U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

|X|  Annual report  pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934.

For the fiscal year ended March 31, 2000

COMMISSION FILE NUMBER 0-27747

                              Dollar Bancorp, Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


              Delaware                                   52-2197122
    ------------------------------           -----------------------------------
   (State or other jurisdiction of          (I.R.S. Employer Identification No.)
   incorporation or organization)

        893 Franklin Avenue
        Newark, New Jersey                                07107
  --------------------------------          ------------------------------------
  (Address of principal executive                      (Zip Code)
             offices)
                        Telephone Number: (973) 483-0001
                                         ---------------

     Securities Registered Pursuant to Section 12(g) of the Exchange Act: Common
Stock, par value $0.01 per share

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

                      Yes   X                 No
                         ------                 ------

         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 the 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. |_|

         The Registrant's revenues for the fiscal year ended March 31, 2000 were
$75,002.

         The voting  stock of the  Company is not traded on an  exchange  and is
illiquid. Based upon the last sale of the common stock at May 31, 2000 of $37.00
per share the aggregate market value was $2,812,000.  The aggregate market value
of the voting equity held by  non-affiliates  computed by reference to the price
at which the common equity was sold, as of May 31, 2000 was $2,556,108.

         The number of shares outstanding of the Registrant's  Common Stock, the
Registrant's  only class of outstanding  capital  stock,  as of May 31, 2000 was
76,000.

                       Documents Incorporated by Reference

         The  following  documents,  in  whole  or  in  part,  are  specifically
incorporated  by reference in the  indicated  Part of this Annual Report on Form
10-KSB:

I.       Portions of the Dollar Bancorp, Inc. 2000 Annual Report to Stockholders
are incorporated by reference into certain items of Part II.

II.      Portions of the Dollar Bancorp, Inc. Proxy Statement for the 2000
Annual Meeting of Stockholders are incorporated by reference into certain items
of Part III.


<PAGE>



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

Dollar Bancorp Inc.

         Dollar Bancorp,  Inc. (the "Company") is a Delaware  corporation  which
was organized in October 1999. The only significant  asset of the Company is its
investment in Dollar Savings Bank (the "Bank"). On October 20, 1999, the Company
acquired  all of the  issued  and  outstanding  common  stock  of  the  Bank  in
connection with the Bank's  reorganization  holding company  structure.  At that
time, each share of the Bank's common stock was automatically converted into one
share of Company common stock,  par value $0.01 per share (the "Common  Stock").
At March 31, 2000, the Company had total assets of $10.2 million, total deposits
of $8.6 million, and stockholders' equity of $1.5 million.

         The  Company's  principal  office is  located at 893  Franklin  Avenue,
Newark,  New Jersey,  07107,  and its telephone  number at that address is (973)
483-0001.

Dollar Savings Bank

         The Bank is a federally  chartered stock savings bank  headquartered in
Newark,  New Jersey which completed its conversion from the mutual to stock form
of  ownership  on October 10,  1997.  Its deposits are insured up to the maximum
allowable  amount by the  Savings  Association  Insurance  Fund  ("SAIF") of the
Federal  Deposit  Insurance  Corporation  (the  "FDIC").  Through  its office in
Newark,  the Bank serves  communities  located in Essex County,  New Jersey. The
principal  business of the Bank has historically  consisted of attracting retail
deposits from the general  public and investing  those funds  primarily in first
mortgage loans on one- to four-family  residential  real estate,  and commercial
real estate loans,  and to a lesser extent  multi-family  real estate.  The Bank
also  originates  other loans  consisting  primarily of loans secured by deposit
accounts.  At March  31,  2000,  substantially  all of the  Bank's  real  estate
mortgage loans were secured by properties  located in the Bank's market area. At
March 31, 2000,  total loans  receivable  were $6.0  million,  or 58.8% of total
assets.

         The  Bank  currently  offers  passbook   savings,   club  accounts  and
certificate accounts.  The Bank obtains deposits within its primary market area.
The  Bank  does  not  accept  any   brokered   deposits.   See   "--Sources   of
Funds--Deposits."

         In the past, the Bank has invested in mortgage-backed  securities. At
March 31, 2000, mortgage-backed securities totaled $20,879. See "--Investment
Activities."

Recent Developments

         On April 17, 2000, the Company entered into a Dealer-Manager  Agreement
with stockholders  owning 90.1% of the common stock of the Company (the "Selling
Stockholders")  and National  Securities  Corporation  ("NSC") whereby NSC would
assist the  Selling  Stockholders  in an effort to sell  their  shares of common
stock in a private  placement.  The  Dealer-Manager  Agreement provides that the
common stock will only been marketed to "accredited  investors," as that term is
defined in the General  Rules and  Regulations  of the  Securities  Act of 1933.
Under the terms of the Dealer- Manager Agreement,  the Dealer-Manager  Agreement
will expire upon NSC's  raising  $4.0  million of gross  proceeds for the common
stock of the Selling Stockholders, or July 15, 2000, whichever comes first.

Market Area and Competition

         As a community-oriented  financial institution, the Bank seeks to serve
the financial  needs of the families in its market area.  The Bank's market area
is Newark,  New Jersey which is located in Essex County,  New Jersey. The Bank's
market area has been in an extended economic decline over the past fifteen years
and  is   characterized   by  high  levels  of   unemployment  in  lower  income
neighborhoods. Newark's population declined over 20% from 1980 to 1995.

         The  economy of the Bank's  market  area  consists  primarily  of small
business  retailers.  The Bank is  significantly  affected by the Newark economy
which, in recent years,  has experienced a significant  decline and reduction in
employment  due to layoffs,  corporate  relocations  to achieve lower  operating
costs, a reduced tax base, and a decline

                                        1

<PAGE>



in the manufacturing  sector of the economy.  Consequently,  the market area has
experienced  a decline  in real  estate  values,  and the  ability of the Bank's
borrowers  to make timely  payment on their loans has been  adversely  affected.
These factors have  contributed  to a decline in the Bank's asset quality in the
early 1990's.

         The Bank faces  significant  competition  in  attracting  deposits from
commercial banks,  other savings  institutions and credit unions. The Bank faces
additional  competition  for deposits from short-term  money market funds,  from
other  corporate and government  securities  funds and from brokerage  funds and
insurance  companies.  The  Bank  also  faces  significant  competition  in  the
origination  of loans from savings  institutions,  mortgage  banking  companies,
credit unions and commercial banks.

Lending Activities

         General.  The Bank's loan portfolio consists primarily of loans secured
by real  estate.  Such  loans are  secured  by one- to  four-family  residences,
commercial real estate loans, and to a lesser extent by multi-family  dwellings.
The Bank also originates  other loans  consisting  primarily of loans secured by
deposit accounts.  At March 31, 2000, the Bank's loans totaled $6.0 million,  of
which $4.0 million or 61.51% were one-to four-family residential mortgage loans,
$1.2  million or 19.29%  were  commercial  loans and  $661,000,  or 10.25%  were
multi-family  loans. Of the one- to four- family  mortgage loans  outstanding at
that date, $3.3 million, or 84.0% were fixed-rate loans, and $635,000,  or 16.0%
were adjustable-rate loans. At March 31, 2000, loans secured by deposit accounts
totaled $62,000, or 0.96% of the Bank's loan portfolio.

         The Bank's loans-to-one  borrower limit is generally the greater of 15%
of  unimpaired  capital  and  surplus  or  $500,000.  See   "Regulation--Federal
Regulation of Savings  Banks." At March 31, 2000,  the maximum loan amount which
the Bank could  have had  outstanding  to any one  borrower  and the  borrower's
related entities was approximately  $500,000. At March 31, 2000, the Bank had no
loans or groups of loans to  related  borrowers  with  outstanding  balances  in
excess of this amount. The Bank's largest lending relationship at March 31, 2000
was $403,000 in loans-to-one borrower which was secured by one single family and
two multi-family  properties.  The Bank's second largest lending relationship at
March 31, 2000 was $309,000 which was secured by multi-family  real estate.  The
Bank's third largest lending relationship totaled $295,000, which consisted of a
real estate loan secured by a single-family residence. At March 31, 2000, all of
these loans were performing in accordance with their terms.

         Loan Portfolio Composition. Set forth below is data relating to the
composition of the Bank's loan portfolio by type of loan as of the dates
indicated.
<TABLE>
<CAPTION>

                                                                     At March 31,
                                                    -----------------------------------------------
                                                            2000                      1999
                                                    ---------------------     ---------------------
                                                    Amount        Percent      Amount       Percent
                                                    ------        -------     -------       -------
                                                                   (Dollars in Thousands)

<S>                                                 <C>            <C>       <C>             <C>
Real estate loans:
  One- to four-family............................  $  3,967        61.51%    $ 4,551         68.21%
  Multi-family...................................       661        10.25         688         10.31
  Construction...................................       515         7.99          --            --
  Commercial.....................................     1,244        19.29       1,385         20.76
                                                   --------        -----     -------         -----
    Total real estate loans......................  $  6,387        99.04     $ 6,624         99.28
                                                   ========        =====     =======         =====

Other loans:
  Deposit account................................  $     62         0.96     $    48          0.72
                                                   --------        -----     -------         -----
    Total other loans............................        62         0.96          48          0.72
                                                   --------        -----     -------         -----

Total loans......................................     6,449       100.00%      6,672        100.00%
                                                   ========       ======     =======        ======

Less:
Deferred fees and discounts......................        14                        8
Allowance for losses.............................       351                      432
Loans in process.................................       111                       --
                                                   --------                  -------
Total loans receivable, net......................  $  5,973                  $ 6,232
                                                   ========                  =======

</TABLE>

                                        2

<PAGE>



         The following  table shows the composition of the Bank's loan portfolio
by fixed and adjustable rates at the dates indicated.
<TABLE>
<CAPTION>

                                                                     At March 31,
                                                    -----------------------------------------------
                                                            2000                      1999
                                                    ---------------------      --------------------
                                                    Amount        Percent      Amount       Percent
                                                    ------        -------      ------       -------
                                                                   (Dollars in Thousands)
<S>                                                 <C>            <C>       <C>             <C>
Fixed-rate loans:
  Real estate:
  One- to four-family............................  $  3,332        51.67%    $ 3,683         55.20%
  Multi-family...................................       661        10.25         688         10.31
  Construction...................................       515         7.99          --            --
  Commercial.....................................     1,050        16.28       1,188         17.81
                                                   --------       ------     -------         -----
    Total real estate loans......................     5,558        86.19       5,559         83.32
  Other..........................................        62         0.96          48          0.72
                                                   --------       ------     -------         -----
    Total fixed-rate loans.......................     5,620        87.15       5,607         84.04
                                                   ========       ======     =======         =====

Adjustable-rate loans:
  Real estate:
  One- to four family............................       635         9.85         868         13.01
  Commercial.....................................       194         3.00         197          2.95
                                                   --------       ------       -----         -----
    Total adjustable rate loans..................       829        12.85       1,065         15.96
                                                   --------       ------     -------        ------
    Total loans..................................  $  6,449       100.00%    $ 6,672        100.00%
                                                   ========       ======     =======        ======

Less:
Deferred fees....................................        14                        8
Allowance for loan losses........................       351                      432
Loans in process.................................       111                       --
                                                   --------                  -------
    Total loans receivable, net..................  $  5,973                  $ 6,232
                                                   ========                  =======

</TABLE>

         One- to Four-Family Mortgage Loans. The Bank's primary lending activity
is the origination of one- to four- family, owner-occupied, residential mortgage
loans  secured  by  property  located  in the  State of New  Jersey.  Loans  are
generated  through the Bank's  marketing  efforts,  its existing  customers  and
referrals.  The Bank generally has limited its real estate loan  originations to
the financing of properties  located within the State of New Jersey and will not
make out of state loans. At March 31, 2000, the Bank had $4.0 million, or 61.51%
of its loan portfolio, invested in mortgage loans secured by one- to four-family
residences.

         The  Bank   originates  for  retention  in  its  portfolio   fixed-rate
residential  one- to  four-family  loans with terms of up to 10 years.  The Bank
originates  balloon loans generally with five year terms and which amortize over
30 years. The Bank's  fixed-rate  mortgage loans amortize monthly with principle
and interest due each month.

         The Bank currently offers ARM loans with  amortization  periods ranging
up to 30 years.  The Bank generally offers ARM loans that adjust at either every
one,  three or five  years  from the date of  origination,  with  interest  rate
adjustment limitations up to two percentage points per adjustment and with a cap
of up to six percentage points on total interest rate increases over the life of
the loan.  In a rising  interest rate  environment,  such rate  limitations  may
prevent ARM loans from repricing to market interest  rates,  which would have an
adverse effect on net interest income.  The Bank's ARM loans adjust at 300 basis
points over the  corresponding  one, three or five year Treasury Bill rates.  At
March 31, 2000, ARM loans secured by residential one- to four-family real estate
totaled $635,000.  The origination of fixed-rate mortgage loans versus ARM loans
is monitored on an ongoing basis and is affected  significantly  by the level of
market  interest  rates,  customer  preference,  the  Bank's  interest  rate gap
position and loan  products  offered by the Bank's  competitors.  During  fiscal
2000, the Bank originated $390,000 of fixed-rate  residential mortgage loans and
no ARM loans secured by residential one- to four-family real estate.

         The primary  purpose of  offering  ARM loans is to make the Bank's loan
portfolio more interest rate sensitive.  However,  as the interest income earned
on ARM loans varies with prevailing  interest rates, such loans do not offer the
Bank  predictable  cash flows as would  long-term,  fixed-rate  loans. ARM loans
carry increased credit risk associated with potentially  higher monthly payments
by  borrowers  as  general  market  interest  rates  increase.  It is  possible,
therefore,

                                        3

<PAGE>



during periods of rising  interest  rates,  that the risk of  delinquencies  and
defaults  on ARM loans may  increase  due to the upward  adjustment  of interest
costs to the borrower, resulting in increased loan losses.

         The  Bank's  residential  first  mortgage  loans  customarily   include
due-on-sale clauses, which are provisions giving the Bank the right to declare a
loan  immediately  due and payable in the event,  among other  things,  that the
borrower sells or otherwise  disposes of the underlying real property serving as
security for the loan.  Due-on-sale  clauses are a means of imposing  assumption
fees and increasing the interest rate on the Bank's  mortgage  portfolio  during
periods of rising interest rates.

         Effective  December 19, 1993, all financial  institutions were required
to adopt and maintain  comprehensive  written real estate lending  policies that
are consistent  with safe and sound banking  practices.  These lending  policies
must reflect consideration of the Interagency Guidelines for Real Estate Lending
Policies adopted by the Federal banking agencies, including the OTS, in December
1992 ("Guidelines").  The Guidelines set forth,  pursuant to the mandates of the
FDICIA, uniform regulations  prescribing standards for real estate lending. Real
estate  lending is defined as extension of credit  secured by liens on interests
in real  estate or made for the  purpose  of  financing  the  construction  of a
building or other improvements to real estate,  regardless of whether a lien has
been taken on the property.

         The policies must address certain lending  considerations  set forth in
the Guidelines,  including  loan-to-value  ("LTV") limits,  loan  administration
procedures,  underwriting standards,  portfolio  diversification  standards, and
documentation,  approval and reporting requirements. These policies must also be
appropriate  based upon the size of the  institution and the nature and scope of
its operations,  and must be reviewed and approved by the institution's board of
directors at least annually.  The LTV ratio  framework,  with an LTV ratio being
the total amount of credit to be extended  divided by the appraised value of the
property  at the time the credit is  originated,  must be  established  for each
category of real estate loans.  If not a first lien, the lender must combine all
senior liens when calculating  this ratio.  The Guidelines,  among other things,
establish the following supervisory LTV limits: raw land (65%); land development
(75%);  construction   (commercial,   multi-family  and  nonresidential)  (80%);
improved property (85%); and owner occupied one- to four-family  residential (no
maximum  ratio,  however,  any LTV ratio in excess of 90%  requires  appropriate
insurance or readily marketable collateral).

         Certain  institutions  are  permitted to make real estate loans that do
not  conform  with  the   established  LTV  ratio  limits  up  to  100%  of  the
institution's  total capital.  Within this aggregate limit,  total loans for all
commercial,  agricultural,   multi-family  and  other  non-one-  to  four-family
residential  properties  should not exceed 30% of total capital.  An institution
will come  under  increased  supervisory  scrutiny  as the  total of such  loans
approaches  these  levels.  Certain  loans are exempt from the LTV ratios (e.g.,
those  guaranteed by a government  agency,  loans to facilitate the sale of real
estate  owned,  loans  renewed,  refinanced  or  restructured  by  the  original
lender(s) to the same  borrower(s)  where there is no  advancement of new funds,
etc.).

         Regulations  limit  the  amount  that a  savings  association  may lend
relative  to the  appraised  value of the real  estate  securing  the  loan,  as
determined  by an appraisal at the time of loan  origination.  Such  regulations
permit a maximum LTV ratio of 95% for  residential  property (and 100% for loans
guaranteed  by the  Veterans  Administration)  and 90% for all other real estate
loans.  The maximum LTV ratio on other types of real estate  loans is  generally
the lesser of 80% of the appraisal  value or the purchase price of the property.
The Bank will not originate  residential mortgage loans with LTV ratio in excess
of 80%.

         When  underwriting  residential real estate loans, the Bank reviews and
verifies each loan applicant's employment, income and credit history. Management
believes that  stability of income and past credit history are integral parts in
the  underwriting  process.  Generally,  the applicant's  total monthly mortgage
payment,  including  all escrow  amounts,  is limited to 25% of the  applicant's
total monthly income.  Written  appraisals are generally required on real estate
property offered to secure an applicant's loan. The Bank requires fire, casualty
and, where  necessary,  flood  insurance on all properties  securing real estate
loans.  The Bank also  requires  title  insurance.  The Bank will  generally not
originate a one- to four-family residential loan in excess of $250,000.


                                        4

<PAGE>



         Commercial  Real Estate  Loans.  The Bank  originates  commercial  real
estate loans which may be secured by retail facilities, religious facilities and
office buildings.  At March 31,2000,  $1.2 million, or 19.29% of the Bank's loan
portfolio  consisted  of  commercial  real  estate  loans.  At March  31,  2000,
substantially  all of the Bank's  commercial  real estate  loans were secured by
properties within Essex County. The maximum LTV for commercial real estate loans
originated by the Bank is 70%. At March 31, 2000,  the largest  commercial  real
estate loan had a principle  balance of  $215,000,  and was secured by an office
building.  The loan was  performing  in  accordance  with its terms at March 31,
2000.

         The  underwriting  standards  employed by the Bank for commercial  real
estate loans include a determination  of the  applicant's  credit history and an
assessment of the applicant's ability to meet existing  obligations and payments
on the proposed loan.  Written  appraisals  are obtained on all commercial  real
estate  loans.  The Bank  assesses  the  creditworthiness  of the  applicant  by
reviewing  a  credit  report,  financial  statements  and  tax  returns  on  the
applicant.

         Loans secured by  commercial  real estate  generally  involve a greater
degree of credit risk than one- to four- family  mortgage  loans.  The increased
risk is the result of several factors, including the effects of general economic
conditions  in income  producing  properties  and the  successful  operation  or
management of the properties securing the loans.  Furthermore,  the repayment of
loans  secured  by  commercial  real  estate  is  typically  dependent  upon the
successful  operation of the related business and real estate  property.  If the
cash flow from the project is reduced,  the borrower's ability to repay the loan
may be impaired.

         Multi-family  Real Estate  Loans.  Loans secured by  multi-family  real
estate  constituted  $661,000,  or 10.25% of total loans at March 31,  2000.  At
March 31, 2000,  the Bank had 5 loans secured by  multi-family  real estate.  At
March 31, 2000 the Bank's largest  multi-family  loan had a principle balance of
$237,000 and was  performing in  accordance  with its terms.  Multi-family  real
estate loans are offered with  fixed-rates of interest.  Multi-family  loans are
underwritten as five year balloon loans with 30 amortization periods.

         In underwriting  multi-family  real estate loans,  the Bank reviews the
expected net operating  income  generated by the real estate to support the debt
service,  the age and condition of the collateral,  the financial  resources and
income level of the borrower and the borrower's experience in owning or managing
similar properties. The Bank generally requires a debt service coverage ratio of
at least 125% of the monthly  loan  payment.  The Bank makes  multi-family  real
estate loans up to 70% of the appraised value of the property securing the loan.
The Bank always obtains personal  guarantees from all  multi-family  real estate
borrowers.

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

         Other Lending. The Bank currently offers loans secured by deposits. The
Bank currently  originates  substantially  all of its other loans in its primary
market area generally to its existing  customers.  At March 31, 2000, the Bank's
other loan portfolio totaled $62,000 or 0.96% of total loans.


                                        5

<PAGE>



Loan Maturity Schedule

         The following table  illustrates the interest rate  sensitivity rate of
the Bank's loan portfolio at March 31, 2000.  Mortgages which have adjustable or
renegotiable interest rates are shown as maturing in the period during which the
contract  is due.  The  schedule  does  not  reflect  the  effects  of  possible
prepayments or enforcement of due-on-sale clauses.
<TABLE>
<CAPTION>

                                                                             Multi-family
                                      One-to Four-Family    Construction     and Commercial           Other              Total
                                      ------------------    --------------- -------------------  ------------------  ---------------
                                               Weighted            Weighted            Weighted            Weighted         Weighted
                                                Average             Average             Average             Average          Average
                                      Amount      Rate      Amount   Rate   Amount       Rate    Amount      Rate   Amount    Rate
                                      ------  ---------     ------ -------- ------     --------  ------   --------- ------ ---------
                                                                                              (Dollars in Thousands)
<S>                                  <C>        <C>     <C>         <C>       <C>         <C>       <C>         <C>    <C>       <C>
Due During Years Ending March 31,
2001..............................  $ 1,311     8.85%   $    515    19.62%  $    706    11.26%  $     62    5.00%  $  2,594  11.55%
2002..............................      637    10.26          --       --        264    11.26         --      --        901  10.55
2003..............................      367     8.89          --       --        195    10.20         --      --        562   9.34
2004..............................      721     8.81          --       --         69     9.00         --      --        790   8.83
2005..............................      332     9.71          --       --        597     9.67         --      --        929   9.68
2006-2010.........................      432     7.48          --       --         74     9.50         --      --        506  10.38
2011-2020.........................      167     7.90          --       --         --       --   $     --      --        167   7.90
                                    -------             --------            --------            --------

Total.............................  $ 3,967     8.29%   $    515    19.62%  $  1,905    10.48%  $     62    5.00%  $  6,449  10.43%
                                    =======             ========            ========            ========           ========
</TABLE>


The total  amount of loans due after  March 31,  2001 which  have  predetermined
interest  rates is $3.3 million,  while the total amount of loans due after such
dates which have floating or adjustable interest rates is $526,000.



                                        6

<PAGE>



Origination of Loans

         Loan   originations   are  developed  from  continuing   business  with
depositors  and borrowers and walk-in  customers.  All real estate loans must be
approved by the Bank's Board of  Directors.  Consumer and other loans secured by
deposits may be approved by the Bank's President.

         While the Bank originates both  adjustable-rate  and fixed-rate  loans,
its  ability  to  originate  loans to a  certain  extent is  dependent  upon the
relative  customer  demand for loans in its  market,  which is  affected  by the
interest rate  environment,  among other  factors.  For the year ended March 31,
2000,  the Bank  originated  $1.1 million in fixed-rate  loans and no adjustable
rate loans.

         Set forth below is a table  showing the Bank's  loan  originations  and
repayments for the periods indicated. In recent years the Bank has not purchased
any loans.

<TABLE>
<CAPTION>

                                                                      Year Ended March 31,
                                                                -------------------------------
                                                                   2000                 1999
                                                                -----------          ----------
                                                                         (In Thousands)

<S>                                                             <C>                   <C>
Total loans receivable at beginning of period.............      $  6,232              $  6,368
                                                                --------              --------
Originations by type:
Adjustable rate:
 One- to four-family real estate..........................            --                   474
Non-real estate - other...................................            --                    --
                                                                --------              --------
  Total adjustable rate...................................            --                   474
                                                                --------              --------
Fixed-rate:
 One- to four-family real estate..........................           390                   823
 Commercial real estate...................................           140                    --
  Construction............................................           515
Non-real estate - other...................................            16                   283
                                                                --------              --------
  Total fixed-rate........................................         1,061                 1,106
                                                                --------              --------
   Total loans originated.................................         1,061                 1,580
                                                                --------              --------

Sales and repayments:
One- to four-family real estate...........................            --                    --
Commercial real estate....................................            --                    --
  Total loans sold........................................            --                    --
Principle repayments......................................         1,356                 1,796
                                                                --------               -------
  Total reductions........................................            --
                                                                --------               -------
Increase (decrease) in other items, net...................            36                    80
                                                                --------               -------
  Net increase (decrease).................................          (259)                 (136)
                                                                --------               -------

   Total loans receivable, net............................      $  5,973              $  6,232
                                                                ========              ========
</TABLE>

Delinquencies and Classified Assets

         The Bank's  collection  procedures  provide that when a loan is 15 days
past due, the Bank will call the borrower and send a letter  seeking to obtain a
commitment to make the loan current.  If the loan remains delinquent a certified
letter is sent to the borrower  stressing the importance of reinstating the loan
and obtaining  reasons for the delinquency and additional  telephone  contact is
attempted.  If the  borrower is unable or  unwilling  to make the loan  current,
foreclosure  proceedings will be initiated once the loan becomes 90 days or more
delinquent.

         In recent years the Bank has increased its  collection  efforts by more
closely monitoring  delinquent loans and employing diligent  collection efforts.
At March 31, 2000 and 1999 the  percentage of total loans  delinquent 90 days or
more to net loans receivable were 8.5% and 6.5%, respectively.

         Delinquent  Loans  and  Nonperforming  Assets.  Generally,  when a loan
becomes more than 60 days delinquent, the Bank will place the loan on nonaccrual
status and previously accrued interest income on the loan is charged against

                                        7

<PAGE>



current income. The loan will remain on a non-accrual status as long as the loan
is  more  than  60  days  delinquent.  The  Bank  will  classify  a  loan  as  a
nonperforming asset once it becomes delinquent 60 days or more.

         Real  estate  acquired  through   foreclosure  or  by  deed-in-lieu  of
foreclosure  is  classified  as real estate owned until such time as it is sold.
When real estate  owned is  acquired,  it is recorded at the lower of the unpaid
principle  balance of the related loan, or its fair market value, less estimated
selling expenses. Any further write-down of real estate owned is charged against
earnings.  At March 31, 2000,  the Bank owned one property  with a book value of
$275,000 as of March 31, 2000, which is a single-family residence. This property
is currently under contract for sale.

         Delinquent  consumer  loans are handled in a similar manner as to those
described  above;  however,  shorter  time frames for each step apply due to the
type of collateral  generally  associated  with such types of loans.  The Bank's
procedures  for  repossession  and sale of  consumer  collateral  are subject to
various requirements under New Jersey and federal consumer protection laws.

         At March 31, 2000, the Bank had nonperforming  loans totaling $657,000,
which were comprised of 6 loans.  At that date, the largest  nonperforming  loan
consisted of a  residential  real estate loan  secured by a single  family home.
This  loan was  originated  in  1997,  and the  original  principle  amount  was
$355,000.  At March 31, 2000, the loan had a net principle  balance of $278,313.
The borrower's  loan payments have been  chronically  late and loan payments are
more than sixty days in arrears.  In 1997,  the  property  securing the loan was
appraised at $415,000.

         The Bank has no other  nonperforming  loans with principle  balances in
excess of $100,000.

                                        8

<PAGE>



         The following table sets forth  information  with respect to the Bank's
delinquent loans and other problem assets at March 31, 2000.
<TABLE>
<CAPTION>

                                                          Loans Delinquent For:
                                    -----------------------------------------------------------
                                            60-89 Days                   90 Days and Over           Total Delinquent Loans
                                    ---------------------------   -----------------------------   --------------------------
                                                        Percent                        Percent                       Percent
                                                        of Loan                        of Loan                       of Loan
                                    Number    Amount   Category   Number      Amount  Category    Number    Amount   Category
                                    ------    ------   --------   ------     -------  --------    ------    ------   --------
                                                                      (Dollars in Thousands)
<S>                                 <C>       <C>      <C>        <C>       <C>        <C>        <C>       <C>      <C>
Real Estate:
One- to Four-Family..............        2    $  150        3.8%        4   $   507    12.8%          6     $  657     16.6%
Commercial.......................       --        --         --        --        --      --          --         --       --
Multi-family.....................       --        --         --        --        --      --          --         --       --
                                    ------    ------     ------     -----   -------   -----       -----     ------    -----
    Total (1)....................        2    $  150        2.3%        4   $   507     7.9%          6     $  657     10.2%
                                    ======    ======     ======     =====   =======   =====       =====     ======    =====
</TABLE>

-----------------
(1)Percentage of loan category is to total loans.


                                        9

<PAGE>



         The table below sets forth the amounts and categories of  nonperforming
assets in the Bank's loan portfolio. Loans are placed on non-accrual status when
the loan  becomes 60 days or more past due.  The Bank does not have any accruing
loans delinquent more than 90 days. Foreclosed assets include assets acquired in
settlement of loans.

<TABLE>
<CAPTION>


                                                                 At March 31,
                                                       --------------------------------
                                                          2000                  1999
                                                       ---------             ----------
                                                            (Dollars in Thousands)
<S>                                                    <C>                   <C>
Non-accruing loans:
  One- to four-family ...........................      $     657             $     368
  Multi-family...................................             --                    43
                                                       ---------             ---------
    Total (1)....................................            657                   411
                                                       ---------             ---------

Foreclosed Assets:
  One-to four-family.............................            275                    --
                                                       ---------             ---------
    Total .......................................            275                    --
                                                       ---------             ---------
Total nonperforming assets.......................      $     932             $     411
                                                       =========             =========

Total as a percentage of total assets............           9.12%                 4.34%
                                                       =========             =========
</TABLE>
--------------------------
(1)  Gross loan amounts

         For the years ended March 31, 2000 and March 31, 1999,  gross  interest
income which would have been recorded had the non-accruing loans been current in
accordance   with  their   original  terms  amounted  to  $69,000  and  $40,000,
respectively.  The amounts  that were  included in interest  income on such loan
were  $38,000 and $26,000 for the years ended March 31, 2000 and March 31, 1999,
respectively.

         Classified Assets.  Federal  regulations provide for the classification
of loans and other assets, such as debt and equity securities, considered by the
OTS to be of lesser quality, as "substandard," "doubtful" or "loss." An asset is
considered  "substandard"  if it is  inadequately  protected  by the current net
worth and paying  capacity of the  obligor or the  collateral  pledged,  if any.
"Substandard"  assets include those characterized by the "distinct  possibility"
that the insured  institution  will sustain "some loss" if the  deficiencies are
not  corrected.  Assets  classified  as  "doubtful"  have all of the  weaknesses
inherent in those classified  "substandard" with the added  characteristic  that
the weaknesses  present make "collection or liquidation in full" on the basis of
currently  existing  facts,  conditions  and values,  "highly  questionable  and
improbable."  Assets  classified as "loss" are those considered  "uncollectible"
and  of  such  little  value  that  their  continuance  as  assets  without  the
establishment  of a specific loss reserve is not warranted.  Assets which do not
currently expose the Bank to sufficient risk to warrant classification in one of
the  aforementioned  categories but possess  weaknesses are designated  "special
mention" by management.

         When  an  insured  institution  classifies  problem  assets  as  either
substandard or doubtful,  it may establish  general  allowances for losses in an
amount  deemed  prudent  by  management.   General  allowances   represent  loss
allowances which have been established to recognize the inherent risk associated
with lending activities,  but which, unlike specific  allowances,  have not been
allocated to particular problem assets. When an insured  institution  classifies
problem  assets as  "loss,"  it is  required  either  to  establish  a  specific
allowance for losses equal to 100% of that portion of the asset so classified or
to  charge-off  such  amount.   An   institution's   determination   as  to  the
classification  of its  assets  and the amount of its  valuation  allowances  is
subject to review by the regulatory authorities, who may order the establishment
of additional general or specific loss allowances.


                                       10

<PAGE>



         On the basis of management's  review of its assets,  at March 31, 2000,
the Bank had  classified  a total of $948,000  of its loans and other  assets as
follows:
<TABLE>
<CAPTION>


                                                                        At March 31, 2000
                                                                        -----------------
                                                                         (In Thousands)

<S>                                                                      <C>
Special mention...............................................           $       278
Substandard...................................................                   670
Doubtful assets...............................................                    --
Loss assets...................................................                    --
                                                                         -----------
  Total.......................................................           $       948
                                                                         ===========
General loss allowance........................................           $       331
                                                                         ===========
Specific loss allowance.......................................           $        20
                                                                         ===========
</TABLE>


         Other Loans of Concern. Other than the nonperforming loans set forth in
the tables above,  as of March 31, 2000,  there were no loans  classified by the
Bank with respect to which known  information about the possible credit problems
of the  borrowers  or the cash  flows of the  security  properties  have  caused
management  to doubt the ability of the  borrowers  to comply with  present loan
repayment  terms and which may result in the future  inclusion  of such items in
the nonperforming asset categories.

         Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in its loan  portfolio and changes in the nature and volume of its loan
activity,  including  those  loans  which are being  specifically  monitored  by
management.  Such  evaluation,  which  includes a review of loans for which full
collectible may not be reasonably assured,  considers,  among other matters, the
loan classifications discussed above, the estimated fair value of the underlying
collateral, economic conditions,  historical loan loss experience, the amount of
loans outstanding and other factors that warrant recognition in providing for an
adequate loan loss allowance.

