Romaine  will be paid in a lump sum an amount  equal to 2.99 times his five
year  average  cash  compensation.  Had a change in control  been deemed to have
occurred at completion of the last fiscal

                                       28

<PAGE>



year,   Mr.  Romaine  would  have  been  entitled  to  a  lump  sum  payment  of
approximately  $388,000.  The payment  that would be made would be an expense to
the Bank, thereby reducing net income and the Bank's capital by that amount. The
agreement is reviewed annually by the Board of Directors and may be extended for
additional  one-year  periods upon a determination of the Board and satisfactory
job performance within the Board's sole discretion.

         The Bank also  entered into similar  employment  agreements  with eight
officers  of the  Bank,  with  terms of three,  two and one years and  severance
protection  upon  a  termination  of  employment  or  diminution  of  employment
following a change in control with such payment  equalling between one and three
times the current  annual  compensation  of such  individuals.  Upon a change in
control, payment to all executive officers as a group (seven persons), excluding
Mr. Romaine,  as of December 31, 1998,  would have equalled  approximately  $1.0
million.

Other Compensation

         Employee  Stock  Ownership  Plan.  The Bank  maintains  an ESOP for the
exclusive  benefit  of  participating  employees.  Participating  employees  are
employees who have completed one year of service with the Bank or its subsidiary
and have attained the age 21.

         The ESOP be  funded  by  contributions  made by the Bank in cash or the
Common  Stock.  Benefits  may be paid either in shares of the Common Stock or in
cash. The ESOP borrowed funds with which to acquire 243,340 shares of the Common
Stock  issued in the  Conversion,  representing  8.0% of the  Common  Stock then
outstanding.  The loan is secured by the shares  purchased  and earnings of ESOP
assets.  Shares  purchased  with such loan  proceeds  will be held in a suspense
account for allocation  among  participants as the loan is repaid.  This loan is
expected to be fully repaid in approximately 15 years. For the 1998 fiscal year,
the Bank recognized an expense of $299,000 regarding the ESOP.

         1996 Stock Option Plan. The Company's Board of Directors adopted a 1996
Stock Option Plan,  which was approved by the Company's  stockholders on July 9,
1996. Pursuant to the 1996 Stock Option Plan, a number of shares equal to 10% of
the Common Stock issued in the Company's initial public offering (304,175 shares
of Common  Stock) were  reserved for  issuance by the Company  upon  exercise of
stock  options to be granted to officers,  directors,  and key  employees of the
Company (or any present of future parent or  subsidiary  of the  Company),  from
time to time under the 1996 Stock  Option  Plan.  The  purpose of the 1996 Stock
Option Plan is to provide additional  incentive to certain officers,  directors,
and key  employees by  facilitating  their  purchase of a stock  interest in the
Company.  The 1996  Stock  Option  Plan  became  effective  on July 9,  1996 and
provides  for a term of ten years,  after  which no awards  may be made,  unless
earlier  terminated by the Board of Directors  pursuant to the terms of the 1996
Stock Option Plan.

         An initial  grant of stock options under the 1996 Stock Option Plan was
made to officers,  directors,  and key employees  upon the Company's  receipt of
stockholder  approval  on July 9,  1996,  and the option  exercise  price is the
closing  price of the  Common  Stock on the date of  stockholder  approval.  The
initial  grant of stock  options  were the only  options  granted  to  officers,
directors,  and key employees during the fiscal year ended December 31, 1996. In
December 1997,  certain  officers and key employees were granted an aggregate of
16,000 additional  options under the 1996 Stock Option Plan. The option exercise
price is the  closing  price of the  Company's  Common  Stock on the date of the
grant. No options were granted to officers,  directors and key employees  during
the fiscal year ended  December  31, 1998.  As of the Record Date,  15,208 stock
options have been exercised pursuant to the 1996 Stock Option Plan.



