SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
(Mark One)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the fiscal year ended             December 31, 1999
                          -------------------------------------------------
                                            - OR -

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

For the transition period from to SEC File Number: 0-25149
                                                   -------

                            RIDGEWOOD FINANCIAL, INC.
--------------------------------------------------------------------------------
              (Exact name of small business issuer in its charter)

                     New Jersey                           22-3616280
---------------------------------------------------  ---------------
       (State or other jurisdiction of               (I.R.S. Employer
      of incorporation or organization)              Identification No.)

   55 North Broad Street, Ridgewood, New Jersey           07450
---------------------------------------------------    ------------
        (Address of principal executive offices)        (Zip Code)

Registrant's telephone number, including area code:    (201) 445-4000
                                                    --------------------

Securities registered pursuant to Section 12(b) of the Act:    None
                                                           -------------

Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $0.10 per share
                     ---------------------------------------
                                (Title of Class)

         Check  whether  the issuer:  (1) has filed all  reports  required to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the
past 12 months (or for such shorter period that  Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.    Yes  X    No
                ---      ---

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained,  to the best of  registrant's  knowledge,  in definitive  proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X]

         State issuer's revenues for its most recent fiscal year $16,926,000.

         Issuer's  voting  stock  trades on The Nasdaq  Stock  Market  under the
symbol  "RSBI".  The  aggregate  market  value  of  the  voting  stock  held  by
non-affiliates  of the issuer,  based upon the closing price of such stock as of
March 15, 2000 was $7.0 million.  Issuer has no non-voting stock.

         As of March 15, 2000,  registrant had 3,180,000  shares of common stock
outstanding.

         Transitional Small Business Disclosure Format (check one): Yes    No X
                                                                        ---  ---

                      DOCUMENTS INCORPORATED BY REFERENCE:
1.   Portions  of the Annual  Report to  Stockholders  for the Fiscal Year ended
     December 31, 1999. (Part II)
2.   Portions of the Proxy Statement for the Annual Meeting of Stockholders  for
     the Fiscal Year ended December 31, 1999. (Part III)
<PAGE>
Forward-Looking Statements

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

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

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

                                     PART I

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

General

         Ridgewood  Financial,   Inc.  is  a  bank  holding  company  formed  in
connection with the mutual holding company  reorganization  of Ridgewood Savings
Bank of New Jersey (the  "Bank"),  which was  completed on January 7, 1999.  The
Bank is a  wholly  owned  subsidiary  of the  Company.  In  connection  with the
reorganization,  the Company sold 1,494,600  shares (or 47%) of its Common Stock
to the public.  The  remaining  1,685,400  shares (or 53%) are held by Ridgewood
Financial, MHC (the "MHC"). The MHC is owned and controlled by the depositors of
the Bank and conducts no significant operations of its own, other than holding a
majority of the Company's  stock.  References to the  Registrant or Company used
throughout  this  document  generally  refers to the  consolidated  entity which
includes the main  operating  company,  the Bank,  unless the context  indicates
otherwise.

                                       1
<PAGE>

         The  Company  provides  retail  banking  services,  with an emphasis on
one-to  four-family  residential  mortgage loans,  commercial loans and consumer
loans  as well  as  certificates  of  deposit,  checking  accounts  and  savings
accounts.  At December  31,  1999,  the Company had total  assets,  deposits and
equity of $277 million, $202 million and $25 million, respectively.

     The  Company  attracts  deposits  from the  general  public  and uses these
deposits   primarily   to   originate   loans   and  to   purchase   investment,
mortgage-backed  and other  securities.  The principal  sources of funds for the
Company's lending and investing activities are deposits,  Federal Home Loan Bank
("FHLB") advances,  the repayment and maturity of loans and sale, maturity,  and
call of  securities.  The  principal  source of income is  interest on loans and
investment and mortgage-backed  securities.  The principal expenses are interest
paid on deposits and FHLB advances and non-interest expenses.

Competition

         The Company is one of many  financial  institutions  serving its market
area which consists of northwestern  Bergen County,  New Jersey and includes the
townships of Allendale,  Franklin Lakes, Glen Rock, Ho-Ho-Kus,  Mahwah,  Midland
Park, Oakland,  Paramus,  Ramsey,  Ridgewood,  Saddle River, Upper Saddle River,
Waldwick and Wyckoff.  The  competition  for deposit  products  comes from other
insured financial  institutions such as commercial banks,  thrift  institutions,
credit unions,  and  multi-state  regional  banks in the Company's  market area.
Deposit  competition also includes a number of insurance  products sold by local
agents and investment products such as mutual funds and other securities sold by
local and  regional  brokers.  Loan  competition  varies  depending  upon market
conditions  and  comes  from  other  insured  financial   institutions  such  as
commercial  banks,  thrift  institutions,  credit unions,  multi-state  regional
banks, and mortgage bankers.


                                       2

<PAGE>

Analysis of Loan  Portfolio.  Set forth below is selected  data  relating to the
composition  of the  Company's  loan  portfolio  by type  of  loan on the  dates
indicated.

<TABLE>
<CAPTION>

                                                                         At December 31,
                               -------------------------------------------------------------------------------------------------
                                       1999               1998               1997              1996                   1995
                               ------------------ ------------------ ------------------- ---------------------------------------
                                    $        %        $          %       $          %        $         %          $         %
                                   ---      ---      ---        ---     ---        ---      ---       ---        ---        --
                                                                    (Dollars in thousands)
<S>                           <C>          <C>   <C>          <C>   <C>          <C>   <C>          <C>      <C>          <C>
Type of Loans:
--------------
  First mortgage loans:
      One-to-four family ...   $146,971     87.22 $ 88,936     82.23 $ 86,140     80.70 $ 90,500     82.96   $ 88,685     91.02
      Commercial real estate      6,932      4.11    8,032      7.43   10,313      9.66   10,613      9.73      3,170      3.25
  Commercial ...............      1,689      1.00      497       .46      134       .13       78       .07         78       .08
  Consumer loans:
    Equity .................     12,612      7.48   10,397      9.61    9,645      9.04    7,519      6.89      5,144      5.28
    Education ..............         28       .02       36       .03      160       .15      120       .12         84       .09
    Loans to depositors,
      secured by savings ...        214       .13      202       .19      315       .30      245       .22        235       .24
    Other ..................         69       .04       58       .05       35       .02       11       .01         41       .04
                                -------    ------  -------    ------  -------    ------  -------    ------     ------    ------
                                168,515    100.00% 108,158    100.00% 106,742    100.00% 109,086    100.00  %  97,437    100.00%
                                -------    ======  -------    ======  -------    ======  -------    ======     ------    ======
Less:
  Net deferred loan fees            123                315                409                521                  638
  Allowance for loan losses         924                822                618                606                  593
                                --------          --------           --------           --------             --------
Total loans receivable, net     $167,468          $107,021           $105,715           $107,959             $ 96,206
                                ========          ========           ========           ========             ========

Loans held for sale             $     --          $     --           $    750           $  3,756             $    199
                                ========          ========           ========           ========             ========
</TABLE>

                                       3
<PAGE>



         Loan  Maturity.  The  following  table sets forth the  maturity  of the
Company's  loan  portfolio  at  December  31,  1999.  The table does not include
prepayments  or  scheduled  principal  repayments.   Prepayments  and  scheduled
principal repayments on loans totalled $38.2 million for the year ended December
31, 1999. All loans are shown as maturing based on contractual maturities.

                            Due     Due after
                           within   1 through    Due after
                           1 year    5 years     5 years    Total
                         ---------  ----------  --------- --------
                                      (In Thousands)
Amounts Due:
One-to-four family ...   $  1,689   $  3,648   $141,634   $146,971
Commercial real estate        723        163      6,046      6,932
Commercial ...........        728        961       --        1,689
Consumer .............        220      2,065     10,638     12,923
                         --------   --------   --------   --------
Total amount due .....   $  3,360   $  6,837   $158,318   $168,515
                         ========   ========   ========   ========


         The  following  table sets forth the dollar  amount as of December  31,
1999 of all  loans due after  December  31,  2000,  which are based  upon  fixed
interest rates or floating or adjustable interest rates.