         Real estate properties acquired through foreclosure are recorded at the
lower of cost or fair value minus  estimated  cost to sell. If fair value at the
date of  foreclosure  is  lower  than  the  balance  of the  related  loan,  the
difference  will be  charged-off to the allowance for loan losses at the time of
transfer.  Valuations are periodically  updated by management,  and if the value
declines,  a specific  provision for losses on such property is established by a
charge to  operations.  At March 31, 2000,  the Bank had one property  which was
acquired through foreclosure.  This property is a single family residence with a
fair value of $275,000 as of March 31, 2000.

         Although   management  believes  that  it  uses  the  best  information
available to determine the allowance,  unforeseen market conditions could result
in   adjustments,   and  net  earnings  could  be   significantly   affected  if
circumstances differ substantially from the assumptions used in making the final
determination.  Future additions to the Bank's allowance for loan losses will be
the result of periodic loan,  property and collateral reviews and thus cannot be
predicted in advance. In addition,  federal regulatory agencies,  as an integral
part of the examination  process,  periodically  review the Bank's allowance for
loan losses.  Such agencies may require the Bank to increase the allowance based
upon their  judgment of the  information  available to them at the time of their
examination.  At March 31, 2000, the Bank had a total  allowance for loan losses
of $351,000,  representing  53.4% of total  nonperforming  loans and 5.9% of the
Bank's loans, net. See Note 3 of the Notes to Financial Statements.


                                       11

<PAGE>



         The  distribution  of the Bank's  allowance  for losses on loans at the
dates indicated is summarized as follows:
<TABLE>
<CAPTION>

                                                                               March 31,
                                                   ---------------------------------------------------------------
                                                                2000                             1999
                                                   ------------------------------   ------------------------------
                                                                          Percent                          Percent
                                                                         of Loans                         of Loans
                                                                Loan      in Each                Loan      in Each
                                                   Amount of  Amounts    Category   Amount of  Amounts    Category
                                                   Loan Loss  by         to Total   Loan Loss  by         to Total
                                                   Allowance  Category     Loans    Allowance  Category     Loans
                                                   ---------  --------  ----------  ---------  --------  ----------
                                                                        (Dollars in Thousands)

<S>                                                <C>        <C>          <C>      <C>        <C>         <C>
One- to four-family..............................  $    68    $ 3,967      61.51%   $  149     $4,551      68.21%
Multi-family.....................................      124        661      10.25       124        688      10.31
Commercial real estate...........................      106      1,244      19.29       106      1,385      20.76
Construction.....................................       --        515       7.99        --         --         --
Other............................................       --         62       0.96        --         48       0.72
Unallocated......................................       53         --         --        53         --         --
                                                   -------    -------     ------    ------     ------     ------
  Total..........................................  $   351    $ 6,449     100.00%   $  432     $6,672     100.00%
                                                   =======    =======     ======    ======     ======     ======

</TABLE>


         The following table sets forth an analysis of the Bank's  allowance for
loan losses.
<TABLE>
<CAPTION>

                                                                                     Years Ended March 31,
                                                                                    ----------------------
                                                                                      2000         1999
                                                                                    --------      --------
                                                                                    (Dollars in Thousands)

<S>                                                                                 <C>          <C>
Balance at beginning of period...............................................       $    432     $    348
                                                                                    --------     --------
Charge-offs:
  Commercial real estate.....................................................             --           --
    Total....................................................................             --           --
                                                                                    --------     --------

Recoveries...................................................................             --           --
                                                                                    --------     --------

Net charge-offs..............................................................            100           --
Provisions charged to operations.............................................             19           84
                                                                                    --------     --------
Balance at end of period.....................................................       $    351     $    432
                                                                                    ========     ========
Ratio of net charge-offs during the period to average loans
  outstanding during the period                                                         1.72%          --%
                                                                                    ========     ========

Allowance for loan losses as a percent of total loans outstanding............           5.44%        6.47%
                                                                                    ========     ========
</TABLE>

                                       12

<PAGE>



Investment Activities

         General.  The Bank must maintain  minimum  levels of  investments  that
qualify as liquid  assets  under OTS  regulations.  Liquidity  may  increase  or
decrease  depending upon the  availability  of funds and  comparative  yields on
investments  in  relation  to the  return on loans.  Historically,  the Bank has
generally  maintained  liquid  assets at levels  above the minimum  requirements
imposed  by the OTS  regulations  and at levels  believed  adequate  to meet the
requirements  of normal  operations,  including  repayments of maturing debt and
potential  deposit  outflows.  Cash flow projections are regularly  reviewed and
updated to assure that adequate liquidity is maintained.  At March 31, 2000, the
Bank's  liquidity  ratio  (liquid  assets as a  percentage  of net  withdrawable
savings deposits and current borrowings) was 41.53%.

         Federally  chartered savings  institutions have the authority to invest
in various types of liquid assets, including United States Treasury obligations,
securities  of various  federal  agencies,  certain  certificates  of deposit of
insured banks and savings institutions, certain bankers' acceptances, repurchase
agreements  and  federal  funds.  Subject  to  various  restrictions,  federally
chartered savings institutions may also invest their assets in commercial paper,
investment grade corporate debt securities and mutual funds whose assets conform
to the investments that a federally  chartered savings  institution is otherwise
authorized to make directly.

         Generally,  the  investment  policy of the Bank, as  established by the
Board of Directors,  is to invest funds among various  categories of investments
and maturities based upon the Bank's liquidity needs, asset/liability management
policies, investment quality, marketability and performance objectives.

         Mortgage-backed  Securities. The Bank has not purchased mortgage-backed
securities  within  the past 10 years.  The  mortgage-backed  securities  in the
Bank's  portfolio  have  fixed-rates  of  interest.  The Bank's  mortgage-backed
securities are  principally  Freddie Mac and Government  National  Mortgage Bank
("GNMA")   obligations.   At  March  31,   2000,   the  Bank's   investment   in
mortgage-backed  securities totaled $21,000. At March 31, 2000 all of the Bank's
mortgage-backed securities were classified as held-to-maturity.

         Freddie   Mac  and  GNMA   certificates   are   modified   pass-through
mortgage-backed  securities  that  represent  undivided  interests in underlying
pools  of  fixed-rate,  single-family  residential  mortgages  issued  by  these
government-   sponsored   entities.   As  a  result,   the  interest  rate  risk
characteristics  of the  underlying  pool  of  mortgages,  i.e.,  fixed-rate  or
adjustable  rate, as well as prepayment  risk, are passed on to the  certificate
holder.  Freddie Mac  provides  the  certificate  holder a  guarantee  of timely
payments of interest and ultimate  collection of principle,  whether or not they
have been collected. GNMA's guarantee to the holder timely payments of principle
and interest and are backed by the full faith and credit of the U.S. government.

         Mortgage-backed  securities  generally  yield  less than the loans that
underlie such  securities,  because of the cost of payment  guarantees or credit
enhancements  that reduce credit risk. In addition,  mortgage-backed  securities
are more liquid than individual  mortgage loans and may be used to collateralize
obligations  of the Bank.  In general,  mortgage-  backed  securities  issued or
guaranteed  by  Freddie  Mac are  weighted  at no more  than 20% for  risk-based
capital purposes,  and  mortgage-backed  securities issued or guaranteed by GNMA
are  weighted  at  0%  for  risk-based  capital  purposes,   compared  to  whole
residential  mortgage  loans which are assigned a risk weighting of 50% to 100%.
Therefore,  mortgage-backed  securities  allow the Bank to  optimize  regulatory
capital to a greater extent than non- securitized whole loans.

         While  mortgage-backed  securities  carry  a  reduced  credit  risk  as
compared  to whole  loans,  such  securities  remain  subject to the risk that a
fluctuating  interest  rate  environment,  along with other  factors such as the
geographic  distribution  of  the  underlying  mortgage  loans,  may  alter  the
prepayment  rate of such mortgage loans and so affect both the prepayment  speed
and value of such securities.


                                       13

<PAGE>



         The following table shows the balance of mortgage-backed  securities as
well as  purchase,  sale and  repayment  activities  of the Bank for the  period
indicated.  The Bank did not  purchase  or sell any  mortgage-backed  securities
during the periods presented.
<TABLE>
<CAPTION>


                                                                                Years Ended March 31,
                                                                                ---------------------
                                                                                  2000         1999
                                                                                --------     --------
                                                                                   (In Thousands)

<S>                                                                             <C>          <C>
Balance, beginning.........................................................     $  29        $  35
Purchases..................................................................        --           --
Sales......................................................................        --           --
Principle repayments:......................................................        (8)          (6)
                                                                                -----        -----
Balance, ending............................................................     $  21        $  29
                                                                                =====        =====
</TABLE>


         At March 31, 2000, the Bank's investment  securities  consisted of FHLB
stock totaling  $56,000.  The Bank also has interest bearing cash which consists
of  certificates  of deposit of insured banks and savings  institutions  of $2.0
million. The Bank invests excess liquidity in FHLB overnight deposits.

         OTS  regulations  restrict  investments  in  corporate  debt and equity
securities  by  the  Bank.  These  restrictions   include  prohibitions  against
investments  in the debt  securities  of any one  issuer in excess of 15% of the
Bank's  unimpaired   capital  and  unimpaired  surplus  as  defined  by  federal
regulations,  plus an  additional  10% if the  investments  are fully secured by
readily  marketable  collateral.  At March 31, 2000,  the Bank was in compliance
with this regulation. See "Regulation--Federal  Regulation of Savings Banks" for
a discussion of additional restrictions on the Bank's investment activities.

         The  following   table  sets  forth  the   composition  of  the  Bank's
mortgage-backed securities at the dates indicated. At March 31, 2000, the market
value of the Bank's mortgage-backed securities portfolio was $21,000.
<TABLE>
<CAPTION>

                                                                                    March 31,
                                                              ---------------------------------------------------
                                                                       2000                           1999
                                                              -----------------------        --------------------
                                                                Book          % of             Book         % of
                                                                Value         Total            Value        Total
                                                              --------     ----------        --------     -------
                                                                             (Dollars in Thousands)
<S>                                                           <C>           <C>              <C>          <C>
Mortgage-backed securities held for investment:
  GNMA.................................................       $  18         85.71%           $  25        86.21%
  Freddie Mac..........................................           3         14.29                4        13.79
                                                              -----        ------            -----       ------

Total mortgage-backed securities.......................       $  21        100.00%           $  29       100.00%
                                                              =====        ======            =====       ======
</TABLE>


         The following table sets forth the composition of the Bank's investment
securities and interest bearing cash at the dates indicated.
<TABLE>
<CAPTION>

                                                                                    March 31,
                                                              -----------------------------------------------------
                                                                       2000                           1999
                                                              ----------------------        -----------------------
                                                                Book          % of             Book         % of
                                                                Value         Total            Value        Total
                                                              ---------     --------        ---------      ---------
                                                                             (Dollars in Thousands)

<S>                                                           <C>              <C>           <C>             <C>
FHLB stock................................................    $    56          1.7%          $   56          2.2%
                                                              =======       ======           ======        =====

Interest-bearing deposits with banks......................    $ 3,166         98.3%          $2,505         97.8%
                                                              =======       ======           ======        =====
</TABLE>
                                       14

<PAGE>



         The composition and maturities of the investment  securities portfolio,
excluding FHLB stock, are indicated in the following table.
<TABLE>
<CAPTION>

                                                                    March 31, 2000
                                      --------------------------------------------------------------------------------
                                      Less Than    1 to 5         5 to 10      Over 10
                                       1 Year        Years         Years        Years     Total Investment Securities
                                      ---------    --------      --------     ---------  -----------------------------
                                        Book         Book          Book         Book         Book        Market
                                        Value        Value         Value        Value        Value        Value
                                      ---------    --------      --------     ---------  -----------------------------
                                                                (Dollars in Thousands)

<S>                                       <C>      <C>          <C>          <C>          <C>           <C>
Interest bearing deposits
  with other banks                   $ 3,166       $    --      $    --      $    --      $ 3,166       $3,166
Mortgage-backed securities..........      --            --           18            3           21           21

Weighted average yield..............    6.09%           --%        7.74%       13.08%        6.11%        6.11%
</TABLE>


         The Bank's investment securities portfolio at March 31, 2000, contained
neither  tax-exempt  securities  nor  securities of any issuer with an aggregate
book value in excess of 10% of the Bank's  retained  earnings,  excluding  those
issued by the U.S. government, or its agencies.

Sources of Funds

         General.  The Bank's primary sources of funds are deposits,  receipt of
principle and interest on loans and securities,  interest-earning  deposits with
other banks, FHLB advances, and other funds provided from operations.

         FHLB advances are used to support  lending  activities and to assist in
the Bank's asset/liability management strategy. Typically, the Bank does not use
other forms of borrowings.  At March 31, 2000, the Bank had no outstanding  FHLB
advances.

         Deposits.  The Bank offers a limited variety of deposit  accounts.  The
Bank's  deposits  consist of savings  accounts,  club  accounts and  certificate
accounts.  The terms of certificate accounts currently range from 30 days to two
years.

         The Bank relies primarily on advertising,  competitive pricing policies
and customer service to attract and retain these deposits.  Currently,  the Bank
solicits  deposits from its market area only, and does not use brokers to obtain
deposits.  The flow of deposits is influenced  significantly by general economic
conditions,   changes  in  money  markets  and  prevailing  interest  rates  and
competition.

         The Bank has become more  susceptible  to  short-term  fluctuations  in
deposit  flows  as  customers   have  become  more   interest  rate   conscious.
Notwithstanding   the  foregoing,   a  significant   percentage  of  the  Bank's
certificates  of deposit are for terms of less than one year. At March 31, 2000,
$3.3 million,  or 37.8% of the Bank's  deposits were in certificates of deposits
with terms of one year or less.  The Bank  believes  that upon  maturity most of
these  deposits will remain at the Bank.  The ability of the Bank to attract and
maintain  savings  accounts and  certificates of deposit,  and the rates paid on
these  deposits,  has been and will  continue  to be  significantly  affected by
market conditions.


                                       15

<PAGE>



Savings Portfolio

         Deposits  in the Bank as of March 31,  2000,  were  represented  by the
deposit  programs  described  below.  The following  table sets forth the dollar
amount of savings  deposits in the various types of deposit  programs offered by
the Bank as of the dates indicated.
<TABLE>
<CAPTION>

                                                                            March 31,
                                                       --------------------------------------------------
                                                              2000                           1999
                                                       ---------------------         --------------------
Savings Deposits                                       Amount       Percent          Amount       Percent
----------------                                       ------       --------         ------       -------
                                                                     (Dollars in Thousands)

<S>                                                    <C>           <C>              <C>            <C>
Regular savings accounts 2.00%...................      $ 5,280       61.32%           $ 4,444        56.24%
Club accounts 2.00%..............................           38        0.44                 40         0.51
                                                       -------      ------            -------        -----

Total non-certificates...........................        5,318       61.76              4,484        56.75
                                                       -------      ------            -------        -----

Certificates

0.00 - 3.99%.....................................           85        0.99              1,051        13.30
4.00% - 5.99%....................................        3,170       36.81              2,329        29.47
6.00% - 7.99%....................................           --          --                 --           --
                                                       -------      ------            -------        -----

Total certificates...............................        3,255       37.80              3,380        42.77
                                                       -------      ------            -------        -----
Accrued interest payable.........................           38        0.44                 38         0.48
                                                       -------      ------            -------       ------
Total deposits...................................      $ 8,611      100.00%           $ 7,902       100.00%
                                                       =======      ======            =======       ======
</TABLE>

Deposit Activity

         The following table sets forth the savings flows at the Bank during the
periods indicated.
<TABLE>
<CAPTION>

                                                                          Year Ended March 31,
                                                                       ---------------------------
                                                                         2000              1999
                                                                       --------         ----------
                                                                          (Dollars In Thousands)

<S>                                                                    <C>              <C>
Opening balance.......................................                 $ 7,902          $  7,675
Interest credited.....................................                     248               247
Net increase (decrease)...............................                     461               (20)
                                                                       -------          --------

Ending balance........................................                   8,611             7,902
                                                                       =======          ========

Percent increase (decrease)...........................                    8.97%             2.96%
                                                                       =======          ========
</TABLE>


         The following table indicates the amount of the Bank's  certificates of
deposits and other  deposits by time  remaining  until  maturity as of March 31,
2000.
<TABLE>
<CAPTION>


                                                                                 Maturity
                                                        -------------------------------------------------------------
                                                                       Over          Over
                                                        3 Months      3 to 6        6 to 12      Over
                                                           or Less    Months        Months     12 Months    Total
                                                        -----------   --------     --------    ---------    ---------
                                                                               (In Thousands)
<S>                                                          <C>            <C>          <C>           <C>    <C>
Certificates of deposit less than $100,000...........        $1,518         $568         $155          $--    $2,241

Certificates of deposit of $100,000 or more..........           501           --          516           --     1,017
                                                             ------     --------      -------      -------    ------

Total certificates of deposit........................        $2,019         $568         $671          $--    $3,258
                                                             ======     ========      =======      =======    ------
Accrued Interest Payable.............................                                                             35
                                                                                                                  --
     Total...........................................                                                         $3,293
                                                                                                              ======
</TABLE>


                                       16

<PAGE>



Time Deposit Maturity Schedule

     The following table shows rate and maturity for the Bank's  certificates of
deposits as of March 31, 2000.
<TABLE>
<CAPTION>

                                                                                                       Percent
                                       2.00-3.99%      4.00-5.99%     6.00-7.99%        Total         of Total
                                       ----------      ----------     ----------      --------       ----------
                                                                (Dollars in Thousands)
Certificate accounts maturing in quarter ending:

<S>                                     <C>          <C>               <C>            <C>              <C>
June 30, 2000......................     $    85      $   1,934         $    --        $   2,019        61.31%
September 30, 2000.................          --            568              --              568        17.25
December 31, 2000..................          --             95              --               95         2.89
March 31, 2001.....................          --            568              --              568        17.25
June 30, 2001......................          --              8              --                8          .24
September 30, 2001.................          --             --              --               --           --
December 31, 2001..................          --             --              --               --           --
  Subtotal.........................     $    85      $   3,173         $    --        $   3,258        98.94%
                                        =======      =========         =======        ---------       ------
Accrued Interest Payable...........                                                   $      35         1.06%
                                                                                      ---------       ------
  Total............................                                                   $   3,293       100.00%
                                                                                      =========       ======

</TABLE>

         Borrowings.  The  Bank's  borrowings  historically  have  consisted  of
advances  from the FHLB of New  York.  Such  advances  may be made  pursuant  to
different credit programs,  each of which has its own interest rate and range of
maturities.  Federal law limits an institution's  borrowings from the FHLB to 20
times the amount  paid for  capital  stock in the FHLB,  subject  to  regulatory
collateral  requirements.  At March 31, 2000,  the Bank had no advances from the
FHLB.  The Bank has the ability to purchase  additional  capital  stock from the
FHLB.

Employees

         At March 31, 2000, the Bank had a total of 5 full-time and no part-time
employees. The Bank's employees are not represented by any collective bargaining
group. Management considers its employee relations to be excellent.

REGULATION AND SUPERVISION

General

         As a federally  chartered savings  institution,  the Bank is subject to
extensive  regulation  by the OTS.  Both the OTS and FDIC, as insurer of deposit
accounts,  periodically  examine the Bank for compliance with various regulatory
requirements.  The Bank must file reports with the OTS describing its activities
and  financial   condition.   The  Bank  is  also  subject  to  certain  reserve
requirements promulgated by the Board of Governors of the Federal Reserve System
("Federal Reserve Board"). This supervision and regulation is intended primarily
for the  protection  of  depositors.  The  regulatory  structure  also gives the
regulatory authorities extensive discretion in connection with their supervisory
and enforcement  activities and examination  policies,  including  policies with
respect to the  classification  of assets and the establishment of adequate loan
loss reserves for regulatory purposes. Any change in such regulation, whether by
the OTS, the FDIC or the Congress  could have a material  adverse  impact on the
Bank and its operations.  Certain of these regulatory  requirements are referred
to below or appear elsewhere herein.

Federal Regulation of Savings Banks

         The  OTS  has  extensive  authority  over  the  operations  of  savings
associations.  As part of this authority,  the Bank is required to file periodic
reports with the OTS and is subject to periodic  examinations by the OTS and the
FDIC.  The last regular OTS and FDIC  examinations  of the Bank were as of 2000.
When these examinations are conducted by the OTS and the FDIC, the examiners may
require the Bank to provide for higher general or specific loan loss reserves.


                                       17

<PAGE>



         All savings associations are subject to a semi-annual assessment, based
upon the savings  association's  total assets. The Bank's OTS assessment for the
fiscal year ended March 31, 2000, was approximately $3,347.

         The OTS also  has  extensive  enforcement  authority  over all  savings
institutions  including the Bank. This  enforcement  authority  includes,  among
other  things,   the  ability  to  assess  civil  money   penalties,   to  issue
cease-and-desist  or  removal  orders and to  initiate  injunctive  actions.  In
general,  these enforcement  actions may be initiated for violations of laws and
regulations  and unsafe or unsound  practices.  Other  actions or inactions  may
provide  the basis for  enforcement  action,  including  misleading  or untimely
reports  filed  with  the  OTS.  Except  under  certain  circumstances,   public
disclosure of final enforcement actions by the OTS is required.

         In addition,  the  investment,  lending and branching  authority of the
Bank is prescribed by federal laws and  regulations,  and the Bank is prohibited
from engaging in any activities not permitted by such laws and regulations.  For
instance,  no savings  institution may invest in non-investment  grade corporate
debt  securities.  In addition,  the permissible  level of investment by federal
associations  in loans secured by  non-residential  real property may not exceed
400% of  total  capital,  except  with  approval  of the  OTS.  Federal  savings
associations are also generally authorized to branch nationwide.  The Bank is in
compliance with the noted restrictions.

         The Bank's general permissible lending limit for  loans-to-one-borrower
is equal to the  greater of $500,000  or 15% of  unimpaired  capital and surplus
(except for loans fully secured by certain  readily  marketable  collateral,  in
which case this limit is increased to 25% of  unimpaired  capital and  surplus).
The Bank is in compliance with the loans-to-one borrower limitation.

         The OTS, as well as the other  federal  banking  agencies,  has adopted
guidelines  establishing  safety and soundness standards on such matters as loan
underwriting and  documentation,  internal controls and audit systems,  interest
rate risk exposure and compensation and other employee benefits. Any institution
which fails to comply  with these  standards  must  submit a capital  compliance
plan. A failure to submit a plan or to comply with an approved plan will subject
the  institution to further  enforcement  action.  The OTS and the other federal
banking  agencies  have also adopted  proposed  additional  guidelines  on asset
quality and earnings  standards.  The guidelines  were designed to enhance early
identification and resolution of problem assets.

Insurance of Accounts and Regulation by the FDIC

         The Bank is a member of the SAIF,  which is  administered  by the FDIC.
Deposits are insured up to applicable  limits by the FDIC and such  insurance is
backed by the full faith and credit of the United States Government. As insurer,
the FDIC  imposes  deposit  insurance  premiums  and is  authorized  to  conduct
examinations of and to require reporting by FDIC-insured  institutions.  It also
may prohibit any FDIC-insured institution from engaging in any activity the FDIC
determines by  regulation or order to pose a serious risk to the FDIC.  The FDIC
also  has  the  authority  to  initiate   enforcement  actions  against  savings
associations,  after giving the OTS an opportunity to take such action,  and may
terminate  the deposit  insurance  if it  determines  that the  institution  has
engaged or is  engaging  in unsafe or unsound  practices,  or is in an unsafe or
unsound condition.

         In September 1996,  Congress  enacted  legislation to recapitalize  the
SAIF by a one-time assessment on all SAIF-insured  deposits held as of March 31,
1995.  The  assessment  was 65.7 basis points per $100 in  deposits,  payable on
November  27, 1996 and amounted to $55,000 for the Bank.  In addition,  interest
payments on FICO bonds issued in the late 1980's by the Financing Corporation to
recapitalize the now defunct Federal Savings and Loan Insurance  Corporation are
now paid  jointly  by Bank  Insurance  Fund  ("BIF")  insured  institutions  and
SAIF-insured institutions. The FICO assessment is 1.29 basis points per $100 for
BIF deposits and 6.44 basis points per $100 for SAIF deposits. Beginning January
1, 2000,  the FICO interest  payments will be paid pro rata by banks and thrifts
based on deposits  (approximately  2.4 basis  points per $100 in  deposits).  In
addition, as of January 1, 1997, SAIF assessment rates dropped significantly and
currently  range  from  zero to 27  basis  points  based  upon an  institution's
regulatory risk classification and capital group.


                                       18

<PAGE>



Regulatory Capital Requirements

         Federally insured savings associations,  such as the Bank, are required
to  maintain a minimum  level of  regulatory  capital.  The OTS has  established
capital standards,  including a tangible capital  requirement,  a leverage ratio
(or core capital) requirement and a risk-based capital requirement applicable to
such  savings  associations.  Generally,  these  capital  requirements  must  be
generally as  stringent  as the  comparable  capital  requirements  for national
banks.  The OTS is also  authorized to impose capital  requirements in excess of
these standards on individual associations on a case-by-case basis.

         The capital  regulations  require  tangible capital of at least 1.5% of
adjusted total assets (as defined by  regulation).  Tangible  capital  generally
includes  common   stockholders'   equity  and  retained  income,   and  certain
noncumulative  perpetual  preferred stock and related income.  In addition,  all
intangible  assets,  other than a limited amount of purchased mortgage servicing
rights,  must be deducted from tangible capital for calculating  compliance with
the requirement.  Further,  the valuation allowance applicable to the write-down
of investments and mortgage-backed securities in accordance with SFAS No. 115 is
excluded from the regulatory capital calculation.

         Pursuant to FDICIA,  the federal banking  agencies,  including the OTS,
have also proposed regulations  authorizing the agencies to require a depository
institution to maintain additional total capital to account for concentration of
credit risk and the risk of  non-traditional  activities.  No  assurance  can be
given as to the final form of any such regulation.

         The OTS and the FDIC are authorized  and,  under certain  circumstances
required, to take certain actions against savings associations that fail to meet
their capital  requirements.  The federal banking  agencies,  including the OTS,
have  additional   enforcement   authority  over   undercapitalized   depository
institutions.  The OTS is  generally  required to take  action to  restrict  the
activities of an  "undercapitalized  association"  (generally  defined to be one
with less than either a 4% core capital ratio, a 4% Tier 1 risked-based  capital
ratio or an 8% risk-based  capital ratio).  Any such  association  must submit a
capital  restoration  plan and until  such plan is  approved  by the OTS may not
increase its assets,  acquire another institution,  establish a branch or engage
in any new activities, and generally may not make capital distributions. The OTS
is  authorized  to impose the  additional  restrictions  that are  applicable to
significantly undercapitalized associations.

          As a condition to the approval of the capital  restoration  plan,  any
company  controlling  an  undercapitalized  association  must agree that it will
enter  into  a  limited  capital  maintenance  guarantee  with  respect  to  the
institution's achievement of its capital requirements.

         Any savings  association  that fails to comply with its capital plan or
is  "significantly  undercapitalized"  (i.e.,  Tier 1 risk-based or core capital
ratios of less than 3% or a  risk-based  capital  ratio of less than 6%) must be
made  subject  to one or more of  additional  specified  actions  and  operating
restrictions, which may cover all aspects of its operations and include a forced
merger  or  acquisition  of  the   association.   An  association  that  becomes
"critically  undercapitalized" (i.e., a tangible capital ratio of 2% or less) is
subject to further mandatory restrictions on its activities in addition to those
applicable to significantly  undercapitalized associations. In addition, the OTS
must appoint a receiver (or conservator  with the concurrence of the FDIC) for a
savings  association,  with certain limited exceptions,  within 90 days after it
becomes critically undercapitalized.

         Any  undercapitalized  association  is  also  subject  to  the  general
enforcement  activity of the OTS and the FDIC,  including the  appointment  of a
receiver or conservator.

         The OTS is also generally  authorized to reclassify an association into
a lower capital category and impose restrictions  applicable to such category if
the institution is engaged in unsafe or unsound  practices or is in an unsafe or
unsound condition.


                                       19

<PAGE>



         The  imposition by the OTS or the FDIC of any of these  measures on the
Bank  may  have a  substantial  adverse  effect  on the  Bank's  operations  and
profitability and the value of the Bank's common stock. Bank shareholders do not
have preemptive rights, and therefore, if the Bank is directed by the OTS or the
FDIC to issue additional shares of Common Stock, such issuance may result in the
dilution in the percentage of ownership of the Bank of its stockholders..

Limitations on Capital Distributions.

         OTS regulations  impose  limitations upon all capital  distributions by
savings  institutions,  such  as  cash  dividends,  payments  to  repurchase  or
otherwise acquire its shares, payments to stockholders of another institution in
a cash-out  merger and other  distributions  charged  against  capital.  A "well
capitalized" institution can, after prior notice but without the approval of the
OTS,  make capital  distributions  during a calendar year in an amount up to 100
percent of its net income during the calendar year, plus its retained net income
for  the   preceding   two  years.   As  of  March  31,  2000  the  Bank  was  a
"well-capitalized" institution.

Liquidity

         All savings associations,  including the Bank, are required to maintain
an average daily  balance of liquid assets equal to a certain  percentage of the
sum of its  average  daily  balance of net  withdrawable  deposit  accounts  and
borrowings  payable  in one  year or  less.  For a  discussion  of what the Bank
includes  in  liquid  assets,  see  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
This liquid asset ratio  requirement  may vary from time to time (between 4% and
10%)  depending  upon  economic  conditions  and  savings  flows of all  savings
associations. At the present time, the minimum liquid asset ratio is 4%.

         In  addition,  short-term  liquid  assets  (e.g.,  cash,  certain  time
deposits,  certain  bankers  acceptances  and short- term United States Treasury
obligations)  currently must constitute at least 1% of the association's average
daily  balance of net  withdrawable  deposit  accounts  and current  borrowings.
Penalties may be imposed upon associations for violations of either liquid asset
ratio  requirement.  At March 31,  2000,  the Bank was in  compliance  with both
requirements,  with a short-term  liquid  assets ratio and overall  liquid asset
ratio of 41.5%.

Accounting

         An  OTS  policy  statement   applicable  to  all  savings  associations
clarifies  and  re-emphasizes  that  the  investment  activities  of  a  savings
association  must be in  compliance  with  approved  and  documented  investment
policies and  strategies,  and must be accounted  for in  accordance  with GAAP.
Under the policy  statement,  management must support its  classification of and
accounting for loans and securities (i.e., whether held for investment,  sale or
trading) with appropriate documentation.

         The OTS has adopted an amendment to its accounting  regulations,  which
may be made more stringent than GAAP by the OTS, to require that transactions be
reported in a manner that best reflects their underlying  economic substance and
inherent risk and that financial  reports must  incorporate any other accounting
regulations  or orders  prescribed  by the OTS. The Bank is in  compliance  with
these amended rules.

Qualified Thrift Lender Test

         The HOLA requires  savings  institutions to be qualified thrift lenders
("QTL").  To be a QTL, the Bank can either satisfy the QTL test, or the Domestic
Building and Loan  Association  ("DBLA")  Test of the  Internal  Revenue Code of
1986, as amended (the "Code"). Under the QTL test, a savings bank is required to
maintain at least 65% of its "portfolio assets" (total assets less (i) specified
liquid assets up to 20% of total assets,  (ii) intangibles,  including goodwill,
and (iii) the value of property used to conduct business) in certain  "qualified
thrift investments,"  primarily  residential  mortgages and related investments,
including certain mortgage-backed and related securities on a monthly basis in 9
out of every 12  months.  Under  the  DBLA  test,  an  institution  must  meet a
"business  operations test" and a "60% of assets test." The business  operations
test requires the business of a DBLA to consist primarily of acquiring the

                                       20

<PAGE>



savings of the public and investing in loans.  An  institution  meets the public
savings  requirements  when it meets one of two conditions:  (i) the institution
acquires its savings in conformity with OTS rules and  regulations;  or (ii) the
general  public holds more than 75% of its deposits,  withdrawable  shares,  and
other obligations. The general public may not include family or related business
groups or persons who are officers or directors of the institution.

         The 60% of assets test  requires  that at least 60% of a DBLA's  assets
must consist of assets that thrifts  normally  hold,  except for consumer  loans
that are not educational loans. The DBLA test does not include,  as the QTL test
does to a limited or optional  extent,  mortgage loans  originated and sold into
the secondary market and subsidiary investments. A savings bank that fails to be
a  QTL  must  either  convert  to  a  bank  charter  or  operate  under  certain
restrictions. As of March 31, 2000, the Bank met the QTL test.

Community Reinvestment Act

         Under the  Community  Reinvestment  Act  ("CRA"),  every  FDIC  insured
institution has a continuing and affirmative obligation consistent with safe and
sound banking  practices to help meet the credit needs of its entire  community,
including  low and moderate  income  neighborhoods.  The CRA does not  establish
specific lending requirements or programs for financial institutions nor does it
limit an institution's  discretion to develop the types of products and services
that it believes are best suited to its particular  community,  consistent  with
the CRA. The CRA requires the OTS, in  connection  with the  examination  of the
Bank,  to assess the  institution's  record of meeting  the credit  needs of its
community  and to take such record  into  account in its  evaluation  of certain
applications, such as a merger or the establishment of a branch, by the Bank. An
unsatisfactory  rating may be used as the basis for the denial of an application
by the OTS.

Transactions with Affiliates

         Generally,   transactions   between  a  savings   association   or  its
subsidiaries  and its affiliates are required to be on terms as favorable to the
association as transactions with non-affiliates.  In addition,  certain of these
transactions,  such as loans to an affiliate,  are restricted to a percentage of
the association's  capital.  In addition,  a savings association may not lend to
any affiliate  engaged in activities not  permissible for a bank holding company
or acquire the securities of most affiliates.

