<PAGE>

STATEN ISLAND
[GRAPHIC-LOGO] Bancorp, Inc.
15 BEACH STREET, STATEN ISLAND, NY 10304

Member F.D.I.C. Equal Opportunity Employer, Equal Housing Lender
www.sisb.com

<PAGE>
                                 STATEN ISLAND
                          [GRAPHIC-LOGO] Bancorp, Inc.


[GRAPHIC-THREE PHOTOS]



                             Staten Island Bancorp


                             1 9 9 9 ANNUAL REPORT



<PAGE>
Profile

Staten  Island  Bancorp,  Inc.  (SIB) was  organized in 1997 and is the
holding  company for Staten  Island  Savings Bank, a federally  chartered,  FDIC
insured  thrift  institution,  originally  organized in 1864.  Headquartered  in
Staten Island,  New York, the bank operates 16 full service branches and a trust
department in Staten Island, and one branch office in Bay Ridge,  Brooklyn,  New
York.  In January  2000,  SIB  acquired  First State  Bancorp.  First State will
operate  as a  division  of Staten  Island  Savings  Bank with two  branches  in
Monmouth  County,  New Jersey and four  branches  in Ocean  County,  New Jersey.
Staten  Island  Savings Bank also has two operating  subsidiaries:  SIB Mortgage
Corp., d/b/a Ivy Mortgage; and American Construction Lending Services.

The  principal  business  of the  Bank  consists  of  attracting  deposits  from
consumers  and  businesses  in  its  market  area  and   originating   consumer,
residential,  multi-family  and commercial  real estate loans,  as well as other
business loans. Staten Island Bancorp, Inc.'s common stock is publicly traded on
the New York  Stock  Exchange  under the symbol  "SIB".  Staten  Island  Bancorp

Mission

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


[GRAPHIC-MAP]
<PAGE>
PERSONAL BANKING SERVICES
Day of Deposit-Day of Withdrawal
Savings Accounts
Holiday Club Accounts
Insured Money Market Accounts
Time Savings Accounts
Checking Accounts
Checking with Interest
Checking  Overdraft
Retirement Plans
Mortgage  Loans
Bi-weekly Mortgage Loans
Construction Loans
Home Equity Loans
Home Improvement  Loans
HomeSecured Advantage Loans
Personal Loans
Passbook Loans
Student Loans
Automated Payment System
Bank-by-Phone
Bill  Pay-by-Phone
THE bankCard
24 Hour Automated Teller Machines
Direct Deposit of Payroll
  and Government Checks
Safe Deposit Boxes
Savings Bank Life Insurance
Money Orders
Banking by Mail
U.S. Savings Bonds
Travelers Checks
Utility Bill Payments
Drive-thru Banking
PC Banking
Visa Check Card
Drive-thru ATM
<PAGE>
BUSINESS BANKING SERVICES
Business Checking Accounts
Business  Checking with Interest
 Business  Overdraft  Checking
Business Savings Accounts
Retirement  Accounts
Lawyer Escrow Accounts (IOLA)
 Bank-by-Phone
Bill Pay-by-Phone
Automatic Transfers and Payments
Direct Payroll Deposit
Payroll Check Cashing
Night  Deposit Boxes
Safe Deposit Boxes
24 Hour  Automated  Teller Machines
 Merchant Card Services
  Treasury Tax and Loan Payment
Secured Lines of Credi
 Unsecured Lines of Credit
Business Term Loans
Commercial Mortgage Loans
Construction Loans
Tailored Business Loans
Small Business Administration (SBA)
  Loans
PC Banking for Business
<PAGE>
Trust and investment  services
Estate Management
 Trust Management
Custody
Record Keeping
Income  Collection
 Security  Processing  and  Safekeeping
 Investment Management
<PAGE>
<TABLE>
<CAPTION>
Staten Island Bancorp, Inc. and Subsidiary
FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------------------------
                                                                                           At or For the Years Ended December 31,
(dollars in thousands, except per share data)                                             1999              1998            1997
------------------------------------------------------------------------------------------------------------------------------------
Operations Data
<S>                                                                                  <C>               <C>              <C>
         Net interest income ...................................................     $   138,409       $   121,072      $    86,755
         Provision (benefit) for loan losses ...................................          (1,843)            1,594            6,003
         Total other income ....................................................          30,853            10,380            7,454
         Contribution to SISB Community Foundation .............................            --                --             25,817
         Total other expenses ..................................................          82,971            55,918           42,908
                                                                                     -----------       -----------      -----------
         Income before provision for income taxes ..............................          88,134            73,940           19,481
         Provision for income taxes ............................................          35,259            29,678            4,932
------------------------------------------------------------------------------------------------------------------------------------
         Net income ............................................................          52,875            44,262           14,549
------------------------------------------------------------------------------------------------------------------------------------
Financial
Condition Data
         Total assets ..........................................................     $ 4,489,314       $ 3,776,947      $ 2,651,170
         Loans receivable, net .................................................       2,150,039         1,457,058        1,082,918
         Loans held for sale, net ..............................................          46,588            77,943             --
         Securities available for sale, net ....................................       1,963,954         2,029,041        1,350,467
         Deposits ..............................................................       1,820,233         1,729,061        1,623,652
         Borrowed funds ........................................................       2,049,411         1,344,517          250,042
         Stockholders' equity ..................................................         571,377           669,042          685,886
         Non-performing assets .................................................          13,361            17,081           21,943
         Net loan charge-offs ..................................................             503               782              271
         Allowance for loan losses .............................................          14,271            16,617           15,709
------------------------------------------------------------------------------------------------------------------------------------
Selected Financial Ratios
         Stockholders' equity to total assets ..................................           12.73%           17.71%            25.87%
         Tangible equity to assets .............................................           13.01            16.84             24.78
         Total risk-based capital ..............................................           25.58            35.93             59.62
         Net interest margin ...................................................            3.50             4.13              4.39
         Interest rate spread ..................................................            2.60             2.93              3.82
         Return on average assets ..............................................            1.28             1.45              0.70
         Return on average equity ..............................................            8.44             6.39              7.79
         Efficiency ratio ......................................................           47.70            41.11             43.30
         Non-performing assets to total assets .................................            0.30             0.45              0.83
------------------------------------------------------------------------------------------------------------------------------------
Per Share
Data
         Basic earnings (loss) since conversion ................................     $      1.40      $      1.06       $     (0.29)
         Fully diluted earnings (loss) since conversion ........................            1.40             1.06             (0.29)
         Tangible book value ...................................................           14.37            14.90             14.79
         Market value ..........................................................           18.00            19.94             20.94
         Cash dividends declared ...............................................            0.44             0.32                --
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Total  Assets (In  millions  of dollars)  [Graphic - bar chart]
Total Loans (In millions  of  dollars)  [Graphic - bar chart]
Total Deposits (In millions of dollars) [Graphic - bar chart]

                                                                               1
<PAGE>
1999 Highlights

Earnings per share increased by 32.1%
Residential loan production exceeds a record  $1.3  billion
Commercial loan production reaches a record $360 million
Non-performing loans decline to 0.28% of total loans
Formed American Construction Lending Services
Deposit share in Staten Island increases to 30.4%
Announced intention to acquire First State Bancorp in New Jersey
Received approvals for three new branches in the year 2000

TO OUR SHAREHOLDERS

  "Our  success  is due to a  number  of  factors,  not the  least of which is a
dedication toward product development and excellence in customer service."

