SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K


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

                   For the fiscal year ended December 31, 1998

                          Commission File No.: 1-13503

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


            Delaware                                     13-3958850
---------------------------------                  ----------------------
  (State or other jurisdiction                        (I.R.S. Employer
of incorporation or organization)                  Identification Number)


         15 Beach Street
     Staten Island, New York                               10304
            ---------                                    ----------
            (Address)                                    (Zip Code)


       Registrant's telephone number, including area code: (718) 447-7900

   Securities registered pursuant to Section 12(g) of the Act: Not Applicable

           Securities registered pursuant to Section 12(b) of the Act

                     Common Stock (par value $.01 per share)
                     ---------------------------------------
                                (Title of Class)


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

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

Based upon the $16.50 closing price of the Registrant's common stock as of March
24,  1998,  the  aggregate  market  value  of  the  37,570,845   shares  of  the
Registrant's  common stock deemed to be held by non-affiliates of the Registrant
was  $619.9 million. Although directors and executive officers of the Registrant
and certain of its employee benefit plans were assumed to be "affiliates" of the
Registrant for purposes of this  calculation,  the  classification  is not to be
interpreted as an admission of such status.

Number of shares of Common Stock outstanding as of March 24, 1999:  42,538,705
<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

         List hereunder the following  documents  incorporated  by reference and
the Part of the Form 10-K into which the document is incorporated.

(1) Portions of the Annual Report to  Stockholders  for the year ended  December
31, 1998 are incorporated into Part II, Items 5 through 8 of this Form 10-K.

(2) Portions of the  definitive  proxy  statement for the 1998 Annual Meeting of
Stockholders  are  incorporated  into Part III,  Items 9 through 13 of this Form
10-K.
<PAGE>
PART I

Item 1.  Business

Staten Island Bancorp, Inc.

         Staten Island Bancorp,  Inc. (the "Company") is a Delaware  corporation
organized  in July,  1997 by Staten  Island  Savings Bank (the "Bank" or "Staten
Island  Savings") for the purpose of becoming a unitary  holding  company of the
Bank. The Bank's  conversion to stock form and the concurrent  offer and sale of
the  Company's  common stock was  consummated  on December  22,  1997.  The only
significant  assets  of the  Company  are the  capital  stock of the  Bank,  the
Company's loan to the Employee Stock Ownership Plan ("ESOP"), and the portion of
the net  conversion  proceeds  retained  by the  Company  for  investments.  The
business and  management of the Company  consists  primarily of the business and
management of the Bank.  The Company  neither owns nor leases any property,  but
instead uses the premises and equipment of the Bank.  At the present  time,  the
Company does not intend to employ any persons  other than  officers of the Bank,
and the Company  will  utilize the support  staff of the Bank from time to time.
Additional  employees  will be hired as  appropriate  to the extent the  Company
expands or changes its business in the future.

         The Company's  executive  office is located at the executive  office of
the Bank at 15 Beach Street,  Staten Island,  New York 10304,  and its telephone
number is (718) 447-7900.

Staten Island Savings Bank

         The Bank was originally founded as a New York  State-chartered  savings
bank in 1864.  The Bank  maintains a network of 16  full-service  branch offices
located in Staten Island and one branch office  located in the Bay Ridge area of
Brooklyn,  New York as well as three limited  service  branch  offices in Staten
Island.  The Bank also maintains a lending center and Trust Department office on
Staten Island along with a commercial  lending  office in the Bay Ridge Brooklyn
branch. The Bank is a traditional, full-service, community oriented savings bank
headquartered  in Staten  Island,  New York.  Staten Island Savings is primarily
engaged in attracting deposits from the general public and using those and other
available sources of funds to originate loans secured primarily by single-family
(one to four units) residences located in Staten Island and, to a lesser extent,
the metropolitan New York area.

         The Bank has long-standing ties to Staten Island with over 134 years of
service to the  communities  and residents of Staten Island and, more  recently,
the Bay Ridge area of Brooklyn. As of June 30, 1998 (the latest available data),
the Bank was the largest depository institution in terms of deposit market share
in Staten  Island with 30% of the total  deposits and 23% of the total number of
branch offices of depository  institutions in Staten Island.  Historically,  the
Bank also has been  among  the  leaders  in terms of the  number  and  amount of
residential mortgage loan originations in Staten Island.  Staten Island Savings'
operating  strategy  emphasizes  customer  service and convenience and, in large
part, the Bank  attributes its commitment to maintaining  customer  satisfaction
for its market share position.  The Bank attempts to  differentiate  itself from
its  competitors  by providing  the type of  personalized  customer  service not
generally  available  from  larger  banks  while  offering a greater  variety of
products and services than is typically  available from smaller local depository
institutions.  The  Bank  has  an  experienced  management  team  directing  its
operations.  The Bank's Chairman and Chief  Executive  Officer and President and
Chief  Operating  Officer have 32 years and 28 years,  respectively,  of service
with the Bank while the other executive  officers of the Bank have an average of
15 years of service with Staten Island Savings.

         In  recent  years,   the  Bank  has   facilitated  its  growth  through
acquisitions.   In  1998,  the  Bank's  wholly-owned  subsidiary,  SIB  Mortgage
Corporation (the "Mortgage  Company")  acquired the assets of Ivy Mortgage Corp.
The Mortgage  Company,  located in Branchburg,  New Jersey,  will continue to do
business as Ivy Mortgage  Corp.  in 22 states  primarily on the east coast.  The
Mortgage  Company  originates  loans and sells them to investors  generating fee
income for the Company.  The Bank will also purchase  specific  adjustable  rate
loans  and  higher  yielding  loans  from the  Mortgage  Company  to fill in its
portfolio with loan products the Bank  requires.  The Bank will also use certain
of the  Mortgage  Company  locations  to  offer  its  commercial  loan  products
including loans to small businesses. This will alleviate some of the reliance of
the Bank's  business on the economy of Staten  Island and to a larger extent New
York City. In 1990, the Bank acquired several branch offices of a former savings
and loan association  from the Resolution Trust  Corporation and in August 1995,
the Bank acquired,  Gateway State Bank, a local commercial bank headquartered on
Staten Island.

                                       1
<PAGE>
         The Bank is subject to examination and comprehensive  regulation by the
Office of Thrift Supervision  ("OTS"),  which is the Bank's chartering authority
and primary federal regulator. The Bank is also regulated by the Federal Deposit
Insurance  Corporation  ("FDIC"),  the  administrator of the Bank Insurance Fund
("BIF"). The Bank is also subject to certain reserve requirements established by
the Board of Governors of the Federal  Reserve System ("FRB") and is a member of
the Federal Home Loan Bank ("FHLB") of New York, which is one of the 12 regional
banks comprising the FHLB System.

         Staten Island Savings'  executive office is located at 15 Beach Street,
Staten Island, New York 10304, and its telephone number is (718) 447-7900.

         This Form 10-K and the Company's Annual Report to Stockholders  contain
certain forward-looking  statements and information relating to the Company that
are  based on the  beliefs  of  management  as well as  assumptions  made by and
information  currently available to management.  In addition, in those and other
portions of this document and the Company's Annual Report to  Stockholders,  the
words  "anticipate,  "believe,"  "estimate,"  "expect,"  "intend,"  "should" and
similar  expressions,  or the negative thereof, as they relate to the Company or
the Company's management,  are intended to identify forward-looking  statements.
Such statements  reflect the current views of the Company with respect to future
looking events and are subject to certain risks,  uncertainties and assumptions.
Should  one or more of  these  risks  or  uncertainties  materialize  or  should
underlying assumptions prove incorrect,  actual results may vary materially from
those  described  herein  as  anticipated,   believed,  estimated,  expected  or
intended.   The  Company  does  not  intend  to  update  these   forward-looking
statements.

Market Area and Competition

         The Bank  faces  significant  competition  both in making  loans and in
attracting  deposits.  There are a significant number of financial  institutions
located  within the Bank's  market area,  many of which have  greater  financial
resources than the Bank. The Bank's competition for loans comes principally from
commercial banks, other savings banks, savings associations and mortgage-banking
companies. The Bank's most direct competition for deposits has historically come
from savings  associations,  other savings  banks,  commercial  banks and credit
unions. The Bank faces additional competition for deposits from short-term money
market funds and other corporate and government  securities funds and from other
non-depository  financial  institutions  such as brokerage  firms and  insurance
companies.  Competition for banking  services may increase as a result of, among
other things,  the  elimination  of  restrictions  on  interstate  operations of
financial institutions.

Lending Activities

         General.  At December 31, 1998,  Staten Island Savings' total net loans
amounted to $1.5  billion or 38.6% of the  Company's  total assets at such date.
The Bank's primary  emphasis has been,  and continues to be, the  origination of
loans secured by first liens on single-family  residences (which includes one to
four family  residences)  located  primarily  in Staten  Island and, to a lesser
extent, Brooklyn and other areas in New York. At December 31, 1998, $1.2 billion
or 81.5% of the Bank's net loan  portfolio  were  secured by one to four  family
residences  of which  $797.7  million  were  located  on  Staten  Island  and an
additional $316.8 million located in other areas of New York State.

         In addition to loans secured by single-family  residential real estate,
the Bank's  mortgage loan portfolio  includes  loans secured by commercial  real
estate,  which  amounted to $137.7  million or 9.5% of the net loan portfolio at
December 31, 1998,  construction and land loans,  which totaled $42.4 million or
2.9% at December 31, 1998, home equity loans,  which totaled $6.1 million or .4%
at  December  31,  1998,  and loans  secured by  multi-family  (over four units)
residential properties,  which amounted to $33.3 million or 2.3% of the net loan
portfolio  at  December  31,  1998.  In addition  to  mortgage  loans,  the Bank
originates various other loans including  commercial business loans and consumer
loans.  At December  31, 1998,  the Bank's  total other loans  amounted to $67.6
million or 4.6% of the net loan portfolio.

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

                                       2
<PAGE>
         Loan  Portfolio  Composition.   The  following  table  sets  forth  the
composition of the Bank's loans at the dates indicated.
<TABLE>
<CAPTION>
                                                                                   At December 31,
                                         1998                           1997                             1996         
                                         ----                           ----                             ----         
                                            Percent of                     Percent of                      Percent of 
                                Amount          Total        Amount           Total           Amount           Total  
                                ------          -----        ------           -----           ------           -----  
                                                                                     (Dollars in Thousands)
<S>                         <C>                <C>       <C>              <C>            <C>                <C>     <C
Mortgage loans:
One to four family            $ 1,187,212        81.48%    $  863,694       79.76%         $ 743,089          76.76%  
residential................                                                                                  
  Multi-family residential.        33,328          2.29        28,218        2.61             26,444           2.73   
  Commercial real estate...       137,720          9.45       120,084       11.09            115,593          11.94   
  Construction and land....        42,420          2.91        40,479        3.74             28,779           2.97   
  Home equity..............         6,121          0.42         6,538        0.60              7,464           0.76   
                                ---------        ------     ---------       ------           -------         ------   
    Total mortgage loans...     1,406,801         96.55     1,059,010        97.80           921,369          95.18   
Other loans:
  Student loans............           940          0.06         4,033        0.37              4,522           0.47   
  Automobile leases (1)....             -          0.00             -          -              28,249           2.92   
  Passbook loans...........         5,989          0.41         6,929        0.00              5,933           0.61   
  Commercial business loans        36,592          2.51        19,559        1.84             14,995           1.55   
  Other....................        24,070          1.65        13,212        1.22              9,712           1.00   
                                ---------        ------     ---------       ------           -------         ------   
    Total other loans......        67,591          4.63        43,733         4.04            63,411           6.55   
                                ---------        ------     ---------       ------           -------         ------   
    Total loans receivable.     1,474,392        101.18     1,102,743       101.84           984,780         101.73   
Less:
  Premium (discount) on             1,194          0.08         (729)       (0.07)           (3,475)         (0.36)   
loans purchased..                                                                                                     
  Allowance for loan losses      (16,617)        (1.14)      (15,709)       (1.45)           (9,977)         (1.03)   
                                                                                                                      
  Deferred loan fees.......       (1,910)        (0.12)       (3,387)       (0.32)           (3,313)       (0.34)     
                                ---------        ------     ---------       ------           -------         ------   
                                                                                                                      
Loans receivable, net......   $ 1,457,059       100.00%    $1,082,918       100.00%       $ 968,015         100.00%  
                              ===========       ======     ==========       ======        =========                  
                                                                                                      
<PAGE>
<CAPTION>
                                                 1995
                                                 ----
                                             Percent of              Percent
                                  Amount        Total      Amount       of
                                  ------        -----      ------       --
                                          (Dollars in Thousands)
<S>                         <C>               <C>     <C>          <C>   
Mortgage loans:
One to four family           $ 611,964         76.39%  $ 506,397    83.16%
residential................ 
  Multi-family residential.     25,977          3.24      24,347    4.00
  Commercial real estate...     99,000         12.36      30,037    4.93
  Construction and land....     18,123          2.26       3,003    0.49
  Home equity..............      8,193          1.02       9,858    1.59
                               -------        ------     -------  ------
    Total mortgage loans...    763,257         95.27     573,442   94.17
Other loans:
  Student loans............      6,072          0.76      23,398    3.84
  Automobile leases (1)....     18,705          2.33       8,344    1.37
  Passbook loans...........      5,683          0.71       4,673    0.77
  Commercial business loans     15,257          1.90         200    0.03
  Other....................      9,079          1.13       5,972    0.98
                               -------        ------     -------  ------
    Total other loans......     54,796          6.84      42,587    6.99
                               -------        ------     -------  ------
    Total loans receivable.    818,053        102.11     616,029  101.16
Less:
  Premium (discount) on                       (0.36)               (0.19)
loans purchased..              (2,911)                   (1,134)
  Allowance for loan losses   (10,704)        (1.34)               (0.51)
                                                         (3,124)
  Deferred loan fees.......    (3,301)        (0.41)     (2,817)
                               -------        ------     -------  ------
                                                                   (0.46)
Loans receivable, net...... $ 801,137         100.00% $ 608,954  100.00%
                            =========         ======  =========  ====== 
</TABLE>

(1) Consists of loans secured by assignments of automobile lease payments.


                                       3
<PAGE>
<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                                      1998              1997              1996
                                                   ----------      ----------          --------
                                                               (Dollars In Thousands)
<S>                                               <C>               <C>                <C>     
Total loans held at beginning
  of period................................       $ 1,102,743       $ 984,780          $818,053
Originations of loans:
  Mortgage loans:
    One to four family residential.........           508,124         194,937           181,200
    Multi-family residential...............             9,988           4,603             2,087
    Commercial real estate.................            41,294          22,171            35,677
    Construction and land..................            38,514          27,936            32,080
    Home equity............................             2,686           2,744             1,224
  Other loans:
    Student loans..........................             2,205           3,202             3,469
    Passbook loans.........................             5,666           8,614             5,995
    Commercial business loans..............            23,180           9,415             7,806
    Other consumer loans (1)...............            12,197           7,666             3,131
                                                  -----------       ---------          --------
      Total  originations..................           643,854         289,512           287,950
Purchases of loans:
  Mortgage loans:
    One to four family residential (2).....            59,412              --                --
    Multi-family residential...............                --              --                --
    Commercial real estate.................                --              --                --
    Construction and land..................                --              --                --
    Home equity............................                --              --                --
  Other loans:                                                             --
    Student loans..........................                --              --                --
    Passbook loans.........................                --              --                --
    Commercial business loans..............                --              --                --
    Other consumer loans...................             6,855              --                --
                                                  -----------       ---------          --------
      Total purchases .....................            66,267              --                --
                                                  -----------       ---------          --------
        Total originations and purchases...           710,121         289,512           287,950
                                                  -----------       ---------          --------
<PAGE>
<CAPTION>
                                                            Year Ended December 31,
                                                      1998              1997              1996
                                                   ----------      ----------          --------
                                                               (Dollars In Thousands)
<S>                                               <C>               <C>                <C>     
Loans sold:
  Mortgage loans:
    One to four family residential(3)......            57,577           1,104                --
    Multi-family residential...............                --              --                --
    Commercial real estate.................                --              --                --
    Construction and land..................                --              --                --
    Home equity............................                --              --                --
  Other loans:
    Student loans..........................                --           3,185             3,340
     Passbook loans........................                                --                --
    Commercial business loans..............                --              --                --
    Other consumer loans...................                --              --                --
                                                  -----------       ---------          --------
      Total sold...........................            57,577           4,289             3,340
Transfers to real estate owned..........                1,166           1,149             1,629
Charge-offs................................             2,119           1,022             2,373
Repayments.................................           201,091         165,089           113,881
                                                  -----------       ---------          --------
Net activity in loans......................           448,091         117,963           166,727
                                                  -----------       ---------          --------
Gross loans held at end of period..........        $1,550,834      $1,102,743          $984,780
                                                   ==========      ==========          ========
</TABLE>


(1) Includes amounts drawn on overdraft loans.