         Certain  transactions with directors,  officers or controlling  persons
are also subject to conflict of interest  regulations enforced by the OTS. These
conflict of interest  regulations and other statutes also impose restrictions on
loans to such persons and their related interests. Generally, such loans must be
made on terms  substantially the same as for loans to unaffiliated  individuals.
However,  recent  regulations  now permit  executive  officers and  directors to
receive loans with the same terms as those provided to other  employees  through
benefit or compensation  plans,  as long as executive  officers or directors are
not given preferential treatment compared to the other participating employees.

Federal Securities Law

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

Federal Reserve System

         The Federal  Reserve  Board  requires all  depository  institutions  to
maintain  non-interest  bearing  reserves  at  specified  levels  against  their
transaction accounts (primarily checking,  NOW and Super NOW checking accounts).
At March 31, 2000, the Bank was in compliance  with these reserve  requirements.
The balances maintained to meet the reserve  requirements imposed by the Federal
Reserve Board may be used to satisfy liquidity  requirements that may be imposed
by the OTS. See "--Liquidity."


                                       21

<PAGE>



         Savings  associations are authorized to borrow from the Federal Reserve
Bank  "discount   window,"  but  Federal  Reserve  Board   regulations   require
associations to exhaust other reasonable alternative sources of funds, including
FHLB borrowings, before borrowing from the Federal Reserve Bank.

Federal Home Loan Bank System

         The  Bank is a  member  of the  FHLB of New  York,  which  is one of 12
regional FHLBs,  that  administers the home financing credit function of savings
associations.  Each FHLB  serves as a reserve  or central  bank for its  members
within its assigned  region.  It is funded  primarily from proceeds derived from
the sale of  consolidated  obligations  of the FHLB  System.  It makes  loans to
members (i.e.,  advances) in accordance with policies and procedures established
by the board of directors of the FHLB. These policies and procedures are subject
to the  regulation  and  oversight of the Federal  Housing  Finance  Board.  All
advances from the FHLB are required to be fully secured by sufficient collateral
as determined by the FHLB. In addition,  all long-term  advances are required to
provide funds for residential home financing.

         As a member, the Bank is required to purchase and maintain stock in the
FHLB of New York. At March 31, 2000,  the Bank had $56,000 of FHLB stock,  which
was in compliance with this  requirement.  In past years,  the Bank has received
substantial dividends on its FHLB stock. Dividends received were $3,000, or 5.3%
for the year ended March 31, 2000. No assurance can be given that such dividends
will continue in the future at such levels.

         Under  federal  law,  the FHLBs are  required to provide  funds for the
resolution  of  troubled  savings  associations  and to  contribute  to low- and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income  housing
projects.  These  contributions  have  affected  adversely  the  level  of  FHLB
dividends  paid and could continue to do so in the future.  These  contributions
could also have an adverse  effect on the value of FHLB stock in the  future.  A
reduction  in value of the  Bank's  FHLB  stock may  result  in a  corresponding
reduction in the Bank's capital.

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

         The Company  conducts  its  business  through  one  office,  located in
Newark, New Jersey.  The following table sets forth information  relating to the
Company's office as of March 31, 2000.
<TABLE>
<CAPTION>

                                                                           Total
                                                                        Approximate                 Net Book
                                                   Year                   Square                    Value at
              Location                            Opened                  Footage                March 31, 2000
-----------------------------------             ---------               ------------           -----------------

<S>                                               <C>                    <C>                     <C>
Main Office:
893 Franklin Avenue
Newark, New Jersey                                 1957                    2,500                    $288,000
</TABLE>

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

         The Company is involved,  from time to time,  as plaintiff or defendant
in various legal actions arising in the normal course of their businesses. While
the ultimate outcome of these proceedings cannot be predicted with certainty, it
is the opinion of management,  after consultation with counsel  representing the
Company in the proceedings,  that the resolution of these proceedings should not
have a  material  effect on the  Company's  financial  position  or  results  of
operations.

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

         Not applicable.

                                       22

<PAGE>



                                     PART II

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

         The  "Stockholder  Information"  and "Common Stock and Related Matters"
sections of the  Company's  annual  report to  stockholders  for the fiscal year
ended March 31, 2000 (the "2000 Annual Report to Stockholders") are incorporated
herein by reference. No other sections of the 2000 Annual Report to Stockholders
are incorporated herein by this reference.

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

         The  "Management's  Discussion and Analysis of Financial  Condition and
Results  of  Operations"   section  of  the  Company's  2000  Annual  Report  to
Stockholders is incorporated herein by reference.  No other sections of the 2000
Annual Report to Stockholders are incorporated herein by this reference.

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

         The material  identified in Item 13(a)(1) hereof is 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
---------------------------------------------------------------------

         The  "Proposal  I--Election  of  Directors"  section  of the  Company's
definitive  proxy  statement for its 2000 annual  meeting of  stockholders  (the
"Proxy Statement") is incorporated herein by reference.

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

         The "Proposal  I--Election of Directors" section of the Company's Proxy
Statement is incorporated herein by reference.

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

         The "Proposal  I--Election of Directors" section of the Company's Proxy
Statement is incorporated herein by reference.

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

         The "Proposal  I--Election of Directors" section of the Company's Proxy
Statement is incorporated herein by reference.


                                     PART IV

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

         (a)(1)  Financial Statements
                 --------------------

















                                       23

<PAGE>



         The following documents appear in sections of the Company's 2000 Annual
Report to Stockholders under the same captions,  and are incorporated  herein by
reference.  No other  sections of the 2000  Annual  Report to  Stockholders  are
incorporated herein by this reference.

                  (i)      Selected Financial Information and Other Data;

                  (ii)     Management's Discussion and Analysis of Financial
                           Condition and Results of Operations;

                  (iii)    Independent Auditors' Report;

                  (iv)     Statements of Financial Condition;

                  (v)      Statements of Operations;

                  (vi)     Statements of Stockholders' Equity;

                  (vii)    Statements of Cash Flows; and

                  (viii)   Notes to Financial Statements.

         With the exception of the aforementioned  sections,  the Company's 2000
Annual Report to  Stockholders is not deemed filed as part of this Annual Report
on Form 10-KSB,  and no other sections of the 2000 Annual Report to Stockholders
are incorporated herein by this reference.

         (a)(2)  Financial Statement Schedules
                 -----------------------------

         All  financial  statement  schedules  have been omitted as the required
information  is  inapplicable  or has been  included  in the Notes to  Financial
Statements.

         (a)(3) Exhibits
                --------

         Please see the exhibit  index which  immediately  precedes the attached
exhibits.

         (b)      Reports on Form 8-K

                  None




                                       24

<PAGE>



                                   SIGNATURES

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


                                       DOLLAR BANCORP, INC.


Date:    June 26, 2000                 By:      \s\ Robert DeMane
                                          --------------------------------------
                                                Robert DeMane, President and
                                                  Chief Executive Officer



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



By:  \s\ Robert DeMane                   By: \s\ Susan L. Velardi
   ---------------------------------        ------------------------------------
     Robert DeMane, President, Chief         Susan L. Velardi, Vice President
       Executive Officer and Director        and Secretary
     (Principal Executive Officer)           (Principal Financial and
                                             Accounting Officer)

Date: June 26, 2000                                      Date: June 26, 2000



By:                                      By: \s\ Ira Geller
   ---------------------------------        ------------------------------------
     David J. Breitkopf,                     Ira Geller, Director
     Chairman of the Board

Date:                                                    Date: June 26, 2000



By:                                      By: \s\ Alex Velto
   ---------------------------------        ------------------------------------
     Karin Meyer, Director                   Alex Velto, Director


Date:                                                    Date: June 26, 2000







                                       25

<PAGE>



                                  EXHIBIT INDEX


3.1      Certificate of Incorporation of Dollar Bancorp, Inc.*

3.2      Bylaws of Dollar Bancorp, Inc.*

4        Form of Stock Certificate of Dollar Bancorp, Inc.*

10       Dealer Merger Agreement

13       Annual Report to Shareholders

21       Subsidiaries of the Registrant

----------

*        Incorporated  herein by reference to the  Company's  Current  Report on
         Form 8-K, as filed with the SEC on October 21, 1999.



                                       26

<PAGE>



                                  EXHIBIT 10.1

                            DEALER MERGER AGREEMENT

<PAGE>

                            DEALER MANAGER AGREEMENT

                                  by and among

                              DOLLAR BANCORP, INC.,

                              DOLLAR SAVINGS BANK,

                         NATIONAL SECURITIES CORPORATION

                                       and

               EACH OF THE SELLING SHAREHOLDERS REFERRED TO HEREIN

                           Dated as of April 17, 2000






<PAGE>

<TABLE>
<CAPTION>


                                                 TABLE OF CONTENTS

                                                                                                                Page
<S>                                                                                                             <C>
ARTICLE I.                 DEFINITIONS

         Section 1.1       Definitions............................................................................1

ARTICLE II.       SALE OF SHARES OF COMMON STOCK

         Section 2.1       Appointment of Dealer Manager .........................................................6
         Section 2.2       Costs, Expenses and Fees ..............................................................6
         Section 2.3       Closing ...............................................................................7

ARTICLE III.      REPRESENTATIONS AND WARRANTIES

         Section 3.1       Representations and Warranties of the Company and the Bank.............................7
         Section 3.2       Representations and Warranties of the Selling Shareholders............................14
         Section 3.3       Representations and Warranties of the Dealer Manager..................................16

ARTICLE IV.       CONDITIONS PRECEDENT TO THE CLOSING

         Section 4.1       Conditions to the Obligations of the Parties..........................................17
         Section 4.2       Conditions to the Obligations of the Dealer Manager...................................18
         Section 4.3       Conditions to the Obligations of the Selling Shareholders.............................20
         Section 4.4       Conditions to the Obligations of the Company and the Bank.............................20

ARTICLE V.        COVENANTS

         Section 5.1       Information...........................................................................20
         Section 5.2       Blue Sky..............................................................................20
         Section 5.3       Issuance..............................................................................21
         Section 5.4       Press Releases........................................................................21
         Section 5.5       No Solicitation.......................................................................21
         Section 5.6       Compliance ...........................................................................21


ARTICLE VI.       INDEMNIFICATION

         Section 6.1       Company and Bank Indemnification......................................................22
         Section 6.2       Dealer Manager Indemnification........................................................23
         Section 6.3       Selling Shareholders Indemnification..................................................24
         Section 6.4       Notice................................................................................25

</TABLE>

                                                         i

<PAGE>



<TABLE>
<CAPTION>
<S>                                                                                                              <C>
ARTICLE VII.      CONTRIBUTION

         Section 7.1       Contribution..........................................................................25

ARTICLE VIII.              BUSINESS COMBINATION ADVISORY SERVICES
                           AND RIGHT OF FIRST REFUSAL

         Section 8.1       Purpose ..............................................................................26
         Section 8.2       Engagement Period ....................................................................27
         Section 8.3       Compensation .........................................................................27
         Section 8.4       Payment of Advisory Fees .............................................................27
         Section 8.5       Expenses .............................................................................28
         Section 8.6       Indemnification ......................................................................28
         Section 8.7       Limitation on Use of Advice ..........................................................28
         Section 8.8       Right of First Refusal ...............................................................28

ARTICLE IX.       MISCELLANEOUS

         Section 9.1       Survival of Provisions................................................................28
         Section 9.2       Termination...........................................................................29
         Section 9.3       Waiver; Amendments....................................................................30
         Section 9.4       Communications........................................................................30
         Section 9.5       Entire Agreement; Amendment...........................................................31
         Section 9.6       Governing Law and Time................................................................31
         Section 9.7       Consent to Jurisdiction...............................................................31
         Section 9.8       Severability..........................................................................31
         Section 9.9       Headings and Gender...................................................................31


         Appendix A        Dealer Manager Warrant
         Appendix B        Form of Employment Agreement with Robert DeMane
         Appendix C        Form of Opinion of Counsel to the Company and the Bank
         Appendix D        Indemnification for Advisory Services

</TABLE>

                                                        ii

<PAGE>



                            DEALER MANAGER AGREEMENT

         Agreement,  dated as of April 17, 2000 (the  "Agreement")  by and among
Dollar Bancorp,  Inc., a Delaware  corporation (the  "Company"),  Dollar Savings
Bank, its wholly-owned subsidiary (the "Bank"),  National Securities Corporation
(the  "Dealer  Manager")  and the  shareholders  of the  Company  listed  on the
signature  pages to the Purchase  and Sale  Agreement  (as defined  herein) (the
"Selling Shareholders"),  with respect to the sale of the shares of Common Stock
of the Selling  Shareholders  to each of the  purchasers  listed on the investor
signature  pages  to  the  Purchase  and  Sale  Agreement   (collectively,   the
"Transaction").


                                    ARTICLE I
                                   DEFINITIONS

     Section 1.1 Definitions.  As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings
indicated:

         "Acquisition Transaction" has the meaning set forth in Section 5.5.

         "Advisory Fee" has the meaning set forth in Section 8.3.

         "Advisory Warrant" has the meaning set forth in Section 8.3(b).

         "Affiliate"  means,  with  respect  to any  Person,  any  Person  that,
directly or  indirectly,  controls,  is controlled by or is under common control
with such Person.  For the purposes of this  definition,  "control"  (including,
with correlative  meanings,  the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the  management  and policies of such Person,  whether
through the ownership of voting securities, by contract or otherwise.

         "Agreement"  means this  Dealer  Manager  Agreement  by and between the
Company, the Bank, the Dealer Manager and the Selling Shareholders,  as amended,
supplemented or modified from time to time.

         "Attorney-in-Fact" has the meaning set forth in Section 3.2(a).

         "Bank" means Dollar Savings Bank, a federally  chartered  savings bank,
together with its successors.

         "Business Combination" has the meaning set forth in Section 8.1.

         "Business Day" means any day except a Saturday,  Sunday or other day on
which commercial  banks and savings  institutions in the State of New Jersey are
authorized or obligated by law to close.




<PAGE>




         "Capital  Securities"  of any Person means  Capital Stock of the Person
and Stock Equivalents of the Person.

         "Capital  Stock" of any Person means any and all shares or other equity
interest of such Person.

         "Closing" has the meaning set forth in Section 2.3.

         "Closing Date" has the meaning set forth in Section 2.3.

         "Code"  means the  Internal  Revenue  Code of 1986,  as amended (or any
successor  statute in effect from time to time),  and the rules and  regulations
promulgated thereunder.

         "Commission"  means the  Securities  and  Exchange  Commission  and any
successor thereto.

         "Common Stock" means the Common Stock, par value $.01 per share, of the
Company.

          "Company" means Dollar Bancorp, Inc., a Delaware corporation, together
with its successors.

         "Company Financial Statements" means the (i) consolidated statements of
financial  condition of the Bank as of March 31, 1999 and 1998 and  consolidated
statements of income,  stockholders'  equity and cash flows of the Bank for each
of the years  ended March 31, 1999 and 1998,  accompanied  by the related  audit
report of Fontanella and Babitts and (ii) an unaudited consolidated statement of
financial  condition  of the  Company as of December  31, 1999 and an  unaudited
consolidated  statement  of  income of the  Company  for the nine  months  ended
December 31, 1999.

         "Confidential  Private  Placement  Memorandum"  means the  Confidential
Private Placement  Memorandum,  dated April 14, 2000, as amended or supplemented
by the Company at any time prior to the Closing.

         "Custody  Agreement" means the Letter  Agreement,  dated as of April 7,
2000, by Eugene Boffa, as the Custodian,  as amended,  supplemented and modified
from time to time.

         "Dealer Manager" means National Securities  Corporation in its capacity
as private placement agent pursuant to this Agreement.

         "Engagement Period" has the meaning set forth in Section 8.2.

         "Environmental  Claim" means any written  notice from any  governmental
authority  or  third  party  alleging  potential  liability  (including  without
limitation   potential  liability  for  investigating   costs,   cleanup  costs,
governmental response costs, natural resource damages, property damages,


                                        2

<PAGE>



personal injuries or penalties)  arising out of, based on, or resulting from the
presence,  or release into the  environment  of any  Materials of  Environmental
Concern.

         "Environmental Laws" means any law, statute,  rule or regulation of any
governmental,  judicial,  legislative,  executive,  administrative or regulatory
authority of the United States, or of any state,  local or foreign government or
any  subdivision  thereof or of any  governmental  body or other  regulatory  or
administrative agency or commission,  domestic or foreign (a "Law"), relating to
pollution or  protection  of the  environment  (including  ambient air,  surface
water,  groundwater,  land  surface or  subsurface  strata),  including  without
limitation the Comprehensive Environmental Response,  Compensation and Liability
Act of 1980, as amended, the Resource  Conservation and Recovery Act of 1976, as
amended,  and other Laws  relating to (i)  emissions,  discharges or releases of
pollutants, contaminants, chemicals, or industrial toxic or hazardous substances
or wastes  (collectively known as "Polluting  Substances") or (ii) the handling,
storage,  disposal,  reclamation,   recycling  or  transportation  of  Polluting
Substances.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended (or any successor statute in effect from time to time).

         "Escrow  Agent" means US Bank National  Association,  and any successor
thereto  engaged by the  Company and the  Selling  Shareholders  pursuant to the
Escrow Agreement.

         "Escrow  Agreement"  means the Escrow  Agreement,  dated as of April 7,
2000,  by and among the Company,  the Dealer  Manager and the Escrow  Agent,  as
amended, supplemented or modified from time to time.

         "Exchange  Act" means the  Securities  Exchange Act of 1934, as amended
and in effect from time to time (or any successor statute in effect from time to
time), and the rules and regulations of the Commission promulgated thereunder.

         "FDIA"  means the  Federal  Deposit  Insurance  Act, as amended (or any
successor statute in effect from time to time).

         "FDIC"  means  the  Federal  Deposit  Insurance   Corporation  and  any
successor thereto.

         "Fee" has the meaning set forth in Section 2.2(iii).

         "HOLA" means the Home  Owners'  Loan Act, as amended (or any  successor
statute in effect from time to time).

         "Letter of Intent"  means the letter dated March 21, 2000, by and among
the Dealer Manager, the Company and the Selling Shareholders.



                                        3

<PAGE>



         "Lien" means,  with respect to any asset, any mortgage,  lien,  pledge,
encumbrance, charge or security interest of any kind in respect of such asset.

         "Management"  means the following  members of the senior  management of
the Company or the Bank:  President,  Chief Executive  Officer,  Chief Financial
Officer and any Executive Vice President or persons holding similar positions.

         "Material  Adverse  Effect"  means a  material  adverse  effect  on the
financial  condition,  business or results of  operations of the Company and the
Bank, taken as a whole;  provided,  however,  that Material Adverse Effect shall
not be deemed to include  the impact of the  transactions  contemplated  by this
Agreement or any Related  Agreement,  including the fees and expenses to be paid
in connection  with the  consummation of the  transactions  contemplated by this
Agreement  and the Related  Agreements or any impact or effect on the Company or
the Bank  resulting  from  actions  taken by the  Company  or the Bank after the
Closing.

         "Materials of Environmental  Concern" means  pollutants,  contaminants,
wastes,  toxic  substances,  petroleum  and  petroleum  products  and any  other
materials regulated under Environmental Laws.

         "Non-performing  Assets" means the following consolidated assets of the
Company: (i) loans, securities or other assets with respect to which the Company
or the Bank has ceased recognizing  interest under generally accepted accounting
principles  or as to which any payments of principal or interest are past due 90
days  or more  as of the  applicable  date  and  (ii)  Real  Estate  Owned;  and
references herein to the amounts of  Non-performing  Assets shall mean and refer
to the  aggregate  carrying  value of such  assets  as  stated  in the books and
financial  statements  of the  Company  and the Bank  under  generally  accepted
accounting principles.

         "OTS" means the Office of Thrift Supervision and any successor thereto.

         "Person"  means  an  individual,  a  corporation,  a  partnership,   an
association, a trust or any other entity or organization, including a government
or a political subdivision or an agency or instrumentality thereof.

         "Power  of  Attorney"  means the Power of  Attorney  granted  to Robert
DeMane by the Selling Shareholders as the Attorney-in-Fact, dated as of April 7,
2000, as amended, supplemented or modified from time to time.

         "Preferred Stock" has the meaning set forth in Section 3.1(a).

         "Previously Disclosed" means disclosed either (i) in a letter dated the
date hereof delivered from the Selling Shareholders to the Company, specifically
referring  to the  appropriate  section  of this  Agreement  and  describing  in
reasonable  detail the matters  contained  therein,  or (ii) in the Confidential
Private Placement Memorandum.


                                                         4

<PAGE>




         "Purchase and Sale Agreement"  means the Purchase and Sale Agreement by
and among the Company,  the Dealer  Manager,  the Selling  Shareholders  and the
Purchasers, as amended, supplemented or modified from time to time.

         "Purchaser"  means each Person  (other than the Company)  listed on the
investor  signature pages to the Purchase and Sale Agreement,  and its permitted
successors and assigns as provided  therein,  including any Person who becomes a
party thereto by executing and  delivering  an investor  signature  page thereto
after the date of the Purchase and Sale Agreement.

         "Real Estate  Owned" means the  consolidated  properties of the Company
acquired by foreclosure on a loan or deed-in-lieu  thereof or otherwise included
in the  Company's  real estate owned for purposes of reporting  asset quality of
the Bank in its reports filed with the OTS.

         "Related  Agreements" means the Letter of Intent, the Purchase and Sale
Agreement,  the  Custody  Agreement,  the  Escrow  Agreement  and the  Power  of
Attorney.

         "SAIF" means the Savings Association Insurance Fund administered by the
FDIC, and any successor thereto.

         "Securities  Act" means the  Securities Act of 1933, as amended (or any
successor  statute  thereto as in effect  from time to time),  and the rules and
regulations of the Commission promulgated thereunder.

         "Selling  Shareholders"  means the shareholders of the Company who have
signed the signature pages to the Purchase and Sale Agreement.

         "State" means each of the states of the United States,  the District of
Columbia and the Commonwealth of Puerto Rico.

         "Stock  Equivalents"  means,  with  respect  to  any  Person,  options,
warrants, calls, contracts or other rights entered into or issued by such Person
which confer upon the holder  thereof the right  (whether or not  contingent) to
acquire any Capital Stock,  voting securities or securities  convertible into or
exchangeable for Capital Stock or voting securities of such Person.

         "Subsidiary"  of any  Person  means any entity of which  securities  or
other  ownership  interests  having ordinary voting power to elect a majority of
the board of directors or other persons  performing  similar functions are owned
directly or indirectly by such Person.

         "Target Business" has the meaning set forth in Section 8.1.

         "Taxes" means all taxes,  charges,  fees, levies or other  governmental
assessments,  including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer,


                                                         5

<PAGE>



franchise,   profits,  license,   withholding,   payroll,  employment,   excise,
estimated, severance, stamp, occupation, property or other taxes, customs, dues,
fees, assessments or charges of any kind whatsoever,  together with any interest
and any penalties,  additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign).

         "Tax Returns"  means all federal,  State and local returns  relating to
Taxes.

                                   ARTICLE II
                         SALE OF SHARES OF COMMON STOCK

         Section  2.1  Appointment  of  Dealer  Manager.  On  the  basis  of the
representations  and  warranties  herein  contained and subject to the terms and
conditions  herein set forth, the Selling  Shareholders  hereby appoint National
Securities  Corporation as the Dealer Manager to solicit purchase orders for the
shares of Common Stock owned by the Selling Shareholders which are to be sold to
the  Purchasers.  On the  basis of the  representations  and  warranties  herein
contained,  and subject to the terms and conditions  herein set forth,  National
Securities  Corporation  hereby accepts such  appointment  and agrees to use its
best efforts to assist in the  solicitation of purchase orders for the shares of
Common  Stock  owned  by  the  Selling  Shareholders  in  accordance  with  this
Agreement;  provided, however, that the Dealer Manager shall not be obligated to
take any action which is  inconsistent  with any applicable  laws,  regulations,
decisions or orders.  It is understood  that the Dealer  Manager is not and will
not be an underwriter  of Common Stock,  and that there can be no assurance that
its  solicitation  of  purchase  orders  for  Company  Common  Stock  under this
Agreement will be successful.

         Section 2.2  Costs, Expenses and Fees.

         (i) The costs and expenses  (calculated as of the Closing) and the fees
of the transactions  contemplated by this Agreement shall be paid at the Closing
out of the gross proceeds from the sale of the shares of Common Stock. The costs
and expenses  for such  transaction  includes,  without  limitation,  (i) a 3.0%
non-accountable expense allowance to be paid to the Dealer Manager in connection
with  its  engagement  hereunder;  (ii)  the fees  and  expenses  of the  Dealer
Manager's  counsel;  (iii) the cost of obtaining  all  securities  approvals (if
any); (iv) the cost of printing and distributing the offering materials; and (v)
the costs of blue sky  qualification  (including  fees and  reasonable  expenses
(including any requisite  filing fees) of the Dealer  Manager's  counsel) of the
Common Stock in the various states (if any).

         (ii) The Selling  Shareholders shall be responsible for any federal and
state taxes or withholding  obligations associated with the sale of their shares
of Common Stock pursuant to the Purchase and Sale  Agreement.  The provisions of
this  paragraph  are  not  intended  to  apply  to  or in  any  way  impair  the
indemnification provisions of Article VI.

         (iii) The Dealer  Manager  will be paid a  placement  fee of 10% of the
gross proceeds raised from the sale of the Common Stock in immediately available
funds at the Closing Date out of the


                                                         6

<PAGE>



proceeds  raised  from the sale of  shares  of  Common  Stock  pursuant  to this
Agreement.  The  placement  fee to be paid to the Dealer  Manager  hereunder  is
referred to as the "Fee."

         (iv) In  connection  with the Closing,  the Company  shall issue to the
Dealer  Manager a warrant to purchase  9.947% of the Common Stock of the Company
in the form attached hereto as Appendix A.

         Section  2.3  Closing.  The  purchase  and sale of the shares of Common
Stock will take place at a closing (the  "Closing") to be held at the offices of
the Dealer  Manager's legal counsel in Washington,  D.C., on such date as all of
the conditions to the parties' obligations  hereunder specified in Article IV of
this  Agreement  (other than the  delivery of  certificates,  opinions and other
instruments and documents to be delivered at the Closing) have been satisfied or
waived,  or at such other  location,  and on such other Business Day and time as
the parties  hereto shall  mutually  agree.  The date on which the Closing is to
occur is referred to herein as the "Closing Date."

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         Section 3.1 Representations and Warranties of the Company and the Bank.
The Company and the Bank  represent and warrant to, and covenant and agree with,
the Dealer Manager as follows:

         (a) Capital  Structure.  As of the date hereof,  the authorized capital
stock of the  Company  consists  of 900,000  shares of Common  Stock and 100,000
shares of preferred stock, par value $.01 per share ("Preferred  Stock").  As of
the date hereof, there were 76,000 shares of Common Stock issued and outstanding
and no shares of Preferred Stock were issued or outstanding.  Immediately  prior
to the  Closing,  subject to the receipt of  shareholder  approval,  the Company
shall amend its Certificate of Incorporation in order to increase its authorized
Capital  Stock to  5,000,000  shares of Common  Stock  and  2,000,000  shares of
Preferred Stock. As of the date hereof,  all outstanding  shares of Common Stock
have  been  duly   authorized   and  validly  issued  and  are  fully  paid  and
nonassessable and none of the outstanding shares of Common Stock has been issued
in  violation  of the  preemptive  rights  of any  Person.  There  are no  Stock
Equivalents authorized,  issued or outstanding with respect to the Capital Stock
of the Company as of the date hereof.

         (b) Organization, Standing and Authority of the Company. The Company is
a Delaware  corporation  duly organized,  validly  existing and in good standing
under the laws of the State of Delaware with full corporate  power and authority
to own or lease all of its properties and assets and to carry on its business as
now  conducted  and is duly  licensed or qualified to do business and is in good
standing in each  jurisdiction  in which its ownership or leasing of property or
the conduct of its business  requires such  licensing or  qualification,  except
where the failure to be so  licensed,  qualified or in good  standing  would not
have a Material Adverse Effect.  The Company is duly registered as a savings and
loan holding company under the HOLA and the regulations of the OTS thereunder.


                                                         7

<PAGE>



The Company has heretofore delivered true and complete copies of the Certificate
of Incorporation and Bylaws of the Company as in effect as of the date hereof to
the Dealer Manager.

         (c)  Ownership  of the Bank.  The Bank is the only  direct or  indirect
Subsidiary of the Company.  Except for (i) Capital Stock of the Bank, (ii) stock
in the  Federal  Home  Loan Bank of New York,  and  (iii)  securities  and other
interests taken in  consideration of debts  previously  contracted,  the Company
does  not  own or have  the  right  to  acquire,  directly  or  indirectly,  any
outstanding  Capital Stock or other voting securities or ownership  interests of
any corporation, bank, savings association,  partnership, joint venture or other
organization. The outstanding shares of Capital Stock of the Bank have been duly
authorized  and  validly  issued,  are  fully  paid and  nonassessable,  and are
directly owned by the Company free and clear of all Liens. No Stock  Equivalents
are authorized,  issued or outstanding  with respect to the Capital Stock of the
Bank and there are no agreements,  understandings or commitments relating to the
right of the Company to vote or to dispose of such Capital Stock.

         (d)  Organization,  Standing and  Authority of the Bank.  The Bank is a
federally  chartered  savings bank duly organized,  validly existing and in good
standing under the laws of the United States.  The deposit  accounts of the Bank
are insured by the SAIF to the maximum extent permitted by law, and the Bank has
paid all premiums and assessments required by law and regulations.  The Bank has
full power and authority to own or lease all of its properties and assets and to
carry on its business as now  conducted  and is duly licensed or qualified to do
business and is in good standing in each  jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such  qualification,
except where the failure to be so licensed,  qualified or in good standing would
not have a Material  Adverse Effect.  The Company has heretofore  delivered true
and complete copies of the Bank's Charter and Bylaws as in effect as of the date
hereof to the Dealer Manager.

         (e) Authority.  The Company and the Bank have full corporate  power and
authority to perform  their  obligations  under this  Agreement  and each of the
Related  Agreements to which they are or will become a party, and the execution,
delivery and  performance by the Company and the Bank of this Agreement and each
Related  Agreement  to which  they  are or will  become  a party  has been  duly
authorized by all necessary  corporate action on the part of the Company and the
Bank.

         (f) Due Execution. This Agreement and each of the Related Agreements to
which the Company and the Bank are or will become a party, when duly authorized,
executed and delivered by the Company and the Bank,  will  constitute  valid and
binding  obligations of the Company and the Bank enforceable against the Company
and the Bank in accordance with their terms, except as (A) enforceability may be
limited  by  bankruptcy,  insolvency,  moratorium  and  similar  laws  affecting
creditors'  rights generally and (B) rights of acceleration and the availability
of  equitable  remedies  may be  limited  by  equitable  principles  of  general
applicability.

         (g) No Conflict. The execution, delivery and performance of this
Agreement and each of the Related  Agreements by the Company and the Bank will
not  conflict  with or  constitute  a breach  of,  or a  default  under  (i) the
Certificate of Incorporation, Charter or the Bylaws of the Company and


                                                         8

<PAGE>



the Bank, as the case may be, (ii) any obligation,  agreement,  indenture, bond,
debenture,  note,  instrument or any other evidence of indebtedness to which the
Company and the Bank are a party or as to which any of their  respective  assets
are  subject,  or  (iii)  any  law,  ordinance,  order,  license,  rule or other
regulation or demand of any court or governmental  agency,  arbitration panel or
authority applicable to the Company and the Bank, except, in the case of clauses
(ii) and (iii) above, for such conflicts,  breaches or defaults which would not,
individually or in the aggregate,  have a Material  Adverse Effect.  No consent,
approval,  order or other  authorization of any governmental,  administrative or
regulatory body or agency is legally  required by or on behalf of the Company or
the Bank in  connection  with the  execution,  delivery and  performance  by the
Company and the Bank of this  Agreement  and each of the Related  Agreements  to
which the Company and the Bank is or will  become a party.  The  representations
and warranties set forth in clause (iii) of the second preceding sentence and in
the preceding sentence,  insofar as they relate to federal and State banking and
securities  law  requirements  are made in reliance on the  representations  and
warranties of the Purchasers contained in the Purchase and Sale Agreement.

         (h)  Regulatory  Reports.  The Company and the Bank have filed with the
OTS and the FDIC, as the case may be, in correct form the reports required to be
filed under applicable laws and regulations and such reports fairly presented in
all material respects the information contained therein and such reports were in
all material respect  complete and accurate and in material  compliance with the
requirements of applicable laws and regulations, provided that information as of
a later date shall be deemed to modify  information  as of an earlier  date.  In
connection with the most recent  examinations of the Company and the Bank by the
OTS and the FDIC,  neither  the  Company or the Bank was  required to correct or
change  any  action,  procedure  or  proceeding  which the  Company  or the Bank
believes has not been corrected or changed as requested.

         (i)      Financial Statements.
                  --------------------

                  (i) The Confidential Private Placement Memorandum includes the
         Company  Financial  Statements,  which fairly present the  consolidated
         financial condition of the Company as of the respective dates set forth
         therein,  and the  consolidated  results of  operations,  stockholders'
         equity and cash flows of the Company for the  respective  periods or as
         of the respective dates set forth therein.

                  (ii) The Company  Financial  Statements  have been prepared in
         accordance with generally accepted accounting  principles  consistently
         applied  during the periods  involved,  except as stated  therein.  The
         books and records of the Company and the Bank are being  maintained  in
         material compliance with applicable legal and accounting  requirements,
         and such books and records  accurately reflect in all material respects
         all  dealings  and  transactions  in respect of the  business,  assets,
         liabilities and affairs of the Company and the Bank.

                  (iii)    Except to the extent (x) reflected, disclosed or
         provided for in the consolidated statement of financial condition of
         the Company as of December 31,


                                                         9

<PAGE>



         1999  (including  related notes) and (y) of liabilities  incurred since
         such date in the ordinary  course of business,  neither the Company nor
         the Bank has any liabilities,  whether absolute, accrued, contingent or
         otherwise, which would have a Material Adverse Effect.