  We are  pleased  to  present  this  report  to you  following  the  successful
completion of our second year as a public company. The year 1999 was highlighted
by our ability to significantly  improve upon the earnings momentum generated in
our first year, while we continued to position our Company for future growth and
profitability.

  In the third  quarter of 1999,  we announced  our  agreement to acquire  First
State Bancorp and its  subsidiary,  First State Bank, a $374 million  commercial
bank with  branches  located in Monmouth and Ocean  Counties,  New Jersey.  This
acquisition was completed in January 2000.

  In the fourth  quarter we announced  the  formation  of American  Construction
Lending  Services  (ACLS),  as an  operating  subsidiary  of the Bank  providing
construction  lending on a nationwide  basis.  ACLS initiated loan production in
the fourth quarter.

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

  We are proud of the accomplishments noted in this report and eager to continue
to provide  results that reflect our  commitment  toward  improving  shareholder
value.

  The  Financial  Year in Review

  Last year we  reported  that  strategies  were in place that would  enable the
Company to continue earnings growth and business  expansion.  Net income for the
year 1999 was $52.9 million or

2
<PAGE>
         "We are proud of the accomplishments noted in this report and
        eager to continue to provide results that reflect our commitment
                      toward improving shareholder value."
--------------------------------------------------------------------------------

$1.40 on a diluted per share basis. This represents a very strong 32.1% increase
in earnings per share as compared to the prior year.

  Total assets  increased by 18.9% to $4.5  billion--primarily  through  another
year of record  growth of $662 million in net loans.  Asset  generation  through
loan growth remains an enormous  strength of our Company.  This is  accomplished
through expansion into new markets,  close monitoring of the changing demands of
the residential and commercial  marketplace,  flexibility in product  offerings,
and a high level of service to loan brokers and individual borrowers.  In total,
the Company  originated  $1.6 billion in loans, an increase of $964 million over
last year. Our mortgage banking subsidiary,  Ivy Mortgage,  originated over $700
million in residential  mortgage loans, of which $85 million in  adjustable-rate
loans  are  held  in  the  Bank's   portfolio.   We  anticipate   that  our  new
construction-lending  subsidiary,  American Construction Lending Services, Inc.,
will enable the Company to  capitalize  on the  opportunities  available in this
rapidly growing loan sector.

  Asset  growth was mainly  funded by an  increase  of $705  million in borrowed
funds,  a  capital  management  strategy  that was  implemented  in an effort to
prudently  generate  earnings on the expanded  capital base  resulting  from the
Bank's stock  conversion in December  1997.  Borrowings  now total $2.0 billion.
While we have been  comfortable with this strategy to date, we do not anticipate
materially  increasing  borrowings in the year 2000.  This means that additional
loan  growth  will be funded  through  cash  flows  and sales of our  securities
portfolio,  sales of long-term  fixed-rate  mortgage loans,  and through deposit
growth in new markets.  Our net loan growth of 43% during 1999 was  accomplished
through a significant  increase in loan originations,  primarily with respect to
loans on one-to-four family residential properties,  the traditional backbone of
our lending  operations.  We also  continued to diversify our loan  portfolio by
pursuing commercial real estate and other business lending opportunities.

  Loan quality  remains a priority,  particularly  as we expand into new markets
with a much broader  product  line.  We are proud to report that,  while we have
substantially  increased our loan portfolio, we also have reduced non-performing
assets.  Non-performing  loans  declined by 21.7% during the year, and now total
$12.5 million, or 0.28% of total assets. At year-end the Company's allowance for
loan losses was $14.3 million, or 114.4% of non-performing loans.

  Despite  steadily rising  interest rates  throughout the year, we were able to
reduce the overall  cost of deposits  from 2.96% to 2.75%,  and at the same time
increase  market share and maintain our level of core deposits at an outstanding
69% of total  deposits.  This  was  accomplished  through  continued  growth  in
lower-cost  commercial deposit accounts,  and from customer loyalty created as a
result of our strong service and cross-selling practices.


                                                                               3
<PAGE>
           "Our success is due to a number of factors, not the least
            of which is a dedication toward product development and
                        excellence in customer service."
--------------------------------------------------------------------------------

Capital  Management Strategies

  The  continuation  of  effective  capital  management  strategies  remained  a
priority  throughout 1999. These strategies included a stock repurchase program,
the payment of regular  quarterly  dividends,  acquisition  and  expansion,  and
prudent leveraging of the balance sheet.

  Regular quarterly  dividend payments continued in 1999 with total dividends of
$0.44 per  share  declared  during  the year.  The  stock  repurchase  plan also
continued,  and by  December,  the  Company  completed  its third 5%  repurchase
program. In total, $93.7 million was used to repurchase Company stock during the
year.  We remain  predisposed  toward this program as a way of deploying  excess
capital,  and the Company commenced a new 5% repurchase program during the first
quarter 2000.

  As we mentioned in the  introduction,  two important  decisions were made with
respect to expansion  of the Company in 1999.  We formed  American  Construction
Lending  Services,  Inc.,  in an effort to  capitalize  on the  rapidly  growing
segment of residential  construction  lending occurring  throughout the country.
ACLS is operated by senior lenders with  significant  prior  experience  serving
this  segment.  We expect that ACLS will enable the Company to improve its yield
on interest  earning assets  through a product line of short-term  variable-rate
loans.

  The Company also announced the  acquisition  of First State Bancorp,  Inc. and
First State Bank,  a $374  million  commercial  bank with six  branches  serving
communities in Monmouth and Ocean  Counties,  New Jersey.  This is the Company's
first extension of branch  operations west into the State of New Jersey and will
serve as the platform for continued geographic and product expansion.  With cost
savings  resulting from the  elimination  of duplicate  operations and selective
restructuring of First State's balance sheet, this transaction is expected to be
accretive to cash earnings in 2000.

Expanding the Franchise

  The formation of ACLS and the  acquisition  of First State should  enhance the
Company's  core deposit and lending  franchise and improve the earnings  stream.
Synergies  between the Bank's loan  department,  Ivy Mortgage and ACLS are being
implemented which we anticipate will make the origination, servicing and sale of
loans much more efficient, less costly and more profitable.

  We also anticipate  excellent  opportunities to grow market share in the First
State  markets due to the broader  range of  commercial  and  consumer  products
supported  by Staten  Island  Savings  Bank's state of the art  technology,  and
proven expertise in product delivery and service.