(2) Represents loans purchased in the Ivy Mortgage Corp. acquisition.

(3) Loan sales by Ivy Mortgage Corp.

                                       4
<PAGE>
         The lending  activities of Staten Island Savings are subject to written
underwriting standards and loan origination procedures established by management
and approved by the Bank's  Board of  Directors.  Applications  for mortgage and
other loans are taken at all of the Bank's  branch  offices.  In  addition,  the
Bank's business development officers,  loan officers and branch managers call on
individuals in the Bank's market area in order to solicit new loan  originations
as well as other  banking  relationships.  The Bank also  relies on  independent
mortgage brokers,  a group of whom are authorized to accept and process mortgage
loan  applications  on the Bank's  behalf,  and a non-employee  commercial  loan
solicitor in order to obtain new loan  applications.  All loan  applications are
forwarded to the Bank's loan  origination  center for underwriting and approval.
The Bank's  employees at the loan  origination  center  supervise the process of
obtaining  credit reports,  appraisals and other  documentation  involved with a
loan. The Bank requires that a property appraisal be obtained in connection with
all new mortgage  loans.  Property  appraisals  are performed by an  independent
appraiser  from a list approved by the Bank's Board of Directors.  Staten Island
Savings  requires that title insurance and hazard insurance be maintained on all
collateral  properties (except for home equity loans and home secured loans) and
that flood insurance be maintained if the property is within a designated  flood
plain.

         Certain  officers  of the Bank  have  been  authorized  by the Board of
Directors to approve  loans up to certain  designated  amounts.  The Loan Review
Committee  of the Board of  Directors  must  approve  all loans where new monies
advanced would increase  borrowers or guarantors total  outstanding  credit with
the Bank above $1.5 million but not exceeding  $5.0 million.  Loans in excess of
$5.0 million must be approved by the full Board of Directors of the Bank.

         A  federal  savings  association  generally  may not make  loans to one
borrower and related  entities in an amount which exceeds 15% of its  unimpaired
capital and surplus,  although  loans in an amount equal to an additional 10% of
unimpaired  capital and surplus may be made to a borrower if the loans are fully
secured by readily marketable securities.  However, the Bank generally maintains
a more restrictive limit of loans to any one borrower and related entities of 5%
of the Bank's unimpaired  capital and surplus,  or $21.1 million at December 31,
1998.

         One to  Four  Family  Residential.  Substantially  all  of  the  Bank's
single-family   residential   mortgage  loans  consist  of  conventional  loans.
Conventional  loans are loans that are neither  insured by the  Federal  Housing
Administration  ("FHA") or partially  guaranteed  by the  Department of Veterans
Affairs  ("VA").  The vast  majority  of the  Bank's  single-family  residential
mortgage  loans are  secured by  properties  located in Staten  Island and, to a
lesser extent, Brooklyn and other areas of New York. Historically,  the Bank has
retained  substantially  all mortgage  loans which it has originated and has not
engaged in sales of residential  mortgage  loans.  As of December 31, 1998, $1.2
billion,   or  81.5%,  of  the  Bank's  net  loans  consisted  of  single-family
residential  mortgage loans.  The Bank originated  $508.1 million of one to four
family  residential  mortgage  loans during the year ended December 31, 1998 and
$194.9  million  and  $181.2  million in 1997 and 1996,  respectively.  The Bank
anticipates that a significant  portion of its future new loan originations will
continue to be single-family residential mortgage loans.

                                       5
<PAGE>
         The Bank's  residential  mortgage  loans  have  either  fixed  rates of
interest or  interest  rates which  adjust  periodically  during the term of the
loan. Fixed-rate loans generally have maturities ranging from 10 to 30 years and
are fully amortizing with monthly or bi-weekly loan payments sufficient to repay
the total  amount of the loan with  interest  by the end of the loan  term.  The
Bank's  fixed-rate  loans generally are originated  under terms,  conditions and
documentation  which  permit  them  to  be  sold  to  U.S.  Government-sponsored
agencies,  such as the Federal Home Loan  Mortgage  Corporation  ("FHLMC"),  and
other  investors in the secondary  market for  mortgages.  At December 31, 1998,
$855.5 million, or 72.1%, of the Bank's single-family residential mortgage loans
were fixed-rate loans. Substantially all of the Bank's single-family residential
mortgage loans contain due-on-sale clauses, which permit the Bank to declare the
unpaid  balance to be due and payable  upon the sale or transfer of any interest
in the property securing the loan. The Bank enforces such due-on-sale clauses.

         The adjustable-rate  single-family  residential  mortgage ("ARM") loans
currently  offered by the Bank have interest rates which adjust every one, three
or five years in  accordance  with a  designated  index such as one-,  three- or
five-year U.S.  Treasury  obligations  adjusted to a constant  maturity ("CMT"),
plus a stipulated margin. In addition,  the Bank offers an ARM with a fixed-rate
for the first ten years which adjusts on an annual basis thereafter. At December
31, 1998, the Bank's five-year and ten-year ARM loans amounted to $202.4 million
and  $93.0  million,  respectively.  The  Bank's  adjustable-rate  single-family
residential real estate loans generally have a cap of 2% thru 5% on any increase
or decrease in the interest rate at any adjustment date, and include a specified
cap on the maximum  interest rate over the life of the loan, which cap generally
is 5% or 6% above  the  initial  rate.  From time to time,  based on  prevailing
market  conditions,  the Bank may offer ARM loans with  initial  rates which are
below the fully indexed rate. Such loans generally are underwritten based on the
fully indexed rate.  The Bank's  adjustable-rate  loans require that any payment
adjustment  resulting  from a change in the interest rate of an  adjustable-rate
loan be sufficient to result in full  amortization of the loan by the end of the
loan term and,  thus, do not permit any of the increased  payment to be added to
the  principal  amount of the  loan,  or  so-called  negative  amortization.  At
December  31,  1998,  $331.7  million  or  27.9%  of  the  Bank's  single-family
residential mortgage loans were adjustable-rate loans.

         Adjustable-rate  loans  decrease the risks  associated  with changes in
interest  rates but involve  other risks,  primarily  because as interest  rates
increase,  the loan payment by the borrower increases to the extent permitted by
the terms of the loan, thereby  increasing the potential for default.  Moreover,
as with fixed-rate  loans, as interest rates increase,  the marketability of the
underlying  collateral  property  may be adversely  affected by higher  interest
rates. The Bank believes that these risks, which have not had a material adverse
effect on the Bank to date,  generally,  are less than the risks associated with
holding fixed-rate loans in an increasing interest rate environment.

         The volume and types of ARMs  originated by the Bank have been affected
by such market  factors as the level of interest  rates,  competition,  consumer
preferences  and   availability   of  funds.  In  recent  periods,   demand  for
single-family  ARMs has been  relatively weak due to the prevailing low interest
rate  environment  and consumer  preference for fixed-rate  loans.  Accordingly,
although the Bank will  continue to offer  single-family  ARMs,  there can be no
assurance that in the future the

                                       6
<PAGE>
Bank will be able to  originate a  sufficient  volume of  single-family  ARMs to
increase or maintain the proportion that these loans bear to total loans.

         The Bank's  single-family  residential  mortgage loans generally do not
exceed $700,000.  In addition,  the maximum  loan-to-value ("LTV") ratio for the
Bank's  single-family  residential  mortgage  loans  generally  is  95%  of  the
appraised  value of the  security  property,  provided,  however,  that  private
mortgage  insurance  is  obtained on the  portion of the  principal  amount that
exceeds 80% of the appraised value.

         At December  31, 1998,  the Bank's home equity  loans  amounted to $6.1
million  or 0.4% of the Bank's net loans.  The Bank  offers  floating  rate home
equity  lines of credit.  Home  equity  loans,  like  single-family  residential
mortgage  loans,  are  secured  by  the  underlying  equity  in  the  borrower's
residence.  However,  the Bank generally  obtains a second mortgage  position to
secure its home equity loans. The Bank's home equity loans generally require LTV
ratios of 80% or less after taking into consideration any first mortgage loan.

         Commercial  Real Estate Loans and  Multi-Family  Residential  Loans. At
December  31, 1998,  the Bank's  commercial  real estate loans and  multi-family
residential  mortgage  loans  amounted  to $137.7  million  and  $33.3  million,
respectively, or 9.5% and 2.3%, respectively, of the Bank's net loan portfolio.

         The Bank's  commercial real estate loans generally are secured by small
office  buildings,  retail and industrial use buildings,  strip shopping centers
and other  commercial  uses  located  in the  Bank's  market  area.  The  Bank's
commercial  real estate loans seldom exceed $1.0 million and, as of December 31,
1998, the average size of the Bank's  commercial real estate loans was $325,000.
The Bank  originated  $41.3 million of  commercial  real estate loans during the
year ended  December  31,  1998  compared to $22.2  million  and $35.7  million,
respectively, of commercial real estate loan originations in 1997 and 1996.

         The Bank's multi-family  residential real estate loans are concentrated
in Brooklyn and, to a lesser extent,  Staten Island.  The Bank originated  $10.0
million of  multi-family  residential  real estate  loans  during the year ended
December 31, 1998  compared to $4.6 million and $2.1 million,  respectively,  of
originations  in 1997 and 1996.  The Bank  generally  has not been a substantial
originator  of  multi-family  residential  real estate loans due to, among other
factors,  the  relatively  limited  amount of apartment  and other  multi-family
properties in Staten Island.

         The Bank's  commercial real estate and multi-family  residential  loans
generally  are three or  five-year  adjustable-rate  loans  indexed to  three-or
five-year U.S. Treasury obligations adjusted to a CMT, plus a margin. Generally,
fees of between 50 basis  points and 1.50% of the  principal  loan  balance  are
charged to the borrower  upon closing.  The Bank  generally  charges  prepayment
penalties on commercial real estate and multi-family residential mortgage loans.
Although terms for multi-family residential and commercial real estate loans may
vary, the Bank's underwriting  standards generally provide for terms of up to 25
years with amortization of principal over the term of the loan and LTV ratios of
not more than 75%. Generally, the Bank obtains personal guarantees

                                       7
<PAGE>
of the  principals as  additional  security for any  commercial  real estate and
multi-family residential loans.

         The Bank  evaluates  various  aspects of  commercial  and  multi-family
residential  real estate loan  transactions in an effort to mitigate risk to the
extent  possible.  In underwriting  these loans,  consideration  is given to the
stability of the property's  cash flow history,  future  operating  projections,
current and projected occupancy,  position in the market,  location and physical
condition.  The Bank has also generally imposed a debt coverage ratio (the ratio
of net cash from  operations  before payment of debt service to debt service) of
not less than 125%. The underwriting  analysis also includes credit checks and a
review of the financial condition of the borrower and guarantor,  if applicable.
An appraisal report is prepared by an independent appraiser  commissioned by the
Bank to  substantiate  property  values  for every  commercial  real  estate and
multi-family  loan  transaction.  All appraisal reports are reviewed by the Bank
prior to the closing of the loan.

         Commercial  real estate and  multi-family  residential  lending entails
substantially different risks when compared to single-family residential lending
because such loans often  involve  large loan  balances to single  borrowers and
because the  payment  experience  on such loans is  typically  dependent  on the
successful operation of the project or the borrower's business.  These risks can
also be  significantly  affected  by supply and demand  conditions  in the local
market for apartments,  offices, warehouses, or other commercial space. The Bank
attempts  to minimize  its risk  exposure  by  limiting  such  lending to proven
businesses,  only  considering  properties with existing  operating  performance
which  can  be  analyzed,  requiring  conservative  debt  coverage  ratios,  and
periodically monitoring the operation and physical condition of the collateral.

         As of December 31, 1998, $6.5 million or 4.7% of the Bank's  commercial
real estate  loans and  $131,000 or 0.4% of its  multi-family  residential  real
estate loans were considered non-performing loans.

         Construction and Land Loans. The Bank originates primarily  residential
construction  loans to local  (primarily  Staten  Island) real estate  builders,
generally  with  whom it has an  established  relationship.  To a  significantly
lesser extent, the Bank originates such loans to individuals who have a contract
with a builder for the construction of their residence.  The Bank's construction
loans are secured by property  located  primarily in the Bank's  market area. At
December 31, 1998, construction and land loans amounted to $42.4 million or 2.9%
of  the  Bank's  net  loan  portfolio  of  which  $32.0  million   consisted  of
construction  loans and $10.4 million  consisted of land loans. In addition,  at
such date,  the Bank had $14.1  million of  undisbursed  funds for  construction
loans in process.  The Bank originated  $38.5 million of  construction  and land
loans during the year ended  December 31,  1998,  compared to $27.9  million and
$32.1 million of construction loans in 1997 and 1996, respectively.

         The Bank's construction loans generally have floating rates of interest
for a term of up to two years. Construction loans to builders are typically made
with a maximum  loan to value  ratio of 75%.  The Bank's  construction  loans to
local  builders  are made on either a pre-sold or  speculative  (unsold)  basis.
However, the Bank generally limits the number of unsold homes under construction

                                       8
<PAGE>
to its builders, with the amount dependent on the reputation of the builder, the
present outstanding obligations of the builder, the location of the property and
prior  sales of homes in the  development  and the  surrounding  area.  The Bank
generally limits the number of construction  loans for speculative  units to two
to four model homes per project.

         Prior to making a  commitment  to fund a  construction  loan,  the Bank
requires an appraisal of the property by independent  appraiser  approved by the
Board of  Directors.  The Bank's staff also reviews and inspects each project at
the commencement of construction and prior to every disbursement of funds during
the term of the construction loan. Loan proceeds are disbursed after inspections
of the project based on a percentage of  completion.  The Bank requires  monthly
interest payments during the construction term.

         The Bank originates  land loans to local  developers for the purpose of
holding or developing  the land (i.e.,  roads,  sewer and water) for sale.  Such
loans are secured by a lien on the property, are generally limited to 60% of the
appraised  value of the secured  property and are typically made for a period of
up to two years with a floating  interest rate based on the prime rate. The Bank
requires  monthly  interest  payments  during  the  term of the land  loan.  The
principal  of the loan is  reduced  as lots are  sold and  released.  All of the
Bank's  land loans are  secured by  property  located  in its  market  area.  In
addition,  the Bank generally obtains personal guarantees from its borrowers and
originates such loans to developers with whom it has established relationships.

         Construction  and land  lending  generally is  considered  to involve a
higher level of risk as compared to permanent single-family residential lending,
due to the concentration of principal in a limited number of loans and borrowers
and the effects of general  economic  conditions  on  developers  and  builders.
Moreover,  a  construction  loan can  involve  additional  risks  because of the
inherent  difficulty in estimating both a property's  value at completion of the
project and the estimated cost (including  interest) of the project.  The nature
of these loans is such that they are  generally  more  difficult to evaluate and
monitor.  In  addition,  speculative  construction  loans to a  builder  are not
pre-sold and thus pose a greater  potential  risk to the Bank than  construction
loans to individuals on their personal residences.

         The Bank has attempted to minimize the foregoing  risks by, among other
things,  limiting the extent of its construction and land lending  generally and
by  limiting  its  construction  and  land  lending  to  primarily   residential
properties. In addition, the Bank has adopted strict underwriting guidelines and
other  requirements  for loans which are believed to involve higher  elements of
credit risk, by limiting the geographic  area in which the Bank will do business
to its existing market and by working with builders with whom it has established
relationships.  It is also the Bank's policy to obtain personal  guarantees from
the principals of its corporate borrowers on its construction and land loans.