                  (iv)  The   accountants  who  certified  the  audited  Company
         Financial  Statements  included in the Confidential  Private  Placement
         Memorandum  have advised the Company that they are  independent  public
         accountants within the meaning of the Securities Act.

                  (v) Since  December  31,  1999,  there  have been no  material
         changes to the Company Financial Statements which would individually or
         in the aggregate have a Material Adverse Effect.

         (j) Material  Adverse Change.  Since December 31, 1999, (i) neither the
Company nor the Bank has  incurred  any material  liability  (on a  consolidated
basis),  except in the ordinary course of business consistent with past practice
(excluding the  incurrence of expenses or  obligations  in connection  with this
Agreement, any Related Agreement or any of the transactions  contemplated hereby
or  thereby)  and  except  for such  liability  or  liabilities  as  would  not,
individually or in the aggregate,  have a Material  Adverse Effect,  and (ii) no
events or  developments  involving the Company or the Bank have occurred  which,
individually or in the aggregate, (A) have had a Material Adverse Effect, or (B)
materially  impair the ability of the Company to perform its  obligations  under
this  Agreement or any Related  Agreement to which it is or will become a party,
in either case,  except for any material  adverse  change  caused by (i) general
changes  in market  interest  rates or (ii)  regulatory  changes  affecting  the
savings and loan industry.

         (k)      Environmental Matters.
                  ---------------------

                  (i) To the knowledge of the Company,  the Company and the Bank
         are  in  compliance  with  all  Environmental   Laws,  except  for  any
         violations of any Environmental Law which would not, individually or in
         the aggregate,  have a Material Adverse Effect. Neither the Company nor
         the Bank has received any  communication  alleging  that the Company or
         the  Bank  is not in  such  compliance  and,  to the  knowledge  of the
         Company,  there are no  present  circumstances  that  would  prevent or
         interfere with the continuation of such compliance.

                  (ii) To the knowledge of the Company,  none of the  properties
         owned,  leased or operated by the Company or the Bank has been or is in
         violation of or liable under any Environmental Law, except for any such
         violations  or  liabilities  which  would  not  individually  or in the
         aggregate have a Material Adverse Effect.

                  (iii) To the  knowledge of the  Company,  there are no past or
         present  actions,  activities,  circumstances,  conditions,  events  or
         incidents that would


                                                        10

<PAGE>



         reasonably form the basis of any Environmental  Claim or other claim or
         action  or  governmental   investigation   that  would  result  in  the
         imposition of any liability arising under any Environmental Law against
         the Company or the Bank or against any Person whose  liability  for any
         Environmental Claim the Company or the Bank has or may have retained or
         assumed  either  contractually  or by operation of law,  except such as
         would not have a Material Adverse Effect.

         (l) Allowance for Loan Losses.  The allowance for loan losses reflected
in the  consolidated  statement of financial  condition  included in the Company
Financial  Statements  as of  December  31,  1999 is  adequate  in all  material
respects as of such date and has been determined in a manner consistent with the
requirements  of  generally  accepted  accounting   principles  to  provide  for
reasonably  anticipated losses on outstanding loans net of recoveries.  The Real
Estate Owned  reflected  in the  consolidated  statement of financial  condition
included in the Company Financial  Statements as of December 31, 1999 is carried
at the lower of cost or fair value, less estimated costs to sell, as required by
generally accepted accounting principles.

         (m) Tax  Matters.  The Company  and the Bank have timely  filed all Tax
Returns  required  by  applicable  law to be filed by them  (including,  without
limitation,  estimated tax returns, income tax returns,  information returns and
withholding  and  employment tax returns) and have paid, or where payment is not
required to have been made,  have set up an adequate  reserve or accrual for the
payment of, all Taxes  required to be paid pursuant to such Tax Returns,  except
in all cases  where the  failure to have  timely  filed such Tax Returns or have
paid or have set up an  adequate  reserve or accrual for the payment of all such
Taxes would not have a Material Adverse Effect. As of the date hereof,  there is
no audit  examination,  assessed  deficiency,  deficiency  litigation  or refund
litigation  with respect to any Taxes of the Company or the Bank.  All Taxes due
with  respect to completed  and settled  examinations  or  concluded  litigation
relating to the Company  have been paid in full or adequate  provision  has been
made for any such Taxes on the  Company's  consolidated  statement  of financial
condition in accordance  with  generally  accepted  accounting  principles.  The
Company has not executed an extension or waiver of any statute of limitations on
the  assessment  or  collection  of any  material  tax due that is  currently in
effect.

         (n) ERISA.  Neither the Company nor the Bank  maintains  any  "employee
benefit  plans" (as defined in Section  3(3) of the Employee  Retirement  Income
Security Act of 1974, as amended ("ERISA")).

         (o) Litigation.  There are no actions,  suits,  investigations or legal
proceedings  pending  against,  or to the  knowledge of the Company,  threatened
against,  or affecting  the Company or the Bank or their  respective  properties
before  any court or  governmental  body or agency  which  would  reasonably  be
expected to have a Material  Adverse Effect or which in any manner challenge the
legality,  validity  or  enforceability  of this  Agreement,  any of the Related
Agreements  or the Common  Stock,  or which  would  reasonably  be  expected  to
materially impair the ability or obligation of the Company to perform fully on a
timely basis its obligations under this Agreement or under any Related Agreement
to which it will become a party.


                                                        11

<PAGE>



         (p)  Licenses  and  Permits.  Each of the  Company and the Bank has all
permits, licenses,  certificates of authority,  orders and approvals of, and has
made all filings, applications and registrations with, federal, State, local and
foreign  governmental or regulatory bodies that are necessary in order to permit
it to carry on its business as it is presently  being  conducted and the absence
of which  would have a Material  Adverse  Effect;  all such  permits,  licenses,
certificates  of  authority,  orders and approvals are in full force and effect;
and to the knowledge of the Company, no suspension or cancellation of any of the
same is threatened.

         (q) No Default or Violation. Neither the Company nor the Bank currently
is in violation of its Certificate of  Incorporation,  Charter or its Bylaws, as
the case may be, and,  neither the Company nor the Bank is in  violation  of any
applicable  federal,  state or local  law or  ordinance  or any  order,  rule or
regulation of any federal,  State,  local or other  governmental  agency or body
(including,   without  limitation,  all  banking,  securities,  safety,  health,
environmental,  zoning, anti-discrimination,  antitrust, and wage and hour laws,
ordinances,  orders,  rules and regulations),  or in default with respect to any
order,  writ,  injunction or decree of any court, or in default under any order,
license,  regulation  or demand of any  governmental  agency,  where any of such
violations or defaults would,  individually  or in the aggregate,  reasonably be
expected  (i) to have a Material  Adverse  Effect or (ii)  materially  adversely
impair the  ability of the Company to perform on a timely  basis any  obligation
which it has under this Agreement,  or under any Related Agreement,  and neither
the  Company  nor the Bank has  received  any notice or  communication  from any
federal, State or local governmental authority asserting that the Company or the
Bank is in violation of any of the foregoing which would  reasonably be expected
to have any effect set forth in clauses (i) or (ii)  above.  Neither the Company
nor the Bank is subject to any regulatory or supervisory cease and desist order,
agreement, written directive, memorandum of understanding or written commitment,
and none of them has received  any written  communication  requesting  that they
enter into any of the foregoing.

         (r) Certain  Contracts.  Neither the Company nor the Bank is in default
or in non-  compliance,  which  default or  non-compliance  would  reasonably be
expected  to have a Material  Adverse  Effect,  under any  contract,  agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party  or by which  its  assets,  business  or  operations  may be bound or
affected,  whether  entered into in the ordinary course of business or otherwise
and whether  written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice,  or both, would constitute such a default
or non-compliance.

         (s)  Insurance.  The Company and the Bank are insured for such  amounts
which the Company and the Bank believe are reasonable  with insurance  companies
which the  Company  and the Bank  believe are  financially  sound and  reputable
against  such risks as the Company  and the Bank  consider  to be  necessary  or
appropriate  and have  maintained all insurance  required by applicable laws and
regulations, except where the failure to be so insured would not have a Material
Adverse  Effect.  Neither the Company  nor the Bank has  received  any notice of
cancellation or notice of a material  amendment of any such insurance  policy or
bond or is in default under such policy or bond, no coverage thereunder is being
disputed and all material claims thereunder have been filed in a


                                                        12

<PAGE>



timely  fashion,  except where any such  cancellation,  default or dispute would
not, individually or in the aggregate, have a Material Adverse Effect.

         (t) Properties.  All real and personal property owned by the Company or
the Bank or presently used by either of them in their respective  business is in
an adequate  condition  (ordinary  wear and tear  excepted) and is sufficient to
carry on the  business  of the Company  and the Bank in the  ordinary  course of
business  consistent  with their past  practices.  The Company and the Bank have
good and  marketable  title  free and clear of all Liens to all of the  material
properties  and  assets,  real  and  personal,  reflected  on  the  consolidated
statement of financial condition of the Company as of December 31, 1999 included
in the Company Financial  Statements or acquired after such date, except (i) for
Liens for  current  taxes not yet due or  payable,  (ii) for  pledges  to secure
deposits  and  other  Liens  incurred  in the  ordinary  course  of its  banking
business,  (iii) for such Liens, if any, which would not, individually or in the
aggregate,  have  a  Material  Adverse  Effect  and  (iv)  as  reflected  on the
consolidated  statement of financial condition of the Company as of December 31,
1999  included  in the  Company  Financial  Statements.  All real  and  personal
property which is material to the Company's business on a consolidated basis and
leased or  licensed  by the  Company or the Bank is held  pursuant  to leases or
licenses  which are valid and  enforceable in accordance  with their  respective
terms and such leases  will not  terminate  or lapse prior to the Closing  Date,
except where such invalidity, unenforceability,  termination or lapse would not,
individually or in the aggregate, have a Material Adverse Effect.

         (u)  Certain  Fees.  Except for the Fees,  costs and  expenses  payable
pursuant to this  Agreement and the fees payable to Eugene Boffa in his capacity
as Custodian,  no fees or commissions will be payable by the Company or the Bank
to brokers,  finders,  investment  bankers or banks  pursuant  to any  agreement
entered  into by the  Company  or the  Bank  with  respect  to the  transactions
contemplated by this Agreement and the Related Agreements.

         (v) Similar  Offerings.  The Company has not,  directly or  indirectly,
solicited  any  offer to buy or  offered  to sell,  and will  not,  directly  or
indirectly,  solicit any offer to buy or offer to sell,  in the United States or
to any United  States  citizen or resident,  any  security  which is or would be
integrated  with the sale of the  shares of Common  Stock of the  Company to the
Purchasers  in a manner that would  require such Common  Stock to be  registered
under the Securities Act.

         (w) Regulation M. The Company has not taken and will not take, directly
or indirectly,  any action designed to, or that might be reasonably expected to,
cause or result in  stabilization  or manipulation of the price of the shares of
Common Stock which are to be sold to the Purchasers pursuant to the Purchase and
Sale Agreement and this Agreement.

         (x) No  Registration.  It is not necessary in connection  with the sale
and  delivery  to the  Purchasers  of the  shares of Common  Stock in the manner
contemplated  by the  Purchase and Sale  Agreement  and this  Agreement  and the
Confidential Private Placement Memorandum to register the shares of Common Stock
under the Securities Act.



                                                        13

<PAGE>



         (y) Memorandum. The Confidential Private Placement Memorandum does not,
and at the Closing Date will not, include an untrue statement of a material fact
or omit to state a  material  fact  necessary  in  order to make the  statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.  Other than as set forth above, the Company makes no  representation
or warranty as to compliance by the Company with any federal or State securities
disclosure requirements.

         (z)  Disclosure.  None of the  representations  and  warranties  of the
Company  or the Bank or any of the  information  or  documents  which  have been
Previously  Disclosed  pursuant  hereto are false or  misleading in any material
respect or contain any untrue statement of a material fact, or omit to state any
material fact required to be stated or necessary to make any such information or
document, at the time and in light of the circumstances, not misleading.

         Section 3.2 Representations and Warranties of the Selling Shareholders.
The Selling Shareholders  represent and warrant to, and covenant and agree with,
the Dealer Manager as follows:

         (a)  Good Title and Other Matters.
              ----------------------------

                  (i) The Selling  Shareholders  have, and immediately  prior to
         the Closing such Selling  Shareholders  will have, good and valid title
         to their shares of Common Stock, free and clear of all Liens.

                  (ii)  Certificates in negotiable form  representing all of the
         shares of Common  Stock have been  placed in custody  under the Custody
         Agreement,  duly executed and delivered by such Selling  Shareholder to
         the  Custodian,  and such Selling  Shareholders  have duly executed and
         delivered the Power of Attorney,  appointing the Selling  Shareholders'
         attorney-in-fact (the "Attorney-in-Fact") with authority to execute and
         deliver this Agreement and the Related  Agreements to which the Selling
         Shareholders  are or will  become a party  on  behalf  of such  Selling
         Shareholders,  to authorize  the delivery of the shares of Common Stock
         to be sold pursuant to the Purchase and Sale Agreement and otherwise to
         act on behalf  of such  Selling  Shareholders  in  connection  with the
         transactions  contemplated by this Agreement and the Related Agreements
         to which the Selling Shareholders are or will become a party.

                  (iii) The  obligations of the Selling  Shareholders  hereunder
         are not intended to be terminated  by operation of law,  whether by the
         death or incapacity of any  individual  Selling  Shareholder  or by the
         occurrence of any other event;  if any individual  Selling  Shareholder
         should die or become  incapacitated,  or if any other such event should
         occur, before the completion of the transaction contemplated hereunder,
         it is the  intention  of the  Selling  Shareholders  that  certificates
         representing  the shares of Common  Stock shall be  delivered  by or on
         behalf of the Selling  Shareholders  in  accordance  with the terms and
         conditions of this Agreement and of


                                                        14

<PAGE>



         the Related  Agreements to which the Selling  Shareholders  are or will
         become a party;  and it is the  intention  of the Selling  Shareholders
         that actions  taken by the Attorney-  in-Fact  pursuant to the Power of
         Attorney shall be as valid as if such death,  incapacity or other event
         had not  occurred,  regardless  of  whether or not the  Custodian,  the
         Attorney-in-Fact,  or any of them,  shall have received  notice of such
         death, incapacity or other event.

         (b) Authority.  The Selling  Shareholders have full power and authority
to perform their obligations under this Agreement and the Related  Agreements to
which the Selling Shareholders are or will become a party.

         (c) Due Execution.  This Agreement and the Related  Agreements to which
the Selling Shareholders are or will become a party constitute valid and binding
obligations  of  the  Selling  Shareholders   enforceable  against  the  Selling
Shareholders  in  accordance  with  their  respective   terms,   except  as  (A)
enforceability may be limited by bankruptcy,  insolvency, moratorium and similar
laws affecting  creditors'  rights  generally and (B) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles of
general applicability.

         (d) No  Conflict.  The  execution,  delivery  and  performance  of this
Agreement and the Related  Agreements to which the Selling  Shareholders  are or
will become a party by the Selling  Shareholders will not individually or in the
aggregate,  materially impair the ability of the Selling Shareholders to perform
their  obligations  under this Agreement or the Related  Agreements to which the
Selling Shareholders are or will become a party.

         (f)  Material   Adverse  Change.   To  the  knowledge  of  the  Selling
Shareholders,  since December 31 ,1999, no events or developments  involving the
Company  or the Bank have  occurred  which,  individually  or in the  aggregate,
materially  impair the  ability of the  Selling  Shareholders  to perform  their
obligations under this Agreement or the Related  Agreements to which the Selling
Shareholders are or will become a party.

         (g) Litigation.  There are no actions,  suits,  investigations or legal
proceedings  pending against,  or to the knowledge of the Selling  Shareholders,
threatened  against,  or affecting the Selling  Shareholders before any court or
governmental  body or agency which would reasonably be expected to in any manner
challenge the legality, validity or enforceability of this Agreement, any of the
Related Agreements to which the Selling  Shareholders are or will become a party
or the Common Stock to be redeemed by the Company for such Selling Shareholders,
or which  would  reasonably  be  expected  to  materially  impair the ability or
obligation of the Selling  Shareholders to perform fully on a timely basis their
obligations  under this Agreement or any Related  Agreement to which the Selling
Shareholders are or will become a party.

         (h) Certain Fees.  Except for the Fee,  costs and expenses  payable to
the Dealer Manager  pursuant to this Agreement,  no fees or commissions  will be
payable  to  brokers,  finders,  investment  bankers  or banks  pursuant  to any
agreement entered into by the Selling Shareholders with respect

                                                        15

<PAGE>



to their sale of shares of Common  Stock or the  purchase of Common Stock by the
Purchasers or any of the other  transactions  contemplated  by this Agreement or
the Related  Agreements to which the Selling  Shareholders  are or will become a
party. The Selling Shareholders represent,  warrant and agree that to the extent
any fees or commissions shall be payable by the Selling Shareholders to brokers,
finders,  investment  bankers or banks pursuant to any other  agreement  entered
into by the Selling  Shareholders with respect to the transactions  contemplated
by this  Agreement or the Related  Agreements to which the Selling  Shareholders
are or will  become a party,  the  Selling  Shareholders  shall be  jointly  and
severally responsible for the payment of such fees and commissions.

         (i) Private Offering.  Neither the Selling  Shareholders nor any Person
authorized to act on their behalf, has taken or will take any action which might
subject the sale of the shares of Common Stock to the registration  requirements
of  the  Securities  Act  or  comparable  provisions  of  any  applicable  State
securities laws.

         (j) Regulation M. The Selling  Shareholders have not taken and will not
take,  directly  or  indirectly,  any  action  designed  to,  or that  might  be
reasonably  expected to, cause or result in stabilization or manipulation of the
price of the  shares of  Common  Stock  which  are to be sold to the  Purchasers
pursuant to the Purchase and Sale Agreement and this Agreement.

         Section 3.3       Representations and Warranties of Dealer Manager.

         (a) The Dealer Manager has offered the shares of Common Stock for sale,
solicited offers to buy the shares of Common Stock, and otherwise  negotiated in
respect of the shares of Common  Stock only in a manner  that  conformed  to the
offering procedures set forth in the Confidential Private Placement Memorandum.

         (b) The Dealer Manager has delivered to each offeree a copy of the
Confidential Private Placement Memorandum.

         (c) Immediately  prior to making the offer to each offeree,  the Dealer
Manager will have reasonable  grounds to believe and will believe that each such
offeree was an "accredited  investor" as such term is defined in Rule 501 of the
General Rules and  Regulations of the Commission  under the Securities  Act. The
representations and warranties contained in this Section 3.3(c), insofar as they
relate to federal and State securities laws  requirements,  are made in reliance
on the representations and warranties of the Purchasers contained in Section 3.3
of the Purchase and Sale Agreement.

         (d) The Dealer Manager will not,  directly or through any agent,  offer
the shares of Common Stock for sale,  or solicit any offers to buy the shares of
Common Stock, or otherwise  negotiate with any person with respect to the shares
of Common  Stock on the basis of general  solicitation  or general  advertising,
including  without  limitation,  any  advertisement,  article,  notice  or other
communication  published  in  any  newspaper,  magazine  or  similar  medium  or
broadcast  over  television or radio;  or,  distribute  any letters,  circulars,
notices, memoranda, or other written


                                                        16

<PAGE>



communications  of a general nature to customers  announcing or  describing,  or
inviting inquiries concerning the offering of the shares of Common Stock.

         (e) The Dealer Manager is a corporation and is validly existing in good
standing under the laws of the State of Washington with full power and authority
to perform its obligations under this Agreement.

         (f) The execution and delivery of this  Agreement and the  consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary  action on the part of the Dealer Manager,  and this Agreement has
been duly and validly  executed and  delivered by the Dealer  Manager and is the
legal,  valid and  binding  agreement  of the  Dealer  Manager,  enforceable  in
accordance with its terms, except as may be limited by bankruptcy, insolvency or
other laws affecting the enforceability of the rights of creditors generally and
judicial limitations on the right of specific performance.

         (g)  Each  of  the  Dealer  Manager  and  its  employees,   agents  and
representatives  who shall perform any of the services  hereunder  shall be duly
authorized  and  empowered,  and shall have all licenses,  approvals and permits
necessary to perform such services.

         (h) No  approval  of any  regulatory  or  supervisory  or other  public
authority is required in  connection  with the Dealer  Manager's  execution  and
delivery of this Agreement, except as may have been received.

         (i) There is no suit or proceeding or charge or action before or by any
court,  regulatory  authority  or  government  agency  or body  or,  to the best
knowledge of the Dealer Manager,  pending or threatened,  which might materially
adversely affect the Dealer Manager's performance under this Agreement.

                                   ARTICLE IV
                       CONDITIONS PRECEDENT TO THE CLOSING

         Section  4.1  Conditions  to  the  Obligations  of  the  Parties.   The
requirement of each of the parties hereto to fulfill their obligations hereunder
at the  Closing  shall be subject  to the  satisfaction  or waiver  prior to the
Closing of the following conditions:

         (a) All  requirements  prescribed  by law  which are  necessary  to the
consummation of the transactions  contemplated by this Agreement and the Related
Agreements shall have been satisfied.

         (b) No party  to this  Agreement  or the  Related  Agreements  shall be
subject to any order,  decree or  injunction  of a court or agency of  competent
jurisdiction  which  enjoins  or  prohibits  the  consummation  of  any  of  the
transactions contemplated by this Agreement or the Related Agreements.



                                                        17

<PAGE>



         (c) No statute,  rule or regulation  shall have been enacted,  entered,
promulgated,  interpreted,  applied or  enforced by any  governmental  authority
which  prohibits,  restricts  or  makes  illegal  consummation  of  any  of  the
transactions contemplated by this Agreement or the Related Agreements.

         (d) The  Selling  Shareholders  shall  have  completed  the sale of all
2,000,000  shares  of  Common  Stock  owned  by  the  Selling   Shareholders  as
contemplated by this Agreement,  the aggregate  consideration  to be paid to the
Selling  Shareholders  for the Common  Stock  pursuant to Section  2.2(b) of the
Purchase  and Sale  Agreement  shall  have  been  paid,  and the Fee,  costs and
expenses  provided  hereunder  shall  have been paid  from the  proceeds  of the
consideration received by the Selling Shareholders.

         Section 4.2 Conditions to the  Obligations of the Dealer  Manager.  The
requirement of the Dealer Manager to fulfill its obligations  hereunder shall be
subject to the  satisfaction  or waiver  prior to the  Closing of the  following
conditions:

         (a) Each of the  representations  and warranties of the Company and the
Bank contained in this Agreement and the Related  Agreements to which they are a
party shall be true and correct in all material  respects as of the date of such
agreements  and as of the Closing Date as if made on the Closing Date (or on the
date when made in the case of any  representation or warranty which specifically
relates to an earlier date);  the Company and the Bank shall have performed,  in
all material  respects,  each of its covenants and agreements  contained in this
Agreement  and the Related  Agreements to which they are a party to be performed
prior to the Closing;  and the Dealer Manager and the Selling Shareholders shall
have received a certificate  signed by the Chief Executive Officer and the Chief
Financial  Officer of the Company and the Bank,  dated the Closing  Date, to the
foregoing effect.

         (b)  Each  of  the   representations  and  warranties  of  the  Selling
Shareholders  contained in this  Agreement  and the Purchase and Sale  Agreement
shall  be true  and  correct  in all  material  respects  as of the date of such
agreements  and as of the Closing Date as if made on the Closing Date (or on the
date when made in the case of any  representation or warranty which specifically
relates to an earlier date); the Selling  Shareholders shall have performed,  in
all material respects,  each of their covenants and agreements  contained in the
Purchase and Sale  Agreement  and this  Agreement  to be performed  prior to the
Closing;  and  the  Company  and  the  Dealer  Manager  shall  have  received  a
certificate  signed  by  Robert  DeMane,  as  Attorney-in-Fact  for the  Selling
Shareholders, dated the Closing Date, to the foregoing effect.

         (c) The Company shall have taken all  appropriate  actions  required to
split the Common Stock, to be effective immediately prior to the Closing,  which
will result in 2,220,914 shares of Common Stock being issued and outstanding.

         (d) The Company shall have obtained the requisite stockholder approval
of an amendment to its Certificate of Incorporation to increase its authorized
Common Stock and Preferred


                                                        18

<PAGE>



Stock to 5,000,000 and 2,000,000 shares, respectively, and shall have filed with
the Secretary of State of the State of Delaware the appropriate documentation in
order to effect such amendment.

         (e)  Effective  upon  consummation  of  the  Transaction,  all  of  the
directors  other than Mr. DeMane shall have resigned as directors of the Company
and the Bank and Messrs. Michael Allocca,  Leonard Makowka,  Robert Gault, Peter
Rodney Jackson,  Donald Berg and Phil Esposito shall have been elected directors
of the Company and the Bank, subject to any required filing,  notice or approval
of the OTS.

         (f) Robert DeMane shall have executed the Employment Agreement attached
hereto as Appendix B.

         (g) At the Closing  Date,  the Dealer  Manager  shall have received the
favorable opinion,  dated as of the Closing Date, of Luse Lehman Gorman Pomerenk
and Schick,  counsel for the Company and the Bank, the form of which is attached
hereto as Appendix  C. Such  counsel  may state  that,  insofar as such  opinion
involves factual matters, they have relied, to the extent they deem proper, upon
certificates  of  officers  of the  Company  or Bank,  as the  case may be,  and
certificates of public officials.

         (h) At the  Closing  Date,  there  shall not have been,  since the date
hereof or since the  respective  dates as of which  information  is given in the
Confidential  Private Placement  Memorandum,  any material adverse change in the
financial  condition,  results of operations or business  affairs of the Company
and the  Bank  considered  as one  enterprise,  whether  or not  arising  in the
ordinary course of business, and the Dealer Manager and the Selling Shareholders
shall have received a certificate of the President and Chief  Executive  Officer
of the Company and the Bank and the Chief  Financial  Officer of the Company and
the  Bank,  each  dated as of  Closing  Date,  to the  effect  that,  except  as
Previously  Disclosed,  (i) there has been no such material adverse change, (ii)
there shall have been no material  transaction  entered into by the Company from
the latest date as of which the financial  condition of the Company as set forth
in  the  Confidential  Private  Placement  Memorandum  other  than  transactions
referred to or  contemplated  therein and  transactions in the ordinary cause of
business, and (iii) the Company shall not have received from the OTS or the FDIC
any  direction  (oral or written) to make any  material  change in the method of
conducting its business with which it has not complied (which direction, if any,
shall  have been  disclosed  to the  Dealer  Manager)  or which  materially  and
adversely  would  affect  the  business,   financial  condition  or  results  of
operations of the Company or the Bank.

         (i) The Company shall have executed and delivered the Dealer Manager
Warrant to the Dealer Manager.

         (j) The Dealer  Manager shall have  received  such other  certificates,
opinions,  documents and instruments  related to the  transactions  contemplated
hereby  as may have been  reasonably  required  by the  Dealer  Manager  and are
customary for transactions of this type, and all documents,


                                                        19

<PAGE>



instruments  and  other  legal  matters  in  connection  with  the  transactions
contemplated  by this  Agreement  shall be reasonably  satisfactory  in form and
substance to it and its counsel.

         Section 4.3 Conditions to Obligations of the Selling Shareholders.  The
requirement of the Selling  Shareholders to fulfill their obligations under this
Agreement shall be subject to the satisfaction or waiver prior to the Closing of
the following conditions:

         (a) Each of the  representations  and  warranties of the Dealer Manager
contained in this Agreement  shall be true and correct in all material  respects
as of the date of this  Agreement  and as of the Closing  Date as if made on the
Closing Date.

         (b) Each Purchaser  shall have  delivered the applicable  consideration
for each of the shares of Common  Stock to be  purchased  by it  pursuant to the
Purchase  Agreement,  such amount to be payable by wire transfer of  immediately
available funds to an account with a bank  designated by the Dealer Manager,  by
notice to each Purchaser to be provided no later than two Business Days prior to
the Closing Date.

         Section 4.4  Conditions to Obligations of the Company and the Bank. The
requirement of the Company and the Bank to fulfill their obligations  hereunder,
shall be subject to the  satisfaction,  or waiver prior to the  Closing,  of the
following  condition:  No party to this Agreement (other than the Company) shall
be in material  breach of this  Agreement  unless  such  breach  shall have been
waived in writing by each of the other parties to this Agreement.

                                    ARTICLE V
                                    COVENANTS

         Section 5.1 Information.  If any event or circumstance shall occur as a
result of which it is necessary,  in the  reasonable  opinion of counsel for the
Dealer  Manager,  to amend or  supplement  the  Confidential  Private  Placement
Memorandum in order to make the Confidential  Private  Placement  Memorandum not
misleading  in the  light  of the  circumstances  existing  at  the  time  it is
delivered to a Purchaser,  the Company will  forthwith  amend or supplement  the
Confidential Private Placement Memorandum (in form and substance satisfactory to
counsel for the Dealer  Manager)  so that,  as so amended or  supplemented,  the
Confidential  Private Placement  Memorandum will not include an untrue statement
of a material fact or omit to state a material  fact  necessary in order to make
the statements therein,  in the light of the circumstances  existing at the time
it is delivered to a Purchaser, not misleading,  and the Company will furnish to
the  Dealer  Manager  a  reasonable  number  of  copies  of  such  amendment  or
supplement.  For the purpose of this  subsection,  the Company will furnish such
information  with respect to itself as the Dealer  Manager may from time to time
reasonably request.

         Section 5.2 Blue Sky.  The Company will take all  reasonably  necessary
action,  in  cooperation  with the Dealer  Manager,  to  qualify,  to the extent
required,  the shares of Common Stock for offering and sale under the applicable
securities laws of such states of the United States and other


                                                        20

<PAGE>



jurisdictions  as the Dealer  Manager and the  Company  have  agreed;  provided,
however,  that the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation in any jurisdiction in
which it is not so qualified.

         Section 5.3 Issuance.  The Company will not,  without the prior written
consent of the Dealer  Manager,  sell or issue,  contract  to sell or  otherwise
dispose  of, any shares of Common  Stock or other  securities  convertible  into
shares  of Common  Stock  (other  than the  Warrant  to be issued to the  Dealer
Manager hereunder) for a period of 180 days following the Closing Date.

         Section 5.4 Press  Releases.  The Company and the Dealer  Manager shall
agree with each other as to the form and substance of any press release  related
to this  Agreement,  the Related  Agreements  or the  transactions  contemplated
hereby or thereby,  and consult with each other as to the form and  substance of
other public  disclosures  which may relate to the transactions  contemplated by
this  Agreement  or the Related  Agreements,  provided,  however,  that  nothing
contained herein shall prohibit any party,  following notification to such other
party,  from making any disclosure which it determines in good faith is required
by law or regulation.

         Section  5.5 No  Solicitation.  Between the time of  execution  of this
Agreement  and the  earlier  of (i) the  Closing  or  (ii)  termination  of this
Agreement  in   accordance   with  Section  8.2  hereof,   neither  the  Selling
Shareholders,  the  Company  or any  of the  Company's  directors,  officers  or
employees,  nor any  representatives  or agents of the Selling  Shareholders the
Company  shall (i)  execute any  agreement,  letter or  undertaking  of any kind
whatsoever  with  respect  to any  acquisition,  lease or  purchase  of all or a
substantial  portion of the assets of, or any  equity  interest  in  (including,
without  limitation,  any sale of all or a portion of the Selling  Shareholders'
shares of Common  Stock),  the  Company  or any  business  combination  with the
Company  (an  "Acquisition  Transaction"),  other than as  contemplated  by this
Agreement,  or (ii) solicit or encourage inquiries or proposals with respect to,
furnish any  information  relating to, or  participate  in any  negotiations  or
discussions  concerning,  an  Acquisition  Transaction.  Other than as set forth
herein, the Selling  Shareholders and/or the Company will immediately notify the
Dealer  Manager  orally and in writing if any such  inquiries or  proposals  are
received by, and such information is required from, or any such  negotiations or
discussions are sought to be initiated with, the Company.

         Section 5.6 Compliance.  The Company will conduct the purchase and sale
of the  Securities in all material  respects in accordance  with all  applicable
laws, statutes, rules, regulations, decisions and orders. The covenant contained
in this  Section 5.6 insofar at it relates to federal and state  securities  law
requirements,  is made in reliance on the  representations and warranties of the
Purchasers contained in Section 3.2 of the Purchase Agreement.




