[graphic-STATEN ISLAND Bancorp,Inc. logo]

                    15 BEACH STREET, STATEN ISLAND, NY 10304

Member F.D.I.C.              Equal Opportunity Employer     Equal Housing Lender

                                  www.sibk.com


<PAGE>

STATEN ISLAND BANCORP, INC.

             2000 Annual Report


                                                        " Bringing a successful
                                                         tradition of Community
                                                         Banking to new markets"





                                       [graphic-STATEN ISLAND Bancorp,Inc. logo]

<PAGE>
CORPORATE PROFILE


MISSION  STATEMENT:  SI Bank & Trust  is a  strong  financial  services  company
committed to improving  shareholder  value and  delivering  the highest  quality
products  and  services  responsive  to the  changing  needs of our consumer and
business markets.  As we grow, we will consistently strive to give extraordinary
service  to our  customers  by  providing  our  employees  with  the  means  and
opportunities  to  make  full  use  of  their  skills  and  capabilities.  These
commitments to our shareholders, customers and employees will enable the Company
to maintain a level of  profitability  necessary to remain  independent  for the
benefit of the communities we serve.

[GRAPHIC-MAP DEPICTING LOCATIONS]

 Staten Island, NY .........17
 Kings (Brooklyn), NY....... 2
 Union, NJ...................3
 Middlesex, NJ ..............1
 Monmouth, NJ................2
 Ocean, NJ...................5


Staten  Island  Bancorp,  Inc.  ("SIB") was organized in 1997 and is the holding
company for SI Bank & Trust (the "Bank"),  a federally  chartered,  FDIC insured
thrift institution, originally organized in 1864 under the name of Staten Island
Savings Bank.  Headquarted in Staten Island, New York, the Bank operates 17 full
service branches and a trust department in Staten Island, New York, two branches
in Brooklyn,  New York, five branches in Ocean County,  New Jersey, two branches
in Monmouth County,  New Jersey,  one branch in Middlesex County, New Jersey and
three branches in Union County, New Jersey.

SI Bank & Trust also has a  mortgage-banking  subsidiary:  SIB  Mortgage  Corp.,
d/b/a Ivy Mortgage.  The  principal  business of the Bank consists of attracting
deposits  from  consumers  and  businesses  in its market  area and  originating
consumer, residential, multi-family and commercial real estate loans, as well as
other business loans.

Staten Island  Bancorp,  Inc.'s common stock is publicly  traded on the New York
Stock Exchange under the symbol "SIB".
<PAGE>

                                                            FINANCIAL HIGHLIGHTS

[GRAPHIC-GRAPH  DEPICTING TOTAL ASSETS (in millions of dollars)]

[GRAPHIC-GRAPH  DEPICTING TOTAL LOANS (in millions of dollars)]

[GRAPHIC-GRAPH  DEPICTING TOTAL DEPOSITS (in millions of dollars)]
<TABLE>
<CAPTION>
                                                                            At or For the Years Ended December 31,
--------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)                                2000             1999            1998
--------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>               <C>            <C>
Operations Data              Net interest income                         $  140,684        $ 138,409      $  121,072
                             Provision (benefit) for loan losses                652           (1,843)          1,594
                             Total other income                              43,562           30,853          10,380
                             Total other expenses                            96,760           82,971          55,918
                             Income before provision for income taxes        86,834           88,134          73,940
                             Provision for income taxes                      32,908           35,259          29,678
                             Net income                                      53,926           52,875          44,262
--------------------------------------------------------------------------------------------------------------------

Financial Condition Data     Total assets                                $5,240,864       $4,489,314      $3,776,947
                             Loans receivable, net                        2,847,660        2,150,039       1,457,058
                             Loans held for sale, net                       116,163           46,588          77,943
                             Securities available for sale, net           1,888,946        1,963,954       2,029,041
                             Deposits                                     2,345,213        1,820,233       1,729,061
                             Borrowed funds                               2,241,011        2,049,411       1,344,517
                             Stockholders' equity                           585,532          571,377         669,042
                             Non-accruing assets                             10,669           13,361          17,081
                             Net loan charge-offs                             1,132              503             782
                             Allowance for loan losses                       14,638           14,271          16,617
--------------------------------------------------------------------------------------------------------------------

Selected Financial Ratios    Stockholders' equity to total assets             11.17%           12.73%          17.71%
                             Tangible equity to assets                        10.09            13.01           16.84
                             Total risk-based capital                         18.77            25.58           35.93
                             Net interest margin                               2.99             3.50            4.13
                             Interest rate spread                              2.22             2.60            2.93
                             Return on average assets                          1.09             1.28            1.45
                             Return on average equity                          9.61             8.44            6.39
                             Efficiency ratio                                 49.41            47.70           41.11
                             Non-accruing assets to total assets               0.20             0.30            0.45
--------------------------------------------------------------------------------------------------------------------

Per Share Data               Basic earnings                              $     1.61        $    1.40       $    1.06
                             Diluted earnings                                  1.61             1.40            1.06
                             Tangible book value                              14.98            14.37           14.90
                             Market value                                     21.38            18.00           19.94
                             Cash dividends paid                               0.51             0.41            0.23

</TABLE>
                                     Page 1
<PAGE>

EXECUTIVE MESSAGE


2000 Highlights

  o Changed name of wholly owned subsidiary to
    SI Bank & Trust


  o Core Cash Earnings per Share increased by 21%


  o Loan production exceeds a record $1.7 billion


  o Non-accruing assets decline to 0.20%
    of total assets


  o Acquired a $374 million commercial bank in
    New Jersey


  o Purchased four branches of a commercial
    bank in New Jersey


  o Opened two de-novo branches


  o Deposit share in Staten Island remains
    in excess of 30%


  o Completed Fifth Stock Repurchase Program


  o SIB Mortgage profitable in 3rd and 4th quarters


To Our Shareholders:

Our third year as a public company has been  highlighted  by continued  earnings
momentum,  expansion  of our  branch  franchise  into the  State of New  Jersey,
continued  record  growth  of  our  loan  production  activities  and  increased
shareholder value.

In addition, on September 5th, we changed the name of the Company's wholly owned
subsidiary  from Staten Island Savings Bank to SI Bank & Trust.  The name change
was implemented due to the continued  expansion of our commercial  services,  as
well as the geographic  expansion of our branch office network beyond the shores
of Staten Island.

In  January  we  completed  the  acquisition  of  First  State  Bancorp  and its
subsidiary,  First State Bank,  a $374  million  commercial  bank with  branches
located in Monmouth and Ocean Counties, New Jersey.

In the fourth quarter we acquired four branches of Unity Bank, expanding our New
Jersey branch network into Middlesex and Union Counties.

These  transactions,   as  well  as  other  activities  noted  in  this  report,
demonstrate management's ongoing commitment to improve shareholder value through
expansion of our franchise,  growth in our key business lines and responsiveness
of our products and services.

The Financial Year in Review

Our financial  performance  remains solid as we continue to execute  capital and
business  plans  that  align  with our  long-term  strategic  vision to  enhance
shareholder  value through  careful and  methodical  growth and  expansion.  Net
income in the year 2000 was affected by narrowing  margins resulting from steady
increases in interest rates. However,  while net income grew by 2.0%, from $52.9
million to $53.9 million, earnings per share

                                     page 2
<PAGE>
[GRAPHIC-GRAPH DEPICTING EARNINGS PER SHARE (IN DOLLARS)]


increased by 15.0% on a diluted per share basis, primarily due to our commitment
to stock repurchases  during the year. Core cash earnings per share increased by
21% to $1.92.

Total assets increased by 16.7% to $5.2 billion,  deposits increased by 28.8% to
$2.3 billion, and stockholders' equity increased to $585.5 million.  This growth
was  accomplished  through the  acquisition  of First  State  Bancorp as well as
continued growth in net loans.

The Company's loan production  reached new record levels due to the expansion of
our two loan subsidiaries,  SIB Mortgage Corp. and American Construction Lending
Services  ("ACLS").  In total, the Company  originated $1.7 billion in loans and
net loan growth was $604  million,  exclusive of the loans  acquired  from First
State. SIB Mortgage, which does business in twenty-seven states as Ivy Mortgage,
originated  $760  million  in  residential  mortgage  loans,  while ACLS had $96
million in loans  outstanding by the end of the year. In an effort to streamline
operations and improve operating efficiencies,  we recently announced the merger
of ACLS with and into SIB Mortgage Corp.

[graphic photo]

          "The Company's loan production reached new record levels..."

Our commercial  lending  initiatives  have proven to be successful  resulting in
significant increases in commercial real estate, multi-family,  construction and
unsecured  commercial  loans. The commercial loan portfolio  increased by 55% to
$560 million  during the year.  This segment of our  portfolio  provides us with
higher  yielding,  shorter-term  loans,  which  are  complementary  to our  core
one-to-four family residential mortgage loan portfolio.

Asset  growth  was  mainly  funded  through  cash  flows,  amortization  of  our
securities  portfolio,  sales of long-term  fixed-rate  mortgage loans,  and the
acquisition and growth of deposits in new markets.

The Company's  reliance on borrowed  funds  declined  slightly to 42.8% of total
assets, from 45.7% of total assets at year-end 1999. Total borrowings  increased
slightly to $2.2 billion during the year. However, it is our intention to reduce
borrowings in 2001 as a result of  anticipated  deposit growth in our New Jersey
markets.  In addition,  $1.4 billion,  or 63% of borrowed funds will re-price in
2001. The weighted average cost of the borrowings was 6.19% for the year.

                                     page 3
<PAGE>
Loan quality remains a priority, particularly as we expand into new markets with
a much  broader  product  line.  We are  proud  to  report  that,  while we have
substantially  increased our loan portfolio,  we have also reduced  non-accruing
assets  to  $10.7  million  or 0.20% of total  assets.  In  addition,  we made a
provision of $652  thousand to our allowance for loan losses due to the changing
dollar mix of our loan  originations.  At December 31, 2000,  our  allowance for
loan losses was 149.7% of  non-accruing  loans,  up from 114.4% at December  31,
1999.

Steadily  rising  interest  rates  throughout  the year  resulted  in  narrowing
interest spreads and margins.  However,  the trend stabilized  during the fourth
quarter  and  recent  cuts in the Fed Funds  rate  should  allow the  Company to
improve these spreads during the coming year.  Also, fee income has increased by
approximately  37% over the prior year, which will serve to offset the narrowing
spreads.  New initiatives  for growth of our Trust and Investment  Services have
also resulted in early success, and should produce a larger amount of fee income
in the future.

Capital Management Strategies

The  capital  management   strategies  deployed  throughout  the  year  include:
continuing  our stock  repurchase  program;  the  payment of  regular  quarterly
dividends;  and acquisition and expansion. As mentioned earlier, we are planning
to de-emphasize  leveraging of the balance sheet in 2001 as a capital management
strategy, provided we can effectively increase deposits in our new markets.

Through  December  2000, we have completed five stock  repurchase  programs.  In
total,  10.2 million  shares have been  repurchased at an average cost of $18.45
per share.  We remain  predisposed  toward  this  program as a way of  deploying
excess capital and the Company commenced a new 5% repurchase  program during the
first quarter 2001.

Regular quarterly  dividend payments also continued in 2000 with total dividends
of $.51 per share  declared  during  the year.  We  increased  the amount of our
dividend twice during the year and our dividend payout ratio amounted to 31.7%.

Revenue Enhancements Through
Cost-Efficient Expansion

As we mentioned in the introduction,  geographic expansion into the State of New
Jersey was  accomplished  with the January  acquisition  of First State Bancorp,
Inc.  and First State Bank,  a $374  million  commercial  bank with six branches
serving  communities in Monmouth and Ocean  Counties,  New Jersey.  By March 31,
2000,  we  had  achieved  all  cost  savings  objectives  with  respect  to  the
integration  of the First State network.  We also purchased four branches,  with
$41 million in deposits, from Unity Bank which enabled us to establish locations
in Middlesex and Union Counties in New Jersey.

We expect to  capitalize  on  excellent  opportunities  to grow market share and
generate  revenue in these new  markets  through the  introduction  of a broader
range  of  commercial  and  consumer  products  supported  by SI Bank &  Trust's
enhanced technology and proven expertise in product delivery and service.

In addition,  Ivy Mortgage opened additional sales offices which are expected to
enable  us to  further  increase  production  significantly.  More  importantly,
approximately  $1.5 million in cost reductions were  implemented at Ivy Mortgage
and the  mortgage-banking  operation was profitable in both the third and fourth
quarters.

             [GRAPHIC-GRAPH DEPICTING TOTAL OTHER INCOME (thousands of dollars)]

By year-end we opened two de-novo branches,  one in Brooklyn,  New York, and one
in Jackson,

                                     page 4

<PAGE>
New  Jersey.  Our  ability  to serve  the  financial  needs of  individuals  and
businesses in our core markets remains obvious as our  share-of-market in Staten
Island remains in excess of 30% of total deposits.

A New Name, but the Same Core Principals
of Community Banking

On September  5th, we changed the name of the Company's  subsidiary  from Staten
Island  Savings  Bank  to SI  Bank  &  Trust.  A big  step  for a  136-year  old
institution,  but appropriate due to our successful transition to a full-service
community bank that began approximately five years ago. As we enter new markets,
we believe that the general  definition of a "savings  bank" was too limiting in
its description of the scope of products and services available to the consumers
and businesses we serve.

                                                                 [graphic-photo]


More  importantly,  we are confident  that these new markets will respond to the
brand of community banking that has enabled us to maintain our dominant position
in our core market of Staten Island.  We know that community  banking is defined
by the people that  deliver the  services,  which is why we remain  committed to
extensive  operational  and service  training.  We also  understand that revenue
enhancements  exist  within  our  own  customer  base,  which  is why we  remain
committed to product and sales  training for our customer  contact  staff at all
levels.


And we understand that the confidence of our  shareholders is dependent upon our
ability to improve  revenues  through cost  effective and efficient  delivery of
products  to our  marketplace,  which  is why we  remain  committed  to  careful
monitoring of expense controls as well as responsive product delivery.


The directors,  officers and staff at SI Bank & Trust have a vested  interest in
the Company's success due to their participation in the Employee Stock Ownership
Plan (ESOP),  our 401(k),  and other stock benefit plans,  as well as individual
investments  in our stock that many of them have made.  In this  regard,  we are
partners  with  our  shareholders  and  mindful  that,  in  order  to  be  truly
successful,  our  business  decisions  must result in long-term  improvement  in
shareholder value.

We  remain  appreciative  to our  shareholders  for  entrusting  us  with  their
financial  investment in our Company and pledge our continued  commitment toward
maintaining the strong  fundamentals of the Company.  Namely, a loyal and stable
low-cost core customer base, the highest quality asset generation, and a team of
banking  professionals  prepared  to set SI Bank & Trust  apart  as the  premier
community bank within the markets we serve.


/s/James R. Coyle
-----------------
James R. Coyle
President and Chief Operating Officer


                    /s/Harry P. Doherty
                    -------------------
                    Harry P.Doherty
                    Chariman and Chief Executive Officer

                                     page 5
<PAGE>

"Our new markets have been added to our core branch  franchise in Staten Island,
NY. We are proud that in Staten  Island we continue to maintain  marketshare  in
excess of 30%, and household penetration of approximately 50%..."

The Community Bank Franchise Expands
Into New Markets

In recent years, the Bank's branch expansion strategies have included whole bank
and branch acquisitions,  as well as de novo branching. In 2000, we accomplished
all three.

In January 2000,  as part of its efforts to  strengthen  its franchise and enter
new markets,  Staten Island  Bancorp  completed the  acquisition  of First State
Bancorp and its  subsidiary,  First State Bank, a $374 million  commercial  bank
with six branch offices.  This network of branches served as the Bank's platform
for entering the strong markets of Monmouth and Ocean Counties, New Jersey.

The  purchase  of four  branches  and $41  million in  deposits of Unity Bank in
December 2000 enabled the Bank to establish  four  additional  branch offices in
Union and Middlesex Counties in New Jersey.

We also opened two new de novo branches, one in Bensonhurst, Brooklyn, New York,
in September;  and the second in December, in the town of Jackson, Ocean County,
New Jersey. Each community is contiguous to towns already served by the Bank. By
year-end deposits in these two branches totaled $15 million.

A significant  opportunity  for growth  exists in these new markets  through the
implementation of SI Bank & Trust's proven sales and service  philosophies.  The
introduction  of new  business  and  consumer  products  to the 15,000  existing
customer households and  tens-of-thousands  of non-customer  households in these
markets will include on-line and ATM banking, electronic bill-payment,  mortgage
and consumer loans,  secured and unsecured  commercial loans and trust services.
In addition,  the employees in the new branches have  participated in the Bank's
extensive sales and service training  programs  designed to identify  cross-sell
opportunities, which we hope will further strengthen the customer's relationship
with the Bank.

[graphic-photo of Bensonhurst, Brooklyn, NY, opened September 2000]

We have also deployed  business  development  activities  that have proven to be
extremely  successful in the core markets served by the Bank.  These  strategies
include the  effective  partnership  of business  development  officers,  branch
managers and commercial  loan officers in the  acquisition of new customers,  as
well as the expansion of services used by our current customer base.

Our new markets have been added to our core branch  franchise in Staten  Island,
NY. We are proud that in Staten Island,  we continue to maintain  marketshare in
excess  of  30%,  and  household


                                     page 6
<PAGE>
penetration  of  approximately  50%,  despite  aggressive  branching and pricing
strategies employed by competitors.  In addition,  core deposit balances make up
approximately 60% of the total, with over 17% in non-interest checking accounts.

We  believe  that  our  ability  to  retain  such  a  significant   market-share
demonstrates the  effectiveness  of our retail and business banking  strategies.
These strategies have included responsive product development and high standards
of customer service.  Usage of new products  introduced in recent years, such as
on-line banking,  the Visa Check Card and small business loans have continued to
expand and add to revenue  due to  well-defined,  targeted  marketing  and sales
efforts.
                                     [graphic-Jackson, NJ, opened December 2000]


Our solid base of core  deposits  also enables the Bank to generate  service and
fee income that helps offset the narrowing  interest margins that were common in
our industry  during the past year.  We also benefit from the fees  generated by
our  financial  services  subsidiary  through  the  sale of  Savings  Bank  Life
Insurance in our New York markets.

Our Trust and Investment Services Department experienced significant growth this
past year. Assets under management at December 31, 2000 totaled $216 million, an
increase  of $40  million or 23%  compared  to  December  31,  1999.  Fee income
generated by this department  increased by approximately 20% in 2000. The growth
in new trust and  investment  services  clients  has been due to the  successful
integration of business  development  activities targeting the existing customer
base.

Loan Production Remains Strong

The  programs,  products  and  practices  implemented  over the  past few  years
continued to result in record levels of loan  production.  Loan  originations in
2000 totaled $1.7 billion, which included $850 million by Ivy Mortgage and ACLS,
and  approximately  $850  million  by the  Bank's  residential,  commercial  and
consumer loan units. This record production  resulted in net loan growth of $604
million,  exclusive  of the First State  acquisition,  and was  accomplished  in
several ways.

Our extensive  product line gives  borrowers the opportunity to select among the
aspects that are most  important to them.  "No-point"  options are  available on
most products, along with other features including "no-income" verification, and
bi-weekly  payments on fixed-rate  mortgage  loans.  The  availability  of jumbo
loans,  government-backed  FHA loans and loans  provided  through  state housing
programs such as the State of New York

                                     page 7

<PAGE>
Mortgage  Association  (SONYMA),  round out the product mix which is designed to
cover the first-time buyer to the more experienced buyer.

Responsiveness  is  another  important  factor in the  successful  growth of our
residential  mortgage loan volumes.  Our Priority Access  Program,  available to
mortgage  brokers,  accounted for approximately 90% of the Bank's total mortgage
loan originations for the year. Members of our program are constantly  providing
us with feedback  concerning the changing  conditions of the residential lending
marketplace.  This  enables us to react more quickly with respect to pricing and
product changes.