         Other Loans. The Bank offers a variety of other or non-mortgage  loans.
Such other loans,  which include  commercial  business  loans,  passbook  loans,
student loans,  overdraft loans,  manufactured home loans and a variety of other
personal  loans,  amounted to $67.6 million or 4.6% of the Bank's loan portfolio
at December 31, 1998.

                                       9
<PAGE>
         At December 31, 1998, the Bank's commercial  business loans amounted to
$36.6 million or 2.5% of the Bank's net loan  portfolio.  The Bank's  commercial
business  loans have a term of up to five years and may have either  fixed-rates
of interest or, to a lesser  extent,  floating rates tied to the prime rate. The
Bank's commercial  business loans are made to small- to medium-sized  businesses
within  the Bank's  market  area.  A  substantial  portion  of the Bank's  small
business loans are unsecured with the remainder  generally  secured by perfected
security  interests in accounts  receivable  and  inventory  or other  corporate
assets.  In addition,  the Bank generally  obtains personal  guarantees from the
principals of the borrower with respect to all  commercial  business  loans.  In
addition,  the Bank may extend loans for a commercial business purpose which are
secured by a mortgage on the proprietor's home or the business property. In such
cases, the loan, while  underwritten to commercial  business loan standards,  is
reported as a single-family or commercial real estate mortgage loan, as the case
may be.  Commercial  business  loans  generally  are deemed to involve a greater
degree of risk than single-family residential mortgage loans.

         The Bank's commercial  business loans include  discounted loans,  which
amounted to $8.2 million or 0.6% of the Bank's  loans at December 31, 1998.  The
Bank's  discounted  loans,  which are made  primarily to local  businesses,  are
designed  to provide an interim  source of  financing  and require no payment of
principal  or  interest  until the due date of the loan,  which may be up to one
year but  generally  is 60 or 90 days  from the date of  origination.  While the
borrower is contractually  obligated to repay the entire face amount of the loan
at  maturity,  the Bank  advances  only a portion  of the face  amount  with the
difference   constituting  the  interest  component.  In  addition  to  personal
guarantees, discounted loans may also be secured by perfected security interests
in receivables.  However,  due to the lack of an  amortization  schedule and, in
certain cases,  the absence of perfected  security  interests,  discounted loans
generally  may be deemed to  involve a greater  risk of loss than  single-family
residential mortgage loans.

         At December 31, 1998,  included in total other loans as other loans was
$6.8 million of loans secured by manufactured  housing. This represents 0.46% of
the Bank's net loan portfolio. The Bank currently purchases these loans, after a
review of the loan  documentation  and  underwriting  which is  prepared  by the
company  originating  the  loan.  The  majority  of the  loans  are  secured  by
manufactured housing and are located in the Northeastern section of the country.
The Bank  services  the loan and is assisted by the  originating  company in the
collection process.

         At December 31, 1998, the Bank had $1.0 million of student loans in its
portfolio. The Bank has been and continues to be an active originator of student
loans.  Substantially,  all of these loans are originated  under the auspices of
the New York State Higher Education Services Corporation ("NYSHESC").  Under the
terms of these loans, no repayment is due until the student's  graduation,  with
98% of the  principal  guaranteed  by the NYSHESC.  The terms and rates of these
loans are established by the NYSHESC.  Presently, the Bank's general practice is
to sell its student loans into the secondary market as the loans are originated.

         The  balance  of the Bank's  other  loans  consist of loans  secured by
passbook  accounts,  loans on overdraft  accounts,  home  improvement  loans and
various other personal loans.

                                       10
<PAGE>
         Loans Held For Sale. At December 31, 1998 the Bank had $77.9 million of
loans held for sale.  Such loans are originated by the Mortgage  Company through
its network of retail loan  origination  offices.  The loans are underwritten by
the Mortgage Company to meet the standards of its investors.

         The Bank has  provided the  Mortgage  Company with a warehouse  line of
credit to fund the loans.  The  majority of the loans are secured by one to four
family residences.  The Mortgage Company also has a line of credit with the Bank
for its operating cash needs. Both borrowing  arrangements have similar terms to
other  commercial  borrowers with similar loan  products.  Revenues and expenses
generated are eliminated on the consolidated financial statements.

         A majority  of the loans are sold  within a 45 day  period to  approved
buyers.  Revenues  and costs in  originating  and selling the loan are  deferred
until the loan is sold and the transaction is completed. Revenues generated from
the sale are recorded as other income in the  Company's  consolidated  financial
statements.

         Loan  Origination  and Loan Fees.  In addition  to  interest  earned on
loans, the Bank receives loan origination fees or "points" for many of the loans
it  originates.  Loan points are a  percentage  of the  principal  amount of the
mortgage loan and are charged to the borrower in connection with the origination
of the loan.

         In  accordance  with SFAS No. 91, which  addresses the  accounting  for
non-refundable  fees and costs  associated with  originating or acquiring loans,
the Bank's loan  origination  fees and certain  related direct loan  origination
costs are offset,  and the  resulting  net amount is deferred  and  amortized as
interest  income over the contractual  life,  adjusted for  prepayments,  of the
related loans as an adjustment to the yield of such loans. At December 31, 1998,
the Bank had $1.9 million of such deferred loan fees and costs, net.

Asset Quality

         General.  As a part of the Bank's efforts to improve its asset quality,
it has developed and  implemented  an asset  classification  system.  All of the
Bank's assets are subject to review under this classification  system. Loans are
periodically  reviewed  and the  classifications  are  reviewed  by the Board of
Directors on at least a quarterly  basis. In addition,  the Bank has retained an
independent third party consultant to review the Bank's  classifications,  among
other things,  on a periodic  basis.  The Bank has also added staff and enhanced
the procedures of the loan administration area in the collection and loan review
area.

         When a borrower  fails to make a required  payment on a loan,  the Bank
attempts to cure the deficiency by contacting the borrower and seeking  payment.
Contacts  are  generally  made 16 days  after a payment is due.  In most  cases,
deficiencies are cured promptly.  If a delinquency  continues,  late charges are
assessed  and  additional  efforts are made to collect the loan.  While the Bank
generally  prefers to work with  borrowers  to resolve such  problems,  when the
account becomes 90 days  delinquent,  the Bank  institutes  foreclosure or other
proceedings, as necessary, to minimize any potential loss.

                                       11
<PAGE>
         Loans  are  placed  on  nonaccrual  status  when,  in the  judgment  of
management,  the  probability of collection of interest is deemed to be doubtful
and the value of the  collateral  is not  sufficient  to satisfy  all  interest,
principal and potential  costs due on the loan.  Management  reviews  individual
loans to determine their accrual status when they approach 90 days past due. The
Bank does not accrue  interest on unsecured  loans that are 90 days or more past
due.  When a loan is placed  on  nonaccrual  status  previously  accrued  unpaid
interest is deducted from interest income.

         Real  estate  acquired  by the Bank as a result  of  foreclosure  or by
deed-in-lieu  of  foreclosure  is  classified  as real estate  owned until sold.
Pursuant to Statement of Position ("SOP") 92-3 issued by the American  Institute
of Certified Public Accountants ("AICPA") in April 1992, which provides guidance
on  determining  the balance  sheet  treatment  of  foreclosed  assets in annual
financial  statements for periods ending on or after December 15, 1992, there is
a  rebuttable  presumption  that  foreclosed  assets  are held for sale and such
assets are  recommended to be carried at the lower of fair value minus estimated
costs to sell the property,  or cost  (generally  the balance of the loan on the
property at the date of acquisition).  After the date of acquisition,  all costs
incurred in  maintaining  the property  are expensed and costs  incurred for the
improvement or development of such property are  capitalized up to the extent of
their net  realizable  value.  The Bank's  accounting  for its real estate owned
complies with the guidance set forth in SOP 92-3.

         Delinquent Loans. The following table sets forth information concerning
delinquent  mortgage  loans at December  31,  1998,  in dollar  amounts and as a
percentage of each category of the Bank's loan portfolio.  The amounts presented
represent the total outstanding  principal balances of the related loans, rather
than the actual payment amounts which are past due.
<TABLE>
<CAPTION>
                                                                                  December 31, 1998
                                                                                  -----------------
                                                            30-59 Days               60-89 Days               90 Days or More
                                                   -------------------------   ------------------------    ---------------------
                                                                 Percent of               Percent of                 Percent of
                                                   Amount      Loan Category   Amount     Loan Category    Amount  Loan Category
                                                   ------      -------------   ------     -------------    ------  -------------
                                                                                (Dollars in Thousands)
<S>                                               <C>              <C>        <C>             <C>         <C>            <C>  
Mortgage loans:                                                                                                         
  Residential:                                                                                                          
    Single-family ..............................  $   950          0.08%      $ 7,814         0.62%       $ 2,350        0.20%
    Multi-family ...............................      145          0.44           168         0.50           --          0.00%
  Commercial real estate .......................      334          0.24           727         0.53          1,495        1.09%
  Construction and land ........................       79          0.19         1,168         2.75          3,028        7.14%
  Home equity ..................................       12          2.58           210         3.43           --          0.00%
                                                  -------          ----       -------         ----        -------        ---- 
    Total ......................................  $ 1,520          0.54%      $10,087         3.43%       $ 6,873        0.49%
                                                                                                                        
Other loans:                                                                                                            
  Commercial business loans ....................    2,569          7.02%         1,02         4.10%            50        0.14%
  Other loans ..................................      860          2.77%          665          .15%           499        1.61%
                                                  -------          ----       -------         ----        -------        ---- 
                  Total other loans ............    3,429          5.07%        2,167         3.21%           549        0.81%
                                                  -------          ----       -------         ----        -------        ---- 
                      Total loans ..............  $ 4,949          0.34%      $12,254         0.83%       $ 7,422        0.50%
                                                  =======          ====       =======         ====        =======        ==== 
</TABLE>

                                       12
<PAGE>
         Non-Performing  Assets. The following table sets forth information with
respect to non-performing  assets identified by the Bank,  including  nonaccrual
loans and other real estate owned, and non-performing investments in real estate
at the dates indicated.
<TABLE>
<CAPTION>
                                                                           At December 31,
                                                                           ---------------
                                               1998            1997            1996            1995            1994
                                               ----            ----            ----            ----            ----
                                                                                     (Dollars in Thousands)
<S>                                        <C>              <C>                <C>         <C>             <C>     
Nonaccrual loans:
    Mortgage loans:
        Single-family residential...         $7,067           $9,395            $10,417    $11,159(1)        $6,692
        Multi-family residential....            131              319                322         98               86
        Commercial real estate......          6,534            8,436             11,102     11,653              560
        Construction and land.......          1,761            1,131                 --        379              240
        Home equity.................            212              545                644        124              --
    Other loans:
        Automobile leases...........             --               --                 15         18              --
        Commercial business loans...            346              835                 81         49              --
        Discounted loans............                                                 25        126              --
        Other loans.................            181              570                144        307               61
                                           --------         --------           --------    --------        --------
            Total nonaccruing loans.         16,232           21,231             22,750      23,913           7,639
                                           --------         --------           --------    --------        --------
        Total non-performing loans...        16,232           21,316             22,751      24,215           8,054
                                           --------         --------           --------    --------        --------
    Other real estate owned, net.....           849             618               1,103         627             373
                                           --------         --------           --------    --------        --------
        Total non-performing assets..      $ 17,081         $ 21,934           $ 23,854    $ 24,842        $  8,427
                                           ========         ========           ========    ========        ========

Non-performing assets to total
  loans.............................           1.10%           1.98%             2.42%        3.04%            1.37%
Non-performing assets to total
  assets............................           0.45%           0.82%             1.34%        1.44%            0.61%
Non-performing loans to total
  loans.............................           1.05%           1.93%             2.31%        2.96%            1.31%
Non-performing loans to total
  assets............................           0.43%           0.80%             1.28%        1.40%            0.59%

</TABLE>

(1) The acquisition of Gateway occurred in August 1995.
<PAGE>
         Non-performing  assets at December 31, 1998 totaled  $17.1 million down
from $21.9  million at December 31, 1997 and $23.9 million at December 31, 1996.
The primary reason for the increase in non-performing assets in 1995 compared to
earlier periods was the acquisition of a local  commercial  bank. While the Bank
has continued to originate  commercial real estate loans,  construction and land
loans,  and  commercial  business  loans,  and intends to increase  the level of
originations  of  such  loans,  management  has  implemented  loan  underwriting
policies  and  procedures  which it believes  are more  conservative  than those
previously  used by this  commercial  bank.  Management  has also  enhanced  the
collection and workout procedures and loan  administration  staff with regard to
non-performing assets which is reflected in the decrease achieved in 1998.

         The interest income that would have been recorded during the year ended
December 31, 1998 if all of the Bank's  non-performing  loans at the end of such
period had been  current in  accordance  with their terms during such period was
$794,000.  The actual amount of interest 

                                       13
<PAGE>
recorded  as income (on a cash  basis) on such loans  during  1998  amounted  to
$713,000.

         Classified and Criticized Assets. Federal regulations require that each
insured  institution  classify its assets on a regular  basis.  Furthermore,  in
connection with  examinations of insured  institutions,  federal  examiners have
authority to identify  problem assets and, if appropriate,  classify them. There
are three  classifications  for problem  assets:  "substandard,"  "doubtful" and
"loss."  Substandard  assets  have  one  or  more  defined  weaknesses  and  are
characterized  by the distinct  possibility  that the insured  institution  will
sustain some loss if the  deficiencies  are not corrected.  Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses  make  collection  or  liquidation  in full on the basis of currently
existing  facts,  conditions  and  values  questionable  and  there  is  a  high
probability of loss. An asset classified loss is considered uncollectible and of
such  little  value  that  continuance  as an  asset of the  institution  is not
warranted.   Another  category   designated   "special  mention"  also  must  be
established  and maintained for assets which do not currently  expose an insured
institution  to a  sufficient  degree  of  risk  to  warrant  classification  as
substandard,  doubtful or loss. At December 31, 1998,  the Bank had an aggregate
of $25.8  million of classified  assets of which $14.9  million were  classified
substandard and $10.9 million of assets which were deemed special mention.

         Allowance for Loan Losses.  The allowance for loan losses is maintained
through  provisions  for loan losses which are  determined  by  management.  The
provision for loan losses are determined by management's  ongoing  evaluation of
the risks inherent in the portfolio.  Such evaluation  includes the national and
regional  economics,  the real estate market in the Bank's primary lending area,
chargeoff  and recovery  trends in the  portfolio,  and the  composition  of the
portfolio.  At December 31, 1998, the Bank's  allowance for loan losses amounted
to $16.6 million or 102.4% and 1.1% of the Bank's non-performing loans and total
loans receivable, respectively. The Bank's provision for loan losses amounted to
$1.6  million  for  1998  and  $6.0  million   during  1997  which   included  a
non-recurring amount of $4.0 million.

         Effective  December 21, 1993, and reinforced with a joint press release
November 24, 1998 the OTS, in conjunction  with the Office of the Comptroller of
the Currency,  the FDIC and the Federal Reserve Board, issued a Policy Statement
regarding  an  institution's  allowance  for loan and lease  losses.  The Policy
Statement,  which reflects the position of the issuing  regulatory  agencies and
does  not   necessarily   constitute   GAAP,   includes   guidance  (i)  on  the
responsibilities  of  management  for the  assessment  and  establishment  of an
adequate allowance and (ii) for the agencies' examiners to use in evaluating the
adequacy  of  such  allowance  and  the  policies  utilized  to  determine  such
allowance.  The Policy Statement also sets forth  quantitative  measures for the
allowance with respect to assets  classified  substandard  and doubtful and with
respect  to  the  remaining   portion  of  an   institution's   loan  portfolio.
Specifically,  the  Policy  Statement  sets  forth  the  following  quantitative
measures  which  examiners  may  use  to  determine  the  reasonableness  of  an
allowance: (i) 50% of the portfolio that is classified doubtful; (ii) 15% of the
portfolio  that is  classified  substandard;  and (iii) for the  portions of the
portfolio that have not been  classified  (including  loans  designated  special
mention), estimated credit losses over the upcoming 12 months based on facts and
circumstances  available on the evaluation date. While the Policy Statement sets
forth this quantitative  measure,  such guidance is not intended as a "floor" or
"ceiling." The Bank's policy for  establishing  loan losses is not  inconsistent
with the Policy Statement.