                                                        21

<PAGE>



                                   ARTICLE VI
                                 INDEMNIFICATION

         Section 6.1 Company and Bank Indemnification.  The Company and the Bank
agree to indemnify and hold harmless the Dealer Manager,  its  affiliates,  each
person,  if any, who controls the Dealer Manager,  within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, and their respective
partners,  directors,  officers, employees and agents (including counsel for the
Dealer Manager) as follows:

                  (i) from  and  against  any and all  loss,  liability,  claim,
         damage and expense whatsoever,  as incurred,  related to or arising out
         of the offer, purchase and sale of the Common Stock or any action taken
         by the Dealer  Manager  where acting as described in Article II hereof,
         except to the extent that any loss, liability, claim, damage or expense
         is found in a final  judgment by a court of competent  jurisdiction  to
         have resulted  primarily from the Dealer  Manager's gross negligence or
         willful misconduct;

                  (ii)  from and  against  any and all loss,  liability,  claim,
         damage and expense whatsoever,  as incurred,  based upon or arising out
         of any untrue  statement or alleged untrue statement of a material fact
         contained in the Confidential Private Placement Memorandum with respect
         to the Company and the Bank (or any amendment or supplement thereto) or
         the omission or alleged omission therefrom of a material fact necessary
         in  order  to  make  the  statements  therein,  in  the  light  of  the
         circumstances  under which they were made,  not  misleading,  provided,
         however,  that the Company and the Bank shall not be liable in any such
         case to the extent  that any such  loss,  liability,  claim,  damage or
         expense  arises out of or is based upon an untrue  statement or alleged
         untrue   statement  or  omission  or  alleged   omission  made  in  the
         Confidential   Private  Placement   Memorandum  (or  any  amendment  or
         supplement  thereto) in reliance  upon and in  conformity  with written
         information furnished by the Dealer Manager expressly for use therein;

                  (iii) from and  against  any and all loss,  liability,  claim,
         damage  and  expense  whatsoever,  as  incurred,  to the  extent of the
         aggregate  amount paid in  settlement  of any  litigation  involving or
         affecting the Company and the Bank, or any  investigation or proceeding
         by any governmental agency or body,  commenced or threatened  involving
         or  affecting  the  Company  or the Bank,  or of any  claim  whatsoever
         described in clauses (i) or (ii) above,  if such settlement is effected
         with the written  consent of the Company  and the Bank,  which  consent
         shall not be unreasonably withheld; and

                  (iv)  from and  against  any and all  expense  whatsoever,  as
         incurred  (including,  subject  to  Section  6.2  hereof,  the fees and
         disbursements  of  counsel  chosen by the Dealer  Manager),  reasonably
         incurred  in  investigating,  preparing  for or  defending  against any
         litigation, or any investigation, proceeding or inquiry by any


                                                        22

<PAGE>



         governmental  agency or body,  commenced  or  threatened,  or any claim
         whatsoever  described in clauses (i) or (ii) above,  to the extent that
         any such expense is not paid under (i),  (ii) or (iii) above whether or
         not the purchase and sale of the shares of Common Stock is consummated,
         except to the extent that any such  expense is  incurred in  connection
         with a final  judgment  by a court of  competent  jurisdiction  to have
         resulted  primarily  from the  Dealer  Manager's  gross  negligence  or
         willful misconduct;

                  (v) In addition to, and without  limiting,  the  provisions of
         Section 6.1 hereof,  in the event that the Dealer Manager,  any person,
         if any, who controls the Dealer  Manager  within the meaning of Section
         15 of the  Securities Act or Section 20 of the Securities Act or any of
         its partners, directors, officers, employees and agents is requested or
         required to appear as a witness or  otherwise  gives  testimony  in any
         action, proceeding, investigation or inquiry involving or affecting the
         Company  and the Bank,  which is  brought by or on behalf of or against
         the Company and the Bank, the Dealer Manager or any of their respective
         affiliates  in which the Dealer  Manager or such person or agent is not
         named as a defendant,  the Company and the Bank agree to reimburse  the
         Dealer Manager for all reasonable and necessary  out-of-pocket expenses
         incurred by it in connection  with  preparing or appearing as a witness
         or otherwise giving testimony.

         Section 6.2 Dealer Manager  Indemnification.  The Dealer Manager agrees
to  indemnify  and  hold  harmless  the  Company  and the  Bank  and each of its
directors,  officers and each  person,  if any, who controls the Company and the
Bank,  within the meaning of Section 15 of the  Securities  Act or Section 20 of
the Exchange  Act,  against any loss,  liability,  claim,  damage and expense to
which the Company and the Bank or any such  director,  officer,  or  controlling
person  may  become  subject  under  any  applicable  federal  or  state  law or
otherwise, insofar as such loss, liability, claim, damage and expense arises out
of or are based upon any untrue  statement  or alleged  untrue  statement of any
material fact contained in the Confidential  Private  Placement  Memorandum with
respect to  information  furnished to the Company and the Bank by or through the
Dealer  Manager  in writing  expressly  for use  therein  (or any  amendment  or
supplement  thereto) or the omission or alleged omission therefrom of a material
fact  necessary  in  order  to make  the  statements  therein,  in  light of the
circumstances under which they were made, not misleading, and will reimburse any
legal or other expenses  reasonably  incurred by the Company and the Bank or any
such director, officer or controlling person in connection with investigating or
defending  any such  loss,  liability,  claim,  damage,  action  or  proceeding;
provided,  however,  that the Dealer  Manager will be liable in each case to the
extent,  but only to the extent,  that such untrue  statement or alleged  untrue
statement or omission or alleged omission was made in the  Confidential  Private
Placement  Memorandum (or any amendment or supplement  thereto) in reliance upon
and in conformity with written information furnished to the Company and the Bank
by or through the Dealer  Manager  expressly for use therein.  In no event shall
the  Dealer  Manager  be liable for an amount  which  exceeds  the Fee which the
Dealer Manager has received or would have received pursuant to this Agreement.



                                                        23

<PAGE>



         Section  6.3   Selling   Shareholders   Indemnification.   The  Selling
Shareholders,  jointly and  severally,  agree to indemnify and hold harmless the
Dealer Manager, each person, if any, who controls the Dealer Manager, within the
meaning of Section 15 of the  Securities  Act or Section 20 of the Exchange Act,
and  its  respective  partners,   directors,   officers,  employees  and  agents
(including counsel for the Dealer Manager) as follows:

                  (i) from  and  against  any and all  loss,  liability,  claim,
         damage and expense whatsoever,  as incurred,  related to or arising out
         of the breach by the  Selling  Shareholders  of their  representations,
         warranties  or  covenants  set forth in this  Agreement  or the Related
         Agreements  to which they are a party,  except to the  extent  that any
         such expense is incurred in connection with a final judgment by a court
         of competent  jurisdiction  to have resulted  primarily from the Dealer
         Manager's gross negligence or willful misconduct;

                  (ii)  from and  against  any and all loss,  liability,  claim,
         damage and expense whatsoever,  as incurred,  based upon or arising out
         of any untrue  statement or alleged untrue statement of a material fact
         contained in the Confidential Private Placement Memorandum with respect
         to information furnished by the Selling Shareholders  expressly for use
         therein (or any  amendment  or  supplement  thereto) or the omission or
         alleged  omission  therefrom of a material  fact  necessary in order to
         make the statements  therein,  in the light of the circumstances  under
         which they were  made,  not  misleading,  provided,  however,  that the
         Selling Shareholders shall not be liable in any such case to the extent
         that any such loss,  liability,  claim, damage or expense arises out of
         or is based upon an untrue  statement  or alleged  untrue  statement or
         omission or alleged omission made in the Confidential Private Placement
         Memorandum  (or any amendment or  supplement  thereto) in reliance upon
         and in  conformity  with  information  furnished by the Company and the
         Bank or written  information  furnished by the Dealer Manager expressly
         for use therein;

                  (iii) from and  against  any and all loss,  liability,  claim,
         damage  and  expense  whatsoever,  as  incurred,  to the  extent of the
         aggregate  amount paid in  settlement  of any  litigation  involving or
         affecting the Selling Shareholders,  or any investigation or proceeding
         by any governmental agency or body, commenced or threatened,  involving
         or  affecting  the  Selling  Shareholders,  or of any claim  whatsoever
         described in clauses (i) or (ii) above,  if such settlement is effected
         with the written  consent of the  Selling  Shareholders  which  consent
         shall not be unreasonable withheld;

                  (iv)  from and  against  any and all  expense  whatsoever,  as
         incurred  (including,  subject  to  Section  6.2  hereof,  the fees and
         disbursements  of  counsel  chosen by the Dealer  Manager),  reasonably
         incurred  in  investigating,  preparing  for or  defending  against any
         litigation,  or  any  investigation,   proceeding  or  inquiry  by  any
         governmental  agency or body,  commenced  or  threatened,  or any claim
         whatsoever  described in clauses (i) or (ii) above,  to the extent that
         any such expense is not paid


                                                        24

<PAGE>



         under (i),  (ii) or (iii) above whether or not the purchase and sale of
         the shares of Common  Stock is  consummated,  except to the extent that
         any such expense is incurred in connection  with a final  judgment by a
         court of competent  jurisdiction  to have resulted  primarily  from the
         Dealer Manager's gross negligence or willful misconduct; and

                  (v) In addition to, and without  limiting,  the  provisions of
         Section 6.3 hereof,  in the event that the Dealer Manager,  any person,
         if any, who controls the Dealer  Manager  within the meaning of Section
         15 of the  Securities  Act or Section 20 of the  Exchange Act or any of
         its partners, directors, officers, employees and agents is requested or
         required to appear as a witness or  otherwise  gives  testimony  in any
         action, proceeding, investigation or inquiry involving or affecting the
         Selling  Shareholders,  which is  brought by or on behalf of or against
         the Selling Shareholders, the Dealer Manager or any of their respective
         affiliates  in which the Dealer  Manager or such person or agent is not
         named as a defendant,  the Selling  Shareholders agree to reimburse the
         Dealer Manager for all reasonable and necessary  out-of-pocket expenses
         incurred by it in connection  with  preparing or appearing as a witness
         or otherwise giving testimony.

         Section 6.4 Notice. Any party seeking indemnification shall give notice
as promptly as reasonably  practicable to the other parties hereto of any action
commenced  against it, but failure to so notify the other  parties  hereto shall
not relieve the party seeking  indemnification  from any liability  which it may
have otherwise than on account of this indemnity agreement.

                                   ARTICLE VII
                                  CONTRIBUTION

         Section 7.1  Contribution.  In order to provide for just and  equitable
contribution in circumstances in which the indemnity  agreement  provided for in
Article VI hereof is for any reason held to be  unenforceable by the indemnified
parties   although   applicable  in  accordance  with  its  terms,  the  Selling
Shareholders,  the Company and the Bank and the Dealer Manager shall  contribute
to the aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by said indemnity  agreement incurred by the Selling  Shareholders,
the  Company  and  the  Bank  and  the  Dealer  Manager,  as  incurred,  in such
proportions  (i)  that the  Dealer  Manager  is  responsible  for  that  portion
represented  by the  percentage  that the Fee  received  by the  Dealer  Manager
pursuant to this  Agreement  (before  deducting  expenses)  bears to the maximum
aggregate gross proceeds from the sale of the shares of Common Stock pursuant to
this Agreement and the Purchase  Agreement and the Selling  Shareholders and the
Company and the Bank  severally but not jointly  responsible  for the balance or
(ii) if,  but only if,  the  allocation  provided  for in clause  (i) is for any
reason held  unenforceable,  in such proportion as is appropriate to reflect not
only the relative  benefits to the Selling  Shareholders and the Company and the
Bank on the one hand and the Dealer Manager on the other, as reflected in clause
(i), but also the relative fault of the Selling Shareholders and the Company and
the Bank on the one hand and the Dealer  Manager  on the  other,  as well as any
other


                                                        25

<PAGE>



relevant  equitable  considerations.  The relative  fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged  omission to state a material fact
relates to  information  supplied  by the  Company  and the Bank or the  Selling
Stockholders on the one hand or the Dealer Manager on the other and the parties'
relative intent, knowledge,  access to information and opportunity to correct or
prevent   such   statement  or  omission.   No  person   guilty  of   fraudulent
misrepresentation  (within the meaning of Section 11(f) of the  Securities  Act)
shall be  entitled  to  contribution  from any person who was not guilty of such
fraudulent misrepresentation.  For purposes of this Article VII, each person, if
any,  who controls  the Dealer  Manager  within the meaning of Section 15 of the
Securities  Act or Section 20 of the  Exchange Act shall have the same rights to
contribution  as the Dealer  Manager,  and each  director of the Company and the
Bank shall have the same  rights to  contribution  as the  Company and the Bank.
Notwithstanding  anything  to the  contrary  set  forth  herein,  to the  extent
permitted by applicable law, in no event shall the Dealer Manager be required to
contribute  an  aggregate  amount in excess of the Fee  received  by the  Dealer
Manager pursuant to this Agreement (before deducting expenses),  and in no event
shall the Selling  Shareholders be required to contribute an amount in excess of
the gross proceeds  received by them pursuant to the Purchase and Sale Agreement
and this Agreement.

         Notwithstanding  the foregoing,  the contribution  provided for in this
Article  VII shall not apply to the Company and the Bank to the extent that such
contribution  by the Bank is found in a final  judgment by a court of  competent
jurisdiction  to  constitute  a covered  transaction  under  Section  23A of the
Federal Reserve Act.

                                  ARTICLE VIII
                     BUSINESS COMBINATION ADVISORY SERVICES
                           AND RIGHT OF FIRST REFUSAL

         Section  8.1  Purpose.  The Dealer  Manager  will assist the Company in
connection with (a) general financial advice,  (b) structuring  potential equity
or debt financings,  (c) modeling the Company's financial  projections,  and (d)
identifying  and  structuring  potential  strategic  alliances  and/or  business
combinations.  In connection therewith, the Dealer Manager will conduct a review
of the business operations and financial  condition of the Company.  The Company
and the Dealer  Manager  agree that  during the  Engagement  Period (as  defined
below),  the Dealer  Manager  shall  introduce  the Company to and/or advise the
Company  with  respect  to  persons  or  entities  (collectively,   the  "Target
Business")  with whom the  Company  may effect a (i)  merger,  (ii)  exchange of
capital stock, (iii) asset acquisition or disposition,  (iv) sale of one or more
product  lines,  subsidiaries  or  divisions,  (v) joint  venture  or  strategic
alliance, or (vi) other similar business combinations (collectively, a "Business
Combination").  If the Company  pursues a Business  Combination  with any Target
Business  during such  Engagement  Period,  it shall utilize the services of the
Dealer Manager as provided herein.



                                                        26

<PAGE>



         Section 8.2 Engagement  Period. The Company agrees to engage the Dealer
Manager to act as its exclusive  financial  advisor to assist the Company as set
forth above for a period of eighteen (18) months  commencing on the Closing Date
(the "Engagement Period").

         Section 8.3       Compensation.

         (a) If a Business  Combination  is  consummated  during the  Engagement
Period,  the Dealer  Manager  shall be paid a fee equal to a  percentage  of the
value of the consideration paid for a Business Combination as follows: 5% on the
first $1,000,000 of consideration; 4% of the second $1,000,000 of consideration;
3% of the third $1,000,000 of consideration;  and 2% of the  consideration  over
$3,000,000  (collectively,  the "Advisory Fee"). The value of such consideration
shall  include  cash,   securities,   assumption  of  debt  and  all  contingent
consideration. If the consideration paid by or to the Company in connection with
any Business Combination is in securities,  the value of the consideration shall
be  deemed to be  closing  price of such  securities  on the last  trading  date
immediately prior to the closing of the Business Combination.  If the securities
are not  publicly  traded,  the  value  shall  be the fair  market  value of the
securities.

         (b) If a Business  Combination  is  consummated  during the  Engagement
Period with a Target  Business  introduced to the Company by the Dealer  Manager
(and such Target  Business was identified in a writing  delivered to the Company
by the Dealer Manager at the time of introduction), the Company shall also issue
to the Dealer Manager five year warrants to acquire an amount of common stock of
the  surviving  company  equal  to  five  percent  (5%)  of  the  value  of  the
consideration paid for such Business Combination (the "Advisory Warrants").  The
exercise price of each Advisory Warrant shall be equal to the closing price of a
share of  common  stock  of the  surviving  company  on the  last  trading  date
immediately prior to the closing of the Business  Combination.  If such security
is not  publicly  traded,  then the  exercise  price  shall be equal to the fair
market  value of a share of common  stock of the  surviving  company on the date
prior to the closing of the Business  Combination.  The Advisory  Warrants shall
have customary  antidilution  provisions  relating to mergers,  reorganizations,
recapitalizations and other corporate  reorganizations,  piggyback  registration
rights, and one demand registration right.

         (c) If the  Company  completes  a  Business  Combination  with a Target
Business  at any time  from  the  Closing  until  the  date  which is two  years
thereafter,  for which the Dealer Manager  provided advice to the Company during
the Engagement Period, as specified herein, the Dealer Manager shall be entitled
to receive a Advisory  Fee in  accordance  with Section  8.3(a).  If the Company
completes  a  Business  Combination  with a Target  Business  introduced  to the
Company  by the  Dealer  Manager,  at any  time as  specified  in the  preceding
sentence,  the Dealer  Manager shall be entitled to receive the Advisory Fee and
the Advisory  Warrants in accordance  with  Sections  8.3(a) and (b). The Dealer
Manager shall provide to the Company,  in writing,  a list of Target  Businesses
covered by Section 8.3(c) at the end of the Engagement Period.

         Section 8.4  Payment of Advisory Fees.  The  Advisory  Fee  shall  be
payable by wire transfer and the Advisory Warrants shall be issued to the Dealer
Manager both at the closing of a


                                                        27

<PAGE>



Business Combination,  except that any Advisory Fee in respect of any contingent
consideration shall be payable whenever such consideration is paid. All Advisory
Fees and expenses set forth herein shall be paid in New York Clearinghouse Funds
to the Dealer Manager.

         Section 8.5 Expenses.  The Company shall  reimburse the Dealer  Manager
for its actual  out-of-pocket  expenses  including,  but not  limited to travel,
subject to prior  approval  by the  Company,  incurred  in  connection  with any
services provided hereunder.

         The  Dealer  Manager  will  not  bear  any  of  the  Company's   legal,
accounting,  printing  or other  expenses  in  connection  with any  transaction
considered  or  consummated.  Neither  the Dealer  Manager,  nor the  directors,
employees and agents of the Dealer Manager will be  responsible  for any fees or
commissions  payable to any finder or to any other  financial  or other  advisor
utilized or retained by the Company.

         Section 8.6  Indemnification.  With respect to any services provided by
the Dealer Manager hereunder during the Engagement Period, the Company agrees to
indemnify  the Dealer  Manager in accordance  with the  provisions of Appendix D
hereto, which is incorporated by reference and made a part hereof.

         Section 8.7 Limitation on Use of Advice. Nothing contained herein shall
require the Company to enter into any transaction  presented to it by the Dealer
Manager, which decision shall be at the Company's sole discretion.

         Section 8.8 Right of First Refusal.  During the period of eighteen (18)
months from the Closing  Date,  the Dealer  Manager  shall have a right of first
refusal to act as a placement agent and/or  managing  underwriter for any public
or private distribution of the Company's Capital Securities, as appropriate. The
Dealer  Manager  shall have  twenty (20) days from the date on which it receives
from the Company a written financing proposal from a broker/dealer  unaffiliated
with the Dealer Manager,  to provide a comparable  financing proposal in writing
to the Company.  If the Dealer  Manager does not provide a comparable  financing
proposal under the terms hereof, the Company may pursue a financing  transaction
with such  unaffiliated  broker/dealer.  If the Dealer  Manager  does  provide a
comparable  proposal  and the  Company  wishes to pursue  such  distribution  of
securities  with a  broker/dealer  unaffiliated  with the  Dealer  Manager,  the
Company may purchase  this right of first  refusal  from the Dealer  Manager for
$100,000, which may be paid in cash or securities, at the option of the Company.

                                   ARTICLE IX
                                  MISCELLANEOUS

         Section 9.1 Survival of Provisions. All representations, warranties and
agreements  contained  in  this  Agreement  by each of the  parties  hereto,  or
contained in certificates of officers of the Selling Shareholders or the Company
and the Bank submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of the


                                                        28

<PAGE>



Dealer  Manager  or  controlling  person,  or by or on  behalf  of  the  Selling
Shareholders  or the Company  and the Bank,  in each case,  with  respect to the
other parties to this  Agreement,  and shall  survive  delivery of the shares of
Common Stock.

         Section 9.2       Termination.

         (a) The Dealer  Manager may terminate  this Agreement at any time at or
prior  to the  Closing  Date  (i) if  there  has  been,  since  the date of this
Agreement or since the respective dates as of which  information is given in the
Confidential  Private Placement  Memorandum,  any material adverse change in the
financial condition, results of operations or business affairs of the Company or
the Bank, or the Company and the Bank considered as one  enterprise,  whether or
not arising in the ordinary  course of business,  (ii) if there has occurred any
material  adverse  change in the  financial  markets in the United States or any
outbreak of  hostilities  or escalation  thereof or other calamity or crisis the
effect of which,  in the  reasonable  judgment  of the  Dealer  Manager,  are so
material and adverse as to make it  impracticable to market the shares of Common
Stock or to enforce contracts for the sale of the shares of Common Stock,  (iii)
if trading generally on either the American Stock Exchange or the New York Stock
Exchange has been suspended,  or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices for securities have been required, by either
of said  exchanges  or by  order of the  Commission  or any  other  governmental
authority, or if a banking moratorium has been declared by either Federal or New
Jersey  authorities,  (iv) if there shall have been such material adverse change
in the  condition  or prospects  of the Company and the Bank  considered  as one
enterprise  or the  prospective  market for the  Company's  securities as in the
Dealer  Manager's  good faith opinion would make it  inadvisable to proceed with
the offering,  sale or delivery of the shares of Common Stock,  or (v) if any of
the conditions  specified in Sections 4.1 and 4.2 have not been met or waived by
it pursuant to the terms of this Agreement by 5:00 p.m., Eastern Time on May 26,
2000 (which may be extended  up through  July 15, 2000  pursuant to the terms of
the Letter of  Intent).  The Dealer  Manager  shall  provide the Company and the
Selling Shareholders with 5 days prior written notice of termination pursuant to
this Section 9.2(a).

         (b) The Selling Shareholders may terminate this Agreement if any of the
conditions  specified  in Sections  4.1 and 4.3 has not been met or waived by it
pursuant to the terms of this  Agreement  by 5:00 p.m.,  Eastern Time on May 26,
2000 (which may be extended  through July 15, 2000  pursuant to the terms of the
Letter of Intent). The Selling Shareholders shall provide the Dealer Manager and
the Company with 5 days written notice of  termination  pursuant to this Section
9.2(b).

         (c) The Company may terminate  this  Agreement if any of the conditions
specified in Sections 4.1 and 4.4 of this  Agreement  has not been met or waived
by it pursuant to the terms of this Agreement by 5:00 p.m.,  Eastern Time on May
26, 2000 (which may be extended  through July 15, 2000  pursuant to the terms of
the Letter of Intent).  The  Company  shall  provide the Dealer  Manager and the
Selling  Shareholders  with 5  days  prior  written  notice  of any  termination
pursuant to this Section 9.2(c) hereof.



                                                        29

<PAGE>



         (d) If this  Agreement is  terminated  pursuant to this  Section,  such
termination  shall be without  liability  of any party to any other party except
that the provisions of Articles VI and VII hereof shall survive any  termination
of this Agreement.

         Section 9.3 Waiver;  Amendments. No failure or delay on the part of any
party hereto in exercising any right, power or remedy hereunder shall operate as
a waiver  thereof,  nor shall any single or partial  exercise of any such right,
power or remedy preclude any other or further  exercise  thereof or the exercise
of any other  right,  power or  remedy.  The  remedies  provided  for herein are
cumulative  and are not  exclusive of any remedies  that may be available to the
parties hereto at law or in equity.  No waiver of or consent to any departure by
the parties  hereto from any  provision  of this  Agreement  shall be  effective
unless signed in writing by the party entitled to the benefit thereof. Except as
otherwise  provided  herein,  no amendment,  modification  or termination of any
provision of this Agreement shall be effective unless signed in writing by or on
behalf of the parties hereto. Any amendment,  supplement or modification of this
Agreement, any waiver of any provision of this Agreement, and any consent to any
departure from the terms of any provision of this Agreement,  shall be effective
only in the specific  instance  and for the  specific  purpose for which made or
given. Except where notice is specifically required by this Agreement, no notice
to or demand on any party hereto in any case shall entitle  another party hereto
to any other or further notice or demand in similar or other circumstances.

         Section   9.4   Communications.   All   notices,   demands   and  other
communications  provided for or permitted  hereunder shall be made in writing by
hand-delivery,  registered first-class mail, telex,  telecopier,  or air courier
guaranteeing overnight delivery:

          (i) if to the  Selling  Shareholders,  to c/o  Robert  DeMane,  Dollar
     Bancorp,   Inc.,  893  Franklin  Avenue,  Newark,  New  Jersey  07107,  and
     thereafter  at such other  address  notice of which is given in  accordance
     with this Section 9.4;

          (ii) if to the Company,  initially at 893 Franklin Avenue, Newark, New
     Jersey 07107, Attention:  President;  and thereafter at such other address,
     notice of which is given in accordance with this Section 9.4.; and

          (iii) if to the Dealer  Manager,  initially at 5777 W. Century  Blvd.,
     Suite 1605, Los Angeles,  California 90045, Attention: Hugh Kretschmer; and
     thereafter  at such other  address  notice of which is given in  accordance
     with this Section 9.4.

         All such notices and  communications  shall be deemed to have been duly
given:  at the time  delivered by hand, if personally  delivered;  five Business
Days after being sent by certified mail,  return receipt  requested,  if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next  Business  Day if timely  delivered  to an air courier  guaranteeing
overnight delivery.



                                                        30

<PAGE>



         Section 9.5 Entire Agreement; Amendment. This Agreement and the Related
Agreements  represent  the  entire  understanding  of the  parties  hereto  with
reference to the  transactions  contemplated  hereby and  supersede  any and all
other oral or written agreements heretofore made. Specifically and not by way of
limitation,  the terms of the Letter of Intent shall  continue in full force and
effect to the extent that its terms are not inconsistent  with the terms of this
Agreement. No waiver, amendment or other modification of this Agreement shall be
effective unless in writing and signed by the parties hereto.

         Section 9.6 Governing Law and Time. This Agreement shall be governed by
and construed in accordance with the laws of the State of California  applicable
to  agreements  made and to be  performed  in said State  without  regard to the
conflicts of laws provisions thereof. Unless otherwise noted, specified times of
day refer to Eastern time.

         Section 9.7 Consent to Jurisdiction. The parties to this Agreement each
irrevocably consent to the jurisdiction of the courts of the State of California
and of any federal court located in such state in connection  with any action or
proceeding arising out of or related to this Agreement or any Related Agreement,
any document or  instrument  delivered  pursuant to or in  connection  with this
Agreement or any Related Agreement,  or a breach of this Agreement,  any Related
Agreement or any document or instrument delivered with respect to this Agreement
or any Related Agreement.

         Section 9.8 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction  shall, as to that jurisdiction,
be  ineffective  to the extent of such  invalidity or  unenforceability  without
rendering  invalid or  unenforceable  the remaining terms and provisions of this
Agreement or affecting  the  validity or  enforceability  of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.

         Section 9.9 Headings and Gender.  The Article and Section  headings and
Table of Contents  used or contained in this  Agreement are for  convenience  of
reference only and shall not affect the construction of this Agreement. Use of a
particular  gender  herein  shall be  considered  to  represent  the  masculine,
feminine or neuter gender whenever appropriate.


                                                        31

<PAGE>



         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

                                            DOLLAR BANCORP, INC.



                                            By:      \s\ Robert DeMane
                                            Name:    Robert DeMane
                                            Title:   President and Chief
                                                       Executive Officer


                                            DOLLAR SAVINGS BANK



                                            By:      \s\ Robert DeMane
                                            Name:    Robert DeMane
                                            Title:   President and Chief
                                                       Executive Officer


                                            THE SELLING SHAREHOLDERS


                                            By:      \s\ Robert DeMane
                                            Name:    Robert DeMane
                                            Title:   Attorney-in-Fact


CONFIRMED AND ACCEPTED, as of the date first above written:

NATIONAL SECURITIES CORPORATION


By:      \s\ Steven Rothstein
Name:    Steven Rothstein
Title:   Chairman of the Board




                                                        32

<PAGE>



                                                                      APPENDIX A






















                             DEALER MANAGER WARRANT




                                                        33

<PAGE>



         NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK  ISSUABLE  UPON THE
EXERCISE  HEREOF  HAVE BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS
AMENDED (THE  "SECURITIES  ACT"). THE HOLDER HEREOF,  BY ITS ACCEPTANCE  HEREOF,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS WARRANT MAY BE OFFERED,  SOLD OR
OTHERWISE  DISPOSED OF ONLY (1) TO THE  COMPANY,  (2) SO LONG AS THIS WARRANT IS
ELIGIBLE  FOR  RESALE  PURSUANT  TO RULE 144A  UNDER THE  SECURITIES  ACT ("RULE
144A"),  TO A  PERSON  WHOM  THE  SELLER  REASONABLY  BELIEVES  IS A  "QUALIFIED
INSTITUTIONAL  BUYER," AS DEFINED IN RULE 144A,  THAT IS PURCHASING  FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED  INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE SALE OR OTHER DISPOSITION IS BEING MADE IN RELIANCE ON RULE 144A,
(3) PURSUANT TO AN EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE), (4) TO AN "ACCREDITED INVESTOR" AS DEFINED IN
RULE 501 UNDER THE SECURITIES  ACT  ("ACCREDITED  INVESTOR"),  THAT IS ACQUIRING
THIS  WARRANT  FOR ITS OWN  ACCOUNT OR FOR THE  ACCOUNT  OF  ANOTHER  ACCREDITED
INVESTOR FOR INVESTMENT  PURPOSES AND NOT FOR  DISTRIBUTION  IN VIOLATION OF THE
SECURITIES  ACT,  IF A  SIGNED  CERTIFICATION  LETTER  (A FORM OF  WHICH  MAY BE
OBTAINED FROM THE COMPANY) IS DELIVERED BY THE  TRANSFEREE TO THE COMPANY OR (5)
PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE SECURITIES  ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE  SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES, AND IN EACH CASE SUBJECT TO THE RIGHT OF THE COMPANY PRIOR TO ANY
SUCH OFFER,  SALE OR  DISPOSITION  PURSUANT TO CLAUSE (2), (3) OR (4) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL,  CERTIFICATIONS  AND/OR OTHER INFORMATION
REASONABLY SATISFACTORY TO THE COMPANY.


                                        Void After 5:00 p.m., Eastern Time,
                                               on ________ __, 2005


No. 1


                                                         1

<PAGE>



                              DOLLAR BANCORP, INC.

                Warrant to Purchase ______ Shares of Common Stock
                             (Subject to Adjustment)


         THIS  CERTIFIES   THAT,  FOR  VALUE   RECEIVED,   National   Securities
Corporation or its registered  assigns (the  "Holder"),  is entitled to purchase
from Dollar Bancorp,  Inc. (the "Company"),  subject to the terms and conditions
set forth hereinafter, _______ fully paid and nonassessable shares of the Common
Stock,  $0.01 par value per share,  of the Company  (the  "Common  Stock") at an
exercise  price of $2.00 per share upon surrender of this Warrant to the Company
at the  Company's  principal  office  in  Newark,  New  Jersey  with the form of
election  to  purchase  attached  to this  Warrant  duly  completed  and signed,
together  (except in the case of a cashless  exercise,  as set forth below) with
payment of the exercise  price by wire transfer or other payment of  immediately
available funds. The exercise price and the number of shares of Common Stock for
which this Warrant is exercisable  are subject to change or adjustment  upon the
occurrence of certain events as set forth below.

Section 1.        Duration and Exercise of Warrants.

         1.1 (a) This Warrant may be exercised on or after  _________,  2000 and
will expire at 5:00 p.m.,  Eastern Time, on  __________,  2005 (the  "Expiration
Date"). On the Expiration Date, all rights evidenced by this Warrant shall cease
and this Warrant shall become void.

                  (b) Subject to the provisions of this Warrant,  the registered
Holder of this  Warrant  shall have the right to purchase  from the Company (and
the Company shall issue and sell to such registered  Holder) the number of fully
paid and  nonassessable  shares  of  Common  Stock set forth on the face of this
Warrant (or such number of shares of Common Stock as may result from adjustments
made from time to time as provided  herein),  at the price of $2.00 per share in
lawful money of the United States of America (such exercise price per share,  as
adjusted from time to time as provided  herein,  being referred to herein as the
"Exercise  Price"),  upon (i)  surrender  of this  Warrant to the Company at the
Company's principal office in Newark, New Jersey with the exercise form attached
hereto duly  completed and signed by the registered  Holder or Holders  thereof,
and (ii)  except in the case of a  cashless  exercise,  as set forth in  Section
1.1(c) below, payment by wire transfer or other payment of immediately available
funds,  in lawful money of the United States of America,  of the Exercise  Price
for the  shares  of  Common  Stock in  respect  of which  this  Warrant  is then
exercised (and any applicable transfer taxes pursuant to Section 2 hereof). Upon
surrender of this Warrant,  and payment of the Exercise  Price as provided above
(except in the case of a cashless  exercise),  the Company shall  promptly issue
and cause to be delivered to or upon the written order of the registered  Holder
of this  Warrant  and in such  name or  names  as  such  registered  holder  may
designate,  a  certificate  or  certificates  for the number of shares of Common
Stock so purchased  upon the exercise of this Warrant,  together with payment in
respect of any fraction of a share of Common Stock  issuable upon such surrender
pursuant to Section 11 hereof.

                  (c) Notwithstanding  the provisions  governing the exercise of
this Warrant set forth in Section 1.1(b) above,  the  registered  Holder of this
Warrant may exercise this Warrant  without paying the applicable  Exercise Price
upon surrender of this Warrant to the Company at the


                                                         2

<PAGE>



Company's principal office in Newark, New Jersey with the exercise form attached
hereto duly completed and signed by the registered Holder or Holders thereof. In
such event, the Holder will receive upon exercise the number of shares of Common
Stock otherwise issuable upon such exercise, less the number of shares of Common
Stock having an aggregate  Current Market Price (as defined  herein) on the date
of exercise  equal to the Exercise  Price  multiplied by the number of shares of
Common Stock for which this Warrant is being exercised and/or by delivery to the
Company  by the  Holder  of the  number of  shares  of  Common  Stock  having an
aggregate  Current  Market  Price on the date of exercise  equal to the Exercise
Price  multiplied by the number of shares of Common Stock for which this Warrant
is being exercised.

