<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934


                  For the fiscal year ended December 31, 1998

 
                                    0-28886
                            Commission File Number
 
                             ROSLYN BANCORP, INC.
            -------------------------------------------------------
            (Exact name of registrant as specified in its charter.)
 
             Delaware                                     11-3333218
 -------------------------------         ------------------------------------
 (State or Other Jurisdiction of         (I.R.S. Employer Identification No.)
 Incorporation or Organization)
 
             1400 Old Northern  Boulevard, Roslyn, New York  11576
          ----------------------------------------------------------
              (Address of Principal Executive Offices) (Zip Code)
 
                                (516) 621-6000
          ----------------------------------------------------------
             (Registrant's telephone number, including area code)
 
                                     None
          ----------------------------------------------------------
          Securities registered pursuant to Section 12(b) of the Act
 
                         Common Stock, $.01 par value
          ----------------------------------------------------------
          Securities registered pursuant to Section 12(g) of the Act


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                           Yes [X]    No [ ]

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

As of March 22, 1999 the aggregate market value of the voting stock held by non-
affiliates of the registrant was $1,355,869,113.  This figure is based on the
closing price on the NASDAQ National Market for a share of the registrant's
common stock on March 22, 1999 which was $17.625 as reported in the Wall Street
Journal on March 23, 1999.

The Registrant had 76,928,744 shares of Common Stock outstanding as of March 22,
1999.
<PAGE>
 
                      DOCUMENTS INCORPORATED BY REFERENCE
                                        

Portions of the Annual Report to Stockholders for the year ended December 31,
1998 are incorporated by reference into Part II of this Form 10-K.

Portions of the Proxy Statement for the 1999 Annual Meeting of Stockholders are
incorporated by reference into Part III of this Form 10-K.

                                       2
<PAGE>
 
                                     INDEX
                                        
<TABLE> 
<CAPTION> 
                                                                                                 Page
                                                                                                  No.
                                                                                                 -----
<S>                                                                                              <C> 
PART I

  Item 1.   Business...........................................................................    4

  Item 2.   Properties.........................................................................   54

  Item 3.   Legal Proceedings..................................................................   59

  Item 4.   Submission of Matters to a Vote of Security Holders................................   59


PART II

  Item 5.   Market for the Company's Common Equity and Related Stockholder Matters.............   59

  Item 6.   Selected Financial Data............................................................   59

  Item 7.   Management's Discussion and Analysis of Financial Condition and
            Results of Operations..............................................................   59

  Item 7A.  Quantitative and Qualitative Disclosures about Market Risk.........................   59

  Item 8.   Financial Statements and Supplementary Data........................................   59

  Item 9.   Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure...............................................................   59


PART III

  Item 10.  Directors and Executive Officers of the Company....................................   60

  Item 11.  Executive Compensation.............................................................   60

  Item 12.  Security Ownership of Certain Beneficial Owners and Management.....................   60

  Item 13.  Certain Relationships and Related Transactions.....................................   60


PART IV

  Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................   60

SIGNATURES.....................................................................................   63
</TABLE> 

                                       3
<PAGE>
 
                                     PART I
                                        
                                      
ITEM 1. BUSINESS.
-----------------

     GENERAL

     Roslyn Bancorp, Inc. (also referred to as the Company or Registrant) was
incorporated under Delaware law on July 26, 1996.  On January 10, 1997, the
Registrant acquired The Roslyn Savings Bank and subsidiaries (the Bank), Roslyn,
New York, as part of the Bank's conversion from the mutual to stock form of
organization (the Conversion).  On January 10, 1997, Roslyn Bancorp, Inc. issued
an aggregate of 43,642,459 shares of its common stock, par value $0.01 per share
(Common Stock), of which 42,371,359 shares were issued in a subscription
offering and 1,271,100 shares were issued to The Roslyn Savings Foundation (the
Foundation), a charitable foundation established by the Bank.  Prior to such
date, the Company had no assets, liabilities or operations.  In connection with
the Conversion, the Company raised $410.7 million of net conversion proceeds, of
which $205.3 million was utilized for the acquisition of 100% of the outstanding
stock of the Bank.  The Company is a savings and loan holding company and is
subject to regulation by the Office of Thrift Supervision (OTS) and the
Securities and Exchange Commission (SEC). At December 31, 1998, the Company had
consolidated total assets of $3.74 billion, deposits of $2.07 billion and
stockholders' equity of $598.9 million. Currently, the Company's activities
consist solely of managing the Bank and investing the portion of net conversion
proceeds retained by the Company.  The following discussion addresses the
operations of the Bank and its subsidiaries.

     The Bank is a community-oriented stock savings bank which was originally
chartered by the State of New York in 1875.  In August 1995, the Bank completed
its acquisition of certain assets and liabilities of Residential Mortgage
Banking, Inc. (RMBI), including its loan servicing portfolio, through its wholly
owned mortgage banking subsidiary, Roslyn National Mortgage Corp.
(RNMC)(formerly Residential First, Inc. (RFI)).  The Bank's principal business
consists of the acceptance of retail deposits from the general public in the
areas surrounding its branch offices and the investment of those deposits,
together with funds generated from operations and borrowings, primarily in
mortgage-backed and mortgage related securities, and various debt and equity
securities, one- to four-family residential mortgage loans and commercial real
estate loans.  The Bank also invests in multi-family, construction and
development, home equity, second mortgage, consumer and student loans.  It is
the Bank's policy to generally sell, on a servicing retained basis, most longer-
term fixed-rate and adjustable-rate one- to four-family loans as a method of
managing its interest rate risk and increasing its loan servicing fee income.
However, the Bank currently retains for its portfolio one- to four-family fixed-
rate loans of up to 15 years plus loans in excess of 15 years which have
interest rates of 8% or greater.  The Bank's revenues are derived principally
from the interest income generated by its investment securities, mortgage,
consumer and commercial loans and from gains on loan sales and loan servicing
fees.  The Bank's primary sources of funds are deposits, borrowings, principal
and interest payments on loans and securities, and proceeds from the sale of
loans and securities.

     The Bank's mortgage banking subsidiary, RNMC, conducts mortgage banking
activities consisting of the origination, sale and servicing of one- to four-
family loans secured by properties in the Bank's primary lending area as well as
through RNMC's mortgage origination offices located in New York, New Jersey,
Connecticut, Tennessee, Delaware, Pennsylvania, Virginia and Maryland. In
addition, RNMC has established correspondent relationships with other lenders
from whom RNMC will purchase loans. Currently, all of the Bank's origination of
one- to four-family loans is conducted through RNMC, which originates loans on
behalf of the Bank as well as for various other investors and financial
institutions.

     In addition to RNMC, the Bank maintains various subsidiaries, which were
incorporated in New York to either (a) maintain ownership of specific real
estate properties the Bank has taken ownership over as a result of foreclosure
or in connection with its lending activities (b) operate as a real estate
investment trust (REIT) or (c) offer annuity and life insurance products. The
Bank also offers savings bank life insurance through its Savings Bank Life
Insurance (SBLI) department.

                                       4
<PAGE>
 
     As a New York State-chartered stock savings bank, the Bank's deposits are
insured up to the applicable limits by the Federal Deposit Insurance Corporation
(FDIC).  The Bank is regulated by the Superintendent of Banks of the State of
New York, the New York Banking Board and the New York State Banking Department
(NYSBD).

     On February 16, 1999, a merger between T R Financial Corp., a Delaware
company and the Company was completed with the Company as the surviving
corporation. The transaction will be treated as a tax-free reorganization and
accounted for using the pooling-of-interests method of accounting. As part of
this merger, on February 16, 1999, TR Financial Corp's. wholly owned subsidiary,
Roosevelt Savings Bank, a New York State-chartered stock savings bank, was
merged into the Bank. The combined bank retained the Roslyn name, and has $7.8
billion in assets, more than $4.2 billion in deposits and 25 full-service
banking locations in Kings, Queens, Nassau and Suffolk Counties on Long Island,
New York.

     Pursuant to the merger agreement, each share of T R Financial Corp. common
stock was converted into the Company's stock at a fixed exchange ratio of 2.05.
As a result, 17,347,768 shares of T R Financial Corp. common stock were
exchanged for 35,528,785 shares of Roslyn common stock and a total of 1,746,876
T R Financial Stock Options were converted into options to purchase a maximum of
3,581,096 shares of the Company's common stock at an exercise price ranging from
$2.20 to $17.32 depending on the exercise price of the underlying T R Financial
stock option.  Additionally under the agreement, five former officers and
directors of T R Financial Corp. have joined the Boards of Directors of the
Company and the Bank.

     The Company's executive offices are located at 1400 Old Northern Boulevard,
Roslyn, New York  11576.  The telephone number is (516) 621-6000.


MARKET AREA AND COMPETITION

     The Bank is a community-oriented financial institution offering a variety
of financial services to meet the needs of the communities it serves.  As of
December 31, 1998, the Bank operated ten full service banking offices in Nassau
and Suffolk Counties.  The Bank's primary deposit gathering area is currently
concentrated around the areas where its full service banking offices are located
in Nassau and Suffolk Counties, which the Bank generally considers to be its
primary market area.  The Bank's primary lending area has also historically been
concentrated in Nassau and Suffolk Counties.  However, with the establishment of
RNMC in August 1995, the Bank's primary lending area with regards to one- to
four-family loans was broadened to include the areas surrounding RNMC's mortgage
origination offices.

     The New York City metropolitan area has historically benefited from having
a large number of corporate headquarters and a diversity of financial service
entities.  Additionally, the Counties of Nassau and Suffolk have historically
benefited from a large developed suburban market, well educated employment base
and a diversity of industrial, service and high technology businesses.  During
the late 1980's and early 1990's, however, due in part to the effects of a
prolonged period of weakness in the national economy, the decline in the
regional economy, layoffs in the financial services industry and corporate
relocations, the New York City metropolitan area experienced reduced levels of
employment. In addition, the Counties of Nassau and Suffolk experienced reduced
employment as a result of restructuring and downsizing in the high technology
defense related industries.  These conditions, in conjunction with a surplus of
available commercial and residential property, resulted in an overall decline in
the underlying values of properties located in the area during the late 1980s
and early 1990s.  Since 1993, the prices and values of real estate have
stabilized and, in certain areas, the prices and values of real estate have
increased.

     The Bank faces significant competition in its primary market area both in
attracting deposits and in originating loans.  The Long Island, New York area is

                                       5
<PAGE>
 
a highly competitive market.  The Bank faces direct competition from a
significant number of financial institutions operating in its market area, many
with a state-wide or regional presence, and, in some cases, a national presence.
This competition arises from commercial banks, savings banks, mortgage banking
companies, mortgage brokers, credit unions and other providers of financial
services, many of which are significantly larger than the Bank and, therefore,
have greater financial and marketing resources than those of the Bank.


LENDING ACTIVITIES

     Loan Portfolio Composition.  The types of loans that the Bank may originate
are subject to federal and state laws and regulations.  The interest rates
charged by the Bank on loans are affected principally by the demand for such
loans, the supply of money available for lending purposes and the rates offered
by its competitors.  These factors are, in turn, affected by general and
economic conditions, monetary policies of the federal government, including the
Federal Reserve Board, legislative tax policies and governmental budgetary
matters.

     The Bank's loan portfolio consists primarily of first mortgage loans
secured by one- to four-family residences and commercial real estate properties
located in its primary lending area. At December 31, 1998, the Bank's gross loan
portfolio including loans held for sale and loans held for investment totaled
$1.30 billion, of which $835.4 million were one- to four-family residential
mortgage loans, or 64.21% of total gross loans, and $273.0 million were
commercial real estate loans, or 20.99% of total gross loans. At such date, the
remainder of the loan portfolio consisted of $49.6 million of multi-family
loans, or 3.81% of total gross loans; $83.4 million of construction and
development loans, or 6.41% of total gross loans; $47.8 million of home equity
and second mortgage loans, or 3.68% of total gross loans; $10.4 million of
consumer loans, primarily consisting of private banking, passbook, modernization
and personal secured and unsecured loans, or 0.80% of total gross loans; and
$1.3 million of student loans, or 0.10% of total gross loans. Included in first
mortgage loans secured by one- to four-family residences is approximately $228.1
million of purchased loans.

                                       6
<PAGE>
 
     The following table sets forth the composition of the Bank's loan
portfolio, including loans held-for-sale, in dollar amounts and in percentages
of the respective gross loan portfolios at the dates indicated.


<TABLE>
<CAPTION>
                                                               At December 31,
                          ----------------------------------------------------------------------------------------
                                   1998                             1997                           1996              
                          ------------------------        ------------------------        ------------------------   
                                           Percent                         Percent                         Percent   
                                             of                              of                              of      
                             Amount         Total            Amount         Total            Amount         Total    
                          -----------    ---------        -----------    ---------        -----------    ---------   
                                                           (Dollars in thousands)                                    
<S>                       <C>            <C>              <C>            <C>              <C>            <C>         
Real estate loans:                                                                                                   
 One-to four-family        $  835,364      64.21%          $  633,957        63.28%        $  263,373        49.83%  
 Multi-family                  49,576       3.81               44,006         4.39             46,576         8.81   
 Commercial real estate       273,017      20.99              248,607        24.82            168,797        31.94   
 Construction                                                                                                        
  and development              83,433       6.41               52,269         5.22             37,459         7.09   
 Home equity                                                                                                         
  and second mortgage          47,832       3.68               16,974         1.69              9,506         1.80   
Consumer (1)                   10,402       0.80                4,686         0.47              1,241         0.23   
Student                         1,285       0.10                1,296         0.13              1,576         0.30   
                          -----------    ---------        -----------    ---------        -----------    ---------   
 Gross loans                1,300,909     100.00%           1,001,795       100.00%           528,528       100.00%  
                                         =========                       ==========                      ==========                
Less:                                                                                                                
 Unamortized discounts,                                                                                              
   net                          3,911                           5,974                             701                
 Deferred loan (costs)/fees      (719)                          1,522                             917                
 Deferred                                                                                                            
  mortgage interest               685                             696                             566                
 Allowance for                                                                                                       
  possible loan losses         24,779                          24,029                          23,320                
                          -----------                      ----------                        --------                
   Total loans, net         1,272,253                         969,574                         503,024                
Less:                                                                                                                
Loans held-for-sale, net:                                                                                            
 One- to four-family           79,991                          13,987                          12,558                
 Student                        1,285                           1,296                           1,576                
                          -----------                      ----------                        --------
 Loan receivable held                                                                                                
   for investment, net    $ 1,190,977                      $  954,291                        $488,890                
                          ===========                      ==========                        ========                 



<CAPTION>
                                               At December 31,
                          --------------------------------------------------------
                                   1995                             1994                 
                          ------------------------        ------------------------       
                                           Percent                         Percent       
                                             of                              of          
                             Amount         Total            Amount         Total        
                          -----------    ---------        -----------    ---------       
                                            (Dollars in thousands)                                                                  
<S>                       <C>            <C>              <C>            <C>             
Real estate loans:        
 One-to four-family       $  197,357         48.41%       $   153,203        41.52%        
                          
 Multi-family                 36,353          8.92             18,617         5.05      
 Commercial real estate      124,976         30.65            114,317        30.98      
 Construction                                
  and development             41,611         10.21             56,163        15.22      
 Home equity                                 
  and second mortgage          3,672          0.90              4,346         1.18      
Consumer (1)                   1,760          0.43              1,680         0.46      
Student                        1,959          0.48             20,626         5.59      
                          -----------    ---------        -----------    ---------       
 Gross loans                 407,688        100.00%           368,952       100.00%     
                                         =========                       =========
Less:                     
 Unamortized discounts,   
   net                           763                              978
 Deferred loan (costs)/fees      666                              611
 Deferred                     
  mortgage interest              493                              145
 Allowance for                
  possible loan losses        23,350                           25,127
                          -----------                     -----------                
   Total loans, net          382,416                          342,091          
Less:                        
Loans held-for-sale, net:    
 One- to four-family          15,278                                -
 Student                       1,873                                -    
                          -----------                     -----------                    
 Loan receivable held     
   for investment, net    $   365,265                     $   342,091   
                          ===========                     ===========
</TABLE>



(1)  Consumer loans originated consist of private banking, personal secured,
     personal unsecured, modernization and passbook loans. Private banking,
     personal secured and personal unsecured loans were originated beginning
     during the year ended December 31, 1997. The amounts shown prior to
     December 31, 1997 do not include the aforementioned loan products.

                                       7
<PAGE>
 

     Loan Originations.  Prior to the establishment of its mortgage banking
subsidiary, RNMC, in August 1995, all of the Bank's loan origination activity
was conducted directly by the Bank's loan personnel at its branch offices and
through referrals from local real estate agents, attorneys and builders. While
the Bank continues to directly originate all commercial real estate, multi-
family, construction and development, home equity, second mortgage, consumer and
student loans, since the establishment of RNMC in August 1995, all one- to four-
family loan origination activity has been conducted through RNMC.  RNMC's
commissioned loan officers operate in the Bank's full-service banking offices as
well as through RNMC's mortgage origination offices.

     All loans originated by the Bank, or by RNMC on behalf of the Bank, are
underwritten pursuant to the Bank's loan underwriting policies and procedures.
The Bank originates both adjustable-rate and fixed-rate one- to four-family
loans, multi-family loans, commercial real estate loans, home equity and second
mortgage loans, construction and development loans, consumer loans and student
loans.  Commencing in 1993, the Bank has placed increased emphasis on the
origination and retention of one- to four-family loans and commercial real
estate loans to selected real estate developers operating within the Bank's
primary market area.  In 1998, the Bank emphasized the sale of one- to four-
family loans to the secondary market.  In 1995, the Bank began to phase out its
direct student loan originations (except for its direct lending program with the
Student Loan Marketing Association (SLMA)) in response to the federal
government's initiation of the Federal Family Education Loan Program, which is a
direct student lending program.  The Bank's and RNMC's ability to originate
loans is dependent upon the relative customer demand for the type of loan and
demand for fixed-rate or adjustable-rate loans, which is affected by the current
and expected future levels of interest rates.

     During 1998, the Bank purchased in bulk, $7.8 million of residential whole
loans from unaffiliated originators.  The Bank discontinued its loan purchase
program during early 1998 since the Bank's mortgage Company's loan production
reached an appropriate level to meet the Bank's portfolio needs.  It is not
anticipated that the Company will resume this program in the near future.
Previously, it was the Company's strategy to leverage the Bank's balance sheet
due to the large capital base resulting from the Company's January 1997 public
offering.  It simultaneously represented an effort to increase the Company's
loan to deposit and loan to asset ratios.

     Loan Sales, Servicing and Mortgage Banking Activities.  Prior to the
establishment of RNMC, the Bank's loan sale, purchase and servicing activities
were primarily conducted directly by the Bank. Since August 1995, all of the
Bank's mortgage banking operations have been conducted through RNMC with the
exception of the servicing of one- to four-family loans originated by the Bank
prior to the establishment of RNMC, which continued to be serviced by the Bank
through June 30, 1998 and thereafter are being serviced directly by a third
party provider (Cenlar) on behalf of the Bank. RNMC was formed in conjunction
with the Bank's August 1995 acquisition of certain assets and liabilities,
including the loan servicing portfolio, RMBI, a mortgage banking firm then
operating in the New York Counties of Nassau, Suffolk, Queens and Albany and the
New Jersey Counties of Morris and Monmouth. RNMC's activities are directed by
its executive officers, with such activities being overseen by the Bank.

     RNMC originates one- to four-family loans through commissioned loan
personnel and through referrals from real estate brokers, builders, developers
and other sources.  RNMC also utilizes a network of approved mortgage brokers
and loan correspondents to originate mortgage loans.  As a mortgage banking
company, RNMC originates one- to four-family loans for sale to the Bank, as well
as a variety of other investors, including financial institutions and securities
brokerage firms.  RNMC also originates loans for sale directly to the Federal
National Mortgage Association (FNMA) and the Federal Home Loan Mortgage
Corporation (FHLMC) based upon loan terms and underwriting criteria provided to
RNMC by such agencies.  RNMC delivers loan products to investors in the form of

                                       8
<PAGE>
 
whole loans and in the form of mortgage-backed securities issued by FNMA and
FHLMC, which it receives in exchange for the sale of whole loans to such
agencies.  RNMC's one- to four-family loan production is not dedicated to the
Bank as RNMC offers a variety of competing loan products to customers pursuant
to loan programs that are pre-approved by other potential loan investors.
Accordingly, the Bank competes with RNMC's other investors for the purchase of
one- to four-family loans on the basis of rates and terms.  Based upon an
ongoing best execution analysis, RNMC sells loans on a servicing retained or a
servicing released basis. The Bank may revise its policy as to the types of
loans it will originate for investment through RNMC based upon an analysis of
the current and anticipated market interest rates and other market conditions.
It is currently the policy of the Bank to retain for its portfolio investment
certain adjustable-rate one- to four-family loans and fixed-rate one- to four-
family mortgage loans with terms of up to fifteen years plus loans in excess of
fifteen years which have interest rates of 8% or more originated by RNMC. For
the year ended December 31, 1998, RNMC originated $1.03 billion of loans of
which $363.4 million were purchased by the Bank for its loan portfolio.  RNMC
currently does not offer commercial real estate, multi-family, construction and
development, home equity, second mortgage or consumer loans.

     The primary funding source for the loans originated by RNMC is provided by
the Bank through a $190.0 million revolving line of credit.  The borrowings on
the line of credit are immediately paid down by RNMC upon the sale of loans.  At
December 31, 1998, $150,000 of RNMC's mortgage loans were pledged to secure
notes payable to FNMA under a warehouse line of credit known as the FNMA "As
Soon As Pooled Plus Program."  The notes are repaid as the related mortgage
loans are sold or collected.