                                       14
<PAGE>
         The following table sets forth the activity in the Bank's allowance for
loan losses during the periods indicated.
<TABLE>
<CAPTION>
                                              Year Ended December 31,
                                  1998       1997       1996        1995      1994
                                 -------    -------    -------    -------    -------
                                              (Dollars in Thousands)
<S>                              <C>        <C>        <C>        <C>        <C>    
Allowance at beginning of
  period .....................   $15,709    $ 9,977    $10,704    $ 3,124    $ 3,180
Provisions ...................     1,594      6,003      1,000      8,026         76
Increase as a result of ......        96       --         --         --         --
acquisition
  Charge-offs:
    Mortgage loans:
      Single-family
        residential ..........       358        501      1,590        606        107
      Multi-family
        residential ..........        31        100       --         --           36
      Commercial real estate .       344        210        376       --         --
    Other loans ..............     1,386        507        729        176        275
                                 -------    -------    -------    -------    -------
      Total charge-offs ......     2,119      1,318      2,695        782        418
  Recoveries:
   Mortgage loans:
     Single-family
       residential ...........       267        533        408        198        166
     Multi-family residential       --         --         --         --           10
     Commercial real estate ..       210        251        413         19       --
     Construction and land ...         3         10       --         --         --
    Other loans ..............       857        253        147        119        110
                                 -------    -------    -------    -------    -------
      Total recoveries .......     1,337      1,047        968        336        286
                                 -------    -------    -------    -------    -------
Allowance at end of period ...   $16,617    $15,709    $ 9,977    $10,704    $ 3,124
                                 =======    =======    =======    =======    =======

Allowance for loan losses to
  total nonperforming loans at
  end of period ..............    102.37%     73.69%     43.85%     44.20%     38.79%
                                 =======    =======    =======    =======    =======

Allowance for loan losses to
total loans at end of period .      1.07%      1.42%      1.02%      1.32%      0.51%
                                 =======    =======    =======    =======    =======
</TABLE>

                                       15
<PAGE>
         The following table sets forth information concerning the allocation of
the Bank's allowance for loan losses by loan category at the dates indicated.
<TABLE>
<CAPTION>
                                                                             At December 31,
                                 1998                      1997                   1996                    1995           
                         ---------------------   ------------------------  ---------------------   --------------------  
                                   Percent of                 Percent of              Percent of             Percent of  
                                    Loan in                    Loan in                  Loan in                Loan in   
                                   Category to               Category to             Category to             Category to 
                         Amount    Total Loans   Amount      Total Loans   Amount    Total Loans   Amount    Total Loans 
                         ------    -----------   ------      -----------   ------    -----------   ------    ----------- 
                                                                         (Dollars in Thousands)
<S>                     <C>           <C>        <C>           <C>        <C>         <C>         <C>          <C>       
Residential ........   $  5,562         84.89%    $ 5,853       82.37%    $ 3,192       77.20%     $ 2,002       77.50%  
Other...............      7,721         11.74       6,696       15.43       5,842       17.98        7,735       17.77   
Other loans.........      3,334          4.40       3,160        4.04         943        6.55          967        6.84   
                        -------       ------     -------       ------      ------      ------      -------      ------   
 Total..............    $16,617       101.02%    $15,709       101.84%     $9,977      101.73%     $10,704      102.11%  
                        =======       ======     =======       ======      ======      ======      =======      ======   
<PAGE>
<CAPTION>
                            At December 31,
                                 1994
                        -----------------------     
                                    Percent of  
                                      Loan in   
                                    Category to 
                        Amount      Total Loans 
                        ------      ----------- 
                        (Dollars in Thousands)
<S>                    <C>            <C>    
Residential ........    $2,100          85.78%
Other...............       --            8.39
Other loans.........     1,024           6.99
                        ------         ------ 
 Total..............    $3,124         101.16%
                        ======         ====== 
</TABLE>


                                       16
<PAGE>
         The Bank will  continue  to monitor and modify its  allowance  for loan
losses  as  conditions  dictate.   While  management  believes  that,  based  on
information  currently  available,  the  Bank's  allowance  for loan  losses  is
sufficient  to cover  losses  inherent in its loan  portfolio  at this time,  no
assurance  can be given that the Bank's level of allowance  for loan losses will
be sufficient  to absorb future loan losses  incurred by the Bank or that future
adjustments  to the  allowance for loan losses will not be necessary if economic
and other conditions differ substantially from the economic and other conditions
used by  management  to determine  the current  level of the  allowance for loan
losses.  In addition,  the OTS, as an integral part of its examination  process,
periodically  reviews  the Bank's  allowance  for loan  losses.  Such agency may
require the Bank to make  additional  provisions for estimated loan losses based
upon judgments different from those of management.

Securities Activities

         General. As of December 31, 1998,  the Company had securities  totaling
$2.0 billion or 53.7% of the Company's total assets at such date. The unrealized
appreciation  on the Company's  securities  available for sale amounted to $15.5
million,  net of income taxes. The securities  investment policy of the Bank and
Company,  which has been  established  by the Board of  Directors,  is designed,
among  other  things,  to  assist  the  Bank in its  asset/liability  management
policies.  The investment policy emphasizes  principal  preservation,  favorable
returns on investments,  maintaining  liquidity  within  designated  guidelines,
minimizing credit risk and maintaining flexibility. Interest and dividend income
from the Company's  securities  portfolio is the largest source of income to the
Company.  The current  securities  investment  policies  permit  investments  in
various types of assets including  obligations of the U.S.  Treasury and federal
agencies,   investment   grade   corporate   obligations,   various   types   of
mortgage-backed and mortgage-related securities,  commercial paper, certificates
of deposit,  equities and federal funds sold to financial  institutions approved
by the Board of Directors.

         The Bank  converted  to a federally  chartered  mutual  savings bank in
August 1997. Prior to that date, the Bank operated as a New York State-chartered
mutual savings bank.  While operating  under its New York Charter,  the Bank was
permitted  to make certain  investments  in equity  securities  and stock mutual
funds. Pursuant to the current law for federally chartered thrifts, the Bank was
required to divest or  transfer  such  securities.  The Bank  transferred  these
securities  with a market value of $60.8 million to the Company during the month
of February 1998. The Company's securities portfolio as of December 31, 1998 was
$171.6 million,  consisting of equity  investments  and certain  corporate bonds
which are not legal investments for a federally chartered thrift.

         The Bank currently does not participate in hedging  programs,  interest
rate  swaps,  or  other  activities  involving  the  use  of  off-balance  sheet
derivative financial instruments. These activities require the prior approval of
the Board of Directors under the Bank's securities investment policy. Similarly,
the Bank has not and does not invest in mortgage derivative securities which are
deemed to be "high risk," or purchase  privately issued securities which are not
rated investment  grade. The Bank tests its securities on at least a semi-annual
basis to ensure that they would not be considered  "high risk"  securities under
Federal banking laws.

                                       17
<PAGE>
         At December 31, 1998, all of the Company's  securities  were classified
as available for sale.  Such  classification  as available for sale provides the
Company  with the  flexibility  to sell  securities  if  deemed  appropriate  in
response  to,  among  other  factors,  changes  in  interest  rates.  Securities
classified as available for sale are carried at fair value. Unrealized gains and
losses on available for sale  securities are  recognized as direct  increases or
decreases in equity,  net of applicable income taxes.  Securities  classified as
trading  account  are carried at market  value with any  increase or decrease in
unrealized  appreciation  or  depreciation  included  in  the  Company's  income
statement. As of December 31, 1998, the Company had no securities that were held
in a trading account. In the year ended December 31, 1998 the Company recognized
a net gain on  security  transactions  of  $524,000  compared  to net  losses on
security  transactions  of $85,000 and $2.7 million for the years ended December
31, 1997 and 1996, respectively.

         The Bank's investment policy provides  management with the authority to
sell securities  provided,  among other things,  any losses on such sales do not
exceed  $500,000,  in which event prior  approval of the Board of  Directors  is
required. Generally, management will enter into such securities sales only if it
believes that it can replace the securities sold with newly purchased securities
that,  due to their higher  yield,  will offset the losses within a twelve month
period. During the fourth quarter of 1996, management and the Board of Directors
reviewed the Bank's entire securities  portfolio and authorized  extensive sales
as part of its securities restructuring efforts. The Bank substantially replaced
the securities sold with securities having a significantly higher (over 75 basis
points)  projected  yield without,  in  management's  view,  sacrificing  credit
quality or liquidity.  The Bank does not anticipate that it will, as a matter of
course,  continue  to  authorize  similar  amounts  of losses in its  securities
activities.

                                       18
<PAGE>
      The  following  table sets  forth the  activity  in the  Bank's  aggregate
securities portfolio during the periods indicated.
<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                             1998           1997           1996
                                         -----------    -----------    -----------
                                                   (Dollars In Thousands)

<S>                                      <C>            <C>            <C>        
Securities at beginning of period ....   $ 1,350,466    $   703,134    $   788,622
Purchases:
  U.S. government and agencies .......        19,819         25,073         29,670
  State and municipals ...............          --             --             --
  Agency mortgage-backed securities ..       351,465        519,430        212,634
  Agency CMOs ........................       199,852        166,015         35,079
  Private CMOs .......................       374,353        165,137         53,258
  Other debt securities ..............       239,128            167           --
  Marketable equity securities .......       119,768         34,483         15,059
                                         -----------    -----------    -----------
    Total purchases ..................     1,304,385        910,305        345,700
Sales:
  U.S. government and agencies .......          --           30,000         71,051
  State and municipals ...............          --             --               70
  Agency mortgage-backed securities ..         2,772         18,183        113,617
  Agency CMOs ........................          --             --           16,332
  Private CMOs .......................          --           24,952           --
  Other debt securities ..............        88,168           --           36,042
  Marketable equity securities .......        18,284         24,822          3,305
                                         -----------    -----------    -----------
    Total sales ......................       109,224         97,957        240,417
Repayments and prepayments:
  U.S. government and agencies .......        49,943         22,025         46,800
  State and municipals ...............          --            3,045           --
  Agency mortgage-backed securities ..       263,362        104,187        102,748
  Agency CMOs ........................       134,220         33,366          4,399
  Private CMOs .......................        72,082         16,866          3,466
  Other debt securities ..............          --            1,000         31,767
  Marketable equity securities .......            60           --             --
                                         -----------    -----------    -----------
  Total repayments and prepayments ...       519,667        180,489        189,180
Accretion of discount and amortization
  of premium .........................        (2,392)          (520)          (692)
Unrealized gains or (losses) on
  available-for-sale securities ......         5,473         16,435           (899)
Realized gains and losses on trading
  assets .............................          --             (442)          --
                                         -----------    -----------    -----------
Securities at end of period ..........   $ 2,029,041    $ 1,350,466    $   703,134
                                         ===========    ===========    ===========
</TABLE>


                                       19
<PAGE>
         Mortgage-Backed and Mortgage-Related  Securities. At December 31, 1998,
the Company's  securities  included $913.0 million, or 24.2% of total assets, of
mortgage  participation  certificates  (which are also known as  mortgage-backed
securities).

         Mortgage-backed securities represent a participation interest in a pool
of single-family or multi-family mortgages.  The principal and interest payments
on  mortgage-backed  securities  are passed from the  mortgage  originators,  as
servicer,   through  intermediaries  (generally  U.S.  Government  agencies  and
government-sponsored  enterprises)  that pool and  repackage  the  participation
interests,  in the form of securities,  to investors such as the Bank. Such U.S.
Government agencies and government  sponsored  enterprises,  which guarantee the
payment of principal and interest to investors, primarily include the FHLMC, the
FNMA and the Government National Mortgage Association ("GNMA").

         The FHLMC is a private  corporation  chartered by the U.S.  Government.
The FHLMC issues  participation  certificates backed principally by conventional
mortgage  loans.  The FHLMC  guarantees  the timely  payment of interest and the
ultimate  return  of  principal  on  participation  certificates.  The FNMA is a
private corporation chartered by the U.S. Congress with a mandate to establish a
secondary  market for mortgage loans.  The FNMA guarantees the timely payment of
principal and interest on FNMA  securities.  FHLMC and FNMA  securities  are not
backed by the full faith and credit of the United States,  but because the FHLMC
and the FNMA are U.S.  Government-sponsored  enterprises,  these  securities are
considered  to be among the highest  quality  investments  with  minimal  credit
risks.  The GNMA is a government  agency  within the  Department  of Housing and
Urban Development which is intended to help finance  government-assisted housing
programs. GNMA securities are backed by FHA-insured and VA-guaranteed loans, and
the timely  payment of principal and interest on GNMA  securities are guaranteed
by the GNMA and  backed  by the full  faith and  credit of the U.S.  Government.
Because the FHLMC, the FNMA and the GNMA were established to provide support for
low- and  middle-income  housing,  there are limits to the maximum size of loans
that qualify for these programs.

         Mortgage-backed  securities  typically are issued with stated principal
amounts,  and the  securities  are backed by pools of mortgages  that have loans
with  interest  rates that are within a range and have varying  maturities.  The
underlying   pool  of  mortgages  can  be  composed  of  either   fixed-rate  or
adjustable-rate  loans. As a result, the risk  characteristics of the underlying
pool of mortgages,  (i.e.,  fixed-rate or adjustable-rate) as well as prepayment
risk, are passed on to the  certificate  holder.  The life of a  mortgage-backed
pass-through security thus approximates the life of the underlying mortgages.

         The Bank's  securities also include $711.0  million,  or 18.8% of total
assets, in collateralized mortgage obligations ("CMOs"), which are also known as
mortgage-related  securities.  CMOs have been  developed in response to investor
concerns  regarding the uncertainty of cash flows associated with the prepayment
option of the  underlying  mortgagor  and are typically  issued by  governmental
agencies,  governmental sponsored enterprises and special purpose entities, such
as trusts,  corporations or partnerships,  established by financial institutions
or  other  similar  institutions.  A CMO  can  be  collateralized  by  loans  or
securities which are insured or guaranteed by the FHLMC,

                                       21
<PAGE>
the FNMA or the GNMA. As of December 31, 1998, $234.6 million of the Bank's CMOs
were insured or guaranteed by the FHLMC,  FNMA or GNMA and the remaining  $476.3
million of the Bank's CMOs were rated "AAA" by national rating  agencies.  While
non-agency  private  issue CMOs are  somewhat  less liquid than CMOs  insured or
guaranteed by the GNMA,  FNMA or FHLMC,  they generally have a higher yield than
agency insured or guaranteed  CMOs. In contrast to pass-through  mortgage-backed
securities, in which cash flow is received pro rata by all security holders, the
cash  flow  from  the  mortgages  underlying  a CMO is  segmented  and  paid  in
accordance  with a  predetermined  priority  to  investors  holding  various CMO
classes. By allocating the principal and interest cash flows from the underlying
collateral  among the  separate  CMO  classes,  different  classes  of bonds are
created, each with its own stated maturity,  estimated average life, coupon rate
and  prepayment  characteristics.  The regular  interests  of some CMOs are like
traditional  debt  instruments  because they have stated  principal  amounts and
traditionally defined interest rate terms.  Purchasers of certain other CMOs are
entitled  to the  excess,  if  any,  of the  issuer's  cash  inflows,  including
reinvestment   earnings,   over  the  cash   outflows   for  debt   service  and
administrative  expenses.  These  CMOs may  include  instruments  designated  as
residual  interests,  which  represent  an  equity  ownership  interest  in  the
underlying  collateral,  subject to the first lien of the investors in the other
classes of the CMO.  Certain  residual  CMO  interests  may be riskier than many
regular  CMO  interests  to the extent  that they could  result in the loss of a
portion of the original investment. Moreover, cash flows from residual interests
are very sensitive to prepayments  and, thus,  contain a high degree of interest
rate risk. As of December 31, 1998, the Bank's CMOs did not include any residual
interests, or interest-only or principal-only securities. As a matter of policy,
the Bank does not invest in  residual  interests  of CMOs or  interest-only  and
principal-only securities.