         For purposes of this  Warrant,  the term  "Current  Market Price" shall
mean (i) if the shares of Common Stock are traded on the Nasdaq  National Market
("NNM") or on a national securities exchange, the per share closing price of the
shares of Common  Stock on the date of exercise  of this  Warrant or (ii) if the
shares of Common Stock are traded in the over-the-counter  market and not in the
NNM or a national securities exchange,  the average of the per share closing bid
prices of the shares of Common Stock during the thirty (30) consecutive  trading
days  immediately  preceding  the date in  question,  as  reported by the Nasdaq
SmallCap  Market  (or an  equivalent  generally  accepted  reporting  service if
quotations are not reported on the Nasdaq  SmallCap  Market).  The closing price
referred  to in clause (i) above  shall be the last  reported  sale price or, in
case no such  reported sale takes place on such day, the average of the reported
closing  bid and asked  prices,  in either  case in the NNM or on the  principal
stock exchange on which the shares of Common Stock are then listed. For purposes
of clause (ii) above,  if trading in the shares of Common  Stock is not reported
by the Nasdaq SmallCap Market, the bid price referred to in said clause shall be
the lowest bid price as reported in the Nasdaq Electronic  Bulletin Board or, if
not reported thereon,  as reported in the "pink sheets" published by Nasdaq, and
if the shares of Common Stock are not so reported,  shall be  determined  by the
price of a share of Common Stock  determined by the Company's Board of Directors
in good faith.

                  (d) The exercise of this Warrant  shall be deemed to have been
effected  immediately  prior to the close of  business on the  Business  Day (as
defined in Section 17 hereof) on which the Holder surrenders this Warrant to the
Company and payment of the Exercise  Price (and any  applicable  transfer  taxes
pursuant to Section 2 hereof) is made, and at such time the person in whose name
any  certificate for shares of Common Stock shall be issuable upon such exercise
shall be deemed to be the record  holder of such shares of Common  Stock for all
purposes.

         1.2 In the  event  that less  than all of the  shares  of Common  Stock
represented by this Warrant are exercised on or prior to the Expiration  Date, a
new  Warrant,  duly  executed by the Company,  will be issued for the  remaining
number  of shares  of  Common  Stock  exercisable  pursuant  to the  Warrant  so
surrendered,  and the Company shall deliver the required new Warrant pursuant to
the provisions of this Section 1.

         1.3 The  number  of  shares of  Common  Stock to be  received  upon the
exercise of this Warrant and the Exercise  Price are subject to adjustment  from
time to time as hereinafter set forth.



                                                         3

<PAGE>



Section 2.        Payment of Taxes.

         The Company will pay all stamp transfer and other similar taxes payable
in  connection  with the  original  issuance  of this  Warrant and the shares of
Common Stock issuable upon exercise thereof, provided, however, that the Company
shall not be required to (i) pay any such tax which may be payable in respect of
any transfer involving the transfer and delivery of this Warrant or the issuance
or delivery of  certificates  for shares of Common Stock  issuable upon exercise
thereof in a name other than that of the  registered  Holder of this  Warrant or
(ii)  issue or  deliver  any  certificate  for  shares of Common  Stock upon the
exercise of this Warrant until any such tax required to be paid under clause (i)
shall have been paid,  all such tax being  payable by the holder of this Warrant
at the time of surrender.

Section 3.        Mutilated or Missing Warrants.

         In case this Warrant shall be mutilated, lost, stolen or destroyed, the
Company  will  issue and  deliver  in  exchange  and  substitution  for and upon
cancellation of, the mutilated Warrant,  or in substitution for the lost, stolen
or  destroyed  Warrant,  a new  Warrant of like tenor  evidencing  the number of
shares of Common Stock  purchasable  upon  exercise of the Warrant so mutilated,
lost, stolen or destroyed, but only upon receipt of evidence satisfactory to the
Company of such loss, theft or destruction of such Warrant and an indemnity,  if
requested,  reasonably satisfactory to it. Any such new Warrant shall constitute
an original contractual obligation of the Company,  whether or not the allegedly
lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.

Section 4.        Reservation of Warrant Shares.

         The Company  shall at all times  reserve for issuance and delivery upon
exercise of this  Warrant  such number of shares of Common Stock or other shares
of capital  stock of the  Company as from time to time  shall be  issuable  upon
exercise of this  Warrant.  All such shares shall be duly  authorized  and, when
issued  upon  such   exercise,   shall  be  validly   issued,   fully  paid  and
nonassessable,  free and clear of all liens,  security  interests,  charges  and
other encumbrances and free and clear of all preemptive rights. After 5:00 p.m.,
Eastern Time, on the Expiration Date, no shares of Common Stock shall be subject
to reservation in respect of this Warrant.

Section 5.        Restrictions on Transfer; Registration Rights.

         Neither  this  Warrant  nor the shares of Common  Stock  issuable  upon
exercise  thereof may be sold,  transferred or otherwise  disposed of, except in
accordance  with and subject to the provisions of the Securities Act of 1933, as
amended  (the  "Securities  Act"),  and the  rules and  regulations  promulgated
thereunder.  The Holder shall have the right to register, in connection with any
public offering by the Company (other than a registration statement filed by the
Company on Form S-4 or Form S-8 or any respective  successor  forms thereto) all
of the shares of Common  Stock  issued  pursuant to this  Warrant  ("Registrable
Securities").  In  the  event  the  Company  proposes  to  register  any  of its
securities in connection with a public offering,  it will give written notice to
the  Holder,  at least  thirty  (30) days prior to the filing of a  registration
statement,  of its  intention  to do so. Upon the written  request of the Holder
given within  fifteen (15) days after receipt of any such notice of the Holder's
desire  to  have  its  Registrable  Securities  included  in  such  registration
statement,  the Company  shall afford such Holder the  opportunity  to have such
Holder's Registrable Securities


                                                         4

<PAGE>



registered under such registration.  Notwithstanding the foregoing,  the Company
shall  have the  right at any time  after it shall  have  given  written  notice
(irrespective of whether a written request for inclusion of any such Registrable
Securities  shall  have  been  made)  to elect  not to file  any  such  proposed
registration  statement,  or to withdraw  the same after the filing but prior to
the effective date thereof.  The  registration  rights provided  hereunder shall
expire at such time as all of the Holder's  Registrable  Securities  (other than
Registrable  Securities held by affiliates of the Company) are saleable  without
volume limitations pursuant to Rule 144 of the Securities Act.

Section 6.        Rights and Liability of Warrant Holder.

         The  Holder  of this  Warrant  shall  not,  by virtue  thereof,  be (i)
entitled  to any rights of a  stockholder  of the  Company,  either at law or in
equity,  and the rights of such holder are limited to those expressed herein, or
(ii) subject to any liability as a stockholder of the Company.

Section 7.        Adjustments of Exercise Price and Number of Shares of Common
                  Stock.

         The  Exercise  Price and the number and kind of shares of Common  Stock
issuable  upon the  exercise  of this  Warrant  will be  subject  to  change  or
adjustment from time to time as set forth in this Section 7. In the event of any
change in the Common Stock by reason of a stock dividend, stock split (including
a reverse stock split),  split-up,  recapitalization,  combination,  exchange of
shares or  similar  transaction,  the type and  number  of shares or  securities
subject  to this  Warrant  and the  Exercise  Price  thereof  shall be  adjusted
appropriately,  and proper  provision shall be made in the agreements  governing
such  transactions  so that the  Holder  of this  Warrant  shall  receive,  upon
exercise of this Warrant,  the number and class of shares or other securities or
property  that the Holder of this Warrant  would have received in respect of the
Common Stock if this Warrant had been exercised immediately prior to such event,
or the record date therefor, as applicable.

Section 8.        Reorganizations and Asset Sales.

         If any capital  reorganization or reclassification of the capital stock
of the  Company,  or  consolidation  or  merger  of  the  Company  with  another
corporation,  or the sale of all or  substantially  all of its assets to another
corporation  shall be effected in such a way that  holders of Common Stock shall
be  entitled  to  receive  stock,  securities  or assets  with  respect to or in
exchange  for  Common  Stock,  then,  as a  condition  of  such  reorganization,
reclassification,  consolidation,  merger or sale, lawful and adequate provision
shall be made whereby the Holder of this Warrant shall thereafter have the right
to  purchase  and  receive,  upon the basis  and upon the  terms and  conditions
specified in this Warrant and in lieu of the shares of Common Stock  immediately
theretofore   purchasable  and  receivable  upon  the  exercise  of  the  rights
represented hereby, such shares of stock,  securities or assets as may be issued
or payable  with  respect to or in exchange for a number of shares of such stock
immediately  theretofore  purchasable  and  receivable  upon the exercise of the
rights   represented   hereby   had   such   reorganization,   reclassification,
consolidation,  merger or sale not taken place, and in any such case appropriate
provision  shall be made with respect to the rights and  interests of the Holder
of this  Warrant  to the end  that  the  provisions  hereof  (including  without
limitation provisions for adjustments of the Exercise Price and of the number of
shares  purchasable  upon the  exercise of this  Warrant)  shall  thereafter  be
applicable,  as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof. The Company shall not
effect any such consolidation,  merger or sale, unless prior to the consummation
thereof the successor


                                                         5

<PAGE>



corporation  (if other than the Company)  resulting from such  consolidation  or
merger or the  corporation  purchasing  such  assets  shall  assume,  by written
instrument  executed  and mailed by first class mail,  postage  prepaid,  to the
Holder  hereof at the last  address of such  Holder  appearing  on the  register
maintained by the Company,  the obligation to deliver to such Holder such shares
of stock,  securities or assets as, in accordance with the foregoing provisions,
such Holder may be entitled to purchase.

Section 9.        Notice of Adjustment.

         Whenever  the  number  of  shares  of  Common  Stock or other  stock or
property  issuable  upon the  exercise of this  Warrant is  adjusted,  as herein
provided,  the Company shall promptly mail by first class mail, postage prepaid,
to the  Holder at the last  address of such  Holder  appearing  on the  register
maintained  by the  Company,  notice  of  such  adjustment  or  adjustments.  In
addition,  the  Company  at its sole  expense  shall  within  90  calendar  days
following  the end of each fiscal year of the Company  during which this Warrant
remains  outstanding  and an  adjustment  has  occurred,  and promptly  upon the
request of the Holder of this Warrant in connection  with the exercise  thereof,
cause to be delivered to the Holder a certificate of the chief financial officer
of the Company setting forth the number of shares of Common Stock or other stock
or property  issuable upon the exercise of this Warrant  after such  adjustment,
setting  forth a brief  statement of the facts  requiring  such  adjustment  and
setting forth the computation by which such adjustment was made.

Section 10.       Statement of Warrants.

         This Warrant may continue to express the same number and kind of shares
which  may be  purchased  upon  exercise  hereof as are  stated  in the  Warrant
initially issued or any substitute Warrant issued therefor,  notwithstanding any
adjustment in the Exercise Price and/or in the number or kind of shares issuable
upon exercise of this Warrant. In the event of any such adjustment,  the Company
will, at its expense,  promptly  upon the Holder's  surrender of this Warrant to
the Company,  execute a new Warrant or Warrants  stating the Exercise  Price and
the number and kind of shares issuable upon exercise of this Warrant.

Section 11.       Fractional Interest.

         The Company shall not be required to issue fractional  shares of Common
Stock  on the  exercise  of this  Warrant.  If more  than one  Warrant  shall be
presented for exercise at the same time by the Holder, the number of full shares
of Common Stock which shall be issuable upon such exercise  shall be computed on
the basis of the  aggregate  number of shares  of  Common  Stock  acquirable  on
exercise of the  Warrants  so  presented.  If any  fraction of a share of Common
Stock would,  except for the  provisions  of this Section 11, be issuable on the
exercise of any Warrant (or specified portion thereof), the Company shall pay an
amount in cash calculated by it to be equal to the then current market price per
share multiplied by such fraction computed to the nearest whole cent. The Holder
by his acceptance of this Warrant expressly waives any and all rights to receive
any fraction of a share of Common Stock or a stock  certificate  representing  a
fraction of a share of Common Stock.



                                                         6

<PAGE>



Section 12.       Entire Agreement.

         This  Warrant  constitutes  the  full  and  entire   understanding  and
agreement  among the parties  with regard to the  subject  matter  hereof and no
party  shall be  liable  or  bound  to any  other  party  in any  manner  by any
representations,  warranties, covenants or agreements except as specifically set
forth herein or therein.

Section 13.       Successors and Assigns.

         13.1 All covenants and provisions of this Warrant by or for the benefit
of the Company or the holder of this Warrant shall bind and inure to the benefit
of their respective successors, assigns, heirs and personal representatives.

         13.2 Subject to the  requirements  of Section 5 of this  Warrant,  this
Warrant is assignable,  in whole or in part, without charge to the holder hereof
upon  surrender  of this  Warrant  with a properly  executed  assignment  at the
principal office of the Company.  Upon any partial assignment,  the Company will
at its  expense  issue and  deliver to the holder  hereof a new  Warrant of like
tenor,  in the name of the holder hereof,  which shall be  exercisable  for such
number of shares of Common Stock (or any shares of stock or other  securities at
the time issuable  upon  exercise of this  Warrant)  which were not so assigned.
Except as provided in this  Section  13.2,  this  Warrant may not be assigned or
transferred.

Section 14.       Termination.

         This  Warrant  shall  terminate  at 5:00  p.m.,  Eastern  Time,  on the
Expiration  Date or upon such earlier date on which all of this Warrant has been
exercised.

Section 15.       Headings.

         The  headings  of  sections  of this  Warrant  have been  inserted  for
convenience of reference  only, are not to be considered a part hereof and shall
in no way modify or restrict any of the terms or provisions hereof.

Section 16.       Amendments.

         This Warrant and any term hereof may be changed, waived,  discharged or
terminated only by an instrument in writing signed by the Company and the Holder
of this Warrant.

Section 17.       Notices.

         All notices, demands and other communications provided for or permitted
hereunder  shall be made in writing  by  hand-delivery,  registered  first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:

                  (a) if to the Holder of this Warrant, at the address set forth
         on the register of the Warrants  maintained by the Company,  or at such
         other address as the holder of this Warrant shall have furnished to the
         Company in writing;


                                                         7

<PAGE>



                  (b) if to the  Company,  initially  at  893  Franklin  Avenue,
         Newark, New Jersey 07107, and thereafter at such other address,  notice
         of which is given in accordance with the provisions of this Section 17.

         All such notices and  communications  shall be deemed to have been duly
given:  at the time  delivered by hand, if personally  delivered;  five Business
Days after being sent by certified mail,  return receipt  requested,  if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next  Business  Day if timely  delivered  to an air courier  guaranteeing
overnight delivery. For purposes of this Warrant, a "Business Day" means any day
except a Saturday, Sunday or other day on which commercial banks in the State of
California are authorized by law to close.

Section 18.       Benefits of This Warrant.

         Nothing in this  Warrant  shall be  construed  to give to any person or
corporation,  other than the Company and the registered  holder of this Warrant,
any legal or  equitable  right,  remedy or claim  under this  Warrant,  it being
intended that this Warrant  shall be for the sole and  exclusive  benefit of the
Company and the registered holder thereof.

Section 19.       Governing Law.

         This Warrant shall be governed by and construed in accordance  with the
laws of the State of Delaware.



         IN WITNESS WHEREOF,  the Company has caused this Warrant to be executed
by its duly authorized officer.


Dated: ________ __, 2000          DOLLAR BANCORP, INC.



                                  By:
                                  Name:    Robert DeMane
                                  Title:   President and Chief Executive Officer





                                                         8

<PAGE>



                              ELECTION TO PURCHASE

                                 Dated: ________

         The undersigned hereby  irrevocably  exercises this Warrant to purchase
_______  shares of Common  Stock and either (i) makes  payment  of  $_______  in
payment  of the  Exercise  Price  thereof  or (ii)  complies  with the  cashless
exercise  procedure set forth herein, in either case on the terms and conditions
specified in this  Warrant,  surrenders  this  Warrant and all right,  title and
interest  herein to the  Company  and  directs  that the shares of Common  Stock
deliverable  upon the exercise of this Warrant be  registered in the name and at
the address specified below and delivered thereto.


Name:________________________________________________________________
                       (Please Print)

Address:_____________________________________________________________

City, State and Zip Code:____________________________________________

If such number of shares of Common  Stock is less than the  aggregate  number of
shares of Common Stock purchasable  hereunder,  the undersigned  requests that a
new  Warrant  representing  the  balance  of such  shares  of  Common  Stock  be
registered in the name and at the address specified below and delivered thereto.


Name:________________________________________________________________
                        (Please Print)

Address:_____________________________________________________________

City, State and Zip Code:____________________________________________

Taxpayer Identification or Social Security Number:___________________


         Signature:______________________________


Note: The above signature must correspond with the name as written upon the face
of this Warrant in every  particular,  without  alteration or enlargement or any
change whatsoever.



                                                         9

<PAGE>



                                                                      APPENDIX C

                 FORM OF OPINION OF COUNSEL TO COMPANY AND BANK

         (a) The Company has been duly incorporated and is validly existing as a
corporation  in good  standing  under the laws of the State of Delaware  and has
full power and authority to own or lease all of its properties and assets and to
carry on its business as now  conducted  and is duly licensed or qualified to do
business and is in good standing in each  jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such  qualification,
except where the failure to be so licensed,  qualified or in good standing would
have a Material Adverse Effect;

         (b) The Bank is the only direct or indirect  Subsidiary of the Company,
all  the  capital  stock  of  which  is  owned  by the  Company.  The  Bank is a
federally-chartered  savings bank that has been duly incorporated and is validly
existing as a  corporation  under the laws of the United  States with full power
and authority to own or lease all of its  properties  and assets and to carry on
its business as now  conducted  and is duly licensed or qualified to do business
and is in good standing in each  jurisdiction  in which its ownership or leasing
of property or the conduct of its business requires such  qualification,  except
where the failure to be so licensed,  qualified or in good standing would have a
Material Adverse Effect;

         (c) The Dealer Manager  Agreement,  the Purchase and Sale Agreement and
each of the applicable  Related  Agreements have been duly authorized,  executed
and  delivered  by the Company  and the Bank;  the Company and the Bank have the
corporate  power and authority to perform each of their  respective  obligations
under the Dealer Manager Agreement,  the Purchase and Sale Agreement and each of
the  applicable  Related  Agreements;  and the  Dealer  Manager  Agreement,  the
Purchase  and Sale  Agreement  and  each of the  applicable  Related  Agreements
constitute valid and binding obligations of the Company and the Bank enforceable
against the  Company  and the Bank in  accordance  with their  terms,  except as
rights to indemnity and contribution  thereunder may be limited under applicable
law, and subject to bankruptcy, fraudulent conveyance,  insolvency,  moratorium,
reorganization  or other laws  heretofore  or hereafter  enacted  relating to or
affecting  the  rights  of  creditors  generally,  and by  equitable  principles
limiting the right to obtain  specific  performance  or other similar  equitable
relief (regardless of whether such  enforceability is considered in a proceeding
in equity or at law);

         (d) The  execution and delivery by the Company and the Bank of, and the
full  and  timely  performance  by the  Company  and the  Bank of each of  their
respective obligations under the Dealer Manager Agreement, the Purchase and Sale
Agreement and each of the applicable  Related Agreements do not conflict with or
constitute a breach of, or a default under (i) the Certificate of  Incorporation
or Federal Stock Charter,  as the case may be, or the Bylaws,  of the Company or
the Bank (ii) any obligations,  agreement,  indenture,  bond,  debenture,  note,
instrument or other evidence of indebtedness to which the Company or the Bank is
a party or as to which any of their respective assets are subject,  or (iii) any
law, ordinance,  order, license, rule or other regulation or demand of any court
or governmental agency, arbitration panel or authority applicable to the Company
or the Bank,  except,  in the case of  clauses  (ii) and (iii)  above,  for such
conflicts,  breaches  or  defaults  which  would  not,  individually  or in  the
aggregate, have a Material Adverse Effect. The opinion set forth in clause (iii)
of the preceding sentence are limited to the Delaware General Corporation Law,


                                                        C-1

<PAGE>



Federal and State banking and securities  laws,  ordinances,  orders,  licenses,
rules  or  regulations,  and are made in  reliance  on the  representations  and
warranties of the  Purchasers  contained in Section 3.3 of the Purchase and Sale
Agreement.

         (e) Except for compliance with applicable  Federal and State securities
laws in connection  with the Dealer  Manager  Agreement,  no consent,  approval,
order or other  authorization of any governmental,  administrative or regulatory
body or agency is legally required by or on behalf of the Company or the Bank in
connection  with the execution,  delivery and  performance of the Dealer Manager
Agreement and each of the Related Agreements to which the Company or the Bank is
a party. The opinion set forth in the preceding sentence,  insofar as it relates
to Federal and State  securities and banking laws and  regulations,  are made in
reliance on the  representations  and warranties of the Purchasers  contained in
Section 3.3 of the Purchase and Sale Agreement;

         (f)  As of the  date  of  the  Dealer  Manager  Agreement,  there  were
_________  shares of Common Stock of the Company issued and  outstanding  and no
shares of Preferred Stock  outstanding.  As of the date hereof, as a result of a
stock split  effected  immediately  prior to the Closing,  there are  __________
shares of Common  Stock  issued and  outstanding,  2,000,000 of which shares are
being  transferred  and sold by the Selling  Shareholders  to the  Purchasers in
accordance  with the terms of the  Purchase  and Sale  Agreement  and the Dealer
Manager Agreement. As of the date hereof, all outstanding shares of Common Stock
have  been  duly   authorized   and  validly  issued  and  are  fully  paid  and
nonassessable and none of the outstanding shares of Common Stock has been issued
in violation of the pre-emptive rights of any Person. Except with respect to the
Dealer Manager Warrant,  there are no Stock  Equivalents  authorized,  issued or
outstanding with respect to the Capital Securities of the Company as of the date
hereof.

         (g)  The  Dealer  Manager  Warrant  issued  to the  Dealer  Manager  in
connection  with the  Closing  and the shares of Common  Stock to be issued upon
exercise  of the  Dealer  Manager  Warrant  have  each  been  authorized  by all
necessary  corporate  action on the part of the  Company.  When the  Warrant  is
delivered to the Dealer Manager at the Closing,  the Dealer Manager Warrant will
be duly  authorized,  validly  issued,  fully paid and  nonassessable  and shall
constitute a valid and binding  obligation of the Company,  enforceable  against
the  Company  in  accordance  with its terms.  When the  Common  Stock is issued
pursuant to the exercise of the Dealer Manager Warrant against payment therefore
as  provided  in the Dealer  Manager  Warrant,  such  Common  Stock will be duly
authorized,  validly issued,  fully paid and nonassessable,  and the issuance of
the  Common  Stock will not be in  violation  of the  pre-emptive  rights of any
Person.

         (h) There are no actions,  suits,  investigations  or legal proceedings
pending against, or to our knowledge threatened against, the Company or the Bank
or their respective  properties  before any court or governmental body or agency
which would reasonably be expected to have a Material Adverse Effect or which in
any manner  challenges the legality,  validity or  enforceability  of the Dealer
Manager  Agreement,  any of the Related Agreements or the Common Stock, or which
would  reasonably be expected to materially  impair the ability or obligation of
the Company to perform fully on a timely basis its obligations  under the Dealer
Manager  Agreement,  or the  Company to perform  fully on a timely  basis  their
obligations under any Related Agreement to which it is a party.

         (i) To our knowledge, each of the Company and the Bank has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and


                                                        C-2

<PAGE>



registrations with, Federal, State, local and foreign governmental or regulatory
bodies that are  necessary  in order to permit it to carry on its business as it
is  presently  being  conducted  and the  absence of which could have a Material
Adverse Effect; to our knowledge,  all such permits,  licenses,  certificates of
authority,  orders  and  approvals  are in full  force  and  effect;  and to our
knowledge, no suspension or cancellation of any of the same is threatened;

         (j) To our knowledge,  neither the Company nor the Selling Shareholders
has,  directly or  indirectly,  solicited any offer to buy or offered to sell in
the United  States or to any United  States  citizen or  resident,  any security
which is or would be  integrated  with the sale of the Common  Stock in a manner
that would require the Common Stock to be registered under the Securities Act;

         (k) To our knowledge,  neither the Company nor the Selling Shareholders
has taken,  directly or  indirectly,  any action  designed  to, or that might be
reasonably  expected to, cause or result in stabilization or manipulation of the
price of the Common Stock;

         (l) To our  knowledge,  neither the Company,  any of its affiliates (as
such term is defined in Rule 501(b) under the Securities Act, "Affiliates"), the
Selling  Shareholders nor any person acting on its behalf (other than the Dealer
Manager,  as to whom no  opinion  is  given)  has  engaged  or will  engage,  in
connection  with the  offering  of the  Common  Stock,  in any  form of  general
solicitation or general  advertising within the meaning of Rule 502(c) under the
Securities Act;

         (m) It is not necessary in connection with the offer, sale and delivery
of the Common Stock in the manner  contemplated by the Dealer Manager  Agreement
and the Confidential  Private Placement  Memorandum to register the Common Stock
under the Securities Act, as amended;

         (n) At the  date  of its  issuance  and  as of  the  date  hereof,  the
Confidential Private Placement Memorandum complied in all material respects with
the applicable requirements of the Securities Act; and

         (o) No  information  has come to our  attention  that  would lead us to
believe  that the  Confidential  Private  Placement  Memorandum  (except  as the
financial  statements and schedules,  notes to financial  statements,  financial
tables, and other financial  information and statistical data contained therein,
as to which we express no view),  as of its date,  contained  or, as of the date
hereof contains,  any untrue statement of a material fact or omitted or omits to
state a material  fact required to be stated  therein,  or necessary to make the
statements made therein in light of the circumstances under which they are made,
not misleading.


                                                        C-3

<PAGE>



                                                                      APPENDIX D

                      INDEMNIFICATION FOR ADVISORY SERVICES

         Recognizing that  transactions of the type contemplated by Article VIII
of the Agreement  sometimes  result in litigation and that the Dealer  Manager's
role is advisory,  the Company  agrees to indemnify and hold harmless the Dealer
Manager,  its affiliates and their respective  officers,  directors,  employees,
agent and controlling persons (collectively,  the "Indemnified  Parties"),  from
and against  any losses,  claims,  damages  and  liabilities,  joint or several,
related to or arising in any  manner  out of any  transaction,  proposal  or any
other matter (collectively,  the "Matters")  contemplated by Article VIII of the
Agreement,  and will promptly reimburse the Indemnified Parties for all expenses
(including  reasonable  fees and  expenses  of legal  counsel)  as  incurred  in
connection with the investigation of, preparation for, or defense of any pending
or  threatened  claim  related  to or  arising  in any  manner out of any Matter
arising from the  engagement  of the Dealer  Manager  under  Article VIII of the
Agreement,  or  any  action  or  proceeding  arising  therefrom   (collectively,
"Proceedings"),  whether or not such Indemnified  Party is a formal party to any
such Proceeding.  Notwithstanding the foregoing, the Company shall not be liable
in respect of any losses, claims, damages,  liabilities or expenses that a court
of competent  jurisdiction  shall have  determined  by final  judgment  resulted
solely from the gross negligence or willful  misconduct of an Indemnified Party.
The Company  further agrees that it will not,  without the prior written consent
of the  Dealer  Manager,  settle,  compromise  or  consent  to the  entry of any
judgment  in  any  pending  or   threatened   Proceeding  in  respect  of  which
indemnification  may be sought  hereunder  (whether or not the Dealer Manager or
any  Indemnified  Party is an actual  or  potential  party to such  Proceeding),
unless such settlement,  compromise or consent includes an unconditional release
of the  Dealer  Manager  and each other  Indemnified  Party  hereunder  from all
liability arising out of such Proceeding.

         The Company agrees that if any indemnification or reimbursement  sought
hereunder  were for any reason not to be available to any  Indemnified  Party or
insufficient  to hold it harmless as and to the extent  contemplated  hereunder,
then  the  Company  shall  contribute  to the  amount  paid or  payable  by such
Indemnified Party in respect of losses,  claims, damages and liabilities in such
proportion as is appropriate to reflect the relative benefits to the Company and
its  stockholders  on the one hand,  and the Dealer  Manager  on the  other,  in
connection  with the  Matters to which  such  indemnification  or  reimbursement
relates or, if such allocation is not permitted by applicable law, not only such
relative  benefits but also the  relative  faults of such parties as well as any
other equitable  considerations.  It is hereby agreed that the relative benefits
to the Company and/or its stockholders and to the Dealer Manager with respect to
the Dealer Manager's  engagement pursuant to Article VIII of the Agreement shall
be deemed to be in the same  proportion  as (i) the total value paid or received
or to be paid or received by the Company and/or its stockholders pursuant to the
Matters  (whether or not consummated) for which the Dealer Manager is engaged to
render  services bears to (ii) the fees paid to the Dealer Manager in connection
with such engagement.  In no event shall the Indemnified  Parties  contribute or
otherwise  be liable  for an amount  in excess of the  aggregate  amount of fees
actually  received by the Dealer Manager pursuant to such engagement  (excluding
amounts received by the Dealer Manager as reimbursement of the expenses).

         The Company  further  agrees that no  Indemnified  Party shall have any
liability (whether direct or indirect,  in contract or tort or otherwise) to the
Company for or in connection with the Dealer  Manager's  engagement  pursuant to
Article VIII of the Agreement except for losses, claims, damages,


                                                        D-1

<PAGE>



liabilities  or  expenses  that a court of  competent  jurisdiction  shall  have
determined  by final  judgment  resulted  solely  from the gross  negligence  or
willful misconduct of such Indemnified  Party. The indemnity,  reimbursement and
contribution  obligations  of the Company  shall be in addition to any liability
which the Company may otherwise  have and shall be binding upon and inure to the
benefit of any successors,  assigns,  heirs and personal  representatives of the
Company or an Indemnified Party.

         The  indemnity,  reimbursement  and  contribution  provisions set forth
herein shall remain operative and in full force and effect regardless of (i) any
withdrawal,  termination or consummation of or failure to initiate or consummate
any Matter referred to herein,  (ii) any  investigation  made by or on behalf of
any party hereto or any person controlling  (within the meaning of Section 15 of
the  Securities  Act, as amended,  or Section 20 of the Exchange  Act) any party
hereto,  (iii) any termination or the completion or expiration of the Engagement
Period and (iv) whether or not the Dealer Manager shall,  or shall not be called
upon to, render any formal or informal advice in the course of such engagement.


                                                        D-2


<PAGE>


                                   EXHIBIT 13

                          ANNUAL REPORT TO SHAREHOLDERS



<PAGE>



                  SELECTED FINANCIAL INFORMATION AND OTHER DATA


         Set  forth  below  are  selected  financial  and  other  data of Dollar
Bancorp, Inc. (the "Company"), or prior to October 20, 1999, Dollar Savings Bank
(the  "Bank").  The  selected  financial  and other data does not  purport to be
complete  and is  qualified  in  its  entirety  by  reference  to  the  detailed
information and Consolidated  Financial  Statements and Notes thereto  presented
elsewhere in this Annual Report.
<TABLE>
<CAPTION>


                                                                                          At March 31,
                                                                ----------------------------------------------------
                                                                      2000                1999              1998
                                                                ----------------    -------------       ------------
                                                                                  (In Thousands)
Selected Financial Condition Data:

<S>                                                               <C>               <C>                 <C>
Total assets                                                      $    10,223       $       9,464       $     9,201
Loans receivable, net                                                   5,973               6,231             6,368
Mortgage backed securities                                                 21                  29                35
Deposits                                                                8,611               7,902             7,675
Stockholders' equity                                                    1,485               1,410             1,268

</TABLE>

<TABLE>
<CAPTION>

                                                                                            At March 31,
                                                                  --------------------------------------------------
                                                                        2000              1999              1998
                                                                  --------------    -------------       ------------
                                                                                  (In Thousands)
Selected Operations Data:

<S>                                                               <C>               <C>                 <C>
Total interest income                                             $       735       $         757       $       773
Total interest expense                                                    246                 240               225
                                                                  -----------       -------------       -----------
         Net interest income                                              489                 517               548
Provision for loan losses                                                  19                  83                 -
                                                                  -----------       -------------       -----------
Net interest income after provision for loan losses                       470                 434               548
Non-interest income                                                        43                  59                67
Non-interest expense                                                      438                 351               461
                                                                  -----------       -------------       -----------
Income before income taxes                                                 75                 142               154
Income tax provision                                                        -                   -                 -
                                                                  -----------       -------------       -----------
Net income                                                        $        75       $         142       $       154
                                                                   ==========        ============        ==========

</TABLE>



<PAGE>

<TABLE>
<CAPTION>



                                                                                             At March 31,
                                                                  -------------------------------------------------
                                                                        2000              1999              1998
                                                                  --------------    -------------       -----------

Selected Financial Ratios and Other Data:

Performance Ratios:
<S>                                                                        <C>              <C>               <C>
  Return on assets (ratio of net income to average total assets)........   0.74%            1.48%             1.67%
  Return on equity (ratio of net income to average equity)..............   5.19%           10.54%            16.52%
  Net interest rate spread during the period............................   5.16%            5.76%             6.09%
  Net interest margin (1)...............................................   5.36%            5.99%             6.33%
  Ratio of non-interest expense to average total assets.................   4.35%            3.67%             5.00%
  Ratio of avg interest-earning assets to avg int-bearing liabilities    107.45%          108.34%           109.62%

Asset Quality Ratios:
  Nonperforming assets to total assets at end of period.................   9.12%            4.34%             4.13%
  Allowance for loan losses to non-performing loans.....................  53.42%          105.11%            91.58%
  Allowance for loan losses to total loans outstanding..................   5.44%            6.47%             5.17%

Capital Ratios:
  Stockholders' equity to total assets at end of period.................  14.53%           14.90%            13.78%
  Average stockholders' equity to average assets........................  14.36%           14.06%            10.10%

Other Data:
  Number of full-service offices........................................        1              1                 1
</TABLE>

(1)  Net interest income divided by average interest earning assets




<PAGE>


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

         The earnings of the Company depend in part on its level of net interest
income,  which  is the  difference  between  interest  earned  on the  Company's
interest-earning  assets,  consisting  primarily of loans  receivable  and, to a
lesser extent, interest-bearing deposits at other institutions, and the interest
paid on  interest-bearing  liabilities,  which consist of savings deposits.  Net
interest  income is a function of the Company's  interest rate spread,  which is
the difference between the average yield earned on  interest-earning  assets and
the average rate paid on interest-bearing  liabilities, as well as a function of
the average balance of  interest-earning  assets as compared to interest-bearing
liabilities.   The  Company's  earnings  also  are  affected  by  its  level  of
noninterest  income,  including loan fees and service  charges,  and noninterest
expense, including salaries and employee benefits, occupancy expense, charges to
income associated with the declining property values, equipment costs, losses on
the  sale of  nonperforming  loans  and real  estate  owned,  deposit  insurance
premiums  and other  noninterest  expenses  (consisting  of  professional  fees,
examination  fees,  telephone,  postage,  advertising,  supplies  and  insurance
premiums).  Earnings of the Company also are affected  significantly  by general
economic and  competitive  conditions,  particularly  changes in market interest
rates, government policies and actions of regulatory  authorities,  which events
are beyond the control of the Company.