     RNMC's mortgage banking revenues generally consist of loan origination
fees, interest income earned on mortgages during the period they are held-for-
sale, less the interest expense incurred to finance the mortgages, gains (or
losses) from the sale of mortgage loans, loan servicing fees and gains (or
losses) from the sale of any loan servicing.

     Between the time RNMC issues loan commitments and the time such loans, or
the securities into which the loans are converted, are sold, RNMC is exposed to
movements in the market price due to changes in market interest rates.  RNMC
attempts to manage this risk by utilizing forward cash sales to FNMA, FHLMC and
other approved investors or agencies and forward sales of mortgage-backed
securities to securities brokers and dealers, other financial institutions and
private investors (such forward sales of loans or mortgage-backed securities are
collectively referred to as "forward sale commitments"). Generally, RNMC
attempts to cover between 75% and 105% of the principal amount of the loans that
it has committed to fund at specified interest rates with forward sale
commitments.  However, the type, amount and delivery date of forward sale
commitments RNMC will enter into is based upon anticipated movements in market
interest rates, bond market conditions and management's estimates as to closing
volumes and the length of the origination or purchase commitments.  Differences
between the volume and timing of actual loan originations and purchases and
management's estimates can expose the Bank and RNMC to losses.  If RNMC is not
able to deliver the mortgage loans or mortgage-backed securities during the
appropriate delivery period called for by the forward sale commitment, RNMC may
be required to pay a non-delivery fee, repurchase the delivery commitments at
current market prices or purchase whole loans at premium for delivery.  While
the aforementioned activity is managed continually, there can be no assurance
that RNMC will be successful in its efforts to eliminate the risk of interest
rate fluctuation between the time of the loans origination or purchase
commitments are issued and the ultimate sale of the loans.

     Currently, the Bank services all of its commercial real estate,
construction and development, multi-family, home equity, second mortgage,
consumer and student loans. All one- to four-family loans originated by the bank
for its portfolio prior to its establishment of RNMC on August 1, 1995 are
serviced by a third party service provider on behalf of the Bank, the same third
party service provider services all loans RNMC originates on behalf of the Bank
as well as for all conforming loans sold to other investors. All FHA and VA
loans are sold, on a servicing-released basis,
                                       9
<PAGE>
 
as are other selected loans sold to private institutional investors. In
addition, in connection with the Bank's acquisition of certain liabilities and
assets from RMBI, the Bank acquired the servicing rights of $623.0 million of
loans sold by RMBI. At December 31, 1998, RNMC's loan servicing portfolio,
totaled $1.51 billion, primarily consisting of conforming fixed-rate loans.
Excluding RNMC, the Bank's loan servicing portfolio totaled $521.7 million as of
December 31, 1998 and primarily consisted of one-to four-family, commercial real
estate and construction and development loans. Loan servicing includes
collecting and remitting loan payments, accounting for principal and interest,
contacting delinquent mortgagors, supervising foreclosures and property
dispositions in the event of unremedied defaults, making certain insurance and
tax payments on behalf of the borrowers and generally administering the loans.
During 1998 RNMC and the Bank utilized a third party subservicer, Cenlar, to
service all loans. Cenlar receives an annual flat fee per loan and any ancillary
fee income and RNMC recognizes servicing fee income in excess of servicing fees
paid to Cenlar and retains the use of the escrow balances. During the year ended
December 31, 1998, the Bank, through RNMC, sold without recourse, approximately
$343.2 million of whole loans with loan servicing retained.

                                       10
<PAGE>
 
  The following table set forth the Bank's loan originations, purchases, sales
and principal repayments for the periods indicated and includes RNMC's loan
originations on behalf of the Bank.



<TABLE>
<CAPTION>
                                                     1998            1997            1996
                                                  -----------    -----------     ------------
                                                               (In thousands)                                          
<S>                                            <C>             <C>             <C>
Gross loans (1):                                                                  
 Balance outstanding at beginning of year      $    1,001,795  $      528,528  $      407,688
                                                  -----------     -----------     -----------
  Loans originated:                                                                 
      One- to four-family                           1,033,825         320,465         299,292
      Multi-family                                      7,000           7,000          14,000
      Commercial real estate                           59,014          83,775          59,555
      Construction and development                    101,873          75,271          42,540
      Home equity and second mortgage                  43,130          12,078           8,943
      Consumer and student (2)                         12,998           9,846           3,958
                                                  -----------     -----------     -----------
        Total loans originated                      1,257,840         508,435         428,288
  Loans purchased                                       7,778         303,363          12,734
                                                  -----------     -----------     -----------
        Total loans originated and                                                
           purchased                                1,265,618         811,798         441,022
                                                  -----------     -----------     -----------
  Less:                                                                             
     Principal repayments                             284,690         126,127          95,069
     Sales of loans                                   681,677         212,231         221,989
     Transfers to real estate owned                       137              82             997
     Principal charged-off                                  -              91           2,127
                                                  -----------     -----------     -----------
       Total loans                                  1,300,909       1,001,795         528,528
  Less:  Loans held-for-sale, net                      81,276          15,283          14,134
                                                  -----------     -----------     -----------
  Loans receivable held for investment at end                                      
     of year                                   $    1,219,633  $      986,512  $      514,394 
                                                  ===========     ===========     =========== 
                                                                            
</TABLE>


(1)  Gross loans includes loans receivable held for investment and loans held-
     for-sale.
(2)  Consumer loans originated consist of private banking, personal secured,
     personal unsecured, modernization and passbook loans.  Private banking,
     personal secured and personal unsecured loans were originated beginning
     during the year ended December 31, 1997.  The amounts shown prior to
     December 31, 1997 do not include the aforementioned loan products.

                                       11
<PAGE>
 
 The following table shows the maturity of the Bank's loan portfolio at December
31, 1998.  Loans held-for-sale are included in the within one year maturity
category.  The table does not include prepayments or scheduled principal
amortization.  Prepayments and scheduled principal amortization on loans totaled
$284.7 million, for the year ended December 31, 1998. 



<TABLE>
<CAPTION>
                                                                       At December 31, 1998
                                               ---------------------------------------------------------------------------
                                                                       Real Estate Loans
                                               ---------------------------------------------------------------------------  
                                                                                                                   Home     
                                                 One- to                      Commercial      Construction      Equity and  
                                                  Four-         Multi-           Real             and             Second    
                                                  Family        Family          Estate        Development        Mortgage   
                                               ----------    ----------     ------------    --------------    ------------  
                                                                            (In thousands)  
<S>                                         <C>           <C>            <C>             <C>               <C>         
Amounts due:                                                                                                              
 Within one year                              $  82,033         $  432         $  9,655          $ 25,824        $     866
                                             ----------         --------       --------          --------        ---------       
 After one year:                                                                                                               
   More than one year to three years                891               -           10,850            50,642           1,220          
   More than three years to five years            6,556               -           17,044             6,967           4,105 
   More than five years to 10 years              24,198           44,831         195,512                -            7,179 
   More than 10 years to 20 years               312,794            4,313          39,626                -            2,604 
   More than 20 years                           408,892               -              330                -           31,858 
                                             ----------         --------        --------         ---------       ---------       
   Total due after December 31, 1999            753,331           49,144         263,362            57,609          46,966    
                                             ----------         --------        --------         ---------       ---------       
   Total amount due                          $  835,364         $ 49,576       $ 273,017         $  83,433        $ 47,832
                                             ==========         ========       =========         =========       =========
    Less:                                                                                                                   
        Unamortized (premiums),net                                                                               
        Deferred loan fees, net                                                                                             
        Deferred mortgage (expense) 
        Allowance for possible loan losses                                                                                  
    Total loans, net                                                                                                 
    Less:  Loans held-for-sale, net                                                                          
                                                                                                             
    Loans receivable held for
     investment, net


<CAPTION>
                                                       At December 31, 1998
                                               ------------------------------------
                                               
                                                                           Total
                                                                           Loans        
                                                Consumer     Student     Receivable    
                                               ----------   ----------   ----------      
                                                        (In thousands)                                 
<S>                                            <C>          <C>          <C>    
Amounts due:                                   
 Within one year                               $    8,750   $    1,285   $  128,845
                                               ----------   ----------   ----------      
 After one year:                                
   More than one year to three years                  373            -       63,976                 
   More than three years to five years              1,068            -       35,740   
   More than five years to 10 years                   211            -      271,931    
   More than 10 years to 20 years                       -            -      359,337     
   More than 20 years                                   -            -      441,080     
                                               ----------   ----------   ----------      
   Total due after December 31, 1999                1,652            -    1,172,064         
                                               ----------   ----------   ----------      
   Total amount due                             $  10,402  $     1,285   $1,300,909 
                                               ==========   ==========   
    Less:
        Unamortized discounts, net                                            3,911    
        Deferred loan (costs), net                                             (719)  
        Deferred mortgage interest                                              685 
        Allowance for possible loan losses                                   24,779 
                                                                         ----------
Total loans, net                                                          1,272,253     
Less:  Loans held-for-sale, net                                             (81,276)
                                                                         ----------
Loans receivable held for
   investment, net                                                       $1,190,977       
                                                                         ==========               
</TABLE> 

                                       12
<PAGE>
 
     The following table sets forth at December 31, 1998, the dollar amount of
gross loans receivable contractually due after December 31, 1999, and whether
such loans have fixed or adjustable interest rates.



<TABLE>
<CAPTION>
 
                                                        Due After December 31, 1999
                                              -------------------------------------------
                                                  Fixed        Adjustable      Total
                                              -------------  -------------  -------------
                                                                 (In thousands)
<S>                                           <C>            <C>            <C>        
Real estate loans:                            
  One- to four-family                         $     506,054  $     247,277  $     753,331
  Multi-family                                       31,053         18,091         49,144
  Commercial real estate                            141,799        121,563        263,362
  Construction and development                            -         57,609         57,609
  Home equity and second mortgage                    13,905         33,061         46,966
                                                -----------    -----------    -----------
     Total real estate loans                        692,811        477,601      1,170,412
Consumer and student loans (1)                        1,652              -          1,652
                                                -----------    -----------    -----------
                                              $     694,463  $     477,601  $   1,172,064
                                                ===========    ===========    ===========
</TABLE>

______________
(1)   Includes private banking, personal secured, personal unsecured,
      modernization and passbook loans.



     One- to Four-Family Loans.  The Bank, through RNMC, currently offers both
fixed-rate and adjustable-rate mortgage loans secured by one- to four-family
residences with maturities up to forty years located in the Bank's primary
market area, as well as in the New York, New Jersey, Connecticut, Delaware, 
Tennessee, Pennsylvania, Virginia and Maryland areas in which RNMC operates
mortgage origination offices. One- to four-family mortgage loan originations are
generally obtained from RNMC's loan representatives operating in the Bank's
branch offices and RNMC's mortgage origination offices, and through their
contacts with the local real estate industry and through direct consumer
advertising. Additionally, from time to time the Bank may purchase residential
one- to four-family loans in the secondary market. All loans purchased in the
secondary market are quality control reviewed for adherence to the Bank's
underwriting standards.

     At December 31, 1998, the Bank's one- to four-family loans totaled 
$835.4 million, or 64.21% gross loans. Of the one- to four-family loans
outstanding at that date, 62.22% were fixed-rate loans and 37.78% were
adjustable-rate mortgage loans. The Bank, through RNMC, offers fixed-rate
mortgage loans with terms of ten, fifteen, twenty and thirty years. The Bank,
through RNMC, currently offers a number of adjustable-rate mortgage loans with
terms of up to forty years and interest rates which adjust annually from the
outset of the loan or which adjust annually after a three, seven or ten year
initial fixed-rate period. The interest rates for the majority of the Bank's
adjustable-rate mortgage loans are indexed to the one year and five year
Constant Maturity Treasury (CMT) Index. Interest rate adjustments on such loans
are limited to a 2% annual adjustment cap and a maximum adjustment of 6% over
the life of the loan. Certain of the Bank's adjustable-rate mortgage loans can
be converted to fixed-rate loans with interest rates based upon the then-current
market rates plus a varying margin.

                                       13
<PAGE>
 
     The volume and type of adjustable-rate mortgage loans originated by RNMC on
behalf of the Bank have been affected by such market factors as interest rates,
competition, consumer preferences and the availability of funds.  The
origination of adjustable-rate residential mortgage loans, as opposed to fixed-
rate residential mortgage loans, helps reduce the Bank's exposure to increases
in interest rates.  However, adjustable-rate loans generally pose credit risks
not inherent in fixed-rate loans, primarily because as interest rates rise, the
underlying payments of the borrower rise, and thereby increasing the potential
for default.  Periodic and lifetime caps on interest rate increases help to
reduce the risks associated with adjustable-rate loans but also limit the
interest rate sensitivity thereof.

     One- to four-family residential mortgage loans are generally underwritten
according to FNMA and FHLMC guidelines.  The Bank, through RNMC, generally
originates one- to four-family residential mortgage loans in amounts up to 90%
of the lower of the appraised value or the selling price of the property
securing the loan up to a maximum amount of $600,000 for loans originated for
sale and up to a maximum amount of $1 million for loans to be sold to private
investors, subject to certain exceptions to these guidelines which must be
approved by either the Chief Executive Officer or Senior Lending Officer and
reviewed by the Board of Directors.  The Bank currently requires private
mortgage insurance to be obtained for loans in excess of an 80% loan to value
ratio.  Mortgage loans originated by the Bank 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 the borrower transfers ownership of the
property without the Bank's consent.  Due-on-sale clauses are an important means
of adjusting the yields on the Bank's fixed-rate mortgage loan portfolio and the
Bank has generally exercised its rights under these clauses.

     In an effort to provide financing for low and moderate income home buyers,
RNMC participates in residential mortgage programs and products sponsored by the
State of New York Mortgage Agency (SONYMA) and the New Jersey Mortgage Housing
Finance Agency (NJMHFA).  The SONYMA and NJMHFA mortgage programs provide low
and moderate income households with fixed-rate loans which are generally below
prevailing fixed-rate mortgages and which allow below market down payments.

     Multi-Family Lending.  The Bank originates fixed- and adjustable-rate
multi-family mortgage loans generally secured by forty to four hundred unit
apartment buildings located in the Bank's primary market area.  At December 31,
1998, the Bank's multi-family loan portfolio was $49.6 million, or 3.81% of
total gross loans.  In reaching its decision on whether to make a multi-family
loan, the Bank considers the qualifications and financial condition of the
borrower, including credit history, profitability and expertise, as well as the
value and condition of the underlying property.  Additionally, factors
considered by the Bank include: the net operating income of the mortgaged
premises before debt service and depreciation; the debt coverage ratio (the
ratio of net earnings to debt service); and the ratio of loan amount to
appraised value.  Pursuant to the Bank's underwriting policies, a multi-family
mortgage loan may be made in an amount up to 75% of the lower of the appraised
value or sales price of the underlying property with amortization periods of up
to 30 years.  The Bank's adjustable-rate multi-family loans are originated with
rates that are generally fixed for the first five years with a single adjustment
on the fifth anniversary of the loan based upon the average monthly yield on
U.S. Treasury obligations, adjusted to a constant maturity of five years, plus a
margin of 1.50% to 2.50%.  Ten year fixed-rates based on similar spreads are
also available.  The Bank offers multi-family loans with terms of up to ten
years.  The Bank's current policies limit the amount of multi-family loans the
Bank may have to 25% of the aggregate loan portfolio.  The Bank's current
policies limit such loans to $10 million per project and an aggregate of $30
million in loans outstanding per borrower, although the Bank will make
exceptions to this policy provided full Board approval for the loan is obtained.
In addition, the Bank generally requires a debt service coverage ratio of a
minimum of 120%.  The Bank also requires an appraisal on the property conducted
by 

                                       14
<PAGE>
 
an independent appraiser and title insurance. Additionally, the Bank requires a
market occupancy rate of at least 90% prior to lending for multi-unit apartment
buildings.

     When evaluating the qualifications of the borrower for a multi-family loan,
the Bank considers the financial resources and income level of the borrower, the
borrower's experience in owning or managing similar property and the Bank's
lending experience with the borrower.  The Bank's underwriting policies require
that the borrower be able to demonstrate management skills and the ability to
maintain the property from current rental income.  The Bank's policy requires
borrowers to present evidence of the ability to repay the mortgage and a history
of making mortgage payments on a timely basis.  In making its assessment of the
creditworthiness of the borrower, the Bank generally reviews the financial
statements and credit history of the borrower, as well as other related
documentation.

     Commercial Real Estate Lending.  The Bank originates commercial real estate
loans that are generally secured by properties used for business purposes or a
combination of residential and retail purposes which are located in the Bank's
primary market area.  The Bank's underwriting procedures provide that commercial
real estate loans generally may be made in amounts up to 75% of the lower of the
appraised value or sales value of the property, subject to the Bank's current
loans-to-one-borrower limit, which at December 31, 1998, was $10 million per
project and an aggregate of $30 million in loans outstanding per borrower.  The
Bank will make exceptions to this policy provided full board approval for the
loan is obtained.  These loans may be made with terms up to 20 years and are
generally offered at interest rates which adjust in accordance with the CMT
Index.  The Bank's underwriting standards and procedures are similar to those
applicable to its multi-family loans, whereby the Bank considers the net
operating income of the property and the borrower's expertise, credit history
and profitability.  The Bank has generally required that the properties securing
commercial real estate loans have debt service coverage ratios of at least 125%.
At December 31, 1998 the Bank's commercial real estate loan portfolio totaled
approximately $273.0 million, or 20.99% of gross loans.

     Construction and Development Lending.  The Bank originates loans for the
development of commercial and residential property located in its primary market
area.  The Bank will originate loans for the acquisition of commercial and
residential property located in its primary market area only if such acquisition
loan is part of an overall development loan.  Construction and development loans
are offered primarily to experienced local developers operating in the Bank's
primary market area.  The majority of the Bank's construction loans are
originated primarily to finance the construction of one- to four-family, owner-
occupied residential, multi-family and commercial real estate properties located
in the Bank's primary market area.  Such loans are offered for the construction
of properties that are pre-sold or for which permanent financing has been
secured.  At December 31, 1998, the Bank had $84.4 million of construction loan
commitments for the construction of one- to four-family properties.
Construction loans are generally offered with terms up to three years for
residential property and up to two years for multi-family and commercial
property.  Construction loans may be made in amounts up to 90% of the estimated
cost of construction.  With respect to construction loans, the Bank's policy is
to require borrowers to secure permanent financing commitments from generally
recognized lenders for an amount equal to or greater than the amount of the
loan.  In some cases, the Bank may itself provide permanent financing.  Loan
proceeds are disbursed generally on a monthly basis in increments as
construction progresses and as inspections by the Bank's supervising engineer
warrant.

     Construction and development financing is generally considered to involve a
higher degree of credit risk than long-term financing on improved, owner-
occupied real estate and therefore, the personal guarantee of the borrower
during the construction stage is required.  Risk of loss on a construction loan
is 

                                       15
<PAGE>
 
dependent largely upon the accuracy of the initial estimate of the property's
value at completion of construction compared to the estimated cost (including
interest) of construction and other assumptions, including the estimated time to
sell residential properties. If the estimate of value proves to be inaccurate,
the Bank may be confronted with a project, when completed, having a value which
is insufficient to assure full repayment.

     Home Equity and Second Mortgage Lending.  The Bank offers fixed-rate, fixed
term home equity loans and adjustable rate home equity lines-of-credit in its
primary market area.  Standard fixed rate, fixed term home equity loans are
offered in amounts of up to 80% of the appraised value of the property
(including the first mortgage) with a maximum loan amount of $100,000.  Standard
adjustable rate home equity lines-of-credit are offered in either, a) amounts up
to 80% of the appraised value of the property (including the first mortgage)
with a maximum line amount of $100,000, or, b) amounts up to 70% of the
appraised value of the property (including the first mortgage) on lines greater
than $100,000, to a maximum line of $250,000.

     The Bank also offers home equity loans and lines-of-credit for individuals
whose loan-to-value ratios or expense ratios exceed that used for the standard
product.  The alternative loan-to-value product offers loans or lines-of-credit
up to 90% of the property value (including the first mortgage) to a maximum of
$100,000.  The alternative income product offers loans or line-of-credit up to a
maximum of 65% of the property value (including the first mortgage) up to a
maximum of $100,000.  The alternative loan products carry an interest rate
greater than that offered on the standard products.

     Consumer and  Student Lending.  The Bank's portfolio of consumer and
student loans primarily consists of private banking, secured and unsecured
personal loans, and home improvement loans.  Private banking entails offering a
wide array of deposit and loan products that are customized to meet the needs of
a specific client base, principally composed of entrepreneurs, professionals and
senior corporate executives.  Private banking can be either fixed or adjustable
rate, secured or unsecured and typically have a maturity of one year or less, or
are payable on demand.  Unsecured personal loans are offered with a maximum term
of 5 years and maximum amount of $15,000.  Secured personal loans are
collateralized with deposits from any federally insured financial institution.
Secured personal loans have a maximum term of 5 years and a maximum amount of
$50,000.  Home improvement loans are offered to homeowners for the purpose of
modernization and maintenance of owner-occupied properties for terms up to 5
years and to a maximum loan amount of $20,000.  The Bank offers both subsidized
and unsubsidized student loans through a forward purchasing and servicing
agreement with the Student Loan Marketing Association (Sallie Mae).