In addition,  many applicants have schedules that may not allow them to speak to
loan  representatives   during  "normal"  business  hours.  We  provide  a  loan
specialist  who is available  seven days a week at locations  determined  by the
borrower.

The  operations of Ivy Mortgage  Corp.  reduce the  Company's  dependence on the
market  in and  around  the New York  Metropolitan  area.  Ivy  Mortgage  has an
extensive   presence  as  a  licensed  mortgage  banker  in  the  northeast  and
mid-Atlantic regions of the country, and in the past year opened offices in five
additional states, bringing total coverage to 27 states. During the year we also
implemented approximately $1.5 million in cost controls at Ivy Mortgage and this
subsidiary was profitable  during the third and fourth  quarters.  The Bank also
retained  approximately  $222  million of Ivy  Mortgage's  adjustable-rate  loan
production  in order to  increase  the  amount of  adjustable-rate  loans in its
portfolio.

We continue to achieve  controlled,  yet significant,  improvement in commercial
loan production.  With an approach toward "relationship lending," our commercial
real estate and business  loan  officers have the expertise and the resources to
structure  complicated  transactions  and  to  meet  tight  deadlines.  We  also
continued to enhance the profitability of these customers by generating deposits
and other fee business such as trust services.


               [graphic-Professional office, Staten Island, NY--construction and
                permanent financing by SI Bank & Trust]


The commercial  loan portfolio  reached a record $562 million by year-end,  with
growth in all segments of the portfolio.  The operation of ACLS has  contributed
to  the  growth  in the  construction  loan  portfolio,  which  provides  higher
yielding, variable rate, short-term loans.


Community Banking Is All About The People

The Bank has had a tradition  of  solidifying  its ties with the  community  and
developing business through support of local charitable,  housing,  educational,
health care and civic organizations.  The directors, officers and staff continue
to  contribute  their time,  money and  talents to  hundreds  of  organizations.
Proceeds from team activities  such as  walk-a-thons,  bowl-a-thons,  dress down
days and other events are donated to various charitable organizations. Directors
and officers also serve on numerous boards and advisory committees.

This individual  giving is supported by corporate  sponsorship of various events
and programs such as the  "Newspaper-in-Education"  program, serving hundreds of
classrooms and students in schools throughout Staten Island, in partnership with
the local newspaper, the Staten Island Advance.

In addition, the SISB Community Foundation,  which was formed and funded through
the stock  conversion,  has contributed  millions of dollars in each of the past
three years to local housing, education and charitable causes.

 [graphic-Professional office, Brooklyn, NY--purchase, renovation
and permanent financing by SI Bank & Trust]


We believe that these activities are paramount in our positioning as a community
bank. They expand our reach into households and businesses and present SI Bank &
Trust with additional opportunities for growth.

                                     page 8
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY

     The following selected  historical  financial data for the five years ended
December 31, 2000 is derived in part from the audited  financial  statements  of
Staten Island Bancorp,  Inc. the ("Company").  The selected historical financial
data set forth below should be read in conjunction with the historical financial
statements  of the Company,  including  the related  notes,  included  elsewhere
herein.

<TABLE>
<CAPTION>

                                                                                        December 31,
                                                         ------------------------------------------------------------------------
(000's omitted except share data)                             2000           1999           1998           1997            1996
Selected Financial Condition Data:
<S>                                                      <C>             <C>            <C>            <C>             <C>
Total assets .........................................   $  5,240,864    $ 4,489,314    $ 3,776,947    $  2,651,170    $1,782,323
Securities available for sale, net ...................      1,888,946      1,963,954      2,029,041       1,350,467       703,134
Loans receivable, net ................................      2,847,660      2,150,039      1,457,058       1,082,918       968,015
Loans held for sale, net .............................        116,163         46,588         77,943              --            --
Intangible assets(1) .................................         62,447         15,432         17,701          18,414        20,490
Deposits .............................................      2,345,213      1,820,233      1,729,061       1,623,652     1,577,748
Borrowings ...........................................      2,241,011      2,049,411      1,344,517         250,042            54
Stockholders' equity .................................        585,532        571,377        669,042         685,886       171,080
Tangible book value per share ........................          14.98          14.37          14.90           14.79            --
Common Shares Outstanding ............................     34,920,987     38,693,623     43,704,812      45,130,312            --
<CAPTION>

                                                                                 For the Year Ended December 31,
                                                         ------------------------------------------------------------------------
Selected Operating Data:                                      2000           1999           1998            1997          1996
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>             <C>            <C>            <C>             <C>
Net interest income ..................................   $     140,684   $   138,409    $   121,072    $     86,755    $   73,993
Provision (benefit) for loan losses ..................            652         (1,843)         1,594           6,003         1,000
Other income .........................................         43,562         30,853         10,380           7,454         3,929
Charitable contribution to
   SISB Community Foundation .........................             --             --             --          25,817            --
Other expenses .......................................         96,760         82,971         55,918          42,908        40,066
Income tax expense ...................................         32,908         35,259         29,678           4,932        15,081
Net income ...........................................   $     53,926    $    52,875    $    44,262    $     14,549    $   21,775
Earnings (loss) per share basic and diluted ..........   $       1.61    $      1.40    $      1.06    $       (.29)(3)$       --
   Dividends paid per share ..........................   $       0.51    $      0.41    $      0.23    $         --    $       --
<CAPTION>

                                                                              At or For the Year Ended December 31,
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>            <C>            <C>             <C>           <C>
Key Operating Ratios: ................................           2000           1999           1998            1997          1996
Performance Ratios:(2)(3)
  Return on average assets ...........................            1.09%          1.28%          1.45%           0.70%         1.24%
  Return on average equity ...........................            9.61           8.44           6.39            7.79         14.03
  Average interest-earning assets to
     average interest-bearing liabilities ............          117.83         125.65         139.98          118.70        120.24
  Interest rate spread(4) ............................            2.22           2.60           2.93            3.82          3.84
  Net interest margin(4) .............................            2.99           3.50           4.13            4.39          4.46
  Non-interest expenses, exclusive of
     amortization of intangible assets,
     to average assets ...............................            1.85           1.93           1.76            1.96          2.16
Asset Quality Ratios:
  Non-accruing assets to total assets
     at end of period(5) .............................            0.20%          0.30%          0.45%           0.83%         1.34%
  Allowance for loan losses to
     non-accruing loans at end of period .............          149.74         114.40         102.37           73.69         43.85
  Allowance for loan losses to total loans
     at end of period ................................            0.51           0.66           1.13            1.42          1.02
Capital Ratios:
  Average equity to average assets(3) ................           11.35%         15.17%         22.64%           8.96%         8.85%
  Tangible equity to assets at end of period .........           10.09          13.01          16.84           24.78          8.55
  Total capital to risk-weighted assets ..............           18.77          25.58          35.93           59.62         20.66
</TABLE>

(1)  Consists  of  excess  of  cost  over  fair  value  of net  assets  acquired
     ("goodwill"),  core deposit  intangibles  and loan  servicing  assets which
     amounted to $56.7 million, $2.8 million, and $3.0 million, respectively, at
     December 31, 2000.
(2)  With the exception of end of period ratios, all ratios are based on average
     daily balances during the respective periods.
(3)  The  conversion  proceeds  were received on December 22, 1997 and have been
     reflected in the  performance  and other ratios as of that date.  Per share
     information  for  1997  is  since  conversion.
(4)  Interest rate spread represents the difference between the weighted average
     yield  on  interest-earning   assets  and  the  weighted  average  cost  of
     interest-bearing  liabilities;  net interest margin represents net interest
     income as a percentage of average interest-earning assets.
(5)  Non-accruing  assets consist of non-accrual  loans and real estate acquired
     through foreclosure or by deed-in-lieu thereof.

                                     page 9
<PAGE>

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


General.  The following  discussion is intended to assist in  understanding  the
financial  condition and results of operations of the Company.  The  information
contained  in this  section  should be read in  conjunction  with the  Financial
Statements  and the  accompanying  Notes to Financial  Statements  and the other
sections contained in this Annual Report.

The Company's results of operations depend primarily on its net interest income,
which is the difference between interest income on interest-earning assets, that
principally consists of loans and mortgage-backed and investment securities, and
interest expense on interest-bearing  liabilities which principally  consists of
deposits  and borrowed  funds.  The  Company's  results of  operations  also are
affected  by the  provision  or  benefit  for  loan  losses,  the  level  of its
non-interest income and expenses and income tax expense.

Asset and Liability  Management.  The principal  goal of the Company's  interest
rate risk management is to minimize the potential of adverse effects of material
and prolonged  increases or decreases in interest rates on the Company's results
of operations.  The Company evaluates the inherent interest rate risk in certain
balance  sheet  accounts  in an  effort to  determine  the  acceptable  level of
interest rate risk  exposure  based on the Company's  business  plan,  operating
environment,  capital,  liquidity requirements and performance  objectives.  The
Board of Directors sets limits for earnings at risk and the net portfolio  value
("NPV")  ratio in order to reduce the potential  vulnerability  of the Company's
operations  to changes in interest  rates.  The  Company's  Asset and  Liability
Management   Committee  ("ALCO")  is  comprised  of  members  of  the  Company's
management  under the  direction of the Board of  Directors.  The purpose of the
ALCO is to  communicate,  coordinate and control asset and liability  management
consistent  with the  Company's  business plan and Board  approved  policies and
limits.  The ALCO  establishes  and  monitors  the  volume and mix of assets and
funding  sources taking into account  relative costs and spreads,  interest rate
sensitivity and liquidity needs. The objectives are to manage assets and funding
sources to produce results that are consistent with liquidity, capital adequacy,
growth,  risk and  profitability  goals.  The ALCO generally  meets on a monthly
basis to review,  among other  things,  economic  conditions  and interest  rate
outlook,   current  and  projected   liquidity  needs  and  capital   positions,
anticipated changes in the volume and mix of assets and liabilities and interest
rate risk  exposure  limits  compared  to current  projections  pursuant to "gap
analysis"  and  income  simulations.   At  each  meeting,  the  ALCO  recommends
appropriate strategy changes based on such review which are then reported to the
Board of Directors.

Market  Risk.  The  Company's  primary  market risk is in market  interest  rate
volatility  due to the  potential  impact on net interest  income and the market
value of all interest-earning assets and interest-bearing  liabilities resulting
from changes in interest rates. The operation of the Company does not subject it
to foreign  exchange or  commodity  price risk and the Company  does not own any
trading  assets.  The real estate loan portfolio of the Company is  concentrated
primarily within the New York metropolitan  area, making it subject to the risks
associated with the local economy.

Interest  Rate  Sensitivity.  Interest  rate  sensitivity  is a  measure  of the
difference  between  amounts of  interest-earning  assets  and  interest-bearing
liabilities  which either  reprice or mature within a given period of time.  The
difference,  or the interest rate repricing "gap," provides an indication of the
extent by which an  institution's  interest  rate  spread  will be  affected  by
changes in  interest  rates.  A gap is  considered  positive  when the amount of
interest rate  sensitive  assets  exceeds the amount of interest rate  sensitive
liabilities,  and is  considered  negative  when the  amount  of  interest  rate
sensitive  liabilities  exceeds the amount of interest  rate  sensitive  assets.
Generally,  during a period of rising  interest  rates,  a  negative  gap within
shorter maturities would adversely affect net interest income,  while a positive
gap within  shorter  maturities  would  result in an  increase  in net  interest
income,  and during a period of falling  interest  rates,  a negative gap within
shorter  maturities  would result in an increase in net interest  income while a
positive gap within shorter  maturities  would have the opposite  effect.  As of
December 31, 2000,  the ratio of the  Company's  one-year  interest  rate gap to
total assets was a negative  31.9% and its ratio of  interest-earning  assets to
interest-bearing liabilities maturing or repricing within one year was 42.2%.

   The static gap analysis  alone is not a complete  representation  of interest
rate risk since it fails to account  for  changes  in  prepayment  speeds on the
Company's loan and investment portfolios in different rate environments and does
not  address the extent to which  rates on assets or  liabilities  may change or
reprice.  The  behavior of deposit  balances  will also vary with changes in the
customer mix,  management's  pricing strategies and changes in the general level
of  interest  rates.  Thus,  gap  analysis  does  not  provide  a  comprehensive
presentation  of the  possible  risks to income  embedded in the balance  sheet,
customer structure and various management strategies.

   To  measure  earnings  at  risk,  ALCO  makes  extensive  use of an  earnings
simulation  model  in  the  formation  of  its  interest  rate  risk  management
strategies.  The model uses management  assumptions  concerning the repricing of
assets and liabilities, as well as business volumes projected under a variety of
interest rate scenarios. These scenarios incorporate interest rate increases and
decreases of 200 basis points over a twelvemonth period.

   Management's assumptions for prepayments in the loan portfolio and pricing of
the Company's deposit products are based on management's review of past behavior
of the Company's depositors and borrowers in response to changes in both general
market  interest rates and rates offered by the Company's  federal  savings bank
subsidiary,   SI  Bank  &  Trust  (the  "Bank").   These  assumptions  represent
management's estimates and do not necessarily reflect actual results.

   At December 31, 2000, based on this model, the Company's  potential  earnings
at risk to a gradual  200 basis point rise or decline in market  interest  rates
over the next twelve months

                                     page 10
<PAGE>
was a 7.9%  decrease in projected  net income for the year 2001 in a rising rate
environment  and a 4.0%  increase in  projected  net income in a declining  rate
environment.  Actual  interest  rate  changes  during the past three  years have
fallen within this range and  management  expects that any changes over the next
year will not exceed this range.

   Management has included all financial instruments and assumptions that have a
material  effect in  calculating  the  Company's  potential  net  income.  These
measures of risk represent the Company's  exposure to interest rate movements at
a particular  point in time.  The ALCO monitors the Company's  risk profile on a
quarterly  basis,  or as needed,  to monitor the effects of movement in interest
rates and also any changes or developments in the Company's core business.

   The Company also reviews the market value of portfolio  equity  ("NPV") which
is  defined  as the net  present  value  of an  institution's  existing  assets,
liabilities and off balance sheet  instruments on a quarterly  basis. The Office
of Thrift  Supervision  ("OTS")  monitors the Bank's  interest rate risk through
this calculation,  which they prepare  quarterly,  based on data provided by the
Bank. In addition,  the Company  prepares its NPV  calculation  based on its own
assumptions which could vary from those used by the OTS.
<TABLE>
<CAPTION>
                                                                     Four to      More than     More than
                                                   Within Three       Twelve     One Year to  Three Years to   Over Five
                                                      Months          Months     Three Years    Five Years       Years       Total
------------------------------------------------------------------------------------------------------------------------------------
                                                                                    (dollars in thousands)
<S>                                                  <C>            <C>            <C>           <C>          <C>         <C>
Interest-earning assets(1):
Loans receivable(2):
  Mortgage loans:
    Fixed-rate.....................................  $  50,953      $ 142,849      $ 317,905     $  255,342   $  519,125  $1,286,174
    Adjustable-rate................................    318,555        273,444        457,761        315,429      183,797   1,548,986
  Other loans .....................................     14,520         30,094         29,051         15,297       31,974     120,936
Securities:
  Non-mortgage(3) .................................    102,135         25,080         51,630         59,450      295,077     533,372
  Mortgage-backed fixed-rate(4) ...................     35,488        118,795        352,509        360,397      241,435   1,108,624
  Mortgage-backed adjustable-rate(4) ..............     28,630         66,295         93,637         62,576        1,470     252,608
Other interest-earning assets......................     12,000             --             --             --           --      12,000
                                                     ---------    -----------     ----------    -----------   ----------   ---------
  Total interest-earning assets ...................    562,281        656,557      1,302,493      1,068,491    1,272,878   4,862,700
                                                     =========    ===========     ==========    ===========   ==========   =========

Interest-bearing liabilities:
  Deposits:
    NOW accounts(5)................................      9,827         29,480         36,119          9,561       21,247     106,233
    Savings accounts(5) ...........................     32,310         96,930        197,662        129,240      304,095     760,238
    Money market deposit accounts(5) ..............     28,123         84,368         15,663          7,476        6,764     142,394
    Certificates of deposit .......................    254,401        509,235        143,515         31,629        8,803     947,583
  Other borrowings ................................    695,537      1,151,447        368,990         25,000           37   2,241,011
                                                     ---------    -----------     ----------    -----------   ----------   ---------
  Total interest-bearing liabilities ..............  1,020,198      1,871,460        761,949        202,906      340,946   4,197,459
                                                     =========    ===========     ==========    ===========   ==========   =========

Excess (deficiency) of interest-earning assets
  over interest-bearing liabilities ...............   (457,917)    (1,214,903)       540,544        865,585      931,932     665,241
                                                     =========    ===========     ==========    ===========   ==========   =========

Cumulative excess (deficiency) of interest-earning
  assets over interest-bearing liabilities.........  $(457,917)   $(1,672,820)   $(1,132,276)   $  (266,691)  $  665,241
                                                     =========    ===========     ==========    ===========   ==========

Cumulative excess (deficiency) of interest-earning
  assets over interest-bearing liabilities as a
  percent of assets ...............................     (8.74)%        (31.92)%       (21.60)%       (5.09)%       12.69%
                                                     =========    ===========     ==========    ===========   ==========   =========
</TABLE>

(1)  Adjustable-rate  loans are included in the period in which  interest  rates
     are next  scheduled  to adjust  rather than in the period in which they are
     due and  fixed-rate  loans are  included  in the  periods in which they are
     scheduled  to be repaid,  based on scheduled  amortization,  as adjusted to
     take into account estimated prepayments in the current rate environment and
     loans held for sale are included in the time period they are expected to be
     sold.
(2)  Balances have been reduced for non-accruing  loans,  which amounted to $9.8
     million at December 31, 2000.
(3)  Based on contractual maturities.
(4)  Reflects estimated prepayments in the current interest rate environment.
(5)  Although the  Company's  NOW  accounts,  savings  accounts and money market
     deposit accounts are subject to immediate withdrawal,  management considers
     a  substantial   amount  of  such  accounts  to  be  core  deposits  having
     significantly  longer effective  maturities.  The decay rates used on these
     accounts are based on the latest  available OTS  assumptions and should not
     be regarded as indicative of the actual withdrawals that may be experienced
     by the Company. If all of the Company's NOW accounts,  savings accounts and
     money market  deposit  accounts had been assumed to be subject to repricing
     within  one year,  interest-bearing  liabilities  which were  estimated  to
     mature or reprice  within one year  would  have  exceeded  interest-earning
     assets with comparable  characteristics  by $2.4 billion or 45.81% of total
     assets.

                                    page 11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Certain  assumptions  are  contained  in the  previous  table  which  affect the
presentation  therein.  Although certain assets and liabilities may have similar
maturities  or  periods of  repricing,  they may react in  different  degrees 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 of other types of assets and liabilities lag behind changes
in market  interest  rates.  Certain assets,  such as  adjustable-rate  mortgage
loans,  have features which  restrict  changes in interest rates on a short-term
basis  and over the life of the  asset.  In the  event of a change  in  interest
rates, prepayment and early withdrawal levels would likely deviate significantly
from those assumed in calculating the table.

CHANGES IN FINANCIAL CONDITION

General.  The Company  recorded  assets of $5.2 billion at December 31, 2000 and
$4.5 billion at December 31, 1999.  The asset growth of $751.6  million or 16.7%
was driven by the  Company's  expansion  into the State of New  Jersey  with the
acquisition  of First State Bank  ("FSB") in January  2000 and four  branches of
Unity Bank in December  2000.  These  acquisitions  resulted in asset  growth of
$415.0 million or 55% of the year's total asset growth.

   The increase of $767.2 million or 34.9% in the loan portfolio was the primary
component of this asset  growth.  The sources of funding for asset growth were a
$525.0  million  increase in  deposits,  a $191.6  million  increase in borrowed
funds, and a decrease of $75.0 million in securities available for sale.

