SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             ----------------------
                                    FORM 10-Q
(Mark One)

|X|      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended    September 30, 1998                          
                               -------------------------------------------------

                                       OR

|_|      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from                         to
                               -----------------------    ----------------------

                         Commission file number 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, Little Falls, New Jersey                           07424
--------------------------------------------------------------------------------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code    (973) 256-6100           
                                                  ------------------------------

                                       N/A
--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report

     Indicate  by check x 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
                                              ---    ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock, as of the latest practicable date November 10, 1998.

             Class                                                Outstanding 
---------------------------                                     ----------------
$.10 par value common stock                                     2,477,525 shares


<PAGE>

                           LITTLE FALLS BANCORP, INC.
                                    FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998

                                      INDEX

                                                                         Page
                                                                         Number
                                                                         -------
PART I - CONSOLIDATED FINANCIAL INFORMATION OF LITTLE FALLS
         BANCORP, INC.

Item 1.  Financial Statements and Notes Thereto..........................     1
Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations.............................     7

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings...............................................     15
Item 2.  Changes in Securities...........................................     15
Item 3.  Defaults upon Senior Securities.................................     15
Item 4.  Submission of Matters to a Vote of Security Holders.............     15
Item 5.  Other Materially Important Events...............................     15
Item 6.  Exhibits and Reports on Form 8-K................................     15

SIGNATURES


<PAGE>



                           LITTLE FALLS BANCORP, INC.
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                             September 30,      December 31,
                                                                 1998              1997
                                                             -------------      ------------
<S>                                                         <C>                 <C>         
ASSETS
Cash and due from banks.................................      $5,885,679          $2,737,709
Interest-bearing deposits in other banks................         687,321             550,522
Federal funds sold......................................       6,250,000           3,500,000
                                                             -----------         -----------
     Total cash and cash equivalents....................      12,823,000           6,788,231
Investment securities held-to-maturity net
  (estimated fair values $52,025,000
  and $58,129,000)......................................      51,693,173          57,987,644
Investment securities available for sale................      33,922,292                  --

Mortgage-backed securities held to maturity, net
  (estimated fair values $69,477,000
  and $91,246,000)......................................      69,242,702          90,957,446
Mortgage-backed securities available for sale...........       6,848,503          13,929,048
Loans receivable, net...................................     152,831,119         147,033,259
Premises and equipment, net.............................       2,630,104           2,617,175
Investment in real estate, net..........................          81,281             427,317
Foreclosed real estate, net.............................         367,200             604,219
Interest receivable, net................................       2,571,746           2,079,091
Federal Home Loan Bank of New York stock, at cost.......       3,767,600           2,517,600
Excess of cost over assets acquired.....................       2,585,640           2,856,230
Other assets............................................       1,336,753             725,234
                                                             -----------         -----------
      TOTAL ASSETS......................................    $340,701,113        $328,522,494
                                                             ===========         ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Deposits..............................................    $233,543,693        $230,132,675
  Securities sold under agreements to repurchase........      68,377,000          58,719,500
  Accounts payable and other liabilities................       1,617,622           1,375,658
                                                             -----------         -----------
      Total liabilities.................................     303,538,315         290,227,833
                                                             -----------         -----------
Stockholders' Equity:
  Preferred stock; 5,000,000 authorized shares;
    none outstanding....................................              --                  --
  Common stock, par value $.10; 10,000,000
     authorized shares; 3,041,750 issued;
     2,477,525 and 2,607,921 outstanding................         304,175             304,175
  Additional paid-in-capital............................      29,177,623          29,067,633
  Retained earnings - substantially restricted..........      19,307,810          18,275,517
  Common Stock acquired ESOP............................      (1,984,762)         (2,106,432)
  Unearned restricted MSBP stock, at cost...............      (1,101,818)         (1,329,167)
  Treasury stock, at cost; 564,225 and 433,829 shares...      (8,191,308)         (5,632,286)
  Unrealized losses in securities available
    for sale, net of deferred taxes.....................        (135,205)            (71,062)
  Minimum pension liability.............................        (213,717)           (213,717)
                                                                --------            --------
      Total stockholders' equity........................      37,162,798          38,294,661
                                                             -----------         -----------
      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........    $340,701,113        $328,522,494
                                                             ===========         ===========
</TABLE>

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

*    The consolidated balance sheet at December 31, 1997 has been taken from the
     audited  balance  sheet at that date. 

     See notes to unaudited consolidated financial statements.

                                        1

<PAGE>

                           LITTLE FALLS BANCORP, INC.
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                     For the Three Months                  For the Nine Months
                                                                     Ended September 30,                   Ended September 30,
                                                                1998                  1997              1998                 1997
                                                             ----------            -----------       -----------         -----------
<S>                                                         <C>                    <C>              <C>                 <C>      
Interest income:                                                                                                       
  Loans receivable..................................         $2,827,929             $2,616,791        $8,470,672         $7,112,288
  Mortgage-backed securities........................          1,300,446              1,799,175         4,455,356          5,357,533
  Investment securities and other interest earning                                                                     
    assets..........................................          1,522,563                932,442         4,230,918          2,830,882
                                                              ---------              ---------        ----------         ----------
Total interest income...............................          5,650,938              5,348,408        17,156,946         15,300,703
                                                              ---------              ---------        ----------         ----------
Interest expense:                                                                                                      
  Deposits..........................................          2,600,168              2,570,720         7,790,124          7,639,391
  Borrowings........................................          1,145,111                751,279         3,241,342          1,712,174
                                                              ---------              ---------        ----------         ----------
Total interest expense..............................          3,745,279              3,321,999        11,031,466          9,351,565
                                                              ---------              ---------        ----------         ----------
Net interest income before provision for loan                                                                          
losses..............................................          1,905,659              2,026,409         6,125,480          5,949,138
Provision for loan losses...........................             60,000                 60,000           180,000            180,000
                                                              ---------             ----------        ----------         ----------
  Net interest income after provisions for loan                                                                        
  losses............................................          1,845,659              1,966,409         5,945,480          5,769,138
                                                              ---------              ---------        ----------         ----------
Total non-interest income...........................            116,520                 68,034           281,146            364,691
                                                              ---------             ----------        ----------         ----------
                                                                                                                       