     Loan Approval Procedures and Authority.  The Board of Directors establishes
the lending policies and loan approval limits of the Bank.  The Board of
Directors has established an Executive Committee, comprised of rotating members
of the Board of Directors, to review and approve loans in amounts greater than
management's approval limits.  The Board of Directors has authorized the
following persons to approve loans up to the amounts indicated:  commercial real
estate loans of up to $1.0 million can be approved by the President or Senior
Lending Officer plus one additional officer in the Lending Division; all
commercial real estate loans, multi-family loans, construction loans and loan
participations in excess of $1.0 million require the approval of the Executive
Committee of the Board of Directors; when these loans exceed $5.0 million, they
require the approval of the Board of Directors. Home equity loans, lines of
credit, personal loans, and home improvement loans are approved by a Consumer
Loan Officer up to a defined maximum amount established by the Board of
Directors. Loan amounts greater than the defined maximum amount must be
countersigned by the Senior Consumer 

                                       16
<PAGE>
 
Lending Officer. Residential loan approval authority limits have been
established by RNMC's Management and approved by its Board of Directors. These
limits require approval by senior personnel for loans that carry greater risks
based upon underwriting criteria.

     With respect to all loans originated by RNMC on behalf of the Bank, upon
receipt of a completed loan application from a prospective borrower, a credit
report is ordered and certain other information is verified by an independent
credit agency.  If necessary, additional financial information may be required.
An appraisal of real estate intended to secure a proposed loan generally is
required to be performed by appraisers approved by the Bank.  For proposed
mortgage loans, the Board of Directors annually approves the independent
appraisers used by the Bank and approves the Bank's appraisal policy.  The
Bank's policy is to obtain title and hazard insurance on all mortgage loans and
the Bank may require borrowers to make payments to a mortgage escrow account for
the payment of property taxes.  Any exceptions to the Bank's underwriting
policies must be noted on an underwriting standards checklist and approved by
the Executive Committee for loans of up to $5.0 million and by the Board of
Directors for loans of $5.0 million or more.  The Bank subjects all loan
commitments for non-residential mortgage loans to an environmental site
assessment.

Delinquent Loans, Real Estate Owned and Classified Assets

     Management and the Board of Directors perform a monthly review of all
delinquent loans.  The procedures taken by the Bank with respect to
delinquencies vary depending on the nature of the loan and period of
delinquency.  The Bank generally requires that delinquent mortgage loans be
reviewed, that a delinquency notice be mailed no later than the 16th day of
delinquency and a late charge assessed after 15 days.  The Bank's subservicer,
Cenlar, follows similar delinquency procedures.  The Bank's policies provide
that telephone contact will be attempted to ascertain the reasons for
delinquency and the prospects of repayment.  When contact is made with the
borrower at any time prior to foreclosure, the Bank will attempt to obtain full
payment or work out a repayment schedule with the borrower to avoid foreclosure.
It is the Bank's general policy to discontinue accruing interest on all loans
which are past due 90 days or when, in the opinion of management, such
suspension is warranted.  Property acquired by the Bank as a result of
foreclosure on a mortgage loan is classified as real estate owned (REO) and is
recorded at the lower of the unpaid principal balance or fair value less
estimated costs to sell at the date of acquisition and thereafter.  Upon
foreclosure, it is the Bank's policy to generally require an appraisal of the
property and, thereafter, appraise the property on an as-needed basis.

     At December 31, 1998, the Bank's real estate owned, net, consisted of
foreclosed assets totaling $532,000 and was held directly by the Bank and its
subsidiaries which were formed for the purpose of holding and maintaining
certain real estate owned.  See "Subsidiary Activities."  At such date, real
estate owned, was comprised of one- to four-family properties with an aggregate
carrying value of $203,000 and commercial real estate properties with an
aggregate carrying value of $828,000.  Bank personnel or an independent
inspector generally conducts periodic external inspections on all properties
securing loans in foreclosure and generally conducts external appraisals on all
properties prior to taking ownership of the property.  Based upon such
inspections and appraisals, the Bank will charge- off any loan principal it
deems uncollectible at such time.  Bank personnel conduct monthly reviews of its
foreclosed real estate and periodically adjust its valuation allowance for
possible declines in the value of real estate owned. The Bank's allowance for
possible losses on real estate owned at December 31, 1998 totaled $499,000, or
48.4% of the aggregate gross value of real estate owned.  The Bank is currently
offering for sale all real estate owned as a result of foreclosure through
brokers and through its own personnel.

                                       17
<PAGE>
 
     The Bank's policies permit the financing of the sale of its foreclosed real
estate on substantially the same terms applicable to its other real estate
mortgage loans with the exception that the Bank may loan up to 80% of the lesser
of the appraised value or sales price of the foreclosed property.

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

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

     A savings institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by the
FDIC and NYSBD, which can order the establishment of additional general or
specific loss allowances.  The FDIC, in conjunction with the other federal
banking agencies, recently adopted an inter-agency policy statement on the
allowance for loan and lease losses. The policy statement provides guidance for
financial institutions on both the responsibilities of management for the
assessment and establishment of adequate allowances and guidance for banking
agency examiners to use in determining the adequacy of general valuation
guidelines.  Generally, the policy statement recommends that institutions have
effective systems and controls to identify, monitor and address asset quality
problems; that management has analyzed all significant factors that affect the
collectibility of the portfolio in a reasonable manner; and that management has
established acceptable allowance evaluation processes that meet the objectives
set forth in the policy statement.   While the Bank believes that it has
established an adequate allowance for possible loan losses, there can be no
assurance that regulators, in reviewing the Bank's loan portfolio, will not
request the Bank to materially increase its allowance for possible loan losses,
thereby negatively affecting the Bank's financial condition and earnings at that
time.  Although management believes that adequate specific and general loan loss
allowances have been established, actual losses are dependent upon future events
and, as such, further additions to the level of specific and general loan loss
allowances may become necessary.

     The Bank's senior management reviews and classifies the Bank's loans on a
monthly basis and reports the results of its reviews to the Board of Directors.
At December 31, 1998, the Bank had $6.5 million of loans designated as
Substandard, consisting of 48 commercial real estate and one- to 

                                       18
<PAGE>
 
four-family loans, and no loans classified as Doubtful or Loss. At December 31,
1998, the Bank had $20.4 million of assets designated as Special Mention,
consisting of 27 commercial real estate and one- to four-family loans, which
were designated due to past loan delinquencies.

                                       19
<PAGE>
 
        The following table sets forth delinquencies in the Bank's loan
portfolio as of the dates indicated:



<TABLE>
                                                                    At December 31, 1998
                                                ------------------------------------------------------------
                                                        60-89 Days                 90 Days or More
                                                ----------------------------    ----------------------------
                                                                  Principal                       Principal 
                                                    Number         Balance          Number         Balance  
                                                   of Loans        of Loans        of Loans        of Loans 
                                                ------------    ------------    ------------    ------------
                                                        (Dollars in thousands)
<S>                                             <C>             <C>             <C>             <C>   
One-to four-family                                      9        $       776           28        $     3,639
Multi-family                                            -                  -            -                  -                   
Commercial real estate                                  -                  -            2              1,020
Construction and development                            -                  -            -                  -
Home equity and second mortgage                         -                  -            1                  3
Consumer (1)                                            2                  9            3                 25
Student loans                                           -                  -            -                  -
                                                ------------    ------------    ------------    ------------
Total                                                  11       $        785           34       $      4,687
                                                ============    ============    ============    ============
Deliquent loans to total loans (2)                                      0.06%                          0.39%
                                                                ============                    ============



<CAPTION>
                                                                    At December 31, 1997
                                                ------------------------------------------------------------
                                                        60-89 Days                 90 Days or More
                                                ----------------------------    ----------------------------
                                                                  Principal                       Principal 
                                                    Number         Balance          Number         Balance  
                                                   of Loans        of Loans        of Loans        of Loans 
                                                ------------    ------------    ------------    ------------
                                                        (Dollars in thousands)
<S>                                             <C>             <C>             <C>             <C>   
One-to four-family                                      8       $      1,045          23        $      2,437
Multi-family                                            -                  -           -                   -                    
Commercial real estate                                  3                448           4               2,060
Construction and development                            -                  -           -                   -
Home equity and second mortgage                         -                  -           1                   3
Consumer (1)                                            -                  -           1                  19
Student loans                                           -                  -           -                   -
                                                ------------    ------------    ------------    ------------
Total                                                  11       $      1,493          29        $      4,519
                                                ============    ============    ============    ============
Deliquent loans to total loans (2)                                      0.15%                          0.46%
                                                                ============                    ============



<CAPTION>
                                                                   At December 31, 1996
                                                ------------------------------------------------------------
                                                        60-89 Days                   90 Days or More
                                                ----------------------------    ----------------------------
                                                                  Principal                       Principal 
                                                    Number         Balance          Number         Balance  
                                                   of Loans        of Loans        of Loans        of Loans 
                                                ------------    ------------    ------------    ------------
                                                        (Dollars in thousands)
<S>                                             <C>             <C>             <C>             <C>   
One-to four-family                                      6       $        475          21        $      1,853
Multi-family                                            -                  -           -                   -    
Commercial real estate                                  -                  -           8               4,004
Construction and development                            -                  -           1                 602
Home equity and second mortgage                         -                  -           -                   -
Consumer (1)                                            1                  5           1                   8
Student loans                                           -                  -           -                   -
                                                ------------    ------------    ------------    ------------
Total                                                   7       $        480         31         $      6,467
                                                ============    ============    ============    ============
Deliquent loans to total loans (2)                                      0.09%                          1.26%
                                                                ============                    ============
</TABLE>

___________________
(1) Consumer loans consist of private banking, personal secured, personal
    unsecured, modernization and passbook loans.  Private banking, personal
    secured and personal unsecured loans were originated beginning during the
    year ended December 31, 1997.  The amounts shown prior to December 31, 1997
    do not include the aforementioned loan products.
(2) Total loans includes loans receivable held for investment, less deferred
    loan fees, deferred mortgage interest and unamortized discounts, net.

                                       20
<PAGE>
 
     Non-Accrual and Past-Due Loans.  The following table sets forth information
regarding non-accrual loans and REO.

<TABLE>
<CAPTION>
                                                                 At December 31,
                                          ---------------------------------------------------------------------
                                              1998           1997          1996           1995          1994
                                          -----------    ----------    -----------    ----------    -----------
                                                             (Dollars in thousands)
<S>                                       <C>            <C>           <C>            <C>           <C>
Non-accrual loans (1):                                                                    
 One- to four-family                        $  4,351       $  3,676      $   2,764     $    2,965    $     4,708
 Multi-family                                      -              -              -              -            263
 Commercial real estate                        1,403          2,723          5,374          8,650         16,519
 Construction and development                      -              -            602            150          2,900
 Home equity                                      62             62              -              -              -
 Consumer (2)                                     25             19              -              -              -
                                          ----------       ----------     ----------   -----------     -----------
  Total non-accrual loans                      5,841          6,480          8,740         11,765         24,390
Loans contractually past due 90 days or                                                                
  more, other than non-accruing                  271              -              -            408            665
                                          ----------     ----------     ----------     ----------      ---------
  Total non-performing loans                   6,112          6,480          8,740         12,173         25,055
Real estate owned, net (3)                       532            157          1,698          6,047          3,359
                                          ----------     ----------     ----------     ----------      ---------
  Total non-performing assets               $  6,644     $    6,637     $   10,438     $   18,220      $  28,414
                                           =========     ==========     ==========     ==========      ========= 
Allowance for possible loan losses as a
   percent of total loans (4)                   2.04%          2.46%          4.55%          6.01%           6.84%
Allowance for possible loan losses as a                                                                 
  percent of total non-performing loans (4)                                                             
   (5)                                        405.42%        370.82%        266.82%        191.82%         100.28%
                                                                                                        
Non-performing loans as a percent of total                                                              
  loans (4) (5)                                 0.50%          0.66%          1.71%          3.13%           6.82%
Non-performing assets as a percent of total                                                             
  assets (6) (7)                                0.18%          0.18%          0.29%          1.14%           1.98%
</TABLE> 

(1) Includes restructured loans which are less than 90 days past due but which
    have not yet complied with the terms of their restructuring agreement for a
    satisfactory period of time.
(2) Includes private banking, personal secured, personal unsecured,
    modernization and passbook loans.  Private banking, personal secured and
    personal unsecured loans were originated beginning during the year ended
    December 31, 1997.  The amounts shown prior to December 31, 1997 do not
    include the aforementioned loan products.
(3) REO balances are shown net of related loss allowances.
(4) Loans include loans receivable held for investment, net, excluding the
    allowance for possible loan losses which at December 31, 1998, 1997, 1996,
    1995 and 1994 was $24.8 million, $24.0 million, $23.3 million, $23.4 million
    and $25.1 million, respectively.
(5) Non-performing loans consist of non-accruing loans and all loans 90 days or
    more past due and other loans which have been identified by the Bank as
    presenting uncertainty with respect to the collectibility of interest or
    principal.
(6) Non-performing assets consist of non-performing loans and REO.
(7) Total assets at December 31, 1996 includes $1.36 billion of proceeds held in
    escrow by the Bank on behalf of depositors and other individuals who
    submitted funds in anticipation of the Bank's conversion to stock form and
    the concurrent issuance of Roslyn Bancorp, Inc. common stock.

                                       21
<PAGE>
 
     The principal balance of non-accrual loans approximated $5.8 million, 
$6.5 million and $8.7 million at December 31, 1998, 1997 and 1996, respectively.
Interest income that would have been recorded if the loans had been performing
in accordance with their original terms aggregated approximately $577,000,
$630,000 and $720,000 during the years ended December 31, 1998, 1997 and 1996.
Actual intrest income recorded on loans previously on non-accrual was 
$1.2 million, $271,000 and $370,000 for the years ended December 31, 1998, 1997
and 1996, respectively.

     The principal balance of restructured loans that have not complied with the
terms of their restructuring agreement for a satisfactory period of time
(normally six months) was $909,000, $280,000 and $1.6 million at December 31,
1998, 1997 and 1996, respectively.  Interest income that would have been
recorded if the loans had been performing in accordance with their original
terms aggregated approximately $76,000, $30,000 and $172,000 during the years
ended December 31, 1998, 1997 and 1996, respectively.  Interest income recorded
for restructured loans amounted to $433,000, $235,000 and $118,000 for the years
ended December 31, 1998, 1997 and 1996, respectively.  Additionally,
restructured loans totaling $4.1 million, $1.4 million and $2.3 million have
complied with the terms of the restructuring agreement for a satisfactory period
and were returned to the performing loan portfolio during the years ended
December 31, 1998, 1997 and 1996, respectively.

Allowance for Possible Loan Losses

     The Company's formalized process for assessing the adequacy of the
allowance for loan losses, and the resultant need, if any, for periodic
provisions to the allowance charged to income, entails both individual loan
analyses and loan pool analyses.  The individual loan analyses are periodically
performed on individually significant loans or when otherwise deemed necessary,
and primarily encompasses multi-family, commercial real estate and construction
and development loans.  The result of these individual analyses is the
allocation of the overall allowance to specific allowances for individual loans,
both loans considered impaired and non-impaired.

     The loan pool analyses are performed on the balance of the portfolio,
primarily the one-to-four family residential and consumer loans.  The pools
consist of aggregations of homogeneous loans having similar credit risk
characteristics.  Examples of pools defined by the Company for this purpose are
Company-originated, fixed-rate residential loans; Company-originated,
adjustable-rate residential loans; purchased, fixed-rate residential loans;
outside-serviced residential loans; residential second mortgage loans;
participations in conventional first mortgages; residential construction loans;
commercial construction loans, etc.  For each such defined pool, there is a set
of sub-pools based upon delinquency status:  current, 30-59 days, 60-89 days,
90-119 days and 120+ days (the latter three sub-pools are considered to be
"classified" by the Company).  For each sub-pool, the Company has developed a
range of allowance necessary to adequately provide for probable losses inherent
in that pool of loans.  These ranges are based upon a number of factors
including the risk characteristics of the pool, actual loss and migration
experience, expected loss and migration experience considering current economic
conditions, industry norms, and the relative seasoning of the pool.  The ranges
of allowance developed by the Company are applied to the outstanding principal
balance of the loans in each sub-pool; as a result, further specific and general
allocations of the overall allowance are made (the allocations for the
classified sub-pools are considered specific and the allocations for the non-
classified sub-pools are considered general).

     The  Company's overall allowance also contains an unallocated amount which
is supplemental to the results of the aforementioned process and takes into
consideration known and expected trends that are likely to affect the
creditworthiness of the loan portfolio as a whole, national and local economic

                                       22
<PAGE>
 
conditions, unemployment conditions in the local lending area and the timeliness
of court foreclosure proceedings in the Company's local and other lending areas.

     During the period from 1995 to 1998, the Company's loan portfolio has
undergone a dramatic change which, together with changes in non-performing
loans, have directly impacted the allowance for loan losses.  At December 31,
1995, $197.4 million, or 48.41%, of the gross loan portfolio was in one-to four-
family residential first mortgage loans and $206.6 million, or 50.67% was in
relatively riskier multi-family, commercial real estate, construction and
development, and home equity and second mortgage loans.  At that date, there
were $12.2 million of non-performing loans, of which $8.7 million were
commercial real estate loans.  The allowance for loan losses as a percent of
loans was 6.01% which may be considered high by industry norms if compared to a
primarily residential loan portfolio, but not considered high in the context of
the Company's loan portfolio mix.

     At December 31, 1996, December 31, 1997 and December 31, 1998, the loan
portfolio showed significant growth in all sectors, and changes in the mix. At
those dates, one-to four-family residential first mortgage loans were $263.4
million, $634.0 million and $835.4 million, respectively, or 49.83%, 63.28% and
64.21%, respectively, of the gross loan portfolio. The aforementioned relatively
riskier loans aggregated $262.3 million, $361.9 million and $453.9 million,
respectively, at those dates, or 49.64%, 36.12%, and 34.89% respectively, of the
gross loan portfolio. Non-performing loans at those dates were $8.7 million,
$6.5 million and $6.1 million, respectively (including $5.4 million, $2.7
million and $1.4 million, respectively, of commercial real estate loans). The
allowance for loan losses as a percent of loans was 4.55%, 2.46% and 2.04%,
respectively, at those dates.

     The quantitative information cited in the two previous paragraphs indicates
a trend over this time horizon of 1) a dramatic increase in absolute dollars,
and significant increase in relative dollars, in the relatively less risky one-
to four-family residential first mortgage loans, 2) a steady increase in
absolute dollars, and significant decrease in relative dollars, in the
relatively riskier loans (as previously defined), and 3) a decrease in absolute
dollars in non-performing loans.  The application of the Company's formalized
process for assessing the adequacy of the allowance for loan losses to the loan
portfolio undergoing the changes cited during this time horizon has resulted in
a relatively flat absolute dollar level of the allowance for loan losses and a
steady decrease in the ratio of the allowance for loans losses to total loans.
Management continues to believe the Company's reported allowance for loans
losses is both appropriate in the circumstances and adequate to provide for
estimated probable losses inherent in the loan portfolio.

     As of December 31, 1998, the Bank's allowance for possible loan losses was
$24.8 million, or 2.04% of total loans and 405.42% of non-performing loans, as
compared to $24.0 million, or 2.46% of total loans and 370.82% of non-performing
loans, as of December 31, 1997.  The Bank had total non-performing loans of $6.1
million and $6.5 million at December 31, 1998 and 1997, respectively, and non-
performing loans to total loans of 0.50% and 0.66%, respectively. The Bank will
continue to monitor and modify its allowance for possible loan losses as
conditions dictate. Management believes that, based on information currently
available, the Bank's allowance for possible loan losses is sufficient to cover
losses inherent in its loan portfolio. At this time, no assurance can be given
that the Bank's level of allowance for possible loan losses will be sufficient
to cover future possible loan losses incurred by the Bank or that future
adjustments to the allowance for possible loan losses will not be necessary if
economic and other conditions differ substantially from the economic and other
conditions used by management to determine the current level of the allowance
for possible loan losses. Management may in the future increase its level of
loan loss allowance as a percentage of total loans and non-performing

                                       23
<PAGE>
 
loans in the event it increases the level of multi-family, commercial real
estate, construction and development or other lending as a percentage of its
total loan portfolio. In addition, the FDIC and NYSBD as an integral part of
their examination process periodically review the Bank's allowance for possible
loan losses. Such agencies may require the Bank to make additional provisions
for estimated possible loan losses based upon judgments that may differ from
those of management.

                                       24
<PAGE>
 
     The following table sets forth activity in the Bank's allowance for
possible loan losses for the periods set forth in the table.


<TABLE>
<CAPTION>
                                                   At or For the Year Ended December 31,
                                             ----------------------------------------------------
                                               1998      1997        1996       1995      1994
                                             --------   --------   --------   --------   --------
                                                               (In thousands)
<S>                                         <C>        <C>        <C>        <C>        <C>    
Balance at beginning of year                $  24,029  $  23,320  $  23,350  $  25,127  $  24,502
                                             --------   --------   --------   --------   --------
Provision for possible loan losses                750        600      2,000        600        600
Charge-offs:                                                                                     
  Real estate loans:                                                                               
  One- to four-family                               -          -         19         14          -
  Commercial real estate                            -         83      1,589      2,385         59
  Construction and development                      -          -        519        111        112
  Consumer and student loans                        -          8          -          -          -
                                             --------   --------   --------   --------   --------
     Total charge-offs                              -         91      2,127      2,510        171
                                             --------   --------   --------   --------   --------
 
Recoveries:
  Real estate loans:  
  One- to four-family                               -          -          3        40         107
  Commercial real estate                            -        200         94        92          89
  Construction and development                      -          -          -         1           -
                                             --------   --------   --------   --------   --------
     Total recoveries                               -        200         97       133         196
                                             --------   --------   --------   --------   --------
Net recoveries (charge-offs)                        -        109     (2,030)    (2,377)        25
                                             --------   --------   --------   --------   --------
Balance at end of year                      $  24,779  $  24,029  $  23,320  $  23,350  $  25,127
                                             ========   ========   ========   ========   ========
Ratio of net recoveries/(charge-offs)
  to average loans outstanding
  during the year                                   -%      0.02%     (0.47)%    (0.66)%     0.01%
                                             ========   ========   ========   ========   ========
</TABLE>

                                       25
<PAGE>
 
     The following tables set forth the Bank's percent of allowance for possible
loan losses to total allowance and the percent of loans to total loans
(including loans held for sale) in each of the categories listed at the dates
indicated.