  Our ability to serve the financial  needs of individuals and businesses in our
core markets is demonstrated  by our ongoing  leadership role in residential and
business  lending in the  communities we serve,  along with our leading share of
the Staten Island deposit market.

  Our  success  is due to a  number  of  factors,  not the  least  of which is a
dedication toward product development and excellence in customer service.

4
<PAGE>
By year-end,  new small  business  loan  products,  debit cards,  and on-line PC
banking and bill payment services were highly successful.

  The scope of services,  which also include a full service trust  department as
well as savings bank life insurance, continue to be evaluated and enhanced based
on responses from our customer base.

New Opportunities in a New Century

  We enter the 21st Century with  enthusiasm  and  confidence  in our ability to
continue to profitably grow our Company.  We have made  significant  progress in
many  areas and we look  forward  to  capitalizing  on the  decisions  that have
brought us to this point.

  Active  management  of our  balance  sheet  remains a priority  and our recent
expansion provides even greater opportunities for earnings growth,  particularly
in  developing  non-interest  income  to offset  the  compressing  net  interest
margins. We are entering new markets with new products,  and with the confidence
that our proven success and traditional customer service values will benefit our
new and future customers and, more importantly, our shareholders.

  We would like to extend our appreciation to our directors,  officers and staff
for  constantly  meeting the  challenges  presented  by our  fast-paced  growth.
Together,  we will  continue our  commitment  to the highest  quality of banking
services.  And together,  we remain  appreciative to our  shareholders for their
trust and confidence.


STATEN ISLAND
[GRAPHIC-LOGO] Bancorp, Inc.

[Graphic - PHOTO OF JAMES R. COYLE]
/S/JAMES R. COYLE
-----------------
JAMES R. COYLE
President and Chief Operating Officer

[Graphic - PHOTO OF HARRY P. DOHERTY]
/S/HARRY P. DOHERTY
-------------------
HARRY P. DOHERTY
Chairman and Chief Executive Officer

                                                                               5
<PAGE>
The Year in Review

                              Loan originations of
                           $1.6 billion exceeded 1998
                           activity by $963 million.
--------------------------------------------------------------------------------

Loan Production Increases Dramatically

  In 1999, Staten Island Savings Bank pursued new opportunities for loan growth,
while we remained  the leading  lender in our  traditional  core  markets.  Loan
production  reached  record  levels once  again.  Originations  of $1.6  billion
exceeded 1998 activity by $963 million. This production included $709 million in
loans originated by THE bank's mortgage company,  SIB Mortgage Corp.,  d/b/a Ivy
Mortgage,  which was acquired in the fourth  quarter of 1998.  In addition,  the
Bank's  residential,  commercial and consumer loan units originated in excess of
$900 million for the first time in the Bank's history. This extraordinary growth
was accomplished in several ways.

  Our extensive product line gives borrowers the opportunity to select among the
aspects that are most  important to them.  Fixed-rate  mortgage loans with terms
from  ten-to-thirty  years,  and  adjustable-rate  loans ranging from one-to-ten
years, provide ample options to borrowers with varying needs.

  "No-point"  options are available on most products,  along with other features
including  "no-income"  verification,   and  bi-weekly  payments  on  fixed-rate
mortgage loans. The availability of jumbo loans, government-backed FHA loans and
loans  provided  through  state  housing  programs such as the State of New York
Mortgage  Association  (SONYMA)  round  out the  product  mix which  covers  the
first-time buyer, to the more experienced buyer.

  Responsiveness  is another  important  factor in the successful  growth of our
residential  mortgage loan volumes.  Our Priority Access  program,  available to
mortgage  brokers,  accounted for  approximately  75% of our total mortgage loan
originations for the year. Our program members are constantly  providing us with
feedback   concerning  the  changing   conditions  of  the  residential  lending
marketplace.  This  enables us to react more quickly with respect to pricing and
product changes.

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

Loan Subsidiaries Enhance Asset Generation

  The  operations  of Ivy Mortgage and American  Construction  Lending  Services
("ACLS") extend beyond our traditional market of the New York Metropolitan area.
Ivy  Mortgage,  with its offices in 22 states,  has an  extensive  presence as a
licensed  mortgage  banker in the  northeast  and  mid-Atlantic  regions  of the
country.  The Bank also  purchased  approximately  $85 million of Ivy Mortgage's
adjustable-rate   loan   production   in  order  to   increase   the  amount  of
adjustable-rate loans in the portfolio.

                                                                 [GRAPHIC-PHOTO]

6
<PAGE>
                            [GRAPHIC-PHOTO OF HOUSE]

  We are  excited  about  the new  markets  we will  serve  through  ACLS.  With
experienced lenders in the construction lending business, ACLS is ready to serve
this  rapidly  growing  segment on a national  level.  We expect to increase our
originations of relatively  higher yielding,  variable-rate  construction  loans
through this operation.

  The  activities  of these  subsidiaries  are expected to reduce the  Company's
dependence on a single market. We will also be taking advantage of the synergies
between the Bank's lending units,  Ivy Mortgage and ACLS. These synergies should
improve the efficiency and reduce the cost of our lending operations.

Commercial Loan Production Increases by 44%

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

  The new Small  Business  Unit,  formed in the fourth quarter of 1998, was well
received  by  business  borrowers  in need of quick  decisions  on  secured  and
unsecured  loans in  amounts  up to  $100,000.  We also  initiated  a program to
utilize  representatives  of Ivy Mortgage in the delivery of this Small Business
Loan program.  By leveraging the network of Ivy Mortgage's  sales staff,  we are
committed to accelerating the growth of this unit.

Growth in the Community Bank Franchise

  In 1999,  deposits in Staten Island Savings Bank's branch network increased by
5.3%.  THE bank's  deposit  market  share on Staten  Island  increased to 30.4%.
Household  penetration  is  outstanding  and  continues  to exceed 50% of Staten
Island households.

                                                                               7
<PAGE>
                            On-line banking for home
                 and business was introduced through PC direct.
--------------------------------------------------------------------------------

  Once again our branch in Bay Ridge,  Brooklyn  experienced the largest deposit
growth in our system in 1999,  with an increase of 26% in total  deposits.  As a
result of the Bank's success in this market,  we are planning to open our second
branch in Brooklyn by the third quarter,  2000, which will serve the communities
of Bensonhurst and Borough Park.

  Core deposits  continue to exceed  two-thirds of our deposit base of which 19%
of total  deposits are  non-interest  bearing  checking  accounts.  Our weighted
average  cost of  deposits  at  year-end  (including  non-interest  bearing  DDA
accounts)  was  2.75%,  a decrease  from  2.96% at  December  31,  1998,  and
continues to place us among the top performers in our peer group.

  Product  expansion  was at the forefront of our retail  banking  strategies in
1999.  On-line  banking for home and business was introduced  through PC direct.
Using a personal  computer,  customers  can access  their  savings and  checking
account balances, review account history and checks paid, transfer money between
accounts  and more.  In addition,  on-line bill payment is available  through PC
direct.  Our  Bank-by-phone  service was also  enhanced to include  bill payment
capabilities.