                                       29

<PAGE>

<TABLE>
<CAPTION>

         AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
                                OPTION/SAR VALUES
------------------------------------------------------------------------------------------------------------------------------------
                                                                           Number of Securities
                                                                          Underlying Unexercised            Value of Unexercised
                                   Shares                                      Options/SARs              in-the-Money Options/SARs
                                Acquired on             Value               at Fiscal Year-End               at Fiscal Year-End
                                  Exercise            Realized                      (#)                             ($)
           Name                     (#)                  ($)             Exercisable/Unexercisable      Exercisable/Unexercisable(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                <C>                  <C>                              <C>    
Leonard G. Romaine                    0                  $0                   12,767/20,650                     114,066/171,094

</TABLE>


(1)      Based on an exercise price of $10.625 for options granted in the fiscal
         year ended  December  31, 1996,  and $20.00 for options  granted in the
         fiscal year ended December 31, 1996 and the closing price of the Common
         Stock on December 31, 1998 of $20.00.

         Management  Stock Bonus Plan.  The board of  directors  of the Bank has
adopted the MSBP as a method of providing directors,  executive officers and key
employees  of the Bank with a  proprietary  interest  in the Company in a manner
designed to encourage  such persons to remain in the  employment or service with
the Bank.  Awards under the MSBP were made in  recognition of prior and expected
future  services  to the Bank to those  directors,  executive  officers  and key
employees of the Bank responsible for  implementation of the policies adopted by
the board of directors of the Bank, the profitable operation of the Bank, and as
a means of  providing a further  retention  incentive  and direct  link  between
compensation and the  profitability of the Bank. Awards under the MSBP vest at a
rate of 20% per year beginning on the anniversary  date of the date of grant. An
initial grant of 82,732 shares of restricted stock was made on July 9, 1997, the
date of stockholder  approval of the MSBP. No awards were granted under the MSBP
in 1998.

         Defined  Benefit  Plan.  The Bank has a defined  benefit  pension  plan
covering substantially all of its employees.  The benefits are based on years of
service  and  employees'  compensation.  The  Bank's  funding  policy is to fund
pension  costs  accrued.  Contributions  are  intended  to provide  not only for
benefits  attributed to service to date but also for those expected to be earned
in the future.

         All full-time  employees of the Bank are eligible to participate  after
one year of service and  attainment  of age 21. A  qualifying  employee  becomes
fully vested in the Pension Plan upon  completion  of five years service or when
the normal  retirement  age of 65 is  attained.  The Pension Plan is intended to
comply with the Employee  Retirement  Income  Security  Act of 1974,  as amended
("ERISA").

         The Pension Plan  provides for monthly  payments to each  participating
employee  at normal  retirement  age.  The annual  allowance  payable  under the
Pension Plan is equal to 25% of an  employee's  average  monthly  salary,  up to
$650,  plus 40% of average  monthly  salary in excess of $650,  reduced for less
than 25 years of service,  plus 1/4 of 1% of average  monthly salary times years
of service.  If benefits are paid prior to age 65, the benefit specified will be
reduced  by 1/15 for each of the first  five years and 1/30 for each of the next
five  years  and  reduced  actuarially  for each  additional  year by which  the
starting  date of such  benefit  precedes  age 65.  There is a  minimum  monthly
benefit  equal to 2% of monthly  salary,  times years of service up to 10 years.
The Pension Plan also provides for payments in the event of disability or death.
At December 31, 1998,  Mr.  Romaine had 29 years of credited  service  under the
Pension  Plan.  The Bank had a pension  expense of $244,000  for the fiscal year
1998. At December 31, 1998, the Pension Plan had projected  benefit  obligations
greater than plan assets of approximately $1.2 million.


                                       30

<PAGE>



         The following table shows the estimated  annual benefits  payable under
the Pension Plan in calendar year 1998 based on the respective  employee's years
of benefit service and applicable average annual salary, as calculated under the
Pension  Plan.  Benefits  under the  Pension  Plan are not subject to offset for
Social Security benefits. 


                                          Years of Benefit Service
                                          ------------------------
                                 15         20        25        30        35
                                 --         --        --        --        --
                               
$ 20,000..................   $  4,848   $  6,464   $  8,080  $  8,330  $  8,680
  40,000..................     10,398     13,864     17,330    17,830    18,330
  60,000..................     15,948     21,264     26,580    27,330    28,080
  80,000..................     21,498     28,664     35,830    36,830    37,830
 100,000..................     27,048     36,064     45,080    46,330    47,580
 120,000..................     32,598     43,464     54,330    55,830    57,330
 150,000..................     40,823     54,564     68,205    70,080    71,955