         Mortgage-backed and  mortgage-related  securities  generally yield less
than  the  loans  which  underlie  such  securities  because  of  their  payment
guarantees or credit  enhancements which offer nominal credit risk. In addition,
mortgage-backed  and related securities are more liquid than individual mortgage
loans and may be used to collateralize  borrowings of the Bank.  Mortgage-backed
securities  issued or guaranteed by the FNMA or the FHLMC (except  interest-only
securities or the residual interests in CMOs) are weighted at no more than 20.0%
for  risk-based  capital  purposes,  compared to a weight of 50.0% to 100.0% for
residential loans.

         The  Bank   generally   does  not   invest   in   mortgage-backed   and
mortgage-related  securities with estimated average lives exceeding 10 years. At
December  31,  1998,  the  estimated   weighted   average  life  of  the  Bank's
mortgage-backed and mortgage-related securities was approximately 4.3 years. The
actual maturity of a mortgage-backed  or  mortgage-related  security may be less
than  its  stated  maturity  due to  prepayments  of the  underlying  mortgages.
Prepayments  that  are  faster  than  anticipated  may  shorten  the life of the
security and adversely affect its yield to maturity. The yield is based upon the
interest  income and the  amortization  of any premium or  accretion of discount
related to the mortgage-backed  security.  In accordance with GAAP, premiums are
amortized and  discounts  are accreted  over the  estimated  lives of the loans,
which  decrease and  increase  interest  income,  respectively.  The  prepayment
assumptions used to determine the amortization period for premiums and discounts
can significantly  affect the yield of the  mortgage-backed or  mortgage-related
security,  and these  assumptions  are reviewed  periodically  to reflect actual
prepayments.  

                                       21
<PAGE>
Although prepayments of underlying  mortgages depend on many factors,  including
the type of mortgages,  the coupon rate, the age of mortgages,  the geographical
location of the underlying real estate collateralizing the mortgages and general
levels of market  interest rates,  the difference  between the interest rates on
the underlying mortgages and the prevailing mortgage interest rates,  generally,
is the most significant determinant of the rate of prepayments.

         During periods of rising  mortgage  interest rates, if the coupon rates
of the underlying  mortgages are less than the prevailing  market interest rates
offered  for  mortgage  loans,  refinancings  generally  decrease  and  slow the
prepayment of the underlying  mortgages and the related securities.  Conversely,
during periods of falling  mortgage  interest  rates, if the coupon rates of the
underlying  mortgages  exceed the prevailing  market  interest rates offered for
mortgage loans,  refinancing  generally increases and accelerates the prepayment
of  the   underlying   mortgages   and  the  related   securities.   Under  such
circumstances,  the Bank may be  subject  to  reinvestment  risk  because to the
extent that the Bank's mortgage-backed and mortgage-related  securities amortize
or prepay  faster than  anticipated,  the Bank may not be able to  reinvest  the
proceeds of such  repayments and  prepayments at a comparable  rate. At December
31,  1998,  of  the  $1.6  billion  of  mortgage-backed   and   mortgage-related
securities,  an aggregate of $1.1 billion were secured by fixed-rate  securities
and an aggregate of $493.9 million were secured by adjustable-rate securities.

U.S. Government and Agency Obligations

         At  December  31,  1998,  the  Company's  U.S.  Government   securities
portfolio  totaled $30.2 million with a weighted  average maturity of 1.1 years.
The  U.S.  Government  agency  securities   portfolio   consisting  of  callable
securities  totaled $46.1 million with a weighted  average maturity of 7.7 years
and a weighted average life of 6 months to the call date.

Other Securities

         At  December  31,  1998,  the  Company's  other  securities   consisted
primarily of $134.6  million in corporate  bonds,  $12.4 million in asset backed
bonds,  and $0.2 million in foreign bonds. The corporate bonds consist of longer
term financial  institution  bonds of which $58.5 million have adjustable  rates
using the 3 month  LIBOR as the index and $76.0  million  have  fixed  rates for
longer terms.  The weighted  average maturity of the corporate bond portfolio is
20.4 years.

Equity Securities

         At December 31, 1998, the Company's investment in equity securities was
$181.5 million, consisting of $80.1 million of preferred stock, $31.6 million of
common stock, $29.7 million of FHLB stock and $40.0 million of mutual funds. All
equity investments are classified as available for sale.

                                       22
<PAGE>
         The  following  table  sets forth  certain  information  regarding  the
maturities of the Bank's U.S. Government Agency obligations and other securities
(all of which were classified as available for sale) at December 31, 1998.
<TABLE>
<CAPTION>
                                                                           Contractually Maturing
                                       Weighted                    Weighted                  Weighted                  Weighted
                          Under 1      Average      1-5            Average      6-10         Average      Over 10      Average
                          Year         Yield        Years          Yield        Years        Yield        Years        Yield
                          ----         -----        -----          -----        -----        -----        -----        -----
                                                                           (Dollars in Thousands)
<S>                       <C>          <C>           <C>            <C>          <C>          <C>          <C>              
U.S.Government and        $17,250      6.54%         $27,804        7.42%        $30,000      6.70%        $    --       --%
 federal agency 
 obligations
Other                         --         --           30,100        6.78%         12,000     5.72%          110,837    7.77%
                          ------                     -------                      ------                  ---------
                          $17,250                    $57,904                     $42,000                   $110,837
                          =======                    =======                     =======                   ========
</TABLE>

Sources of Funds.

         General. Deposits,  repayments and prepayments of loans and securities,
proceeds from sales of loans and securities,  proceeds from maturing  securities
and cash flows from  operations are the primary  sources of the Bank's funds for
use in lending, investing and for other general purposes. The Bank also utilizes
borrowed  funds  on a short  term  basis to  compensate  for  reductions  in the
availability  of funds from other sources and on a longer term basis for general
business.

         Deposits.  The Bank's  deposit  products  include a broad  selection of
deposit instruments,  including negotiable order of withdrawal ("NOW") accounts,
money  market  accounts,   noninterest  bearing  checking  accounts,  commercial
checking accounts,  regular savings accounts and term certificate accounts.  The
Bank also offers jumbo certificate of deposit accounts and Individual Retirement
Accounts  ("IRA") and other qualified plan accounts.  Deposit account terms vary
with the principal  differences  being the minimum  balance  required,  the time
periods the funds must remain on deposit and the interest rate.

         At December 31, 1998,  the Bank's  deposits  totaled $1.7  billion,  of
which 82.3% were interest bearing deposits. Noninterest bearing demand deposits,
commercial  and retail were $305.4  million or 17.7% of deposits.  Core deposits
(savings  accounts,  money market accounts and NOW accounts) were $886.5 million
or 51.3% and  certificates  of deposit were $537.2  million or 31.0% at December
31, 1998.  Although the Bank has a  significant  portion of its deposits in core
deposits,  management  monitors the  activity in these  accounts  and,  based on
historical  experience,  believes it will  continue to retain a large portion of
these deposits.

         Total  deposits held by banks in the Bank's market area have  decreased
over the past few years.  The Bank  utilizes  traditional  marketing  methods to
attract new customers and savings  deposits.  In addition,  the Bank's  business
development  officers have actively  solicited through  individual  meetings and
other contacts,  deposit accounts,  particularly commercial accounts. The Bank's
lending officers and branch managers have increased their efforts to solicit new
deposits from the Bank's loan  customers and other  residents and  businesses in
their market area. The Bank does not participate in the brokered deposit market.
The Bank is the largest  depository  institution,

                                       23
<PAGE>
by deposit market share, in Staten Island.

         For the year ended December 31, 1998 deposits before interest  credited
increased  $54.8  million  compared  with a  decrease  of $9.4  million in 1997.
Inclusive of interest  credited,  deposits  increased $105.4 million in 1998 and
$45.9 million in 1997.

         The  following  table sets forth the  activity  in the Bank's  deposits
during the periods indicated.
<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                      1998                1997                 1996
                                                  ----------           ----------           ----------
                                                                 (Dollars In Thousands)
<S>                                               <C>                  <C>                  <C>       
Beginning balance...................              $1,623,652           $1,577,748           $1,535,617
Net increase (decrease) before
  interest credited.................                  54,763              (9,386)              (8,397)
Interest credited...................                  50,645               55,290               50,528
                                                  ----------           ----------           ----------
Net increase in deposits............                 105,408               45,904               42,131

Ending balance......................              $1,729,060           $1,623,652           $1,577,748
                                                  ==========           ==========           ==========
</TABLE>

         The following table sets forth by various  interest rate categories the
certificates of deposit with the Bank at the dates indicated.
<TABLE>
<CAPTION>
                                                     At December 31,
                                        1998             1997             1996
                                      --------         --------         --------
                                                (Dollars in Thousands)
<S>                                   <C>              <C>              <C>     
0.00% to 2.99% ..............         $  4,343         $   --           $   --
3.00% to 3.99% ..............            3,516            9,704           12,314
4.00% to 4.99% ..............          253,301          128,150          223,234
5.00% to 6.99% ..............          273,931          380,820          262,924
7.00% to 8.99% ..............            2,063            2,019            2,098
                                      --------         --------         --------
    Total ...................         $537,154         $520,693         $500,570
                                      ========         ========         ========
</TABLE>
Weighted Average Rate

         The following  table sets forth the amount and remaining  maturities of
the Bank's certificates of deposit at December 31, 1998.

                                       24
<PAGE>
<TABLE>
<CAPTION>
                                                     Over Six         Over One           Over Two
                                                      Months            Year               Years
                                  Six Months        Through One      Through Two       Through Three   Over Three
                                    and Less           Year            Years               Years         Years
                                    --------           ----            -----               -----         -----
                                                               (Dollars in Thousands)
<S>                               <C>                <C>            <C>               <C>             <C>    
0.00% to 2.99%.............        $    4,343         $    --        $    --          $    --         $    --
3.00% to 3.99%.............             3,037             479             --               --              --
4.00% to 4.99%.............           156,209          46,070         48,073            1,580           1,369
5.00% to 6.99%.............           133,516          63,769         48,732           11,192          16,722
7.00% to 8.99%.............                --              --          2,063               --              --
                                  -----------        --------       --------          -------         -------
    Total..................       $   297,105        $110,318       $ 98,868          $12,772         $18,091
                                  ===========        ========       ========          =======         =======
</TABLE>

         As of December 31,  1998,  the  aggregate  amount of  outstanding  time
certificates  of deposit  in  amounts  greater  than or equal to  $100,000,  was
approximately $122.2 million. The following table presents the maturity of these
time certificates of deposit at such dates.

                                                                December 31,
                                                                    1998
                                                                 --------
                                                          (Dollars in Thousands)
3 months or less............................................      $59,072
Over 3 months through 6 months..............................       20,288
Over 6 months through 12 months.............................       16,566
Over 12 months..............................................       26,240
                                                                 --------
                                                                 $122,166
                                                                 ========
<PAGE>
         The following table sets forth the dollar amount of deposits in various
types of deposits offered by the Bank at the dates indicated.
<TABLE>
<CAPTION>
                                                   At December 31,
                                1998                    1997                  1996
                                ----                    ----                  ----
                          Amount   Percentage     Amount  Percentage    Amount   Percentage
                          ------   ----------     ------  ----------    ------   ----------
                                                (Dollars in Thousands)
<S>                     <C>          <C>       <C>          <C>       <C>          <C>    
Savings accounts ....   $  730,614    42.25%   $  709,074    43.67%   $  735,009    45.27%
Certificates of
  deposits ..........      537,154    31.07       520,693    32.07       500,570    30.83
Money market accounts       82,360     4.76        76,088     4.69        79,704     4.91
NOW accounts ........       73,541     4.25        67,076     4.13        60,206     3.71
Demand deposits .....      305,392    17.66       250,721    15.44       202,259    12.46
                        ----------   ------    ----------   ------    ----------   ------
              Total .   $1,729,061   100.00%   $1,623,652   100.00%   $1,577,748   100.00%
                        ==========   ======    ==========   ======    ==========   ======
</TABLE>

         Borrowings.  During 1998, the Bank continued to leverage its capital by
utilizing  borrowings  as an  additional  source of funds for asset  growth.  At
December 31, 1998 the Bank had  borrowings  of $1.3 billion  which  consisted of
reverse repurchase  agreements with established  brokerage firms and the FHLB of
New York. These borrowings are collateralized  primarily by the Bank's mortgage-
backed  securities.  The Bank had $250.0  million in  borrowings at December 31,
1997.

                                       25
<PAGE>
         The Bank's  strategy to invest  borrowings  at  acceptable  spreads has
increased the overall cost of funds while incrementally  increasing net interest
income and  decreasing  the net interest  rate spread.  The Bank may continue to
utilize borrowings through FHLB advances collateralized by the Bank's whole loan
portfolio in 1999.

         The  following  table  sets  forth  information  with  respect  to  the
Company's reverse repurchase agreements at and during the periods indicated. The
Bank did not have any  reverse  repurchase  agreements  at or for the year ended
December 31, 1996.
<TABLE>
<CAPTION>
                              At or For the Year Ended December 31,
                                    1998           1997
                                    ----           ----
                                   (Dollars in Thousands)

<S>                             <C>              <C>     
Maximum balance                 $ 1,349,477      $250,000
Average balance                 $   664,822      $ 81,071
Year end balance                $ 1,344,477      $250,000
Weighted average
  interest rate:
   At end of year                     5.24%         5.86%
   During the year                    5.58%         5.88%
</TABLE>

         Trust  Activities.  The Bank also  provides  a full  range of trust and
investment  services,  and acts as executor or  administrator  of estates and as
trustee for various types of trusts.  Trust and investment  services are offered
through the Bank's Trust  Department  which was acquired in 1995.  Fiduciary and
investment  services are provided  primarily to persons and entities  located in
Staten Island, New York.  Services offered include fiduciary services for trusts
and  estates,  money  management,  custodial  services  and pension and employee
benefits  consulting.  As of December 31, 1998, the Trust Department  maintained
approximately 435  trust/fiduciary  accounts with an aggregate principal balance
of $137.1 million.

         The  accounts  maintained  by the  Trust/Investment  Services  Division
consist of "managed" and "non-managed"  accounts.  "Managed"  accounts are those
accounts under custody for which the Bank has  responsibility for administration
and investment management and/or investment advice.  "Non-managed"  accounts are
those  accounts  for which the Bank  merely  acts as a  custodian.  The  Company
receives fees dependent upon the level and type of service  provided.  The Trust
Department  administers  various  trust  accounts  (revocable,  irrevocable  and
charitable trusts, and trusts under wills),  agency accounts (various investment
fund  products),  estate accounts and employee  benefit plan accounts  (assorted
plans and IRA  accounts).  Two trust  officers and related staff are assigned to
the Trust Department.  The  administration  of trust and fiduciary  accounts are
monitored by the Trust  Committee  of the Board of  Directors  of Staten  Island
Savings.

                                       26
<PAGE>
         Savings Bank Life Insurance. The Bank has a Savings Bank Life Insurance
("SBLI")  department  which issues life insurance to individuals.  The financial
statements of the SBLI Department are not consolidated with the Bank's. The SBLI
Department's  activities  are  segregated  from the Bank and,  while they do not
directly affect the Bank's earnings,  management  believes that offering SBLI is
beneficial  to the  Bank's  relationship  with its  depositors  and the  general
public.  The SBLI  Department  pays its own expenses and reimburses the Bank for
expenses  incurred on its behalf.  At December 31, 1998, the SBLI Department had
policies totaling $1.6 billion in force.

Subsidiaries

         SIB Mortgage  Corporation  (SIBMC) is a wholly-owned  subsidiary of the
Bank  incorporated  in the  State of New  Jersey in 1998.  SIBMC  was  formed to
purchase the assets of Ivy Mortgage Corp. SIBMC currently originates loans in 22
states and had assets totaling $84.4 million at December 31, 1998.

         Staten Island Funding  Corporation (SIFC) is a wholly-owned  subsidiary
of SIBIC  incorporated  in the  State of  Maryland  in 1998 for the  purpose  of
establishing a Real Estate Investment Trust ("REIT").  The Bank transferred real
estate mortgage loans totaling $648.0 million, net, which included certain other
associated assets and liabilities. In return the Bank received all the shares of
common stock and  preferred  stock in SIFC.  The assets of SIFC  totaled  $655.0
million at December 31, 1998.