Cash and Cash Equivalents. Cash and cash equivalents, which consists of cash and
due from banks,  money  market  accounts,  other  interest-bearing  deposits and
federal funds sold  amounted to $104.1  million at December 31, 2000 compared to
$101.4 million at December 31, 1999.

Loans.  The Company's net loan  portfolio  increased  $767.2 million or 34.9% to
$3.0 billion at December 31, 2000. This increase was due to loan originations of
$1.7 billion and the addition of $93.1 million of loans from the  acquisition of
FSB. The record  originations  included  $850.0 million in  originations  by the
Bank's two lending subsidiaries.  The originations were partially offset by loan
sales of $721.5  million  of one to four  family  residential  loans,  including
$230.0 million of primarily  fixed-rate  residential loans sold by the Bank. The
proceeds  from  these  sales  were  used  to  fund  adjustable  rate  loans  and
construction  loans  originated by the construction  lending  company.  The Bank
retained for its own  portfolio  $222.0  million of higher  yielding one to four
family  adjustable rate residential  loans  originated by the mortgage  company.
Loan demand was primarily in one to four family residential loans;  however, the
Company  had $217.9  million in  commercial  real estate and  construction  loan
originations.  The Company  expanded  its lending  activities  this year through
geographic  expansion by its lending  subsidiaries  into different  areas of the
country and  increasing  the Bank's  presence  in the State of New  Jersey.  The
improved  interest rate environment at year-end resulted in increased volumes at
both lending subsidiaries during the fourth quarter of this year.

Securities.  Securities  amounted to $1.9  billion at December 31, 2000 and $2.0
billion at December 31, 1999. These amounts represent 36.0% and 43.7% of assets,
respectively.  Securities  totaling  $223.5  million  were  acquired  in the FSB
acquisition and were subsequently sold to fund higher yielding loan originations
reflecting  the Company's  efforts to  reallocate  cash flows from the portfolio
into higher  yielding loans.  All of the Company's  securities are classified as
available for sale at such dates.

Deposits. Deposits increased $525.0 million or 28.8% to $2.3 billion at December
31, 2000. This increase was primarily due to the Company's expansion  activities
into the State of New Jersey  with the  acquisition  of FSB and four  additional
branch  locations  from Unity  Bank,  which  resulted  in an  increase of $360.0
million to the deposit base.

   Core  deposits,  which consist of $400.3 million of demand  deposits,  $760.2
million of savings  deposits,  $142.4 million of money market deposits and $94.7
million of NOW  deposits  represented  59.6% of total  deposits at December  31,
2000.  Retail cer tificates of deposit of $872.7  million  represented  37.2% of
total deposits at December 31, 2000.

   In addition,  the Bank  increased  deposits by $74.9 million by instituting a
brokered CD program to use as an alternative  source for funding higher yielding
loans. The Bank continues to utilize effective business  development  efforts to
maintain current and obtain new commercial  relationships.  The Company believes
that its efforts, along with providing quality customer service, will enable the
Bank to maintain its high ratio of demand deposits and strong core deposit base.

Borrowed Funds. The Company's  borrowings at December 31, 2000 were $2.2 billion
compared to $2.0 billion at December 31, 1999,  which  represents an increase of
$191.6  million or 9.3%.  The Company  utilized  borrowings in 2000 primarily to
fund the acquisition of FSB and certain higher yielding loan  originations.  The
borrowings  consist of  reverse  repurchase  agreements  and  advances  from the
Federal Home Loan Bank, which are secured by the one to four family  residential
loan portfolio. At the present time, it is the Company's intention to reduce its
utilization of borrowings to fund asset growth and to emphasize more traditional
funding sources such as deposit growth.

Stockholders'  Equity.  Stockholders'  equity  amounted  to  $585.5  million  at
December 31, 2000 and $571.4 million at December 31, 1999, or 11.2% and 12.7% of
total assets at such dates  respectively.  The increase of $14.2 million was due
to net income of $53.9  million,  an  allocation  of  Employee  Stock  Ownership
("ESOP") and  Recognition  and Retention  Plan ("RRP")  shares,  resulting in an
increase of $9.6  million,  a valuation  adjustment  of the  deferred  tax asset
resulting from the Company's previous  contribution of 2.1 million shares of its
stock to the SISB Community  Foundation resulting in an increase of $4.9 million
and a $31.7  million  increase  in the  unrealized  appreciation  on  securities
available for sale, net of taxes.  These increases were partially  offset by the
use of $67.2 million to continue the Company's  stock  repurchase  program which
has  resulted in the  repurchase  of 10.2 million  shares of treasury  stock and
aggregate cash dividend  payments of $18.8 million.  The tangible book value per
share was $14.98 at December 31, 2000 compared to $14.37 at December 31, 1999.


                                    page 12
<PAGE>

AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID

   The  following  table sets  forth,  for the  periods  indicated,  information
regarding (i) the total dollar amount of interest  income from  interest-earning
assets  and the  resultant  average  yields;  (ii) the  total  dollar  amount of
interest expense on interest-bearing liabilities and the resultant average rate;
(iii) net interest  income;  (iv) interest  rate  spreads;  and (v) net interest
margin.  Information  is based on average  daily  balances  during the indicated
periods.
<TABLE>
<CAPTION>

                                                                         Year Ended December 31,
                                      ----------------------------------------------------------------------------------------------
                                                     2000                          1999                             1998
                                      -----------------------------    ---------------------------    ------------------------------
                                                            Average                        Average                           Average
                                        Average              Yield/    Average              Yield/    Average                 Yield/
                                        Balance    Interest  Cost      Balance    Interest  Cost      Balance     Interest    Cost
------------------------------------------------------------------------------------------------------------------------------------
                                                                            (000's omitted)
<S>                                   <C>          <C>      <C>      <C>         <C>       <C>       <C>          <C>        <C>
Interest-earning assets:
Loans receivable:(1)
  Real estate loans . . . . . . .     $2,540,580   $194,128   7.64%  $1,739,898  $131,978    7.59%   $1,213,098   $  95,742    7.89%
  Other loans . . . . . . . . . .        107,699     10,426   9.68       77,054     7,219    9.37        48,212       5,433   11.27
                                      ----------   --------          ----------  --------            ----------   ---------
Total loans . . . . . . . . . . . .    2,648,279    204,554   7.72    1,816,952   139,197    7.66     1,261,310     101,175    8.02
Securities . . . . . . . . . . . . .   2,025,188    137,848   6.81    2,089,829   136,023    6.51     1,631,050     106,025    6.50
Other interest-earning assets(2) . .      25,743      1,402   5.44       49,679     2,253    4.53        36,648       1,941    5.30
                                      ----------   --------          ----------  --------            ----------   ---------
Total interest-earning assets . . .    4,699,210    343,804   7.32    3,956,460   277,473    7.01     2,929,008     209,141    7.14
                                                   --------                      --------                         ---------
Non-interest-earning assets . . . .      244,255                        173,512                         132,995
                                      ----------                     ----------                      ----------
Total assets . . . . . . . . . . . .  $4,943,465                     $4,129,972                      $3,062,003

Interest-bearing liabilities:
Deposits:
  NOW and money market deposits. . .     219,087     5,960    2.72%     165,071     4,152    2.52%      118,318       3,114    2.63%
  Savings and escrow accounts . . .      793,908    19,488    2.45      752,131    18,716    2.49       780,536      20,953    2.68
  Certificates of deposit . . . . .      827,504    44,781    5.41      556,635    26,477    4.76       528,686      26,875    5.07
                                      ----------   --------          ----------  --------            ----------   ---------
Total Deposits. . . . . . . . . . .    1,840,499    70,229    3.82    1,473,837    49,345    3.35     1,427,540      50,942    3.57
Total borrowings . . . . . . . . . .   2,147,718   132,891    6.19    1,674,990    89,719    5.36       664,863      37,127    5.58
                                      ----------   --------          ----------  --------            ----------   ---------
Total interest-bearing liabilities .   3,988,217   203,120    5.09    3,148,827   139,064    4.42     2,092,403      88,069    4.21
Non-interest-bearing liabilities(3).     394,180                        354,671                         276,455
                                      ----------                     ----------                      ----------
Total liabilities . . . . . . . . .    4,382,397                      3,503,498                       2,368,858
Stockholders' equity . . . . . . . .     561,068                        626,474                         693,145
Total liabilities and stockholders'
   equity . . . . . . . . . . . . .   $4,943,465                     $4,129,972                      $3,062,003
                                      ==========                     ==========                      ==========
Net interest-earning assets. . . . .  $  710,993                     $  807,633                      $  836,605
                                      ==========                     ==========                      ==========

Net interest income/interest
rate spread . . . . . . . . . . . .                $140,684   2.22%              $138,409    2.60%                 $121,072    2.93%
                                                   ========   ====               ========    ====                  ========    ====

Net interest margin. . . . . . . . .                          2.99%                          3.50%                             4.13%
                                                              ====                           ====                              ====

Ratio of average interest-earning
assets to average
interest-bearing liabilities. . . .                         117.83%                        125.65%                           139.98%
                                                            ======                         ======                            ======

</TABLE>

(1)  The  average  balance  of loans  receivable  includes  non-accruing  loans,
     interest on which is recognized on a cash basis.
(2)  Includes Federal Funds sold and interest-earning bank deposits.
(3)  Consists primarily of demand deposit accounts.


                                    page 13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)


RATE/VOLUME ANALYSIS

   The following  table sets forth the effects of changing  rates and volumes on
net interest income of the Company.  Information is provided with respect to (i)
effects on net interest  income  attributable  to changes in volume  (changes in
volume   multiplied  by  prior  rate);  (ii)  effects  on  net  interest  income
attributable  to changes in rate (changes in rate  multiplied by prior  volume);
and  (iii)  changes  in  rate/volume  (change  in rate  multiplied  by change in
volume).
<TABLE>
<CAPTION>

                                                                  For the Year Ended December 31,
                                    -----------------------------------------------------------------------------------------------
                                        2000 compared to 1999                             1999 compared to 1998
                                      Increase (decrease) due to                        Increase (decrease) due to
                                    ---------------------------------------------   -----------------------------------------------
                                                                       Total Net                                         Total Net
                                                            Rate/      Increase                               Rate/      Increase
                                      Rate       Volume     Volume     (Decrease)      Rate      Volume       Volume     (Decrease)
-----------------------------------------------------------------------------------------------------------------------------------
                                                                           (000's omitted)
<S>                                 <C>         <C>         <C>         <C>         <C>          <C>         <C>          <C>
Interest-earning assets:
Loans receivable:
   Real estate loans .............  $    970    $ 60,735    $    446    $ 62,151    $ (3,724)    $ 41,577    $ (1,617)    $ 36,236
   Other loans ...................       240       2,871          95       3,206        (916)       3,250        (548)       1,786
                                    --------    --------    --------    --------    --------     --------    --------     --------
     Total loans receivable ......     1,210      63,606         541      65,357      (4,640)      44,827      (2,165)      38,022
Securities .......................     6,225      (4,207)       (193)      1,825         136       29,823          39       29,998
Other interest-earning assets ....       452      (1,085)       (218)       (851)       (279)         690         (99)         312
                                    --------    --------    --------    --------    --------     --------    --------     --------
Total net change in income
  on interest-earning assets .....     7,887      58,314         130      66,331      (4,783)      75,340      (2,225)      68,332
                                    --------    --------    --------    --------    --------     --------    --------     --------
Interest-bearing liabilities:
Deposits:
  NOW and money
   market deposits ...............       339       1,358         111       1,808        (138)       1,231         (55)       1,038
  Savings and escrow accounts ....      (253)      1,039         (14)        772      (1,530)        (763)         56       (2,237)
  Certificates of deposit ........     3,645      12,885       1,774      18,304      (1,727)       1,421         (92)        (398)
                                    --------    --------    --------    --------    --------     --------    --------     --------
    Total deposits ...............     3,731      15,282       1,871      20,884      (3,395)       1,889         (91)      (1,597)
Borrowings .......................    13,922      25,321       3,929      43,172      (1,514)      56,406      (2,300)      52,592
                                    --------    --------    --------    --------    --------     --------    --------     --------
Total net change in expense
  on interest-bearing liabilities     17,653      40,603       5,800      64,056      (4,909)      58,295      (2,391)      50,995
                                    --------    --------    --------    --------    --------     --------    --------     --------
Net change in net
  interest income ................  $ (9,766)   $ 17,711    $ (5,670)   $  2,275    $    126     $ 17,045    $    166     $ 17,337
                                    ========    ========    ========    ========    ========     ========    ========     ========

</TABLE>

                                    page 14
<PAGE>

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 2000 AND 1999

General.  The Company reported net income of $53.9 million or $1.61 on a diluted
per share basis for the year ended  December 31, 2000  compared to net income of
$52.9 million or $1.40 on a diluted per share basis for the year ended  December
31, 1999.  Core earnings for the year ended December 31, 2000 were $54.3 million
or diluted  earnings per share of $1.62  compared to core  earnings for the year
ended December 31, 1999 of $52.6 million or diluted earnings per share of $1.39.
Core  earnings  for the year ended  December  31, 2000  exclude  $569,000 of net
securities  losses.  Core  earnings  for the year 1999  exclude  a $1.8  million
benefit for loan losses, a $4.1 million  curtailment gain on the freezing of the
Bank's defined benefit pension plan and $5.5 million in net securities losses.

   The increase in net income for the year ended December 31, 2000 was primarily
due to an increase in net interest income of $2.3 million,  an increase in other
income of $12.7  million and a reduction  in the  provision  for income taxes of
$2.4 million. These increases to income were partially offset by a $13.8 million
increase  in  total  other  expenses  and an  increase  of $2.5  million  in the
provision (benefit) for loan losses.

Interest  Income.  The increase in interest income of $66.3 million for the year
ended  December  31,  2000 was  primarily  due to a $65.4  million  increase  in
interest  income from loans.  The  increase in interest  income on loans was due
primarily to a $831.3  million or 45.8%  increase in the average  balance of the
loan portfolio  primarily as a result of increased loan demand and the Company's
continued  efforts to expand  loan  activity  through its  business  development
program,  mortgage  broker  program,  geographic  expansion and  increased  loan
originations  by its two lending  subsidiaries,  SIB Mortgage Corp. and American
Construction  Lending  Services,  Inc.  The  average  balance of the  securities
portfolio  declined  by $64.6  million  during  2000,  primarily  as a result of
management's strategy to fund loan originations with cash flows generated by the
securities  portfolio.  The  increase in the average  yield of  interest-earning
assets was due to a six basis point increase in the average yield on loans and a
31  basis  point  increase  in the  average  yield of the  securities  portfolio
primarily  due to the rising rate  environment  resulting  in the  repricing  of
assets and the origination of loans at higher average yields.

Interest  Expense.  The Company recorded  interest expense of $203.1 million for
the year ended  December 31, 2000 compared to $139.1  million for the year ended
December 31, 1999, an increase of $64.1 million or 46.1%. The primary reason for
the increase was a $43.2  million  increase in interest on borrowed  funds and a
$18.3 million  increase in interest on certificates of deposit.  The increase in
interest  expense on borrowed  funds was due to an increase of $472.7 million in
the  average  balance of borrowed  funds and an 83 basis  point  increase in the
average cost to 6.19% for 2000 from 5.36% for 1999.  The increase in the average
balance of borrowed  funds was primarily  due to the  Company's  program to fund
asset growth with  borrowed  funds at  acceptable  spreads  during 1999 and to a
lesser extent the use of borrowed  funds to fund the  acquisition of FSB in 2000
and certain  adjustable rate loan  originations.  The average cost of borrowings
increased due to the rising  interest rate  environment  throughout  most of the
year resulting in borrowings repricing to higher rates. The increase in interest
expense on  certificates  of deposit was due to an increase of $270.9 million in
the average balance of certificates of deposit  primarily due to the acquisition
of FSB and an increase of 65 basis points in the average cost of certificates of
deposit to 5.41% for the year 2000 from 4.76% for the year 1999.  This  increase
in the average cost was  primarily due to the rising  interest rate  environment
during most of the year increasing the cost of new money and maturing deposits.

   The increase in the average cost of the  Company's  deposits  during 2000 was
also  affected by the  initiation  of a brokered CD program in June 2000.  In an
effort to reduce its  utilization  of borrowings  and increase its deposits as a
relative source of funds,  the Company began a program of using certain national
securities firms to provide additional CD deposits.  The Company's brokered CDs,
which  amounted to $74.9  million at December 31, 2000,  had a weighted  average
cost of 7.0% for the  year.  Brokered  CDs  generally  have a higher  cost  than
non-brokered  CDs and are more subject to withdrawal as the customers  generally
are seeking to obtain higher yielding deposits from institutions  throughout the
country and have little or no allegiance  to any  particular  institution.  Such
customers  are likely to  withdraw  their CDs at the end of their term if a more
competitive rate is available elsewhere.

Net Interest Income. Net interest income was $140.7 million for 2000 compared to
$138.4 million for 1999. The increase of $2.3 million was due to a $66.3 million
increase  in  interest  income  which was  partially  offset by a $64.1  million
increase  in interest  expense.  The  increase  in interest  income was due to a
$742.7 million increase in the average balance of interest-earning assets and an
increase in the average yield on interest-earning  assets from 7.01% for 1999 to
7.32% for 2000.  The  increase  in  interest  expense  was due to an increase of
$839.4 million in the average balance of  interest-bearing  liabilities and a 68
basis point increase in the average cost from 4.42% in 1999 to 5.09% in 2000 due
to the rising interest rate environment  during the year and the changing mix of
deposits  primarily due to the  acquisition of FSB. The net interest rate spread
and  margin  decreased  to 2.22% and  2.99%,  respectively,  for the year  ended
December  31,  2000  from  2.60% and  3.50%,  respectively,  for the year  ended
December  31,  1999.  Such  decreases  were  primarily  due to  rollovers of the
Company's  interest-bearing  liabilities  to higher  costing market rates faster
than the  Company's  interest-earning  assets  repricing to higher  yields.  The
downward  trend  of  interest  rates  in  the  fourth  quarter   stabilized  the
compression of the Company's interest rate spread and margin.

Provision  (Benefit) For Loan Losses. The provision for loan losses was $652,000
for the year 2000  compared to a benefit of $1.8 million for the year 1999.  The
provision  (benefit) for

                                    page 15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

loan losses is based on  management's  continuing  review of the adequacy of the
loan loss allowance,  which includes such factors as the composition of the loan
portfolio and its interest risk characteristics,  the level of charge-offs, both
current and historic,  the level of non-accruing loans and delinquencies,  local
economic  conditions,  including the direction of real estate values and current
trends in regulatory  supervision.  During 2000, the level of non-accrual  loans
decreased by $2.7 million or 21.6%. The Company's net loan charge-offs were $1.1
million for the year ended  December 31, 2000  compared to $503,000 for the year
ended December 31, 1999. During 2000, the quality of the loan portfolio remained
strong.

However,  due to the changing dollar mix of commercial and  construction  loans,
among  other  factors,  management  deemed it  prudent  to add  $652,000  to the
allowance  for loan losses during 2000 compared to a benefit of $1.8 million for
the year 1999.  The  Company's  allowance  for loan losses was $14.6  million at
December 31, 2000 or 149.7% of non-accrual  loans at such date compared to $14.3
million at December 31, 1999, or 114.4% of non-accrual loans at such date.

Other Income.  During 2000,  other income  exclusive of net losses on securities
transactions  and a one time pension  curtailment  gain of $4.1 million in 1999,
increased  $11.8 million or 36.7% to $44.1 million.  This increase was primarily
due to a $4.2  million  increase  in  service  and fee income as a result of the
increase in the cash surrender value of bank owned life insurance ("BOLI"). To a
lesser  extent,  the increase was also caused by an increase in deposit  related
fees and premium  income from the sale of life  insurance.  Loan fees  increased
$5.0 million  primarily due to the increase in net gains on loan sales and other
loan related fees generated at the Company's  mortgage  banking  subsidiary as a
result of increased volumes of loan originations.