Non-interest expense:                                                                                                  
  Compensation and employee benefits................            605,316                661,711         2,045,612          1,915,351
  Occupancy, net....................................             68,585                 67,471           226,313            218,422
  Equipment.........................................             98,407                101,510           322,117            323,245
  Deposit insurance premiums........................             29,844                 29,786            89,826             95,800
  Loss (income) on foreclosed real estate...........             (3,471)                27,337            13,421             66,440
  Amortization of deposit premium...................             90,197                 90,197           270,590            270,590
  Miscellaneous expense.............................            364,594                370,789         1,104,480          1,058,032
                                                              ---------              ---------        ----------         ----------
Total non-interest expenses.........................          1,253,472              1,348,801         4,072,359          3,947,880
                                                              ---------              ---------        ----------         ----------
Income before provision for income taxes............            708,707                685,642         2,154,267          2,185,949
Provision for income taxes..........................            226,000                229,000           719,050            815,000
                                                              ---------              ---------        ----------         ----------
    Net income......................................            482,707                456,642         1,435,217          1,370,949
                                                              ---------              ---------        ----------         ----------
Other comprehensive income, net of income taxes:                                                                       
  Unrealized holding losses on Securities available                                                                    
  for sale, net of income taxes.....................           (227,357)               (46,417)          (44,995)           (46,417)
Less gains on disposition of securities available                                                                      
  for sale, net of income taxes.....................            (19,148)                    -            (19,148)                 -
                                                              ---------                -------        ----------            -------
    Total other comprehensive income                           (246,505)               (46,417)          (64,143)           (46,417)
                                                              ---------              ---------        ----------        -----------
    Comprehensive income                                      $ 236,202              $ 410,225       $ 1,371,074        $ 1,324,532
                                                               ========               ========        ==========        ===========
See notes to unaudited consolidated financial statements.                                                              
                                                                                                                       
Weighted average number of common shares                                                                               
  outstanding:                                                                                                         
                           basic                              2,190,046              2,371,363         2,209,637          2,402,618
                                                              =========              =========         =========          =========
                           diluted                            2,282,214              2,461,826         2,317,936          2,467,004
                                                              =========              =========         =========          =========
Earnings per share:                                                                                                   
                           basic                                  $0.22                  $0.19             $0.65              $0.57
                                                                   ====                   ====              ====               ====
                           diluted                                $0.21                  $0.19             $0.62              $0.56
                                                                   ====                   ====              ====               ====
                                                         
</TABLE>



                                        2

<PAGE>

                           LITTLE FALLS BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                               
<TABLE>
<CAPTION>
                                                                                        For the Nine Months
                                                                                        Ended September 30,
                                                                                --------------------------------
                                                                                    1998                 1997
                                                                                --------------       -----------
                                                                                
<S>                                                                               <C>                <C>      

Cash flows from operating activities:
  Net income..............................................................         $1,435,217         $1,370,949
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Depreciation..........................................................             99,401             99,460
    Provision for loan losses.............................................            180,000            180,000
    Provision for losses on foreclosed properties.........................                 --             27,356
    Amortization of intangibles...........................................            270,590            270,591
    Amortization (accretion) of deferred fees, premiums and discounts, net            183,501            120,508
    Amortization of unearned ESOP shares..................................            231,660            177,719
    Amortization of unearned restricted MSBP stock, at cost...............            227,349            283,221
    Loss on sale of foreclosed real estate................................              8,162             39,067
    Gain on sale of real estate held for investment.......................            (37,911)          (106,318)
    Gain on sale of mortgage-backed securities available for sale.........            (29,910)                --
    Decrease (increase) in other assets...................................           (572,820)           258,193
    Increase in interest receivable, net..................................           (492,655)          (795,295)
    Increase (decrease) in interest payable...............................            (45,228)           471,595
    Increase in accounts payable and other liabilities....................            266,150            199,426
                                                                                 ------------       ------------
      Net cash provided by operating activities...........................          1,723,506          2,596,472
                                                                                 ------------       ------------
Cash flows from investing activities:
    Principal collections on mortgage-backed securities held to maturity..         21,638,349         15,365,831
    Purchase of mortgage-backed securities available for sale.............         (4,961,068)        (9,865,157)
    Principal collections on mortgage-backed securities available for sale          3,751,899                 --
    Purchase of loans.....................................................                 --        (15,096,510)
    Purchases of investments available for sale...........................        (34,135,347)                --
    Net increase in loans receivable......................................         (5,989,555)       (13,049,530)
    Maturity of investments held to maturity..............................         18,000,000          6,342,000
    Proceeds from sale of mortgage-backed security available for sale.....          8,323,081                 --
    Purchase of investments held to maturity..............................        (11,694,185)        (8,000,000)
    Purchases of premises and equipment...................................           (108,910)           (60,123)
    Proceeds from sale of real estate held for investment.................            380,528            248,378
    Proceeds from sale of foreclosed real estate..........................            228,857            344,333
    Purchases of Federal Home Loan Bank of New York stock.................         (1,250,000)          (146,300)
                                                                                 ------------        -----------
      Net cash used in investing activities...............................         (5,816,351)       (23,917,078)
                                                                                 ------------       ------------
 Cash flows from financing activities:
   Net increase (decrease) in deposits....................................          3,432,060         (2,096,778)
   Net increase in borrowed funds.........................................          9,657,500         24,876,000
   Increase in advances from borrowers....................................                 --             29,584
   Repurchase of common stock.............................................         (2,559,022)        (2,355,282)
   Purchase of MSBP stock.................................................                 --         (1,688,171)
   Cash dividends paid....................................................           (402,924)          (287,462)
                                                                                 -------------      -------------
     Net cash provided by financing activities............................         10,127,614         18,477,891
                                                                                 ------------       ------------
     Decrease in cash and cash equivalents................................          6,034,769         (2,842,715)
Cash and cash equivalents:
  Beginning of period.....................................................          6,788,231         10,373,964
                                                                                 ------------       ------------
  End of period...........................................................         12,823,000          7,531,249
                                                                                 ============       ============
Supplemental disclosures:
Cash paid during the year for:
  Interest................................................................        $11,076,694        $ 8,877,270
  Income taxes............................................................          1,006,114            668,000
Unrealized losses on securities available for sale,
  net of income tax.......................................................            (64,143)           (46,417)