                                         Floating or
                         Fixed Rates  Adjustable Rates    Total
                         -----------  ----------------    -----
                                      (In Thousands)

One-to-four family ...   $ 80,220        $ 65,062        $145,282
Commercial real estate      6,109             100           6,209
Commercial ...........        961              --             961
Consumer .............      7,408           5,295          12,703
                         --------        --------        --------
  Total ..............   $ 94,698        $ 70,457        $165,155
                         ========        ========        ========


         One- to Four-Family  Lending. The Registrant's primary lending activity
consists of the  origination of one- to four-family  residential  mortgage loans
secured by  property  located  in its  market  area.  The  Registrant  generally
originates one- to four-family  residential  mortgage loans in amounts up to 80%
of the lesser of the appraised value or selling price of the mortgaged  property
without requiring mortgage  insurance.  The Registrant will originate a mortgage
loan in an amount  up to 95% of the  lesser of the  appraised  value or  selling
price of a mortgaged property,  however,  mortgage insurance for the borrower is
required.  The  Registrant  generally  originates  and  retains  fixed  rate and
adjustable  rate loans for retention in its  portfolio.  The  Registrant  offers
fixed rate  loans with  amortization  periods  ranging  from 5 to 30 years and a
variety of adjustable rate loans.  The adjustable rate loans typically have a 15
to 30 year amortization period. The Registrant's one- to four-family residential
loans  (both  fixed rate and  adjustable  rate) are  generally  underwritten  in
accordance with Federal National Mortgage Association  ("FNMA") guidelines.  See
also, "-- Loan Purchases and Sales."

         Substantially  all of the Registrant's  residential  mortgages  include
"due on sale" clauses,  which are provisions  giving the Registrant the right to
declare a loan immediately  payable if the borrower sells or otherwise transfers
an interest in the property to a third party.


                                       4
<PAGE>

     Commercial Real Estate.  The Registrant  originates  commercial real estate
mortgage  loans  and,  to a  much  lesser  extent,  commercial  business  loans.
Commercial  real estate  mortgage loans are permanent  loans secured by improved
property such as office  buildings,  retail  stores,  and  apartment  buildings.
Essentially  all  originated   commercial  real  estate  loans  are  within  the
Registrant's market area and all are within the State of New Jersey. The largest
commercial  real  estate  loan had a balance of  approximately  $2.0  million on
December 31, 1999 and was performing in accordance with its  contractual  terms.
Typically,  commercial  real estate loans are originated in amounts up to 70% of
the appraised value of the mortgaged property.

         Commercial Lending.  The Registrant offers commercial loans for various
business  purposes  and such  loans are  generally  made to small and  mid-sized
companies in the  Registrant's  primary  lending area. At December 31, 1999, the
commercial  lending portfolio  primarily  consisted of unsecured lines of credit
totaling $715,000, or 42.3% of the total commercial loan portfolio.  Other loans
in the portfolio  consisted of fixed rate secured and unsecured loans with terms
not exceeding 5 years.

         Commercial  business  loans  generally  involve  more risk  than  first
mortgage loans.  The repayment of commercial loans typically is dependent on the
successful  operations and income stream of the business and the borrower.  Such
risks can be affected by economic  conditions.  In addition,  commercial lending
generally requires greater oversight efforts compared to first mortgage loans.

         Consumer Loans. The consumer loan portfolio  consists primarily of home
equity  and  home  improvement  loans.  To  a  lesser  extent,  this  Registrant
originates lines of credit, student loans, loans secured by savings accounts and
other consumer loans.  Consumer loans are originated in the Registrant's  market
area and generally have  maturities of up to 15 years.  As of December 31, 1999,
the  Registrant  had 143  overdraft  accounts  with  available  lines of  credit
totalling  $547,500.  For savings account loans,  the Registrant will lend up to
90% of the account  balance.  Student loans are originated and serviced  through
the Student Loan Marketing  Association  (Sallie Mae),  affording the Registrant
the  ability to offer all of the student  loan  programs  available  to students
without the burden of servicing them.

         Consumer  loans  have a  shorter  term  and  generally  provide  higher
interest  rates than first  mortgage  loans.  The  consumer  loan  market can be
helpful in improving  the spread  between  average loan yield and costs of funds
and at the same time  improve  the  matching  of the rate  sensitive  assets and
liabilities.

         Consumer loans may entail greater risk than residential mortgage loans,
particularly  in the case of  consumer  loans that are  unsecured  or secured by
assets that depreciate rapidly.  Repossessed collateral for a defaulted consumer
loan may not be  sufficient  for  repayment  of the  outstanding  loan,  and the
remaining deficiency may not be collectible.

         Loan Purchases and Sales. During fiscal 1999, the Registrant  purchased
$15.2 million of fixed rate first  mortgage  loans.  The loans are serviced by a
third party and are  "nonconforming"loans in that these loans do not satisfy the
purchase  requirements  of FMNA.  At  December  31,  1999,  all such  loans were
performing loans and had balances not exceeding $512,000. The Registrant did not
sell any loans during fiscal 1999.

         Loan Commitments.  The Registrant  generally grants commitments to fund
fixed and adjustable-rate single-family mortgage loans for periods of 60 days at
a specified  term and  interest  rate.  The total amount of its  commitments  to
extend credit as of December 31, 1999 was $14.8 million.


                                       5
<PAGE>

Non-performing Loans and Problem Assets

         Loans are  reviewed on a regular  basis and are  generally  placed on a
non-accrual  status  when  they are more than 90 days  delinquent.  Loans may be
placed on a non-accrual status at any time if, in the opinion of management, the
collection of additional  interest is doubtful.  Interest  accrued and unpaid at
the time a loan is placed on  non-accrual  status is  charged  against  interest
income.  Subsequent  payments are either  applied to the  outstanding  principal
balance or recorded as  interest  income,  depending  on the  assessment  of the
ultimate collectibility of the loan.

         The  Registrant  has defined the population of impaired loans to be all
nonaccrual and restructured  commercial loans and certain other performing loans
considered  to be impaired as to  principal  and  interest.  Impaired  loans are
individually  assessed to  determine  that the loan's  carrying  value is not in
excess of the fair value of the  collateral  or the present  value of the loan's
expected  future  cash  flows.   Smaller  balance  homogeneous  loans  that  are
collectively  evaluated for impairment,  such as residential  mortgage loans and
installment loans, are excluded from the impaired loan portfolio.



                                       6
<PAGE>
     Non-performing  Assets.  The following  table sets forth  information  with
respect to non-performing  assets for the periods indicated.  During the periods
indicated  there were no restructured  loans or impaired loans.  Interest income
that would have been recorded on loans accounted for on a nonaccrual basis under
the original  terms of such loans was not  material for the year ended  December
31, 1999.
<TABLE>
<CAPTION>
                                                                             At December 31,
                                                     -----------------------------------------------------------
                                                          1999           1998      1997       1996        1995
                                                     ------------   -----------   -------  --------   ----------
                                                                                (Dollars in thousands)
<S>                                                 <C>            <C>           <C>     <C>         <C>
Loans accounted for on a non-accrual basis:
  First mortgage loans:
    One to four-family ....................          $       133    $       695   $  --   $    313    $    397
  Commercial and other ....................                   --             --      --         --          --
  Consumer loans ..........................                   --             --      --         --           3
                                                     -----------    -----------   -----   --------    --------
  Total ...................................          $       133    $       695   $  --   $    313    $    400
                                                     ===========    ===========   =====   ========    ========
Real estate owned .........................          $        --    $        --   $  --   $     --    $     --
                                                     ===========    ===========   =====   ========    ========
Total non-performing assets ...............          $       133    $       695   $  --   $    313    $    400
                                                     ===========    ===========   =====   ========    ========
Total non-accrual loans to
   net loans ..............................                  .08%           .65%     --%       .28%        .41%
                                                     ===========    ===========   =====   ========    ========
Total non-accrual loans
   to total assets ........................                  .05%           .25%     --%       .14%        .22%
                                                     ===========    ===========   =====   ========    ========
Total non-performing
   assets to total assets .................                  .05%           .25%     --%       .14%        .22%
                                                     ===========    ===========   =====   ========    ========
</TABLE>
         Classified   Assets.   Management,   in  compliance   with   regulatory
guidelines,  has instituted an internal loan review  program,  whereby loans are
classified as special  mention,  substandard,  doubtful or loss.  When a loan is
classified  as  substandard  or doubtful,  management is required to establish a
valuation  reserve  for loan losses in an amount  that is deemed  prudent.  When
management  classifies  a loan as a loss asset,  a reserve  equal to 100% of the
loan balance is required to be established or the loan is to be charged-off. The
allowance  for loan losses is composed of an allowance  for both  inherent  risk
associated with lending activities and particular problem assets.