<TABLE>
<CAPTION>
                                                                        At December 31,
                                               -------------------------------------------------------------------  
                                                              1998                             1997
                                               ---------------------------------- --------------------------------  
                                                                     Percent of                         Percent of
                                                            Percent   Loans in                           Loans in
                                                              of        Each                 Percent of    Each
                                                           Allowance  Category               Allowance   Category
                                                           To Total   to Total                To Total   to Total
                                                 Amount    Allowance    Loans       Amount    Allowance    Loans
                                               ---------- ---------- ------------ ----------- -------- -----------  
                                                                     (Dollars in thousands)
<S>                                           <C>         <C>         <C>          <C>        <C>      <C>
One- to four-family                            $   7,162     28.90%     64.21  %    $  6,970    29.01%   63.28  %  
Multi-family                                       1,487      6.00       3.81          1,770     7.37     4.39               
Commercial real estate                             7,732     31.20      20.99          8,003    33.30    24.82            
Construction and development                       5,791     23.37       6.41          3,553    14.79     5.22            
Home equity/second mortgage                          396      1.60       3.68            137     0.57     1.69                  
Consumer and student                                 294      1.19       0.90            103     0.43     0.60                  
Unallocated                                        1,917      7.74        --           3,493    14.53     --                 
                                               ---------- ---------- ------------ ----------- -------- --------  
    Total allowance for 
       possible loan losses                    $  24,779    100.00%    100.00  %    $ 24,029   100.00%  100.00  %
                                               ========== ========== ============ =========== ======== ======== 

<CAPTION> 
                                                                    At December 31,               
                                 -------------------------------------------------------------------------------------------
                                                  1996                                             1995                     
                                 ----------------------------------------         ----------------------------------------  
                                                               Percent                                           Percent      
                                                                 of                                                of       
                                                              Loans in                                          Loans in    
                                              Percent of         Each                           Percent of        Each         
                                              Allowance        Category                         Allowance       Category     
                                               To Total        to Total                          To Total       to Total     
                                  Amount      Allowance         Loans               Amount       Allowance       Loans
                                 ---------    -----------     -----------         ---------     -----------    -----------  
                                                                                           (Dollars in thousands)
<S>                           <C>             <C>             <C>               <C>              <C>           <C>
One- to four-family           $    2,580          11.06   %       49.83   %     $   2,176            9.32   %      48.41   %
Multi-family                       2,960          12.69            8.81             3,036           13.00           8.92    
Commercial real estate             7,474          32.05           31.94             7,185           30.77          30.65    
Construction and development       4,664          20.00            7.09             3,872           16.58          10.21    
Home equity/second mortgage           47           0.20            1.80                35            0.15           0.90    
Consumer and student                  35           0.15            0.53                34            0.15           0.91    
Unallocated                        5,560          23.85               -             7,012           30.03              -     
                                 ---------    -----------     -----------         ---------     -----------    -----------  
     Total allowance for
        possible loan losses  $   23,320         100.00   %      100.00   %     $  23,350          100.00   %     100.00   %
                                 =========    ===========     ===========         =========     ===========    ===========  
<CAPTION> 
                                               At December 31,                       
                                    -----------------------------------------    
                                                      1994                       
                                    -----------------------------------------    
                                                                 Percent of      
                                                                  Loans in       
                                                  Percent of        Each         
                                                  Allowance       Category       
                                                   To Total       to Total       
                                     Amount       Allowance         Loans        
                                    ---------     -----------    ------------    
                                                (Dollars In thousands)
<S>                                 <C>           <C>            <C>
One- to four-family                 $ 2,677           10.65   %      41.52    %  
Multi-family                          2,824           11.24           5.05       
Commercial real estate                7,523           29.94          30.98       
Construction and development          4,426           17.61          15.22       
Home equity/second mortgage              31            0.13           1.18       
Consumer and student                     35            0.14           6.05       
Unallocated                           7,611           30.29              -       
                                    ---------     -----------    ------------    
     Total allowance for                                                         
        possible loan losses        $25,127          100.00   %     100.00    %  
                                    =========     ===========    ============    
</TABLE> 

                                       26
<PAGE>
 
Environmental Issues

         The Bank encounters certain environmental risks in its lending
activities. Under federal and state environmental laws, lenders may become
liable for costs of cleaning up hazardous materials found on property securing
their loans. In addition, the existence of hazardous materials may make it
unattractive for a lender to foreclose on such properties. Although
environmental risks are usually associated with loans secured by commercial real
estate, risks also may be substantial for loans secured by residential real
estate if environmental contamination makes security property unsuitable for
use. This could also have a negative effect on nearby property values. The Bank
attempts to control its risk by requiring that a phase one environmental
assessment be completed as part of its underwriting review for all
non-residential mortgage applications. In addition, the Bank's policy is to
maintain ownership of specific real estate properties acquired by the Bank as a
result of foreclosure in separately incorporated subsidiaries.

Securities Investment Activities

         The Board of Directors sets the securities investment policy of the
Bank. This policy dictates that investment decisions will be made based on the
safety of the investment, liquidity requirements of the Bank and potential
return on the investments. In pursuing these objectives, the Bank considers the
ability of an investment to provide earnings consistent with factors of quality,
maturity, marketability and risk diversification. The Board of Directors has
established an Investment Committee comprised of three Directors and the
Investment Officer to supervise the Bank's securities investment program. The
Bank's Investment Committee meets periodically and evaluates all investment
activities for safety and soundness, evaluates the investment policy and its
objectives for the next period and submits a report to the Board of Directors.
The Bank's Investment Officer is responsible for making securities investment
portfolio decisions in accordance with the Bank's policies. While the Investment
Officer has the authority to conduct trades within specific guidelines
established by the Bank's investment policy, all transactions are periodically
reviewed by the Investment Committee and reported to the Board of Directors on a
monthly basis.

         At December 31, 1998, the Bank's current policies generally limit
securities investments to U.S. Government and agency securities, municipal
bonds, corporate debt obligations and corporate equities. In addition, the
Bank's policies permit investments in mortgage-backed and mortgage related
securities, including securities issued and guaranteed by FNMA, FHLMC,
Government National Mortgage Association (GNMA) and privately-issued
Collateralized Mortgage Obligations (CMOs). The Bank's current securities
investment strategy is to de-emphasize its investment in U.S. Government
obligations, corporate debt and municipal bonds and to emphasize the purchase of
mortgage-backed and mortgage related securities, preferred stock and trust
preferreds issued by corporate issuers in order to increase its overall
investment securities yield while remaining in short- and medium-term
investments for purposes of interest rate risk management.

         At December 31, 1998, the Company had $2.30 billion in securities,
consisting primarily of U.S. Government and agency obligations, mortgage-backed
and mortgage related securities, municipal and corporate obligations, trust
preferreds, and preferred and common stocks, as compared with $2.55 billion at
December 31, 1997. Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (SFAS No.
115), requires the Company to designate its securities as held-to-maturity,
available-for-sale or trading depending on the Company's intent regarding its
investments. Upon the purchase of an investment security, the Bank and the
Holding Company (Roslyn Bancorp, Inc. on an unconsolidated basis) will make a
determination as to the classification of 

                                       27
<PAGE>
 
the security. However, the Bank and the Holding Company currently do not
purchase securities with the intention of trading such securities, nor does the
Bank or the Holding Company maintain trading portfolios. As of December 31,
1998, $2.24 billion of the Company's securities portfolio, or 59.8% of total
assets, was classified as available-for-sale, with an average life of the
portfolio of 2.72 years. At such date, $68.8 million of the Company's securities
portfolio, or 1.8% of total assets, was classified as held-to-maturity, with a
market value of $69.2 million and an average life of the portfolio of 0.77
years. Since December 1995, the Company has designated all newly-purchased
securities as available-for-sale.

         Mortgage-Backed and Mortgage Related Securities. The Bank purchases
mortgage-backed and mortgage related securities in order to: (i) generate
positive interest rate spreads with minimal administrative expense; (ii) lower
its credit risk as a result of the guarantees provided by FHLMC, FNMA, and GNMA;
(iii) utilize these securities as collateral for borrowings; and (iv) increase
the liquidity of the Bank. The Bank has primarily invested in mortgage-backed
and mortgage related securities issued or sponsored by private issuers, GNMA and
FHLMC. The Bank also invests in CMOs issued or sponsored by FNMA, FHLMC, as well
as private issuers. At December 31, 1998, mortgage-backed and mortgage related
securities totaled $1.69 billion, or 45.2% of total assets, and 46.5% of total
interest-earning assets, of which $1.62 billion was classified as
available-for-sale and $68.1 million was classified as held-to-maturity. At
December 31, 1998, 21.1% of the mortgage-backed and mortgage related securities
were adjustable-rate and 78.9% were fixed-rate. The mortgage-backed and mortgage
related securities portfolio had coupon rates ranging from 5.0% to 12.5% and had
a weighted average yield of 6.47% at December 31, 1998. The estimated fair value
of the Bank's mortgage-backed and mortgage related securities held-to-maturity
at December 31, 1998, was $68.4 million.

         At December 31, 1998, the Bank's CMO portfolio totaled $1.30 billion,
or 34.7% of total assets and 35.7% of total interest-earning assets, consisting
of $743.7 million of CMOs issued by private issuers such as GE Capital Mortgage
Services, Inc., Prudential Home Mortgage Securities, Inc., Residential Funding
Mortgage Securities, Inc. and Citicorp Mortgage Securities, Inc., and $552.6
million issued by government sponsored agencies such as FNMA and FHLMC. It is
the policy of the Bank to limit its privately issued CMOs to non-high risk
securities rated "AAA" by two rating agencies with an average life of seven
years or less. The Bank also limits the amount of such investments to $25
million per transaction, 10% of the issuer's outstanding CMOs and 35% of the
Bank's assets. For government sponsored CMOs, the Bank's policy limits such
investments to non-high risk securities that have an average life of ten years
or less. The Bank also limits the amount of such investments to $50 million per
transaction. The Bank monitors the credit rating of its CMOs on a regular basis.
The current securities investment policy of the Bank prohibits the purchase of
higher risk CMOs, which are defined as those securities exhibiting significantly
greater volatility of estimated average life and price relative to interest
rates than do standard 30-year fixed-rate securities. At December 31, 1998,
$1.23 billion of the Bank's CMO portfolio was classified as available-for-sale
and $68.1 million was classified as held-to-maturity, with a market value of
$68.4 million. At such date, the Bank's CMO portfolio had an average estimated
life of 2.26 years and a weighted average yield of 6.53%.

         Debt Securities. The Bank's investment in debt securities generally
consists of investments in U.S. Treasury securities and debt securities issued
by government sponsored agencies such as FNMA, GNMA and FHLMC. To a lesser
extent, the Bank invests in debt securities and commercial paper issued by
industrial and financial companies and obligations of municipalities and public
utilities.

         U.S. Government and Agency Obligations. At December 31, 1998, the
Bank's U.S. Government securities portfolio totaled $47.9 million, all of which
was classified as available-for-sale. Such portfolio 

                                       28
<PAGE>
 
primarily consists of short- to medium-term (maturities of one to five years)
securities. The Bank's current investment practice, however, is to de-emphasize
its investments in such instruments. At December 31, 1998, the Bank's agency
securities portfolio totaled $115.4 million, all of which was classified as
available-for-sale and consisted of callable debentures. The Bank's callable
agency debentures generally are callable at par after one year and in six month
intervals thereafter. The current policy of the Bank limits the purchase of
agency debt obligations to a maturity of thirty years or less and limits such
purchases to $50 million per transaction, although purchases of structured notes
are limited to $20 million per transaction and 10% of the Bank's assets.

         Corporate Bonds. The Bank's policy limits investments in corporate
bonds with maturities of ten years or less to bonds rated "A" or better by at
least one nationally recognized rating agency and to a total investment of 25%
of the Bank's assets, with a 1% limitation of a single issuer. The Bank's policy
limits investments in corporate bonds with maturities between ten years and
thirty years to bonds rated "A" or better by at least one nationally recognized
rating agency and a total investment of no more than 33% of the Bank's current
total corporate investments. Consistent with the Bank's current securities
investment strategy, the Bank has de-emphasized investments in corporate debt
obligations during 1998. As of December 31, 1998, the Bank had no corporate bond
holdings.

         Municipal Bonds. The Bank's municipal bond portfolio, which at December
31, 1998 totaled $715,000, had an estimated fair market value of $755,000. All
of such securities were classified as held-to-maturity and were comprised of
general obligation bonds (i.e., obligations backed by the general credit of the
issuer). All of the Bank's municipal bonds are currently rated "AAA." At
December 31, 1998, the average life of the portfolio was approximately 1.45
years and the portfolio had a weighted average coupon rate of 7.95%. Interest
earned on municipal bonds is exempt from federal, state and local income taxes.
The Bank's current policy is to de-emphasize its investment in municipal bonds.

         Equity Securities. At December 31, 1998, the Bank's equity securities
portfolio totaled $96.8 million, all of which was classified as
available-for-sale. The Company on an unconsolidated basis also has an equity
securities portfolio totaling $353.2 million, all of which was classified as
available-for-sale at December 31, 1998. The Company's equity securities
portfolio consisted of trust preferred, common, and preferred stock. The
majority of the Company's preferred stock portfolio is redeemable by the issuers
pursuant to the terms of the preferred stock, generally after a three to five
year holding period. As of December 31, 1998, the Company had $35.5 million of
preferred stock eligible for redemption on or before December 31, 1999. The
Company benefits from its investment in common and preferred stocks due to a tax
deduction the Company receives with regards to dividends paid by corporate
issuers on equity securities held by other corporate entities such as the
Company.

         Included in the Bank's equity securities at December 31, 1998 was a
$16.2 million investment in two common stock mutual funds. The Bank's policy
limit for its common and preferred stock investments is 5% and 7.5%,
respectively of its total assets and allows for the purchase of common and
preferred stock with a 1% limitation on the purchase of any single issuer. At
December 31, 1998, the Bank's policies permit the purchase of preferred stock
rated "Baa" or better, with a 1% limitation on the purchase of preferred stock
of any single issuer.

                                       29
<PAGE>
 
         The Company's investment policy was modified in 1998 to include capital
notes/trust preferreds issued primarily by financial institutions. These
securities represent secondary capital and rank subordinate and junior in right
of payment to all indebtedness of the issuing company. These higher yielding
securities generally are non-rated or rated below investment grade. In order to
offset the higher degree of risk, management will focus primarily on, but not
limited to, securities issued by New York metropolitan area institutions. At
December 31, 1998, the Company had $144.7 million of trust preferreds.

                                       30
<PAGE>
 
         The following table sets forth the composition of the Company's debt
and equity and mortgage-backed and mortgage related securities portfolios in
dollar amounts and in percentages at the dates indicated:

<TABLE>
<CAPTION>

                                                                                           At December 31,                          
                                                               ---------------------------------------------------------------------
                                                                           1998                                   1997              
                                                               ------------------------------         ----------------------------- 
                                                                                   Percent                               Percent    
                                                                  Amount          of Total               Amount         of Total    
                                                               -------------     ------------         -------------    ------------ 
                                                                                       (Dollars in thousands)
<S>                                                         <C>               <C>                <C>                   <C>
Debt securities:
     U.S. Government obligations                            $       47,882             2.08    % $         77,975             3.05 %
     Agency securities                                             115,397             5.01               125,481             4.92  
     Municipal bonds                                                   715             0.03                 1,930              .08  
     Corporate obligations                                               -             -                    5,385              .21  
                                                               -------------     ------------         -------------    ------------ 
         Total debt securities                                     163,994             7.12               210,771             8.26  
                                                               -------------     ------------         -------------    ------------ 

Equity securities:
     Preferred and common stock and other                          305,254            13.25               285,352            11.18  
     Trust preferreds                                              144,727             6.28                     -               -   
                                                               -------------     ------------         -------------    ------------ 
         Total equity securities                                   449,981            19.53               285,352            11.18  
                                                               -------------     ------------         -------------    ------------ 


Mortgage-backed and mortgage related securities:
     FHLMC                                                               -             -                  253,153             9.91  
     GNMA                                                          391,757            17.00               464,971            18.21  
     FNMA                                                            2,001             0.09                     -               -   
     CMOs                                                        1,296,336            56.26             1,338,702            52.44  
                                                               -------------     ------------         -------------    ------------ 
         Total mortgage-backed and mortgage related
            securities                                           1,690,094            73.35             2,056,826            80.56  
                                                               -------------     ------------         -------------    ------------ 
              Total securities                              $    2,304,069           100.00    % $      2,552,949           100.00 %
                                                               =============     ============         =============    ============ 


     Debt and equity securities available-for-sale          $      613,260            26.62    % $        494,193            19.36 %
     Debt securities held-to-maturity                                  715             0.03                 1,930              .08  
                                                               -------------     ------------         -------------    ------------ 
         Total debt and equity securities                          613,975            26.65               496,123            19.44  
                                                               -------------     ------------         -------------    ------------ 
     Mortgage-backed and mortgage related
        securities available-for-sale                            1,622,023            70.40             1,856,633            72.72  
     Mortgage-backed and mortgage related
        securities held-to-maturity                                 68,071             2.95               200,193             7.84  
                                                               -------------     ------------         -------------    ------------ 
         Total mortgage-backed and mortgage
              related securities                                 1,690,094            73.35             2,056,826            80.56  
                                                               -------------     ------------         -------------    ------------ 
         Total securities                                   $    2,304,069           100.00    % $      2,552,949           100.00 %
                                                               =============     ============         =============    ============ 

<CAPTION>
                                                               At December 31,               
                                                           ------------------------------    
                                                                       1996                  
                                                           ------------------------------    
                                                                               Percent       
                                                              Amount          of Total       
                                                           -------------     ------------    
                                                               (Dollars in thousands)                            
<S>                                                   <C>                    <C>
Debt securities:                                                                             
     U.S. Government obligations                      $        179,259              9.31  %  
     Agency securities                                         124,377              6.46     
     Municipal bonds                                             1,930               .10     
     Corporate obligations                                      14,398               .75     
                                                           -------------     ------------    
         Total debt securities                                 319,964             16.62     
                                                           -------------     ------------    
Equity securities:                                                                           
     Preferred and common stock and other                      168,862              8.78     
     Trust preferreds                                                -                -      
                                                           -------------     ------------    
         Total equity securities                               168,862              8.78     
                                                           -------------     ------------    
                                                                                             
Mortgage-backed and mortgage related securities:                                             
     FHLMC                                                     220,264             11.44     
     GNMA                                                      292,936             15.22     
     FNMA                                                        6,263               .32     
     CMOs                                                      916,580             47.62     
                                                           -------------     ------------    
         Total mortgage-backed and mortgage related                                          
            securities                                       1,436,043             74.60     
                                                           -------------     ------------    
              Total securities                         $     1,924,869            100.00  %  
                                                           =============     ============    
                                                                                             
     Debt and equity securities available-for-sale     $       486,896             25.30  %  
     Debt securities held-to-maturity                            1,930               .10     
                                                           -------------     ------------    
         Total debt and equity securities                      488,826             25.40     
                                                           -------------     ------------    
     Mortgage-backed and mortgage related                                                    
        securities available-for-sale                        1,159,411             60.23     
     Mortgage-backed and mortgage related                                                    
        securities held-to-maturity                            276,632             14.37     
                                                           -------------     ------------    
         Total mortgage-backed and mortgage                                                  
              related securities                             1,436,043             74.60     
                                                           -------------     ------------    
         Total securities                              $     1,924,869            100.00  %  
                                                           =============     ============    
</TABLE>

                                       31
<PAGE>
 
         The following table sets forth the Company's securities activities for
the periods indicated:

<TABLE>
<CAPTION>

                                                                         For the Year Ended December 31,
                                                            -----------------------------------------------------------
                                                                  1998                 1997                 1996
                                                            -----------------     ----------------     ----------------
                                                                                  (In thousands)
<S>                                                      <C>                  <C>                  <C>
Beginning balance                                        $     2,552,949      $      1,924,869     $      1,141,959
                                                            -----------------     ----------------     ----------------
Debt securities purchased - available-for-sale                   111,015               123,329              201,226
Equity securities purchased - available-for-sale                 375,916               155,220               80,012
Mortgage-backed and mortgage related securities
   purchased - available-for-sale                              1,444,982             1,250,235              925,159
Less:
Sale of debt securities - available-for-sale                      25,434                79,864                    -
Sale of equity securities - available-for-sale                   152,224                17,855               35,758
Sale of mortgage-backed and mortgage related securities
   available-for-sale                                             34,304                37,794               89,400
Principal repayments on mortgage-backed
   and mortgage related securities                             1,158,596               353,430              164,630
Maturities of debt securities                                    798,335               451,693              137,453
Realized gains (losses) on sales of mortgage-backed
   and mortgage related securities                                   645                   784                 (873)
Realized gains on debt and equity securities                       6,530                 1,973                   69
Amortization of premium on callable preferred stock                 (786)                 (805)                (705)
Accretion of discount on other securities                         13,453                 5,343                1,242
Change in net unrealized gain on available-for-sale
   securities                                                    (31,742)               32,637                4,021
                                                            -----------------     ----------------     ----------------
Ending balance                                           $     2,304,069      $      2,552,949     $      1,924,869
                                                            =================     ================     ================
</TABLE>