         Report of the Compensation Committee on Executive Compensation

         The Bank Compensation  Committee meets annually to review  compensation
paid to the chief executive  officer.  The Committee  reviews various  published
surveys  of  compensation  paid  to  employees  performing  similar  duties  for
depository institutions and their holding companies,  with a particular focus on
the level of  compensation  paid by comparable  stockholder  institutions in and
around the Bank's  market  area,  including  institutions  with total  assets of
between  $100  million  and  $300  million.  Although  the  Committee  does  not
specifically  set  compensation  levels for executive  officers based on whether
particular  financial  goals have been achieved by the Bank,  the Committee does
consider the overall profitability of the Bank when making these decisions.

         During the year ended December 31, 1998, Leonard G. Romaine,  President
received an increase in his base salary from $115,000 to $125,400. The Committee
will consider the annual compensation paid to the presidents and chief executive
officers of publicly owned financial  institutions  nationally,  in the State of
New Jersey and  surrounding  Northeastern  states  with  assets of between  $100
million and $500 million and the individual job  performance of such  individual
in  consideration  of its  specific  salary  increase  decision  with respect to
compensation  to be paid to the  president and chief  executive  officers in the
future.

         Compensation Committee:

               Albert J. Weite
               Edward J. Seugling
               Raoul G. Barton

         Compensation Committee Interlocks and Insider Participation

         The  Compensation  Committee of the Bank during the year ended December
31, 1998 consisted of Directors Weite,  Barton and Seugling,  all members of the
Board of  Directors  of the  Company.  Romaine was a member of the  Compensation
Committee  during fiscal 1998 but did not  participate in matters  involving his
personal compensation.


                                       31

<PAGE>



Performance Graph

         Set forth below is a stock  performance  graph comparing the cumulative
total  shareholder  return on the  Common  Stock with (a) the  cumulative  total
stockholder  return on stocks  included in the Nasdaq Stock Market index and (b)
the cumulative  total  stockholder  return on stocks included in the Nasdaq Bank
index,  as prepared for Nasdaq by the Center for Research in  Securities  Prices
("CRSP") at the University of Chicago.  All three investment  comparisons assume
the  investment  of $100 as of the close of January 5, 1996 (the closing date of
initial issuance of the Common Stock). All of these cumulative total returns are
computed assuming the reinvestment of dividends. In the graph below, the periods
compared were January 5, 1996 and the Company's  fiscal years ending of December
31, 1996, 1997 and 1998.

         There can be no assurance that the Company's  future stock  performance
will be the same or similar to the  historical  stock  performance  shown in the
graph below.  The Company neither makes nor endorses any predictions as to stock
performance.


[GRAPHIC OMITTED]

==========================================================================
                                 1/5/96    12/31/96   12/31/97   12/31/98
--------------------------------------------------------------------------
CRSP Nasdaq U.S. Index             $100      $126        $161       $227
--------------------------------------------------------------------------
CRSP Nasdaq Bank Index             $100      $134        $224       $222
--------------------------------------------------------------------------
Little Falls Bancorp, Inc.         $100      $113        $184       $181
==========================================================================


                                       32

<PAGE>



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

(a)      Security Ownership of Certain Beneficial Owners.

         Persons  and  groups  owning in excess  of 5% of the  Common  Stock are
required  to file  certain  reports  regarding  such  ownership  pursuant to the
Securities  Exchange Act of 1934,  as amended (the "1934  Act").  The  following
table sets forth, as of the March 22, 1999,  persons or groups who own more than
5% of the Common Stock and the ownership of all executive officers and directors
of the Company as a group.  The  information  provided  is based upon  documents
supplied to the Company by the persons  providing such  information  pursuant to
the 1934 Act. The Company does not verify this information.  Other than as noted
below,  management  knows of no  person  or group  that owns more than 5% of the
outstanding shares of Common Stock at the Voting Record Date.