         SIB Investment Corporation (SIBIC) is a wholly-owned  subsidiary of the
Bank that was incorporated in the State of New Jersey in 1998 for the purpose of
managing certain  investments of the Bank. The Bank transferred the common stock
and a majority of the preferred stock of SIFC to SIBIC.  The consolidated assets
of SIBIC at December 31, 1998 were $686.0 million.

Employees

         The Bank had 538 full-time  employees  and 102  part-time  employees at
December  31,  1998.  None of these  employees  is  represented  by a collective
bargaining  agent and the Bank believes that it enjoys good  relations  with its
personnel.

                                   REGULATION

General

         The Bank is a federally  chartered and insured  savings bank subject to
extensive  regulation  and  supervision  by  the  OTS,  as the  primary  federal
regulator of savings associations, and the FDIC, as the administrator of the BIF
(Bank Inurance Fund).

         The federal banking laws contain numerous provisions  affecting various
aspects of the business and operations of savings  associations  and savings and
loan holding  companies.  The

                                       27
<PAGE>
following  description  of statutory and  regulatory  provisions  and proposals,
which is not intended to be a complete  description of these provisions or their
effects on the Company or the Bank, is qualified in its entirety by reference to
the particular statutory or regulatory provisions or proposals.

Regulation of Savings and Loan Holding Companies

         Holding Company Acquisitions. The Company is a savings and loan holding
company  within the meaning of the Home Owners'  Loan Act, as amended  ("HOLA").
The HOLA and OTS  regulations  generally  prohibit  a savings  and loan  holding
company, without prior OTS approval, from acquiring, directly or indirectly, the
ownership  or  control of any other  savings  association  or  savings  and loan
holding company,  or all, or substantially all, of the assets or more than 5% of
the voting shares thereof.  These provisions also prohibit,  among other things,
any director or officer of a savings and loan holding company, or any individual
who owns or controls more than 25% of the voting shares of such holding company,
from  acquiring  control of any savings  association  not a  subsidiary  of such
savings and loan holding company, unless the acquisition is approved by the OTS.

         Holding Company  Activities.  The Company operates as a unitary savings
and loan  holding  company.  Generally,  there are limited  restrictions  on the
activities  of a unitary  savings and loan holding  company and its  non-savings
association subsidiaries. If the Company ceases to be a unitary savings and loan
holding company,  the activities of the Company and its non-savings  association
subsidiaries would thereafter be subject to substantial restrictions.

         The HOLA requires every savings association subsidiary of a savings and
loan  holding  company to give the OTS at least 30 days'  advance  notice of any
proposed   dividends   to  be  made  on  its   guarantee,   permanent  or  other
non-withdrawable stock, or else such dividend will be invalid.

         Affiliate Restrictions.  Transactions between a savings association and
its "affiliates" are subject to quantitative and qualitative  restrictions under
Sections  23A  and 23B of the  Federal  Reserve  Act.  Affiliates  of a  savings
association include,  among other entities,  the savings  association's  holding
company  and  companies   that  are  under  common   control  with  the  savings
association.

         In  general,  Sections  23A  and  23B and  OTS  regulations  issued  in
connection  therewith  limit the  extent to which a savings  association  or its
subsidiaries may engage in certain "covered  transactions" with affiliates to an
amount equal to 10% of the  association's  capital and  surplus,  in the case of
covered  transactions  with any one affiliate,  and to an amount equal to 20% of
such  capital  and  surplus,  in the  case  of  covered  transactions  with  all
affiliates.  In addition,  a savings association and its subsidiaries may engage
in covered  transactions and certain other  transactions only on terms and under
circumstances  that are  substantially the same, or at least as favorable to the
savings  association  or its  subsidiary,  as those  prevailing  at the time for
comparable transactions with nonaffiliated companies. A "covered transaction" is
defined to include a loan or extension of credit to an affiliate;  a purchase of
investment  securities  issued by an  affiliate;  a purchase  of assets  from an
affiliate,  with certain  exceptions;  the acceptance of securities issued by an
affiliate as

                                       28
<PAGE>
collateral for a loan or extension of credit to any party;  or the issuance of a
guarantee, acceptance or letter of credit on behalf of an affiliate.

         In addition,  under the OTS regulations,  a savings association may not
make a loan or  extension  of credit to an  affiliate  unless the  affiliate  is
engaged only in activities  permissible  for bank holding  companies;  a savings
association  may not purchase or invest in securities of an affiliate other than
shares of a  subsidiary;  a savings  association  and its  subsidiaries  may not
purchase a low-quality  asset from an affiliate;  and covered  transactions  and
certain other transactions between a savings association or its subsidiaries and
an affiliate must be on terms and conditions  that are consistent  with safe and
sound  banking  practices.  With certain  exceptions,  each loan or extension of
credit by a savings  association  to an affiliate  must be secured by collateral
with a  market  value  ranging  from  100% to  130%  (depending  on the  type of
collateral) of the amount of the loan or extension of credit.

         The OTS  regulation  generally  excludes all  non-bank and  non-savings
association  subsidiaries of savings  associations from treatment as affiliates,
except to the extent that the OTS or the Federal  Reserve Board decides to treat
such   subsidiaries  as  affiliates.   The  regulation  also  requires   savings
associations to make and retain records that reflect  affiliate  transactions in
reasonable detail, and provides that certain classes of savings associations may
be required to give the OTS prior notice of affiliate transactions.

Regulation of Federal Savings Banks

         Regulatory  System.  As  a  federally  insured  savings  bank,  lending
activities and other  investments of the Bank must comply with various statutory
and regulatory requirements.  The Bank is regularly examined by the OTS and must
file periodic reports concerning its activities and financial condition.

         Although the OTS is the Bank's primary regulator,  the FDIC has "backup
enforcement  authority" over the Bank. The Bank's eligible  deposit accounts are
insured by the FDIC under the BIF, up to applicable limits.

         Federal Home Loan Banks. The Bank is a member of the FHLB System. Among
other  benefits,  FHLB  membership  provides  the  Bank  with a  central  credit
facility.  The Bank is  required  to own  capital  stock in an FHLB in an amount
equal to the greater of: (i) 1% of its aggregate outstanding principal amount of
its residential  mortgage loans, home purchase contracts and similar obligations
at the beginning of each calendar year, (ii) .3% of total assets, or (iii) 5% of
its FHLB advances (borrowings). The current investment in FHLB stock is based on
5% of the Bank's borrowings outstanding from the FHLB.

         Liquid  Assets.  Under OTS  regulations,  for each  calendar  month,  a
savings bank is required to maintain an average  daily  balance of liquid assets
(including  cash,   certain  time  deposits  and  savings   accounts,   bankers'
acceptances,  certain government  obligations and certain other investments) not
less  than a  specified  percentage  of the  average  daily  balance  of its net

                                       29
<PAGE>
withdrawable accounts plus short-term borrowings (its liquidity base) during the
preceding  calendar  month.  This liquidity  requirement,  which is currently at
5.0%,  may be changed from time to time by the OTS to any amount between 4.0% to
10.0%, depending upon certain factors. OTS regulations also require each savings
association  to maintain an average daily  balance of  short-term  liquid assets
equal to not less than 1.0% of the average daily balance of its net withdrawable
accounts and short-term borrowings during the preceding calendar month. The Bank
maintains liquid assets in compliance with these regulations.

         Regulatory  Capital  Requirements.   OTS  capital  regulations  require
savings  banks  to  satisfy  minimum  capital   standards:   risk-based  capital
requirements, a leverage requirement and a tangible capital requirement. Savings
banks must meet each of these standards in order to be deemed in compliance with
OTS capital requirements. In addition, the OTS may require a savings association
to maintain capital above the minimum capital levels.

         All savings  banks are  required to meet a minimum  risk-based  capital
requirement of total capital (core capital plus supplementary  capital) equal to
8% of  risk-weighted  assets  (which  includes  the credit risk  equivalents  of
certain  off-balance  sheet items). In calculating total capital for purposes of
the risk-based  requirement,  supplementary  capital may not exceed 100% of core
capital. Under the leverage requirement,  a savings bank is required to maintain
core capital equal to a minimum of 3% of adjusted  total assets.  A savings bank
is also  required  to maintain  tangible  capital in an amount at least equal to
1.5% of its adjusted total assets.

         Under OTS  regulations,  a savings  bank with a greater  than  "normal"
level of  interest  rate  exposure  must deduct an  interest  rate risk  ("IRR")
component in calculating  its total capital for purposes of determining  whether
it meets its risk-based capital requirement. Interest rate exposure is measured,
generally,  as the decline in an  institution's  net portfolio  value that would
result from a 200 basis point  increase  or  decrease in market  interest  rates
(whichever would result in lower net portfolio value),  divided by the estimated
economic  value of the savings  association's  assets.  The  interest  rate risk
component  to be  deducted  from  total  capital  is  equal to  one-half  of the
difference between an institution's  measured exposure and "normal" IRR exposure
(which is defined as 2%),  multiplied  by the  estimated  economic  value of the
institution's   assets.   In  August   1995,   the  OTS   indefinitely   delayed
implementation  of its IRR  regulation.  Based on internal  measures of interest
rate risk at December 31, 1998, the Bank would have been required to deduct $8.2
million pursuant to the IRR component in calculating  total  risk-based  capital
had the IRR component of the capital regulations been in effect.  However,  even
in the  event of such a  deduction,  the Bank  would  still  be  deemed  to be a
"well-capitalized" institution.

         These capital  requirements are viewed as minimum standards by the OTS,
and most  institutions  are expected to maintain  capital  levels well above the
minimum.  In addition,  the OTS regulations  provide that minimum capital levels
higher than those provided in the  regulations may be established by the OTS for
individual  savings   associations,   upon  a  determination  that  the  savings
association's  capital is or may become inadequate in view of its circumstances.
The OTS regulations  provide that higher individual  minimum  regulatory capital
requirements  may be appropriate in  circumstances  where,  among others:  (1) a
savings  association  has a high  degree of

                                       30
<PAGE>
exposure to interest rate risk,  prepayment risk, credit risk,  concentration of
credit risk, certain risks arising from  nontraditional  activities,  or similar
risks or a high proportion of off-balance sheet risk; (2) a savings  association
is  growing,  either  internally  or through  acquisitions,  at such a rate that
supervisory  problems are  presented  that are not dealt with  adequately by OTS
regulations;  and (3) a savings  association  may be  adversely  affected by the
activities  or condition of its holding  company,  affiliates,  subsidiaries  or
other persons or savings  associations  with which it has  significant  business
relationships. The Bank is not subject to any such individual minimum regulatory
capital requirement.

         The Bank's  tangible  capital ratio was 11.31%,  its core capital ratio
was 11.39% and its total  risk-based  capital  ratio was 26.04% at December  31,
1998.

         Prompt  Corrective  Action.  The prompt corrective action regulation of
the OTS, promulgated under the Federal Deposit Insurance Corporation Improvement
Act of 1991  ("FDICIA"),  requires  certain  mandatory  actions  and  authorizes
certain  other  discretionary  actions to be taken by the OTS  against a savings
bank that falls within certain  undercapitalized capital categories specified in
the regulation.

         The regulation  establishes five categories of capital  classification:
"well capitalized," "adequately capitalized," "undercapitalized," "significantly
undercapitalized," and "critically  undercapitalized." Under the regulation, the
ratio of total capital to  risk-weighted  assets,  core capital to risk-weighted
assets and the leverage  ratio are used to determine  an  institution's  capital
classification.  The Bank meets the capital requirements of a "well capitalized"
institution under applicable OTS regulations.

         In  general,  the prompt  corrective  action  regulation  prohibits  an
insured  depository  institution from declaring any dividends,  making any other
capital  distribution,  or paying a management  fee to a controlling  person if,
following the  distribution or payment,  the institution  would be within any of
the three  undercapitalized  categories.  In  addition,  adequately  capitalized
institutions  may accept brokered  deposits only with a waiver from the FDIC and
are  subject  to  restrictions  on the  interest  rates that can be paid on such
deposits.  Undercapitalized  institutions  may not  accept,  renew or  roll-over
brokered deposits.

         Institutions  that are  classified as  undercapitalized  are subject to
certain mandatory  supervisory actions,  including:  (i) increased monitoring by
the  appropriate  federal banking agency for the institution and periodic review
of the institution's efforts to restore its capital, (ii) a requirement that the
institution  submit a capital  restoration  plan  acceptable to the  appropriate
federal  banking  agency and implement  that plan,  and that each company having
control of the institution  guarantee  compliance  with the capital  restoration
plan in an amount  not  exceeding  the lesser of 5% of the  institution's  total
assets at the time it received notice of being  undercapitalized,  or the amount
necessary to bring the  institution  into  compliance  with  applicable  capital
standards  at the time it fails to comply with the plan,  and (iii) a limitation
on the  institution's  ability  to make any  acquisition,  open  any new  branch
offices, or engage in any new line of business without the prior approval of the
appropriate federal banking agency for the institution or the FDIC.

                                       31
<PAGE>
         The  regulation  also  provides  that the OTS may  take any of  certain
additional  supervisory actions against an  undercapitalized  institution if the
agency determines that such actions are necessary to resolve the problems of the
institution at the least possible  long-term cost to the deposit insurance fund.
These  supervisory  actions  include:  (i)  requiring the  institution  to raise
additional  capital or be acquired by another  institution or holding company if
certain grounds exist, (ii) restricting transactions between the institution and
its  affiliates,  (iii)  restricting  interest rates paid by the  institution on
deposits,  (iv)  restricting  the  institution's  asset growth or requiring  the
institution to reduce its assets, (v) requiring  replacement of senior executive
officers and directors, (vi) requiring the institution to alter or terminate any
activity  deemed to pose excessive risk to the  institution,  (vii)  prohibiting
capital  distributions by bank holding  companies  without prior approval by the
FRB,  (viii)  requiring  the  institution  to divest  certain  subsidiaries,  or
requiring the institution's holding company to divest the institution or certain
affiliates of the institution, and (ix) taking any other supervisory action that
the agency believes would better carry out the purposes of the prompt corrective
action provisions of FDICIA.

         Institutions  classified  as  undercapitalized  that  fail to  submit a
timely, acceptable capital restoration plan or fail to implement such a plan are
subject  to the  same  supervisory  actions  as  significantly  undercapitalized
institutions.  Significantly  undercapitalized  institutions  are subject to the
mandatory provisions applicable to undercapitalized institutions. The regulation
also makes mandatory for significantly  undercapitalized institutions certain of
the supervisory  actions that are discretionary  for institutions  classified as
undercapitalized,  creates  a  presumption  in  favor of  certain  discretionary
supervisory actions, and subjects significantly undercapitalized institutions to
additional restrictions,  including a prohibition on paying bonuses or raises to
senior executive  officers without the prior written approval of the appropriate
federal bank  regulatory  agency.  In addition,  significantly  undercapitalized
institutions  may be  subjected  to certain of the  restrictions  applicable  to
critically undercapitalized institutions.

         The   regulation   requires   that  an   institution   be  placed  into
conservatorship  or  receivership  within 90 days  after it  becomes  critically
undercapitalized,  unless the OTS, with concurrence of the FDIC, determines that
other action would better achieve the purposes of the prompt  corrective  action
provisions of FDICIA.  Any such  determination  must be renewed every 90 days. A
depository  institution also must be placed into receivership if the institution
continues to be critically undercapitalized on average during the fourth quarter
after the institution initially became critically  undercapitalized,  unless the
institution's  federal bank  regulatory  agency,  with  concurrence of the FDIC,
makes certain positive determinations with respect to the institution.

         Critically  undercapitalized  institutions  are  also  subject  to  the
restrictions generally applicable to significantly undercapitalized institutions
and to a number of other severe  restrictions.  For  example,  beginning 60 days
after  becoming  critically  undercapitalized,  such  institutions  may  not pay
principal or interest on  subordinated  debt  without the prior  approval of the
FDIC. (However, the regulation does not prevent unpaid interest from accruing on
subordinated  debt  under  the  terms  of the  debt  instrument,  to the  extent
otherwise   permitted   by  law.)  In  addition,   critically   undercapitalized
institutions  may  be  prohibited  from  engaging  in a  number  of  activities,

                                       32
<PAGE>
including entering into certain  transactions or paying interest above a certain
rate on new or renewed liabilities.