         An asset is considered  substandard if it is inadequately  protected by
the paying capacity and net worth of the obligor or the collateral  pledged,  if
any.  Substandard assets include those characterized by the distinct possibility
that  the  Registrant  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,  highly  questionable  and
improbable,  on the basis of currently existing facts,  conditions,  and values.
Assets classified as loss are those considered  uncollectible and of such little
value that their  continuance  as assets  without  the  establishment  of a loss
reserve is not  warranted.  Assets  which do not  currently  expose the  insured
institution to a sufficient  degree of risk to warrant  classification in one of
the  aforementioned  categories  but possess  credit  deficiencies  or potential
weaknesses  are required to be  designated  special  mention by  management.  In
addition,  each  loan  that  exceeds  $500,000  and  each  group of loans to one
borrower that exceeds  $500,000 is monitored more closely due to the potentially
greater losses from such loans.

                                       7
<PAGE>

         Management's  evaluation  of  the  classification  of  assets  and  the
adequacy of the  allowance for loan losses is reviewed by the Board on a regular
basis and by the regulatory agencies as part of their examination process.

         The following table sets forth the  Registrant's  classified  assets in
accordance with its classification system.

                                                 At
                                             December 31,
                                                1999
                                              ---------
                                          (In thousands)

Special mention......................          $276
Substandard .........................           141
Doubtful ............................           --
Loss ................................           --
                                               ----

     Total ..........................          $417
                                               ====

Allowance for Loan Losses and Real Estate Owned. At least quarterly,  management
evaluates  the need to  establish  reserves  against  losses  on loans and other
assets based on estimated  losses on specific  loans and on any real estate held
for sale or  investment  when a  finding  is made that a loss is  estimable  and
probable.  Such  evaluation  includes  a review  of all  loans  for  which  full
collectibility may not be reasonably assured and considers, among other matters,
the estimated market value of the underlying  collateral of problem loans, prior
loss  experience,  economic  conditions  and  overall  portfolio  quality.  Also
considered are trends in the loan portfolio,  expected  future loss  experience,
and industry reserve levels.  Provisions for losses are charged against earnings
in the period they are established.

         The  following  table  sets forth  certain  information  regarding  the
allowance for loan losses at or for the dates indicated.

<TABLE>
<CAPTION>
                                            At or for the Year Ended December 31,
                                 ----------------------------------------------------------------
                                    1999         1998         1997           1996            1995
                                 ---------    ---------    ---------      ---------       ---------
                                                      (Dollars in thousands)
<S>                             <C>          <C>          <C>            <C>             <C>
Total loans receivable .......   $ 167,468    $ 107,021    $ 106,465(1)   $ 111,715(1)    $  96,405(1)
                                 =========    =========    =========      =========       =========
Average loans outstanding ....   $ 134,034    $ 105,411    $ 109,954(1)   $ 105,170(1)    $  94,040(1)
                                 =========    =========    =========      =========       =========
Balance at beginning of period   $     822    $     618    $     606      $     593       $     528
Provision for loan losses ....         102          204           12             12              60
Charge-offs ..................          --           --           --             (2)             --
Recoveries ...................          --           --           --              3               5
                                 ---------    ---------    ---------      ---------       ---------

Balance at end of period .....   $     924    $     822    $     618      $     606       $     593
                                 =========    =========    =========      =========       =========
Allowance for loan losses as a
  percent of total loans .....         .55%         .77%         .58%           .54%            .62%
                                 =========    =========    =========      =========       =========
</TABLE>
------------
(1) Includes loans held for sale

                                       8
<PAGE>
         The  following  table  exhibits a  breakdown  by loan  category  of the
allowance for loan losses.
<TABLE>
<CAPTION>
                                                                          At December 31,
                           ---------------------------------------------------------------------------------------------------------
                                1999                     1998                1997                 1996                 1995
                           ------------------     ---------------------- ------------------  -------------------  ------------------
                                   Percent of                Percent of        Percent of            Percent of          Percent of
                                     Loans                       Loans           Loans                Loans               Loans
                                     in Each                    in Each          in Each               in Each            in Each
                                   Category to              Category to        Category to          Category to         Category to
                           Amount  Total Loans     Amount   Total Loans Amount Total Loans   Amount Total Loans  Amount Total Loans
                           ------  -----------     ------   ----------- ------ -----------   ------ -----------  ------ -----------
                                                                     (Dollars in thousands)
<S>                         <C>       <C>       <C>          <C>       <C>      <C>         <C>        <C>      <C>      <C>
First mortgage -
  One-to-four family........$807       87.22%    $679         82.23%    $499      80.70%     $512        82.96%  $542      91.02%
  Commercial real estate....  38        4.11       60          7.43       60       9.66        54         9.73     18       3.25
Commercial..................   9        1.00        4           .46        1        .13        --          .07     --        .08
Consumer loans:
Equity......................  69        7.48       77          9.61       56       9.04        38         6.89     30       5.28
Education...................  --         .02       --           .03        1        .15         1          .12      2        .09
Loans to depositors,
  secured by savings........   1         .13        2           .19        1        .30         1          .22      1        .24
Other.......................  --         .04       --           .05       --        .02        --          .01     --        .04
                             ---     -------      ---       -------      ---     ------       ---       ------    ---     ------
   Total allowance
       for loan losses......$924      100.00%    $822        100.00%    $618     100.00%     $606       100.00%  $593     100.00%
                             ===     =======      ===        ======      ===     ======       ===       ======    ===     ======
</TABLE>

                                       9


<PAGE>



Investment Activities

         The  Registrant  is required  under federal  regulations  to maintain a
minimum  amount of liquid  assets which may be invested in specified  short-term
securities  and certain  other  investments.  The level of liquid  assets varies
depending  upon  several  factors,  including:  (i)  the  yields  on  investment
alternatives,  (ii) management's judgment as to the attractiveness of the yields
then available in relation to other  opportunities,  (iii) expectation of future
yield levels, and (iv) management's  projections as to the short-term demand for
funds  to  be  used  in  loan  origination  and  other  activities.   Investment
securities,  including mortgage-backed securities, are classified at the time of
purchase,  based upon management's  intentions and abilities, as securities held
to maturity or securities  available for sale. Debt securities acquired with the
intent and ability to hold to maturity  are  classified  as held to maturity and
are stated at cost and adjusted  for  amortization  of premium and  accretion of
discount,  which are  computed  using the level yield method and  recognized  as
adjustments  of interest  income.  All other debt  securities  are classified as
available for sale to serve principally as a source of liquidity.

         Current  regulatory  and  accounting  guidelines  regarding  investment
securities  (including  mortgage  backed  securities)  require the Registrant to
categorize  securities as "held to maturity," "available for sale" or "trading."
As of December  31,  1999,  Registrant  had  securities  classified  as "held to
maturity"  and  "available  for sale" in the amount of $18.2  million  and $67.7
million,  respectively and had no securities classified as "trading." Securities
classified as "available for sale" are reported for financial reporting purposes
at the fair  market  value with net  changes in the market  value from period to
period included as a separate  component of stockholders'  equity, net of income
taxes. At December 31, 1999, the Registrant's  securities available for sale had
an amortized cost of $70.9 million and market value of $67.7 million (unrealized
loss of $3.2 million). The changes in market value in the Registrant's available
for sale portfolio  reflect normal market conditions and vary, either positively
or negatively,  based  primarily on changes in general levels of market interest
rates  relative to the yields of the  portfolio.  Changes in the market value of
securities  available for sale do not affect the Company's  income. In addition,
changes in the market value of  securities  available for sale do not affect the
Bank's regulatory capital requirements or its loan-to-one borrower limit.

         At December 31, 1999,  the  Registrant's  investment  portfolio  policy
allowed investments in instruments such as: (i) U.S. Treasury obligations,  (ii)
U.S.  federal  agency or federally  sponsored  agency  obligations,  (iii) local
municipal   obligations,   (iv)   mortgage-backed   securities,   (v)   banker's
acceptances,  (vi) certificates of deposit, and (vii) investment grade corporate
bonds,  and commercial  paper.  The board of directors may authorize  additional
investments.