</TABLE>

    See notes to unaudited consolidated financial statements.

                                        3

<PAGE>

                           LITTLE FALLS BANCORP, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - PRINCIPLES OF CONSOLIDATION

         The consolidated  financial statements as of and for the three and nine
         month periods ended September 30, 1998 and 1997 include the accounts of
         Little Falls Bancorp,  Inc. (the "Company") and its subsidiary,  Little
         Falls Bank (the "Bank") which became the wholly owned subsidiary of the
         Company on  January  5,  1996.  The  Company's  business  is  conducted
         principally through the Bank. All significant intercompany accounts and
         transactions have been eliminated in consolidation.

NOTE 2 - BASIS OF PRESENTATION

         The  accompanying  consolidated  financial  statements were prepared in
         accordance  with  instructions  for Form  10-Q and,  therefore,  do not
         include  all  information  necessary  for a  complete  presentation  of
         consolidated financial condition, results of operations, and cash flows
         in conformity with generally accepted accounting  principles.  However,
         all adjustments, consisting of normal recurring accruals, which, in the
         opinion of  management,  are necessary for a fair  presentation  of the
         consolidated  financial  statements have been included.  The results of
         operations  for the periods  ended  September 30, 1998 and 1997 are not
         necessarily  indicative  of the results  which may be expected  for the
         entire fiscal year or any other period.

         These  statements  should be read in conjunction  with the consolidated
         financial  statements  and  related  notes  which are  incorporated  by
         reference  in the  Company's  Annual  Report  on Form 10-K for the year
         ended December 31, 1997.

NOTE 3 - EARNINGS PER SHARE

         During the quarter ended March 31, 1998, the Company adopted  Statement
         of Financial Accounting Standards  ("Statement") No. 128, "Earnings Per
         Share" and has restated  previously  reported per share amounts.  Under
         the new  standard,  basic  earnings  per share is  computed by dividing
         income  applicable to common shares by the weighted  average  number of
         common shares  outstanding  for the period  (excluding  any  dilution).
         Diluted  earnings  per  share  includes  the  effect  of  all  dilutive
         potential  common  shares  outstanding  during the  period.  Sources of
         potential common shares include  unearned shares and outstanding  stock
         options.

NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS

               Accounting  for Transfers  and Servicing of Financial  Assets and
         Extinguishments  of Liabilities.  The  Financial  Accounting  Standards
         Board  ("FASB")  issued   Statement  of Financial  Accounting  Standard
         ("SFAS") No. 125,  Accounting  for Transfers and Servicing of Financial
         Assets and  Extinguishments of  Liabilities (SFAS No. 125) and SFAS No.
         127,  Deferral of  the  Effective  Date of Certain  Provisions  of FASB
         Statement  No.  125  (SFAS  No.  127)  in   June  and  December   1996,
         respectively.  SFAS No. 125 provides accounting and reporting standards
         for  transfers and servicing of financial assets and extinguishments of
         liabilities.  It  requires  entities to recognize  servicing assets and
         liabilities  for all contracts to service financial assets,  unless the
         assets  are  securitized  and all servicing is retained.  The servicing
         assets  will be measured initially at fair value, and will be amortized
         over the estimated useful lives of the servicing  assets.  In addition,
         the  impairment  of  servicing  assets  will  be  recognized  through a
         valuation allowance.

                                        4

<PAGE>

          SFAS No. 125 also addresses the accounting and reporting standards for
          securities lending,  dollar-rolls,  repurchase  agreements and similar
          transactions.  The Company has  prospectively  adopted SFAS No. 125 on
          January 1, 1997. However, in accordance with SFAS No. 127, the Company
          deferred adoption of the standard as it relates to securities lending,
          dollar-rolls,  repurchase  agreements and similar  transactions  until
          January 1, 1998.  The adoption of SFAS No. 125 did not have a material
          impact on its consolidated financial statements.

               Comprehensive  Income.  Effective  January 1, 1998,  the  Company
          adopted Statement No. 130, "Reporting Comprehensive Income." Statement
          No. 130 requires the reporting of comprehensive  income in addition to
          net income from  operations.  Comprehensive  income is more  inclusive
          financial  reporting  methodology that includes  disclosure of certain
          financial information that historically has not been recognized in the
          calculation  of net income.  As required,  the provisions of Statement
          No.  130  have  been  retroactively  applied  to  previously  reported
          periods.  The application of Statement No. 130 had no material adverse
          effect  on  the   Company's   consolidated   financial   condition  or
          operations.