         If the OTS  determines  that an  institution is in an unsafe or unsound
condition,  or if the  institution  is deemed to be  engaging  in an unsafe  and
unsound  practice,  the  OTS  may,  if  the  institution  is  well  capitalized,
reclassify  it as  adequately  capitalized;  if the  institution  is  adequately
capitalized  but not well  capitalized,  require it to comply with  restrictions
applicable  to  undercapitalized  institutions;   and,  if  the  institution  is
undercapitalized,  require it to comply with certain restrictions  applicable to
significantly undercapitalized institutions.

         Conservatorship/Receivership.  In  addition  to the  grounds  discussed
under "- Prompt Corrective  Action," the OTS (and, under certain  circumstances,
the FDIC) may appoint a conservator or receiver for a savings association if any
one or more of a number of circumstances exist,  including,  without limitation,
the following:  (i) the  institution's  assets are less than its  obligations to
creditors and others,  (ii) a substantial  dissipation of assets or earnings due
to any  violation of law or any unsafe or unsound  practice,  (iii) an unsafe or
unsound  condition  to transact  business,  (iv) a willful  violation of a final
cease-and-desist  order, (v) the concealment of the institution's books, papers,
records or assets or refusal to submit such items for inspection to any examiner
or lawful  agent of the  appropriate  federal  banking  agency or state  bank or
savings association  supervisor,  (vi) the institution is likely to be unable to
pay its  obligations  or meet its  depositors'  demands in the normal  course of
business, (vii) the institution has incurred, or is likely to incur, losses that
will deplete all or substantially all of its capital, and there is no reasonable
prospect for the institution to become  adequately  capitalized  without federal
assistance,  (viii) any  violation of law or unsafe or unsound  practice that is
likely to cause  insolvency or  substantial  dissipation  of assets or earnings,
weaken  the  institution's  condition,  or  otherwise  seriously  prejudice  the
interests of the institution's depositors or the federal deposit insurance fund,
(ix) the institution is  undercapitalized  and the institution has no reasonable
prospect  of  becoming  adequately  capitalized,   fails  to  become  adequately
capitalized  when  required  to do so,  fails to submit a timely and  acceptable
capital  restoration  plan, or materially fails to implement an accepted capital
restoration  plan,  (x)  the  institution  is  critically   undercapitalized  or
otherwise has  substantially  insufficient  capital,  or (xi) the institution is
found guilty of certain criminal offenses related to money laundering.

         Enforcement Powers. The OTS and, under certain circumstances, the FDIC,
have  substantial  enforcement  authority with respect to savings  associations,
including  authority  to bring  various  enforcement  actions  against a savings
association and any of its  "institution-affiliated  parties" (a term defined to
include,  among  other  persons,  directors,  officers,  employees,  controlling
stockholders,  agents and  stockholders  who  participate  in the conduct of the
affairs  of the  institution).  This  enforcement  authority  includes,  without
limitation:  (i) the  ability  to  terminate  a  savings  association's  deposit
insurance, (ii) institute cease-and-desist proceedings,  (iii) bring suspension,
removal,  prohibition and criminal  proceedings  against  institution-affiliated
parties,  and  (iv)  assess  substantial  civil  money  penalties.  As part of a
cease-and-desist  order,  the agencies may require a savings  association  or an
institution-affiliated  party to take affirmative  action to correct  conditions
resulting from that party's  actions,  including to make  restitution or provide

                                       33
<PAGE>
reimbursement, indemnification or guarantee against loss; restrict the growth of
the institution; and rescind agreements and contracts.
         
         Capital Distribution Regulation.  As a subsidiary of a savings and loan
holding company the Bank is required to provide advance notice to the OTS of any
proposed capital distribution on its capital stock.

         Qualified  Thrift Lender Test.  In general,  savings  associations  are
required to maintain at least 65% of their portfolio assets in certain qualified
thrift  investments  (which  consist  primarily  of loans and other  investments
related  to  residential  real  estate  and  certain  other  assets).  A savings
association   that  fails  the  qualified  thrift  lender  test  is  subject  to
substantial restrictions on activities and to other significant penalties.

                                       34
<PAGE>
         Recent  legislation  permits  a savings  association  to  qualify  as a
qualified  thrift  lender not only by  maintaining  65% of  portfolio  assets in
qualified thrift  investments (the "QTL test") but also, in the alternative,  by
qualifying  under the Code as a "domestic  building and loan  association."  The
Bank is a domestic building and loan association as defined in the Code.

         Recent  legislation  also  expands  the  QTL  test to  provide  savings
associations with greater  authority to lend and diversify their portfolios.  In
particular,  credit  card  and  educational  loans  may now be  made by  savings
associations  without regard to any  percentage-of-assets  limit, and commercial
loans  may be made in an  amount  up to 10  percent  of  total  assets,  plus an
additional 10 percent for small business loans.  Loans for personal,  family and
household  purposes  (other than credit card,  small  business  and  educational
loans) are now included  without limit with other assets that, in the aggregate,
may  account for up to 20% of total  assets.  At December  31,  1998,  under the
expanded  QTL test,  approximately  99.97% of the Bank's  portfolio  assets were
qualified thrift investments.

         FDIC  Assessments.  The deposits of the Bank are insured to the maximum
extent  permitted by the BIF, which is  administered by the FDIC, and are backed
by the full faith and credit of the U.S.  Government.  As  insurer,  the FDIC is
authorized to conduct examinations of, and to require reporting by, FDIC-insured
institutions. It also may prohibit any FDIC-insured institution from engaging in
any activity the FDIC determines by regulation or order to pose a serious threat
to the FDIC.  The FDIC also has the  authority to initiate  enforcement  actions
against savings  institutions,  after giving the OTS an opportunity to take such
action.

         The FDIC may terminate the deposit insurance of any insured  depository
institution,  including  the Bank,  if it  determines  after a hearing  that the
institution has engaged or is engaging in unsafe or unsound practices,  is in an
unsafe  or  unsound  condition  to  continue  operations,  or has  violated  any
applicable law, regulation,  order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance  temporarily  during the hearing
process for the permanent  termination of insurance,  if the  institution has no
tangible  capital.  If insurance of accounts is terminated,  the accounts at the
institution at the time of the termination,  less subsequent  withdrawals  shall
continue to be insured for a period of six months to two years, as determined by
the FDIC. Management is aware of no existing circumstances which would result in
termination of the Bank's deposit insurance.

         The FDIC's deposit insurance premiums are assessed through a risk-based
system under which all insured  depository  institutions  are placed into one of
nine  categories  and  assessed  insurance  premiums  based upon their  level of
capital and supervisory evaluation. Under the system, institutions classified as
well   capitalized   and  considered   healthy  pay  the  lowest  premium  while
institutions  that  are less  than  adequately  capitalized  and  considered  of
substantial  supervisory concern pay the highest premium. Risk classification of
all insured  institutions  is made by the FDIC for each  semi-annual  assessment
period.

                                       35
<PAGE>
         The FDIC is authorized to increase  assessment  rates, on a semi-annual
basis, if it determines that the reserve ratio of the SAIF (Savings  Association
Insurance Fund) will be less than the designated  reserve ratio of 1.25% of SAIF
insured deposits. In setting these increased assessments,  the FDIC must seek to
restore the  reserve  ratio to that  designated  reserve  level,  or such higher
reserve  ratio as  established  by the FDIC.  The FDIC may also  impose  special
assessments  on SAIF members to repay  amounts  borrowed  from the United States
Treasury or for any other reason deemed necessary by the FDIC.

         Effective  January  1,  1997,  the  premium  schedule  for BIF and SAIF
insured  institutions  ranges  from  0 to  27  basis  points.  However,  insured
institutions are required to pay a Financing Corporation assessment, in order to
fund the  interest  on bonds  issued to resolve  thrift  failures in the 1980's,
equal to approximately 6 basis points for each $100 in domestic deposits,  while
BIF insured  institutions pay an assessment equal to approximately 1 basis point
for each $100 in domestic deposits.  The assessment is expected to be reduced to
about  2  basis  points  no  later  than  January  1,  2000,  when  BIF  insured
institutions fully participate in the assessment.  These assessments,  which may
be revised based upon the level of BIF and SAIF deposits will continue until the
bonds mature in the year 2017.

         The BIF fund met its target  reserve level in September  1995,  but the
SAIF was not  expected  to meet its target  reserve  level  until at least 2002.
Consequently,  in late 1995,  the FDIC approved a final rule  regarding  deposit
insurance  premiums  which,  effective  with respect to the semi-annual  premium
assessment beginning January 1, 1996, reduced deposit insurance premiums for BIF
member  institutions  to zero  basis  points  (subject  to an annual  minimum of
$2,000) for institutions in the lowest risk category. Deposit insurance premiums
for SAIF members were  maintained at their existing  levels (23 basis points for
institutions in the lowest risk category).

         On September 30, 1996, President Clinton signed into law legislation to
eliminate  the  premium  differential  between  SAIF-insured   institutions  and
BIF-insured  institutions by recapitalizing  the SAIF's reserves to the required
ratio of 1.25% of insured deposits. The legislation provided that the holders of
SAIF-assessable  deposits pay a one-time special  assessment to recapitalize the
SAIF. The legislation also provided for the merger of the BIF and the SAIF, with
such merger being  conditioned upon the prior elimination of the thrift charter.
Effective  October  8,  1996,  FDIC  regulations   imposed  a  one-time  special
assessment  equal to 65.7 basis  points for all  SAIF-assessable  deposits as of
March 31, 1995, which was collected on November 27, 1996.

         Following the imposition of the one-time special  assessment,  the FDIC
lowered  assessment  rates for SAIF  members  to  reduce  the  disparity  in the
assessment  rates  paid by BIF and SAIF  members.  Beginning  October  1,  1996,
effective  BIF and SAIF rates  both  range  from zero  basis  points to 27 basis
points. From 1997 through 1999, FDIC-insured institutions will pay approximately
1.3 basis points of their BIF-assessable  deposits and 6.4 basis points of their
SAIF-assessable deposits to fund the Financing Corporation. The Bank's insurance
premiums,  which  had  amounted  to  the  minimum  $2,000  annual  fee  for  its
BIF-insured deposits, were increased to 1.3 basis points. The Bank paid $204,000
in insurance premiums during 1998.

                                       36
<PAGE>
         Community   Reinvestment  Act  and  the  Fair  Lending  Laws.   Savings
associations have a responsibility under the Community  Reinvestment Act ("CRA")
and  related  regulations  of the OTS to help  meet  the  credit  needs of their
communities,  including low- and moderate-income neighborhoods. In addition, the
Equal  Credit  Opportunity  Act and the Fair  Housing Act  (together,  the "Fair
Lending Laws") prohibit lenders from  discriminating  in their lending practices
on the basis of  characteristics  specified in those statutes.  An institution's
failure to comply  with the  provisions  of CRA could,  at a minimum,  result in
regulatory  restrictions on its activities,  and failure to comply with the Fair
Lending  Laws could result in  enforcement  actions by the OTS, as well as other
federal regulatory agencies and the Department of Justice.

         New  Safety and  Soundness  Guidelines.  The OTS and the other  federal
banking  agencies  have   established   guidelines  for  safety  and  soundness,
addressing  operational  and  managerial,  as well as  compensation  matters for
insured financial institutions. Institutions failing to meet these standards are
required to submit compliance plans to their appropriate federal regulators. The
OTS and the other  agencies have also  established  guidelines  regarding  asset
quality and earnings standards for insured institutions.

         Change of Control.  Subject to certain limited  exceptions,  no company
can acquire control of a savings  association  without the prior approval of the
OTS, and no individual may acquire  control of a savings  association if the OTS
objects.  Any company that acquires control of a savings  association  becomes a
savings and loan holding company subject to extensive registration,  examination
and regulation by the OTS. Conclusive control exists,  among other ways, when an
acquiring party acquires more than 25% of any class of voting stock of a savings
association or savings and loan holding  company,  or controls in any manner the
election  of a  majority  of  the  directors  of the  company.  In  addition,  a
rebuttable  presumption  of control  exists if,  among  other  things,  a person
acquires more than 10% of any class of a savings association or savings and loan
holding  company's  voting  stock (or 25% of any class of stock)  and, in either
case, any of certain additional control factors exist.

         Under recent legislation, companies subject to the Bank Holding Company
Act that acquire or own savings  associations  are no longer  defined as savings
and loan holding  companies  under the HOLA and,  therefore,  are not  generally
subject to  supervision  and  regulation  by the OTS.  OTS approval is no longer
required for a bank holding company to acquire control of a savings association,
although  the  OTS  has  a  consultative  role  with  the  FRB  in  examination,
enforcement and acquisition matters.

                                    TAXATION
Federal Taxation

         General.  The  Company  and the  Bank are  subject  to  federal  income
taxation in the same general manner as other  corporations  with some exceptions
discussed below.  The following  discussion of federal taxation is intended only
to  summarize  certain  pertinent  federal  income  tax

                                       37
<PAGE>
matters and is not a  comprehensive  description of the tax rules  applicable to
the Bank.  The Bank's  federal  income tax returns  have been  audited or closed
without audit by the IRS through 1993.

         Method  of  Accounting.  For  federal  income  tax  purposes,  the Bank
currently  reports its income and expenses on the accrual  method of  accounting
and uses a tax year  ending  December  31 for  filing its  consolidated  federal
income tax returns.  The Small Business  Protection Act of 1996 (the "1996 Act")
eliminated  the use of the reserve method of accounting for bad debt reserves by
savings institutions, effective for taxable years beginning after 1995.

         Bad Debt  Reserves.  Prior to the 1996 Act,  the Bank was  permitted to
establish a reserve for bad debts and to make annual  additions  to the reserve.
These additions could,  within specified formula limits, be deducted in arriving
at the Bank's taxable income. As a result of the 1996 Act, the Bank must use the
specific chargeoff method in computing its bad debt deduction beginning with its
1996  Federal tax return.  In  addition,  the federal  legislation  requires the
recapture  (over a six year  period) of the excess of tax bad debt  reserves  at
December 31, 1995 over those  established as of December 31, 1987. The amount of
such reserve subject to recapture as of December 31, 1998 is approximately  $7.0
million. The Bank began to recapture the reserve in 1998.

         As discussed more fully below, the Bank and subsidiaries  file combined
New York State  Franchise and New York City Financial  Corporation  tax returns.
The basis of the determination of each tax is the greater of a tax on entire net
income (or on  alternative  entire  net  income)  or a tax  computed  on taxable
assets. However, for state purposes, New York State enacted legislation in 1996,
which  among  other  things,  decoupled  the Federal and New York State tax laws
regarding  thrift bad debt  deductions  and permits the continued use of the bad
debt reserve  method under  section 593.  Thus,  provided the Bank  continues to
satisfy certain definitional tests and other conditions,  for New York State and
City income tax  purposes,  the Bank is permitted to continue to use the special
reserve method for bad debt  deductions.  The deductible  annual addition to the
state reserve may be computed using a specific  formula based on the Bank's loss
history  ("Experience  Method")  or a statutory  percentage  equal to 32% of the
Bank's New York State or City taxable income ("Percentage Method").

         Taxable  Distributions  and Recapture.  Prior to the 1996 Act, bad debt
reserves created prior to January 1, 1988 were subject to recapture into taxable
income should the Bank fail to meet certain thrift asset and definitional tests.
New  federal  legislation  eliminated  these  thrift  related  recapture  rules.
However, under current law, pre-1988 reserves remain subject to recapture should
the Bank make  certain  non-dividend  distributions  or cease to maintain a bank
charter.

         At December  31, 1998 the Bank's  total  federal  pre-1988  reserve was
approximately  $11.7 million.  This reserve  reflects the cumulative  effects of
federal tax deductions by the Bank for which no Federal income tax provision has
been made.

         Minimum Tax. The Code imposes an  alternative  minimum tax ("AMT") at a
rate of 20% on a base of regular  taxable  income plus  certain tax  preferences
("alternative  minimum  taxable  income" or  "AMTI").  The AMT is payable to the
extent such AMTI is in excess of an exemption

                                       38
<PAGE>
amount.  Net  operating  losses  can  offset no more  than 90% of AMTI.  Certain
payments of alternative  minimum tax may be used as credits  against regular tax
liabilities  in future years.  The Bank has not been subject to the  alternative
minimum tax and has no such amounts available as credits for carryover.