  We also introduced our website on the Internet. By logging on to www.sisb.com,
consumers,  businesses  and investors can access the latest  information  on the
Bank's products,  services and financial results.  We are planning to expand our
Internet  presence in 2000 by transferring  on-line banking and bill payment and
other transaction based business to the world wide web.

  During 1999, we also expanded the functionality of our ATM card by introducing
the Visa Check Card.  This new product  enables  customers to make  payments for
purchases  directly from their  checking  account by using their ATM card at all
retail and merchant locations where Visa is accepted.

  Product  expansion  has  occurred  in  response  to  customer  demand  and our
continuing  commitment  to meet the  constantly  changing  needs of our customer
base.  One forum used for  customer  feedback is  regularly  scheduled  customer
satisfaction surveys. Responses to these surveys continue to reflect high levels
of customer  satisfaction  among the 70,000 plus households  doing business with
THE bank.

  New business  development is accomplished  through the full-time  efforts of a
team of officers.  Branch  managers are actively  involved in calling on current
customers in order to seek new opportunities or handle current needs. We plan to
continue to integrate  the  activities  of our branch  network,  loan  officers,
business  development  staff and  back-office  operations  to  provide  seamless
service to our customers.

  We also  recognize  that our high  penetration  into the  local  business  and
consumer markets presents  excellent  opportunities  for growth through expanded
product use by current customers.  Staff training directed toward  cross-selling
banking  services  continues,  and  enables THE bank to  strengthen  the overall
relationship with our customers.

[GRAPHIC-PHOTO]
8
<PAGE>
  Personal and business  customers  also have access to services  which  include
trust and  estate  planning,  retirement  planning,  and  investment  management
planning  services.  Our Trust  Department  currently has $133 million in assets
under management.  The availability of Trust services remains another source for
establishing profitable relationships.

Expansion Through Acquisition

  In August 1999, as part of its efforts to  strengthen  its franchise and enter
new markets,  Staten  Island  Bancorp  announced  its intention to acquire First
State Bancorp and its  subsidiary,  First State Bank, a $374 million  commercial
bank with six branch offices. The acquisition was completed in January 2000.

  The First State Division serves as the Bank's platform for entering the strong
markets of Monmouth and Ocean Counties,  New Jersey.  Significant  opportunities
for growth exist  through the  implementation  of Staten Island  Savings  Bank's
proven  sales and service  philosophies.  The  introduction  of new business and
consumer products to the 10,000 households currently banking at First State will
include  electronic banking services,  mortgage and consumer loans,  secured and
unsecured  commercial loans and trust services.  We also have received approvals
to open two new branches in Ocean County by year-end.

  We understand  that an important  element to the  successful  expansion of our
Company is keeping a sharp focus on the traditional values of community banking.
Customer service, accessibility, convenience, flexibility and responsiveness are
several factors associated with our current and future success.

  We have  confidence that we will meet the needs of consumers and businesses in
new markets as  successfully  as we have in current  markets.  Our commitment to
staff training and development,  technology and carefully planned geographic and
product expansion will ensure this success.

[GRAPHIC-PHOTO]
                                                                               9
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
SELECTED  CONSOLIDATED  FINANCIAL AND OTHER DATA

  The  following  selected  historical  financial  data for the five years ended
December 31, 1999 is derived in part from the audited  financial  statements  of
the Company.  The selected  historical  financial data set forth below should be
read in  conjunction  with the historical  financial  statements of the Company,
including the related notes, included elsewhere herein.
<TABLE>
<CAPTION>

                                                                                       December 31,
                                                      ------------------------------------------------------------------------------
(000's omitted except share data)                          1999            1998            1997            1996             1995
<S>                                                   <C>             <C>             <C>               <C>             <C>
Selected Financial Condition Data:
  Total assets ..................................     $  4,489,314    $  3,776,947    $  2,651,170      $  1,782,323    $  1,728,130
  Securities available for sale, net ............        1,963,954       2,029,041       1,350,467           703,134         788,622
  Loans receivable, net .........................        2,150,039       1,457,058       1,082,918           968,015         801,137
  Loans held for sale, net ......................           46,588          77,943            --                --              --
  Intangible assets(1) ..........................           15,432          17,701          18,414            20,490          22,633
  Deposits ......................................        1,820,233       1,729,061       1,623,652         1,577,748       1,535,617
  Borrowings ....................................        2,049,411       1,344,517         250,042                54              46
  Stockholders' equity ..........................          571,377         669,042         685,886           171,080         150,082
  Tangible book value per share .................            14.37          14.90            14.79              --              --
  Common Shares Outstanding .....................       38,693,623      43,704,812      45,130,312              --              --

<CAPTION>

                                                                                For the Year Ended December 31,
                                                      ------------------------------------------------------------------------------
Selected Operating Data:                                    1999            1998            1997              1996            1995
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>               <C>             <C>
Net interest income .............................     $    138,409    $    121,072    $     86,755      $     73,993    $     60,122
Provision (benefit) for loan losses .............           (1,843)          1,594           6,003             1,000             --
Other income ....................................           30,853          10,380           7,454             3,929           4,040
Charitable contribution to
  SISB Community Foundation .....................             --              --            25,817              --              --
Other expenses ..................................           82,971          55,918          42,908            40,066          32,953
Income tax expense ..............................           35,259          29,678           4,932            15,081          13,284
Net income ......................................     $     52,875    $     44,262    $     14,549      $     21,775    $     13,225
Earnings (loss) per share basic and fully diluted     $       1.40    $       1.06    $       (.29)(3)           --              --
Dividends paid ..................................     $        .41    $        .23    $       --        $        --     $        --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                            At or For the Year Ended December 31,
                                                      -----------------------------------------------------
Key Operating Ratios:                                 1999       1998       1997        1996         1995
-----------------------------------------------------------------------------------------------------------
<S>                                                 <C>         <C>         <C>         <C>         <C>
Performance Ratios:(2)(3)
  Return on average assets .................          1.28%       1.45%       0.70%       1.24%       0.88%
  Return on average equity .................          8.44        6.39        7.79       14.03        9.54
  Average interest-earning assets to
    average interest-bearing liabilities ...        125.65      139.98      118.70      120.24      117.17
  Interest rate spread(4) ..................          2.60        2.93        3.82        3.84        3.63
  Net interest margin(4) ...................          3.50        4.13        4.39        4.46        4.16
  Non-interest expenses, exclusive of
    amortization of intangible
    assets, to average assets ..............          1.93        1.76        1.96        2.16        2.11
Asset Quality Ratios:
  Non-performing assets to
    total assets at end of period(5) .......          0.30%       0.45%       0.83%       1.34%       1.44%
  Allowance for loan losses to
    non-performing loans at
    end of period ..........................        114.40      102.37       73.69       43.85       44.20
  Allowance for loan losses to
    total loans at end of period ...........          0.66        1.13        1.42        1.02        1.32
Capital Ratios:
  Average equity to average assets(3) ......         15.17%      22.64%       8.96%       8.85%       9.21%
  Tangible equity to assets at end of period         13.01       16.84       24.78        8.55        7.09
  Total capital to risk-weighted assets ....         25.58       35.93       59.62       20.66       19.65