                                                            Percent of Shares of
Name and Address                    Amount and Nature of       Common Stock
of Beneficial Owner                 Beneficial Ownership        Outstanding
-------------------                 --------------------        -----------

First Manhattan Co.
437 Madison Avenue
New York, NY  10022                         198,000(1)             7.99%

Wellington Management Co. LLP
75 State Street
Boston, MA  02109                           126,100(2)             5.09%

Little Falls Bank
Employee Stock Ownership Plan
86 Main Street
Little Falls, NJ  07424                     241,979(3)             9.77%

John Hancock Advisors, Inc.
Post Office Box 111
Boston, MA  02117                           225,000(4)             9.49%

-------------------------------

(1)      Information  provided is based on a Schedule  13G/A dated  February 11,
         1999.
(2)      Information  provided is based on a Schedule  13G/A  dated  February 8,
         1999 filed by Wellington Management Co. LLP.
(3)      The ESOP  purchased  such  shares  for the  exclusive  benefit  of plan
         participants  with funds  borrowed  from the Company.  These shares are
         held  in  a  suspense   account  and  will  be  allocated   among  ESOP
         participants  annually on the basis of compensation as the ESOP debt is
         repaid. The Board of Directors has appointed a committee  consisting of
         John P. Pullara,  Leonard G. Romaine and Della Talerico to serve as the
         ESOP administrative  committee ("ESOP Committee") and Directors Barton,
         Parker and Seugling to serve as the ESOP  trustees  ("ESOP  Trustees").
         The ESOP Committee or the Board  instructs the ESOP Trustees  regarding
         investment of ESOP plan assets.  The ESOP Trustees must vote all shares
         allocated  to  participant  accounts  under  the  ESOP as  directed  by
         participants.  Unallocated shares and shares for which no timely voting
         direction is received will be voted by the ESOP Trustees as directed by
         the ESOP  Committee.  As of March  11,  1999,  33,927  shares  had been
         allocated under the ESOP to participant accounts.
(4)      Information  provided is based on a Schedule  13G/A  dated  January 13,
         1999. JHA has direct  beneficial  ownership of 225,000 shares of common
         stock. Through separate Advisory Agreements, JHA has sole power to vote
         120,000  shares for the John Hancock  Regional Fund and 105,000  shares
         for the John Hancock and Thrift Opportunity Fund.


                                       33

<PAGE>



(b)      Security Ownership of Management.

         Included under Item 10 of this report.

(c)      Changes in Control.

         On January 26, 1999,  the Registrant  entered into a definitive  merger
agreement that will result in the  acquisition of the Registrant by HUBCO,  Inc.
This  acquisition  is expected to occur during the third fiscal  quarters of the
Registrant's  1999 fiscal  year.  The  Registrant  has  executed a stock  option
agreement with HUBCO,  Inc. that provides  HUBCO,  Inc. with options that may be
exercised for  approximately  19.9% of the common stock of the  Registrant at an
exercise price of $19.25 per share in the event the planned acquisition does not
occur. The planned acquisition is subject to numerous conditions.


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

         No directors,  executive officers,  or immediate family members of such
individuals  were  engaged  in  transactions  with  the  Bank or any  subsidiary
involving   more  than  $60,000   during  the  year  ended  December  31,  1998.
Furthermore,  the Bank had no "interlocking"  relationships  existing during the
year ended  December 31, 1998 in which (i) any executive  officer is a member of
the  Board of  Directors/Trustees  of  another  entity,  one of whose  executive
officers  is a member  of the  Bank's  Board  of  Directors,  or where  (ii) any
executive  officer is a member of the compensation  committee of another entity,
one of whose executive officers is a member of the Bank's Board of Directors.

         The Bank,  like many financial  institutions,  has followed a policy of
granting various types of loans to officers, directors, and employees. All loans
to executive  officers and  directors of the Bank have been made in the ordinary
course of business and on substantially the same terms and conditions, including
interest rates and  collateral,  as those  prevailing at the time for comparable
transactions  with the Bank's other customers,  and do not involve more than the
normal risk of  collectibility  nor present other unfavorable  features.  Recent
legislation  permits savings  institutions to make loans to executive  officers,
trustees and principal shareholders ("insiders") on preferential terms, provided
the extension of credit is made pursuant to a benefit or compensation program of
the Bank that is widely available to employees of the Bank or its affiliates and
does not give  preference  to any insider  over other  employees  of the Bank or
affiliate.  All loans by the Bank to its directors  and  executive  officers are
subject  to OTS  regulations  restricting  loans  and  other  transactions  with
affiliated persons of the Bank. Loans to executive officers and directors of the
Bank, the Company and their  affiliates  amounted to  approximately  $684,000 or
2.19% of the Bank's retained earnings at December 31, 1998.