         As a  source  of  liquidity  and  to  supplement  Registrant's  lending
activities,   the  Registrant   has  invested  in  residential   mortgage-backed
securities.  Mortgage-backed  securities  can serve as collateral for borrowings
and, through repayments,  as a source of liquidity.  Mortgage-backed  securities
represent a participation  interest in a pool of  single-family or other type of
mortgages.  Principal  and  interest  payments  are  passed  from  the  mortgage
originators, through intermediaries (generally quasi-governmental agencies) that
pool and repackage the  participation  interests in the form of  securities,  to
investors,  like us. The  quasi-governmental  agencies  guarantee the payment of
principal  and interest to investors  and include the Federal Home Loan Mortgage
Corporation  ("FHLMC"),  Government National Mortgage Association ("GNMA"),  and
Federal National Mortgage Association ("FNMA").

        Mortgage-backed  securities  typically are issued with stated principal
amounts.  The  securities  are backed by pools of mortgages that have loans with
interest  rates that are  within a set range and have  varying  maturities.  The
underlying  pool of mortgages can be composed of either fixed rate or adjustable


                                       10
<PAGE>

rate mortgage  loans.  Mortgage-backed  securities are generally  referred to as
mortgage participation certificates or pass-through  certificates.  The interest
rate risk  characteristics of the underlying pool of mortgages (i.e., fixed rate
or adjustable  rate) and the prepayment  risk, are passed on to the  certificate
holder. The life of a mortgage-backed pass-through security is equal to the life
of the underlying  mortgages.  Expected  maturities will differ from contractual
maturities due to scheduled  repayments and because borrowers may have the right
to  call  or  prepay   obligations   with  or  without   prepayment   penalties.
Mortgage-backed securities issued by FHLMC, GNMA, and FNMA make up a majority of
the pass-through certificates market.

         The Registrant also invests in mortgage-related  securities,  primarily
collateralized mortgage obligations ("CMOs"), issued or sponsored by GNMA, FNMA,
FHLMC,  as well as  private  issuers.  CMOs  are a type  of debt  security  that
aggregates  pools  of  mortgages  and  mortgage-backed  securities  and  creates
different  classes of CMO securities  with varying  maturities and  amortization
schedules as well as a residual  interest with each class having  different risk
characteristics.  The cash  flows from the  underlying  collateral  are  usually
divided into "tranches" or classes whereby  tranches have descending  priorities
with  respect to the  distribution  of principal  and interest  repayment of the
underlying  mortgages and mortgage- backed securities as opposed to pass through
mortgage-backed  securities  where  cash flows are  distributed  pro rata to all
security  holders.  Unlike  mortgage-backed  securities  from which cash flow is
received and prepayment risk is shared pro rata by all securities holders,  cash
flows from the mortgages and mortgage backed securities underlying CMOs are paid
in  accordance  with a  predetermined  priority  to  investors  holding  various
tranches of such  securities or obligations.  A particular  tranche or class may
carry  prepayment  risk  which  may be  different  from  that of the  underlying
collateral  and other  tranches.  CMOs  attempt to  moderate  reinvestment  risk
associated  with   conventional   mortgage-backed   securities   resulting  from
unexpected prepayment activity.

Investment Portfolio

         The  following  table sets forth the carrying  value of the  investment
securities  portfolio,  and  mortgage-backed  securities  portfolio at the dates
indicated.

                                                         At December 31,
                                                  ------------------------------
                                                    1999       1998       1997
                                                  --------   ---------  --------

(In thousands)

Investment Securities Held to Maturity:
 U.S. Government Securities ...................   $     --     $   --   $  1,771
 U.S. Agency Securities .......................        860      1,354      7,895
                                                  --------   --------   --------
   Total Investment Securities Held to Maturity        860      1,354      9,666
                                                  --------   --------   --------
Investment Securities Available for Sale:
  U.S. Government Securities ..................      2,000         --        498
  U.S. Agency Securities ......................      7,299      1,468     23,193
  Municipal Securities ........................     23,256     13,901      3,241
  Corporate Bonds .............................      6,921      1,522         --
  FNMA Common Stock ...........................         --         30         22
                                                  --------   --------   --------
    Total Investment Securities Available For
    Sale ......................................     39,476     16,921     26,954
                                                  --------   --------   --------
Mortgage-backed Securities Held to Maturity ...     17,340     11,277     14,356
                                                  --------   --------   --------
Mortgage-backed Securities Available For Sale .     28,265     88,390     50,099
                                                  --------   --------   --------
   Total Investment and Mortgage-backed
   Securities .................................   $ 85,941   $117,942   $101,075
                                                  ========   ========   ========

                                       11
<PAGE>



         Investment Portfolio Maturities. The following table sets forth certain
information   regarding  the  carrying  values,   weighted  average  yields  and
maturities  of  the  Registrant's  investment  and  mortgage-backed   securities
portfolio  at  December  31,  1999.  The  following  table  does not  take  into
consideration  the effects of  scheduled  repayments  or the effects of possible
prepayments.

<TABLE>
<CAPTION>
                                                                                                                    Total
                               One Year or Less   One to Five Years  Five to Ten Years More than Ten Years    Investment Securities
                               -----------------  -----------------  ----------------- ------------------- -------------------------
                               Carrying  Average  Carrying  Average  Carrying Average  Carrying  Average  Carrying  Average   Market
                                Value   Yield(1)    Value   Yield(1)    Value Yield(1)    Value  Yield(1)    Value  Yield(1)  Value
                                ------  --------  -------- --------  -------- -------  -------- --------  -------- -------   -------
                                                                       (Dollars in thousands)
<S>                           <C>        <C>    <C>         <C>     <C>       <C>     <C>        <C>    <C>         <C>    <C>
Investment Securities:
U.S. government securities...  $ 2,000     5.50% $     --      -- %  $    --      --%  $    --       --%  $ 2,000     5.50% $  2,000
U. S. agency securities......       --       --     6,221     6.35        --      --     1,938     6.10     8,159     6.29     8,146
Municipal securities(2)......       40     5.46     2,341     5.34     2,116    5.77    18,759     6.50    23,256     6.32    23,256
Corporate bonds..............       --       --     6,921     6.37        --      --        --       --     6,921     6.37     6,921
Mortgage-backed securities...      140     6.58     3,941     6.53    21,278    6.58    20,246     6.30    45,605     6.45    45,353
                                   ---              -----             ------            ------             ------             ------
    Total....................  $ 2,180     5.57% $ 19,424     6.27%  $23,394    6.51%  $40,943     6.38%  $85,941    6.37%  $ 85,676
                                ======     ====   =======     ====   =======    ====   =======     ====   =======    ====    =======
</TABLE>
-------------------
(1)  Average yields are calculated on a yield-to-maturity basis.
(2)  Average  yields  on  municipal  securities  are  generally  tax-exempt  and
     calculated on a tax-equivalent  basis using a statutory  federal income tax
     rate of 34%.

                                       12
<PAGE>

Sources of Funds

         General.  Deposits are the major source of the  Registrant's  funds for
lending and other  investment  purposes.  Borrowings may be used on a short-term
basis to  compensate  for  reductions  in the  availability  of funds from other
sources.  In addition to deposits and  borrowings,  the Bank derives  funds from
loan and mortgage-backed  securities principal repayments, and proceeds from the
sale  of  mortgage-backed   securities  and  investment  securities.   Loan  and
mortgage-backed  securities  payments are a relatively  stable  source of funds,
while deposit inflows are significantly influenced by general interest rates and
money  market  conditions.  They  also may be used on a  longer-term  basis  for
interest rate risk management and general business purposes.

         Deposits. The Registrant offers a variety of deposit accounts, although
a majority of deposits  are in  fixed-term,  market-rate  certificate  accounts.
Deposit account terms vary, primarily as to the required minimum balance amount,
the amount of time that the funds  must  remain on  deposit  and the  applicable
interest rate.

Jumbo Certificates of Deposit

         The following table shows the amount of the  Registrant's  certificates
of deposit of $100,000 or more by time  remaining  until maturity as of December
31, 1999.

                                                           Certificates
                   Maturity Period                          of Deposit
                   ---------------                          ----------
                                                          (In thousands)
                   Within three months                         $6,849
                   Three through six months                     2,401
                   Six through twelve months                    3,307
                   Over twelve months                           6,283
                                                                -----
                                                             $ 18,840
                                                             ========


         Borrowings.   Deposits  are  the  primary   source  of  funds  for  the
Registrant's  lending and  investment  activities  and for its general  business
purposes. The Registrant, as the need arises, relies upon advances from the FHLB
of New York ( the "FHLB") to supplement its supply of lendable funds and to meet
deposit withdrawal requirements. Advances from the FHLB are typically secured by
the Registrant's stock in the FHLB and a portion of the Registrant's residential
mortgage loans and may be secured by other assets (principally  securities which
are obligations of or guaranteed by the U.S.  Government).  The Registrant funds
loan demand and investment opportunities out of current loan and mortgage-backed
securities  repayments,  investment  maturities and new deposits.  However,  the
Registrant has utilized FHLB advances to supplement these sources and as a match
against certain assets in order to better manage interest rate risk.