</TABLE>
(1)Consists  of  excess  of  cost  over  fair  value  of  net  assets   acquired
   ("goodwill") and core deposit intangibles which amounted to $13.5 million and
   $1.9 million, respectively at December 31, 1999.
(2)With the exception of end of period  ratios,  all ratios are based on average
   daily balances during the respective periods.
(3)The  conversion  proceeds  were  received on December  22, 1997 and have been
   reflected  in the  performance  and other  ratios as of that date.  Per share
   information for 1997 is since conversion.
(4)Interest rate spread  represents the difference  between the weighted average
   yield  on   interest-earning   assets  and  the  weighted   average  cost  of
   interest-bearing  liabilities;  net interest  margin  represents net interest
   income as a percentage of average interest-earning assets.
(5)Non-performing  assets consist of non-accrual  loans and real estate acquired
   through foreclosure or by deed-in-lieu thereof.

10
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

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

  Market Risk.  The  Company's  primary  market risk is in market  interest rate
volatility  due to the  potential  impact on net interest  income and the market
value of all interest-earning assets and interest-bearing  liabilities resulting
from changes in interest rates. The operation of the Company does not subject it
to foreign  exchange or  commodity  price risk and the Company  does not own any
trading  assets.  The real estate loan portfolio of the Company is  concentrated
primarily within the New York  metropolitan  area making it subject to the risks
associated with the local economy.
<PAGE>
Interest  Rate  Sensitivity.  Interest  rate  sensitivity  is a  measure  of the
difference  between  amounts of  interest-earning  assets  and  interest-bearing
liabilities  which either  reprice or mature within a given period of time.  The
difference,  or the interest rate repricing  "gap" provides an indication of the
extent by which an  institution's  interest  rate  spread  will be  affected  by
changes in  interest  rates.  A gap is  considered  positive  when the amount of
interest rate  sensitive  assets  exceeds the amount of interest rate  sensitive
liabilities,  and is  considered  negative  when the  amount  of  interest  rate
sensitive  liabilities  exceeds the amount of interest  rate  sensitive  assets.
Generally,  during a period of rising  interest  rates,  a  negative  gap within
shorter maturities would adversely affect net interest income,  while a positive
gap within  shorter  maturities  would  result in an  increase  in net  interest
income,  and during a period of falling  interest  rates,  a negative gap within
shorter  maturities  would result in an increase in net interest  income while a
positive gap within shorter  maturities  would have the opposite  effect.  As of
December 31, 1999, the ratio of the Company's one-year gap to total assets was a
negative  26.0% and its  ratio of  interest-earning  assets to  interest-bearing
liabilities maturing or repricing within one year was 46.72%.

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

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

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

  At December 31, 1999, based on this model, the Company's potential earnings at
risk to a gradual 200 basis point rise or decline in market  interest rates over
the next twelve months was a 3.37% decrease in projected net income for the year
2000 in a rising rate environment and a 6.62% increase in projected net income

                                                                              11
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

  Actual  interest  rate changes  during the past three years have fallen within
this range and  management  expects that any changes over the next year will not
exceed this range.

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

  The Company also  reviews the market value of portfolio  equity (NPV) which is
defined  as  the  net  present  value  of  an  institution's   existing  assets,
liabilities and off balance sheet instruments,  on a quarterly basis. The Office
of Thrift  Supervision (OTS) monitors the Bank's interest rate risk through this
calculation,  which they prepare quarterly, based on information provided by the
Bank.  In addition  the Company  prepares its NPV  calculation  based on its own
assumptions which could vary from those used by the OTS.

<TABLE>
<CAPTION>
                                                           Four to       More than       More than
                                         Within Three      Twelve       One Year to   Three Years to    Over Five
                                            Months         Months       Three Years      Five Years       Years            Total
                                         -----------    -----------    -----------    -----------     -----------     -----------
                                                                           (dollars in thousands)
<S>                                      <C>            <C>            <C>            <C>             <C>             <C>
Interest-earning assets(1):
  Loans receivable(2):
    Mortgage loans:
      Fixed .........................    $    56,372    $   155,405    $   329,562    $   247,112     $   455,059     $ 1,243,510
      Adjustable ....................        141,449        182,255        267,304        223,254          50,339         864,601
    Other loans .....................          5,051         18,731         18,947         15,815          26,232          84,776
Securities:
  Non-mortgage(3) ...................         94,907         20,659          6,701         10,651         385,680         518,598
  Mortgage-backed fixed(4) ..........         54,017        163,723        457,693        233,833         262,920       1,172,186
  Mortgage-backed adjustable(4) .....         31,772         78,329        143,352         84,490           1,828         339,771
Other interest-earning assets .......         20,400           --             --             --              --            20,400
                                         -----------    -----------    -----------    -----------     -----------     -----------
  Total interest-earning assets .....    $   403,968    $   619,102    $ 1,223,559    $   815,155     $ 1,182,058      $4,243,842
                                         ===========    ===========    ===========    ===========     ===========     ===========
Interest-bearing liabilities:
  Deposits:
    NOW accounts(5) .................          8,432         25,296         30,993          8,204          18,232          91,157
    Savings accounts(5) .............         31,356         94,069        191,826        125,425         295,118         737,794
    Money market deposit accounts(5)          17,578         52,735          9,790          4,673           4,228          89,004
    Certificates of deposit .........        234,511        222,938         98,721         16,873            --           573,043
  Other borrowings ..................        635,585        867,137        356,689        190,000            --         2,049,411
                                         -----------    -----------    -----------    -----------     -----------     -----------
  Total interest-bearing liabilities     $   927,462    $ 1,262,175    $   688,019    $   345,175     $   317,578     $ 3,540,409
                                         ===========    ===========    ===========    ===========     ===========     ===========
Excess (deficiency) of
  interest-earning assets over
    interest-bearing liabilities ....    $  (523,494)   $  (643,073)   $   535,540    $   469,980     $   864,480     $   703,433
                                         ===========    ===========    ===========    ===========     ===========     ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                      <C>            <C>            <C>            <C>             <C>             <C>
Cumulative excess (deficiency) of
  Interest-earning assets over
    interest-bearing liabilities ....    $  (523,494)   $(1,166,567)   $  (631,027)   $  (161,047)    $   703,433
Cumulative excess (deficiency) of
    interest-earning assets over
    interest-bearing liabilities as a
    percent of assets ...............         (11.66)%       (25.99)%       (14.06)%        (3.59)%        15.67%
                                         ===========    ===========    ===========    ===========     ===========     ===========
</TABLE>