                                       32
<PAGE>
 
The following table sets forth certain information regarding the amortized cost
and estimated fair value of the Company's debt and equity and mortgage-backed
and mortgage related securities at the dates indicated:

<TABLE>
<CAPTION>
                                                                        At December 31,
                                         ----------------------------------------------------------------------------------
                                                   1998                        1997                         1996
                                         --------------------------  --------------------------  --------------------------
                                                        Estimated                   Estimated                   Estimated
                                          Amortized       Fair        Amortized       Fair        Amortized       Fair
                                            Cost          Value         Cost          Value         Cost          Value
                                         ------------  ------------  ------------  ------------  ------------  ------------
                                                                         (In thousands)
<S>                                     <C>           <C>           <C>           <C>           <C>           <C>
Debt and equity securities:
  Debt securities held-to-maturity:
     State, County and
       Municipal bonds                  $       715   $        755  $    1,930    $   2,026     $    1,930    $    2,067
                                         ------------  ------------  ------------  ------------  ------------  ------------
  Debt securities available-for-sale:
       U.S. Government obligations           45,333         47,882      75,499       77,975        175,440       179,259
       Agency securities                    114,849        115,397     125,097      125,481        124,709       124,377
       Corporate obligations                      -              -       5,365        5,385         14,207        14,398
                                         ------------  ------------  ------------  ------------  ------------  ------------
       Total debt securities
          available-for-sale                160,182        163,279     205,961      208,841        314,356       318,034
                                         ------------  ------------  ------------  ------------  ------------  ------------
  Equity securities
    available-for-sale:
     Preferred and common stock
       and other                            285,208        305,254     253,584      285,352        155,772       168,862
     Trust preferred                        147,131        144,727           -            -              -             -
                                         ------------  ------------  ------------  ------------  ------------  ------------
       Total debt and equity             
         securities                         593,236        614,015     461,475      496,219        472,058       488,963
                                         ------------  ------------  ------------  ------------  ------------  ------------
Mortgage-backed and mortgage related
  securities:
  Held-to-maturity:
     CMOs                                    68,071         68,416     200,193      200,445        276,632       276,046
                                         ------------  ------------  ------------  ------------  ------------  ------------
  Available-for-sale:
     FHLMC                                        -              -     250,206      253,153        220,800       220,264
     GNMA                                   386,436        391,757     456,328      464,971        287,538       292,936
     FNMA                                     2,004          2,001           -            -          6,443         6,263
     CMO's                                1,228,644      1,228,265   1,127,327     1,138,509       636,615       639,948
                                         ------------  ------------  ------------  ------------  ------------  ------------
       Total mortgage-backed and
         mortgage related securities
         available-for-sale               1,617,084      1,622,023   1,833,861     1,856,633     1,151,396     1,159,411
                                         ------------  ------------  ------------  ------------  ------------  ------------
Total mortgage-backed and
 mortgage related securities              1,685,155      1,690,439   2,034,054     2,057,078     1,428,028     1,435,457
                                         ------------  ------------  ------------  ------------  ------------  ------------
Net unrealized gain on securities
 available-for-sale                          25,678              -      57,420            -         24,783             -
                                         ------------  ------------  ------------  ------------  ------------  ------------
Total securities amortized
 cost/estimated fair value              $ 2,304,069   $  2,304,454  $2,552,949    $2,553,297    $1,924,869    $1,924,420
                                         ============  ============  ============  ============  ============  ============
</TABLE>

                                       33
<PAGE>


 
         The table below sets forth certain information regarding the carrying
value, weighted average yields and contractual maturities of the Company's
securities portfolio as of December 31, 1998.

<TABLE>
<CAPTION>
                                   ------------------------------------------------------------------------------------------
                                                                      More than One               More than Five Years
                                     One Year or Less              Year to Five Years                 to Ten Years           
                                   ----------------------         ----------------------         ------------------------    
                                               Weighted                        Weighted                         Weighted     
                                   Carrying     Average           Carrying     Average           Carrying       Average      
                                    Value        Yield             Value        Yield              Value         Yield       
                                   --------    ----------         ---------    ---------         ----------     ---------    
                                                                  (Dollars in thousands)
<S>                            <S>             <C>             <C>             <C>            <C>               <C>     
Held-to-maturity:
  State, County and
    Municipal bonds            $        415        8.17   %    $      300          7.59  %    $        -            -     %  
  Mortgage-backed and
    mortgage related securities           -        -                  117          6.50            6,209            6.78     
                                   --------                       ---------                      ----------                  
     Total held-to-maturity             415        8.17               417          7.28            6,209            6.78     
                                   --------                       ---------                      ----------                  
Available-for-sale:
  Mortgage-backed and
    mortgage related securities:
     GNMA                                 -        -                  355          9.47            1,751            9.80     
     FNMA                                 -        -                    -          -                   -            -        
     CMOs                               674        7.50             2,646          8.06           12,197            7.10     
                                   --------                       ---------                      ----------                  
       Total mortgage-backed
         and mortgage related
         securities                     674        7.50             3,001          8.23           13,948            7.44     
                                   --------                       ---------                      ----------                  
  Debt securities:
     U.S. Government
       obligations                    5,030        6.91            42,852          7.46                -            -        
     Agency securities                    -        -                    -          -                   -            -        
                                   --------                       ---------                      ----------                  
          Total debt securities       5,030        6.91            42,852          7.46                -            -        
                                   --------                       ---------                      ----------                  
                                                                                                                             
  Equity securities (1):
     Preferred and common
       stock and other                    -        -                    -          -                   -            -        
     Trust preferreds                     -        -                    -          -                   -            -        
                                   --------                       ---------                      ----------                  
           Total equity
             securities                   -        -                    -          -                   -            -        
                                   --------                       ---------                      ----------                  
     Total available-for-sale         5,704        6.98            45,853          7.51           13,948            7.44     
                                   --------                       ---------                      ----------                  
Total securities               $      6,119                    $   46,270                     $   20,157                     
                                   ========                       =========                      ==========                  
<CAPTION>

                                   ----------------------------------------------------------     
                                                                                                  
                                     More than Ten Years                     Total                
                                   ------------------------         -------------------------     
                                                  Weighted                         Weighted       
                                   Carrying       Average           Carrying        Average       
                                     Value         Yield              Value          Yield        
                                   ----------     ---------         ----------     ----------     
                                                     (Dollars in thousands)                       
<S>                             <C>              <C>             <C>               <C>
Held-to-maturity:                                                                                 
  Municipal bonds                 $         -         -     %      $       715         7.93  %    
  Mortgage-backed and                                                                             
    mortgage related securities        61,745         6.86              68,071         6.85       
                                   ----------                       ----------                    
     Total held-to-maturity            61,745         6.86              68,786         6.86       
                                   ----------                       ----------                    
Available-for-sale:                                                                               
  Mortgage-backed and                                                                             
   mortgage related securities:
     GNMA                             389,651         6.23             391,757         6.25       
     FNMA                               2,001         6.45               2,001         6.45       
     CMOs                           1,212,748         6.72           1,228,265         6.73       
                                   ----------                       ----------                    
       Total mortgage-backed                                                                      
        and mortgage related                                                                       
        securities                  1,604,400         6.60           1,622,023         6.61       
                                   ----------                       ----------                    
  Debt securities:                                                                                
     U.S. Government                                                                              
       obligations                        -           -                 47,882         7.40       
     Agency securities                115,397         7.13             115,397         7.13       
                                   ----------                       ----------                    
       Total debt securities          115,397         7.13             163,279         7.21       
                                   ----------                       ----------                    
  Equity securities (1):                                                                          
     Preferred and common                                                                         
       stock and other                305,254         5.22             305,254         5.22       
     Trust preferreds                 144,727         8.24             144,727         8.24       
                                   ----------                       ----------                    
       Total equity                                                                           
        securities                    449,981         6.19             449,981         6.19       
                                   ----------                       ----------                    
     Total available-for-sale       2,169,778         6.54           2,235,283         6.57       
                                   ----------                       ----------                    
Total securities                 $  2,231,523                     $  2,304,069                     
                                   ==========                       ==========                    
                                                                    
</TABLE>

(1)   As equity securities have no maturities, they are classified in the more
      than ten year category.


                                       34


<PAGE>
 
Sources of Funds

         General. Deposits, repayments and prepayments of loans and securities,
proceeds from sales of loans and securities, and proceeds from maturing
securities and cash flows from operations are the primary sources of the Bank's
funds for use in lending, investing and for other general purposes. The Bank
also utilizes borrowed funds, primarily reverse-repurchase agreements, to fund
its operations.

         Deposits. The Bank offers a variety of deposit accounts with a range of
interest rates and terms. At December 31, 1998, the Bank's deposit accounts
consisted of savings (including school savings and club accounts), Super NOW and
NOW accounts, checking accounts, money market accounts and certificates of
deposit. The Bank offers certificates of deposit with balances in excess of
$100,000 at preferential rates (jumbo certificates) and also offers Individual
Retirement Accounts (IRAs) and other qualified plan accounts. To enhance the
deposit products it offers and increase its market share, the Bank added
commercial checking accounts for small to moderately-sized commercial
businesses, a payroll account service with direct deposit features, as well as a
low-cost checking account service for low-income customers. Additionally, during
1998 the Bank introduced its Charter Money Market account, and several new
certificates of deposit products which further expanded the Bank's deposits.

         At December 31, 1998, the Bank's deposits totaled $2.07 billion. For
the year ended December 31, 1998, the average balance of core deposits (savings,
Super NOW and NOW, money market and non-interest-bearing checking accounts)
totaled $694.2 million, or 34.05% of total average deposits. At December 31,
1998, the Bank had a total of $1.34 billion in certificates of deposit, of which
$1.02 billion had maturities of one year or less. For the year ended December
31, 1998, the average balance of certificate of deposit accounts represented
65.95% of total average deposits. Although the Bank has a significant portion of
its deposits in shorter term certificates of deposit, management monitors
activity on the Bank's certificate of deposit accounts and, based on historical
experience and the Bank's current pricing strategy, believes it will retain a
large portion of such accounts upon maturity.

         The flow of deposits is influenced significantly by general economic
conditions, changes in money market rates, prevailing interest rates and
competition. The Bank's deposits are obtained predominantly from the areas in
which its branch offices are located. The Bank relies primarily on competitive
pricing of its deposit products, customer service and long-standing
relationships with customers to attract and retain these deposits; however,
market interest rates and rates offered by competing financial institutions
significantly affect the Bank's ability to attract and retain deposits. In
addition, the Bank has historically paid a special interest payment on savings
and NOW accounts, ranging from 10% to 25% of interest paid on these accounts
during the year. For each of the years ended December 31, 1998 and 1997, the
Bank paid a special interest payment of 15% and 25%, respectively of interest
paid on savings and NOW accounts, which totaled $970,000 and $2.3 million,
respectively. The Bank has made no decision as to the amount of such special
interest payment or whether such special interest payments will continue after
1998. The Bank uses traditional means of advertising its deposit products,
including radio and print media and generally does not solicit deposits from
outside its market area. While certificate accounts in excess of $100,000 are
accepted by the Bank, and may be subject to preferential rates, the Bank does
not actively solicit such deposits as such deposits are more difficult to retain
than core deposits. Although the Bank has historically not used brokers to
obtain deposits, the Bank has authorized the utilization of brokers to obtain
deposits to fund its activities and has entered into several relationships with
a nationally recognized retail brokerage firm to accept deposits sold by such
brokerage firm. Dependent on market conditions, the Bank will periodically use
such brokered deposits primarily to fund asset growth and manage interest rate
risk. The Bank's policies limit the amount of 

                                       35
<PAGE>
 
brokered deposits which the Bank may have at any time to 25% of total retail
deposits. At December 31, 1998, the Bank had $129.7 million in brokered
deposits.

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

<TABLE>
<CAPTION>
                                                    For the Year Ended December 31,
                                                 -------------------------------------
                                                     1998         1997         1996
                                                 -----------  -----------  -----------
                                                            (In thousands)
<S>                                             <C>          <C>          <C>
Net deposits (withdrawals)                      $   34,961   $   (99,293) $   560,178
Interest credited on deposit accounts               93,625        86,003       66,412
                                                 -----------  -----------  -----------
Total increase (decrease) in deposit accounts   $  128,586   $   (13,290) $   626,590
                                                 ===========  ===========  ===========
</TABLE>


         At December 31, 1998, the Bank had outstanding $229.1 million in
certificate of deposit accounts in amounts of $100,000 or more, maturing as
follows:

<TABLE>
<CAPTION>
                                                               Weighted
              Maturity Period                     Amount     Average Rate
--------------------------------------------  ------------ --------------
                                                (Dollars in thousands)
<S>                                          <C>           <C> 
Three months or less                         $      80,348        5.21%
Over three through six months                       49,682        5.32
Over six through 12 months                          66,683        5.32
Over 12 months                                      32,393        6.06
                                              ------------ --------------
Total                                        $     229,106        5.39%
                                              ============ ==============
</TABLE>

                                       36
<PAGE>
 
         The following table sets forth the distribution of the Bank's average
deposit accounts for the periods indicated and the weighted average interest
rates on each category of deposits presented. Average balances for the periods
presented utilize average daily balances.

<TABLE>
<CAPTION>

                                                                    For the Years Ended December 31,        
                                         --------------------------------------------------------------------------------------    
                                                         1998                                            1997                      
                                         --------------------------------------          --------------------------------------    
                                                        Percent                                         Percent                    
                                                        of Total      Weighted                         of Total      Weighted      
                                          Average       Average       Average             Average       Average      Average       
                                          Balance       Deposits        Rate              Balance      Deposits        Rate        
                                         ----------     ---------     ---------          ----------    ----------    ----------    
                                                                       (Dollars in thousands)
<S>                                     <C>             <C>           <C>               <C>            <C>           <C>
Money market accounts                 $     67,915          3.33  %        3.30 %        $   52,916          2.90  %       2.70  %  
Savings accounts (1)                       503,354         24.69           2.92             445,716         24.47          3.04     
Super NOW and NOW accounts (2)              87,304          4.28           3.21              78,974          4.34          3.60     
Non-interest-bearing accounts               35,600          1.75           -                 30,644          1.68            -      
                                         ----------     ---------                        ----------      --------                  
 Total                                     694,173         34.05           2.84             608,250         33.39          2.93     
                                         ----------     ---------                        ----------      --------                  
   Total certificates of deposit         1,344,776         65.95           5.70           1,213,478         66.61          5.77     
                                         ----------     ---------                        ----------      --------                  
     Total average deposits           $  2,038,949        100.00  %        4.73          $1,821,728        100.00  %       4.82     
                                         ==========     =========                        ==========      ========                  
<CAPTION>
                                            For the Years Ended December 31,      
                                        --------------------------------------    
                                                        1996                      
                                        --------------------------------------    
                                                       Percent                    
                                                      of Total      Weighted      
                                         Average       Average      Average       
                                         Balance      Deposits        Rate        
                                        ----------    ----------    ----------    
                                                (Dollars in thousands)                                     
<S>                                    <C>            <C>           <C>
Money market accounts                  $   64,046         4.18   %       2.89  %  
Savings accounts (1)                      480,171        31.37           3.08     
Super NOW and NOW accounts (2)             45,990         3.00           2.96     
Non-interest-bearing accounts              29,248         1.91             -      
                                        ----------    ----------                  
 Total                                    619,455        40.46           2.91     
                                        ----------    ----------                  
   Total certificates of deposit          911,216        59.54           5.63     
                                        ----------    ----------                  
     Total average deposits            $1,530,671       100.00   %       4.53     
                                        ==========    ==========                  
</TABLE>

(1)   Includes special interest payment made by the Bank on such accounts for
      the years ended December 31, 1998, 1997 and 1996, which resulted in an
      increased cost of such accounts of 18 basis points, 48 basis points, and
      59 basis points, respectively.

(2)   Includes special interest payment made by the Bank on the NOW accounts for
      the years ended December 31, 1998, 1997 and 1996, which resulted in an
      increased cost of such accounts of 8 basis points, 18 basis points and 35
      basis points, respectively.

                                       37
<PAGE>
 
         The following table presents, by various rate categories, the amount of
certificate of deposit accounts outstanding at the dates indicated.

<TABLE>
<CAPTION>

                                                          Period to Maturity from December 31, 1998                             
                               ------------------------------------------------------------------------------------------------ 
                                                                                   Greater          Greater
                                                 Greater          Greater           Than             Than
                                  One             Than             Than           Three to          Four to          Greater
                                  Year         One to Two         Two to            Four             Five             Than
                                or Less           Years         Three Year          Years            Years          Five Years   
                               -----------     ------------     ------------     ------------     ------------     ------------ 
Certificates of deposit:                                               (In thousands)                 
<S>                        <C>             <C>              <C>              <C>              <C>              <C>              
0 to 3.00%                 $            -  $            -   $            -   $            -   $            -   $            -   
3.01 to 4.00%                           -               -                -                -                -                -   
4.01 to 5.00%                     461,931          37,408               32                -               75                -   
5.01 to 6.00%                     440,852          87,808           19,926           19,217           17,019            9,555   
6.01 to 7.00%                     112,408          19,304           53,840           24,732            4,337           16,307   
7.01 to 8.00%                          34           3,786            1,425              180                7              780   
Over 8.01%                          2,525           7,055            1,372               30                -               41   
                               -----------     ------------     ------------     ------------     ------------     ------------ 
Total                      $    1,017,750  $      155,361   $       76,595   $       44,159   $       21,438   $       26,683   
                               ===========     ============     ============     ============     ============     ============ 
<CAPTION>
                                       At December 31,                
                          ------------------------------------------- 
                              1998           1997           1996      
                          -------------  -------------  ------------- 
Certificates of deposit:                (In thousands)                
<S>                      <C>            <C>            <C>
0 to 3.00%               $         -    $         -    $       223   
3.01 to 4.00%                      -              -             61    
4.01 to 5.00%                499,446         24,214         10,000    
5.01 to 6.00%                594,377        855,534        819,414    
6.01 to 7.00%                230,928        405,297        278,741    
7.01 to 8.00%                  6,212          6,021          6,677    
Over 8.01%                    11,023         12,206         12,937
Total                     -------------  -------------  ------------- 
                         $ 1,341,986    $ 1,303,272    $ 1,128,053    
                          =============  =============  ============= 
</TABLE>

                                       38
<PAGE>
 
Borrowed Funds. The Bank's primary source of borrowings consists of
reverse-repurchase agreements entered into with nationally recognized securities
brokerage firms. At December 31, 1998, the Bank had $959.3 million of
reverse-repurchase agreements outstanding. Reverse-repurchase agreements are
contracts for the sale of securities owned or borrowed by the Bank with an
agreement to repurchase those securities at an agreed upon price and date.
Historically, the Bank has entered into reverse-repurchase agreements as a
method of providing the Bank with cost effective funding in periods where its
needs for funds exceeded the amount of funds provided by its deposit gathering
activities. Currently, the Bank utilizes such reverse-repurchase agreements in
periods when the Bank can generate securities investments with yields in excess
of its cost of such borrowing. At December 31, 1998, the Bank's policies limit
the Bank's use of reverse-repurchase agreements to maturities of overnight to
five years, with collateral consisting of U.S. Treasury obligations, U.S. agency
obligations or mortgage-backed securities. Securities brokers utilized by the
Bank in these agreements must have a minimum of $100 million of "net" excess
capital with a Public Securities Association Master repurchase agreement on
file. The Bank averaged approximately $1.03 billion pursuant to such
reverse-repurchase agreements during the year ended December 31, 1998. At
December 31, 1998, $150,000 of RNMC's mortgage loans were pledged to secure
notes payable to FNMA under a warehouse line of credit known as the FNMA "As
Soon As Pooled Plus Program." These notes are repaid as the related mortgage
loans are sold or collected.

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

<TABLE>
<CAPTION>
                                                                For the Years Ended December 31,
                                                             ---------------------------------------
                                                                 1998          1997         1996
                                                             -------------  -----------  -----------
                                                                        (Dollars in thousands)
<S>                                                         <C>            <C>          <C>
FNMA warehouse line of credit:
  Average balance outstanding                               $     2,556    $   1,128    $   2,248
  Maximum amount outstanding at any month
     end during the year                                          9,027        3,945        3,239
  Balance outstanding at end of year                                150        1,332        1,829
  Weighted average interest rate during the year                   5.60%        6.56%        6.62%
  Weighted average interest rate at end of year                    6.05         6.70         6.87
Reverse-repurchase agreements:
  Average balance outstanding                               $ 1,031,254    $ 629,224    $ 100,159
  Maximum amount outstanding at any month end
    during the year                                           1,141,847      995,861      212,296
  Balance outstanding at end of year                            959,319      965,119            -
  Weighted average interest rate during the year                   5.90%        5.90%        5.58%    
  Weighted average interest rate at end of year                    5.62         6.05          -
Total borrowed funds:
  Average balance outstanding                               $ 1,033,810    $ 630,352    $ 102,407
  Maximum amount outstanding at any month end
     during the year                                          1,141,847      997,288      215,310
  Balance outstanding at end of year                            959,469      966,451        1,829
  Weighted average interest rate during the year                   5.90%        5.91%        5.66%
  Weighted average interest rate at end of year                    5.62         6.05         6.87
</TABLE>

                                       39
<PAGE>
 
Savings Bank Life Insurance

         The Bank, through its Savings Bank Life Insurance (SBLI) department,
engages in group life insurance coverage per individual under SBLI's Financial
Institution Group Life Insurance policy. The SBLI department's activities are
segregated from the Bank and, while they do not directly affect the Bank's
earnings, management believes that offering SBLI is beneficial to the Bank's
relationship with its depositors and the general public. The SBLI department
pays its own expenses and reimburses the Bank for expenses incurred on its
behalf.