                                       13
<PAGE>



         The following  table sets forth  information  concerning  FHLB advances
during the periods indicated (includes both short- and long-term advances).

                                         At or For the Years
                                          Ended December 31,
                                     -----------------------------
                                      1999       1998       1997
                                     -------    -------    -------
                                              (Dollars in thousands)
       FHLB advances:
       Average balance outstanding   $44,427    $23,596    $22,012
       Maximum amount outstanding
           at any month-end during
           the period ............    52,331     32,895     28,400
       Balance outstanding at
         end of period ...........    48,678     32,557     16,282
       Weighted average interest
           rate during the period       5.50%      5.66%      5.93%
       Weighted average
           interest rate at
           the end of the period .      5.55%      5.41%      6.00%

Return On Equity And Assets Ratios

                                                At Or For The Years
                                                 Ended December 31,
                                     -------------------------------------------
                                            1999        1998         1997
                                     --------------- ----------   --------
Equity to Asset Ratio                       8.89        6.34         7.51
Return on Average Equity                    1.27        4.14         7.87
Return on Average Assets                     .12%        .30%         .57%
Dividend Payout Ratio                         --          --           --

Asset/Liability Management

         The  Registrant  has  established an  asset/liability  committee  which
consists  of its senior  management  and  several  non-employee  directors.  The
committee is  responsible  for and  evaluates the interest rate risk inherent in
the Registrant's  assets and  liabilities,  determines the level of risk that is
appropriate given the Registrant's  business  strategy,  operating  environment,
capital,  liquidity and performance objectives, and manages this risk consistent
with the guidelines  approved by the Board of Directors.  The committee operates
under a policy adopted by the Board of Directors and meets at least quarterly to
review  its   asset/liability   policies  and  interest  rate  position  of  the
Registrant.

         The  Registrant is  vulnerable to an increase in interest  rates to the
extent that its interest-bearing liabilities mature or reprice more rapidly than
its   interest-earning   assets.   The  Registrant's   lending  activities  have
historically emphasized the origination of long-term,  adjustable rate and fixed
rate loans secured by single-family residences.  The primary source of funds has
been   deposits   with   substantially   shorter

                                       14
<PAGE>

maturities.   While  having  interest-bearing   liabilities  that  reprice  more
frequently than interest-earning  assets is generally beneficial to net interest
income  during  a  period  of  declining   interest  rates,   this  type  of  an
asset/liability  mismatch  is  generally  detrimental  during  periods of rising
interest rates.

         To reduce the effect of interest  rate changes on net interest  income,
the Registrant has adopted  various  strategies to enable  management to improve
the matching of interest-earning asset maturities to interest-bearing  liability
maturities.  Its  objective is to maintain a consistent  level of  profitability
within  acceptable  risk tolerances  across a broad range of potential  interest
rate  environments.  The principal  elements of these strategies include seeking
to:


o    originate adjustable-rate loans;

o    the extent that market conditions permit,  originate  shorter-term consumer
     loans, which in addition to offering more rate flexibility,  typically bear
     higher interest rates than residential mortgage loans;

o    purchase mortgage-backed securities to provide monthly cash flows; and

o    purchase investment  securities with maturities that match specific deposit
     maturities.

Net Portfolio Value

         The Registrant uses the FDIC  Regulatory  Analysis Model to monitor its
exposure to interest rate risk, which calculates changes in net portfolio value.
Reports  generated  from  assumptions  provided and modified by  management  are
reviewed by the Asset/Liability  Management  Committee and reported to the Board
of Directors  quarterly.  The Interest Rate  Sensitivity of Net Portfolio  Value
Report  shows the degree to which  balance  sheet  line items and net  portfolio
value are  potentially  affected by a 100 to 300 basis point upward and downward
parallel shift (shock) in the Treasury yield curve.

                                       15

<PAGE>

         The following table sets forth, as of December 31, 1999, an estimate of
the projected  changes in the economic value of equity ("EVE") of  instantaneous
and permanent  increases and decreases in market interest rates in the amount of
100,  200,  and 300 basis points  ("bp").  One hundred  basis points  equals one
percent. Dollar amounts are expressed in thousands.

                           Economic Value of Equity     EVE as % of PV of Assets
    Change           ---------------------------------- ------------------------
    in Rates         $ Amount      $ Change   % Change    % EVE Ratio BP Change
    --------         --------      --------  ----------   ----------- ----------
                                       (Dollars in thousands)
     +300 bp          9,609        (15,571)      (61.8)        3.8    (533) bp
      +200           14,582        (10,598)      (42.1)        5.6    (352)
      +100           19,681         (5,499)      (21.8)        7.4    (178)
     Unchanged       25,180             --         --          9.2      --
       -100          30,094           4,914        19.5       10.6     149
       -200          33,420           8,240        32.7       11.6     237
       -300          35,500          10,320        40.1       12.0     281

         Computations  of  prospective  effects of  hypothetical  interest  rate
changes are based on numerous  assumptions,  including relative levels of market
interest rates,  prepayments and deposit  run-offs and should not be relied upon
as  indicative  of actual  results.  Certain  shortcomings  are inherent in such
computations.  Although certain assets and liabilities may have similar maturity
or periods  of  repricing  they may react at  different  times and in  different
degrees to changes in the market interest  rates.  The interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while rates on other types of assets and  liabilities  may lag
behind changes in market interest rates. Certain assets, such as adjustable rate
mortgages, generally have features which restrict changes in interest rates on a
short  term  basis and over the life of the  asset.  In the event of a change in
interest  rates,   prepayments  and  early   withdrawal   levels  could  deviate
significantly  from  those  assumed  in making  calculations  set  forth  above.
Additionally,  an  increased  credit  risk may  result  as the  ability  of many
borrowers to service  their debt may  decrease in the event of an interest  rate
increase.



                                       16
<PAGE>
Average Balance Sheet

The following table sets forth information  relating to our consolidated average
balance  sheet and  reflects  the average  yield on assets and average  costs of
liabilities at and for the periods indicated.  Such yields and costs are derived
by dividing  income or expense by the average  balance of assets or liabilities,
respectively,  for the periods  presented.  Average  balances  are derived  from
month-end  balances.  Management  does not  believe  that  the use of  month-end
balances instead of daily average  balances has caused any material  differences
in the information presented.

<TABLE>
<CAPTION>
                                                                     For the Years Ended December 31,
                                        --------------------------------------------------------------------------------------------
                                                    1999                               1998                        1997
                                        -----------------------------   ------------------------------- ----------------------------
                                        Average              Average     Average              Average   Average            Average
                                        Balance Interest   Yield/Cost    Balance    Interest Yield/Cost  Balance Interest Yield/Cost
                                        ------- --------   ----------    -------    -------- ---------  -------  -------- ---------
                                                                        (Dollars in thousands)
<S>                                   <C>      <C>            <C>     <C>           <C>        <C>    <C>        <C>        <C>
INTEREST-EARNING ASSETS:
  Loans receivable, net (1)            $134,034 $ 9,935         7.41%  $105,411      $ 8,312     7.89% $106,991   $ 8,562     8.00%
  Securities held to maturity (2)        14,374     905         6.30     17,171        1,157     6.74    26,181     1,824     6.97
  Securities available for sale (3)      87,834   5,376         6.12     93,482        5,922     6.33    70,563     4,862     6.89
  Other interest-earning assets (4)      21,900   1,159         5.29     20,078        1,124     5.60    11,382       670     5.89
                                        -------  ------                 -------       ------            -------    ------
    Total interest-earning assets       258,142  17,375         6.73    236,142       16,515     6.99   215,117    15,918     7.40
  Noninterest-earning assets              8,769                           5,280                           5,569
                                        -------                         -------                         -------
    Total assets                       $266,911                        $241,422                        $220,686
                                        =======                         =======                         =======
INTEREST-BEARING LIABILITIES:
  Deposit accounts:
   NOW accounts                        $ 16,250     281         1.73   $ 13,500          252     1.87  $ 10,358       195     1.88
   Passbook accounts                     30,679     980         3.19     28,671          948     3.31    25,260       785     3.11
   Money market deposit accounts          4,288     126         2.94      4,102          123     3.00     4,051       121     2.99
   Certificates of deposit              144,196   7,457         5.17    151,232        8,441     5.58   141,564     7,881     5.57
  Borrowed funds                         44,427   2,445         5.50     23,596        1,335     5.66    22,012     1,305     5.93
                                        -------  ------                 -------       ------            -------    ------
    Total interest-bearing liabilities  239,840  11,289         4.71    221,101       11,099     5.02   203,245    10,287     5.06
                                                 ------                               ------                       ------
  Noninterest-bearing liabilities         2,736                           2,740                           1,552
                                        -------                         -------                         -------
    Total liabilities                   242,576                         223,841                         204,797
Total equity                             24,335                          17,581                          15,889
                                        -------                         -------                         -------
   Total liabilities and total equity  $266,911                        $241,422                        $220,686
                                        =======                         =======                         =======
   Net interest income
     (tax equivalent basis)                      $6,086                               $5,416                       $5,631
                                                  =====                                =====                        =====
   Interest rate spread (5)                                     2.02%                            1.97%                        2.34%
   Net interest margin (6)                                      2.36%                            2.29%                        2.62%
 Ratio of average interest-
   earning assets to average
   interest-bearing liabilities                                 1.08X                            1.07X                        1.06X