(1) Adjustable-rate loans are included in the period in which interest rates are
next  scheduled  to adjust  rather than in the period in which they are due, and
fixed-rate  loans are included in the periods in which they are  scheduled to be
repaid,  based on  scheduled  amortization,  as  adjusted  to take into  account
estimated prepayments in the current rate environment.
(2) Balances have been reduced for non-performing loans, which amounted to $12.5
million at December 31, 1999.
(3) Reflects estimated prepayments in the current interest rate environment.
(4) Based on contractual maturities.
(5) Although the  Company's NOW accounts,  passbook  savings  accounts and money
market  deposit  accounts  are  subject  to  immediate  withdrawal,   management
considers  a  substantial  amount of such  accounts to be core  deposits  having
significantly  longer  effective  maturities.  The  decay  rates  used on  these
accounts are based on the latest  available  OTS  assumptions  and should not be
regarded as indicative of the actual  withdrawals that may be experienced by the
Company.  If all of the Company's NOW accounts,  passbook  savings  accounts and
money market deposit accounts had been assumed to be subject to repricing within
one year, interest-bearing liabilities which were estimated to mature or reprice
within one year would have  exceeded  interest-earning  assets  with  comparable
characteristics by $1.9 billion or 41.32% of total assets.


12
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

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

CHANGES IN FINANCIAL CONDITION

General. The Company recorded total assets of $4.5 billion at December 31, 1999,
representing  a $712.4  million or 18.9%  increase  from the level  recorded  at
December 31, 1998. The primary  components of asset growth were a $661.6 million
or 43.1%  increase in net loans and a $143.0  million  increase in other assets.
The primary source of funding for asset growth was an increase in borrowed funds
of $704.9 million or 52.4% and an increase of $91.2 million or 5.3% in deposits.


  Cash and Cash Equivalents. Cash and cash equivalents which consist of cash and
due from banks, money market accounts and federal funds sold, amounted to $101.4
million  and  $133.1  million  at  December  31,  1999 and  December  31,  1998,
respectively.  The decrease of $31.7 million or 23.8% between  December 31, 1998
and December 31, 1999 was  primarily  due to the  increased  investment of funds
into the origination of new loans.

  Loans.  The Company's net loan portfolio  increased $661.6 million or 43.1% to
$2.2 billion at December 31, 1999. The increase in the loan portfolio was due to
record loan  originations of $1.6 billion or $963.6 million more than last year.
Included  in the amount  originated  is $708.5  million in  originations  by the
Bank's mortgage  banking  subsidiary,  Ivy Mortgage.  Loan sales during the year
amounted to $644.6 million, primarily due to the operation of Ivy Mortgage. Loan
demand was  primarily  in one to four family  residential  loans,  however,  the
Company also had  originations  of commercial  real estate loans totaling $126.6
million.  The Company continues to expand its lending activities through the use
of business  development  officers,  commercial  loan  officers,  mortgage  loan
originators  and  mortgage  brokers.  The  Company  retained  $85.0  million  of
adjustable-rate  residential  loans  originated  by Ivy  Mortgage  for  its  own
portfolio.  The  formation  of it's  subsidiary  American  Construction  Lending
Services  Inc.,  is  expected  to enhance  the  Company's  ability  to  generate
increased  volumes of  relatively  higher  yielding  variable-rate  construction
loans.   ACLS  recently  began   originating   loans  for  the  construction  of
single-family  residential and, to a lesser extent, commercial real estate loans
on a non-speculative  (pre-sold) basis.

  Securities. Securities amounted to $2.0 billion at December 31, 1999 and 1998.
These amounts  represent 43.7% and 53.7% of assets,  respectively.  The decrease
reflects the  Company's  efforts to reallocate  cash flows into higher  yielding
loans.  All of the Company's  securities are classified as available for sale at
such dates.

  Other Assets.  The primary  reason for the increase in other assets was due to
the implementation of a bank owned life insurance program (BOLI) for the purpose
of funding various  employee benefit  programs.  The cash surrender value of the
life insurance policies is recorded as other assets,  resulting in the increase.
<PAGE>
Deposits.  Deposits  rose $91.2  million to $1.8  billion at  December  31, 1999
primarily  reflecting  increases of $35.9 million in certificates of deposits to
$573.0 million, $34.6 million in demand deposits to $340.0 million, $7.2 million
in savings  deposits to $737.8  million,  $6.8  million in NOW deposits to $80.4
million and $6.6  million in money  market  deposits to $89.0  million.  Deposit
growth  especially  in  demand  deposits  is a result  of the  Bank's  continued
business  development  efforts to obtain commercial  relationships which include
demand  deposits as well as the Bank's  continued  emphasis on customer  service
which  results in customer  loyalty and the  retention  of a strong core deposit
base.

  Borrowed  Funds.  The  Company's  borrowings  at  December  31, 1999 were $2.0
billion,  which  represents an increase of $704.9  million or 52.4%  compared to
$1.3 billion at December 31, 1998. The Company utilizes borrowings to fund asset
growth in both the securities  and loan  portfolios.  The borrowings  consist of
reverse  repurchase  agreements  and  advances  from the Federal Home Loan Bank,
which are secured by the one-to-four-family  residential loan portfolio.  At the
present time,  the Company  intends to reduce its  utilization  of borrowings to
fund asset growth during 2000 and to emphasize more traditional  funding sources
such as deposit growth.

  Stockholders'  Equity.  Stockholders'  equity  amounted  to $571.4  million at
December 31, 1999 and $669.0  million at December 31, 1998 or 12.7% and 17.7% of
total assets, at such dates, respectively. The decrease of $97.7 million was due
to the use of $93.7 million to continue the Company's stock  repurchase  program
which has resulted in the  repurchase of 6.4 million  shares of treasury  stock,
aggregate  cash  dividend  payments  of $17.0  million  and a decrease  of $50.2
million in  unrealized  appreciation  on securities  available for sale,  net of
taxes.  These decreases were partially offset by net income of $52.9 million and
an  allocation  of Employee  Stock  Ownership  Plan (ESOP) and  Recognition  and
Retention Plan (RRP) shares,  resulting in an increase of $10.3 million.