Subsidiary Activities

         Roslyn National Mortgage Corp. RNMC is the Bank's wholly owned mortgage
banking subsidiary which was established in August 1995 for the origination,
sale and servicing of one- to four-family loans. RNMC was formed in connection
with the Bank's acquisition of certain assets and liabilities of Residential
Mortgage Banking, Inc. (RMBI). It is a mortgage banking entity currently
operating in New York, New Jersey, Connecticut, Tennessee, Delaware,
Pennsylvania, Virginia, Maryland and Tennessee. The consideration paid for the
assets and liabilities of RMBI, including a $623.0 million loan servicing
portfolio, exceeded the estimated fair market value of the net assets acquired
by approximately $3.5 million, which was recorded by RNMC as goodwill and is
being amortized on a straight line basis over a ten year period. RNMC is
operated under the direction of its executive officers who are overseen by
RNMC's Board of Directors, which consists of certain members of the Board of
Directors of the Company.

         Roslyn Capital Corp. Roslyn Capital Corp. (RCC) is a subsidiary of the
Bank, organized by the Bank on April 1, 1997 for the purpose of engaging in a
REIT. On that date, the Bank transferred one- to four-family residential
mortgage loans, commercial real estate loans and mortgage-backed securities
totaling $707.0 million, net, which included certain associated assets and
liabilities, to RCC. In return, the Bank received shares of common and preferred
stock of RCC. The subsidiary will promote greater retained earnings for the Bank
and thereby serve to strengthen the Bank's capital position from an operational
standpoint.

      RSB Agency, Inc. RSB Agency, Inc., a wholly owned subsidiary of the Bank
incorporated in 1983, previously engaged in the sale of life insurance and
collects commissions for previously-issued life insurance policies. RSB Agency,
Inc. is currently active in the sale of annuities, mutual fund and life
insurance products.

      Other Subsidiaries. The Bank has five other wholly owned subsidiaries.
Blizzard Realty Corp., 1400 Corp. and BSR 1400 Corp. are periodically used to
hold real estate owned. In addition, BSR 1400 Corp. holds Bank facilities and
leases thereon. Residential Mortgage Banking, Inc. was established to preserve
the name thereof for future use. Old Northern Co. Ltd. currently is an inactive
subsidiary. In addition, following the acquisition of Roosevelt Savings Bank,
the Bank has acquired a variety of subsidiaries relating to the operations of
Roosevelt Savings Bank which are presently being merged into the Banks
subsidiaries as operating subsidiaries of the Bank.

Personnel

         As of December 31, 1998, the Bank had 510 full-time employees and 97
part-time employees. The employees are not represented by a collective
bargaining unit and the Bank and RNMC considers its relationship with its
employees to be good.

                                       40
<PAGE>
 
                           REGULATION AND SUPERVISION

General

         The Company, as a savings and loan holding company, is required to file
certain reports with, and otherwise comply with the rules and regulations of,
the OTS.

         The Bank is a New York State chartered stock savings bank and its
deposit accounts are insured up to applicable limits by the FDIC under the Bank
Insurance Fund (BIF). The Bank is subject to extensive regulation by the NYSBD,
as its chartering agency, and by the FDIC, as the deposit insurer. The Bank must
file reports with the NYSBD and the FDIC concerning its activities and financial
condition, in addition to obtaining regulatory approvals prior to entering into
certain transactions such as establishing branches and mergers with, or
acquisitions of, other depository institutions. There are periodic examinations
by the NYSBD and the FDIC to assess the Bank's compliance with various
regulatory requirements and financial condition. This regulation and supervision
establishes a framework of activities in which a savings bank can engage and is
intended primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss reserves for regulatory purposes. Any
change in such regulation, whether by the NYSBD, the FDIC or through
legislation, could have a material adverse impact on the Company and the Bank
and their operations and stockholders. The Company is also required to file
certain reports with and otherwise comply with the rules and regulations of the
OTS, the NYSBD and of the SEC under the federal securities laws. Certain of the
regulatory requirements applicable to the Bank and to the Company are referred
to below or elsewhere herein. The description of statutory provisions and
regulations applicable to savings banks and their holding companies set forth in
this Form 10-K does not purport to be a complete description of such statutes
and regulations and their effect on the Bank and the Company.

New York State Law

         The Bank derives its lending, investment and other authority primarily
from the applicable provisions of New York State Banking Law and the regulations
of the NYSBD, as limited by FDIC regulations. The laws and regulations
established the types of lending and investments in which the Bank may engage.

         The exercise by an FDIC-insured savings bank of the lending and
investment powers of a savings bank under the New York State Banking Law is
limited by FDIC regulations and other federal law and regulations.

         With certain limited exceptions, a New York State chartered savings
bank may not make loans or extend credit for commercial, corporate or business
purposes (including lease financing) to a single borrower, the aggregate amount
of which would be in excess of 15% of the bank's net worth. The Bank currently
complies with all applicable loans-to-one-borrower limitations.

         Under New York State Banking Law, a New York State chartered stock
savings bank may declare and pay dividends out of its net profits, unless there
is an impairment of capital, but approval of the Superintendent is required if
the total of all dividends declared in a calendar year would exceed the total of
its net profits for that year combined with its retained net profits of the
preceding two years, subject to certain adjustments.

         Under the New York State Banking Law, the Superintendent may issue an
order to a New York State chartered banking institution to appear and explain an
apparent violation of law, to discontinue unauthorized or unsafe practices and
to keep prescribed books and accounts. Upon a finding by 

                                       41
<PAGE>
 
the NYSBD that any director, trustee or officer of any banking organization has
violated any law, or has continued unauthorized or unsafe practices in
conducting the business of the banking organization after having been notified
by the Superintendent to discontinue such practices, such director, trustee or
officer may be removed from office by the NYSBD after notice and an opportunity
to be heard. The Bank does not know of any past or current practice, condition
or violation that might lead to any proceeding by the Superintendent or the
NYSBD against the Bank or any of its Directors or officers. The Superintendent
also may take possession of a banking organization under specified statutory
criteria.

      Assessments. Savings banks are required to pay assessments to the NYSBD to
fund operations. Assessments paid by the Bank for the fiscal year ended December
31, 1998 totaled $69,000.

FDIC Regulations

         Capital Requirements. The FDIC has adopted risk-based capital
guidelines to which the Bank is subject. Risk-based capital ratios are
determined by allocating assets and specified off-balance sheet items to four
risk-weighted categories ranging from 0% to 100%, with higher levels of capital
being required for the categories perceived as representing greater risk.

         These guidelines divide a savings bank's capital into two tiers. The
first tier (Tier I) includes stockholders' equity, certain non-cumulative
perpetual preferred stock (excluding auction rate issues) and minority interests
in equity accounts of consolidated subsidiaries, less goodwill and other
intangible assets (except mortgage servicing rights and purchased credit card
relationships subject to certain limitations). Supplementary (Tier II) capital
includes, among other items, cumulative perpetual and long-term limited-life
preferred stock, mandatory convertible securities, certain hybrid capital
instruments, term subordinated debt and the allowance for loan and lease losses,
subject to certain limitations, less required deductions. Savings banks are
required to maintain a total risk-based capital ratio of at least 8%, of which
at least 4% must be Tier I capital.

         In addition, the FDIC regulations prescribe a minimum Tier I leverage
ratio (Tier I capital to adjusted total assets as specified in the regulations)
of 3% for banks that meet certain specified criteria, including that they have
the highest examination rating and are not experiencing or anticipating
significant growth. All other banks are required to maintain a Tier I leverage
ratio of 3% plus an additional cushion of at least 100 to 200 basis points. The
FDIC may, however, set higher leverage and risk-based capital requirements on
individual institutions when particular circumstances warrant.

         The following is a summary of the Bank's regulatory capital at December
31, 1998:

                  GAAP Capital to Total Assets               12.06 %
                  Total Capital to Risk-Weighted Assets      24.38 %
                  Tier I Leverage Ratio                      11.52 %

         In August 1995, the FDIC, along with the other federal banking
agencies, adopted a regulation providing that the agencies will take account of
the exposure of a bank's capital and economic value to changes in interest rate
risk in assessing a bank's capital adequacy. The agencies recently issued a
joint policy statement providing guidance on interest rate risk management,
including a discussion of the critical factors affecting the agencies'
evaluation of interest rate risk in connection with capital adequacy.

         Standards for Safety and Soundness. The federal banking agencies have
adopted final regulations and Interagency Guidelines Establishing Standards for
Safety and Soundness (Guidelines) to implement safety and soundness standards.
The Guidelines set forth the safety and soundness standards that the federal
banking agencies use to identify and address problems at insured depository
institutions before capital becomes impaired. If the appropriate federal banking
agency determines that an institution fails to meet any standard prescribed by
the Guidelines, the agency may require the institution to submit to the agency
an acceptable plan to achieve compliance with the standard.

                                       42
<PAGE>
 
         Dividend Limitations. The FDIC has authority to use its enforcement
powers to prohibit a savings bank from paying dividends if, in its opinion, the
payment of dividends would constitute an unsafe or unsound practice. Federal law
prohibits the payment of dividends by a bank that will result in the bank
failing to meet applicable capital requirements on a pro forma basis.
Additionally, the Bank, as a subsidiary of a savings and loan holding company,
will be required to provide the OTS with 30 days prior written notice before
declaring any dividend. The Plan of Conversion also restricts the Bank's payment
of dividends in the event the dividend would impair the liquidation account
established in connection with the Conversion. The Bank is also subject to
dividend declaration restrictions imposed by New York law.

Investments and Activities

         The activities of all state-chartered financial institutions, including
savings banks and their subsidiaries, have generally been limited by federal law
to those activities of the type and in the amount authorized for national banks,
notwithstanding state law. Applicable regulations thereunder permit certain
exceptions to these limitations. For example, certain state chartered banks,
such as the Bank, may, with FDIC approval, continue to exercise state authority
to invest in common or preferred stocks listed on a national securities exchange
or the National Market System of NASDAQ and in the shares of an investment
company registered under the Investment Company Act of 1940, as amended. Such
banks may also continue to sell savings bank life insurance. In addition, the
FDIC is authorized to permit such institutions to engage in state authorized
activities or investments that do not meet this standard (other than
non-subsidiary equity investments) for institutions that meet all applicable
capital requirements if it is determined that such activities or investments do
not pose a significant risk to the BIF. All non-subsidiary equity investments,
unless otherwise authorized or approved by the FDIC, must have been divested by
December 19, 1996, pursuant to a FDIC-approved divestiture plan unless such
investments were grandfathered by the FDIC. The Bank received grandfathering
authority from the FDIC in February 1993 to invest in listed stocks and/or
registered shares subject to the maximum permissible investment of 100% of Tier
1 capital, as specified by the FDIC's regulations, or the maximum amount
permitted by New York State Banking Law, whichever is less. Such grandfathering
authority is subject to termination upon the FDIC's determination that such
investments pose a safety and soundness risk to the Bank or in the event the
Bank converts its charter or undergoes a change in control. As of December 31,
1998, the Bank had $305.3 million of securities which were subject to such
grandfathering authority.

Prompt Corrective Regulatory Action

         Federal law requires, among other things, that federal bank regulatory
authorities take "prompt corrective action" with respect to banks that do not
meet minimum capital requirements, the severity of which depends upon the degree
of under capitalization.

         An institution is deemed to be "adequately capitalized" if it has a
total risk-based capital ratio of 8% or greater, a Tier I risk-based capital
ratio of 4% or greater, and generally a leverage ratio of 4% or greater. An
institution is deemed to be "undercapitalized" if it has a total risk-based
capital ratio of less than 8%, a Tier I risk-based capital ratio of less than
4%, or generally a leverage ratio of less than 4%. An institution is deemed to
be "significantly undercapitalized" if it has a total risk-based capital ratio
of less than 6%, a Tier I risk-based capital ratio of less than 3%, or a
leverage ratio of less than 3%. An institution is deemed to be "critically
undercapitalized" if it has a ratio of tangible equity (as defined in the
regulations) to total assets that is equal to or less than 2%.

         "Undercapitalized" banks are subject to growth, capital distribution
(including dividend) and other limitations and are required to submit a capital
restoration plan. A bank's compliance with such plan is required to be
guaranteed by any company that controls the undercapitalized institutions. If an
"undercapitalized" bank fails to submit an acceptable plan, it is treated as if
it is "significantly undercapitalized." "Significantly undercapitalized" banks
are subject to one or more of a number of 

                                       43
<PAGE>
 
additional restrictions, including but not limited to an order by the FDIC to
sell sufficient voting stock to become adequately capitalized, requirements to
reduce total assets and cease receipt of deposits from correspondent banks or
dismiss directors or officers, and restrictions on interest rates paid on
deposits, compensation of executive officers and capital distributions by the
parent holding company. "Critically undercapitalized" institutions also may not,
beginning 60 days after becoming "critically undercapitalized," make any payment
of principal or interest on certain subordinated debt or extend credit for a
highly leveraged transaction or enter into any material transaction outside the
ordinary course of business. In addition, "critically undercapitalized"
institutions are subject to appointment of a receiver or conservator. Generally,
subject to a narrow exception, the appointment of a receiver or conservator is
required for a "critically undercapitalized" institution within 270 days after
it obtains such status.

Transactions with Affiliates

         Transactions between depository institutions and their affiliates are
governed by federal law. An affiliate of a savings bank is any company or entity
that controls, is controlled by, or is under common control with the savings
bank, other than a subsidiary. Generally, the extent to which the savings bank
or its subsidiaries may engage in "covered transactions" with any one affiliate
is limited to an amount equal to 10% of such savings bank's capital stock and
surplus. There is an aggregate limit on all such transactions with all
affiliates to an amount equal to 20% of such capital stock and surplus. The term
"covered transaction" includes the making of loans or other extensions of credit
to an affiliate; the purchase of assets from an affiliate, the purchase of, or
an investment in, the securities of an affiliate; the acceptance of securities
of an affiliate as collateral for a loan or extension of credit to any person;
or issuance of a guarantee, acceptance, or letter of credit on behalf of an
affiliate. Federal law also establishes specific collateral requirements for
loans or extensions of credit to, or guarantees, acceptances on letters of
credit issued on behalf of an affiliate. Section 23B requires that covered
transactions and a broad list of other specified transactions be on terms
substantially the same, or no less favorable, to the savings bank or its
subsidiary as similar transactions with non-affiliated parties.

         Federal law also restricts a savings bank with respect to loans to
directors, executive officers, and principal stockholders. Loans to directors,
executive officers and stockholders who control, directly or indirectly, more
than 10% of a savings bank, and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total capital and surplus.
Loans above certain amounts to directors, executive officers, and stockholders
who control more than 10% of a stock savings bank, and their respective related
interests, unless such loan is approved in advance by a majority of the board of
directors of the savings bank. Loans to directors, executive officers and
principal stockholders must be made on terms substantially the same as offered
in comparable transactions to other persons. Recent legislation created an
exception for loans made pursuant to a benefit or compensation program that is
widely available to all employees of the institution and does not give
preference to insiders over other employees. Federal law places additional
limitations on loans to executive officers.

Enforcement

         The FDIC has extensive enforcement authority over insured savings
banks, including the Bank. This enforcement authority includes, among other
things, the ability to assess civil money penalties, to issue cease and desist
orders and to remove directors and officers. In general, these enforcement
actions may be initiated in response to violations of laws and regulations and
to unsafe or unsound practices. The FDIC has authority under federal law to
appoint a conservator or receiver for an insured savings bank under certain
circumstances.

Insurance of Deposit Accounts

         The FDIC has adopted a risk-based insurance assessment system. The FDIC
assigns an institution to one of three capital categories based on the
institution's financial information, as of the 

                                       44
<PAGE>
 
reporting period ending seven months before the assessment period, consisting of
(i) well capitalized, (ii) adequately capitalized or (iii) undercapitalized, and
one of three supervisory subcategories within each capital group. The
supervisory subgroup to which an institution is assigned is based on a
supervisory evaluation provided to the FDIC by the institution's primary federal
regulator and information which the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit insurance
funds. An institution's assessment rate depends on the capital category and
supervisory category to which it is assigned. Assessment rates currently range
from 0 basis points to 27 basis points. The FDIC is authorized to raise the
assessment rates in certain circumstances. The FDIC has exercised this authority
several times in the past and may raise insurance premiums in the future. If
such action is taken by the FDIC, it could have an adverse effect on the
earnings of the Bank. On September 30, 1996, the President signed into law the
Deposit Insurance Funds Act of 1996 (the Funds Act) which, among other things,
imposed a special one-time assessment on Savings Association Insurance Fund
member institutions to recapitalize SAIF. The Funds Act also spreads the
obligations for payment of the Financing Corporation (FICO) bonds across all
SAIF and BIF members. As of January 1, 1997, BIF deposits were assessed a FICO
payment of 1.3 basis points, while SAIF deposits will pay an estimated 6.4 basis
points on the FICO bonds. Full pro rata sharing of the FICO payments between BIF
and SAIF are merged. The Bank's insurance premiums resulted in a refund of
$300,000 during fiscal 1998.

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

Federal Reserve System

         The Federal Reserve Board regulations require depository institutions
to maintain non-interest-earning reserves against their transaction accounts
(primarily Super NOW, NOW and regular checking accounts). For 1998, the Federal
Reserve Board regulations required that reserves be maintained against aggregate
transaction accounts as follows: for that portion of transaction accounts
aggregating $46.5 million or less (subject to adjustment by the Federal Reserve
Board) the reserve requirement is 3%; and for accounts greater than $46.5
million, the reserve requirement is $1.4 million plus 10% (subject to adjustment
by the Federal Reserve Board between 8% and 14%) against that portion of total
transaction accounts in excess of $46.5 million. The first $4.4 million of
otherwise reservable balances (subject to adjustments by the Federal Reserve
Board) are exempted from the reserve requirements. The Bank is in compliance
with the foregoing requirements.


Holding Company Regulation

         The Company is regulated as a non-diversified unitary savings and loan
holding company within the meaning of the federal law. As such, the Company has
registered with the OTS and will be subject to OTS regulations, examinations,
supervision and reporting requirements. In addition, the OTS has enforcement
authority over the Company and its non-savings institution subsidiaries.
Additionally, this authority permits the OTS to restrict or prohibit activities
that are determined to be a serious risk to the subsidiary savings institution.
Additionally, the Bank is required to notify the OTS at least 30 days before
declaring any dividend to the Company.

         As a unitary savings and loan holding company, the Company generally is
not restricted under existing laws as to the types of business activities in
which it may engage. Upon any non-supervisory acquisition by the Company of
another savings association as a separate subsidiary, the Company would become a
multiple savings and loan holding company and would be subject to extensive
limitations on the types of business activities in which it could engage. The
Home Owners' Loan Act (HOLA) limits the activities of a multiple savings and
loan holding company and its non-insured institution subsidiaries 

                                       45
<PAGE>
 
primarily to activities permissible for bank holding companies under Section
4(c)(8) of the Bank Holding Company Act, as amended, subject to the prior
approval of the OTS, and to other activities authorized by OTS regulation.
Multiple savings and loan holding companies are prohibited from acquiring or
retaining, with certain exceptions, more than 5% of a non-subsidiary holding
company, or a non-subsidiary company engaged in activities other than those
permitted by multiple savings and loan holding companies. Recently proposed
legislation would treat all unitary savings and loan holding companies as bank
holding companies and would, subject to a narrow grandfather clause, limit the
activities of such companies to those permissible for bank holding companies
controlling commercial banks.

         The HOLA prohibits a savings and loan holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring more than 5% of
the voting stock of another savings institution, or holding company thereof, or
from acquiring such an institution or company by merger, consolidation or
purchase of its assets, without prior written approval of the OTS. In evaluating
applications by holding companies to acquire savings institutions, the OTS must
consider the financial and managerial resources and future prospects of the
company and institution involved, the effect of the acquisition on the risk to
the insurance funds, the convenience and needs of the community and competitive
factors.

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

         In order for the Company to continue to be regulated as a savings and
loan holding company by the OTS (rather than as a bank holding company by the
Federal Reserve Board), the Bank must continue to qualify as a qualified thrift
lender. In order to qualify as a qualified thrift lender, the Bank must maintain
compliance with a Qualified Thrift Lender Test. Under the qualified thrift
lender test, a savings institution is required to qualify as a "domestic
building loan association" within the meaning of the Internal Revenue Code or
maintain at least 65% of its "portfolio assets" (total assets less: (i)
specified liquid assets up to 20% of total assets; (ii) intangibles, including
goodwill; and (iii) the value of property used to conduct business) in certain
"qualified thrift investments" (primarily residential mortgages and related
investments, including certain mortgage-backed and mortgage related securities)
in at least nine months out of each twelve month period. A holding company of an
institution that fails the test must either convert to a bank holding company
and thereby become subject to the regulation and supervision of the Federal
Reserve Board or operate under certain restrictions. For the year ended December
31, 1998, the Bank maintained in excess of 94.45% of its portfolio assets in
qualified thrift investments. The Bank met all of the requirements relating to
the QTL Test for the year ended December 31, 1998.

         New York State Holding Company Regulation. In addition to the federal
holding company regulations, a bank holding company organized or doing business
in New York State may be also subject to regulation under the New York State
Banking Law. The term "bank holding company," for purposes of the New York State
Banking Law, is defined generally to include any person, company or trust that
directly or indirectly owns, controls or holds with power to vote 10% or more of
the voting stock of each of two or more banking institutions, including
commercial banks and state savings banks and savings and loan associations
organized in stock form. In general, a holding company controlling, directly or
indirectly, only one banking institution is not deemed to be a bank holding
company for the purposes of the New York State Banking Law. The prior approval
of the NYSBD is required before any action is taken that causes any company to
become a bank holding company; any bank holding company acquires direct or
indirect ownership or control of more than 5% of the voting stock of a banking
institution; or acquires a banking institution by merger or purchase of assets.
Although the Company is not currently a bank holding company for purposes of New
York State law, any future acquisition of ownership, control, or the power to
vote 10% or more of the voting stock of another banking institution or bank
holding company would cause it to become such.