                                       34

<PAGE>



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

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

         (1) Financial  Statements of the Company are  incorporated by reference
to the following indicated pages of the Annual Report.

                                                                           PAGE
                                                                           ----

Independent Auditors' Report.........................................        18
Consolidated Statements of Financial Condition as of
  December 31, 1998 and 1997.........................................        19
Consolidated Statements of Income for the Years Ended
  December 31, 1998, 1997 and 1996...................................        20
Consolidated Statements of Comprehensive Income
  for the Years Ended December 31, 1998, 1997 and 1996...............        21
Consolidated Statements of Changes in Stockholders' Equity
  for the Years Ended December 31, 1998, 1997 and 1996...............     22-23
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1998, 1997 and 1996...................................     24-25
Notes to Consolidated Financial Statements...........................     26-58


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

         (2)  All  schedules  are  omitted  because  they  are not  required  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.

          2.0   Branch Sale Agreement**
          3.1   Articles of Incorporation of Little Falls Bancorp, Inc.*
          3.2   Bylaws of Little Falls Bancorp, Inc.*
          4.0   Form of Stock Certificate of Little Falls Bancorp, Inc.*
         10.1   Employment Agreement between the Bank and John P. Pullara**
         10.2   Employment Agreement between the Bank and Leonard G. Romaine**
         10.4   Form of Employment Agreement with Eight Employees of the Bank***
         10.6   1996 Management Stock Bonus Plan***
         10.7   1996 Stock Option Plan***
         10.8   1997 Directors Stock Compensation Plan
         10.9   1998 Directors Stock Compensation Plan
         10.10  Directors Retirement and Consultation Plan
         13.0   1998 Annual Report to Stockholders
         21.0   Subsidiary of  the  Registrant (See Item 1 - Business-Subsidiary
                Activities)
         23.0   Consent of Accountants
         27.0   Financial Data Schedule****

                                       35

<PAGE>




                (b)   Reports on Form 8-K.

                On November 12, 1998  the  Registrant  filed a Current Report on
                Form 8-K  (Items 5 and 7),  announcing  the  termination of  the
                Agreement  of  Merger  between   the  Registrant  and   Skylands
                Community Bank.

------------------------
*        Incorporated  herein by reference  into this document from the Exhibits
         to  Form  S-1,  Registration   Statement,   initially  filed  with  the
         Securities and Exchange  Commission on September 25, 1995 (Registration
         No. 33-97316).

**       Incorporated  by  reference  into this  document  from the  Exhibits to
         Registrant's Annual Report on Form 10-K for the Year Ended December 31,
         1995 (File No. 0-27010).

***      Incorporated  by  reference  into this  document  from the  Exhibits to
         Registrant's Annual Report on Form 10-K for the year ended December 31,
         1996 (File No. 0-27010).

****     In electronic filing only.


                                       36

<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.

                                       LITTLE FALLS BANCORP, INC.

Dated:  __________ ___, 1999           By:  /s/ Leonard G. Romaine   
                                            ------------------------------------
                                            Leonard G. Romaine
                                            President and Director
                                            (Duly Authorized Representative)

          Pursuant to the  requirement 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 and on the dates indicated.


By:   /s/ Albert J. Weite                By:  /s/ Richard A. Capone  
      ---------------------------------       ----------------------------------
      Albert J. Weite                         Richard A. Capone
      Chairman of the Board                   Chief Financial Officer
      and Director                            (Principal Financial and
                                               Accounting Officer)
Date: March 19, 1999                     Date: March 19, 1999


By:   /s/ Edward J. Seugling             By:   
      ---------------------------------       ----------------------------------
      Edward J. Seugling                      John P. Pullara
      Vice Chairman of the Board              Director
      and Director                            

Date: March 19, 1999                     Date: __________ ___, 1999


By:   /s/ George Kuiken                  By:   /s/ Norman A. Parker 
      ---------------------------------        ---------------------------------
      George Kuiken                            Norman A. Parker
      Director                                 Director

Date: March 19, 1999                     Date: March 19, 1999


By:   ---------------------------------
      Raoul G. Barton
      Director

Date: __________ ___, 1999