   The decrease in net securities  losses to $569,000 for the year 2000 compared
to net  securities  losses of $5.5 million for the year 1999 was due to the $9.0
million  write-down of certain  corporate bonds held in the Company's  available
for sale portfolio  partially  offset by $3.5 million in net gains realized from
various  securities  sales in 1999.  The sale of $310.0 million in securities in
the year 2000 was primarily used to fund loan originations.

Other  Expenses.  Other expenses for the year ended December 31, 2000 were $96.8
million or 16.6% more than other  expenses  of $83.0  million for the year ended
December 31, 1999. The increase in other expenses in 2000 was  attributable to a
$3.4  million  increase  in  personnel  expense,  a  $3.4  million  increase  in
commission  expense,  a $1.9 million increase in occupancy and equipment expense
and a $2.9 million increase in amortization  expense of intangible  assets.  The
increase in personnel  costs was primarily due to the Company's  expansion  into
the State of New Jersey,  where it added 11 new branch  offices during the year,
the opening of an additional  office in Brooklyn and annual merit pay increases.
The increase in commission expense was due to the increase in volumes and mix of
loans  originated   by the mortgage  company.  The  increase  in  occupancy  and
equipment expense was due to the previously  mentioned expansion by the Bank and
the  geographic   expansion  of  the  mortgage  company.  The  increase  in  the
amortization  expense of intangible assets was due to the goodwill  amortization
associated with the FSB acquisition in January 2000.

Provision For Income Taxes. The Company's  effective tax rate was 37.9% for 2000
compared to 40.0% for 1999.  The provision  for the year included  miscellaneous
tax  adjustments as the result of the Company's  finalization of its tax returns
for 1999.  Excluding these  miscellaneous tax adjustments the effective tax rate
would  have been  38.4%.  The  reduction  of the  effective  tax rate was due to
various tax planning strategies.

COMPARISON OF RESULTS OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998

General.  The Company reported net income of $52.9 million or $1.40 on a diluted
per share basis for the year ended  December 31, 1999  compared to net income of
$44.3 million or $1.06 on a diluted per share basis for the year ended  December
31, 1998, an increase of $8.6 million or 19.4%. Core earnings for the year ended
December  31,  1999 were $52.5  million or diluted  earnings  per share of $1.39
compared to core earnings for the year ended  December 31, 1998 of $43.9 million
or  diluted  earnings  per  share of $1.06.  Core  earnings  for the year  ended
December 31, 1999 exclude a $1.8 million benefit for loan losses, a $4.1 million
curtailment  gain on the freezing of the Bank's defined benefit pension plan and
$5.5 million in net securities losses. Core earnings for the year ended December
31, 1998 exclude $524,000 of net securities gains.

   Based upon  management's  assessment  of the credit  quality of the Company's
loan  portfolio,  among  other  factors,  during the fourth  quarter of 1999 the
Company  determined  to reverse  $1.9 million of the  allowance  for loan losses
which was the primary  reason for a benefit for loan losses of $1.8  million for
the year ended December 31, 1999. As a result of management's continuing efforts
to moderate  non-interest  expense and in light of stock-based  employee benefit
plans  implemented  since the Company's  initial  public  offering in 1997,  the
Company  froze  its  defined  benefit  pension  plan in 1999  which,  due to its
over-funded  status,  resulted in a curtailment  gain of $4.1 million.  The $5.5
million  in net  securities  losses  for  1999  were  primarily  the  result  of
write-downs  of $9.0 million with respect to corporate  debt  securities  of one
financially distressed issuer.

   The increase in net income for the year ended December 31, 1999 was primarily
due to an increase in net interest income of $17.3 million, the benefit for loan
losses of $1.8 million and an increase in other income of $20.5  million,  which
were  partially  offset by an increase of $27.1 million in total other  expenses
and an increase in the provision for income taxes of $5.6 million.

Interest  Income.  The increase in interest income of $68.3 million for the year
ended December 31, 1999 was primarily due to an increase in the average  balance
of the  Company's  interest-earning  assets,  which  was  partially  offset by a
decrease  in the  average  yield  on  loans.  The  average  balance  of the loan


                                    page 16
<PAGE>

portfolio  increased  $555.6  million  or  44.1%  to $1.8  billion  during  1999
primarily  as a result of  increased  loan  demand and the  Company's  continued
efforts to expand its lending activity through its business development programs
and the expansion of the mortgage  broker  program.  The average  balance of the
securities  portfolio  increased  $458.8 million or 28.1% to $2.1 billion during
1999 primarily as a result of the Company's  continuing  leveraging  strategy to
fund asset growth with borrowed funds when  acceptable  spreads can be obtained.
The average yield earned on the Company's  loan  portfolio  decreased from 8.02%
during  1998 to 7.66%  for  1999.  This  decrease  was due to the  repayment  of
substantial amounts of relatively higher yielding loans, particularly during the
first six months of 1999, and the  origination of loans at market interest rates
which were lower than the average yield of the Company's loan  portfolio  during
the first half of the year.

Interest  Expense.  The Company recorded  interest expense of $139.1 million for
the year ending  December 31, 1999 compared to $88.1 million for the year ending
December 31, 1998, an increase of $51.0 million or 57.9%. The primary reason for
the increase was a $52.6 million increase in the interest on borrowed funds. The
increase in interest  expense on borrowed funds was primarily due to an increase
of $1.0 billion in the average balance of borrowed funds  partially  offset by a
decrease in the average cost from 5.58%  during 1998 to 5.36%  during 1999.  The
increase in the average  balance of  borrowed  funds  during 1999 was due to the
Company's  program  to fund  asset  growth  with  borrowed  funds at  acceptable
spreads.  The average cost of borrowings  decreased in 1999 compared to 1998 due
to the lower interest rates during the first half of 1999.

Net Interest Income. Net interest income was $138.4 million for 1999 compared to
$121.1 million for 1998.  This represents an increase of $17.3 million or 14.3%.
The  increase  was the result of a $68.3  million  increase in interest  income,
which was par tially offset by a $51.0 million increase in interest expense. The
increase in interest  income was due to a $1.0  billion  increase in the average
balance of  interest-earning  assets  which was  partially  offset by a 13 basis
point decrease in the average yield earned on interest-earning assets from 7.14%
in 1998 to 7.01% in  1999.  Interest  expense  increased  due to a $1.1  billion
increase in the average balance of  interest-bearing  liabilities and a 21 basis
point  increase in the  average  cost from 4.21% in 1998 to 4.42% in 1999 due to
the  Company's  increasing  reliance on  borrowings as a source of funds and the
rising  interest  rate  environment  during much of 1999.  The net interest rate
spread and margin decreased to 2.60% and 3.50%, respectively, for the year ended
December  31,  1999  from  2.93% and  4.13%,  respectively,  for the year  ended
December 31, 1998. Such decreases were primarily due to the Bank's continued use
of borrowed  funds during 1999 to leverage the balance  sheet in its effor ts to
incrementally  increase net interest income although such efforts  decreased the
net interest  margin and net interest  spread.  The  interest  rate  environment
during 1999 resulted in lower net interest spreads and margins.

Provision  (Benefit)  For Loan  Losses.  During  1999,  the  quality of the loan
portfolio  remained strong and the level of non-accrual  loans decreased by $3.8
million or 23.2%.  The Company's net loan charge-offs were $503,000 for the year
ended  December 31, 1999  compared to $782,000  for the year ended  December 31,
1998. As a result of the  continued  improvement  in the Company's  non-accruing
loans, among other factors, during the fourth quarter of 1999, management deemed
it prudent to reverse  $1.9 million of the  allowance  for loan losses which was
the primary reason for a $1.8 million  benefit for the loan loss reserve for the
year  1999  compared  to a  provision  of $1.6  million  in the year  1998.  The
Company's  allowance  for loan losses was $14.3 million at December 31, 1999, or
114.4% of non-accrual loans at such date,  compared to $16.6 million at December
31, 1998, or 102.4% of non-accrual loans at such date.

Other Income.  Other income  amounted to $30.9 million and $10.4 million for the
years ended  December  31, 1999 and 1998,  respectively.  The  increase of $20.5
million  in 1999 was due to an  increase  in  service  and fee  income  of $22.4
million and a $4.1 million  curtailment  gain  stemming from the freezing of the
Bank's defined benefit pension plan at year end, which were partially  offset by
net  securities  losses of $5.5 million.  The increase in service and fee income
was  primarily  due to an increase  of $19.7  million in fees  generated  by the
Company's mortgage banking subsidiary,  SIB Mortgage,  d/b/a Ivy Mortgage, and a
$2.6 million  increase in the cash  surrender  value of the Company's  BOLI. The
increase in net securities  losses for the year ended December 31, 1999 compared
to the year  ended  December  31,  1998 was  primarily  due to the $9.0  million
write-down of certain  corporate bonds held in the Company's  available for sale
securities portfolio and  determined by management  to be  permanently  impaired
due to the  distressed  financial  condition of the issuer,  which was partially
offset by $3.5 million in net gains realized from various securities sales.

Other  Expenses.  Other expenses for the year ended December 31, 1999 were $83.0
million or 48.5% more than other  expenses  of $55.9  million for the year ended
December  31,  1998.  The primary  reasons for the  increase  were  increases in
personnel costs of $19.5 million, occupancy and equipment costs of $1.8 million,
and  other  expenses  of $6.3  million.  The  increase  in  personnel  costs was
primarily  due to an  increase  in  aggregate  personnel  costs of $6.5  million
primarily as the result  of the operation of Ivy Mortgage, which was acquired in
November  1998,  for the entire  year,  a $7.6  million  increase in  commission
expense for Ivy  Mortgage,  an increase of $3.0 million in the non-cash  expense
related to the Company's  RRP, a $1.1 million  increase in the Bank's  incentive
plan and other  routine  merit pay  increases.  The  increase in  occupancy  and
equipment  expense during 1999 was primarily due to the  additional  expenses of
Ivy  Mortgage and  additional  property  and  equipment  expense due to business
expansion  and  growth.  The  increase  in other  expenses in 1999 again was due
primarily to loan related expenses resulting from the operation of Ivy Mortgage.


                                    page 17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Provision For Income Taxes. The provision for income taxes was $35.3 million for
1999  compared  to $29.7  million  for the year ended  December  31,  1998.  The
increase in the  provision  was primarily due to an increase of $14.2 million in
income before  taxes.  The  effective  consolidated  tax rate for 1999 was 40.0%
compared to 40.1% for the year 1998.

LIQUIDITY AND CAPITAL

   The  Company's  liquidity,  represented  by cash and cash  equivalents,  is a
product of its  operating,  investing  and financing  activities.  The Company's
primary sources of funds are deposits, amortization,  prepayments and maturities
of outstanding loans and  mortgage-backed  securities,  maturities of investment
securities and other short-term  investments and funds provided from operations.
While scheduled  payments from the  amortization  of loans and  mortgage-related
securities and maturing  investment  securities and short-term  investments  are
relatively  predictable sources of funds, deposit flows and loan prepayments are
greatly   influenced  by  general  interest  rates,   economic   conditions  and
competition. In addition, the Company invests excess funds in federal funds sold
and other  short-term  interest-earning  assets which provide  liquidity to meet
lending  requirements.  Historically,  the Bank relied almost exclusively on its
deposits as a source of funds.  Commencing  in late 1997,  the  Company  began a
leveraging program whereby it uses borrowings, such as FHLB advances and reverse
repurchase  agreements as an additional  source of funds to fund asset growth at
acceptable spreads. This leveraging strategy continued throughout 1998, 1999 and
2000. However, it is management's intent to place less emphasis on this strategy
in the year 2001.  During the year ended December 31, 2000, the Company began to
reduce  its  use of  reverse  repurchase  agreements  and  FHLB  advances  as an
alternative  funding source.  At December 31, 2000, such borrowings  amounted to
$2.2 billion.

   Liquidity  management  is both a daily and  long-term  function  of  business
management.  Excess  liquidity is generally  invested in short-term  investments
such as federal  funds sold.  On a longer term  basis,  the Company  maintains a
strategy of investing in various lending products.  The Company uses its sources
of funds primarily to meet its ongoing commitments, to pay maturing certificates
of  deposit  and  savings  withdrawals,  fund loan  commitments  and  maintain a
portfolio of  mortgage-backed  and  mortgage-related  securities  and investment
securities.   At  December  31,  2000,  the  total  approved  loan   origination
commitments  outstanding  amounted  to $292.4  million and unused  credit  lines
equaled $75.3 million.  At the same date, the unadvanced portion of construction
loans  totaled  $98.0  million and the  mortgage  company had $218.2  million in
commitments to sell loans.  Certificates  of deposit  scheduled to mature in one
year or less at December 31, 2000 totaled $762.8 million.  Investment securities
scheduled  to mature  in one year or less at  December  31,  2000  totaled  $3.3
million and  amortization  from  investments  and loans is  projected  at $756.0
million for the year 2001. Based on historical  experience,  the current pricing
strategy,   and  the  strong  core  deposit  base  management  believes  that  a
significant  portion of maturing  deposits  will remain  with the  Company.  The
Company  anticipates  that it will continue to have sufficient  funds,  together
with borrowings, to meet its current commitments.

   At December 31, 2000 the Bank's  capital  ratios  exceeded all the regulatory
requirements. Under OTS regulations, the Bank is required to comply with each of
three separate  capital adequacy  standards.  At such date the Bank had tangible
capital of $382.2 million or 7.53% of adjusted  assets compared to a requirement
of $76.2 million or 1.50% of adjusted assets,  core capital of $383.1 million or
7.54% of adjusted  assets  compared to a requirement  of $203.1 million or 4% of
adjusted  assets,  and  risk-based  capital of $396.8  million or 15.06% of risk
weighed  assets  compared  to a  requirement  of  $210.8  million  or 8% of risk
weighted assets.

IMPACT OF INFLATION AND CHANGING PRICES

The  consolidated   financial  data  presented  herein  have  been  prepared  in
accordance  with generally  accepted  accounting  principles,  which require the
measurement of financial  position and operating  results in terms of historical
dollars,  without considering changes in relative purchasing power over time due
to inflation.  Unlike most industrial companies,  virtually all of the Company's
assets and  liabilities  are  monetary in nature.  As a result,  interest  rates
generally  have  a  more  significant   impact  on  a  financial   institution's
performance than does the effect of inflation.

PRIVATE SECURITIES LITIGATION REFORM ACT SAFE
HARBOR STATEMENT

   In addition to historical  information,  this Annual Report includes  certain
"forward-looking  statements"  based on  current  management  expectations.  The
Company's actual results could differ  materially,  as defined in the Securities
Act of 1933 and the  Securities  Exchange  Act of 1934,  from  those  management
expectations.  Such forward-looking  statements include statements regarding our
intentions,  beliefs or current expectations as well as the assumptions on which
such statements are based. Stockholders and potential stockholders are cautioned
that  any  such   forward-looking   statements  are  not  guarantees  of  future
performance  and involve risks and  uncertainties,  and that actual  results may
differ materially from those  contemplated by such  forward-looking  statements.
Factors  that  could  cause  future  results  to vary  from  current  management
expectations  include,  but are not limited  to,  general  economic  conditions,
legislative and regulatory changes,  monetary and fiscal policies of the federal
government, changes in tax policies, rates and regulations of federal, state and
local tax  authorities,  changes in interest rates,  deposit flows,  the cost of
funds,  demand for loan products,  demand for financial  services,  competition,
changes in the  quality or  composition  of the  Company's  loan and  investment
portfolios, changes in accounting principles,  policies or guidelines, and other
economic,  competitive,  governmental and  technological  factors  affecting the
Company's operations, markets, products, services and fees.

   The Company undertakes no obligation to update or revise any  forward-looking
statements to reflect  changed  assumptions,  the  occurrence  of  unanticipated
events or changes to future operating results over time.

                                     page 18
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
December 31, 2000 and 1999                                                                    2000               1999
------------------------------------------------------------------------------------------------------------------------
ASSETS                                                                                             (000's omitted)
<S>                                                                                        <C>               <C>
Assets:
   Cash and due from banks .........................................................       $   92,103        $    80,998
   Federal funds sold ..............................................................           12,000             20,400
   Securities available for sale, at fair value ....................................        1,888,946          1,963,954
   Loans, net ......................................................................        2,847,660          2,150,039
   Loans held for sale, net ........................................................          116,163             46,588
   Accrued interest receivable .....................................................           30,905             23,621
   Bank premises and equipment, net ................................................           31,883             24,731
   Intangible assets, net ..........................................................           62,447             15,432
   Other assets ....................................................................          158,757            163,551
                                                                                           ----------         ----------
        Total assets ...............................................................       $5,240,864         $4,489,314
                                                                                           ==========         ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Due depositors--
     Savings .......................................................................       $  760,238       $    737,794
     Certificates of deposit .......................................................          947,584            573,043
     Money market ..................................................................          142,394             89,004
     NOW accounts  .................................................................           94,699             80,352
     Demand deposits ...............................................................          400,298            340,040
                                                                                           ----------         ----------
        Total deposits .............................................................        2,345,213          1,820,233
     Borrowed funds ................................................................        2,241,011          2,049,411
     Advances from borrowers for taxes and insurance ...............................           11,534             10,805
     Accrued interest and other liabilities ........................................           57,574             37,488
                                                                                           ----------         ----------
        Total liabilities...........................................................        4,655,332          3,917,937
                                                                                           ----------         ----------
Commitments and Contingencies (Note 12)

Stockholders' Equity:
   Common  stock,  par  value  $.01  per  share,   100,000,000  shares  authorized,
     45,130,312 issued and 34,920,987 outstanding at December 31, 2000 and
     45,130,312 issued and 38,693,623 outstanding at December 31, 1999 ..............             451                451
Additional paid-in capital ..........................................................         537,744            536,539
Retained earnings--substantially restricted .........................................         291,345            251,315
Unallocated common stock held by ESOP ...............................................         (32,962)           (35,709)
Unearned common stock held by RRP ...................................................         (19,784)           (25,439)
Less--Treasury stock (10,209,325 and 6,436,689 shares at
  December 31, 2000 and 1999, respectively), at cost ................................        (188,321)          (121,149)
Accumulated other comprehensive loss, net of tax ....................................          (2,941)           (34,631)
                                                                                           ----------         ----------
       Total stockholders' equity ...................................................         585,532            571,377
                                                                                           ----------         ----------
       Total liabilities and stockholders' equity ...................................      $5,240,864         $4,489,314
                                                                                           ==========         ==========


</TABLE>
        The accompanying notes are an integral part of these statements.