                                                                              13
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

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

The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest income from interest-earning  assets and
the resultant  average yields;  (ii) the total dollar amount of interest expense
on  interest-bearing  liabilities  and the  resultant  average  rate;  (iii) net
interest  income;  (iv)  interest  rate  spreads;  and (v) net interest  margin.
Information is based on average daily balances during the indicated periods.
<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                 ------------------------------------------------------------------------------
                                                    1999                                    1998
                                 -----------------------------------    ---------------------------------------
                                                             Average                                   Average
                                   Average                    Yield/        Average                     Yield/
                                   Balance        Interest     Cost         Balance       Interest       Cost
                                   -------        --------     ----         -------       --------       ----
<S>                              <C>              <C>          <C>        <C>             <C>          <C>
                                                               (000Os omitted)
Interest-earning assets:
Loans receivable(1):
 Real estate loans ..........    $1,739,898       $131,978     7.59%      $1,213,098      $ 95,742       7.89%
 Other loans ................        77,054          7,219     9.37           48,212         5,433      11.27
                                 -------------------------                ------------------------
 Total loans ................     1,816,952        139,197     7.66        1,261,310       101,175       8.02
 Securities ..................    2,089,829        136,023     6.51        1,631,050       106,025       6.50
 Other interest-
 earning assets(2) ..........        49,679          2,253     4.53           36,648         1,941       5.30
                                 -------------------------                ------------------------
Total interest-
 earning assets .............     3,956,460        277,473     7.01        2,929,008       209,141       7.14
                                                ----------                               ---------
Non-interest-
 earning assets ............        173,512                                  132,995
                                 ----------                               ----------
Total assets ................    $4,129,972                               $3,062,003
                                 ==========                               ==========
Interest-bearing liabilities:
Deposits:
 NOW and money
 market deposits ............    $  165,071          4,152     2.52%      $  118,318         3,114       2.63%
 Savings and
 Escrow accounts ...........       752,131          18,716     2.49          780,536        20,953       2.68
 Certificates
 of deposits ................       556,635         26,477     4.76          528,686        26,875       5.07
                                 -------------------------                ------------------------
 Total deposits .............     1,473,837         49,345     3.35        1,427,540        50,942       3.57
Total other
 borrowings .................     1,674,990         89,719     5.36          664,863        37,127       5.58
                                 -------------------------                ------------------------
Total interest-bearing
 liabilities ................     3,148,827        139,064     4.42        2,092,403        88,069       4.21
                                                ----------                                --------

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                              <C>                                      <C>
Non-interest-bearing
 liabilities(3) .............       354,671                                  276,455
                                 ----------                               ----------
Total liabilities ...........     3,503,498                                2,368,858
Stockholders' equity ........       626,474                                  693,145
                                 ----------                               ----------
Total liabilities and
 stockholders'  equity ......    $4,129,972                               $3,062,003
                                 ----------                               ----------
Net interest-
earning assets ..............    $  807,633                               $  836,605
                                 ==========                               ==========
Net interest income/
interest rate spread ........                   $  138,409     2.60%                      $121,072       2.93%
                                                ===================                       ===================
Net interest margin .........                                  3.50%                                     4.13%
                                                              =====                                    ======
Ratio of average
interest-earning
assets to average
interest-bearing
 liabilities ................                                125.65%                                   139.98%
                                                             ======                                    ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                       1997
                                      --------------------------------------
                                                                     Average
                                       Average                        Yield/
                                       Balance       Interest          Cost
                                       -------       --------          ----
<S>                                   <C>            <C>                <C>
Interest-earning assets:
Loans receivable(1):
 Real estate loans ..........         $  982,569     $ 79,521           8.09%
 Other loans ................             47,150        4,510           9.57
                                      -----------------------
 Total loans ................          1,029,719       84,031           8.16
Securities ..................            822,045       55,973           6.81
Other interest-
 earning assets(2) ..........            126,208        6,808           5.39
Total interest-
 earning assets .............          1,977,972      146,812           7.42
                                      ----------
Non-interest-
 earning assets ............             105,101
                                      ----------
Total assets ................         $2,083,073
                                      ==========
Interest-bearing liabilities:
Deposits:
 NOW and money
 market deposits ............         $  102,837        2,824           2.75%
 Savings and
 Escrow accounts ...........            951,188       25,281           2.66
 Certificates
 of deposits ................            531,293       27,185           5.12
                                      -----------------------
 Total deposits .............          1,585,318       55,290           3.49
Total other
 borrowings .................             81,071        4,767           5.88
                                      -----------------------
Total interest-bearing
 liabilities ................          1,666,389       60,057           3.60
                                                      -------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

<S>                                   <C>          <C>               <C>
Non-interest-bearing
 liabilities(3) .............            230,017
                                      ----------
Total liabilities ...........          1,896,406
Stockholders' equity ........            186,667
                                      ----------
Total liabilities and
 stockholders'  equity ......         $2,083,073
                                      ----------
Net interest-
earning assets ..............         $  311,583
                                      ==========
Net interest income/
interest rate spread ........                      $   86,755           3.82%
                                                   =========================
Net interest margin .........                                           4.39%
                                                                      ======
Ratio of average
interest-earning
assets to average
interest-bearing
 liabilities ................                                         118.70%
                                                                      ======
</TABLE>
(1) The  average  balance of loans  receivable  includes  non-performing  loans,
interest on which is recognized on a cash basis.
(2) Includes money market accounts, Federal Funds sold and interest-earning bank
deposits.
(3) Consists primarily of demand deposit accounts.


14
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

RATE/VOLUME ANALYSIS

  The  following  table sets forth the effects of changing  rates and volumes on
net interest income of the Company.  Information is provided with respect to (i)
effects on interest income  attributable to changes in volume (changes in volume
multiplied  by prior rate);  (ii)  effects on interest  income  attributable  to
changes in rate (changes in rate multiplied by prior volume);  and (iii) changes
in rate/volume (change in rate multiplied by change in volume).
<TABLE>
<CAPTION>
                                                                 For the Year Ended December 31,
                                    ------------------------------------------------------------------------------
                                           1999 compared to 1998                          1998 compared to 1997
                                        Increase (decrease) due to                     Increase (decrease) due to
                                    -------------------------------     Total Net    -----------------------------        Total Net
                                                              Rate/     Increase                            Rate/         Increase
                                     Rate       Volume       Volume    (Decrease)    Rate       Volume      Volume       (Decrease)
                                     ----       ------       ------    ----------    ----       ------      ------       ----------
                                                                   (000's omitted)
<S>                               <C>          <C>          <C>          <C>        <C>         <C>        <C>              <C>
Interest-earning assets:
 Loans receivable:
 Real estate loans ...........    $ (3,724)    $ 41,577     $(1,617)     $36,236    $(1,973)    $18,657    $  (463)         $16,221
 Other loans .................        (916)       3,250        (548)       1,786        803         101         18              922
                                  --------------------------------------------------------------------------------------------------
 Total loans receivable ......      (4,640)      44,827      (2,165)      38,022     (1,170)     18,758       (445)          17,143
 Securities ..................         136       29,823          39       29,998     (2,537)     55,085     (2,496)          50,052
 Other earning assets ........        (279)         690         (99)         312       (125)     (4,831)        89           (4,867)
                                  --------------------------------------------------------------------------------------------------
Total net change in income on
 interest-earning assets .....      (4,783)      75,340      (2,225)      68,332     (3,832)     69,012     (2,852)          62,328
                                  --------------------------------------------------------------------------------------------------
Interest-bearing liabilities:
 Deposits:
 NOW and money
  market deposits ............        (138)       1,231         (55)       1,038       (117)        425        (18)             290
 Savings and
 Escrow accounts ............       (1,530)        (763)         56       (2,237)       252      (4,536)       (45)          (4,329)
 Certificates of deposits ....      (1,727)       1,421         (92)        (398)      (177)       (133)      --               (310)
                                  --------------------------------------------------------------------------------------------------
 Total deposits ..............      (3,395)       1,889         (91)      (1,597)       (42)     (4,244)       (63)          (4,349)
Borrowings ...................      (1,514)      56,406      (2,300)      52,592       (240)     34,325     (1,725)          32,360
                                  --------------------------------------------------------------------------------------------------
Total net change in expense on
 interest-bearing liabilities       (4,909)      58,295      (2,391)      50,995       (282)     30,081     (1,788)          28,011
                                  --------------------------------------------------------------------------------------------------
Net change in
 net interest income .........    $    126     $ 17,045    $    166     $ 17,337    $(3,550)    $38,931    $(1,064)         $34,317
                                  ==================================================================================================
</TABLE>