Financial Condition

         Assets.  Total assets increased $759,000,  or 8.0%, to $10.2 million at
March 31, 2000 from $9.5 million at March 31, 1999. The increase in total assets
is primarily due to a $758,000  increase in cash and amounts due from depository
institutions. The increase is due to an increase in deposits of $709,000.

         Liabilities.  Total liabilities increased by $684,000, or 8.5%, to $8.7
million  at March 31,  2000  from  $8.1  million  at March  31,  1999.  Deposits
increased  by $709,000  from $7.9  million at March 31, 1999 to $8.6  million at
March 31, 2000.  Other  liabilities  decreased  during the 2000 fiscal year from
$95,000 to $67,000.

         Stockholders' equity.  Stockholders' equity increased $75,000, or 5.3%,
to $1.5  million  at March 31,  2000 from $1.4  million at March 31,  1999.  The
increase is due to net income for the 2000 fiscal year of $75,000.



<PAGE>
         Net Interest  Income  Analysis.  The following  table  presents for the
periods  indicated  the total  dollar  amount of interest  income  from  average
interest  earning  assets  and the  resultant  yields,  as well as the  interest
expense on average interest bearing  liabilities,  expressed both in dollars and
rates. No tax equivalent adjustments were made. All average balances are monthly
average  balance.  Non-accruings  loans have been included in the table as loans
carrying a zero yield.
<TABLE>
<CAPTION>

                                                 At March 31, 2000                      Years Ended March 31,
                                                 -----------------  ----------------------------------------------------------------
                                                                                  2000                              1999
                                                 -----------------  --------------------------------  ------------------------------
                                                                     Average   Interest                Average    Interest
                                                  Actual   Yield/  Outstanding  Earned/              Outstanding  Earned/
                                                 Balance    Cost     Balance     Paid    Yield/Cost    Balance     Paid   Yield/Cost
                                                 ------- --------- ----------- --------  ----------   ---------  -------- ----------
                                                                               (Dollars in Thousands)

 Interest-earning assets:
 <S>                       <C>                  <C>          <C>       <C>        <C>      <C>      <C>           <C>      <C>
     Loans receivable (1)                      $   5,973    9.07 %  $  5,816   $   542     9.32 %   $   6,163   $   618    10.03 %
     Mortgage-backed securities                       21    9.52          24         2     8.33            32         3     9.38
     Other interest-earning                        3,222    5.93       3,276       191     5.83         2,441       136     5.57
                                                   -----               -----       ---                  -----       ---
          Total interest-earning assets (1)        9,216    7.98       9,116       735     8.06         8,636       757     8.77
 Non-interest earning assets                       1,007                 951                              942
                                                   -----                 ---                              ---
     Total assets                               $ 10,223            $ 10,067                        $   9,578
                                                  ======              ======                            =====

 Interest-bearing liabilities:
     Savings deposits                          $   5,318    1.94    $  5,187       103     1.99     $   4,684        92     1.96
     Certificate accounts                          3,293    4.34        3297       143     4.34         3,287       148     4.50
                                                   -----                ----       ---                  -----       ---
          Total interest-bearing liabilities       8,611    2.86       8,484       246     2.90         7,971       240     3.01
                                                                                   ---                              ---
     Non-interst-bearings liabilities                127                 137                              260
                                                     ---                 ---                              ---
          Total liabilities                        8,738               8,621                            8,231
 Stockholder's Equity                              1,485               1,446                            1,347
                                                   -----               -----                            -----
     Total liabilities and stockholder's equity $ 10,223            $ 10,067                        $   9,578
                                                  ======            ========                            =====

 Net interest income                            $    489                       $   489                          $   517
                                                     ===                           ===                              ===

 Net interest rate spread                                   5.12 %                         5.16 %                           5.76 %
                                                                                          =====                             ====
 Net yield on average interest-earning assets                                              5.36 %                           5.99 %
                                                                                          =====                             ====
 Average interest-earning assets to average
     interest-bearing liabilities                          107.03 %                      107.45 %                         108.34 %
                                                           ======                        ======                           ======
</TABLE>

(1)Calculated net of deferred loan fees and loss reserves.

<PAGE>

     Rate/Volume  Analysis.  The following  table  presents the dollar amount of
changes  in  interest  income  and  interest  expense  for major  components  of
interest-earning  assets  and  interest-bearing  liabilities.  It  distinguishes
between the changes related to outstanding balances and those due to the changes
in  interest   rates.   For  each  category  of   interest-earning   assets  and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (i.e.,  changes in volume  multiplied  by old rate);  (ii)
changes in rate (i.e.,  changes in rate  multiplied  by old  volume);  and (iii)
changes in rate-volume (changes in rate multiplied by the change in volume).
<TABLE>
<CAPTION>




                                                     Year Ended March 31,                          Year Ended March 31,
                                                         2000 vs. 1999                               1999 vs. 1998
                                         ------------------------------------------- -----------------------------------------------
                                                      Increase/(Decrease)                          Increase/(Decrease)
                                                           Due to                                        Due to
                                         ------------------------------------------- -----------------------------------------------
                                                                            Total                                      Total
                                                                          Increase                                    Increase
                                         Volume       Rate   Rate/Volume (Decrease)  Volume     Rate    Rate/Volume  (Decrease)
                                         ---------   -----   ----------- ---------- ---------   -----   -----------  ----------
                                                                                 (In Thousands)

Interest-earning assets:
<S>                                      <C>        <C>        <C>       <C>       <C>         <C>          <C>     <C>
     Loans receivable                    $    (35)  $   (44)   $     3   $    (76) $    (29)   $   (12)  $     (1)   $   (42)
     Mortgage backed-securities                (1)        -          -         (1)       (1)         1          -          -
     Other(1)                                  47         6          2         55        47        (21)         -         26
                                         ---------  -------    -------   --------   --------   --------  --------    -------
     Total interest earning assets:      $      11  $   (38)   $     5   $    (22) $     17    $   (32)  $     (1)   $   (16)
                                         =========  =======    =======   ========  =========   ========  ========    =======

     Interest-bearing liabilities:
     Savings deposits                    $      10  $     1   $      -   $     11  $    (13)   $     2   $      -    $   (11)
     Certificates accounts                       -       (5)         -         (5)       37        (11)         -         26
     Borrowings                                  -        -          -          -         -          -          -          -

     Total interest-bearing liabilities  $      10  $    (4)   $     -   $      6  $     24    $    (9)  $      -    $    15
                                          ========   ======    =======   ========  ========    =======   ========    =======

     Net change in interest income       $       1  $   (34)   $     5   $    (28) $     (7)   $   (23)  $     (1)   $   (31)
                                          ========   ======    =======   ========  ========    =======   ========    ========

</TABLE>

(1)  Includes  dividends  on  Federal  Home Loan  Bank  stock  and  interest  on
     overnight deposits









<PAGE>

Comparison of Operating Results for the Years Ended March 31, 2000 and 1999

         Net Income. The Company experienced a decrease in net income of $67,000
for the year ended  March 31,  2000 to net income of $75,000  from net income of
142,000 for the year ended March 31, 1999.  The decrease in net income  resulted
primarily  from an  increase  in other  expenses,  including  fees and  expenses
incurred for the formation of the Company.  Interest income  decreased  slightly
due  to a  slight  decrease  in  loans  receivable  and  a  slight  increase  in
nonperforming loans, and interest expense increased $6,000 due to an increase in
deposits.

         Interest Income.  Total interest income decreased $22,000,  or 2.9%, to
$735,000  for the year ended  March 31,  2000 from  $757,000  for the year ended
March 31,1999. The decrease in interest income was attributable to a decrease in
the average  yield on  interest  earning  assets to 8.06% from  8.77%.  Interest
income from loans  receivable  decreased  $76,000,  or 12.3%,  to $542,000  from
$618,000.  The decrease in interest  income from loans  receivable  was due to a
decrease in the average yield to 9.32% from 10.03%.  Interest  income from other
interest bearing assets (consisting of Federal Home Loan Bank ("FHLB") overnight
deposits and certificates of deposit in other financial  institutions) increased
$55,000,  or 40.4% to $191,000 from  $136,000.  The increase in interest  income
from other interest  earning  assets is  attributable  to a $835,000,  or 34.2%,
increase in the average balance of other interest earning assets to $3.3 million
from $2.4  million and an increase in the average  yield of such assets to 5.83%
from 5.57%. The average balance of mortgage-backed  securities decreased $8,000,
or 25.0%,  to $24,000 from $32,000,  while the average yield on  mortgage-backed
securities decreased to 8.33% from 9.38%.

         Interest Expense.  Total interest expense increased $6,000, or 2.5%, to
$246,000  for the year ended  March 31,  2000 from  $240,000  for the year ended
March 31,  1999.  Interest  paid on  certificate  accounts  decreased  $5,000 to
$143,000 from $148,000. The average balance of certificate accounts increased by
$10,000 to  $3,297,000  from  $3,287,000.  The average cost of  certificates  of
deposit decreased from 4.50% to 4.34%. Interest paid on savings deposits,  which
increased  $11,000,  or 12.0%, to $103,000 from $92,000 was partially  offset by
the  decrease in interest  paid on  certificates  of  deposit.  The  increase in
interest paid on savings deposits is primarily attributed to the increase in the
average  outstanding  balance in savings  deposits  of  $503,000,  or 10.7%,  to
$5,187,000 for fiscal 2000 from  $4,684,000 for fiscal 1999. The average cost of
savings deposits remained  relatively  constant at 1.99% in fiscal 2000 compared
to 1.96% in fiscal 1999.

         Provision for Loan Losses.  The Company maintains an allowance for loan
losses based upon management's periodic evaluation of known or inherent risks in
the loan portfolio, the Company's past loss experience,  level of delinquencies,
adverse  situations  that may affect a borrower's  ability to repay a loan,  the
estimated  value  of  the  underlying  collateral  and  market  conditions.  The
allowance for loan losses was $351,000 or 5.4%, of total loans at March 31, 2000
and $432,000,  or 6.5%, of total loans at March 31, 1999.  Loan loss  provisions
are charged against earnings. Nonperforming loans increased to $657,000 at March
31, 2000 from $411,000 at March 31, 1999. The increase in nonperfoming  loans is
primarily  attributable  to a single  family  residence on which the Bank held a
loan which had a remaining balance of $278,000. Subsequent to March 31, 2000 the
property was sold and the loan was paid in full.  Loan loss provisions are based
upon  management's  estimate  of the  fair  value  of the  loan  collateral,  as
applicable,  and the Company's actual loan loss experience, as well as standards
applied  by the  Office  of  Thrift  Supervision  ("OTS")  and  Federal  Deposit
Insurance  Coproration  ("FDIC").  For the year ended March 31, 2000 the Company
established  additional loan loss provisions of $19,000 and established  $84,000
additional  loan loss  provisions for the year ended March 31, 1999. In the year
ended March 31, 2000, the Bank foreclosed on another single family  residence on
which the Bank had carried had a loss provision of $100,000. In fiscal 2000, the
Company's  nonperforming  assets as a  percentage  of total  assets  was 9.1% as
compared to 4.3% for fiscal 1999.

         Management  believes  that the  allowance for loan losses is at a level
that is adequate  to provide  for  estimated  losses,  however,  there can be no
assurance that further  additions will not be made to the loss allowance or that
such losses will not exceed the estimated amount.

         Net Interest Income. Net interest income decreased $28,000, or 5.4%, to
$489,000 for fiscal 2000 from  $517,000  for fiscal  1999.  The net yield of the
average  interest-earning assets decreased to 5.36% from 5.99%. Average interest
earning  assets  decreased to 107.45% of average  interest  bearing  liabilities
during fiscal 2000 from 108.34% for fiscal 1999.

         Non-interest  Income.  Non-interest  income  decreased  by $16,000,  or
27.1%,  to $43,000 for the year ended  March 31, 2000 from  $59,000 for the year
ended March 31, 1999. The decrease in  noninterest  income is primarily due to a
$22,000  decrease in loan fees primarily  related to loan referral fees received
from a mortgage broker.

<PAGE>

         Non-interest Expense. Non-interest expense increased $87,000, or 24.8%,
to $438,000  for the year ended March 31, 2000 from  $351,000 for the year ended
March 31, 1999. Net occupancy expense of premises  decreased $11,000 or 45.8% to
$13,000  from  $24,000.  The  decrease in net  occupancy  expense of premises is
primarily  due to a decrease  in  property  taxes due to a tax  appeal  totaling
$18,000  which  includes a rebate  from prior years of $5,000.  Equipment  costs
increased  slightly $1,000, or 16.7% to $7,000 from $6,000.  Other  non-interest
expense (consisting of professional fees, examination fees, telephone,  postage,
advertising,  supplies and insurance premiums) increased $84,000 to $191,000 for
the year ended  March 31, 2000 from  $107,000 in the year ended March 31,  1999.
The  increase in other non interest  expense is primarily  due to an increase in
legal fees of $82,000.

        Income Taxes. There was no income tax expense for fiscal 2000 and fiscal
1999. This is due to a net operating loss carryover from previous years.

Market Risk/Interest Rate Risk and Asset/Liability Management

         The ability to maximize net interest  income is largely  dependent upon
achieving  a  positive  interest  rate  spread  that  can  be  sustained  during
fluctuations  in  prevailing  interest  rates.  Interest rate  sensitivity  is a
measure  of the  difference  between  amounts  of  interest-earning  assets  and
interest-bearing  liabilities  that either price or mature within a given period
of time.  The  difference,  or the interest rate  repricing  "gap,"  provides an
indication of the extent to which an institution's  interest rate spread will be
affected by changes in interest rates over a period of time. A gap is considered
positive when the amount of interest-earning  assets maturing, or repricing over
a specified period of time, exceeds the amount of  interest-bearing  liabilities
maturing or repricing  within that period and is  considered  negative  when the
amount of  interest-bearing  liabilities  maturing or repricing over a specified
period  of time  exceeds  the  amount of  interest-earning  assets  maturing  or
repricing  within that  period.  Generally,  during a period of rising  interest
rates, a negative gap within a given period of time would  adversely  affect net
interest income, while a positive gap within a given period of time would result
in an increase in net interest  income;  during a period of  declining  interest
rates, a negative gap within a giving period of time would result in an increase
in net interest income, while a positive gap within a given period of time would
have the  opposite  effect.  A  sustained  rise in  interest  rates could have a
negative impact on the Company's future net interest income.

         The Company,  like other  financial  institution  holding  company,  is
subject  to  interest  rate  risk  to  the  extent  that  its   interest-bearing
liabilities with short and intermediate-term maturities reprice more rapidly, or
on a difference  basis,  that its  interest-bearing  assets.  Management  of the
Company  believes  it is critical to manage the  relationship  between  interest
rates and the effect on the Company's net portfolio value ("NPV"). This approach
calculates the difference  between the present value of expected cash flows from
assets and the present value of expected cash flows from liabilities. Management
of the  Company's  assets and  liabilities  is done  within  the  context of the
marketplace, but also within limits established by the Board of Directors on the
amount of change in NPV which is acceptable given certain interest rate changes.

         The Company has taken certain measures to reduce interest rate risk and
protect  it from the  negative  effect  of  increases  in  interest  rates.  The
Company's  current lending strategy is to emphasize the origination of five year
balloon mortgage loans and to limit the term of one- to four-family  residential
loans to 10 years or less.  During  fiscal  2000,  of the $1.0  million  in loan
originations, $515,000 were one year residential construction loans. The Company
has  originated  commercial  real  estate  and  multi-family  loans,  which  are
typically of short  duration and provide  higher rates of interest  than one- to
four-family loans. At March 31, 1999, the Company's one year cumulative interest
sensitivity gap as a percentage of total assets was 18.87%.

         Low cost  deposits also limit  interest rate risk and are  considered a
more stable source of funds than certificates of deposit or outside  borrowings.
The Company  generally will not offer  depositors  certificates  of deposit with
terms exceeding two years.

         Finally,  the Company maintains a significant  percentage of its assets
in cash and cash equivalents.


<PAGE>


Net Portfolio Value

         In order to encourage  association  to reduce their interest rate risk,
the OTS adopted a rule  incorporating  an interest  rate risk ("IRR")  component
into the  risk-based  capital  rules.  The IRR component is a dollar amount that
will  be  deducted  from  total  capital  for  the  purpose  of  calculating  an
institution's  risk-based  capital  requirement  and is measured in terms of the
sensitivity  of its NPV to  changes in  interest  rates.  NPV is the  difference
between  incoming and outgoing  discounted cash flows from assets,  liabilities,
and off-balance sheet contracts.  An institution's IRR is measured as the change
to its NPV as a result  of a  hypothetical  200  basis  point  change  in market
interest  rates.  A  resulting  change in NPV of more  than 2% of the  estimated
market  value of its assets  will  require  the  institution  to deduct from its
capital 50% of that excess change. The rules provide that the OTS will calculate
the IRR component quarterly for each institution.  The Bank, based on asset size
and risk-based capital, has been informed by the OTS that it is exempt from this
rule.  Nevertheless,  the following  table  presents the Bank's NPV at March 31,
2000, as calculated by the OTS, based on information  provided to the OTS by the
Bank.
<TABLE>
<CAPTION>

      Change in
    Interest Rates                                                     March 31, 2000
   in Basis Points                                                   Net Portfolio Value
     (Rate Shock)                                    $ Amount            $ Change                % Change
     ------------                                    --------            --------                --------
                                                                  (Dollars in Thousands)
         <S>                                         <C>                 <C>                     <C>
         300                                               2,128                 102                 5 %
         200                                               2,103                  72                 4 %
         100                                               2,071                  46                 2 %
         Static                                            2,025                   -                 -
         (100)                                             1,965                 -61                -3 %
         (200)                                             1,920                -105                -5 %
         (300)                                             2,006                 -19                -1 %
</TABLE>


         Certain  shortcomings are inherent in the method of analysis  presented
in both the computation of NPV and in the analysis presented in the prior tables
setting  forth  the  maturing  and  repricing  of  interest-earning  assets  and
interest-bearing  liabilities.  Although certain assets and liabilities may have
similar  maturities or periods  within which they will  reprice,  they may react
differently to changes in market interest  rates.  The interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while  interest rates on other types may lag behind changes in
market interest  rates.  Additionally,  adjustable-rate  mortgages have features
which restrict changes in interest rates on a short-term basis and over the life
of the asset. The proportion of adjustable-rate loans could be reduced in future
periods if market interest rates would decrease and remain at lower levels for a
sustained period, due to increased refinancing  activity.  Further, in the event
of a change in interest  rates,  prepayment  and early  withdrawal  levels would
likely  deviate  significantly  from those  assumed in the table.  Finally,  the
ability of many borrowers to service their  adjustable-rate debt may decrease in
the event of a sustained interest rate increase.

Liquidity and Capital Resources

         The Bank's  primary  sources of funds are  deposits and  principal  and
interest  payments  on loans.  In the event that the Bank should  require  funds
beyond its ability to generate them internally,  additional sources of funds are
available  through the use of FHLB advances.  In addition,  the Bank maintains a
significant  level of its assets in cash and cash equivalents which is a readily
available  source  of  funds.  While  scheduled  loan  repayments  and  maturing
investments are relatively predictable,  deposit flows and early loan repayments
are  more  influenced  by  interest  rates,   general  economic  conditions  and
competition.

         Federal  regulations  require  the Bank to  maintain  levels  of liquid
assets. The required percentage has varied from time to time based upon economic
conditions  and savings  flows and is currently 4% of net  withdrawable  savings
deposits  and  borrowings  payable  on  demand  in one year or less  during  the
preceding calendar month. Liquid assets for purposes of this ratio include cash,
certain time deposits,  U.S. Government,  government agency and other securities
and obligations  generally having remaining  maturities of less than five years.
The Bank's most liquid assets are cash and cash equivalents. The levels of these
assets are dependent on the Bank's operating,  financing,  lending and investing
activities  during  any  given  period.  At March  31,  2000 and 1999  liquidity
eligible  assets totaled $3.6 million and $2.8 million,  respectively.  At those
dates,  the Bank's liquidity  ratios were 41.5% and 35.7%  respectively,  all in
excess of the 4% minimum regulatory requirement.
<PAGE>

         The  Bank  uses  its  liquid  resources  principally  to  meet  ongoing
commitments,  to fund maturing  certificates of deposit and deposit withdrawals,
to fund existing and future loan commitments,  to maintain liquidity and to meet
operating expenses.  At March 31, 2000, the Bank had no outstanding  commitments
to extend credit.

         Management  believes  that loan  repayments  and other sources of funds
will be adequate to meet the Bank's foreseeable liquidity needs.

         At March 31, 2000, the Bank had $3.3 million in certificates of deposit
due  within  one year and  $5.3.  million  in  savings  accounts.  Based on past
experience,  management  expects that most of the  deposits  will be retained or
replaced by new deposits.

         The primary  investment  activities of the Bank are the  origination of
one-to  four-family,  commercial  real  estate,  and loans  secured by deposits.
During  the years  ended  March 31,  2000 and 1999,  the Bank  originated  loans
totaling  $1.0 million and $1.3 million,  respectively.  These  activities  were
funded primarily by deposits and principal repayments on loans.

Recent Accounting Developments

         In June 1998, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 133  "Accounting for
Derivative  Instruments  and  Hedging  Activities."  SFAS  No.  133  establishes
accounting and reporting  standards for derivative  instruments  and for hedging
activities.  It requires  that an entity  recognize  all  derivatives  as either
assets or liabilities  in the statement of financial  position and measure those
instruments  at fair value.  In addition,  certain  provisions of this statement
will  permit,  at the date of initial  adoption of SFAS No. 133, the transfer of
any  held-to-maturity  security into either the  available-for-sale  security or
into the trading  category and the transfer of any  available-for-sale  security
into the trading category.  Transfers from the held-to-maturity portfolio at the
date of initial adoption will not call into question the entity's intent to hold
other debt  securities to maturity in the future.  In June 1999, the FASB issued
SFAS No. 137, an amendment to FASB Statement No. 133, which defers the effective
date to periods  beginning  after June 15, 2000. The Company does not expect the
adoption of SFAS to have a material impact on its financial statements.

Impact of Inflation and Changing Prices

         The  Consolidated  Financial  Statements  and Notes  thereto  presented
herein have been prepared in accordance with GAAP,  which generally  require the
measurement of financial  position and operating  results in terms of historical
dollars without considering the change in the relative purchasing power of money
over  time due to  inflation.  The  impact  of  inflation  is  reflected  in the
increased  cost  of  the  Company's  operations.   Nearly  all  the  assets  and
liabilities of the Bank are financial,  unlike most industrial  companies.  As a
result,  the Company's  performance is directly  impacted by changes in interest
rates,  which  are  indirectly  influenced  by  inflationary  expectations.  The
Company's  ability to match the interest  sensitivity of its financial assets to
the interest  sensitivity of its financial  liabilities  in its  asset/liability
management  may tend to minimize  the effect of change in interest  rates on the
Company's performance.  Changes in interest rates do not necessarily move to the
same  extent  as  changes  in the price of goods and  services.  In the  current
increasing  interest rate environment,  liquidity and the maturity  structure of
the  Company's  assets  and  liabilities  and  critical  to the  maintenance  of
acceptable performance levels.

                        COMMON STOCK AND RELATED MATTERS

         Common  Stock.  There is no public  trading  market  for the  Company's
Common Stock. As there are no market makers in the Company's Common Stock, there
is no bid  information.  The last known trade in the Common  Stock was for 3,300
shares at a price of $37.00 per share which occurred on May 31, 2000.

         As of March 31,  2000,  the Company had 76,000  shares of Common  Stock
outstanding.  As of such date the Company had 22  stockholders  of record.  This
does not  reflect  the number of persons  whose  stock is in nominee or "street"
name accounts through brokers.
<PAGE>

         Dividends.  The Company has never paid  dividends on the Common  Stock.
The future payment of dividends will be subject to determination and declaration
by the Board of  Directors in its  discretion,  which will take into account the
Company's  financial  condition and results of  operations,  tax  consideration,
industry  standards,  economic  conditions,  regulatory  restrictions,   general
practices and other factors.

         OTS regulations  impose  limitations upon all capital  distributions by
savings  institutions,  such  as  cash  dividends,  payments  to  repurchase  or
otherwise acquire its shares, payments to stockholders of another institution in
a cash-out  merger and other  distributions  charged  against  capital.  A "well
capitalized" institution can, after prior notice but without the approval of the
OTS,  make capital  distributions  during a calendar year in an amount up to 100
percent of its net income during the calendar year, plus its retained net income
for  the   preceding   two  years.   As  of  March  31,  2000  the  Bank  was  a
"well-capitalized" institution.


<PAGE>


                             STOCKHOLDER INFORMATION


Annual Meeting

The Annual Meeting of Stockholders will be held at 3:00 p.m. on Friday, July 21,
2000, at the main office of Dollar  Savings Bank, 893 Franklin  Avenue,  Newark,
New Jersey 07107.



Officers and Directors

Robert DeMane, President, Chief Executive Officer and Director
David J. Breitkopf, Chairman of the Board
Susan Velardi, Vice President, Secretary and Director
Ira Geller, Director
Karin Meyer, Director
Alex Velto. Director



Special Counsel

Luse Lehman Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W.
Suite 400
Washington, DC 20015



Independent Auditors

Fontanella and Babitts
534 Union Boulevard
Totowa, New Jersey  07512



Annual Report on Form 10-KSB

A copy of the  Company's  Form  10-KSB for the fiscal  year ended March 31, 2000
will be furnished  without  charge to  stockholders  as of record June 27, 2000,
upon written request to Secretary,  Dollar Bancorp,  Inc., 893 Franklin  Avenue,
Newark, New Jersey 07107, or by calling (973) 483-0001.



Corporate Center

893 Franklin Avenue
Newark, New Jersey  07107


<PAGE>
                       DOLLAR BANCORP, INC. AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS
                   (With Independent Auditors' Report Thereon)

                                 March 31, 2000



<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS
                   (With Independent Auditors' Report Thereon)
                                 March 31, 2000
                          ----------------------------


<TABLE>
<CAPTION>
                                      INDEX


                                                                        Page

<S>                                                                      <C>
Independent Auditors' Report                                             1

Consolidated Statements of Financial Condition
 as of March 31, 2000 and 1999                                           2

Consolidated Statements of Income for
 the Years Ended March 31, 2000 and 1999                                 3

Consolidated Statements of Stockholders' Equity
 as of March 31, 2000 and 1999                                           4

Consolidated Statements of Cash Flows for
 the Years Ended March 31, 2000 and 1999                               5 - 6

Notes to Financial Statements                                          7 - 21

</TABLE>





<PAGE>













                          INDEPENDENT AUDITORS' REPORT

Fontanella and Babitts
Certified Public Accountants                       534 Union Boulevard
                                                   Totowa Boro, New Jersey 07512
                                                   Tel: (973) 595-5300
                                                   Fax: (973) 595-5890

To The Board of Directors
Dollar Bancorp, Inc. and Subsidiary


We have audited the accompanying  consolidated statements of financial condition
of Dollar Bancorp,  Inc. and Subsidiary (the "Corporation") as of March 31, 2000
and 1999, and the related statements of income,  stockholders'  equity, and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of Dollar  Bancorp,  Inc. and
Subsidiary,  as of March 31, 2000 and 1999, and the results of their  operations
and cash flows for the years then ended, in conformity  with generally  accepted
accounting principles.


                                       /s/ Fontanella and Babitts



May 17, 2000














                                                        -1-


<PAGE>


<TABLE>
<CAPTION>

                                        DOLLAR BANCORP, INC. AND SUBSIDIARY
                                  CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION


                                                                                          March 31,
Assets                                                                                2000         1999
------                                                                             -----------  -------

<S>                                                                                <C>          <C>
Cash and amounts due from depository
 institutions                                                                      $   409,871  $   313,575
Interest-bearing deposits in other
 banks                                                                               3,165,806    2,504,860
                                                                                   -----------  -----------

      Total cash and cash equivalents (Note 1)                                       3,575,677    2,818,435

Mortgage-backed securities held to maturity,
 approximate fair value of $21,000 (2000) and
 $31,000 (1999) (Notes 1 and 2)                                                         20,879       28,863
Loans receivable, net (Notes 1 and 3)                                                5,972,866    6,231,435
Premises and equipment, net (Notes 1 and 4)                                            287,852      297,135
Real estate acquired in settlement of
 loans, net (Note 1)                                                                   275,175            -
Federal Home Loan Bank of New York stock,
 at cost                                                                                56,500       56,500
Refundable income taxes (Notes 1 and 7)                                                  2,273        3,290
Prepaid income tax (Notes 1 and 7)                                                       9,442        6,601
Other assets                                                                            22,612       22,067
                                                                                   -----------  -----------

      Total assets                                                                 $10,223,276  $ 9,464,326
                                                                                   ===========  ===========

Liabilities and stockholders' equity

Liabilities

Deposits (Note 5)                                                                  $ 8,610,553  $ 7,902,237
Advance payments by borrowers for taxes and
 insurance                                                                              60,261       57,556
Other liabilities                                                                       67,498       94,571
                                                                                   -----------  -----------

      Total liabilities                                                              8,738,312    8,054,364
                                                                                   -----------  -----------

Commitments and contingencies (Note 8)                                                       -            -

Stockholders' equity (Notes 6, 7 and 10)
--------------------

Preferred stock - par value $.01; 100,000 shares
 authorized; no shares issued or outstanding                                                 -            -
Common stock - par value $.01 (2000) $1.00 (1999);
 shares authorized 900,000 (2000) 76,000 (1999);
 shares issued 76,000                                                                      760       76,000
Additional paid in capital                                                             629,382      554,142
Retained earnings - substantially
 restricted                                                                            854,822      779,820
                                                                                   -----------  -----------

      Total stockholders' equity                                                     1,484,964    1,409,962
                                                                                   -----------  -----------

      Total liabilities and stockholders' equity                                   $10,223,276  $ 9,464,326
                                                                                   ===========  ===========

</TABLE>

See notes to consolidated financial statements.


                                                        -2-


<PAGE>

<TABLE>
<CAPTION>


                                        DOLLAR BANCORP, INC. AND SUBSIDIARY
                                         CONSOLIDATED STATEMENTS OF INCOME

                                                                                               Year Ended
                                                                                                March 31,
                                                                                            2000        1999
<S>                                                                                      <C>         <C>
Interest income:
   Loans                                                                                 $  541,923  $  618,042
   Mortgage-backed securities                                                                 2,038       2,813
   Other                                                                                    191,006     136,188
                                                                                         ----------  ----------

      Total interest income                                                                 734,967     757,043
                                                                                         ----------  ----------

Interest expense:
   Deposits:
      Savings                                                                               103,263      91,598
      Time                                                                                  142,457     148,199
                                                                                         ----------  ----------

      Total interest expense                                                                245,720     239,797
                                                                                         ----------  ----------

Net interest income                                                                         489,247     517,246
Provision for loan losses (Notes 1 and 3)                                                    19,412      83,588
                                                                                         ----------  ----------

Net interest income after provision for loan losses                                         469,835     433,658
                                                                                         ----------  ----------

Non-interest income:
   Loan fees and service charges                                                             23,337      44,894
   Other                                                                                     16,167      13,919
   Income from real estate operations                                                         3,634           -
                                                                                         ----------  ----------

      Total non-interest income                                                              43,138      58,813
                                                                                         ----------  ----------

Non-interest expenses:
   Salaries and employee benefits                                                           223,211     209,639
   Net occupancy expense of premises                                                         12,608      24,441
   Equipment                                                                                  6,574       5,617
   Federal insurance premium                                                                  4,227       4,659
   Other                                                                                    191,351     106,593
                                                                                         ----------  ----------

      Total non-interest expenses                                                           437,971     350,949
                                                                                         ----------  ----------

Income before income taxes                                                                   75,002     141,522
Income taxes (Notes 1 and 7)                                                                      -           -
                                                                                         ----------  ----------

      Net income                                                                         $   75,002  $  141,522
                                                                                         ==========  ==========

Basic and diluted earnings per share                                                     $      .99  $     1.86
                                                                                         ==========  ==========

Weighted average number of shares outstanding                                                76,000      76,000
                                                                                         ==========  ==========



</TABLE>





See notes to consolidated financial statements.



                                                        -3-


<PAGE>

<TABLE>
<CAPTION>


                                        DOLLAR BANCORP, INC. AND SUBSIDIARY
                                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


                                                             Additional
                                                Common        Paid in           Retained
                                                Stock         Capital           Earnings             Total
                                               -------       ---------         ----------         --------

<S>                                            <C>           <C>               <C>                <C>
Balance at March 31, 1998                      $76,000       $ 554,142         $  638,298         $1,268,440

Net income                                           -               -            141,522            141,522
                                               -------       ---------         ----------         ----------

Balance at March 31, 1999                       76,000         554,142            779,820          1,409,962

Formation of Holding Company
 (Note 10)                                     (75,240)                           75,240                    -

Net income                                           -               -             75,002             75,002
                                               -------       ---------         ----------         ----------

Balance at March 31, 2000                      $   760       $ 629,382         $  854,822         $1,484,964
                                               =======       =========         ==========         ==========

</TABLE>




































See notes to consolidated financial statements.