              Employers' Disclosures  about  Pensions and  Other  Postretirement
          Benefits.  In February 1998, the FASB issued SFAS No. 132, "Employers'
          Disclosures  about Pensions and Other  Postretirement  Benefits." This
          statement  supersedes the disclosure  requirements  in FASB statements
          No. 87,  "Employers'  Accounting for  Pensions,"  No. 88,  "Employers'
          accounting for Settlements and Curtailments of Defined Benefit Pension
          Plans  and  for  Termination   Benefits,"  and  No.  106,  "Employers'
          Accounting  for  Postretirement  Benefits Other Than  Pensions."  This
          statement addresses  disclosures only. It does not address measurement
          or recognition  and, as such, will not have any impact on consolidated
          financial condition or operations. The disclosure requirements of SFAS
          No. 132 are effective for fiscal years  beginning  after  December 15,
          1997.

              Accounting for Derivative  Instruments and Hedging Activities.  In
          June 1998,  the FASB issued SFAS No. 133,  "Accounting  for Derivative
          Instruments  and  Hedging  Activities."  This  Statement   establishes
          accounting and reporting standards for derivative  instruments and for
          hedging   activities.   It  requires  that  an  entity  recognize  all
          derivatives  as  either  assets or  liabilities  in the  statement  of
          financial  position and measure those  instruments  at fair value.  In
          addition,  certain  provisions of this statement  will permit,  at the
          date of  initial  adoption  of this  Statement,  the  transfer  of any
          held-to-maturity  security  into  either  the  available  for  sale or
          trading  category and the transfer of any  available for sale security
          into  the  trading  category.   Transfers  from  the  held-to-maturity
          portfolio at the date of initial  adoption will not call into question
          the entity's  intent to hold other debt  securities to maturity in the
          future.  This Statement is effective for all fiscal quarters of fiscal
          years  beginning  after June 15,  1999 and is not  expected  to have a
          material  impact on the  Company.  The  Company  at this time does not
          intent to adopt SFAS No. 133 earlier than required.

NOTE 5 -  SUBSEQUENT EVENT - TERMINATION OF AGREEMENT OF MERGER

              On August 12,  1998,  the Company  and  Skylands  Community  Bank,
         Hackettstown,  New Jersey  ("Skylands"),  entered into an Agreement and
         Plan of Reorganizations  and Merger  ("Agreement"),  pursuant to which,
         subject to the  conditions  and upon the terms stated  therein,  Little
         Falls  would  have  merged  with and into a new  company  ("Acquisition
         Corp.") organized to effect the reorganization, and the Bank would have
         been merged with and into Skylands Bank. Skylands and Acquisition Corp.
         would have been the surviving  entities and operated under the names of
         "Skylands  Community  Bank"  and  "Little  Falls  the  Company,  Inc.,"
         respectively  (the two mergers are  collectively  referred to herein as
         the "Mergers").

                                        5

<PAGE>

              In accordance with the Agreement,  each share of the common stock,
         $.10 par value per share,  of the Company ("the Company  Common Stock")
         outstanding immediately prior to the effective time of the Mergers (the
         "Effective  Time") would at the  Effective  Time be converted  into one
         share of the common stock,  $2.50 par value per,  share of  Acquisition
         Corp.  ("Acquisition Corp. Common Stock"), and each share of the common
         stock, $2.50 par value per share, of Skylands ("Skylands Common Stock")
         outstanding  immediately  prior  to the  Effective  Time  would  at the
         Effective Time be converted into the right to receive eight-tenths (.8)
         shares of Acquisition Corp. Common Stock. The Company  shareholders and
         Skylands  shareholders,  upon  completion  of the  Mergers,  would  own
         approximately  57%  and 43% of  Acquisition  Corp.,  respectively.  The
         Mergers would have been accounted for as a "pooling of interests."

              On November 5, 1998,  the Company and Skylands  announced that the
         parties had mutually  agreed to  terminate  the  Agreement  and related
         Stock  Option  Agreements.  In  connection  with the  termination,  the
         Company  expects to write-off  $200,000 in expenses  during the quarter
         ending December 31, 1998.


                                        6

<PAGE>

                           LITTLE FALLS BANCORP, INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                  ---------------------------------------------

         The Private  Securities  Litigation  Reform Act of 1995  contains  safe
harbor  provisions  regarding  forward-looking  statements.  When  used  in this
discussion, the words "believes," "anticipates,"  "contemplates," "expects," and
similar expressions are intended to identify  forward-looking  statements.  Such
statements  are  subject to certain  risks and  uncertainties  which could cause
actual  results to differ  materially  from  those  projected.  Those  risks and
uncertainties  include  changes in interest  rates,  risks  associated  with the
effect of opening a new branch,  the ability to control costs and expenses,  and
general economic  conditions.  The Company  undertakes no obligation to publicly
release the results of any revisions to those forward looking  statements  which
may be made to  reflect  events or  circumstances  after  the date  hereof or to
reflect the occurrence of unanticipated events.

General

         The Company is a New Jersey corporation organized in August 1995 at the
direction  of the Board of  Directors  of the Bank to acquire all of the capital
stock of the Bank issued in 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.

         The Bank is a federally  chartered stock savings bank  headquartered in
Little  Falls,  New Jersey.  The Bank was founded in 1887 and its  deposits  are
federally  insured by the Savings  Association  Insurance  Fund ("SAIF") and the
Bank is a member of the Federal Home Loan Bank  ("FHLB")  System.  The Bank is a
community oriented, full service retail savings institution offering traditional
mortgage  loan  products.  It is the  Bank's  intent to  remain  an  independent
community savings bank serving the local banking needs of its community.

         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.  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.

         The  largest  components  of the Bank's  net  income  are net  interest
income,  which is the difference  between interest income and interest  expense,
and noninterest  income derived  primarily from fees.  Consequently,  the Bank's
earnings are dependent on its ability to originate  loans,  net interest income,
and  the  relative  amounts  of  interest-earning  assets  and  interest-bearing
liabilities.  The Bank's net income is also  affected by its  provision for loan
losses  and  foreclosed  real  estate  as well  as the  amount  of  non-interest
expenses,  such as  compensation  and benefit  expense,  occupancy and equipment
expense and deposit insurance  premium  expenses.  Earnings of the Bank also are
affected   significantly  by  general   economic  and  competitive   conditions,
particularly  changes in market interest rates,  government policies and actions
of regulatory authorities.