         Net Operating Loss Carryovers.  A financial  institution may carry back
net  operating  losses to the  preceding  three taxable years and forward to the
succeeding  15 taxable  years.  This  provision  applies to losses  incurred  in
taxable years  beginning  after 1986. At December 31, 1998,  the Bank had no net
operating loss carryforwards for federal income tax purposes.

         Corporate  Dividends-Received  Deduction.  The Company may exclude from
its  income  100% of  dividends  received  from the Bank as a member of the same
affiliated group of corporations.  The corporate dividends-received deduction is
80% in the case of dividends  received from  corporations with which a corporate
recipient does not file a consolidated tax return,  and  corporations  which own
less than 20% of the stock of a corporation  distributing  a dividend may deduct
only 70% of dividends received or accrued on their behalf.

State and Local Taxation

         New York State and New York City  Taxation.  The  Company  and the Bank
report  income on a combined  calendar year basis to both New York State and New
York City. New York State  Franchise Tax on corporations is imposed in an amount
equal to the  greater of (a) 9% of "entire  net  income"  allocable  to New York
State (b) 3% of "alternative  entire net income" allocable to New York State (c)
0.01% of the average value of assets  allocable to New York State or (d) nominal
minimum tax. Entire net income is based on federal  taxable  income,  subject to
certain  modifications.  Alternative  entire  net  income is equal to entire net
income  without  certain  modifications.  The New York City  Corporation  Tax is
imposed using similar alternative taxable income methods and rates.

         A temporary  Metropolitan  Transportation  Business  Tax  Surcharge  on
Banking  corporations  doing  business  in the  Metropolitan  District  has been
applied since 1982.  The Bank  transacts a  significant  portion of its business
within this  District and is subject to this  surcharge.  For the tax year ended
December  31,  1998,  the  surcharge  rate  is 17% of the  State  franchise  tax
liability

         Delaware  State  Taxation.  As a Delaware  holding  company not earning
income in Delaware, the Company is exempt from Delaware corporate income tax but
is required to file an annual report with and pay an annual franchise tax to the
State of Delaware. The tax is imposed as a percentage of the capital base of the
Company  with an annual  maximum  of  $150,000.  The  Delaware  Tax for 1998 was
$122,000.  The Mortgage  Company is subject to taxes for the  additional  states
that they operate in.

                                       39
<PAGE>
PART II

Item 2.  Properties

         At  December  31,  1998,  the  Bank  conducted  its  business  from its
executive and  administrative  offices in Staten  Island,  New York, and 16 full
service  branch  offices in Staten  Island,  one full service  branch  office in
Brooklyn as well as three limited  service branch  offices,  a loan  origination
center  and its  Trust  Department  in  Staten  Island.  In  addition,  the Bank
maintains 36 automated teller machines ("ATMs"),  with at least two ATMs at each
of the Bank's branch offices, and an office for its SBLI activities.

         SIBMC  conducts  its business  from its  executive  and  administrative
office in Branchburg, New Jersey and eight retail loan origination offices.

          SIBIC  conducts  its  business  in its  executive  office  located  in
Middletown, New Jersey.

         The  following  table sets forth  certain  information  relating to the
Bank's offices at December 31, 1998.
<TABLE>
<CAPTION>
                                                                            Net Book Value of
                                                                              Property and
                                                      Lease                     Leasehold
                                     Owned or         Expiration             Improvements at         Deposits at
Location (1)                         Leased           Date                  December 31, 1998     December 31, 1998
------------                         ------           ----                  -----------------     -----------------
                                                                                   (Dollars in Thousands)
<S>                                  <C>              <C>                   <C>                   <C>
Executive Office:

15 Beach Street                     
Staten Island, NY 10304              Owned                                      1,893              $     --
                                                                                              
Branch Offices:                                                                               
                                                                                              
81-91 Water Street                   Owned                                        242               147,623
Staten Island, NY 10304                                                                       
                                                                                              
15 Hyatt Street                      Owned                                        128                65,581
Staten Island, NY 10301                                                                       
                                                                                              
257 New Dorp Lane                    Owned                                         20               139,526
Staten Island, NY 10305                                                                       
                                                                                              
260 New Dorp Lane                    Owned                                        487                   (1)
Staten Island, NY 10305                                                                       
                                                                                              
1837 Victory Boulevard               Owned                                        177               158,778
Staten Island, NY 10314                                                                       
                                                                                              
1850 Victory Boulevard               Owned                                        157                   (2)
Staten Island, NY 10314                                                                       
</TABLE>
                                       40
<PAGE>
<TABLE>
<CAPTION>
                                                                            Net Book Value of
                                                                              Property and
                                                      Lease                     Leasehold
                                     Owned or         Expiration             Improvements at         Deposits at
Location (1)                         Leased           Date                  December 31, 1998     December 31, 1998
------------                         ------           ----                  -----------------     -----------------
                                                                                   (Dollars in Thousands)
<S>                                  <C>              <C>                   <C>                   <C>
1320 Hylan Boulevard                 Owned                                        490               157,739
Staten Island, NY 10305                                                                       
                                                                                              
461-465, 475 Forest Avenue           Owned                                        684               109,209
Staten Island, NY 10310                                                                       
                                                                                              
3150 Amboy Road                      Owned                                        420               100,917
Staten Island, NY 10308                                                                       
                                                                                              
900 Huguenot Avenue                  Leased                   2000 (3)            356                71,987
Staten Island, NY 10312                                                                       
                                                                                              
5472 Amboy Road                      Owned                                      1,197                   (4)
Staten Island, NY 10309                                                                       
                                                                                              
2700 Hylan Boulevard                 Leased                  2005 (3)             388               125,032
Staten Island, NY 10306                                                                       
                                                                                              
4025 Amboy Road                      Owned                                        262               101,137
Staten Island, NY 10308                                                                       
                                                                                              
6975 Amboy Road                      Owned                                      1,372                65,808
Staten Island, NY 10309                                                                       
                                                                                              
1630 Forest Avenue                   Owned                                      1,125                86,427
Staten Island, NY 10302                                                                       
                                                                                              
43 Richomd Hill Road                 Leased                 1999 (3)              509                70,779
Staten Island, NY 10314                                                                       
                                                                                              
800 Forest Avenue                    Owned                                        808                57,928
Staten Island, NY 10310                                                                       
                                                                                              
1630 Richmond Road                   Owned                                      1,092               145,317
Staten Island, NY 10304                                                                       
                                                                                              
4310-4312-4320 Amboy Road            Leased                 2007 (3)              321                62,847
Staten Island, NY 10312                                                                       
                                                                                              
9512-20 3rd Avenue                   Leased                 1999 (3)              305                62,406
Brooklyn, NY 11209                                                                            
</TABLE>

                                       41
<PAGE>
<TABLE>
<CAPTION>
                                                                            Net Book Value of
                                                                              Property and
                                                      Lease                     Leasehold
                                     Owned or         Expiration             Improvements at         Deposits at
Location (1)                         Leased           Date                  December 31, 1998     December 31, 1998
------------                         ------           ----                  -----------------     -----------------
                                                                                   (Dollars in Thousands)
<S>                                  <C>              <C>                   <C>                   <C>
                                                                                              
Other Offices:                                                                                
                                                                                              
45 Beach Street                      Owned                                        556                   (5)
Staten Island, NY 10304                                                                       
                                                                                              
260 Christopher Lane                 Leased                2003                   184                   (6)
Staten Island, NY 10314                                                                       
                                                                                              
96 Prospect Street                   Owned                                        939                   (5)
Staten Island, NY 10304                                                                       
                                                                                              
1591 Richmond Road                   Owned                                        634                   (7)
Staten Island, NY 10304                                                                       
                                                                                              
176 Broadway                         Leased                2000                     -                   (8)
New York, NY 10038                                                                            
                                                                                              
1500 Victory Blvd.                   Leased                2002(3)                  -                   N/A
Staten Island, NY 10314                                                                       
                                                                                              
SIB Mortgage Corp.                                                                            
Executive Offices/Branch             Leased                2001                    26                   N/A
1250 Route 28                                                                                 
Branchburg, NJ 08876                                                                          
                                                                                              
99 Merimack Street                   Leased                2001                     5                   N/A
Haverhill, Ma                                                                                 
                                                                                              
86 Summit Avenue                     Leased                1999                     6                   N/A
Summit, NJ 07901                                                                              
                                                                                              
400 West Cummings Park               Leased                2001                    10                   N/A
Suite 4900                                                                                    
Woburn, MA 01801                                                                              
                                                                                              
597 Horsham Road                     Leased             Monthly                     0                   N/A
Horsham, PA                                                                                   
                                                                                              
Plaza 800 Islington Street           Leased                2001                     1                   N/A
Portsmouth, NH                                                                                
                                                                                              
29 Emmons Drive                      Leased                2002                     0                   N/A
W Windsor, NJ                                                                                 
</TABLE>


                                       42
<PAGE>
<TABLE>
<CAPTION>
                                                                            Net Book Value of
                                                                              Property and
                                                      Lease                     Leasehold
                                     Owned or         Expiration             Improvements at         Deposits at
Location (1)                         Leased           Date                  December 31, 1998     December 31, 1998
------------                         ------           ----                  -----------------     -----------------
                                                                                   (Dollars in Thousands)
<S>                                  <C>              <C>                   <C>                   <C>
                                                                                              
1111 Street Road                     Leased                2000                     0                   N/A
Southampton, NJ 18966                                                                         
                                                                                              
317 Brick Boulevard                  Leased                2003                     4                   N/A
Brick, NJ 08723                                                                               
                                                                                              
SIB Investment Corporation           Leased                2000                     0                   N/A
1650 Route 35 South                                                                           
Middletown, NJ 07748                                                                          
</TABLE>

(1)  Consists of two ATMs and a manned drive-in facility.    
(2)  Consists of three ATMs and a manned drive-in facility.  
(3)  Excludes options to extended term.
(4)  An automated drive through facility with two ATMs.
(5)  Administrative office.
(6)  Loan origination center.
(7)  Trust Department office.
(8)  SBLI Department.

                                       43
<PAGE>
Item 3.  Legal Proceedings.

         The  Company  is not  involved  in any  legal  proceedings  other  than
immaterial proceedings occurring in the ordinary course of business.

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

         Not applicable.

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

         The  information   required  herein,  to  the  extent  applicable,   is
incorporated  by  reference  from page 35 and 36 of the  Company's  1998  Annual
Report ("1998 Annual Report")

Item 6.  Selected Financial Data.

         The information  required herein is incorporated by reference from page
8 of the 1998 Annual Report.

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

         The information required herein is incorporated by reference from pages
12 to 18 of the 1998 Annual Report.

Item 7A.  Quantitative and Qualitative Disclosure about Market Risk.

         The information required herein is incorporated by reference from pages
9 to 12 of the 1998 Annual Report.

Item 8.  Financial Statements and Supplementary Data.

         The information required herein is incorporated by reference from pages
19 to 35 of the 1998 Annual Report.

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

         Not applicable.


PART III.

Item 10.  Directors and Executive Officers of the Registrant.

         The information required herein is incorporated by reference from pages
3 to 6 of the definitive  proxy  statement of the Company for the Annual Meeting
of Stockholders to be held on April 29, 1999,  which was filed on March 29, 1999
("Definitive Proxy Statement").

Item 11.  Executive Compensation.

         The information required herein is incorporated by reference from pages
10 to 14 of the  Definitive  Proxy  Statement.

                                       44
<PAGE>
Item 12.   Security Ownership of Certain Beneficial Owners and Management.

         The information required herein is incorporated by reference from pages
7 and 9 of the Definitive Proxy Statement.

Item 13.  Certain Relationships and Related Transactions.

         The information required herein is incorporated by reference from pages
14 and 15 of the Definitive Proxy Statement.

PART IV.

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

         (a)  Documents Filed as Part of this Report

         (1)      The following financial statements are incorporated by 
                  reference from Item 8 hereof (see Exhibit 13):
                  Report of Independent Auditors
                  Consolidated  Statements  of Condition as of December 31, 1998
                    and 1997.
                  Consolidated Statements of Income for the Years Ended December
                     31, 1998, 1997 and 1996.
                  Consolidated Statements of Changes in Shareholders' Equity for
                     the Years Ended December 31, 1998, 1997 and 1996.
                  Consolidated  Statements  of Cash  Flows for the  Years  ended
                     December 31, 1998, 1997 and 1996.
                  Notes to Consolidated Financial Statements.

         (2) All  schedules  for  which  provision  is  made  in the  applicable
accounting  regulation  of  the  SEC  are  omitted  because  of the  absence  of
conditions under which they are required or because the required  information is
included in the consolidated financial statements and related notes thereto.

                                       45
<PAGE>
         (3) The  following  exhibits  are filed as part of this Form 10-K,  and
this list includes the Exhibit Index.
<TABLE>
<CAPTION>
                                   Exhibit Index
                                   -------------
<S>               <C>
 3.1*             Certificate of Incorporation of Staten Island Bancorp, Inc.
 3.2*             Bylaws of Staten Island Bancorp, Inc.
 4.0*             Specimen Stock Certificate of Staten Island Bancorp, Inc.
10.1*             Form of Employment Agreement to be entered into among Staten Island Bancorp, Inc.,
                   Staten Island Savings Bank and certain executive officers.
10.2*             Form of Employment Agreement to be entered into between Staten Island Bancorp, Inc.
                    and each of Harry P. Doherty and James R. Coyle.
10.3*             Form of Employment Agreement to be entered into between Staten Island Savings Bank
                    and each of Harry P. Doherty and James R. Coyle.
10.4**            Amended and Restated 1998 Stock Option Plan  
10.5**            Amended and Restated 1998 Recognition and Retention Plan and Trust Agreement 
10.6              Deferred Compensation Plan
13.0              1998 Annual Report to Stockholders
21.0              Subsidiaries of the Registrant - Reference is made to "Item 2.
                    "Business" for the required information
23.0              Consent of Arthur Andersen, LLP
27.0              Financial Data Schedule
</TABLE>

(*)  Incorporated herein by reference from the Company's  Registration Statement
     on Form S-1 (Registration No. 333-32113) filed by the Company with the SEC.

(**) Incorporated  herein  by  reference  from the  Company's  Definitive  Proxy
     Statement dated March 29, 1999.

                                       46
<PAGE>
                                   SIGNATURES


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

                            STATEN ISLAND BANCORP, INC.


                            By:    /s/ Harry P. Doherty
                                   --------------------
                                   Harry P. Doherty
                                   Chairman and Chief Executive Officer


        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the Registrant
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
                Name                                       Title                                   Date
                ----                                       -----                                   ----
<S>                                          <C>                                              <C>
/s/ Harry P. Doherty                         Chairman and Chief Executive                     March 31, 1999
---------------------------                  Officer
Harry P. Doherty                             


/s/ James R. Coyle                           Director, President and Chief
---------------------------                  Operating Officer                                March 31, 1999
James R. Coyle                               


/s/ Edward J. Klingele                       Senior Vice President and Chief
---------------------------                  Financial Officer (principal                                    
Edward J. Klingele                           financial and accounting officer)                March 31, 1999 
                                             


/s/ Harold Banks                             Director                                         March 31, 1999
---------------------------
Harold Banks



/s/ Charles J. Bartels                       Director                                         March 31, 1999
--------------------------
Charles J. Bartels


/s/ William G. Horn                          Director                                         March 31, 1999
--------------------------
William G. Horn


/s/ Dennis P. Kelleher                       Director                                         March 31, 1999
--------------------------
Dennis P. Kelleher



/s/ Julius Mehrberg                          Director                                         March 31, 1999
---------------------------
Julius Mehrberg


/s/ John R. Morris                           Director                                         March 31, 1999
--------------------------
John R. Morris


/s/Kenneth W. Nelson                         Director                                         March 31, 1999
---------------------------
Kenneth W. Nelson


/s/ William E. O'Mara                        Director                                         March 31, 1999
--------------------------
William E. O'Mara
</TABLE>

                                       47