                                                        -4-


<PAGE>

<TABLE>
<CAPTION>


                                        DOLLAR BANCORP, INC. AND SUBSIDIARY
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                             Year Ended
                                                                                              March 31,
                                                                                          2000        1999
<S>                                                                                    <C>         <C>
Cash flows from operating activities:
   Net income                                                                          $   75,002  $  141,522
   Adjustments to reconcile net income (loss)
    to net cash provided by operating activities:
       Amortization of deferred loan fees                                                  (4,198)     (9,535)
       Depreciation of premises and equipment                                              12,881      13,569
       Provision for losses on loans                                                       13,012      83,588
       (Increase) decrease in other assets                                                   (545)      3,997
       Decrease (increase) in refundable income taxes                                       1,017      (5,413)
       Deferred income taxes                                                               (2,841)          -
       (Decrease) in other liabilities                                                    (27,073)    (97,725)
       (Decrease) in accrued interest
        payable on deposits                                                                (2,638)     (7,657)
                                                                                       ----------  ----------

       Net cash provided by operating activities                                           64,617     122,346
                                                                                       ----------  ----------

Cash flows from investing activities:
   Net (increase) decrease in loans receivable                                            (25,420)     62,217
   Principal repayments on mortgage-backed securities                                       7,984       6,283
   Proceeds from sales and other repayments of real
       estate acquired in settlement of loans                                                   -      16,520
   Purchase of equipment                                                                   (3,598)          -
                                                                                       ----------  ----------

      Net cash (used in) provided by investing activities                                 (21,034)     85,020
                                                                                       ----------  ----------

Cash flows from financing activities:
   Net increase in deposits                                                               710,954     235,131
   Increase (decrease) in advance payments by borrowers
       for taxes and insurance                                                              2,705      (7,829)
                                                                                       ----------  ----------

      Net cash provided by financing activities                                           713,659     227,302
                                                                                       ----------  ----------

Net increase in cash and cash equivalents                                                 757,242     434,668
Cash and cash equivalents, beginning                                                    2,818,435   2,383,767
                                                                                       ----------  ----------

Cash and cash equivalents, ending                                                      $3,575,677  $2,818,435
                                                                                       ==========  ==========


</TABLE>












See notes to consolidated financial statements.




                                                        -5-


<PAGE>

<TABLE>
<CAPTION>


                                        DOLLAR BANCORP, INC. AND SUBSIDIARY
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                               Year Ended
                                                                                                March 31,
                                                                                            2000        1999
Supplemental disclosure of cash flow information

<S>                                                                                      <C>         <C>
Cash paid during the year for:
    Income taxes                                                                         $    1,824  $    5,413
                                                                                         ==========  ==========

    Interest                                                                             $  248,358  $  247,454
                                                                                         ==========  ==========

Supplemental schedule of noncash investing activities

Transfer of loan receivable to real estate
 acquired in settlement of loans                                                         $  275,175  $        -
                                                                                         ==========  ==========


</TABLE>





































See notes to consolidated financial statements.



                                                        -6-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of consolidated financial statement presentation

The consolidated  financial  statements  include the accounts of Dollar Bancorp,
Inc. (the "Corporation"),  and the Corporation's wholly owned subsidiary, Dollar
Savings  Bank,  (the "Savings  Bank") and have been prepared in conformity  with
generally accepted accounting principles.  All significant intercompany accounts
and transactions have been eliminated in consolidation.

In preparing the financial statements,  management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the  statement of financial  condition and revenues and expenses for
the period then ended.  Actual  results  could differ  significantly  from those
estimates.  Material estimates that are particularly  susceptible to significant
changes in the near-term  relate to the  determination of the allowance for loan
losses  and the  valuation  of real  estate  acquired  in  settlement  of loans.
Management believes that the allowance for loan losses is adequate and that real
estate acquired in settlement of loans is appropriately valued. While Management
uses available information to recognize losses on loans and real estate acquired
in  settlement  of loans,  future  additions to the allowance for loan losses or
further  writedowns  of real  estate  acquired  in  settlement  of loans  may be
necessary  based on changes in economic  conditions in the Savings Bank's market
area.

Investment and mortgage-backed securities

Investments in debt securities that the Savings Bank has the positive intent and
ability to hold to maturity are  classified as  held-to-maturity  securities and
reported at amortized cost. Debt and equity  securities that are bought and held
principally  for the purpose of selling them in the near term are  classified as
trading securities and reported at fair value, with unrealized holding gains and
losses  included in  earnings.  Debt and equity  securities  not  classified  as
trading securities, nor as held-to-maturity  securities,  shall be classified as
available-for-sale  securities  and  reported  at fair  value,  with  unrealized
holding  gains or losses  reported  in a  separate  component  of  stockholders'
equity.

All mortgage-backed  securities are classified as held-to-maturity,  because the
Savings Bank has the ability and it is management's  intention, to hold all such
securities to maturity.

Gain or loss on sales of  securities  is based upon the specific  identification
method.

Loans receivable, net

Loans are stated at the amount of unpaid principal plus accrued interest less an
allowance for loan losses and deferred  loan fees.  Loans that are sixty days or
more past due are placed on non-accrual status. Interest is calculated by use of
the simple interest method.





                                                        -7-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
-----------------------------------------------

Loan origination fees

The Savings Bank accounts for loan origination fees and costs in accordance with
Statement  of  Financial  Accounting  Standards  No.  91,  "Accounting  for Non-
Refundable  Fees and Costs  Associated  with  Originating or Acquiring Loans and
Indirect  Costs of Leases"  ("SFAS 91").  SFAS 91 requires that the Savings Bank
defer loan  origination  fees and  certain  direct  loan  origination  costs and
amortize such amounts as an adjustment of yield over the contractual life of the
loan.

Allowance for loan losses

An allowance  for loan losses is maintained  at a level  considered  adequate to
absorb loan losses. Management of the Savings Bank, in determining the allowance
for loan losses,  considers the risks inherent in its loan portfolio and changes
in the nature and volume of its loan activities, along with the general economic
and real estate market conditions.

The Savings Bank utilizes a two tier approach:  (1)  identification  of impaired
loans and the  establishment  of specific loss allowance on such loans;  and (2)
establishment  of general  valuation  allowances  on the  remainder  of its loan
portfolio.  The Savings Bank  maintains a loan review  system which allows for a
periodic review of its loan portfolio and the early  identification of potential
impaired  loans.  Such system  takes into  consideration,  among  other  things,
delinquency  status,  size of loans, type and estimated fair value of collateral
and financial  condition of the  borrowers.  Specific loan loss  allowances  are
established for identified loans based on a review of such information.  General
loan loss allowances are based upon a combination of factors including,  but not
limited to,  actual loan loss  experience,  composition  of the loan  portfolio,
current  economic  conditions and  management's  judgment.  Although  management
believes that adequate loan loss allowances are  established,  actual losses are
dependent upon future events, and as such, further additions to the level of the
allowance for loan losses may be necessary.

A loan  evaluated for  impairment is deemed to be impaired when based on current
information  and events,  it is probable that the Savings Bank will be unable to
collect  all  amounts  due  according  to the  contractual  terms  of  the  loan
agreement.  The amount of loan impairment is measured based on the present value
of expected future cash flows discounted at the loans's effective  interest rate
or, as a practical expedient,  at the loan's observable market price or the fair
value  of  the  collateral  if the  loan  is  collateral  dependent.  All  loans
identified  as impaired are evaluated  independently.  The Savings Bank does not
aggregate  such loans for  evaluation  purposes.  Payments  received on impaired
loans are applied first to interest receivable and then to principal.









                                                        -8-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
-----------------------------------------------

Premises and equipment

Premises  and  equipment  are  comprised  of land,  at cost,  and  building  and
furniture,  fixtures and  equipment,  at cost,  less  accumulated  depreciation.
Depreciation charges are computed on the straight-line method over the following
estimated useful lives:
<TABLE>
<CAPTION>

<S>                                                    <C>
         Building and improvements                     5 to 40 years
         Furniture, fixtures and equipment             5 to 10 years
</TABLE>

Real estate acquired in settlement of loans

Real estate  acquired by  foreclosure or deed in lieu of foreclosure is recorded
at the lower of cost or fair value at date of acquisition and thereafter carried
at the lower of such  initially  recorded  amount or fair value  less  estimated
selling costs. Costs incurred in developing or preparing properties for sale are
capitalized.  Income  and  expense  related  to the  holding  and  operating  of
properties  are  recorded  in  operations.  Gains and losses  from sales of such
properties are recognized as incurred.

Income taxes

Federal income taxes and state taxes have been provided on the basis of reported
income.  Deferred  income  taxes are  provided  for certain  items in income and
expense which enter into the  determination  of income for  financial  reporting
purposes in different periods than for income tax purposes.

Concentration of credit risk and interest-rate risk

The Savings Bank is principally  engaged in the business of attracting  deposits
from the general public and using these  deposits,  together with borrowings and
other  funds,  to make loans  secured by real estate  and,  to a lesser  extent,
consumer loans in the Northern New Jersey area. The potential for interest- rate
risk  exists  as a  result  of  the  shorter  duration  of  the  Savings  Bank's
interest-sensitive  liabilities  compared to the  generally  longer  duration of
interest-sensitive  assets. In a rising interest rate  environment,  liabilities
will reprice faster than assets,  thereby reducing net interest income. For this
reason,  management  regularly  monitors the  maturity  structure of the Savings
Bank's  assets and  liabilities  in order to measure its level of  interest-rate
risk and to plan for future volatility.

Statements of cash flows

For the purposes of reporting cash flows, cash and cash equivalents include cash
and amounts due from depository  institutions and  interest-bearing  deposits in
other banks with an original maturity of three months or less.









                                                        -9-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
-----------------------------------------------

Disclosures about fair value of financial instruments

The  following  methods  and  assumptions  were  used  by the  Savings  Bank  in
estimating the fair value of its financial instruments:

      Cash and cash equivalents

      The carrying  amounts  reported in the financial  statements  for cash and
      cash equivalents approximates their fair values.

      Mortgage-backed securities

      Fair value is  determined  by reference  to quoted  market  prices,  where
      available.  If quoted  market  prices are not  available,  fair values are
      based on quoted market prices of comparable instruments.

      Loans receivable

      The fair value of loans is estimated by discounting the future cash flows,
      using the current  rates at which similar loans would be made to borrowers
      with similar credit ratings and for the same remaining maturities, of such
      loans.

      Deposits

      The carrying  amounts  reported in the  financial  statements  for savings
      accounts  approximates their fair values. For fixed-maturity  certificates
      of deposit,  fair value is estimated using the rates currently offered for
      deposits of similar remaining maturities.

      Commitments to extend credit

      The fair  value of  commitments  is  estimated  using  the fees  currently
      charged  to  enter  into  similar  agreements,  taking  into  account  the
      remaining terms of the agreements and the present  creditworthiness of the
      counterparties. For fixed-rate loan commitments, fair value also considers
      the  difference  between  current  levels of interest  rates and committed
      rates.

Reclassification

Certain  amounts,  for the year ended March 31, 1999, have been  reclassified to
conform to the current year's presentation.












                                                       -10-


<PAGE>


<TABLE>
<CAPTION>

                                        DOLLAR BANCORP, INC. AND SUBSIDIARY
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



 2.  MORTGAGE-BACKED SECURITIES HELD TO MATURITY

                                                                                March 31, 2000
                                                                      Carrying  Gross Unrealized  Fair
                                                                       Value    Gains    Losses   Value

<S>                                                                   <C>      <C>     <C>        <C>
Government National Mortgage Association                              $ 17,438 $   453  $     81 $17,810
Federal Home Loan Mortgage Corp.                                         3,441      99         -   3,540
                                                                      -------- -------  -------- -------

                                                                      $ 20,879 $   552  $     81 $21,350
                                                                      ======== =======  ======== =======
</TABLE>
<TABLE>
<CAPTION>

                                                                                March 31, 1999
                                                                      Carrying  Gross Unrealized  Fair
                                                                       Value    Gains    Losses   Value

<S>                                                                   <C>      <C>      <C>      <C>
Government National Mortgage Association                              $ 24,691 $ 1,516  $      - $26,207
Federal Home Loan Mortgage Corp.                                         4,172     228         -   4,400
                                                                      -------- -------  -------- -------

                                                                      $ 28,863 $ 1,744  $      - $30,607
                                                                      ======== =======  ======== =======
</TABLE>

There were no sales of  mortgage-backed  securities during the years ended March
31, 2000 and 1999.

 3.  LOANS RECEIVABLE, NET
<TABLE>
<CAPTION>

                                                                                   March 31,
                                                                            ------------------------
                                                                               2000          1999
                                                                            -----------  -----------

<S>                                                                         <C>          <C>
Real estate mortgages:
      One to four family                                                    $ 3,966,721  $ 4,550,788
      Five or more family                                                       660,981      687,824
      Commercial                                                              1,244,512    1,384,829
      Construction                                                              515,487            -
                                                                            -----------  -----------

                                                                              6,387,701    6,623,441

Consumer:
      Passbook or certificate                                                    61,525       48,171
                                                                            -----------  -----------

      Total loans                                                             6,449,226    6,671,612
                                                                            -----------  -----------

Less: Deferred loan fees                                                         14,380        8,284
      Allowance for loan losses                                                 351,305      431,893
      Loans in process                                                          110,675            -
                                                                            -----------  -----------

                                                                                476,360      440,177

                                                                            $ 5,972,866  $ 6,231,435

</TABLE>







                                                       -11-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



 3.  LOANS RECEIVABLE, NET (Cont'd)
--------------------------

<TABLE>
<CAPTION>
An analysis of the allowance for loan losses follows:
                                                                                      Year Ended
                                                                                       March 31,
                                                                                     2000      1999

<S>                                                                                <C>       <C>
      Balance, beginning                                                           $431,893  $348,305
      Provision charged to operations                                                19,412    83,588
      Charge-offs                                                                  (100,000)        -
                                                                                   --------  --------

      Balance, ending                                                              $351,305  $431,893
                                                                                   ========  ========
</TABLE>

Nonaccrual loans totaled  approximately  $657,000 and $411,000 at March 31, 2000
and 1999, respectively.  Interest income that would have been recorded under the
original  terms  of  such  loans  totaled  approximately  $69,000  and  $40,000,
respectively,  for the years then  ended.  During the years ended March 31, 2000
and  1999,   interest   income   actually   recognized  on  such  loans  totaled
approximately $38,000 and $26,000, respectively.

<TABLE>
<CAPTION>

Impaired loans and related amounts recorded in the allowance for loan losses are
summarized as follows:

                                                                                      March 31,
                                                                                   2000        1999
      <S>                                                                       <C>         <C>
      Recorded investment in impaired loans:
        With recorded allowances                                                $  656,553  $  411,005
        Without recorded allowances                                                      -           -
                                                                                ----------  ----------

           Total impaired loans                                                    656,553     411,005
        Related allowance for loan losses                                           21,394      12,295
                                                                                ----------  ----------

           Net impaired loans                                                   $  635,159  $  398,710
                                                                                ==========  ==========
</TABLE>

 4.  PREMISES AND EQUIPMENT, NET
<TABLE>
<CAPTION>

                                                                                     March 31,
                                                                                  2000      1999

<S>                                                                             <C>       <C>
Land                                                                            $ 44,000  $ 44,000
Building and improvements                                                        156,000   156,000
Furnishings and equipment                                                        130,845   127,247
Property held for future expansion                                               121,700   121,700
                                                                                --------  --------

                                                                                 452,545   448,947

Less accumulated depreciation                                                    164,693   151,812
                                                                                --------  --------

                                                                                $287,852  $297,135
</TABLE>







                                                       -12-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



 5.  DEPOSITS
<TABLE>
<CAPTION>

                                                                          March 31,
                                                         -------------------------------------------
                                                                 2000                   1999
                                                         --------------------   --------------------
                                                           Amount     Percent     Amount     Percent
<S>                                                      <C>          <C>         <C>        <C>
Savings accounts:
   Regular and club:
      2.00%                                              $5,317,891     61.76   $4,484,115     56.74
Time deposits:
   Market rate:
      91 day:
         3.30%                                               85,560       .99            -         -
         2.75% - 3.00%                                            -         -       93,701      1.19
      6 month:
         4.00% - 4.40%                                      953,647     11.08            -         -
         3.60% - 4.50%                                       -            -      1,058,466     13.39
      12 month:
         4.00% - 4.40%                                    1,043,785     12.12            -         -
         4.00% - 5.00%                                            -         -    1,051,612     13.31
      24 month:
         4.50% - 5.15%                                        5,461       .06            -         -
         4.30% - 5.15%                                            -         -       17,483       .22
   Jumbo:
         Within 90 days:
         5.49% - 6.00%                                    1,204,209     13.99            -         -
         4.50% - 5.00%                                            -         -    1,196,860     15.15
                                                         ----------   -------   ----------   -------

                                                         $8,610,553    100.00   $7,902,237    100.00
                                                         ==========   =======   ==========   =======
</TABLE>

The average rate of interest, net of penalty income, was 2.90% and 3.01% for the
years  ended  March  31,  2000 and  1999,  respectively.  This  average  rate is
calculated by dividing the total  interest paid or credited to accounts,  net of
penalty income, by the average deposit balances outstanding for the period.

Included  in  deposits  at  March  31,  2000 and  1999,  are  deposits  from two
directors,   individually  or  in  trust  for  others,   totaling  approximately
$2,248,000 and $2,161,000, respectively.

The aggregate amount of deposit accounts of $100,000 or more totaled  $1,316,000
and $1,273,000 at March 31, 2000 and 1999, respectively.

 6.  REGULATORY CAPITAL

The  Savings  Bank  is  subject  to  various  regulatory  capital   requirements
administered  by the federal banking  agencies.  Failure to meet minimum capital
requirements   can  initiate   certain   mandatory,   and  possibly   additional
discretionary,  actions by regulators  that, if undertaken,  could have a direct
material  effect on the  Savings  Bank's  financial  statements.  Under  capital
adequacy  guidelines and the regulatory  framework for prompt corrective action,
the Savings Bank must meet specific capital guidelines that involve quantitative
measures of the Savings Bank's assets, liabilities and certain





                                                       -13-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 6.  REGULATORY CAPITAL (Cont'd)
-----------------------

off-balance-sheet  items, as calculated under regulatory  accounting  practices.
The Savings  Bank's  capital  amounts  and  classification  are also  subject to
qualitative judgments by the regulators about components,  risk weightings,  and
other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require the Savings  Bank to maintain  minimum  amounts and ratios (set forth in
the table below) of tangible and core capital (as defined in the regulations) to
total  assets,  and of total  capital (as defined) to  risk-weighted  assets (as
defined). Management believes, as of March 31, 2000, that the Savings Bank meets
all capital adequacy requirements to which it is subject.

The Savings Bank's actual  capital  amounts and ratios are also presented in the
table below. There is no deduction from capital for interest-rate risk.
<TABLE>
<CAPTION>
                                                                                          To be well
                                                                                      capitalized under
                                                                For capital           prompt corrective
                                          Actual              adequacy purposes       action provisions
                                     -----------------        -----------------       -----------------
                                      Amount    Ratio          Amount    Ratio         Amount    Ratio
                                     --------  -------        --------  -------       --------  ------
                                                            (dollars in thousands)

<S>                                  <C>       <C>            <C>         <C>        <C>        <C>
As of March 31, 2000:
  Risk-based capital                 $ 1,551   30.68%         $    404    8.00%      $    506   10.00%
  Core capital                         1,485   14.51%              409    4.00%           614    6.00%
  Tangible capital                     1,485   14.51%              154    1.50%           512    5.00%

As of March 31, 1999:
  Risk-based capital                 $ 1,471   30.22%         $    389    8.00%      $    487   10.00%
  Core capital                         1,410   14.88%              379    4.00%           568    6.00%
  Tangible capital                     1,410   14.88%              142    1.50%           474    5.00%
</TABLE>

 7.  INCOME TAXES

The Savings Bank qualifies as a savings  institution under the provisions of the
Internal Revenue Code, and was therefore, prior to January 1, 1996, permitted to
deduct from taxable income,  an allowance for bad debts based upon eight percent
of taxable  income before such  deduction,  less certain  adjustments.  Retained
earnings,  at March 31, 2000, include  approximately  $403,000 of such bad debt,
which, in accordance with FASB Statement No. 109, "Accounting for Income Taxes,"
is  considered a permanent  difference  between the book and income tax basis of
loans  receivable,  and for which income taxes have not been  provided.  If such
amount  is  used  for  purposes  other  than  for  bad  debt  losses,  including
distributions  in  liquidation,  it will be  subject  to income  tax at the then
current rate.










                                                       -14-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 7.  INCOME TAXES (Cont'd)
-----------------
<TABLE>
<CAPTION>

The components of income taxes are summarized as follows:

                                                                            Year Ended
                                                                             March 31,
                                                                           2000     1999
     <S>                                                                 <C>      <C>
     Current tax expense:
         Federal income                                                  $     -  $  -
         State income                                                      2,841     -
                                                                         -------  ----

                                                                           2,841     -

     Deferred tax expense:
         Federal income                                                        -     -
         State income                                                     (2,841)    -
                                                                         -------  ----

                                                                          (2,841)    -

                                                                         $     -  $  -
                                                                         =======  ====
</TABLE>
<TABLE>
<CAPTION>

The tax effects of temporary  differences that give rise to significant portions
of the net deferred tax asset, at March 31, 2000 and 1999, are as follows:

                                                                              March 31,
                                                                           2000      1999
<S>                                                                      <C>       <C>
     Deferred tax assets:
         Allowance for loan losses                                       $139,940  $126,536
         Deferred interest income                                               -     9,770
         Depreciation, including write down
          of premises                                                      24,404    31,174
         Net operating loss carryforward                                   41,262    62,859
         Other items, principally accrual
          to cash adjustments                                              15,157    21,564
         Valuation allowance                                             (204,068) (238,400)
                                                                         --------  --------

                                                                           16,695    13,503

     Deferred tax liabilities:
         Other items, principally accrual
          to cash adjustments                                               7,253     6,902
                                                                         --------  --------

            Net deferred tax asset                                       $  9,442  $  6,601
                                                                         ========  ========

</TABLE>














                                                       -15-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 7.  INCOME TAXES (Cont'd)
-----------------
<TABLE>
<CAPTION>

The following table presents a reconciliation  between the reported income taxes
and the income  taxes which would be  computed  by applying  the normal  federal
income tax rate (34%) to income before income taxes:

                                                                              Year Ended
                                                                               March 31,
                                                                           2000        1999

<S>                                                                      <C>         <C>
Federal income tax                                                       $  25,501   $  48,117
Increases (reductions) in taxes resulting
 from:
     Change in federal valuation allowance                                 (31,888)    (63,677)
     Other items, net                                                        6,387      15,560
                                                                         ---------   ---------

Effective income tax                                                     $       -   $       -
                                                                         =========   =========
</TABLE>

The  Savings  Bank has  available,  at March 31,  2000,  unused  operating  loss
carryforwards  of  approximately  $121,000,  which may be applied against future
federal taxable income expiring in the year 2011.

 8.  COMMITMENTS AND CONTINGENCIES

The Savings Bank is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing  needs of its  customers.
These financial  instruments are  commitments to originate  mortgage loans.  The
contract amount of the commitment reflects the extent of involvement the Savings
Bank has in the financial instruments.

The Savings Bank's exposure to credit loss in the event of nonperformance by the
other party to the  commitment  is  represented  by the  contract  amount of the
commitment. The Savings Bank uses the same credit policies in making commitments
and conditional obligations as it does for on-balance sheet instruments.

Commitments to originate  mortgage loans are agreements to lend to a customer as
long as there is no  violation of any  condition  established  in the  contract.
Commitments  generally have fixed expiration dates or other termination  clauses
and may require  payment of a fee. The Savings Bank  evaluates  each  customer's
creditworthiness  on a case-by-case  basis. The amount of collateral obtained by
the  Savings  Bank upon  extension  of credit  is based on  management's  credit
evaluation of the counter-party.  Collateral held may include one-to-four family
residential  properties,  five or more unit  residential  rental  properties and
income-producing commercial properties.

The Savings Bank had no commitments to extend credit at March 31, 2000 and 1999.

The Savings  Bank also has, in the normal  course of business,  commitments  for
services and supplies.  Management  does not  anticipate  losses on any of these
transactions.





                                                       -16-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 8.  COMMITMENTS AND CONTINGENCIES (Cont'd)
----------------------------------

The Savings Bank is also a party to  litigation  which  arises  primarily in the
ordinary  course  of  business.  In  the  opinion  of  management  the  ultimate
disposition of such litigation  should not have a material adverse effect on the
financial position of the Savings Bank.

 9.  FAIR VALUES OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>

                                                                        March 31,
                                                         -----------------------------------
                                                               2000               1999
                                                         -----------------  -----------------
                                                         Carrying    Fair   Carrying    Fair
                                                          Value     Value    Value     Value
Financial assets                                                    (in thousands)
----------------

<S>                                                      <C>       <C>      <C>       <C>
Cash and cash equivalents                                $  3,576  $ 3,576  $  2,818  $ 2,818
Mortgage-backed securities
 held to maturity                                              21       21        29       31
Loans receivable                                            5,973    6,124     6,231    6,507

Financial liabilities

Deposits                                                 $  8,611  $ 8,606  $  7,902  $ 7,906
</TABLE>

The fair value  estimates are made at a discrete point in time based on relevant
market information and information about the financial  instruments.  Fair value
estimates are based on judgements  regarding  future  expected loss  experience,
current  economic   conditions,   risk   characteristics  of  various  financial
instruments,  and other  factors.  These  estimates are subjective in nature and
involve uncertainties and matters of significant judgment and, therefore, cannot
be determined with precision.  Changes in assumptions could significantly affect
the  estimates.  Further,  the  foregoing  estimates  may not reflect the actual
amount  that could be  realized  if all or  substantially  all of the  financial
instruments were offered for sale.

In addition,  the fair value estimates were based on existing on-and-off balance
sheet financial  instruments  without attempting to value the anticipated future
business  and the  value of  assets  and  liabilities  that  are not  considered
financial  instruments.  Other  significant  assets and liabilities that are not
considered financial assets and liabilities include real estate owned,  premises
and equipment, and advances from borrowers for taxes and insurance. In addition,
the tax  ramifications  related to the  realization of the unrealized  gains and
losses can have a significant  effect on fair value  estimates and have not been
considered in any of the estimates.

Finally,  reasonable  comparability  between  financial  institutions may not be
likely due to the wide range of  permitted  valuation  techniques  and  numerous
estimates which must be made given the absence of active  secondary  markets for
many of the financial instruments.  The lack of uniform valuation  methodologies
introduces a greater degree of subjectivity to these estimated fair values.


                                                       -17-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.  REORGANIZATION AND STOCK CONVERSION

On June 7, 1997, the Savings Bank  converted  from a New Jersey state  chartered
mutual  savings and loan  association  to a federally  chartered  mutual savings
bank.

On October 10,  1997,  the Savings  Bank  converted  from a federally  chartered
mutual savings bank to a federally chartered stock savings bank through the sale
of 76,000 shares of common stock (par value $1.00).  Total  proceeds of $760,000
were reduced by conversion expenses of $129,858, for net proceeds of $630,142.

At the time of conversion, the Savings Bank established a liquidation account in
an amount  equal to its total  equity as of the date of the latest  statement of
condition  appearing  in the  final  prospectus  used  in  connection  with  the
conversion.  The  liquidation  account  will be  maintained  for the  benefit of
eligible  account holders or supplemental  eligible account holders who continue
to  maintain  their  accounts  at the  Savings  Bank after the  conversion.  The
liquidation account will be reduced annually to the extent that eligible account
holders or supplemental  eligible  account holders have reduced their qualifying
deposits as of each anniversary date.  Subsequent  increases will not restore an
eligible account holder's or supplemental  eligible account holder's interest in
the liquidation  account.  In the unlikely event of a liquidation of the Savings
Bank, (a circumstance  not envisioned or expected by management),  each eligible
account  holder or  supplemental  eligible  account  holder would be entitled to
receive a distribution from the liquidation  account in an amount  proportionate
to the current adjusted qualifying balances for accounts of all eligible account
holders  or  supplemental  eligible  account  holders  then  holding  qualifying
deposits in the Savings Bank.

Office of Thrift Supervision (OTS) regulations impose limitations on all capital
distributions,  such as cash  dividends,  payments to  repurchase  or  otherwise
acquire shares,  payments to  stockholders of another  institution in a cash-out
merger and other distributions charged against capital.

At a special  meeting of stockholders  held September 30, 1999,  stockholders of
the Savings  Bank  approved  the  reorganization  of the  Savings  Bank into the
holding  company  structure,  whereby the Savings  Bank  becomes a  wholly-owned
subsidiary of the Corporation, a Delaware corporation. Each outstanding share of
the Savings Bank's common stock,  par value $1.00 per share,  was  automatically
converted into one share of the  Corporation's  common stock, par value $.01 per
share. The reorganization was completed on October 20, 1999.











                                                       -18-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


11.  IMPACT OF NEW ACCOUNTING STANDARDS

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  SFAS No. 133  establishes  accounting and
reporting standards for derivative  instruments and for hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities in the statement of financial position and measure those instruments
at fair value. In addition, certain provisions of this statement will permit, at
the  date  of  initial   adoption  of  SFAS  No.  133,   the   transfer  of  any
held-to-maturity security into either the available-for-sale or trading category
and the transfer of any  available-for-sale  security into the trading category.
Transfers from the  held-to-maturity  portfolio at the date of initial  adoption
will not call into question the entity's intent to hold other debt securities to
maturity in the future. In June 1999, the FASB issued SFAS No. 137, an amendment
of FASB Statement No. 133, which defers the effective date to periods  beginning
after June 15,  2000.  The Savings Bank does not expect the adoption of SFAS 133
to have a material impact on its financial statements.

12.  PARENT ONLY FINANCIAL INFORMATION

Dollar Bancorp, Inc. operates its wholly owned subsidiary, Dollar Savings
Bank.  The earnings of the subsidiary are recognized by the holding company
using the equity method of accounting.  Accordingly, earnings of the
subsidiary are recorded as increases in the investment in the subsidiary.  The
following are the condensed financial statements for Dollar Bancorp, Inc.
(Parent company only).

<TABLE>
<CAPTION>
                                              STATEMENT OF CONDITION


                                                                                         March 31, 2000


<S>                                                                                        <C>
Assets:
   Investment in subsidiary                                                                $1,484,964
                                                                                           ----------

      Total assets                                                                         $1,484,964
                                                                                           ==========

Liabilities                                                                                $        -

Stockholders' equity                                                                        1,484,964
                                                                                           ----------

      Total liabilities and stockholders' equity                                           $1,484,964
                                                                                           ==========


</TABLE>







                                                       -19-


<PAGE>



                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



12.  PARENT ONLY FINANCIAL INFORMATION (Cont'd)
--------------------------------------


<TABLE>
<CAPTION>
                                                STATEMENT OF INCOME

                                                                                         From Inception
                                                                                        October 20, 1999
                                                                                        to March 31, 2000

<S>                                                                                     <C>
Equity in undistributed earnings
 of subsidiary                                                                              $42,916
                                                                                            -------

Net income                                                                                  $42,916
                                                                                            =======
</TABLE>


<TABLE>
<CAPTION>
                                              STATEMENT OF CASH FLOWS


                                                                                         From Inception
                                                                                        October 20, 1999
                                                                                        to March 31, 2000

<S>                                                                                         <C>
Cash flows from operating activities:
   Net income                                                                               $42,916
   Adjustments to reconcile net income to
    net cash provided by operating activities:
       Equity in undistributed earnings of subsidiary
                                                                                            (42,916)

          Net cash provided by operating activities                                               -
                                                                                               ----

Net increase (decrease)in cash and cash equivalents                                               -

Cash and cash equivalents - beginning                                                             -
                                                                                               ----

Cash and cash equivalents - ending                                                          $     -
                                                                                               ====




</TABLE>












                                                       -20-


<PAGE>


                       DOLLAR BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


13.  QUARTERLY FINANCIAL DATA (UNAUDITED)
-----------------------------------------
<TABLE>
<CAPTION>

                                                                      Quarter Ended
                                                     -----------------------------------------------
                                                     June 30,  September 30, December 31,  March 31,
                                                       1999        1999          1999        2000
                                                     --------  ------------  -----------  ----------
                                                       (In thousands, except for per share amounts)

<S>                                                  <C>       <C>           <C>          <C>
Total interest income                                $    171  $        181  $       192  $      191
Total interest expense                                     53            56           65          72
                                                     --------  ------------  -----------  ----------

Net interest income                                       118           125          127         119

Provision for loan losses                                   -             -            -          19
Non-interest income                                         8             7           13          15
Non-interest expenses                                     119           107          110         102
Income taxes                                                -             -            -           -
                                                     --------  ------------  -----------      ------

Net income                                           $      7  $         25  $        30  $       13
                                                     ========  ============  ===========  ==========

Basic and diluted earnings per share                 $    .10  $        .32  $       .39  $      .18

Weighted average number of
 common shares outstanding                                 76            76           76          76







</TABLE>























                                                       -21-










<PAGE>




                                   EXHIBIT 21

                         SUBSIDIARIES OF THE REGISTRANT



<PAGE>


                         SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>

Name                                State of Incorporation

<S>                                 <C>
Dollar Bancorp, Inc.                Delaware
         |
         | 100%
         |
Dollar Savings Bank                 Federal
</TABLE>