Comparison of Financial Condition

         Total  assets  increased  by $12.2  million at  September  30,  1998 as
compared  to December  31,  1997.  Net loans  increased  by $5.8  million due to
mortgage  originations,  including second  mortgages,  of $19.8 million,  offset
somewhat by loan repayments. Mortgage-backed securities (including those

                                        7

<PAGE>

available  for sale)  decreased by $28.8  million due to repayments of principal
and the sale of a security  with a balance of $8.3  million  offset  somewhat by
securities purchased. Investment securities (including those available for sale)
increased by $27.6 million primarily due to purchases exceeding maturities.

         Total deposits  increased,  after interest  credited,  by $3.4 million.
Borrowed  funds  increased by $9.7  million as the Bank took  advantage of lower
interest  rates to fund investing and lending  activities,  and to allow for the
maturing and withdrawal of high yielding savings deposits.

         Total stockholders' equity decreased by $1.1 million,  primarily due to
the  purchase  of  shares of  Company  stock  pursuant  to the  Company's  stock
repurchase program (130,396 shares at an average price of approximately  $19.625
per share) and to dividends paid, offset somewhat by earnings during the period.

Non-performing Assets

         The following  table sets forth  information  regarding  non-performing
loans and real estate owned.

                                              At the               At the
                                          Nine Months Ended     Year Ended
                                          September 30,1998   December 31, 1997
                                          -----------------   -----------------
                                                 (Dollars in Thousands)

Total non-performing loans.............      $  953              $ 1,284
Real estate owned......................         367                  604
                                              -----                -----
Total non-performing assets............      $1,320               $1,888
                                              =====                =====
Total non-performing loans to                                   
  net loans............................        0.62%                0.87%
                                              =====                =====
Total non-performing loans to                                   
  total assets.........................        0.28%                0.39%
                                              =====                =====
Total non-performing assets to                                  
  total assets.........................        0.39%                0.57%
                                              =====                =====
                                                            

Comparison of Earnings  for the Three and Nine Months Ended  September  30, 1998
and 1997

         Net Income.  Net income for the three and nine months  ended  September
30, 1998 increased $26,000 and $64,000,  respectively,  over the same periods in
1997.  For the three months ended  September 30, 1998 the increase was primarily
due to an increase in  non-interest  income and  decreases in  compensation  and
employee  benefits and loss (income) on foreclosed real estate,  offset somewhat
by a decrease in net interest  income.  For the nine month period,  the increase
was  primarily  due to an increase in net interest  income and decreases in loss
(income) on foreclosed real estate and income tax expense, offset somewhat by an
increase in  compensation  and employee  benefits and a decrease in non-interest
income.

         Total Interest  Income.  Interest income  increased by $303,000 or 5.7%
and $1.9  million or 12.1% for the three and nine  months  ended  September  30,
1998, respectively, as compared to the three and nine months ended September 30,
1997.  These  increases  were due in most part to increases of $28.4 million and
$38.3 million in the average  balances of interest  earning assets for the three
and nine month periods ended  September 30, 1998 as compared to the same periods
in 1997.


                                        8

<PAGE>

         Total Interest Expense.  Interest expense  increased  $423,000 or 12.7%
and $1.7  million or 18.0% for the quarter and nine months ended  September  30,
1998,  respectively,  as compared to the quarter and nine months ended September
30, 1997.  These  increases were primarily due to the increases of $32.3 million
and $41.2 million in the average balance of interest bearing liabilities for the
nine months  ended  September  30, 1998 as compared to the same periods in 1997,
and to  increases  of five and ten basis  points in the average cost of interest
bearing  liabilities  for the three and nine months ended September 30, 1998, as
compared to the same periods in 1997.

         At September 30, 1998,  the Bank had $59.9  million of borrowings  with
the FHLB. They consist of the following:

         (a)     $9.0 million repurchase agreement with rate of 5.82%,  maturing
                 December  1999 with a one time call  feature  at  December  20,
                 1998.

         (b)     Two repurchase  agreements of approximately  $8.2 million each.
                 Both mature in November 1998, at rates of 5.62% and 5.61%.

         (c)     $9.5  million  repurchase  agreement  with  a  rate  of  5.62%,
                 maturing  October  13,  1998.  This  repurchase  agreement  was
                 subsequently  rolled  over  at a  rate  of  5.32%  and  matures
                 November 1998.

         (d)     $25.0 million advance at a rate of 5.35%, with a final maturity
                 of March 2011, but it is callable by the Federal Home Loan Bank
                 after March 2001.

         In addition,  the Bank has an $8.5 million repurchase agreement with an
independent  third  party,  which  matures in  November,  1998 and has a rate of
5.72%.

         Net  Interest  Income.  Net  interest  income  decreased  $121,000  and
increased  $176,000 for the three and nine month  periods  ended  September  30,
1998,  respectively,  when  compared to the three  month and nine month  periods
ended September 30, 1997. The decrease for the three month period was due to the
decrease in the net  interest  spread and an increase in the average  balance of
interest  bearing  liabilities,  offset  somewhat  by an increase in the average
balance of interest earning assets.  For the nine month period, the increase was
due in most part to an  increase  in the  average  balance of  interest  earning
assets offset in part by an increase in the average balance of interest  bearing
liabilities  and a  decrease  in  the  net  interest  spread.  Interest  bearing
liabilities  increased  during  those  periods due to an increase in the average
balance of borrowed money.

         Provisions  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.  The provision for loan losses was $60,000 in the
quarters  ended  September  30, 1998 and 1997 and  $180,000 for each of the nine
months ended September 30, 1998.