                                    page 19
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
For the Years Ended December 31, 2000, 1999 and 1998                       2000         1999         1998
-----------------------------------------------------------------------------------------------------------
                                                                                   (000's omitted,
                                                                                 except share data)
Interest Income:
<S>                                                                      <C>          <C>          <C>
   Loans  ............................................................   $204,554     $139,197     $101,175
   Securities available for sale .....................................    137,848      136,023      106,025
   Other earning assets ..............................................      1,402        2,253        1,941
                                                                         --------     --------     --------
      Total interest income ..........................................    343,804      277,473      209,141
                                                                         --------     --------     --------
Interest Expense:
   Borrowed funds ....................................................    132,891       89,719       37,127
   Certificates of deposit ...........................................     44,781       26,477       26,875
   Savings and escrow ................................................     19,488       18,716       20,953
   Money market and NOW ..............................................      5,960        4,152        3,114
                                                                         --------     --------     --------
      Total interest expense .........................................    203,120      139,064       88,069
                                                                         --------     --------     --------
      Net interest income ............................................    140,684      138,409      121,072
Provision (Benefit) for Loan Losses ..................................        652       (1,843)       1,594
                                                                         --------     --------     --------
   Net interest income after provision (benefit) for loan losses .....    140,032       140,252     119,478
                                                                         --------     --------     --------
Other Income:
   Service and fee income ............................................     16,878       10,057        7,018
   Loan fees and gains ...............................................     27,253       22,234        2,838
   Defined benefit plan curtailment gain .............................         --        4,093           --
   Securities transactions (losses) gains ............................       (569)      (5,531)         524
                                                                         --------     --------     --------
     Total other income ..............................................     43,562       30,853       10,380
                                                                         --------     --------     --------
Other Expenses:
   Personnel .........................................................     56,454       49,719       30,248
   Occupancy and equipment ...........................................      9,827        7,912        6,150
   Data processing ...................................................      5,352        4,448        4,915
   Amortization of intangible assets .................................      5,179        2,236        2,089
   Professional fees .................................................      2,566        2,063        2,403
   Other .............................................................     17,382       16,593       10,113
                                                                         --------     --------     --------
      Total other expenses ...........................................     96,760       82,971       55,918
                                                                         --------     --------     --------
      Income before provision for income taxes .......................     86,834       88,134       73,940
Provision for Income Taxes ...........................................     32,908       35,259       29,678
                                                                         --------     --------     --------
      Net income .....................................................   $ 53,926     $ 52,875     $ 44,262
                                                                         ========     ========     ========

Earnings per Share:
   Basic .............................................................   $   1.61     $   1.40     $   1.06
   Diluted ...........................................................       1.61         1.40         1.06


</TABLE>

        The accompanying notes are an integral part of these statements.

                                     page 20
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY

<TABLE>
<CAPTION>
                                                                                Unearned
                                                               Unallocated       Common
For the Years Ended                             Additional        Common          Stock                       Compre-
December 31, 2000,                    Common      Paid-in       Stock Held       Held by       Treasury       hensive
1999 and 1998                          Stock      Capital         by ESOP           RRP          Stock         Income
-----------------------------------------------------------------------------------------------------------------------
                                                                           (000's
                                                                           omitted)
<S>                                 <C>           <C>            <C>            <C>            <C>            <C>
Balance, January 1, 1998 ......     $     451     $ 532,521      $ (41,262)     $      --      $      --      $      --
  Allocation of 233,843
    ESOP shares ...............            --         1,886          2,806             --             --             --
  Purchase of RRP shares ......            --            --             --        (31,397)            --             --
  Earned RRP shares ...........            --            57             --            524             --             --
  Treasury stock purchases
    (1,425,500 shares), at cost            --            --             --             --        (27,480)            --
  Dividends paid ..............            --            --             --             --             --             --
  Change in unrealized
    appreciation (depreciation)
    on securities, net of tax .            --            --             --             --             --          2,845
  Net income ..................            --            --             --             --             --         44,262
                                    ---------     ---------      ---------      ---------      ---------      ---------
  Comprehensive income ........                                                                               $  47,107
                                                                                                              =========

Balance, December 31, 1998 ....           451       534,464        (38,456)       (30,873)       (27,480)     $      --
  Allocation of 228,904
    ESOP shares ...............            --         1,484          2,747             --             --             --
  Earned RRP shares ...........            --           591             --          5,434             --             --
  Treasury stock purchases
    (5,011,189 shares), at cost            --            --             --             --        (93,669)            --
  Dividends paid ..............            --            --             --             --             --             --
  Change in unrealized
    appreciation (depreciation)
    on securities, net of tax .            --            --             --             --             --        (50,153)
  Net income ..................            --            --             --             --             --         52,875
                                    ---------     ---------      ---------      ---------      ---------      ---------
  Comprehensive income ........                                                                               $   2,722
                                                                                                              =========

Balance, December 31, 1999 ....           451       536,539        (35,709)       (25,439)      (121,149)            --
  Allocation of 228,904
    ESOP shares ...............            --         1,360          2,747             --             --             --
  Earned RRP shares ...........            --          (155)            --          5,655             --             --
  Treasury stock purchases
    (3,772,636 shares), at cost            --            --             --             --        (67,172)            --
  Dividends paid ..............            --            --             --             --             --             --
  Change in unrealized
    appreciation (depreciation)
    on securities, net of tax .            --            --             --             --             --         31,690
  Valuation adjustment for
    deferred tax benefit ......            --            --             --             --             --             --
  Net income ..................            --            --             --             --             --         53,926
                                    ---------     ---------      ---------      ---------      ---------      ---------
  Comprehensive income ........                                                                               $  85,616
                                                                                                              =========

Balance, December 31, 2000 ....     $     451     $ 537,744      $ (32,962)     $ (19,784)     $(188,321)
                                    =========     =========      =========      =========      =========
<CAPTION>

                                                  Accumulated
                                                      Other
                                                  Comprehensive
                                    Retained     Income (Loss)
                                    Earnings      Net of Tax         Total
--------------------------------------------------------------------------------
<S>                                 <C>            <C>            <C>
Balance, January 1, 1998 ......     $ 181,499      $  12,677      $ 685,886
  Allocation of 233,843
    ESOP shares ...............            --             --          4,692
  Purchase of RRP shares ......            --             --        (31,397)
  Earned RRP shares ...........            --             --            581
  Treasury stock purchases
    (1,425,500 shares), at cost            --             --        (27,480)
  Dividends paid ..............       (10,347)            --        (10,347)
  Change in unrealized
    appreciation (depreciation)
    on securities, net of tax .         2,845          2,845
  Net income ..................        44,262             --         44,262
  Comprehensive income ........

Balance, December 31, 1998 ....       215,414         15,522        669,042
  Allocation of 228,904
    ESOP shares ...............            --             --          4,231
  Earned RRP shares ...........            --             --          6,025
  Treasury stock purchases
    (5,011,189 shares), at cost            --             --        (93,669)
  Dividends paid ..............       (16,974)            --        (16,974)
  Change in unrealized
    appreciation (depreciation)
    on securities, net of tax .            --        (50,153)       (50,153)
  Net income ..................        52,875             --         52,875
  Comprehensive income ........

Balance, December 31, 1999 ....       251,315        (34,631)       571,377
  Allocation of 228,904
    ESOP shares ...............            --             --          4,107
  Earned RRP shares ...........            --             --          5,500
  Treasury stock purchases
    (3,772,636 shares), at cost            --             --        (67,172)
  Dividends paid ..............       (18,764)            --        (18,764)
  Change in unrealized
    appreciation (depreciation)
    on securities, net of tax .            --         31,690         31,690
  Valuation adjustment for
    deferred tax benefit ......         4,868             --          4,868
  Net income ..................        53,926             --         53,926
  Comprehensive income ........

Balance, December 31, 2000 ....     $ 291,345      $  (2,941)     $ 585,532
                                    =========      =========      =========
</TABLE>


        The accompanying notes are an integral part of these statements.

                                    page 21
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES OF CASH FLOWS
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>

For the Years Ended December 31, 2000, 1999 and 1998                            2000              1999            1998
------------------------------------------------------------------------------------------------------------------------
                                                                                           (000's omitted)
<S>                                                                         <C>             <C>              <C>
Cash Flows from Operating Activities:
  Net income ............................................................   $   53,926      $    52,875      $    44,262
  Adjustments to reconcile net income to net cash (used in)
    provided by operating activities--
       Depreciation and amortization ....................................        3,292            2,543            1,983
       (Accretion) and amortization of bond and mortgage premiums .......       (1,246)           4,715           (1,258)
       Amortization of intangible assets ................................        5,179            2,236            2,089
       Realized loss (gain) on sale of available for sale securities ....          569           (3,539)            (524)
       Expense charge relating to allocation and earned
          portions of employee benefit plans ............................        8,666            8,790            7,583
       Other noncash (income)  ..........................................       (5,987)          (1,439)          (2,374)
       Provision (benefit) for loan losses ..............................          652           (1,843)           1,594
       Increase (decrease) in deferred loan fees ........................       (5,086)           1,512            1,477
       (Increase) in accrued interest receivable ........................       (3,085)          (4,232)          (3,682)
       (Increase) in other assets .......................................      (15,618)         (90,479)          (5,528)
       (Decrease) increase in accrued interest and other liabilities ....       17,865           12,103          (55,611)
       (Increase) decrease in deferred income taxes .....................          324            4,691           (6,769)
       Recoveries of loans ..............................................        1,054            1,161            1,337
                                                                            ----------      -----------      -----------
           Net cash (used in) provided by operating activities ..........       60,505          (10,906)         (15,421)
                                                                            ----------      -----------      -----------
Cash Flows from Investing Activities:
  Maturities and amortization of available for sale securities ..........      208,587          389,930          519,667
  Sales of available for sale securities ................................      310,222           76,257          109,224
  Purchases of available for sale securities ............................     (159,473)        (517,115)      (1,304,385)
  Principal collected on loans ..........................................      388,311          324,937          201,091
  Loans made to customers ...............................................   (1,712,457)      (1,607,459)        (643,854)
  Purchase of loans .....................................................      (74,545)         (16,088)         (66,267)
  Sales of loans ........................................................      730,506          644,557           57,577
  Capital expenditures ..................................................       (5,396)          (4,961)          (4,392)
  Acquisition of Ivy Mortgage, net of cash acquired .....................           --               --           (2,194)
  Acquisition of First State Bank, net of cash acquired .................      (46,688)              --               --
                                                                            ----------      -----------      -----------
           Net cash used in investing activities ........................     (360,933)        (709,942)      (1,133,533)
                                                                            ----------      -----------      -----------
Cash Flows from Financing Activities:
  Net increase in deposit accounts ......................................      197,469           94,886          107,877
  Increase in borrowings ................................................      191,600          704,894        1,094,475
  Dividends paid ........................................................      (18,764)         (16,974)         (10,347)
  Purchase of treasury stock ............................................      (67,172)         (93,669)         (27,480)
  Purchase of shares for RRP ............................................           --               --          (31,397)
                                                                            ----------      -----------      -----------
           Net cash provided by financing activities ....................      303,133          689,137        1,133,128
           Net increase (decrease) in cash and cash equivalents .........        2,705          (31,711)         (15,826)
Cash and Cash Equivalents,beginning of year .............................      101,398          133,109          148,935
                                                                            ----------      -----------      -----------
Cash and Cash Equivalents,end of year ...................................      104,103      $   101,398      $   133,109
                                                                            ==========      ===========      ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid for--
    Interest ............................................................   $  197,141      $   131,043      $    80,540
    Income taxes ........................................................       25,109           31,300           30,529
  Acquisition of Ivy Mortgage--
    Fair value of assets acquired .......................................           --               --           65,823
    Fair value of liabilities assumed ...................................           --               --           63,937
  Acquisition of First State Bank--
    Fair value of assets acquired .......................................      370,579               --               --
    Fair value of liabilities assumed ...................................      331,280               --               --
</TABLE>
        The accompanying notes are an integral part of these statements.

                                    page 22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   The accounting  and reporting  policies of Staten Island  Bancorp,  Inc. (the
"Company") and subsidiary  conform to generally accepted  accounting  principles
and to  general  practice  within  the  banking  industry.  The  following  is a
description  of the more  significant  policies  which the  Company  follows  in
preparing and presenting its consolidated financial statements.

Basis of Presentation

   The accompanying  consolidated  financial  statements include the accounts of
the Company and its wholly owned  subsidiary  SI Bank & Trust  (formerly  Staten
Island Savings Bank) (the "Bank").  The Bank's wholly owned subsidiaries are SIB
Mortgage Corp. (the "Mortgage Company"),  SIB Investment  Corporation ("SIBIC"),
Staten  Island  Funding  Corporation  ("SIFC"),  American  Construction  Lending
Services,  Inc ("ACLS") and SIB Financial Services Corporation  ("SIBFSC").  All
significant   intercompany   transactions   and  balances  are   eliminated   in
consolidation.

   The Mortgage  Company was set up to acquire the operations of Ivy Mortgage as
discussed in Note 3. SIFC was set up as a real estate  investment  trust,  SIBIC
was set up to hold  certain Bank  investments,  and ACLS was set up to originate
residential  construction  loans throughout the country.  SIBFSC was formed as a
licensed life insurance  agency to sell the products of the SBLI USA Mutual Life
Insurance Co.

   As more fully  discussed in Note 2, Staten Island  Bancorp,  Inc., a Delaware
corporation,  was  organized by the Bank for the purpose of acquiring all of the
capital  stock  of the  Bank  pursuant  to the  conversion  of the  Bank  from a
federally  chartered mutual savings bank to a federally  chartered stock savings
bank.  The Company is subject to the  financial  reporting  requirements  of the
Securities Exchange Act of 1934, as amended.

   In preparing the consolidated financial statements, management is required to
make estimates and  assumptions  that affect the reported  assets,  liabilities,
revenues  and  expenses  as of the  dates of the  financial  statements.  Actual
results could differ significantly from those estimates.

Cash and Cash Equivalents

   For purposes of reporting cash flows, cash and cash equivalents  include cash
and due from banks,  money market  deposits,  interest-bearing  certificates  of
deposit and federal funds sold for the years ended  December 31, 2000,  1999 and
1998.

Securities Available for Sale

   In accordance with Statement of Financial  Accounting  Standards ("SFAS") No.
115,  "Accounting for Certain  Investments in Debt and Equity  Securities," debt
and equity securities used as part of the Company's  asset/liability  management
that may be sold in response to changes in interest  rates are  reported at fair
value,  with unrealized  gains and losses excluded from earnings and reported on
an after-tax basis in a separate  component of stockholders'  equity.  Gains and
losses  on  the  disposition  of  securities  are  recognized  on  the  specific
identification method in the period in which they occur.

   Premiums and discounts on  mortgage-backed  securities are amortized over the
average life of the security using a method which  approximates  the level yield
method.

Loans

   Loans are stated at the principal amount outstanding, net of unearned income,
loan  origination  fees  and  costs,  and an  allowance  for loan  losses.  Loan
origination fees and costs are recognized in interest income as an adjustment to
yield over the life of the loan or at the time of the sale of the loan for loans
held in the por  tfolio  and loans  held for sale.  Premiums  and  discounts  on
purchased  mor tgages are amor tized over the  average  life of the loan using a
method which approximates the level yield method.

   Loans  are  placed on  non-accrual  status  when the  interest  or  principal
payments are 90 days past due unless in the opinion of management, collection is
deemed probable.  When interest  accruals are  discontinued,  the recognition of
interest  income ceases and  previously  accrued  interest  remaining  unpaid is
reversed against income.  Cash payments  received are applied to principal,  and
interest  income is recognized  when  management  determines  that the financial
condition and payment record of the borrower warrant the recognition of income.

   The Bank has defined its impaired  loans as its  non-accrual  loans under the
guidance of SFAS No. 114, entitled, "Accounting by Creditors for Impairment of a
Loan." Pursuant to this accounting  guidance,  a valuation allowance is recorded
on impaired loans to reflect the difference, if any, between the loan face value
and the  present  value  of  projected  cash  flows,  observable  fair  value or
collateral  value.  This  valuation  allowance  is  reported  within the overall
allowance for loan losses.

Loans Held for Sale

   Loans held for sale are carried at the lower of cost or market as  determined
by   outstanding   commitments   from   investors  or  current   investor  yield
requirements.

Mortgage Servicing Rights

   Mortgage  servicing  rights ("MSR") are the rights to service  mortgage loans
for others and are acquired  primarily through loan sales.  Capitalized MSRs are
reported in other assets. After the serviced residential mortgage loan portfolio
is stratified by servicing  type,  loan type,  rate type and interest  rate, the
fair value of the MSR is determined  using the present value of estimated future
cash flows  assuming a market  discount rate and certain  forecasted  prepayment
rates based on the industry experience. MSRs are amortized in proportion to, and
over the  period  of,  the  estimated  net  servicing  income of the  underlying
financial  assets.  The assessment of impairment on MSRs is based on the current
fair value of those rights.  Such  impairment is recognized  through a valuation
allowance established through a charge against gains on loan sales.

                                    page 23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000, 1999 and 1998

Allowance for Loan Losses

   The allowance for loan losses is established by management through provisions
for loan losses charged against income.  Amounts deemed to be uncollectible  are
charged  against the allowance for loan losses,  and subsequent  recoveries,  if
any, are credited to the allowance.

   The amount of the allowance for loan losses is inherently  subjective,  as it
requires  making material  estimates  which may vary from actual results.  These
estimates are evaluated periodically and, as adjustments become necessary,  they
are  reflected  in  operations  in the  periods  in  which  they  become  known.
Considerations in this evaluation  include past and anticipated loss experience,
current portfolio composition,  evaluation of real estate collateral, as well as
current and anticipated economic conditions.  In the opinion of management,  the
allowance,  when taken as a whole,  is adequate to absorb  estimated loan losses
inherent in the Company's entire loan portfolio.

Premises and Equipment

   Premises and equipment are carried at cost,  less allowance for  depreciation
and amor tization  applied on a  straight-line  basis over the estimated  useful
lives of 10 to 50 years for  buildings  and  improvements  and 3 to 10 years for
furniture, fixtures and equipment.

Investments in Real Estate

   Investments  in  real  estate  consist  of  real  estate   acquired   through
foreclosure or by deed in lieu of  foreclosure  and assets  repossessed  ("owned
real estate" or "ORE").  ORE properties are carried at the lower of cost or fair
value at the date of  foreclosure  (new cost  basis) and at the lower of the new
cost basis or fair value less estimated selling costs thereafter.

Goodwill and Other Intangibles

   Goodwill,  representing  the excess of purchase  price over the fair value of
net assets acquired using the purchase method of accounting,  is being amortized
using the straight line method over periods not exceeding 20 years. Core deposit
intangibles,  representing  the premium  associated  with the acquisition of cer
tain  deposit  liabilities,  are being  amor  tized to  operating  expense on an
accelerated basis over the average lives of such deposit liabilities.

   Goodwill and other intangibles,  which collectively  represent less than 1.5%
of total assets, are periodically reviewed for recoverability  through review of
various economic factors to determine whether any impairment exists.

Segment Reporting

   SFAS No.  131,  "Disclosures  about  Segments  of an  Enterprise  and Related
Information," applies to public business enterprises and requires the repor ting
of cer tain financial information about significant  revenue-producing  segments
of the business  for which such  information  is  available  and utilized by the
chief  operating  decision  maker.  The  information  reported for the operating
segments  would include a measure of revenues,  expenses and total assets.  As a
financial institution, substantially all of the Company's operations involve the
delivery of loan and deposit  products to customers.  Management makes operating
decisions  and  reviews  performance  based on ongoing  review of these  banking
services,  which  constitutes the Company's only operating segment for reporting
purposes under SFAS No. 131.

Demand Deposits

   Each of the Bank's commercial and personal demand (checking) accounts and NOW
accounts has a related  interest-bearing  money market sweep  account.  The sole
purpose  of the sweep  accounts  is to reduce  the  noninterest-bearing  reserve
balances  that the Bank is required to maintain  with the Federal  Reserve Bank,
and thereby  increase  funds  available  for  investment  .  Although  the sweep
accounts are classified as money market accounts for regulatory  purposes,  they
are  included  in  demand   deposits  and  NOW  accounts  in  the   accompanying
consolidated statements of financial condition.

Comprehensive Income

   Comprehensive  income  includes  net income  and all other  changes in equity
during  a  period  except  those  resulting  from   investments  by  owners  and
distribution to owners. Other comprehensive income includes revenues,  expenses,
gains and  losses  that  under  generally  accepted  accounting  principles  are
included in comprehensive income but excluded from net income.

   Comprehensive  income and accumulated other comprehensive income are reported
net of related income taxes.  Accumulated  other  comprehensive  income consists
solely of unrealized holding gains and losses on available for sale securities.

Income Taxes

   Deferred income taxes are provided for temporary differences between items of
income or expense  reported in the financial  statements  and those reported for
income tax purposes.