                                       46
<PAGE>
 
Federal Securities Laws

         The Company's common stock is registered with the SEC under Section
12(g) of the Securities Exchange Act of 1934, as amended (the Exchange Act). The
Company is subject to the information, proxy solicitation, insider trading
restrictions and other requirements under the Exchange Act.

         The registration under the Securities Act of 1933, as amended (the
Securities Act) of shares of the common stock that were issued in the Bank's
conversion from mutual to stock form does not cover the resale of such shares.
Shares of the common stock purchased by persons who are not affiliates of the
Company may be resold without registration. Shares purchased by an affiliate of
the Company will be subject to the resale restrictions of Rule 144 under the
Securities Act. If the Company meets the current public information requirements
of Rule 144 under the Securities Act, each affiliate of the Company who complies
with the other conditions of Rule 144 (including those that require the
affiliate's sale to be aggregated with those of certain other persons) would be
able to sell in the public market, without registration, a number of shares not
to exceed, in any three-month period, the greater of (i) 1% of the outstanding
shares of the Company or (ii) the average weekly volume of trading in such
shares during the preceding four calendar weeks. Provision may be made in the
future by the Company to permit affiliates to have their shares registered for
sale under the Securities Act under certain circumstances.

Year 2000 Compliance

The "Year 2000 Problem", as it is generally referred to, concerns the inability
of certain computer hardware and software systems and associated applications to
correctly recognize and process dates beyond December 31, 1999. Many computer
programs were developed using only six digits to define the date field in their
programs. Computer programs used by the Company, its suppliers or outside
service providers that have date-sensitive software may recognize "00" as the
year 1900, rather than the year 2000. Due to the nature of financial
information, calculations that rely on the integrity of the date field for the
correct processing of information could be significantly misstated, if
corrective action is not timely taken.

State of Readiness

The Company has implemented a detailed Year 2000 Plan, according to the
guidelines of the Federal Financial Institutions Examination Council, to
evaluate the Year 2000 compliance of its computer systems and the equipment
which supports the operation of the Company. As a New York State-chartered
savings institution, the Bank is subject to review by both the NYSBD and the
FDIC. The FDIC has completed two Tier II Year 2000 examinations of the Bank's
remediation progress.

Beginning in 1997, the Company initiated formal communications with all of its
service providers, vendors, major fund providers, major borrowers and companies
with which it has material investments, to determine the extent to which it may
be vulnerable to the inability of those parties to remediate their own Year 2000
issues. The Company's vendor relationships cover a wide range of services which
may or may not be subject to a contractual agreement. Where a contractual
relationship exists between the Company and a provider of services, and the
Company suffers harm to its operations due to a failure on the part of the
vendor to provide the service, whether due to Year 2000 or some other issue, the
vendor would be subject to a breach of contract suit. In order to minimize the
risk of material loss or disruption of the Company's business due to an issue
involving date sensitive processing, the Company has not only required of all of
these vendors their written assurances that they are proactively addressing Year
2000 issues within their operations, but the Company is also requesting and
taking advantage of opportunities to test and verify these claims.

Like many financial institutions, the Company relies upon computers for the
daily conduct of its business and for data processing generally. The Company
utilizes a combination of in-house and service bureau applications, with the
bulk of customer account processing being handled by leading national vendors of
data processing services for financial institutions. The Company has received
written assurances that 

                                       47
<PAGE>
 
these service providers have completed their internal remediation of programs,
and have substantially completed the remediation of issues related to
interdependencies with other parties. The Company will participate both directly
and indirectly in the testing of these servicers and other third party
dependencies commencing in November, 1998, and continuing through the end of the
second quarter of 1999.

The Company does not anticipate that there will be any significant or material
condition which will impact these service providers in their ability to deliver
accurate data processing services before, during and after the transition to the
new millennium, therefore no formal contingency plans exist at this time.
However, results of system tests conducted by the Company and by other users of
this service provider will be carefully monitored to ensure that all issues have
been identified and successfully remediated.

In addition to its outsourced systems, the Company relies on in-house, computer
based financial accounting and mortgage origination systems. The Company has
recently installed a new general ledger and financial accounting system, and
anticipates upgrading the mortgage origination system by mid 1999. The new
systems have been certified by their respective vendors to be Year 2000
compliant. Language to that effect was included in the service contracts
executed with the system vendors. Both of these revisions were planned around
the business needs of the Company, not the ability or inability of the installed
software to accommodate Year 2000 processing. Nevertheless, these mission
critical system replacements are Year 2000 compliant.

The balance of the Company's internal processing is supported by PC based
systems, using industry standard software to run non-mission critical
applications. Any software program or application which was not supported by the
vendor, or which required an update to achieve Year 2000 capability, has been
identified for replacement or upgrade. Equipment which contains embedded chips
or microprocessors has also been tested and scheduled for upgrade or replacement
where necessary. All such system enhancements are expected to be completed by
the end of the first quarter of 1999. The cost to remediate these systems is
immaterial, and is being expensed in the period in which it occurs.

The Company believes it has developed an effective plan to address the Year 2000
problem and that, based on the available information, its Year 2000 transition
will not have a material effect on its business, operations or financial
results. However, the Company has no control over the progress of third parties
in addressing their own Year 2000 issues. If the necessary changes are not
effected or are not completed in a timely manner, or if unanticipated problems
arise, there may be a material impact on the Company's financial condition and
results of operations.

Cost to Address the Company's Year 2000 Issues

The Company's costs to achieve Year 2000 compliance are not expected to have a
material financial impact on the Company. The Company's expenses related to Year
2000 issues for 1998 was $60,000 and anticipates the expenses for 1999 to be
approximately $80,000. The Company intends to fund such costs from its current
operations. However, as stated above, there can be no assurance that all such
costs have been identified, or that there may not be some unforeseen cost which
may have a material adverse effect on the Company's financial condition and
results of operations.

Risks of Year 2000 Issues

To date, the Company has not identified any system which presents a material
risk of failing to be Year 2000 compliant in a timely manner, or for which a
suitable alternative cannot be implemented. However, as the Company progresses
with its Year 2000 transition, systems or equipment may be identified which
present a material risk of business interruption. Such disruption may include
the inability to process customer account transactions, including deposits,
withdrawals, loan payments and disbursements; the inability to reconcile and
record daily activity; the inability to process loan applications or to track
delinquencies; the inability to generate checks or to clear funds. In addition,
if any of the Company's major borrowers should fail to achieve Year 2000
compliance, and should they experience a disruption of 

                                       48
<PAGE>
 
their own businesses, their ability to meet their obligations to the Company may
be seriously impaired. To mitigate credit risk in the case of large borrowers,
the Company currently includes a clause relating to the borrower's Year 2000
awareness and preparedness in its loan commitment documents. In addition, 100%
of all borrowers whose loans exceed $500,000 have been contacted to survey their
Year 2000 readiness in order to anticipate any potential exposure. The dollar
value of loans for which borrowers were surveyed equates to 70% of the permanent
and construction loan portfolio.

To the extent that the risks posed by the Year 2000 problem are pervasive in
data processing and telecommunication services worldwide, or to the extent that
disruption of a power utility prevents the Company from gaining access to its
systems, the Company cannot predict with certainty that it will remain
materially unaffected by issues related to the Year 2000 problem, which are
beyond the Company's control.

Contingency Plans

The Company is in the process of developing two types of contingency plans. The
Remediation Plans will identify components of mission critical applications
which are judged, at some point prior to December 31, 1999, to be at risk of
failure to achieve complete renovation, validation and implementation. Business
Interruption Plans will ensure that the Company has sufficiently planned for
unanticipated system failures at critical production dates before, on and after
January 1, 2000.

Remediation Plan: The Company expects to complete its Year 2000 transition and
----------------
to have thoroughly tested its systems prior to any date of potential disruption.
However, the Company is developing Year 2000 remediation plans for mission
critical systems which are not already identified as compliant. If the results
of testing of the Company's systems are not satisfactory, contingency plans will
be invoked within sufficient time to assure successful implementation of a
compliant alternative.

Business Interruption Plans: These plans would be invoked if unanticipated Year
---------------------------
2000 problems disrupt production, similar to Disaster Recovery Plans.
Essentially, they require that resources are planned for deployment to ensure
that such an interruption does not threaten the viability of the Company. The
Company will modify its current Business Resumption Plan to specifically address
the special circumstances of a disruption due to a Year 2000 related component
failure.

The discussion above contains certain forward-looking statements. Actual results
may differ materially from the Company's expectations due to the nature and
uncertainty of circumstances surrounding the Year 2000 problem. The Company may
fail to identify systems that are not Year 2000 compliant, or the Company or
other parties may fail to meet the dates and goals set above. If so, the extent
and nature of efforts to then address those contingencies, to repair or replace
the affected systems, the Company's ability to obtain qualified personnel,
consultants or other resources and the success of those efforts cannot be stated
with any degree of certainty.

                                       49
<PAGE>
 
                           FEDERAL AND STATE TAXATION

Federal Taxation

         General. The Company, the Bank and their subsidiaries (excluding Roslyn
Capital Corporation) will report their income on a consolidated basis, using a
calendar year and the accrual method of accounting and will be subject to
Federal income taxation in the same manner as other corporations with some
exceptions, including particularly the Bank's treatment of its reserve for bad
debts discussed below. The following discussion of tax matters is intended only
as a summary and does not purport to be a comprehensive description of the tax
rules applicable to the Bank or the Company. The Bank was last audited by the
Internal Revenue Service for the year ended December 31, 1991 which resulted in
no change to taxable income.

         Bad Debt Reserves. Prior to the enactment of The Small Business Job
Protection Act of 1996 (the 1996 Act) on August 20, 1996, for federal income tax
purposes, thrift institutions which met certain definitional tests primarily
relating to their assets (the 60% Test) and the nature of their business, were
permitted to establish tax reserves for bad debts and to make annual additions
thereto, which additions could, within certain specified limitations, be
deducted in arriving at taxable income. The Bank's deduction for bad debts with
respect to non-qualifying loans could be computed using an amount based on a six
year moving average of the Bank's actual loss experience (the Experience
Method). The Bank's deduction with respect to "qualifying loans", which are
generally loans secured by certain interest in real property, could be computed
using the Experience Method or a percentage equal to 8% of the Bank's taxable
income (the PTI Method), computed with certain modifications and without regard
to this deduction and reduced by the amount of the any permitted deduction for
bad debts on non-qualifying loans. Additions to the tax bad debt reserve under
the PTI method were subject to an overall limitation. The allowable deduction
under the PTI Method was limited to the excess of 12% of withdrawable accounts
of depositors at the end of the year over the sum of the Bank's surplus,
undivided profits and reserves at the beginning of the year. Use of the PTI
Method had the effect of reducing the marginal rate of federal tax on the Bank's
income to 32.2%, exclusive of any minimum tax, as compared to the maximum
corporate federal income tax rate of 35%.

         The 1996 Act. Under the 1996 Act, for tax years beginning after
December 31, 1995, the PTI Method was repealed. Additionally, "large banks"
(i.e., one with assets having an adjusted basis of more than $500 million),
which includes the Bank, are no longer permitted to make additions to its tax
bad debt reserve, can only deduct bad debts as they occur and is required to
recapture (i.e., include in its taxable income) over a six year period the
excess of the balance of its tax bad debt reserves as of December 31, 1995 over
the balance of such reserves as of December 31, 1987 (or a lesser amount if the
Bank's loan portfolio decreased since December 31, 1987). For tax years
beginning in 1996 and 1997, the recapture requirement is suspended if the
principal amount of residential mortgages originated by the Bank during the year
was not less than the average of the principal amount of loans made during the
six preceding taxable years. As of December 31, 1995, the Bank's tax bad debt
reserve was equal to the balance of such reserve as of December 31, 1987.

         Distributions. Under the 1996 Act, if the Bank makes "non-dividend
distributions" to the Company, such distributions will be considered to have
been made from the Bank's unrecaptured tax bad debt reserves (including the
balance of its reserves as of December 31, 1987) to the extent thereof, and an
amount based on the amount distributed (but not in excess of the amount of such
reserves) will be included in the Bank's income. Non-dividend distributions
include distributions in excess of the Bank's current and accumulated earnings
and profits, as calculated for federal income tax purposes, distributions in
redemption of stock, and distributions in partial or complete liquidation.
Dividends paid out of the Bank's current or accumulated earnings and profits
will not be so included in the Bank's income.

                                       50
<PAGE>
 
     The amount of additional taxable income created from a non-dividend
distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution.  Thus, if the Bank makes a
non-dividend distribution to the Company, approximately one and one-half times
the amount of such distribution (but not in excess of the amount of such
reserves) would be included in income for federal income tax purposes, assuming
a 35% federal corporate income tax rate.  See "Regulation and Supervision" for
limits on the payment of dividends by the Bank.  The Bank does not intend to pay
dividends that would result in a recapture of any portion of its tax bad debt
reserves.

     Corporate Alternative Minimum Tax.  In addition to the regular income tax,
the Code imposes a alternative minimum tax (AMT) in an amount equal to 20% of
alternative minimum taxable income (AMTI) to the extent the AMT exceeds the
regular tax.  AMTI regular taxable income as modified by certain adjustments and
tax preference items.  AMTI includes an amount equal to 75% of the excess of
adjusted current earnings over AMTI (determined without regard to this
adjustment and prior to reduction for net operating losses).  Only 90% of AMTI
can be offset by net operating loss carryforwards.  The AMT is available as a
credit against future regular income tax.  The AMT credit can be carried forward
indefinitely.  The Bank does not expect to be subject to the AMT.

     Dividends Received Deduction and Other Matters.  The Company may exclude
from its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations.  A 70% dividends received deduction generally
applies with respect to dividends received from corporations that are not
members such affiliated group, except that an 80% dividends received deduction
applies if the Company and the Bank own more than 20% of the stock of a
corporation distributing a dividend.

State and Local Taxation

     New York State Taxation.  The Bank is subject to the New York State
Franchise Tax on Banking Corporations in an annual amount equal to the greater
of (i) 9% of the Bank's "entire net income" allocable to New York State during
the taxable year, or (ii) the applicable alternative minimum tax.  The
alternative minimum tax is generally the greatest of (a) .01% of the value of
the taxable assets allocable to New York State with certain modifications, (b)
3% of the Bank's "alternative entire net income" allocable to New York State or
(c) $250.  Entire net income is similar to federal taxable income, subject to
certain modifications (including that net operating losses cannot be carried
back or carried forward) and alternative entire net income is equal to entire
net income without certain adjustments.  The Bank, the Company and their
subsidiaries (excluding Roslyn Capital Corporation) file a combined return.

     The Company, the Bank and their subsidiaries do business within the
Metropolitan Transportation Business Tax District (the District) which is
comprised of the counties of New York, Bronx, Kings, Queens, Richmond, Dutchess,
Nassau, Orange, Putnam, Rockland, Suffolk, and Westchester.  A tax surcharge is
imposed on banking corporations doing business within the District and has been
applied since 1982.  For the tax year ended December 31, 1998, the surcharge
rate was 17%.

     The Bank was last audited by the State of New York for the three-year
period ended December 31, 1995, which resulted in adjustments which were
immaterial to the Bank's financial statements.

     Bad Debt Reserves: For purposes of computing its New York State entire net
income, the Bank is permitted a deduction for an addition to the reserve for
losses on qualifying real property loans. The allowable deduction is the same as
for federal income tax purposes, prior to the 1996 Act, except that the
percentage allowable under the PTI Method was 32% instead of 8%.  The New York
State tax law was amended in August 1996 to prevent the recapture of tax bad
debt reserves that would otherwise occur as a result of the enactment of the
1996 Act.  However, the New York bad debt reserve is subject to recapture for
"non-dividend distributions" in a manner similar to the recapture of the federal
tax bad debt reserves for such distributions.  Also, the New York tax bad debt
reserve is subject to recapture in the event that the Bank fails to meet the 60%
Test, which it presently satisfies.  Although there can be

                                       51
<PAGE>
 
no assurance that the Bank will satisfy the 60% Test in the future, management
believes that this level of qualifying assets can be maintained by the Bank.
Each year the Bank reviews the most favorable method to calculate the deduction
attributable to an addition to the tax bad debt reserve.

     Delaware Taxation:  The Company, as a Delaware holding company not earning
income in Delaware, is exempted from the corporate income tax.  However, the
Company is required to file an annual report with and pay an annual franchise
tax based on authorized shares to the State of Delaware.

     Roslyn National Mortgage Corporation:  RNMC is subject to tax in the
various states in which it operates.  RNMC is also subject to tax in New York
City.


               EXECUTIVE OFFICERS OF THE REGISTRANT AND THE BANK

     The name, age, position, term of office as officer and period during which 
he or she has served as an officer is provided below for each executive officer 
of the Registrant and the Bank. All executive officers of the Registrant are 
also executive officers of the Bank.

     Joseph L. Mancino, Vice Chairman of the Board, President and Chief
Executive Officer and a Director of the Registrant, Chairman of the Board,
President and Chief Executive Officer of the Bank, joined the Bank in 1960, and
became Chairman of the Board, President and Chief Executive Officer of the Bank
in 1992 and of the Registrant in 1997. In connection with the Registrant's
acquisition of T R Financial Corp. in 1999, Mr. Mancino became Vice Chairman of
the Registrant. Mr. Mancino is 61 years of age.

     John M. Tsimbinos, Chairman of the Board of the Registrant and Vice
Chairman of the Board of the Bank, joined the Bank in 1999 in connection with
the Registrant's acquisition of T R Financial Corp. Mr. Tsimbinos is 62 years of
age.

     John R. Bransfield, Jr., Senior Executive Vice President and Chief
Operating Officer, joined the Bank in 1993 as a Senior Vice
President and Senior Lending Officer, became a Director in 1998, and became
Senior Executive Vice President and Chief Operating Officer in 1999. Mr.
Bransfield is 57 years of age.

     Nancy C. MacKenzie, Executive Vice President and Chief Information Officer
of the Bank, joined the Bank in 1976, became Chief Information Officer in 1995,
and became Executive Vice President and Chief Information Officer in 1999. Ms.
MacKenzie is 45 years of age.

     Daniel L. Murphy, Executive Vice President and Retail Banking Officer of
the Bank, joined the Bank in 1978, and became Executive Vice President and
Retail Banking Officer in 1999. Mr. Murphy is 39 years of age.

     Michael P. Puorro, Executive Vice President and Chief Financial Officer,
joined the Bank in 1992 and became Executive Vice President and Chief Financial
Officer in 1999. Mr. Puorro is 39 years of age.

     John L. Klag, Executive Vice President and Investment Officer of the Bank,
joined the Bank in 1993 and became Executive Vice President and Investment
Officer in 1999. Mr. Klag is 41 years of age.

     A. Gordon Nutt, Executive Vice President and Special Transition Officer and
Director, joined the Bank in 1999 in connection with the Registrant's
acquisition of T R Financial Corp. Mr. Nutt is 65 years of age.

     Kevin T. Dunne, Senior Vice President and Senior Consumer Lending Officer
of the Bank, joined the Bank in 1974 and became Senior Vice President and Senior
Consumer Lending Officer in 1999. Mr. Dunne is 43 years of age.

     Ralph E. Caccipuoti, Senior Vice President and Retail Operations Officer of
the Bank, joined the Bank in 1975 and became Senior Vice President and Retail
Operations Officer in 1999. Mr. Caccipuoti is 43 years of age.

                                       52
<PAGE>
 
     John F. Coffey, Senior Vice President and Senior Commercial Lending Officer
of the Bank, joined the Bank in 1996, and became Senior Vice President and
Commercial Lending Officer in 1999. Mr. Coffey is 52 years of age.

     William A. Walter, Senior Vice President and Assistant Chief Financial
Officer of the Bank, joined the Bank in 1996, and became Senior Vice President
and Assistant Chief Financial Officer in 1999. Mr. Walter is 34 years of age.

     Walter G. Mullins, Senior Vice President and Marketing Officer of the Bank,
joined the Bank in 1999 in connection with the Registrant's acquisition of T R
Financial Corp. Mr. Mullins is 53 years of age.

     Gerard L. Treglia, Senior Vice President and Retail Systems Officer of the
Bank joined the Bank in 1999 in connection with the Registrant's acquisition of
T R Financial Corp. Mr. Treglia is 49 years of age.

                                       53
<PAGE>
 
Item 2. Properties.
-------------------

     The Bank currently conducts its business through 25 full service banking
offices which includes 15 branches acquired pursuant to the Company's
acquisition of T R Financial Corp. and the Bank's contemporaneous merger with
Roosevelt Savings Bank on February 16, 1999. In addition, RNMC, the Bank's
mortgage banking subsidiary, conducts its business through the Bank's banking
offices as well as fourteen mortgage origination offices. The following table
sets forth the Bank's and RNMC's offices as of December 31, 1998.