         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

                                        9

<PAGE>

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.

         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.

         An analysis of the allowance for loan losses follows:
<TABLE>
<CAPTION>


                                                                         Nine Months
                                                                     Ended September 30,
                                                                  ----------------------- 
                                                                    1998           1997
                                                                  --------       --------
                                                                       (In thousands)

<S>                                                               <C>              <C>    

             Balance - beginning............................      $ 1,168          $ 1,090
             Provisions charged to operations...............          180              180
             Loans charged off, net of recoveries...........          (19)            (151)
                                                                    -----            -----
             Balance-ending.................................      $ 1,329          $ 1,119
                                                                   ======           ======
</TABLE>


         Impaired loans and related  amounts  recorded in the allowance for loan
losses at September 30, 1998 are summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                       At                    At
                                                                  September 30,         December 31,
                                                                      1998                  1997
                                                                  --------------      ---------------
<S>                                                                 <C>                   <C>   
 
     With recorded allowances................                        $  614                  $744

      Without recorded allowances.............                             -                     -
                                                                       -----                 -----
      Total impaired loans....................                           614                   744
      Related allowance for loan losses.......                            92                   111
                                                                       -----                 -----
      Net impaired loans......................                        $  522                $  633
                                                                       =====                 =====
</TABLE>


         Non-interest  Income.  Non-interest  income  increased  by $48,000  and
decreased  by $84,000 for the three and nine months  ended  September  30, 1998,
respectively.  The increase for the three month period was due in most part to a
gain  of  $30,000  on the  sale  of a  mortgage-backed  security  classified  as
available for sale. The decrease  during the nine month period was primarily due
to a $125,000  gain  recorded  on the sale of the Bank's  Frenchtown,  NJ branch
office  in  June  1997  offset  somewhat  by a  $30,000  gain  on the  sale of a
mortgage-backed  security  classified as available for sale. The office had been
closed during the third quarter of 1996 and deposits were  transferred  to other
Bank's offices.

         Non-interest Expense. Non-interest expense decreased by $95,000 for the
three  months  ended  September  30, 1998 as compared to the three  months ended
September  30,  1997.  This  decrease  was due in most  part  to a  decrease  in
compensation and employee  benefits of $56,000 and a decrease of $31,000 in loss
on foreclosed real estate.  The decrease in compensation  and employee  benefits
was due to an decrease in pension-related  expenses of $43,000 and a decrease in
other employee benefits of $44,000,

                                       10

<PAGE>

offset somewhat by normal annual merit  increases.  The increase in compensation
and employee  benefits for the  nine-month  period was due to an increase in the
expense  related to the Company's  Employee Stock  Ownership Plan resulting from
the increase in the average price of Little Falls Bancorp, Inc. common stock and
normal merit increases offset by decreases in pension-related expenses and other
employee benefits.

         On  November  5, 1998,  the Company  and  Skylands  announced  that the
parties had mutually  agreed to terminate the Agreement and related Stock Option
Agreements. In connection with the termination, the Company expects to write-off
approximately $200,000 in expenses during the quarter ending December 31, 1998.

         Income Tax Expense. Income tax expense decreased $3,000 and $96,000 for
the three and nine month  periods  ended  September  30, 1998 as compared to the
same periods  last year.  These  decreases  were due in most part to the Company
increasing investments in assets that are taxed at a reduced Federal tax rate.

Liquidity and Capital Resources

         On  September  30,  1998,  the Bank was in  compliance  with its  three
regulatory capital requirements as follows:
<TABLE>
<CAPTION>

                                                             Amount                 Percent
                                                             ------                 -------
                                                                (Dollars in thousands)

<S>                                                        <C>                     <C>  

Tangible capital...............................             $28,466                  8.49%
Tangible capital requirement...................               5,029                  1.50
                                                             ------                  ----
Excess over requirement........................             $23,437                  6.99%
                                                             ======                  ====

Core capital...................................             $28,466                  8.49%
Core capital requirement.......................              13,411                  4.00%
                                                             ------                  ----
Excess over requirement........................             $15,055                  4.49%
                                                             ======                  ====

Risk based capital.............................             $21,740                 16.40%
Risk based capital requirement.................              10,604                  8.00%
                                                             ------                  ----
Excess over requirement........................             $11,136                  8.40%
                                                             ======                  ====
</TABLE>


         Management  believes  that  under  current  regulations,  the Bank will
continue to meet its minimum capital  requirements  in the  foreseeable  future.
Events  beyond the control of the Bank,  such as increased  interest  rates or a
downturn  in the  economy in areas in which the Bank  operates  could  adversely
affect  future  earnings  and as a result,  the  ability of the Bank to meet its
future Company's requirements.

         The Company's  liquidity is a measure of its ability to fund loans, pay
withdrawals of deposits, and other cash outflows in an efficient, cost effective
manner.  The  Company's  primary  sources of funds are  deposits  and  scheduled
amortization and prepayment of loan and  mortgage-backed  principal.  During the
past several years,  the Company has used such funds  primarily to fund maturing
time deposits, pay savings withdrawals,  fund lending commitments,  purchase new
investments,  and increase liquidity.  The Company is currently able to fund its
operations  internally.  Additionally,  sources of funds  include the ability to
utilize  Federal  Home Loan Bank of New York  advances and the ability to borrow
against

                                       11

<PAGE>

mortgage-backed and investment securities. As of September 30, 1998, the Company
had $68.4 million of borrowed  funds.  Loan payments,  maturing  investments and
mortgage-backed  security prepayments are greatly influenced by general interest
rates, economic conditions and competition.