Earnings Per Share

   Earnings  per share are  computed  by  dividing  net  income by the  weighted
average number of shares of common stock and dilutive  common stock  equivalents
outstanding,  adjusted  for  the  unallocated  por  tion of  shares  held by the
Employee Stock  Ownership Plan ("ESOP") and unearned  Recognition  and Retention
Plan ("RRP") in  accordance  with the Statement of Position  93-6.  For the year
ended  December 31, 2000,  the basic and diluted  weighted  average common stock
outstanding  was  33,510,674  shares.  For the year ended December 31, 1999, the
basic and diluted  weighted  average  common stock  outstanding  was  37,878,481
shares.  For the year ended  December 31, 1998,  the basic and diluted  weighted
average common stock outstanding was 41,567,051 shares.


                                    page 24
<PAGE>

Stock-Based Compensation

   SFAS No. 123, "Accounting for Stock-Based  Compensation," encourages but does
not require  companies  to record  compensation  cost for  stock-based  employee
compensation  plans at fair value rather than the intrinsic  value-based  method
that is contained in Accounting Principles Board Opinion No. 25, "Accounting for
Stock  Issued to  Employees"  ("APB No.  25") and related  Interpretations.  The
Company has chosen to account for stock-based  compensation  using the intrinsic
value method as prescribed in APB No. 25, measuring  compensation cost for stock
options as the excess, if any, of the quoted market price of the Company's stock
at the date of the grant over the  amount an  employee  must pay to acquire  the
stock.

Treasury Stock

   Repurchases of common stock are recorded as treasury stock at cost.

Bank Owned Life Insurance ("BOLI")

   In August 1999,  the Bank  invested in BOLI  policies to fund certain  future
employee benefit costs. The Bank's investment totaled approximately $100 million
and the Bank is the beneficiary of these  policies.  The cash surrender value of
the BOLI policies is recorded on the Company's balance sheet as other assets and
the change in the cash surrender value is recorded as other income.

New Accounting Pronouncements

   In June 1998, the Financial  Accounting  Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June
1999, the FASB issued SFAS No. 137,  "Accounting For Derivative  Instruments and
Hedging  Activities  Deferral  of the  Effective  Date of SFAS No.  133,"  which
amended the  effective  date of SFAS No. 133.  SFAS No. 133 is now effective for
all fiscal  quarters of all fiscal  years  beginning  after June 15,  2000.  The
statement   established   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 management's  opinion,
the  adoption  of SFAS Nos.  133 and 137 will not have a material  effect on the
Company's financial statements.

   In September 2000, the Financial  Accounting Standards Board issued Statement
of Financial  Accounting  Standards ("SFAS") No. 140,  "Accounting for Transfers
and Servicing of Financial  Assets and  Extinguishments  of  Liabilities."  This
Statement  replaces  SFAS No. 125,  "Accounting  for  Transfers and Servicing of
Financial Assets and  Extinguishments  of Liabilities." It revises the standards
for accounting for  securitiza-tions and other transfers of financial assets and
collateral and requires  certain  disclosures,  but it carries over most of SFAS
No.  125's  provisions  without  reconsideration.  SFAS  No.  140  is  generally
effective for transfers and servicing of financial assets and extinguishments of
liabilities  occurring  after March 31, 2001. The Corporation is still assessing
the impact, if any, of SFAS No. 140 on its accounting and disclosures.

Reclassifications

   Certain reclassifications have been made to the prior year amounts to conform
with current year presentation.

2.ORGANIZATION/FORM OF OWNERSHIP

   The Bank was originally founded as a New York State chartered savings bank in
1864. In August 1997, the Bank converted to a federally chartered mutual savings
bank and is now regulated by the Office of Thrift  Supervision (the "OTS").  The
Bank is a  community  bank  providing a complete  line of retail and  commercial
banking  services along with trust services.  Individual  customer  deposits are
insured up to $100,000 by the Federal Deposit Insurance Corporation ("FDIC").

   On April 16,  1997,  the  Board of  Directors  of the Bank  adopted a Plan of
Conversion  to convert  from a  federally  chartered  mutual  savings  bank to a
federally  chartered  stock  savings  bank with the  concurrent  formation  of a
holding company.  As part of the conversion,  the Company was incorporated under
Delaware law in July 1997. The Company  completed its initial public offering on
December  22, 1997 and issued  42,981,250  shares of common  stock  resulting in
proceeds of  approximately  $532,972,000,  net of expense  totaling  $8,591,000,
before the  contribution  to the SISB  Community  Foundation.  The Company  used
$253,592,000 or 50% of the net proceeds to purchase all of the outstanding stock
of the Bank.  The Company  also loaned  $41,262,000  to the Bank to establish an
ESOP which  purchased  3,438,500  shares of the  Company's  stock in the initial
public offering.

   As part of the Plan of  Conversion,  the  Company  formed the SISB  Community
Foundation and donated  2,149,062  shares of the Company valued at approximately
$25,789,000.  The Company recorded a contribution  expense charge of $25,789,000
and a corresponding  deferred tax benefit of $11,987,000  for this donation.  In
addition,   the  Bank  paid  expenses  on  behalf  of  the  Foundation  totaling
approximately  $28,000  in  1997.  The  formation  of  this  private  charitable
foundation  was  undertaken  in order to further  the Bank's  commitment  to the
communities that it serves.

   Additionally,  the Bank  established,  in accordance with the requirements of
the OTS, a liquidation  account for $183,947,000  which was equal to its capital
as of the date of the  latest  consolidated  statement  of  financial  condition
(September 30, 1997) appearing in the IPO prospectus supplement. The liquidation
account is  reduced as and to the extent  that  eligible  account  holders  have
reduced  their  qualifying  deposits.  Subsequent  increases  in deposits do not
restore an eligible account holder's interest in the liquidation account. In the
event of a complete

                                    page 25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2000, 1999 and 1998


liquidation  of the Bank,  each  eligible  account  holder  will be  entitled to
receive a distribution from the liquidation  account in an amount  proportionate
to the adjusted  qualifying  balances for accounts then held. This account had a
balance of $40,144,000 at December 31, 2000.

   In addition to the restriction  described  above, the Company may not declare
or pay cash  dividends on or repurchase any of its shares of common stock if the
effect thereof would cause  stockholders'  equity to be reduced below applicable
regulatory capital  maintenance  requirements or if such declaration and payment
would otherwise violate regulatory requirements.

3.ACQUISITIONS

   On November 20, 1998, SIB Mortgage Corp.  acquired  substantially  all of the
assets of Ivy Mortgage Corp., a New Jersey-based  mortgage loan originator which
has branch offices  primarily  throughout the  Northeastern  United States.  The
acquisition by SIB Mortgage Corp.  was funded by the Bank. The  acquisition  has
been accounted for using the purchase method of accounting and, accordingly, the
purchase  price has been  allocated to the assets  acquired and the  liabilities
assumed based upon the fair values at the date of acquisition. The excess of the
purchase price over the fair value of the net assets acquired was  approximately
$1,775,000  and has been recorded as goodwill.  Included as part of the purchase
price is a  noncompete  agreement  (the  "Agreement")  with the  sellers  of Ivy
Mortgage. The noncompete agreement, which is recorded as goodwill, is being amor
tized over five years on a  straight-line  basis and the  remaining  goodwill is
being amortized over 15 years on a straight-line  basis. The original  Agreement
contained  provision for payments which are contingent upon future earnings.  In
January  2000,  the  original  Agreement  was  amended to relieve  the seller of
certain potential  obligations and to eliminate the provision which provided for
future payments to the sellers contingent upon future earnings.

   On January 14, 2000, the Company  acquired  First State Bancorp,  the holding
company for First State Bank,  which operated six  full-service  branches in the
State of New Jersey.  First State  Bancorp,  a bank holding  company with assets
over $370 million,  was acquired for cash consideration  totaling $84.5 million,
including transaction costs.

   The  acquisition  has  been  accounted  for  using  the  purchase  method  of
accounting, and accordingly, the purchase price has been allocated to the assets
acquired  and the  liabilities  assumed  based  upon  fair  value at the date of
acquisition.  The  excess of the  purchase  price over the fair value of the net
assets  acquired was $45.5 million and has been  recorded as goodwill,  which is
being amortized on a straight line basis over 15 years.

 4.REGULATORY MATTERS

   The Federal Deposit Insurance Corporation  Improvement Act of 1991 ("FDICIA")
imposes  a  number  of  mandatory  supervisory  measures  on  banks  and  thrift
institutions.  One of the items  FDICIA  imposed  was  certain  minimum  capital
requirements or classifications.  Such  classifications are used by the FDIC and
other  bank  regulatory   agencies  to  determine   matters  ranging  from  each
institution's   semiannual  FDIC  deposit  insurance  premium  assessments,   to
approvals of applications  authorizing  institutions to grow their asset size or
otherwise expand business activities. Under OTS capital regulations, the Bank is
required to comply with each of three separate capital adequacy  standards.  Set
forth below is a summary of the Bank's  compliance with OTS capital standards as
of December  31, 2000 and 1999.  The  Company's  capital  ratios are  presented,
however,  there  are no  capital  requirements  set by the OTS for the  Company.
(000's omitted):

                                        December 31, 2000
                           --------------------------------------------
                             Actual    Percent      Required    Percent
----------------------------------------------------------------------
SI Bank & Trust:
  Tangible capital.......  $ 382,150     7.53%      $ 76,151      1.50%
  Core capital...........    383,089     7.54        203,107      4.00
  Risk-based capital.....    396,837    15.06        210,751      8.00

                                        December 31, 1999
                           --------------------------------------------
                             Actual    Percent      Required    Percent
-----------------------------------------------------------------------
SI Bank & Trust:
  Tangible capital.......  $ 388,248     8.93%      $ 65,213      1.50%
  Core capital...........    390,192     8.97        173,980      4.00
  Risk-based capital.....    404,463    19.80        163,442      8.00

                                        December 31, 2000
                           --------------------------------------------
                             Actual    Percent      Required    Percent
-----------------------------------------------------------------------
Staten Island Bancorp:
  Tangible capital.......  $ 522,326     10.09%     $ 77,665      1.50%
  Core capital...........    523,265     10.10       207,144      4.00
  Risk-based capital.....    537,903     18.77       229,292      8.00

                                        December 31, 2000
                           --------------------------------------------
                             Actual    Percent      Required    Percent
-----------------------------------------------------------------------
Staten Island Bancorp:
  Tangible capital....... $ 585,976      13.01%     $ 67,559      1.50%
  Core capital...........   587,921      13.05       180,234      4.00
  Risk-based capital.....   602,191      25.58       188,340      8.00


                                 page 26
<PAGE>

5. INVESTMENT SECURITIES

Securities Available for Sale

The amortized cost and approximate market value of securities available for sale
are summarized as follows:
<TABLE>
<CAPTION>
                                                                   December 31, 2000
                                             --------------------------------------------------------
                                                               Gross             Gross
                                              Amortized     Unrealized        Unrealized      Market
                                                Cost           Gains            Losses        Value
-----------------------------------------------------------------------------------------------------
                                                                   (000's omitted)
<S>                                          <C>             <C>             <C>            <C>
Debt securities:
  U.S. Government
     and agencies.......................     $ 178,351       $    865        $ (1,130)      $ 178,086
  GNMA, FNMA and
  FHLMC mortgage
     participation
     certificates .....................        712,292          7,000          (2,064)        717,228
  Agency CMOs .........................        223,224            657          (2,614)        221,267
  Privately issued
     CMOs .............................        412,374            601          (2,223)        410,752
  Other ...............................        170,480            947         (13,530)        157,897
                                            ----------       --------        --------      ----------
                                             1,696,721         10,070         (21,561)      1,685,230
                                            ----------       --------        --------      ----------
Marketable
    equity securities:
     Common stocks ....................         98,632          7,349            (897)        105,084
     Preferred stocks .................         69,913            130          (7,155)         62,888
     Mutual Fund ......................         29,337          6,691            (284)         35,744
                                            ----------       --------        --------      ----------
                                               197,882         14,170          (8,336)        203,716
                                            ----------       --------        --------      ----------
       Total securities
         available
         for sale .....................     $1,894,603       $ 24,240        $(29,897)     $1,888,946
                                            ==========       ========        ========      ==========

<CAPTION>
                                                                   December 31, 1999
                                             --------------------------------------------------------
                                                               Gross             Gross
                                              Amortized     Unrealized        Unrealized      Market
                                                Cost           Gains            Losses        Value
-----------------------------------------------------------------------------------------------------
                                                                   (000's omitted)
<S>                                          <C>             <C>             <C>            <C>
Debt securities:
  U.S. Government
     and agencies.....................      $ 164,236        $     63        $  (8,542)    $    155,757
  GNMA, FNMA and
  FHLMC mortgage
     participation
     certificates ...................
  Agency CMOs .......................         813,632           1,380          (21,401)         793,611
  Privately issued
     CMOs ...........................         248,376              60           (9,819)         238,617
  Other .............................
                                              436,604               1          (18,403)         418,202
Marketable
    equity securities: ..............         163,357             628          (11,168)         152,817
                                           ----------        --------        ---------     ------------
     Common stocks ..................
     Preferred stocks ...............       1,826,205           2,132          (69,333)       1,759,004
                                           ----------        --------        ---------     ------------
     Mutual Fund ....................

       Total securities .............          97,787           9,201           (5,943)         101,046
         available ..................          79,870             604          (10,916)          69,558
         for sale ...................          26,691           7,779             (123)          34,346
                                           ----------        --------        ---------     ------------
                                              204,348          17,584          (16,982)         204,950
                                           ----------        --------        ---------     ------------

                                           $2,030,553        $ 19,716        $ (86,315)    $  1,963,954
                                           ==========        ========        =========     ============

</TABLE>

   The amortized cost and market value of debt securities  available for sale at
December 31, 2000 and 1999, by contractual  maturity,  are shown below. Expected
maturities will differ from contractual  maturities  because  borrowers may have
the right to call or  prepay  obligations  with or  without  call or  prepayment
penalties.

<TABLE>
<CAPTION>

                                 December 31, 2000              December 31, 1999
                             ------------------------     -------------------------
                              Amortized        Market       Amortized       Market
                                 Cost          Value          Cost          Value
-----------------------------------------------------------------------------------
                                                    (000's omitted)
<S>                         <C>            <C>            <C>            <C>
Due in one
   year or less ..........  $    3,331     $    3,347     $    8,150     $    8,176
Due after one year
   through five years ....      96,721         97,875         58,256         56,785
Due after five years
   through ten years .....     124,157        121,221        132,988        125,979
Due after ten years ......     536,996        524,292        564,803        535,836
                            ----------     ----------     ----------     ----------
                               761,205        746,735        764,197        726,776
GNMA, FNMA
   and FHLMC
   mortgage
   participation
   certificates
   and agency
CMOs .....................     935,516        938,495      1,062,008      1,032,228
                            ----------     ----------     ----------     ----------
                            $1,696,721     $1,685,230     $1,826,205     $1,759,004
                            ==========     ==========     ==========     ==========

</TABLE>

   Proceeds  from sales of securities  available for sale during 2000,  1999 and
1998 were  $309,972,000,  $76,257,000 and $109,224,000 with realized gross gains
of $8,140,000,  $8,876,000 and $2,374,000 and realized gross losses  $8,709,000,
$14,407,000  and  $1,850,000,   respectively.   Gross  losses  in  1999  include
write-downs of approximately $9,000,000 on securities whose decline in value was
deemed to be other than temporary.

6.LOANS

   A significant  portion of the Bank's loans are to borrowers who are domiciled
on Staten Island.  The income of many of those customers is dependent on the New
York City  economy.  In addition,  most of the Bank's real estate loans  involve
mortgages on Staten  Island  properties.  Thus,  the majority of the Bank's loan
portfolio is susceptible to the economy of Staten Island,  a borough of New York
City, which is its primary marketplace.

   While  management  uses  available  information to provide losses of value on
loans and foreclosed  properties,  future loss provisions may be necessary based
on changes in economic  conditions.  In addition,  the Bank's regulators,  as an
integral part of their examination process, periodically review the valuation of
the Bank's loans and foreclosed properties. Such regulators may require the Bank
to recognize write-downs based on judgments different from those of management.


                                    page 27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2000, 1999 and 1998

   Loans, net consist of the following at December 31, 2000 and 1999:
<TABLE>
<CAPTION>

                                                                      2000           1999
----------------------------------------------------------------------------------------------
                                                                         (000's omitted)
<S>                                                                <C>             <C>
Loans secured by mortgages on real estate:
    1-4 family residential...................................      $2,206,972      $ 1,737,913
    Multi-family properties .................................          49,034           42,501
    Commercial properties ...................................         307,407          223,809
    Home equity..............................................          10,699            5,390
    Construction and land ...................................         152,956           60,105
    Deferred origination costs and
       unearned income, net .................................          11,696            5,537
                                                                   ----------      -----------
           Net loans secured by mortgages
              on real estate ................................       2,738,764        2,075,255
                                                                   ----------      -----------
Other loans:
    Student .................................................             333              657
    Passbook ................................................           6,237            5,357
    Commercial ..............................................          52,980           33,646
    Other  ..................................................          63,984           49,395
                                                                   ----------      -----------
    Net other loans .........................................         123,534           89,055
                                                                   ----------      -----------
    Net loans before the
       allowance for loan losses ............................       2,862,298        2,164,310
       Allowance for loan losses ............................         (14,638)         (14,271)
                                                                   ----------      -----------
           Net loans ........................................      $2,847,660      $ 2,150,039
                                                                   ==========      ===========

</TABLE>


   A summary of  activity in the  allowance  for loan losses for the years ended
December 31, 2000, 1999 and 1998, is as follows:


                                            2000           1999            1998
--------------------------------------------------------------------------------
                                                     (000's omitted)

Beginning balance .................      $ 14,271       $ 16,617       $ 15,709
  Increase as a result
     of acquisition ...............           847             --             96
  Provision (benefit) charged
     to operations ................          652         (1,843)         1,594
  Charge-offs .....................        (2,186)        (1,665)        (2,119)
  Recoveries ......................         1,054          1,162          1,337
                                         --------       --------       --------
Ending balance ....................      $ 14,638       $ 14,271       $ 16,617
                                         ========       ========       ========


   Non-accrual loans totaled  $9,776,000 at December 31, 2000, which is also the
Bank's recorded  investment in loans for which impairment has been recognized in
accordance  with  SFAS No.  114 and  SFAS No.  118.  Non-accrual  loans  totaled
$12,474,000 at December 31, 1999. The loss of interest  income  associated  with
loans on non-accrual  status was approximately  $728,000,  $746,000 and $794,000
for the years ended December 31, 2000, 1999 and 1998, respectively.

   At  December  31,  2000 and 1999,  the  valuation  allowance  related  to all
impaired loans totaled $8,152,000 and $7,195,000,  respectively, and is included
in the allowance for loan losses shown on the statement of financial  condition.
The average  recorded  investment in impaired loans for the years ended December
31, 2000 and 1999, was approximately $12,857,000 and $13,342,000, respectively.

   At  December  31, 2000 and 1999,  the Company had other real estate  totaling
$893,000 and $887,000, respectively, classified in other assets.

   At December 31, 2000 and 1999, the Company was servicing mortgages for others
totaling $262,957,000 and $122,589,000, respectively.

   At December 31, 2000 and 1999, the Company had mortgage  servicing  rights of
$3,053,000 and $254,000, respectively.

   At December  31, 2000 and 1999,  the Company had  balances  outstanding  from
various officers totaling $5,706,000 and $3,944,000, respectively.