</TABLE>

---------------------------------
(1)  Loans receivable,  net includes  non-accrual loans.  Interest includes loan
     origination fees, which are immaterial.
(2)  Includes mortgage-backed and investment securities held to maturity.
(3)  Investments,  mortgage-backed  securities,  and  loans  held  for  sale are
     carried at market value.  Yields on tax exempt obligations were computed on
     a tax equivalent basis, at 34%.
(4)  Includes   federal   funds   sold,   Federal   Home  Loan  Bank  stock  and
     interest-earning deposits.
(5)  Interest rate spread represents the difference between the average yield on
     interest-earning   assets  and  the   average   cost  of   interest-bearing
     liabilities.
(6)  Net  interest  margin  represents  net interest  income  divided by average
     interest-earning assets.

                                       17
<PAGE>



Volume/Rate Table

         The following table  represents the extent to which changes in interest
rates and changes in the volume of interest-earning  assets and interest-bearing
liabilities  have affected our interest  income and interest  expense during the
periods indicated.  Information is provided in each category with respect to (i)
changes  attributable to changes in volume (change in volume multiplied by prior
rate),  (ii) changes  attributable to changes in rate (change in rate multiplied
by prior volume), and (iii) the net change. Changes attributable to the combined
impact of volume and rate have been allocated  proportionately to the change due
to volume and the changes due to rate.
<TABLE>
<CAPTION>
                                       Years Ended December 31,        Years Ended December 31,
                                    -----------------------------   --------------------------------
                                          1999 vs. 1998                   1998 vs. 1997
                                    -----------------------------   --------------------------------
                                         Increase (Decrease)               Increase (Decrease)
                                                 Due to                          Due to
                                    -----------------------------   --------------------------------
                                     Volume       Rate       Net       Volume     Rate         Net
                                     ------       ----       ---       ------     ----         ---
                                                             (In thousands)
<S>                                <C>        <C>        <C>        <C>        <C>        <C>
Interest income:
  Loans receivable, net .........   $ 2,153    $  (530)   $ 1,623    $  (129)   $  (121)   $  (250)
  Securities held to maturity ...      (180)       (72)      (252)      (609)       (58)      (667)
  Securities available for sale .      (353)      (193)      (546)     1,480       (420)     1,060
  Other interest earning assets .        99        (64)        35        489        (35)       454
                                    -------    -------    -------    -------    -------    -------
    Total .......................   $ 1,719    $  (859)   $   860    $ 1,231    $  (634)   $   597
                                    =======    =======    =======    =======    =======    =======
Interest expense:
  NOW Accounts ..................   $    49    $   (20)   $    29    $    58    $    (1)   $    57
  Passbook accounts .............        66        (34)        32        110         53        163
  Money market accounts .........        12         (9)         3          2         --          2
  Certificates of deposit .......      (382)      (602)      (984)       546         14        560
  Borrowed funds ................     1,149        (39)     1,110         91        (61)        30
                                    -------    -------    -------    -------    -------    -------
    Total .......................   $   894    $  (704)   $   190    $   807    $     5    $   812
                                    =======    =======    =======    =======    =======    =======

Net change in net interest income   $   825    $  (155)   $   670    $   424    $  (639)   $  (215)
                                    =======    =======    =======    =======    =======    =======
</TABLE>

Personnel

         As of December 31, 1999, the Registrant had 33 full-time  employees and
12  part-time  employees.  The  employees  are not  represented  by a collective
bargaining unit. The Registrant  believes its relationship with its employees to
be satisfactory.

Regulation

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

                                       18
<PAGE>


Regulation of the Company

         General.  As  a  bank  holding  company,  the  Company  is  subject  to
regulation  and  supervision  by the Board of Governors  of the Federal  Reserve
System (the "Federal  Reserve") and by the New Jersey  Department of Banking and
Insurance  Department (the "Department").  This regulation is generally intended
to ensure that the Company  limits its  activities  to those  allowed by law and
that it operates in a safe and sound manner  without  endangering  the financial
health of its  subsidiary  bank.  The mutual  holding  company is a bank holding
company and is subject to the regulations summarized below.

         Financial  Modernization  Legislation.  On November 12, 1999, President
Clinton signed into law the  Gramm-Leach-Bliley  Act (the "GLB Act") which will,
effective March 11, 2000,  permit  qualifying  bank holding  companies to become
financial  holding  companies and thereby  affiliate with  securities  firms and
insurance companies and engage in other activities that are financial in nature.
The GLB Act defines  "financial in nature" to include  securities  underwriting,
dealing and market making;  sponsoring  mutual funds and  investment  companies;
insurance underwriting and agency;  merchant banking activities;  and activities
that the Board has determined to be closely  related to banking.  A bank holding
company  may elect to be  treated as a  financial  holding  company  only if all
depository  institution  subsidiaries  of the  holding  company  have at least a
satisfactory rating under the Community Reinvestment Act and are and continue to
be well-capitalized and well-managed.

         The  GLB  Act  also  authorizes  national  banks  to  engage,   through
"financial  subsidiaries,"  in any activity that is permissible  for a financial
holding company and any activity that is determined to be financial in nature or
incidental to a financial activity,  except insurance underwriting,  real estate
development,  real estate  investment  (except as  otherwise  permitted by law),
insurance company  portfolio  investments and merchant banking  activities.  The
authority of a national bank to invest in a financial subsidiary is subject to a
number of conditions,  including, among other things, requirements that the bank
must be  well-managed  and  well-capitalized  (after  deducting from capital the
bank's outstanding investments in financial  subsidiaries).  The GLB Act further
provides  that a state bank may invest in financial  subsidiaries,  assuming the
requisite  investment  authority under state law, subject to the same conditions
that apply to national bank investments in financial subsidiaries.

         In  addition,  the GLB Act  enacts a number  of  consumer  protections,
including  provisions  intended to protect privacy of bank customers'  financial
information and provisions  requiring disclosure of ATM fees imposed by banks on
customers of other banks.

         Federal  Law and Other  Limitations.  A bank  holding  company  may not
acquire  direct or indirect  ownership  or control of more than 5% of the voting
shares of any bank,  or increase its  ownership or control of any bank,  without
prior approval of the Federal Reserve.

         Federal  law  also  prohibits  a bank  holding  company,  with  certain
exceptions, from acquiring more than 5% of the voting shares of any company that
is not a bank and from  engaging in any business  other than banking or managing
or  controlling  banks.  The principal  exceptions to this  prohibition  involve
certain non-bank activities that, by statute or by FRB regulation or order, have
been  identified  as  activities  closely  related to the business of banking or
managing  or  controlling  banks.  The GLB Act  greatly  expanded  the  scope of
business  activities  permissible  for bank  holding  companies  by  authorizing
"financial holding companies." Effective March 11, 2000, the GLB Act will permit
a bank holding company,  upon  classification as a financial holding company and
assuming such holding company's subsidiary banks meet

                                       19
<PAGE>

certain requirements,  to engage in a broad variety of activities "financial" in
nature. See "-- Financial Modernization Legislation."