         The Company anticipates that it will have sufficient funds available to
meet its current commitments. As of September 30, 1998, the Company had mortgage
commitments  to fund loans of $2.5 million.  Also, at September 30, 1998,  there
were commitments on unused lines of credit relating to home equity loans of $4.5
million.  Certificates  of  deposit  scheduled  to mature in one year or less at
September  30,  1998  totaled  $115.2  million.   Based  on  historical  deposit
withdrawals and outflows,  and on internal monthly deposit reports  monitored by
management,  management  believes  that a majority of such  deposits will remain
with the Company. As a result, no adverse liquidity effects are expected.

         The Bank is required  under  federal  regulations  to maintain  certain
specified  levels of "liquid  investments,"  which include certain United States
government  obligations  and other  approved  investments.  Current  regulations
require  the Bank to  maintain  liquid  assets  of not  less  than 4% of its net
withdrawable  accounts plus short term  borrowings.  Those levels may be changed
from time to time by the regulators to reflect current economic conditions.  The
Bank has maintained liquidity in excess of regulatory requirements.

Risk Management

         In an effort  to reduce  interest  rate  risk and  protect  it from the
negative effect of rapid increases and decreases in interest rates, the Bank has
instituted certain asset and liability management measures including emphasizing
the origination of three, five and ten year  adjustable-rate  mortgage loans and
investing excess funds in short- and medium-term  mortgage-backed and investment
securities.  The Bank retains an asset/liability  consultant,  FinPro,  Inc., to
assist it in  analyzing  its asset  liability  position.  With the  consultant's
assistance,  the Bank undertakes a quarterly  extensive study of various trends,
conducts   separate   deposit   and  asset   analyses   and   prepares   various
asset/liability  tables including  contractual  interest rate gap, interest rate
gap with prepayment  assumptions,  margin/spread  and duration tables.  Interest
rate gap analysis  measures the difference  between amounts of  interest-earning
assets and interest-bearing  liabilities which either reprice or mature within a
given period of times and their sensitivity to changing interest rates.

         The Bank, like many other thrift  institutions,  is exposed to interest
rate risk as a result of the  difference  in the  maturity  of  interest-bearing
liabilities  and  interest-earning  assets and the volatility of interest rates.
Most deposit  accounts react more quickly to market interest rate movements than
do the existing mortgage loans because of the deposit accounts' shorter terms to
maturity;  sharp decreases in interest rates would typically increase the Bank's
earnings.  Conversely,  this same mismatch will generally  adversely  affect the
Bank's  earnings  during  periods of increasing  interest  rates.  The extent of
movement of interest rates is an uncertainty  that could have a negative  impact
on the earnings of the Bank.

         Volatility  in  interest  rates can also  result in  disintermediation,
which is the flow of funds away from savings institutions (such as the Bank) and
into other  investments,  such as U.S.  Government and corporate  securities and
other investment vehicles.  Because of the absence of federal insurance premiums
and reserve  requirements,  such investments may pay higher rates of return than
investment vehicles offered by savings institutions.


                                       12

<PAGE>

Year 2000

         During fiscal 1998, the Bank adopted a Year 2000  Compliance  Plan (the
"Plan") and established a Year 2000 Compliance Committee (the "Committee").  The
objectives  of the  Plan  and the  Committee  are to  prepare  the  Bank for the
millennium.  As recommended by the Federal  Financial  Institutions  Examination
Council,  the Plan  encompasses  the following  phases:  Awareness,  Assessment,
Renovation, Validation and Implementation.  These phases will enable the Bank to
identify risks,  develop an action plan,  perform  adequate testing and complete
certification that its processing systems will be Year 2000 ready.  Execution of
the plan is currently on target.  The Bank is currently in Phase 3,  Renovation,
(which  includes  code  enhancements,  program  changes,  hardware  and software
upgrades,  system  replacements and third party vendor  monitoring) and Phase 4,
Validation,  (which  includes  testing of  incremental  changes to hardware  and
software, testing connections with third-party vendors and establishing controls
to  ensure  timely  completion  of all  hardware  and  software  prior  to final
implementation).  Prioritization  of the  most  critical  applications  has been
addressed,  along with contract and service  agreements.  The primary  operating
software  for the Bank is obtained  and  maintained  by an external  provider of
software (the "External Provider"). The Bank has maintained ongoing contact with
this  vendor so that  modification  of the  software  is a top  priority  and is
expected to be accomplished, though there is no assurance, by December 31, 1998.
The Bank has contacted all other material vendors and suppliers  regarding their
Year 2000 readiness. Each of these third parties has delivered written assurance
to the Bank that they expect to be Year 2000  compliant  prior to the Year 2000.
The  Renovation  phase is targeted for  completion  by December 31, 1998 and the
Validation   phase  is  targeted  for   completion   by  March  31,  1999.   The
Implementation  phase is to certify that systems are Year 2000 ready, along with
assurances  that any new systems are  compliant on a going  forward  basis.  The
implementation phase is targeted for completion by September 30, 1999.

         The Bank  expects to incur  consulting  and other  expenses  related to
testing and enhancements to prepare the systems for the Year 2000. The Bank does
not  anticipate  that the related  costs will be material in any single year. In
total,  the  Bank  estimates  that  it's  cost for  compliance  will  amount  to
approximately  $100,000  over  the two  year  period  from  1998 -  1999.  As of
September 30, 1998 the Bank estimates that approximately  $50,000 of these costs
have been incurred. No assurance can be given that the Year 2000 Compliance Plan
will be completed  successfully  by the Year 2000, in which event the Bank could
incur  significant  costs.  If the  External  Provider  is unable to resolve the
potential  problem in time, the Bank would likely  experience  significant  data
processing  delays,  mistakes or failures.  These  delays,  mistakes or failures
could have a  significant  adverse  impact on the  financial  statements  of the
Company.

         Successful  and timely  completion of the Year 2000 project is based on
management's best estimates  derived from various  assumptions of future events,
which are inherently uncertain, including the progress and results of the Bank's
External  Provider,  testing  plans,  and all  vendors,  suppliers  and customer
readiness.