<TABLE>
<CAPTION>
                                                                                                            
                                                                  Original                                  
                                           Leased                  Year                                     
                                             or                  Leased or         Date of Lease            
Location                                    Owned                Acquired           Expiration              
----------------------------             -----------           -------------    -------------------         
                                                                                                            
<S>                                      <C>               <C>                 <C>                          
Administrative/Main Office:                 Owned                   1932          Not Applicable            
Roslyn Office:                                                                                              
1400 Old Northern Boulevard                                                                                 
Roslyn, NY  11576                                                                                           
                                                                                                            
Branch Offices:                                                                                             
                                                                                                            
Bayshore                                   Leased                   1999               2009                 
(Office opens June 1, 1999)                                                                                 
130-145 East Main Street                                                                                    
Bayshore, NY  11706                                                                                         
                                                                                                            
Bayside (1)                                 Owned                   1969          Not Applicable            
224-04 Union Turnpike                                                                                       
Bayside, NY  11364                                                                                          
                                                                                                            
Bellmore                                    Owned                   1972          Not Applicable            
2641 Merrick Road                                                                                           
Bellmore, NY  11710                                                                                         
                                                                                                            
2790 Sunrise Highway (1)                   Leased                   1980               2010                 
Bellmore, NY  11710                                                                                         
                                                                                                            
Bellerose (1)                               Owned                   1975          Not Applicable            
247-53 Jamaica Avenue                                                                                       
Bellerose, NY  11426                                                                                        
                                                                                                            
Brooklyn (1)                                Owned                   1920          Not Applicable            
1024 Gates Avenue                                                                                           
Brooklyn, NY  11221                                                                                         
                                                                                                            
2925 Avenue U (1)                           Owned                   1955          Not Applicable            
Brooklyn, NY  11229                                                                                         
                                                                                                            
Dix Hills (1)                              Leased                   1995               2002                 
699 Old Country Road                                                                                        
Dix Hills, NY  11746                                                                                        
                                                                                                            
East Northport                              Owned                   1992          Not Applicable            
580 Larkfield Road
East Northport, NY  11731
</TABLE> 

                                       54
<PAGE>
 
<TABLE> 
<CAPTION>
                                                                                                           
                                                                  Original                                 
                                           Leased                  Year                                    
                                             or                  Leased or         Date of Lease           
Location                                    Owned                Acquired           Expiration             
----------------------------             -----------           -------------    -------------------        
                                                                                                           
<S>                                      <C>               <C>                 <C>                         
Farmingdale                                 Owned                   1968          Not Applicable           
14 Conklin Street                                                                                          
Farmingdale, NY 11735                                                                                      
                                                                                                           
Garden City (1)                             Owned                   1976          Not Applicable           
1122 Franklin Avenue                                                                                       
Garden City, NY  11530                                                                                     
                                                                                                           
108-110 Seventh Street (1)                 Leased                   1995               2025                
Garden City, NY  11530                                                                                     
                                                                                                           
Hewlett (1)                                 Owned                   1996          Not Applicable           
1280 Broadway                                                                                              
Hewlett, NY  11557                                                                                         
                                                                                                           
Howard Beach (1) (2)                        Owned                   1965          Not Applicable           
156-02 Cross Bay Boulevard                                                                                 
Howard Beach, NY  11414                                                                                    
                                                                                                           
Lawrence                                   Leased                   1996               2003                
333 Central Avenue                                                                                         
Lawrence, NY  11559                                                                                        
                                                                                                           
Little Neck (1)                            Leased                   1971               2017                
254-09 Horace Harding Expressway                                                                           
Little Neck, NY  11362                                                                                     
                                                                                                           
Massapequa (3)                             Leased                   1996               2004                
6199 Sunrise Highway                       /Owned                                                          
Massapequa, NY  11758                                                                                      
                                                                                                           
Massapequa Park (1)                         Owned                   1961          Not Applicable           
4848 Merrick Road                                                                                          
Massapequa Park, NY  11762                                                                                 
                                                                                                           
New Hyde Park (1)                           Owned                   1975          Not Applicable           
1114 Jericho Turnpike                                                                                      
New Hyde Park, NY  11040                                                                                   
                                                                                                           
North Babylon (1)                           Owned                   1991          Not Applicable           
1501 Deer Park Avenue                                                                                      
North Babylon, NY  11703                                                                                   
                                                                                                           
1520 Deer Park Avenue (1)                   Owned                   1994          Not Applicable           
North Babylon, NY  11703                                                                                   
                                                                                                           
Oceanside                                   Owned                   1998          Not Applicable           
3140 Long Beach Road
Oceanside, NY  11572
</TABLE> 

                                       55
<PAGE>
 
<TABLE> 
<CAPTION>
                                                                                                         
                                                                  Original                               
                                           Leased                  Year                                  
                                             or                  Leased or         Date of Lease         
Location                                    Owned                Acquired           Expiration           
----------------------------             -----------           -------------    -------------------      
                                                                                                         
<S>                                      <C>               <C>                 <C>                       
Smithtown                                  Leased                   1998               2008              
719 Smithtown Bypass                                                                                     
Smithtown, NY  11787                                                                                     
                                                                                                         
West Hempstead                              Owned                   1965          Not Applicable         
50 Hempstead Turnpike                                                                                    
West Hempstead, NY  11552                                                                                
                                                                                                         
Woodbury (4)                               Leased                   1976               2009              
8081 Jericho Turnpike                                                                                    
Woodbury, NY 11797                                                                                       
                                                                                                         
Administrative Office:                      Owned                   1996          Not Applicable         
Port Washington Office:
2 Seaview Boulevard
Port Washington, NY  11050
</TABLE>

                                       56
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                                       
                                                                  Original                             
                                           Leased                  Year                                
                                             or                  Leased or         Date of Lease       
Location                                    Owned                Acquired           Expiration         
----------------------------             -----------           -------------    -------------------    
                                                                                                       
<S>                                      <C>               <C>                 <C>                        
RNMC Origination Offices:                                                                                 
                                                                                                          
Hauppauge - Main Office                    Leased                   1986               2002               
350 Motor Parkway, Suite 410                                                                              
Hauppauge, NY  11788                                                                                      
                                                                                                          
Brentwood (Office opens                    Leased                   1999               1999               
June 1, 1999)                                                                                             
5115 Maryland Way                                                                                         
Brentwood, TN  37027                                                                                      
                                                                                                          
Cherry Hill                                Leased                   1998               1999               
Executive Quarters                                                                                        
1930 E. Marlton Pike                                                                                      
Suite Q26                                                                                                 
Cherry Hill, NJ  08003                                                                                    
                                                                                                          
Clark                                      Leased                   1998               2003               
Garden State Executive Plaza                                                                              
77 Brant Avenue                                                                                           
Clark, NJ  07066                                                                                          
                                                                                                          
Columbia                                   Leased                   1999               2004               
6996 Columbia Gateway Drive                                                                               
Suite 102                                                                                                 
Columbia, MD  21045                                                                                       
                                                                                                          
Fairfield                                  Leased                   1998               2003               
111 Beach Road                                                                                            
Fairfield, CT  06430                                                                                      
                                                                                                          
Melville                                   Leased                   1999               2010               
48 South Service Road                                                                                     
Melville, NY  11747                                                                                       
                                                                                                          
Parsippany                                 Leased                   1998               2003               
400 Lanidex Plaza                                                                                         
Suite 4203                                                                                                
Parsippany, NJ  07054                                                                                     
                                                                                                          
Patchogue                                  Leased                   1998               1999               
57 E. Main Street                                                                                         
Patchogue, NY  11772                                                                                      
                                                                                                          
Richboro                                   Leased                   1998               2000               
130 Almshouse Road
Suite 200A
Richboro, PA  18954
</TABLE>

                                       57
<PAGE>
 
<TABLE> 
<CAPTION>
                                                                                                          
                                                                  Original                                
                                           Leased                  Year                                   
                                             or                  Leased or         Date of Lease          
Location                                    Owned                Acquired           Expiration            
----------------------------             -----------           -------------    -------------------       
                                                                                                          
<S>                                      <C>               <C>                 <C>                        
Syracuse (5)                               Leased                   1997               2000               
251 Salina Meadow Parkway                                                                                 
Suite 250                                                                                                 
Syracuse, NY  13212                                                                                       
                                                                                                          
Vienna                                     Leased                   1999               2004               
1604 Springhill Road                                                                                      
Suite 110                                                                                                 
Vienna, VA  22182                                                                                         
                                                                                                          
West Hartford                              Leased                   1996               2000               
15 North Main Street                                                                                      
West Hartford, CT  06107                                                                                  
                                                                                                          
Wilmington                                 Leased                   1998               2002               
5301 Limestone Road                                                                                       
Suite 104                                                                                                 
Wilmington, DE  19808                                                                                     
                                                                                                          
Whitestone                                 Leased                   1998               2003               
17-20 Whitestone Expressway                                                                               
Suite 400                                                                                                 
Whitestone, NY  11357                                                                                     
                                                                                                          
Woodhaven                                  Leased                   1998               2000               
95-04 Jamaica Avenue
Woodhaven, NY 11421
</TABLE>

______________________________
(1)  The Bank acquired these former offices of Roosevelt Savings Bank on
     February 16, 1999.
(2)  Includes a leased accommodation facility adjacent to the branch office.
     The lease on such facility expires December 2011.
(3)  The Bank owns the building but leases the minority portion of the land. The
     Bank has the option to renew the lease upon expiration for two 
     additional consecutive terms of 33 years each.
(4)  The Bank owns the building but leases the majority portion of the land. The
     Bank has the option to renew the lease upon expiration for two 
     additional consecutive terms of 20 years each.
(5)  Vacant as of September 1997.

                                       58
<PAGE>
 
Item 3. Legal Proceedings.
--------------------------

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

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

     On December 22, 1998, the Company held a special meeting of stockholders to
approve and adopt the Agreement and Plan of Merger, dated as of May 25, 1998, by
and between Roslyn Bancorp, Inc. and T R Financial Corp. pursuant to which,
among other things, T R Financial Corp. merged with and into Roslyn Bancorp,
Inc. the number of votes counted at the meeting was:

              For                    Against                 Abstain
         --------------           -------------            -----------
           23,185,207               4,722,808                365,865


                                    PART II

Item 5.  Market for the Company's Common Equity and Related Stockholder Matters.
--------------------------------------------------------------------------------

     Information regarding the market for the Company's common equity and
related stockholder matters appears in the 1998 Annual Report to Stockholders
under the caption "Market Price of Common Stock" and is incorporated herein by
this reference.  The following schedule summarizes the dividend payment ratio 
(dividends declared/net income per share) for the periods indicated:

                                 December 31, 
                            -------------------------
                            1998      1997      1996
                            -----     -----     -----
                            27.57%    21.69%     N/A           


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

     Information regarding selected financial data appears on page one of the
1998 Annual Report under the caption "Selected Consolidated Financial and Other
Data of the Company" and is incorporated herein by this reference.

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

     Information regarding management's discussion and analysis of financial
condition and results of operations appears on pages four through 23 of the 1998
Annual Report under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and is incorporated herein by
this reference.

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

     The information contained in the section captioned "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Management of
Interest Rate Risk and Gap Analysis" in the 1998 Annual Report is incorporated
herein by this reference.

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

     Information regarding the financial statements and the Independent
Auditors' Report appears on pages 24 through 67 of the 1998 Annual Report and is
incorporated herein by this reference.

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

     None.

                                       59
<PAGE>
 
                                   PART III

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

     Information regarding the directors and executive officers of the Company
is incorporated herein by reference to the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held on May 19, 1999 under the caption
"Information with Respect to the Nominees, Continuing Directors, and Certain
Executive Officers of the Company". Pursuant to General Instruction G(3) to the 
Form 10-K, the Company's Proxy Statement for the Annual Meeting of Stockholders 
to be held on May 19, 1999 will be filed with the Commission not later than 120
days after the end of the fiscal year covered by this Form 10-K.



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

     Information regarding executive compensation is incorporated herein by
reference to the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held beginning on May 19, 1999 under the caption "Executive
Compensation", not including the report of the personnel committee and the stock
performance graph.  Pursuant to General Instruction G(3) to the Form 10-K, the 
Company's Proxy Statement for the Annual Meeting of the Stockholders to be held 
on May 19, 1999 will be filed with the Commission not later than 120 days 
after the end of the fiscal year covered by this Form 10-K.

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

     The Company knows of no single person or group that is the beneficial owner
of more than 5% of the Company's common stock.

     Information regarding security ownership of management is incorporated
herein by reference to the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 19, 1999 under the caption "Information with
Respect to the Nominees, Continuing Directors and Named Executive Officers of
the Company". Pursuant to General Instruction G(3) to the Form 10-K, the
Company's Proxy Statement for the Annual Meeting of Stockholders to be held on
May 19, 1999 will be filed with the Commission not later than 120 days after the
end of the fiscal year covered by this Form 10-K.


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

     Information regarding certain relationships and related transactions is
incorporated herein by reference to the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held on May 19, 1999 under the caption
"Transactions With Certain Related Persons". Pursuant to Genral Instruction G(3)
to the Form 10-K, the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 19, 1999 will be filed with the Commission not
later than 120 days after the end of the fiscal year covered by this Form 10-K.

                                    PART IV

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

     1. Financial Statements

        The following consolidated financial statements are included in the
        Company's Annual Report to Stockholders for the fiscal year ended
        December 31, 1998 and are incorporated herein by this reference:
 
        - Consolidated Statements of Financial Condition as of December 31, 1998
          and 1997

        - Consolidated Statements of Income for the Years Ended December 31,
          1998, 1997 and 1996

        - Consolidated Statements of Changes in Stockholders' Equity for the
          Years Ended December 31, 1998, 1997 and 1996

        - Consolidated Statements of Cash Flows for the Years Ended December 31,
          1998, 1997 and 1996

        - Notes to Consolidated Financial Statements

                                       60
<PAGE>
 
        - Independent Auditors' Report

        - Selected Quarterly Financial Data (Unaudited) for the Years Ended
          December 31, 1998 and 1997

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

(a)  2. Financial Statement Schedules

        Financial Statement Schedules have been omitted because they are not
        applicable or the required information is shown in the Consolidated
        Financial Statements or Notes thereto.

(b)  Reports on Form 8-K filed during the last quarter of 1998

        The Company filed an 8-K on December 31, 1998 to report that it did not
        intend to increase the stock exchange ratio for its acquisition of T R
        Financial Corp. Two press releases, dated December 28, and December 30,
        1998 announcing the Company's intentions were filed by exhibit.

(c)  Exhibits Required by Securities and Exchange Commission Regulation S-K

Exhibit
Number
------

2.1    Agreement and Plan of Merger, dated as of May 25, 1998, by and between
       Roslyn Bancorp, Inc. and T R Financial Corp./1/
2.2    First Amendment, dated as of January 23, 1999, to the Agreement and Plan
       of Merger, dated as of May 25, 1998, by and between Roslyn Bancorp, Inc.
       and T R Financial Corp./2/
3.1    Certificate of Incorporation of Roslyn Bancorp, Inc./3/
3.2    Amended and Restated Bylaws of Roslyn Bancorp, Inc.
3.3    Second Amended and Restated Bylaws of Roslyn Bancorp, Inc.
4.0    Form of Stock Certificate of Roslyn Bancorp, Inc./3/
10.1   Employment Agreement between Roslyn Bancorp, Inc. and Joseph L. Mancino
10.2   Employment Agreement between Roslyn Savings Bank and Joseph L. Mancino
10.3   Employment Agreement between Roslyn Bancorp, Inc. and John R. Bransfield,
       Jr.
10.4   Employment Agreement between Roslyn Savings Bank and John R. Bransfield,
       Jr.
10.5   Employment Agreement between Roslyn Bancorp, Inc. and Michael P. Puorro
10.6   Employment Agreement between Roslyn Savings Bank and Michael P. Puorro
10.7   Employment Agreement between Roslyn Savings Bank and John L. Klag
10.8   Employment Agreement between Roslyn Savings Bank and Nancy MacKenzie
10.9   Employment Agreement between Roslyn Savings Bank and Daniel L. Murphy
10.10  Employment Agreement between Roslyn Bancorp, Inc. and R. Patrick Quinn
10.11  Employment Agreement between Roslyn Savings Bank and R. Patrick Quinn
10.12  Employment Agreement between Roslyn Bancorp, Inc. and John M. Tsimbinos
10.13  Employment Agreement between Roslyn Bancorp, Inc. and A. Gordon Nutt
10.14  Employment Agreement between Roslyn Savings Bank and A. Gordon Nutt
10.15  The Roslyn Savings Bank Management Supplemental Retirement Plan/3/
10.16  Roslyn Bancorp, Inc. 1997 Stock-Based Incentive Plan/4/
10.17  Supplemental Executive Retirement Plan of Roosevelt Savings Bank, as 
       amended and restated as of March 16, 1993/5/
10.18  First Amendment to the Supplemental Executive Retirement Plan of 
       Roosevelt Savings Bank, as amended and restated./6/
10.19  T R Financial Corp. 1993 Incentive Stock Option Plan, amended and 
       restated as of January 23, 1997./3/
11.0   Statement re: Computation of Per Share Earnings
13.0   1998 Annual Report to Shareholders
21.0   Subsidiary information is incorporated by reference to "Part I -
       Subsidiary Activities"
23.0   Consent of KPMG LLP 
27.0   Financial Data Schedule

_______________

                                       61
<PAGE>
 
1.  Incorporated by reference into this document from the Registration Statement
    on Form S-4, and any amendments thereto, Registration No. 333-67369, filed
    with the Securities and Exchange Commission on November 16, 1998.

2.  Incorporated by reference into this document from the Form 8-K, and any 
    amendments thereto, Commission File No. 0-28886, filed with the Securities
    and Exchange Commission on February 18, 1999.

3.  Incorporated by reference into this document from the Exhibits filed with
    the Registration Statement on Form S-1, and any amendments thereto,
    Registration Statement No. 333-10471, filed with the Securities and Exchange
    Commission on August 20, 1996.

4.  Incorporated by reference into this document from the Appendix to the Proxy
    Statement for the Annual Meeting of Shareholders held on July 22, 1997,
    filed with the Securities and Exchange Commission on June 6, 1997.

5.  Incorporated by reference into this document from the Exhibits to T R 
    Financial Corp.'s Annual Report on Form 10-K for fiscal year 1993,
    Commission File No. 0-21386, filed with the Securities and Exchange
    Commission on March 30, 1994.

6.  Incorporated by reference into this document from the Exhibits to T R 
    Financial Corp.'s Annual Report on Form 10-K for fiscal year 1995,
    Commission File No. 0-21386, filed with the Securities and Exchange
    Commission on March 27, 1996 and as amended as of March 29, 1996.

7.  Incorporated by reference to the Exhibits to T R Financial Corp.'s
    definitive Proxy Statement for its 1997 Annual Meeting of Stockholders,
    Commission File No. 0-21386, filed with the Securities and Exchange
    Commission on March 19, 1997.

                                       62
<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.

                             Roslyn Bancorp, Inc.
                  ------------------------------------------
                                 (Registrant)


                          /s/ Joseph L. Mancino                   March 31, 1999
                  ------------------------------------------      --------------
                  Joseph L. Mancino, Vice Chairman of the
                  Board, President & Chief Executive Officer



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

<TABLE> 
<CAPTION> 
NAME                               TITLE                                          DATE
----                               -----                                          -----
<S>                                <C>                                        <C> 
/s/ Joseph L. Mancino              Vice Chairman of the Board, President,     March 31, 1999
------------------------------     & Chief Executive Officer                  --------------
Joseph L. Mancino                  
                                                                          
                                                                          
/s/ John M. Tsimbinos              Chairman of the Board                      March 31, 1999
------------------------------                                                --------------
John M. Tsimbinos                                                          
                                                                          
                                                                          
/s/ John R. Bransfield             Director and Vice President                March 31, 1999
------------------------------                                                --------------
John R. Bransfield                                                        
                                                                          
                                                                          
/s/ Michael P. Puorro              Treasurer & Chief Financial Officer        March 31, 1999
------------------------------                                                --------------
Michael P. Puorro                                                         
                                                                          
                                                                          
/s/ A. Gordon Nutt                 Director, Executive Vice President         March 31, 1999
------------------------------     & Special Transition Officer               --------------
A. Gordon Nutt                                              
                                                                          
                                                                          
/s/ Thomas J. Calabrese, Jr.       Director                                   March 31, 1999
------------------------------                                                --------------
Thomas J. Calabrese, Jr. 
                                                                          
                                                                          
/s/ Maureen E. Clancy              Director                                   March 31, 1999
------------------------------                                                --------------
Maureen E. Clancy                                                         
                                                                          
                                                                          
/s/ Thomas A. Doherty              Director                                   March 31, 1999
------------------------------                                                --------------
Thomas A. Doherty                                                         
                                                                          
                                                                          
/s/ Robert G. Freese               Director                                   March 31, 1999
------------------------------                                                --------------
Robert G. Freese                                                          
                                                                          
                                                                          
/s/ Leonard Genovese               Director                                   March 31, 1999
------------------------------                                                --------------
Leonard Genovese 
</TABLE>  

                                       63
<PAGE>
 
                             SIGNATURES (Continued)
<TABLE> 
<CAPTION> 
NAME                               TITLE                                          DATE
----                               -----                                          -----
<S>                                <C>                                       <C> 
                               
/s/ Dr. Edwin W. Martin, Jr.       Director                                  March 31, 1999
----------------------------------                                           --------------
Dr. Edwin W. Martin, Jr.                                                  
                                                                          
                                                                          
/s/ Victor C. McCuaig              Director                                  March 31, 1999
----------------------------------                                           --------------
Victor C. McCuaig                                                         
                                                                          
                                                                          
/s/ John P. Nicholson              Director                                  March 31, 1999
----------------------------------                                           --------------
John P. Nicholson                                                         
                                                                          
                                                                          
/s/ James E. Swiggett              Director                                  March 31, 1999
----------------------------------                                           --------------
James E. Swiggett                                                         
                                                                          
                                                                          
/s/ Spiros J. Voutsinas            Director                                  March 31, 1999
----------------------------------                                           --------------
Spiros J. Voutsinas                                                       
                                                                          
                                                                          
/s/ Richard C. Webel               Director                                  March 31, 1999
----------------------------------                                           --------------
Richard C. Webel 
</TABLE> 
         


                                       64