         Regulatory  Capital  Requirements.  The  Federal  Reserve  has  adopted
capital  adequacy  guidelines  pursuant  to which it  assesses  the  adequacy of
capital in examining  and  supervising  a bank holding  company and in analyzing
applications.  The Federal  Reserve capital  adequacy  guidelines are similar to
those imposed on the Bank by the FDIC.

         Commitments  to  Affiliated  Depository  Institutions.   Under  Federal
Reserve  policy,  the Company  will be expected to act as a source of  financial
strength  to  the  Bank  and  to  commit   resources  to  support  the  Bank  in
circumstances when it might not do so absent such policy. The enforceability and
precise  scope of this policy is unclear.  However,  should the Bank require the
support of additional capital resources, it is expected that the Company will be
required to respond with any such resources available to it.

         Restrictions   Applicable  to  New   Jersey-Chartered   Mutual  Holding
Companies. The Department is authorized to approve the reorganization of a state
chartered  savings bank to a mutual  savings bank holding  company.  The general
powers of a mutual  savings bank holding  company are similar to the  authorized
powers  of  New  Jersey  corporations,  subject  to  the  interpretation  of the
Department.

Regulation of the Bank

         General.  As a New Jersey chartered savings bank insured by the Savings
Association  Insurance  Fund (the  "SAIF"),  the Bank is  subject  to  extensive
regulation and examination by the New Jersey Department of Banking and Insurance
(the  "Department"),  the FDIC, which insures its deposits to the maximum extent
permitted  by law,  and to a much lesser  extent,  by the Federal  Reserve.  The
federal and state laws and  regulations  which are applicable to banks regulate,
among other things, the scope of their business, their investments, the reserves
required  to be  kept  against  deposits,  the  timing  of the  availability  of
deposited  funds and the nature and amount of and  collateral for certain loans.
The laws and regulations  governing the Bank generally have been  promulgated to
protect  depositors  and not for the  purpose of  protecting  stockholders.  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 regulation,  whether by the Department,  the FDIC or the United States
Congress,  could have a material  adverse  impact on the  Company,  the Bank and
their operations.

         New  Jersey  Savings  Bank  Law.  The New  Jersey  Banking  Act of 1948
("Banking  Code")  contains  detailed  provisions  governing  the  organization,
location of offices,  rights and  responsibilities of directors,  officers,  and
employees,  as well as corporate powers,  savings and investment  operations and
other aspects of the Bank and its affairs.  The Banking Code delegates extensive
rule-making  power and  administrative  discretion to the Department so that the
supervision and regulation of state chartered  savings banks may be flexible and
readily responsive to changes in economic  conditions and in savings and lending
practices.


                                       20
<PAGE>

         One of the  purposes of the Banking  Code is to provide  savings  banks
with the  opportunity  to be fully  competitive  with each  other and with other
financial  institutions existing under other state, federal and foreign laws. To
this end, the Banking Code  provides  state-chartered  savings banks with all of
the  powers  enjoyed  by  federal  savings  and loan  associations,  subject  to
regulation by the Department.  Federal law, however,  generally  prohibits state
chartered institutions from making new investments,  loans, or becoming involved
in activities as principal  and equity  investments  which are not permitted for
national banks. The ability of the Banking Code to provide additional  operating
authority to the Bank is limited by federal law.

         Insurance of Deposit  Accounts.  The deposit  accounts held by the Bank
are insured by the SAIF to a maximum of  $100,000  for each  insured  member (as
defined by law and  regulation).  Insurance of deposits may be terminated by the
FDIC  upon a finding  that the  institution  has  engaged  in unsafe or  unsound
practices,  is in an unsafe or unsound  condition to continue  operations or has
violated any applicable law, regulation, rule, order or condition imposed by the
FDIC or the institution's primary regulator.

         The Bank is required to pay insurance premiums based on a percentage of
its insured  deposits to the FDIC for insurance of its deposits by the SAIF. The
FDIC also  maintains  another  insurance  fund, the Bank Insurance Fund ("BIF"),
which primarily insures  commercial bank deposits.  The FDIC has set the deposit
insurance assessment rates for SAIF-member institutions for the first six months
of 2000 at 0% to .027% of insured  deposits  on an  annualized  basis,  with the
assessment rate for most savings institutions set at 0%.

         In  addition,  all  FDIC-insured   institutions  are  required  to  pay
assessments  to the FDIC at an annual  rate of  approximately  .0212% of insured
deposits to fund interest payments on bonds issued by the Financing  Corporation
("FICO"),  an agency of the Federal  government  established to recapitalize the
predecessor to the SAIF.  These  assessments  will continue until the FICO bonds
mature in 2017.

         Regulatory Capital  Requirements.  Under FDIC regulations,  the Bank is
required  to  maintain  minimum  leverage  capital (a ratio of Tier 1 capital to
total risk-weighted assets) of 3%. For institutions other than those most highly
rated by the FDIC,  additional  capital  of at least 100 to 200 basis  points is
required.   Tier  1  capital  is  the  sum  of  common   stockholders'   equity,
noncumulative  perpetual  preferred  stock  (including any related  surplus) and
minority  investments in certain  subsidiaries,  less certain intangible assets,
deferred  tax  assets,  certain  identified  losses and certain  investments  in
securities  subsidiaries.  As a  state-chartered  savings  bank,  the Bank  must
currently also deduct from Tier 1 capital an amount equal to its investments in,
and extensions of credit to, subsidiaries  engaged in activities not permissible
for national banks.

         In addition to the leverage  ratio,  the Bank must  maintain a ratio of
qualifying total capital to  risk-weighted  assets of at least 8.0%, of which at
least four percentage  points must be Tier 1 capital.  Qualifying  total capital
consists  of Tier 1 capital  plus Tier 2 or  supplementary  capital  items which
include  allowances for loan losses in an amount of up to 1.25% of risk-weighted
assets,  cumulative  preferred stock and preferred stock with a maturity of over
20 years and certain  other  capital  instruments.  Qualifying  total capital is
further  reduced by the amount of the bank's  investments in banking and finance
subsidiaries  that  are  not  consolidated  for  regulatory   capital  purposes,
reciprocal  cross-holdings  of  capital  securities  issued  by other  banks and
certain other deductions. Under the FDIC's risk-weighted system,

                                       21
<PAGE>

all of a bank's  balance  sheet  assets  and the  credit  equivalent  amounts of
certain  off-balance  sheet items are  assigned to risk weight  categories.  The
aggregate  dollar  amount of each  category  is  multiplied  by the risk  weight
assigned to that category.  The sum of these  weighted  values equals the bank's
risk-weighted assets.

         Pursuant to New Jersey banking law, the minimum  leverage capital for a
depository  institution  is a ratio of Tier 1  capital  to  total  risk-weighted
assets of four percent. However, the Department may require a higher ratio for a
particular depository institution.

         New Jersey banking law requires that a depository  institution maintain
qualifying  capital of at least eight  percent of its risk weighted  assets.  At
least four  percent of this  qualifying  capital  shall be in the form of Tier 1
capital.  For purposes of New Jersey banking law, risk weighted  assets,  Tier 1
capital,  and  total  assets  are  defined  in the  same  manner  as in the FDIC
regulations.

         The Bank was in  compliance  in both  the FDIC and New  Jersey  capital
requirements at December, 31, 1999.

         Regulatory Capital Distributions.  Earnings of the Bank appropriated to
bad debt reserves and deducted for federal income tax purposes are not available
for payment of cash dividends or other  distributions  to  stockholders  without
payment  of taxes  at the then  current  tax rate by the Bank on the  amount  of
earnings removed from the reserves for such distributions.

         Dividends  payable by the Bank to the Company and dividends  payable by
the  Company to  stockholders  are  subject to  various  additional  limitations
imposed by federal and state laws,  regulations and policies  adopted by federal
and state  regulatory  agencies.  Under  New  Jersey  law,  the Bank may not pay
dividends unless, following payment, the capital stock of the Savings Bank would
be  unimpaired  and (a) the Bank will have a surplus of not less than 50% of its
capital stock, or, if not, (b) the payment of such dividends will not reduce the
surplus of the Bank. Under applicable regulations,  the Bank would be prohibited
from making any capital  distributions  if, after making the  distribution,  the
Bank would have: (i) a total risk-based  capital ratio of less than 8.0%; (ii) a
Tier 1 risk-based  capital ratio of less than 4.0%; or (iii) a leverage ratio of
less than 4.0%, unless a higher ratio is required by the Department.