Impact of Inflation and Changing Prices

         The consolidated financial statements of the Company and notes thereto,
presented  elsewhere  herein,  have been prepared in accordance with GAAP, which
require the measurement of financial  position and operating results in terms of
historical  dollars without  considering  the change in the relative  purchasing
power of money over time due to inflation.  The impact of inflation is reflected
in the  increased  cost of the  Company's  operations.  Unlike  most  industrial
companies,  nearly all the assets and  liabilities of the Company are financial.
As a result,  interest rates have a greater impact on the Company's  performance
than do the  effects  of  general  levels of  inflation.  Interest  rates do not
necessarily  move in the same  direction  or to the same extent as the prices of
goods and services.


                                       13

<PAGE>



Additional Key Operating Ratios

<TABLE>
<CAPTION>

                                                                             For the                          For the
                                                                       Three Months Ended                Nine Months Ended
                                                                          September 30,                    September 30,
                                                                    -----------------------           -----------------------
                                                                    1998(1)          1997(1)          1998(1)          1997(1)
                                                                    -------          -------          -------          ------- 

<S>                                                                  <C>               <C>             <C>              <C>  
Return on average assets...................................          0.55%             0.57%           0.55%            0.60%
Return on average equity...................................          5.18%             4.75%           5.12%            4.63%
Interest rate spread.......................................          1.96%             2.24%           2.07%            2.22%
Net interest margin........................................          2.27%             2.64%           2.46%            2.70%
Noninterest expense, to average assets.....................          1.44%             1.66%           1.57%            1.69%
</TABLE>


<TABLE>
<CAPTION>
                                                                          At September 30,           At December 31,
                                                                                1998                      1997
                                                                           --------------             --------------

<S>                                                                           <C>                       <C>   
Tangible book value per share......................................            $13.96                    $13.59

</TABLE>

----------------
(1)      The ratios for the three and nine month periods are annualized.

                                       14

<PAGE>

                    LITTLE FALLS BANCORP, INC. AND SUBSIDIARY

                                     PART II

ITEM 1.   LEGAL PROCEEDINGS

          Neither  the Company nor the Bank was engaged in any legal  proceeding
          of a material  nature at September  30, 1998.  From time to time,  the
          Company is a party to routine legal proceedings in the ordinary course
          of business, such as claims to enforce liens, condemnation proceedings
          on properties in which the Company holds  security  interests,  claims
          involving the making and servicing of real property  loans,  and other
          issues incident to the business of the Company. There were no lawsuits
          pending or known to be  contemplated  against the Company at September
          30, 1998 that would have a material effect on the operations or income
          of the Company or the Bank, taken as a whole.

ITEM 2.   CHANGES IN SECURITIES

          Not applicable.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          Not applicable.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          Not applicable.

ITEM 5.   OTHER MATERIALLY IMPORTANT EVENTS

          On November 5, 1998,  the  Registrant  announced  that it and Skylands
          Community Bank had mutually agreed to terminate the Agreement and Plan
          of  Reorganization  and Mergers,  including  the related  stock option
          agreements. In connection with the termination, the Registrant expects
          to  write-off  approximately  $200,000 in expenses  during the quarter
          ending December 31, 1998.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
<S>      <C>     <C> 
 
          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
         11.0     Earnings Per Share Calculation
         27.0     Financial Data Schedule****

                  (b)     Reports on Form 8-K.
</TABLE>

         On August 17, 1998 the  Registrant  filed a current  Report on Form 8-K
announcing that it had entered into an Agreement and Plan of Reorganization  and
Mergers with Skyland Community Bank (Items 5 and 7).

                                       15

<PAGE>

----------------------------
*        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.                                         

                                       16

<PAGE>



                    LITTLE FALLS BANCORP, INC. AND SUBSIDIARY

                                   SIGNATURES


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

                                    LITTLE FALLS BANCORP, INC.




Date: November 12, 1998             By:   /s/ Leonard G. Romaine              
                                          --------------------------------------
                                          Leonard G. Romaine
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)



Date: November 12, 1998             By:   /s/ Richard Capone                   
                                          --------------------------------------
                                          Richard Capone
                                          Senior Vice President and
                                          Chief Financial Officer
                                          (Principal Officer)



<PAGE>


                                   EXHIBIT 11

                      EARNINGS (LOSS) PER SHARE CALCULATION


<TABLE>
<CAPTION>



                                                             For the Three Months                  For the Nine Months
                                                              Ended September 30,                  Ended September 30,

                                                               1998              1997               1998               1997
                                                           -------------     -------------      --------------      ----------

<S>                                                        <C>               <C>                <C>                <C>      

Net Income.........................................         $  482,707         $ 456,642          1,435,217         $1,370,949

Basic Weighted Average Shares                                2,190,046         2,371,363          2,209,637          2,402,618
Outstanding........................................

Basic Earnings Per Share...........................              $0.22             $0.19              $0.65              $0.57

Basic Weighted Average Shares                                2,190,046         2,371,363          2,209,637          2,402,618
Outstanding........................................

Potential common stock due to:
                  Stock options....................             87,362            86,430            100,934             63,166
                  MSBP.............................              4,806             4,033              7,365              1,220
                                                             ---------         ---------          ---------          ---------
Diluted weighted average shares                              2,282,214         2,461,826          2,317,936          2,467,004
outstanding........................................

Diluted earnings per share.........................              $0.21             $0.19              $0.62              $0.56

</TABLE>

Basic  earnings per share of common  stock for the three and nine month  periods
ended September 30, 1998 and 1997 has been determined by dividing net income for
the period by the weighted average number of shares of common stock outstanding,
net of average unearned ESOP shares of 200,639,  204,740,  220,919, and 225,020,
respectively,  and average unearned MSBP shares of 86,840,  93,129,  77,115, and
92,097, respectively.