7. PREMISES AND EQUIPMENT

   Premises  and  equipment  at December 31, 2000 and 1999,  are  summarized  as
follows:

                                                          2000           1999
--------------------------------------------------------------------------------
                                                          (000's omitted)
Land, building and leasehold improvements.            $  28,931     $ 22,821

Furniture, fixtures and equipment.........               18,957       19,561
                                                      ---------     --------
                                                         47,888       42,382
Less--Accumulated depreciation
  and amortization........................              (16,005)     (17,651)
                                                      ---------     --------

                                                      $  31,883     $ 24,731
                                                      =========     ========
8. DUE DEPOSITORS

   Scheduled  maturities of  certificates  of deposit at December 31, 2000,  are
summarized as follows:

                                                  Weighted
                                     Amount     Average Rate
------------------------------------------------------------
                                         (000's omitted)

2001...........................      $762,795        5.72%
2002...........................       119,519        5.91
2003...........................        22,016        5.78
2004...........................        12,162        5.72
2005...........................        23,014        5.80
2006 and thereafter............         8,078        7.08
                                     --------
                                     $947,584       5.76%
                                     ========       ====


   The aggregate amounts of outstanding certificates of deposit in denominations
of  $100,000  or more at  December  31,  2000 and  1999  were  $226,902,000  and
$161,603,000, respectively.

9. BORROWED FUNDS

   The Company was obligated for borrowings as follows:

                                                    December 31,
--------------------------------------------------------------------------------
                                         2000                       1999
                                              Weighted                  Weighted
                                               Average                   Average
                                   Amount       Rate         Amount       Rate
--------------------------------------------------------------------------------
                                   (000's omitted)            (000's omitted)
Reverse Repurchase
    Agreements
    Non-FHLB ..............     $  629,974      6.15%     $  846,372     5.56%
Reverse Repurchase
    Agreements FHLB........        263,000      5.40         318,000     5.38
FHLB Advances .............      1,348,000      6.51         885,000     5.90
Mortgage payable...........             37     12.00              39    12.00
                                ----------                ----------
                                $2,241,011      6.28%     $2,049,411    5.68%
                                ==========                ==========

                                    page 28
<PAGE>

   The average  balance of borrowings  for the years ended December 31, 2000 and
1999 was $2,147,718,000 and $1,674,990,000,  respectively. The maximum month end
balance  of  borrowings  for the years  ended  December  31,  2000 and 1999 were
$2,249,963,000 and $2,049,411,000, respectively.


   The Company's borrowings at December 31, 2000 have contractual  maturities as
follows (000's omitted):

               2001  ........................  $1,407,134
               2002  ........................      90,000
               2003  ........................     132,500
               2004  ........................      53,250
               2005  ........................     220,090
               2008  ........................     248,000
               2009  ........................      35,000
               2010  ........................      55,000
               2012  .........................         37
                                               ----------
                                               $2,241,011
                                               ==========

   As  of  December  31,  2000,   $977,786,000  of  investment   securities  and
$1,872,831,000  in mortgage  loans were pledged as collateral for these borrowed
funds.

10. EMPLOYEE BENEFIT PLANS

Defined Benefit Plan

   Costs of the Bank's defined benefit plan are accounted for in accordance with
SFAS No. 87. The following  table sets forth the change in benefit  obligations,
the  change in the plan  assets,  the  funded  status of the plan,  and  amounts
recognized in the accompanying consolidated financial statements at December 31,
2000  and  1999,  respectively,   based  upon  the  latest  available  actuarial
measurement dates of December 31, 2000 and 1999, respectively.

                                                         2000           1999
--------------------------------------------------------------------------------
                                                           (000's omitted)
Projected benefit obligation,
  beginning of year .............................      $ 17,245        $ 22,483
     Service cost ...............................            --           1,355
     Interest cost ..............................         1,359           1,457
     Benefits paid ..............................        (1,001)         (1,203)
     Actuarial loss (gain) ......................         2,072          (2,599)
     Curtailment of future benefits .............            --          (4,248)
                                                       --------        --------
     Projected benefit obligation, end of year ..      $ 19,675        $ 17,245
                                                       ========        ========


The following table sets forth the Plan's change in plan assets:

                                                         2000             1999
--------------------------------------------------------------------------------
                                                             (000's omitted)
Fair value of the plan assets, beginning of year..      $ 28,242      $ 22,507

  Actual return on plan assets .....................         946         6,938
  Employer contributions ...........................          --            --
  Benefits paid ....................................      (1,001)       (1,203)
                                                        --------      --------
Fair value of the plan assets, end of year .........    $ 28,187      $ 28,242
                                                        ========      ========

Funded status ......................................    $  8,512      $ 10,998
                                                        --------      --------

Unrecognized net actuarial loss (gain) .............    $ (2,726)       (6,680)

     Prepaid cost...................................    $  5,786      $  4,318
                                                        ========      ========

The components of net pension expense are as follows:

                                              2000            1999        1998

--------------------------------------------------------------------------------
                                                      (000's omitted)
Service cost-benefits earned
    during the year ..................      $    --       $ 1,355       $ 1,172
Interest cost on projected
    benefit obligation ...............        1,359         1,457         1,350
Net amortization and deferral ........           --           (15)         (125)
Actual return on plan assets .........        2,072        (2,599)          (21)
Deferred investment gain (loss) ......       (4,900)          614        (1,799)
                                            -------       -------       -------
        Net pension expense ..........      $(1,469)      $   812       $   577


Major assumptions utilized:

                                           2000         1999         1998
--------------------------------------------------------------------------------
Weighted average discount rate .......     7.25%        6.75%        6.50%
Rate of increase in compensation .....       --         4.50         4.50
    levels
Expected long-term rate of
    return on assets .................     9.00         9.00         8.00


   During  1999,  the Bank  amended the defined  benefit  plan to freeze  future
benefit  accruals on December 31, 1999. In  connection  with the freezing of the
plan and the plan's  measurement  date of December 31, 1999, in accordance  with
SFAS No.  88, the Bank  recognized  a  curtailment  gain of  approximately  $4.1
million for the year ended December 31, 1999.

Postretirement Benefits

   The Bank provides  postretirement  benefits,  including medical care and life
insurance, which cover substantially all active employees upon their retirement.

   The Bank's  postretirement  benefits are unfunded.  The following table shows
the  components of the plan's  accrued  postretirement  benefit cost included in
other  liabilities on the consolidated  statements of financial  condition as of
December 31, 2000 and 1999:

                                                               2000        1999
--------------------------------------------------------------------------------
                                                                (000's omitted)
Accumulated postretirement benefit obligation:
    Retirees ...........................................      $1,262      $1,522
    Other fully eligible participants ..................       2,229       2,024
    Unrecognized gain (loss) ...........................         770         399
    Unrecognized past service liability ................         433         508
                                                              ------      ------
        Accrued postretirement benefit cost ............      $4,694      $4,453
                                                              ======      ======


Net periodic  postretirement  benefit cost for 2000,  1999 and 1998 included the
following components:

                                                2000           1999        1998

--------------------------------------------------------------------------------
                                                        (000's omitted)
Service cost--benefits attributed to
      service during period ...............      $210           $217      $ 173
Interest cost on accumulated
      postretirement benefit obligation ...       270            228        205
Amortization of:
Unrecognized (gain) loss ..................        (3)            --        (13)
  Unrecognized past service liability .....       (75)           (75)       (75)
                                                 ----           ----      -----
  Net periodic postretirement
    benefit cost ..........................      $402           $370      $ 290
                                                 ====           ====      =====

                                    page 29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2000, 1999 and 1998

   The average health care cost trend rate assumption  significantly affects the
amounts  reported.  For example,  a 1% increase in this rate would  increase the
accumulated  benefit  obligation by $263,000,  $214,000 and $280,000 at December
31, 2000,  1999 and 1998,  respectively,  and increase the net periodic  cost by
$37,000,  $43,000 and $37,000 for the years ended  December 31,  2000,  1999 and
1998,  respectively.  The  postretirement  benefit cost components for 2000 were
calculated  assuming average health care cost trend rates ranging up to 6.5% and
grading to 5% in 2004 and thereafter.

401(k) Plan

   The Bank has a 401(k) plan (the "Plan") covering  substantially all full-time
employees.  The Plan provides for employer matching  contributions  subject to a
specified maximum, and also contains a profit-sharing feature which provides for
contributions  at the  discretion  of the Company.  The Plan expense in 2000 and
1999 was matched through stock  contributions under the ESOP. Amounts charged to
operations  for  the  years  ended  December  31,  2000,   1999  and  1998  were
approximately $581,000, $535,000 and $514,000, respectively.

Employee Stock Ownership Plan

   The ESOP borrowed $41,262,000 from the Company and used the funds to purchase
3,438,500  shares of the Company's stock issued in the conversion.  The loan has
an interest rate of 8.25% and will be repaid over a 15-year period. The loan was
issued on December 19, 1997. Shares purchased are held in a suspense account for
allocation among the participants as the loan is paid. Contributions to the ESOP
and shares released from the loan  collateral will be in an amount  proportional
to  repayment  of the ESOP  loan.  Shares  allocated  will first be used for the
employer  matching  contribution  for the 401(k) plan with the remaining  shares
allocated to the participants based on compensation as described in the plan, in
the year of  allocation.  The  vesting  schedule  will be the same as the Bank's
current 401(k) plan.  Forfeitures from the 401(k) matching contributions will be
used to reduce future employer 401(k) matching  contributions  while forfeitures
from  shares  allocated  to  the  participants   will  be  allocated  among  the
participants  the same as  contributions.  There were 228,904 and 228,904 shares
allocated  in 2000 and 1999,  respectively.  The Company  recorded  compensation
expense of  $1,773,000,  $2,790,000  and  $4,020,000  for the ESOP for the years
ended December 31, 2000, 1999 and 1998, respectively.

Recognition and Retention Plan

   The Company maintains the 1998 Recognition and Retention Plan (the "RRP") for
the directors and officers of the Bank which was  implemented  in July 1998. The
objective of the RRP is to enable the Company to provide officers, key employees
and  directors  of the Bank with a  proprietary  interest  in the  Company as an
incentive to contribute to its success. During 1998, the RRP purchased 1,719,250
shares of the Company or 4% of the common  stock sold in the  Conversion  on the
open market.  These purchases were funded by the Bank.  Awards vest at a rate of
20% per year for directors and  officers,  commencing  one year from the date of
award. Awards become 100% vested upon retirement,  termination of employment due
to  death  or  disability  or upon  change  of  control.  The  Company  recorded
compensation  expense of  $6,313,000,  $6,025,000 and $3,049,000 for the RRP for
the years ended December 31, 2000,  1999 and 1998,  respectively.  The following
table sets forth the activity in the RRP plan.

<PAGE>
<TABLE>
<CAPTION>
                               2000                1999                 1998
                         -----------------   ------------------  --------------------
                         Number   Weighted   Number   Weighted   Number     Weighted
                           of     Average      of     Average      of       Average
                         Shares    Price     Shares     Price    Shares      Price
-------------------------------------------------------------------------------------
<S>                       <C>      <C>       <C>       <C>      <C>          <C>
Granted  ............     29,200   $17.86    18,200    $18.63   1,501,675    $20.25
Vested  .............    309,670    20.23   297,530     20.25      28,700     20.25
Forfeited ...........      2,370    20.25     5,325     20.25         --         --
Shares
   Available ........    177,870            204,700               217,575
</TABLE>

Stock Option Plan

   The Company  maintains  the 1998 Stock Option Plan (the "Option  Plan").  The
Company has reserved for future  issuance  pursuant to the Option Plan 4,298,125
shares of common  stock,  which is equal to 10% of the common  stock sold in the
Conversion.  Under the Option Plan,  stock options  (which expire ten years from
the date of grant) have been granted to the  directors and officers of the Bank.
Each option  entitles the holder to purchase one share of the  Company's  common
stock at an exercise  price  equal to the fair market  value of the stock at the
date of the  grant.  Options  will be  exercisable  in whole or in part over the
vesting period. The options vest ratably over a five-year period.  However,  all
options  become  100%  exercisable  in the event  the  employee  terminates  his
employment due to retirement, death or disability or upon change of control.

   The  Company  has chosen to account for  stock-based  compensation  using the
intrinsic value method  prescribed in APB No. 25. Since each option granted at a
price equal to the fair market value of one share of the Company's  stock on the
date of the grant, no compensation cost has been recognized. The following table
compares  reported  net income and earnings per share to net income and earnings
per  share  on a pro  forma  basis  assuming  that  the  Company  accounted  for
stock-based  compensation  under SFAS No. 123. The effects of applying  SFAS No.
123 in this pro forma disclosure are not indicative of future amounts.

                                           2000          1999           1998

--------------------------------------------------------------------------------
                                         (000's omitted, except per share data)
Net income:
   As reported .......................  $  53,926     $   52,875     $   44,262
   Pro forma .........................     50,396         47,341         40,108
Earnings per share:
   As reported
   Basic .............................       1.61           1.40           1.06
Diluted ..............................       1.61           1.40           1.06
   Pro forma
   Basic .............................       1.50           1.25           0.97
Diluted ..............................       1.50           1.25           0.97

                                     page 30
<PAGE>

Stock Option Activity

   The following table sets forth stock option activity and the weighted average
fair value of options granted.


                                        2000            1999           1998
--------------------------------------------------------------------------------
Options outstanding
   beginning of year ..........      3,046,000       3,056,000             --
Options granted ...............         45,000          91,000      3,056,000
Options exercised .............             --              --             --
Options forfeited .............        (13,200)       (101,000)            --
Options outstanding
   end of year ................      3,077,800       3,046,000      3,056,000
Remaining options available for
   grant under plan 1,220,325 .      1,252,125       1,242,125
Exercisable options end of year      1,258,400         626,200         70,000

Weighted average exercise
   price on exercisable
   options end of year ........          22.82           22.88          22.88
Weighted average fair value
   options granted ............     $     6.84      $     6.77         $ 8,34



   The fair value of each option granted is estimated on the date of grant using
the  Black-Scholes  Option  Pricing Model using the following  weighted  average
assumptions:


                                                2000        1999        1998
--------------------------------------------------------------------------------
Risk free interest rate ....................    5.50%       5.50%       5.21%
Expected dividend yield ....................    2.70%       2.70%       1.80%
Volatility .................................   30.42%      29.92%      35.57%
Expected life in years .....................       6           6           6


Supplemental Executive Retirement Plan

   In 1993,  the Bank  adopted a  Supplemental  Executive  Retirement  Plan (the
"Executive  Plan") for certain  senior  officers that provides for payments upon
retirement,  death or disability. The annual benefit is based upon annual salary
(as defined) plus  interest.  Amounts  charged to operations for the years ended
December  31,  2000,  1999 and 1998 were  approximately  $407,000,  $458,000 and
$436,000, respectively.

11. INCOME TAXES

   The provision for income taxes consists of the following:

                                                   2000      1999         1998
--------------------------------------------------------------------------------
                                                        (000's  omitted)
Current:
   Federal .................................     $22,790     $26,353     $21,299
   State ...................................       1,727       2,778       2,610
   City ....................................       1,801       2,776       2,676
                                                  26,318      31,907      26,585
Deferred ...................................       6,590       3,352       3,093
                                                 -------     -------     -------
                                                 $32,908     $35,259     $29,678
                                                 =======     =======     =======


   The following  table  reconciles the federal  statutory rate to the Company's
effective tax rate:

                                                      December 31, 2000
                                                  ---------------------------
                                                                Percentage of
                                                    Amount      Pretax Income

--------------------------------------------------------------------------------
                                                        (000's omitted)

Federal tax at statutory rate ..............       $ 30,392           35.0%
State and local income taxes ...............          2,565            3.0
Tax-exempt dividend income .................         (1,357)          (1.6)
Amortization of goodwill ...................          1,738            2.0
Other ......................................           (430)          (0.5)
     Income tax provision ..................       $ 32,908           37.9%
                                                   --------           ----
                                                   ========           ====


                                                      December 31, 1999
                                                  ---------------------------
                                                                Percentage of
                                                    Amount      Pretax Income
--------------------------------------------------------------------------------
                                                        (000's omitted)

Federal tax at statutory rate ..............       $ 30,847           35.0
State and local income taxes ...............          4,475            5.0
Tax-exempt dividend income .................         (1,425)          (1.6)
Amortization of goodwill ...................            318            0.4
Other ......................................          1,044            1.2
                                                   --------           ----
      Income tax provision .................       $ 35,259           40.0
                                                   ========           ====


                                                      December 31, 1998
                                                  ---------------------------
                                                                Percentage of
                                                    Amount      Pretax Income
--------------------------------------------------------------------------------
                                                        (000's omitted)

Federal tax at statutory rate ..............       $ 25,879           35.0
State and local income taxes ...............          2,837            3.8
Tax-exempt dividend income .................           (436)          (0.6)
Amortization of goodwill ...................            318            0.4
Other ......................................          1,080            1.5
                                                   --------           ----
      Income tax provision .................       $ 29,678           40.1
                                                   --------           ----


   The  following  is a summary  of the  income tax  (liability)  receivable  at
December 31, 2000 and 1999:

                                                     2000             1999

--------------------------------------------------------------------------------
                                                       (000's omitted)

Current taxes ..............................      $ (5,691)        $ (2,286)
Deferred taxes .............................        25,340           47,146
                                                  --------         --------
                                                  $ 19,649         $ 44,860
                                                  ========         ========


                                    page 31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2000, 1999 and 1998


   The  components  of the net  deferred tax asset at December 31, 2000 and 1999
are as follows:


                                                              2000       1999
-------------------------------------------------------------------------------
                                                               (000's omitted)
Assets:
   Contribution to Foundation .........................     $ 5,537     $ 4,051
   Allowance for loan losses ..........................       5,868       5,991
   Postretirement benefit accrual .....................       1,984       1,935
   Non-accrual loans ..................................         517         634
   Deferred compensation ..............................         975       1,088
   ESOP shares ........................................       1,485       1,053
   Unrealized loss on AFS securities ..................       6,049      30,764
   Other ..............................................       8,969       6,532
                                                            -------     -------
        Total assets ..................................      31,384      52,048
                                                            -------     -------

Liabilities:
   Bad debt recapture under Section 593 ...............       1,250       1,666
   Pension plan and curtailment gain ..................       2,288       1,935
   Fixed asset tax basis adjustment ...................         662          --
   Bond discounts .....................................       1,115          51
   Other ..............................................         729       1,250
                                                            -------     -------
        Gross deferred tax liability ..................       6,044       4,902
                                                            -------     -------
        Net deferred tax asset ........................     $25,340     $47,146
                                                            =======     =======


   At December  31, 2000 and 1999,  the  deferred tax asset is included in other
assets in the accompanying consolidated financial statements.

Bad Debt Deduction

   Through  January 1, 1996,  under  Section 593 of the Internal  Revenue  Code,
thrift  institutions  such as the Bank  which met  certain  definitional  tests,
primarily  relating  to their  assets  and the  nature of their  business,  were
permitted to establish a tax reserve for bad debts and to make annual  additions
thereto,  which  additions may,  within  specified  limitations,  be deducted in
arriving  at  their  taxable  income.  The  Bank's  deduction  with  respect  to
"qualifying  loans," which are generally  loans secured by certain  interests in
real  property,  was computed  using an amount  based on the Bank's  actual loss
experience (the "Experience  Method"), or a percentage equal to 8% of the Bank's
taxable income (the "PTI Method"), computed without regard to this deduction and
with  additional  modifications  and  reduced  by the  amount  of any  permitted
addition to the non-qualifying  reserve.  Similar deductions or additions to the
Bank's bad debt reserve are  permitted  under the New York State Bank  Franchise
Tax; however,  for purposes of these taxes, the effective  allowable  percentage
under the PTI Method was approximately 32% rather than 8%.

   Effective January 1, 1996, Section 593 was amended, and the Bank is unable to
make  additions to its federal tax bad debt reserve,  is permitted to deduct bad
debts only as they occur and is  additionally  required to  recapture  (that is,
take into taxable  income)  over a six-year  period,  beginning  with the Bank's
taxable year  beginning on January 1, 1996, the excess of the balance of its bad
debt  reserves as of December  31, 1995 over the balance of such  reserves as of
December  31, 1987,  or over a lesser  amount if the Bank's loan  portfolio  has
decreased  since  December  31,  1987.  Such  recapture  requirements  have been
deferred for taxable years through  December 31, 1997, as the Bank  originated a
minimum  amount of  certain  residential  loans  based  upon the  average of the
principal  amounts of such loans  originated  by the Bank during its six taxable
years preceding January 1, 1996. The recapture  requirement  amount for the year
2000 was $1,190,000.