         Loans to One Borrower.  Under New Jersey and federal law, savings banks
have, subject to certain exemptions, lending limits to one borrower in an amount
equal to 15% of the institution's  capital accounts. As of December 31, 1999 the
Bank's loans-to-one borrower limitations was $3.5 million.

Item 2. Description of Property
-------------------------------

         The  Registrant's  executive  offices  are  located at 531 North  Maple
Avenue in Ridgewood,  New Jersey.  The Registrant  conducts its business through
three  offices,  which are  located in  Ridgewood  and Mahwah,  New Jersey.  The
following table sets forth the location of each of the Registrant's  offices and
the year the office was acquired or leased.

                                       22
<PAGE>

                                            Year Facility
                                                Opened or         Leased or
Office Location                                 Acquired            Owned
---------------                                 --------            -----
Broad Street Office
  55 North Broad Street
  Ridgewood, NJ                                   1964             Leased

Mahwah Office
  6 East Ramapo Avenue
  Mahwah, NJ                                      1995             Leased

Maple Avenue Office
  531 North Maple Avenue
  Ridgewood, NJ                                   1995             Owned

         The Broad  Street  office  lease is dated  April 6, 1975 with a term of
thirty years. The Mahwah office lease has a term of twelve years. Each lease has
a renewal  option.  The Registrant has a limited  service branch which is opened
several hours a week that is located in a nursing home in Allendale, New Jersey.

         The Registrant  plans to open its fourth branch and new headquarters in
April  2000.  The  office  is to be  located  at  1124  East  Ridgewood  Avenue,
Ridgewood, New Jersey. The property was acquired in 1999.

         (b) Investment  Policies.  See "Item 1.  Business"  above for a general
description of the Registrant's  investment policies and any regulatory or Board
of Director's  percentage of assets limitations  regarding certain  investments.
The  Registrant's  investments are primarily to produce income,  and to a lesser
extent, possible capital gain.

                  (1)  Investments  in Real Estate or  Interests in Real Estate.
See "Item 1.  Business  - Lending  Activities  and -  Regulation,"  and "Item 2.
Description of Property."

                  (2)  Investments  in  Real  Estate  Mortgages.  See  "Item  1.
Business - Lending Activities and - Regulation.

                  (3)  Investments  in  Securities  of or  Interests  in Persons
Primarily  Engaged in Real Estate  Activities.  See "Item 1.  Business - Lending
Activities and - Regulation.

         (c)     Description of Real Estate and Operating Data.  Not applicable.


                                       23
<PAGE>

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

         There  are  various   claims  and  lawsuits  in  which   Registrant  is
periodically involved, such as claims to enforce liens, condemnation proceedings
on properties in which Registrant holds security interests, claims involving the
making and  servicing  of real  property  loans,  and other  issues  incident to
Registrant's  business.  In the  opinion  of  management,  no  material  loss is
expected from any of the pending claims or lawsuits.

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

         Not applicable.

                                     PART II

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

         The  information  contained under the section  captioned  "Stock Market
Information" of the Company's  Annual Report to stockholders for the fiscal year
ended  December  31,  1999  (the  "Annual  Report")  is  incorporated  herein by
reference.

Item  6.  Management's Discussion and Analysis or Plan of Operation
-------------------------------------------------------------------

         The  information  contained  in  the  section  captioned  "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Annual Report is incorporated herein by reference.

Item  7.  Financial Statements
------------------------------

         The  Registrant's   financial  statements  listed  under  Item  13  are
incorporated herein by reference.

Item  8.  Changes in and Disagreements with Accountants On Accounting and
-------------------------------------------------------------------------
Financial Disclosure.
---------------------

                                 Not applicable.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons: Compliance
--------------------------------------------------------------------------------
with Section 16(a) of the Exchange Act.
---------------------------------------

         The  information  required  under this item is  incorporated  herein by
reference  to the  Proxy  Statement  for the 2000  Annual  Meeting  (the  "Proxy
Statement")  contained under the sections  captioned  "Section 16(a)  Beneficial
Ownership  Reporting  Compliance,"  "Proposal I - Election of Directors," and "-
Biographical Information."


                                       24
<PAGE>

Item 10.  Executive Compensation
--------------------------------

         The  information  required by this item is incorporated by reference to
the  Proxy  Statement  contained  under  the  section  captioned  "Director  and
Executive Officer Compensation."


Item 11.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------

         (a)      Security Ownership of Certain Beneficial Owners
         (b)      Security Ownership of Management

                  The information  required by items (a) and (b) is incorporated
                  herein  by reference to the Proxy  Statement  contained  under
                  the  sections captioned  "Principal Holders" and "Proposal I -
                  Election of Directors."

         (c)       Management of the Company knows of no arrangements, including
                   any pledge by any person of  securities  of the Company,  the
                   operation  of which  may at a  subsequent  date  result  in a
                   change in control of the Company.

Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

         The  information  required  by this  item  is  incorporated  herein  by
reference  to  the  section   captioned   "Certain   Relationships  and  Related
Transactions" in the Proxy Statement.

Item 13.  Exhibits, Lists and Reports on Form 8-K
-------------------------------------------------

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

         (1) The  consolidated  statements  of financial  condition of Ridgewood
Financial,  Inc. and subsidiary as of December 31, 1999 and 1998 and the related
consolidated  statements  of income,  changes in  shareholders'  equity and cash
flows  for the  years  then  ended,  together  with the  related  notes  and the
independent   auditors'  report  of  KPMG  LLP,  independent   certified  public
accountants for the year ended December 31, 1999.

         (2)      Schedules omitted as they are not applicable.



                                       25



<PAGE>
         3. The following  exhibits are included in this Report or  incorporated
herein by reference:
<TABLE>
<CAPTION>
               <S>       <C>
                  (a)      List of Exhibits:
                  3(i)     Certificate of Incorporation of Ridgewood Financial, Inc.*
                  3(ii)    Bylaws of Ridgewood Financial, Inc.*
                  10.1     Employment Agreement with Susan E. Naruk*
                  10.2     Employment Agreement with Nelson Fiordalisi*
                  10.3     Employment Agreement with John Scognamiglio*
                  10.4     Employment Agreement with Jean Miller*
                  10.5     Supplemental Executive Retirement Plan*
                  13       Portions of the Annual Report to Shareholders
                  21       Subsidiaries of the Registrant (See Item 1 -- Description of Business-- General)
                  23       Consent of KPMG LLP
                  27       Financial Data Schedule (electronic filing only)

                  (b)      The Registrant did not file any  reports  on Form 8-K
                           during the quarter ended December 31, 1999.
</TABLE>


-----------------
*  Incorporated  by  reference  to  the  identically  numbered  exhibit  of  the
Registration  Statement  on Form  SB-2  (File  No.  333-62363)  filed  with  the
Commission on August 27, 1998.

                                       26



<PAGE>


                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the  Securities  Exchange Act of
1934, the registrant caused this report to be signed as of March 24, 2000 on its
behalf by the undersigned, thereunto duly authorized.

                            Ridgewood Financial, Inc.

                                         By:  /s/Susan E. Naruk
                                              ----------------------------------
                                              Susan E. Naruk
                                              President and Chief
                                              Executive Officer
                                              (duly authorized representative)

         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following  persons on behalf of the  registrant  and in
the capacities indicated as of March 24, 2000.
<TABLE>
<CAPTION>
<S>                                                 <C>
/s/Susan E. Naruk                                    /s/John Scognamiglio
------------------------------------------           --------------------------------------------
Susan E. Naruk                                       John Scognamiglio
President, Chief Executive Officer,                  Senior Vice President and Chief
and Director                                         Financial Officer
(Principal Executive Officer)                        (Principal Financial and Accounting Officer)

/s/Nelson Fiordalisi                                 /s/Bernard J. Hoogland
------------------------------------------           --------------------------------------------
Nelson Fiordalisi                                    Bernard J. Hoogland
Executive Vice President, Chief Operating            Director
Officer, and Director

/s/Michael W. Azzara                                 /s/John Kandravy
------------------------------------------           --------------------------------------------
Michael W. Azzara                                    John Kandravy
Director                                             Director

/s/Jerome Goodman                                    /s/Robert S. Monteith
------------------------------------------           --------------------------------------------
Jerome Goodman                                       Robert S. Monteith
Director                                             Director

/s/John J. Repetto                                   /s/Paul W. Thornwall
------------------------------------------           --------------------------------------------
John J. Repetto                                      Paul W. Thornwall
Director                                             Director

</TABLE>