   The New York State tax law has been amended to prevent a similar recapture of
the Bank's bad debt reserve,  and to permit continued future use of the bad debt
reserve  method  for  purposes  of  determining  the  Bank's  New York State tax
liability. This change also provides for an indefinite deferral of the recapture
of the bad debt reserves generated for New York State purposes.

   The New York City tax law was also  amended  and is  similar  to the New York
State tax law  regarding  bad debt  reserves  and  provides  for the  indefinite
deferral  of the  recapture  of bad debt  reserves  generated  for New York City
purposes.  Prior to the tax law changes  mentioned above, for New York State and
New York City  purposes,  the bad debt  deduction was equal to a multiple of the
federal  bad debt  deduction,  which is  approximately  four  times the  federal
amount.

State, Local and Other Taxes

   The Company files state and local tax returns on a calendar-year basis. State
and local  taxes  imposed on the  Company  consist  primarily  of New York State
franchise tax, New York City Financial  Corporation tax, Delaware  franchise tax
and state taxes for an additional 30 states.  These  additional  state taxes are
attributable  to the operation of SIB Mortgage Corp.  and American  Construction
Lending  Services,  Inc. which have offices in these additional  locations.  The
Company's  annual liability for New York State and New York City purposes is the
greater of a tax on income or an alternative  tax based on a specified  formula.
Liability for other state taxes are determined in accordance with the applicable
local tax code. The Company's  liability for Delaware  franchise tax is based on
the lesser of a tax based on an authorized shares method or an assumed par value
capital  method;  however,  under each method,  the Company's total tax will not
exceed $150,000.

12. COMMITMENTS AND CONTINGENCIES AND
    RELATED PARTY TRANSACTIONS

   In the normal course of business,  there are various outstanding  commitments
and contingent liabilities, such as standby letters of credit and commitments to
extend  credit,  which  are  not  reflected  in  the  accompanying  consolidated
financial  statements.  The Company uses the same policies in making commitments
as it does for on-balance sheet instruments.  No material losses are anticipated
as a result of these  transactions.  The Company is  contingently  liable  under
standby letters of credit in the amount of $4,786,000 and $4,811,000 at December
31, 2000 and 1999,  respectively.  In  addition,  at December 31, 2000 and 1999,
mortgage loan  commitments  and unused  balances  under  revolving  credit lines
approximated  $469,519,000 and  $390,479,000,  respectively.  As of December 31,
2000 and December 31, 1999 the Mortgage Company had commitments to sell loans of
$218.6 million and $70.5 million, respectively.

                                    page 32
<PAGE>
   Total operating  rental  commitments on branch offices and other  facilities,
which expire at various  dates through May 2015,  exclusive of renewal  options,
are as follows (000's omitted):


               2001 ........................... $ 2,467
               2002 ...........................   1,922
               2003 ...........................   1,481
               2004 ...........................   1,334
               2005 and thereafter.............   3,832
                                                -------
                                                $11,036
                                                =======

   Rental  expense  included  in the  statements  of  income  was  approximately
$2,213,000,  $1,648,000 and $768,000 for the years ended December 31, 2000, 1999
and 1998, respectively.

13. DISCLOSURES ABOUT FAIR VALUE OF
    FINANCIAL INSTRUMENTS

   The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:

Cash and Due From Banks and Federal Funds Sold

   For  these  short-term  instruments,  the  carrying  amount  is a  reasonable
estimate of fair value.

Accrued Interest

   The carrying amount is a reasonable estimate of fair value.

Securities Available for Sale

   Fair  values  for  securities  are  based on quoted  market  prices or dealer
quotes. If a quoted market price is not available, fair value is estimated using
quoted market prices for similar securities.

Loans

   For  loans,   fair  value  is  based  on  the   credit  and   interest   rate
characteristics  of  individual  loans.  These  loans  are  stratified  by type,
maturity,  interest rate,  underlying  collateral where  applicable,  and credit
quality  ratings.  Fair value is estimated by  discounting  scheduled cash flows
through estimated  maturities using discount rates which in management's opinion
best reflect  current market  interest rates that would be charged on loans with
similar  characteristics and credit quality.  Credit risk concerns are reflected
by adjusting cash flow forecasts, by adjusting the discount rate or by adjusting
both.

Deposit Liabilities

   The fair value of demand deposits,  savings accounts and certain money market
deposits is the amount  payable on demand at the reporting  date. The fair value
of fixed-maturity certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.

   Demand  deposits,  savings  accounts and certain  money  market  deposits are
valued at their carrying value. In the Company's  opinion,  these deposits could
be sold at a premium  based on  management's  knowledge of the results of recent
sales of financial institutions in the New York City area.

Advances From Borrowers for Taxes and Insurance

   The carrying amount is a reasonable estimate of fair value.

Borrowed Funds

   Fair value is based on  discounted  contractual  cash flows using rates which
approximate the rates offered for borrowings of similar remaining maturities.

Loan Commitments

   Fair values for loan commitments are based on fees currently charged to enter
into  similar  agreements,  taking  into  account  the  remaining  terms  of the
agreements and the  counterparties'  credit  standing,  and are not  significant
since fees charged are not material.

   The  estimated  fair values of the  Company's  financial  instruments  are as
follows:

                                                        December 31, 2000
                                                        -----------------
                                                   Carrying            Fair
                                                    Amount             Value
--------------------------------------------------------------------------------
                                                          (000's omitted)
Financial assets:
  Cash and due  from  banks ..............       $    92,103        $    92,103
  Federal funds sold .....................            12,000             12,000
  Securities  available for sale .........         1,888,946          1,888,946
  Loans ..................................         2,978,501          2,988,491
  Less--Allowance for loan losses ........           (14,638)           (14,638)
  Accrued interest  receivable ...........            30,905             30,905
Financial liabilities:
   Savings and demand deposits ...........         1,397,629          1,397,629
   Certificates of deposit ...............           947,584            948,650
   Borrowed funds ........................         2,241,011          2,277,774
   Advances from borrowers for
    taxes and insurance ..................            11,534             11,534
   Accrued interest payable ..............            26,969             26,969


                                                        December 31, 1999
                                                        -----------------
                                                   Carrying            Fair
                                                    Amount             Value
--------------------------------------------------------------------------------
                                                          (000's omitted)

Financial assets:
  Cash and due  from  banks ..............       $    80,998        $    80,998
  Federal funds sold .....................            20,400             20,400
  Securities  available for sale .........         1,963,954          1,963,954
  Loans ..................................         2,210,898          2,111,761
  Less--Allowance for loan losses ........           (14,271)           (14,271)
  Accrued interest  receivable ...........            24,731             24,731
Financial liabilities:
   Savings and demand deposits ...........         1,247,190          1,247,190
   Certificates of deposit ...............           573,043            573,230
   Borrowed funds ........................         2,049,411          2,069,770
   Advances from borrowers for
    taxes and insurance ..................            10,805             10,805
   Accrued interest payable ..............            16,485             16,485


14. STATEN ISLAND BANCORP, INC.

   The following condensed  statements of financial condition as of December 31,
2000 and 1999, and condensed statements of income and cash flows for each of the
years in the three-year

                                    page 33

<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 2000, 1999 and 1998


period  ended  December 31, 2000  represent  the  parent-company-only  financial
information and should be read in conjunction  with the  consolidated  financial
statements and the notes thereto.

<TABLE>
<CAPTION>
Condensed Statements of Financial Condition

                                                                  December 31,
                                                                  ------------
                                                              2000           1999
-----------------------------------------------------------------------------------
                                                                 (000's omitted)
Assets:
<S>                                                        <C>            <C>
   Cash ..............................................     $   9,980      $   3,482
   Securities available for sale .....................       118,849        145,332
   Investment in Bank ................................       441,961        374,187
   ESOP loan receivable from Bank ....................        36,497         38,217
   Other assets ......................................        13,007         11,284
                                                           ---------      ---------
       Total assets ..................................     $ 620,294      $ 572,502
                                                           =========      =========

Liabilities:
   Loan payable to Bank ..............................     $  33,191      $      --
   Accrued interest and other liabilities ............         1,571          1,125
                                                           ---------      ---------
       Total liabilities .............................        34,762          1,125
Stockholders' equity:
   Common stock ......................................           451            451
   Additional paid in capital ........................       537,744        536,539
   Retained earnings
    (substantially restricted) .......................       291,345        251,315
   Unallocated ESOP shares ...........................       (32,962)       (35,709)
   Unearned RRP shares ...............................       (19,784)       (25,439)
   Less--Treasury stock (10,209,325 and
     6,436,689 shares at December 31, 2000
     and 1999, respectively), at cost ................      (188,321)      (121,149)
   Accumulated other comprehensive
     income (loss), net of taxes .....................        (2,941)       (34,631)
                                                           ---------      ---------
       Total stockholders' equity ....................       585,532        571,377
                                                           ---------      ---------
       Total liabilities and
          stockholders' equity .......................     $ 620,294      $ 572,502
                                                           =========      =========

<CAPTION>
Condensed Statements of Income
                                                              December 31,
                                          ------------------------------------------------
                                              2000                1999             1998
------------------------------------------------------------------------------------------
                                                           (000's omitted)
<S>                                       <C>               <C>               <C>
Income:
   Investment income ................     $      9,395      $     12,222      $      7,810
   Other interest income ............               41               172               287
   Interest income ESOP loan ........            3,101             3,236             3,464
   Other income .....................              386                76                --
   Loss on sale of investments ......             (590)           (5,555)             (646)
                                                12,333            10,151            10,915
Expenses:
   Interest expense .................            4,390             1,675               657
   Other expense ....................              348               483               598
   Income before taxes and equity in
       undistributed earnings of Bank            7,595             7,993             9,660
   Provision for income taxes .......            3,119             3,830             3,107
           Income before equity in
             undistributed earnings
             of Bank ................            4,476             4,163             6,553
Equity in undistributed earnings
   of Bank ..........................           49,448            48,712            37,709
                                          ------------      ------------      ------------
           Net income ...............     $     53,926      $     52,875      $     44,262
                                          ============      ============      ============

<CAPTION>

Condensed Statements of Cash Flows
                                                                                   December 31,
                                                             ------------------------------------------------
                                                                2000                    1999           1998
-------------------------------------------------------------------------------------------------------------
                                                                               (000's omitted)
<S>                                                          <C>                    <C>            <C>
Cash flows from operating activities:
   Net income .........................................      $ 53,926               $ 52,875       $  44,262
   Adjustments to reconcile net income
      to net cash provided by operating
      activities --
   Undistributed earnings of Bank .....................       (49,450)               (48,712)        (37,709)
   Amortization of bond and
     mortgage premium .................................            (2)                    74            (23)
   Loss on sale of available
     for sale securities ..............................           590                  1,737            646
   Decrease (increase) in accrued
     interest receivable ..............................            87                    171           (683)
   Decrease (increase) in
     other assets .....................................          (689)                    --          1,868
   (Decrease) increase in
     accrued interest payable .........................           447                    (13)         1,112
    Decrease (increase) in
     deferred income taxes ............................        (1,676)                 5,539          1,684
                                                             --------               --------       ---------
         Net cash provided by
           operating activities .......................         3,233                 11,671         11,157
                                                             --------               --------       ---------
Cash flows from investing activities:
    Decrease in investment in Bank ....................        20,000                 80,000             --
    Maturities of available for sale
     securities .......................................            --                  7,428             --
    Sales of available for sale
     securities .......................................        52,828                 66,205         99,627
    Purchases of available for sale
     securities .......................................       (18,538)              (272,711)
Principal collected on ESOP loan ......................         1,720                  1,584          1,461
                                                             --------               --------       ---------
         Net cash provided by
           (used in) investing
           activities .................................        56,010                 88,446       (171,623)
                                                             --------               --------       ---------
Cash flows from financing activities:
    Increase in borrowings ............................        33,191                     --             --
    Dividends paid ....................................       (18,764)               (16,974)       (10,347)
    Purchase of treasury stock ........................       (67,172)               (93,669)       (27,480)
                                                             --------               --------       ---------
    Net cash used in
     financing activities .............................       (52,745)              (110,643)       (37,827)
                                                             --------               --------       ---------
    Net increase (decrease)
     in cash and cash equivalents .....................         6,498                (10,526)      (198,293)
Cash and cash equivalents,
  beginning of year ...................................         3,482                 14,008        212,301
                                                             --------               --------       ---------
Cash and cash equivalents,
  end of year .........................................     $   9,980              $   3,482      $  14,008
                                                            =========              =========      =========

</TABLE>
                                    page 34
<PAGE>

15. QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected  unaudited  quar terly  financial data for the years ended December 31,
2000 and 1999 is presented below:

<TABLE>
<CAPTION>
                                             Fourth       Third         Second        First
                                             Quarter      Quarter       Quarter       Quarter
---------------------------------------------------------------------------------------------
2000:
<S>                                         <C>          <C>           <C>           <C>
     Interest income ..................     $ 91,654     $ 86,540      $ 84,204      $ 81,406
     Interest expense .................       55,193       53,150        49,073        45,704
     Net interest income ..............       36,461       33,390        35,131        35,702
     Provision for loan losses ........          611           12            11            18
     Service and fee income ...........        4,573        4,262         3,903         4,079
     Loan fees and gains ..............        9,096         8,329        5,580         4,309
     Securities transactions ..........          173          416         (934)         (224)
     Noninterest expense ..............       26,335       24,786       23,281        22,358
     Income before
     income taxes .....................       23,357       21,599       20,388        21,490
     Income taxes .....................        8,751        7,938        7,892         8,327
     Net income .......................       14,606       13,661       12,496        13,163
     Earnings per share--
       Basic ..........................         0.45         0.41         0.37          0.38
       Diluted ........................         0.45         0.41         0.37          0.38
     Dividends declared
       per common
       share  .........................         0.14         0.13         0.12          0.12
Stock price per
  common share--
     High .............................     21 15/16           20        18 1/8      18 15/16
     Low ..............................       17 5/8     16 13/16        15 5/8      15 13/16
     Close ............................       21 3/8           20        17 5/8        17 1/8


<CAPTION>
                                             Fourth       Third         Second        First
                                             Quarter      Quarter       Quarter       Quarter
---------------------------------------------------------------------------------------------
1999:
<S>                                        <C>          <C>           <C>           <C>
Interest income .......................    $ 77,033      $ 70,856     $ 66,840     $ 62,744
Interest expense ......................      40,538        36,266       32,533       29,727
Net interest income ...................      36,495        34,590       34,307       33,017
Provision (benefit)
  for loan losses .....................      (1,943)           30           11           59
Service and fee income ................       3,513         2,876        1,879        1,790
Loan fees and gains ...................       5,485         5,880        7,164        3,705
Defined benefit plan
  curtailment gain ....................       4,093            --           --           --
Securities transactions ...............      (6,452)          436          361          124
Noninterest expense ...................      22,612        21,440       21,240       17,679
Income before
  income taxes ........................      22,465        22,312       22,460       20,897
Income taxes ..........................       8,813         8,740        9,129        8,577
Net income ............................      13,652        13,572       13,331       12,320
Earnings per share--
  Basic ...............................         .38          .36          .35          .31
  Diluted .............................         .38          .36          .35          .31
  Dividends declared
    per common
    share .............................         .12          .11          .11          .10
Stock price per
    common share--
  High ................................     20 3/16        18 7/8      19 1/4     19 15/16
  Low  ................................     17 11/16       17 3/8      16 1/4     16 1/2
  Close  ..............................     18             18 13/16    18         17 3/16

</TABLE>

16. SUBSEQUENT EVENT (UNAUDITED)

   Subsequent to December 31, 2000 the Company has merged ACLS into the Mortgage
Company with ACLS operating as a division of the Mortgage Company. The impact of
this event will not have a material effect on the operations of the Company.


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and
Stockholders of Staten Island Bancorp, Inc.:

   We  have  audited  the  accompanying  consolidated  statements  of  financial
condition of Staten Island Bancorp, Inc. (a Delaware corporation) and subsidiary
as of December 31, 2000 and 1999,  and the related  consolidated  statements  of
income,  changes in stockholders' equity and cash flows for each of the years in
the three-year  period ended December 31, 2000.  These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

   We conducted  our audits in  accordance  with  auditing  standards  generally
accepted in the United States.  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  consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the  financial  position of Staten
Island  Bancorp,  Inc. and  subsidiary as of December 31, 2000 and 1999, and the
results  of their  operations  and their cash flows for each of the years in the
three-year  period ended  December  31,  2000,  in  conformity  with  accounting
principles generally accepted in the United States.



/s/Arthur Andersen LLP
----------------------
Arthur Andersen LLP

New York, New
York January 22, 2001


                                    page 35
<PAGE>

CORPORATE INFORMATION
STATEN ISLAND BANCORP INC.

DIRECTORS

Harold Banks
Charles J. Bartels
James R. Coyle
Harry P. Doherty
William G. Horn
Denis P. Kelleher
Julius Mehrberg
John R. Morris
Kenneth W. Nelson
William E. O'Mara


DIRECTORS EMERITI

Elliott L. Chapin
Pio Paul Goggi
Dennis E. Knudsen
Edward F. Norton, Jr.
Edward F. Vitt
Raymond A. Vomero


OFFICERS OF STATEN
ISLAND BANCORP INC.

Harry P. Doherty
  Chief Executive Officer
James R. Coyle
  Chief Operating Officer
Edward Klingele
  Chief Financial Officer
Patricia A. Smith
  Corporate Secretary





CORPORATE OFFICE

15 Beach Street
Staten Island, New York 10304


ANNUAL MEETING

The annual meeting of stockholders will be held on May 10, 2001 at 10:00 a.m. at
the Excelsior  Grand,  2380 Hylan  Boulevard,  Staten Island,  New York,  10306.
Notice  of the  meeting  and a proxy  form are  included  with this  mailing  to
shareholders of record as of March 12, 2001.
<PAGE>
SI BANK & TRUST--
A Staten Island Bancorp Company

SENIOR OFFICERS

Harry P. Doherty
    Chairman and Chief Executive Officer

James R. Coyle
    President and Chief Operating Officer

John P. Brady
    Executive Vice President

Ira Hoberman
    Executive Vice President

Frank J. Besignano
    Senior Vice President

Donald C. Fleming
    Senior Vice President

Edward Klingele
    Senior Vice President

Deborah Pagano
    Senior Vice President




INVESTOR RELATIONS

Shareholders,  analysts and others  interested  in  additional  information  may
contact:

Donald C. Fleming
Senior Vice President
15 Beach Street
Staten Island, New York 10304
(718) 556-6518
www.sibk.com

TRANSFER AGENT AND REGISTRAR

Inquiries regarding stock transfer, lost certificates, or changes in name and/or
address should be directed to the stock and transfer agent and registrar:

Registrar and Transfer Company
Investor Relations
10 Commerce Drive
Cranford, New Jersey 07016
(800) 368-5948

<PAGE>

SIB MORTGAGE CORPORATION--
d/b/a IVY MORTGAGE

Richard W. Payne
  President and Chief Executive Officer

Paul Heckman
  Executive Vice President

Ralph Picarillo
  Executive Vice President, Treasurer and
Chief Financial Officer

SIB INVESTMENT CORP.

Bernard Durnin
  President



STOCK LISTING

Staten  Island  Bancorp  Inc.'s  common  stock is traded  on the New York  Stock
Exchange (NYSE) under the symbol SIB.

 Shares outstanding as of January 1, 2001:
  34,920,987
Shareholders of record as of January 1, 2001:
  9,363

INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105

COUNSEL
The Law Firm of Hall & Hall
57 Beach Street
Staten Island, New York 10304

Elias, Matz, Tiernan & Herrick, LLP
734 15th Street N.W., 12th fl.
Washington, D.C. 20005

                                     page 36