                                                                              15
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

Comparison of Results of Operations for the
Years Ended December 31, 1999 and 1998

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

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

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

  Interest Income. The increase in interest income of $68.3 million for the year
ended December 31, 1999 was primarily due to an increase in the average  balance
of the  Company's  interest-earning  assets,  which  was  partially  offset by a
decrease  in the  average  yield  on  loans.  The  average  balance  of the loan
portfolio  increased  $555.6  million  or  44.1%  to $1.8  billion  during  1999
primarily as a result of  increased  loan demand,  and the  Company's  continued
efforts to expand  it's  lending  activity  through  it's  business  development
programs and the expansion of the mortgage broker  program.  The average balance
of the securities  portfolio  increased  $458.8 million or 28.1% to $2.1 billion
during  1999  primarily  as a  result  of the  Company's  continuing  leveraging
strategy to fund asset growth with borrowed funds when acceptable spreads can be
obtained.  The average yield earned on the Company's  loan  portfolio  decreased
from 8.02% during 1998 to 7.66% for 1999. This decrease was due to the repayment
of substantial amounts of relatively higher yielding loans,  particularly during
the first six months of 1999, and the  origination  of loans at market  interest
rates which were lower than the average  yield of the Company's  loan  portfolio
during the first half of the year.
<PAGE>
  Interest Expense.  The Company recorded interest expense of $139.1 million for
the year ending  December 31, 1999 compared to $88.1 million for the year ending
December 31, 1998, an increase of $51.0 million or 57.9%. The primary reason for
the increase was a $52.6 million increase in the interest on borrowed funds. The
increase in interest  expense on borrowed funds was primarily due to an increase
of $1.0 billion in the average balance of borrowed funds  partially  offset by a
decrease in the average cost from 5.58%  during 1998 to 5.36%  during 1999.  The
increase  in the  average  balance  of  borrowed  funds is due to the  Company's
program to fund asset growth with  borrowed  funds at  acceptable  spreads.  The
average cost of borrowings  has decreased due to the lower interest rates during
the first half of the year.

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

16
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

  Provision  (Benefit) For Loan Losses. The provision  (benefit) for loan losses
is based on  management's  continuing  review of the  adequacy  of the loan loss
allowance,  which includes such factors as the composition of the loan portfolio
and its inherent risk  characteristics,  the level of charge-offs,  both current
and historic,  the level of  non-performing  loans,  local economic  conditions,
including the direction of real estate values,  and current trends in regulatory
supervision.  During 1999, the quality of the loan portfolio remained strong and
the level of non-accrual loans decreased by $3.8 million or 23.2%. The Company's
net loan charge-offs were $503,000 for the year ended December 31, 1999 compared
to $782,000 for the year ended  December 31, 1998.  As a result of the continued
improvement in the Company's non-accruing loans, among other factors, during the
fourth quarter of 1999,  management deemed it prudent to reverse $1.9 million of
the  allowance  for loan losses which was the primary  reason for a $1.8 million
benefit for the loan loss  reserve for the year 1999  compared to a provision of
$1.6 million in the year 1998. The Company's allowance for loan losses was $14.3
million at  December  31,  1999,  or 114.4% of  non-accrual  loans at such date,
compared to $16.6 million at December 31, 1998, or 102.4% of  non-accrual  loans
at such date.

  Other Income. Other income amounted to $30.9 million and $10.4 million for the
years ended  December  31, 1999 and 1998,  respectively.  The  increase of $20.5
million was due to an increase  in service  and fee income of $22.4  million,  a
$4.1 million  curtailment  gain stemming from the freezing of the Bank's defined
benefit  pension plan at year end, which were  partially  offset by net security
losses of $5.5 million. The increase in service and fee income was primarily due
to an increase of $19.7  million in fees  generated  by Ivy  Mortgage and a $2.6
million  increase in the cash  surrender  value of the Company's bank owned life
insurance  (BOLI).  The  increase  in net  security  losses  for the year  ended
December 31, 1999 compared to the year ended December 31, 1998 was primarily due
to the $9.1 million  writedown of certain  corporate bonds held in the Company's
available  for sale  securities  portfolio  and  determined  by management to be
permanently  impaired due to the distressed  financial  condition of the issuer,
which was  partially  offset by $3.5 million in net gains  realized from various
security sales.

  Other Expenses. Other expenses for the year ended December 31, 1999 were $83.0
million or 48.5% more than other  expenses  of $55.9  million for the year ended
December  31,  1998.  The primary  reasons for the  increase  were  increases in
personnel  costs of $19.5  million,  in occupancy  and  equipment  costs of $1.8
million, and other expenses of $6.3 million. The increase in personnel costs was
primarily  due to an  increase  in  aggregate  personnel  costs of $6.5  million
primarily as the result of the operation of Ivy  Mortgage,  for the entire year,
which was  acquired in November  1998,  a $7.6  million  increase in  commission
expense for Ivy  Mortgage,  an increase of $3.0 million in the non-cash  expense
related to the Company's  RRP, a $1.1 million  increase in the Bank's  incentive
plan and other  routine  merit pay  increases.  The  increase in  occupancy  and
equipment  expense is primarily  due to the  additional  expense of $1.1 million
from the Mortgage Company and additional  property and equipment  expense due to
business  expansion  and growth.  The increase in other  expenses  again was due
primarily to loan related expenses resulting from the operation of Ivy Mortgage.
<PAGE>
  Provision For Income  Taxes.  The provision for income taxes was $35.3 million
for the year 1999  compared  to $29.7  million for the year ended  December  31,
1998.  The increase in the  provision  was primarily due to an increase of $14.2
million in income before taxes. The effective consolidated tax rate for 1999 was
40.0% compared to 40.1% for the year 1998.

Comparison of Results of Operations for the
Years Ended December 31, 1998 and 1997

  General.  The Company  reported net income of $44.3 million or $1.06 per share
for the year ended December 31, 1998 compared to net income of $14.5 million for
the year ended  December 31, 1997, an increase of $29.8  million or 205.5%.  The
earnings for the year ended December 31, 1997 included a one time  non-recurring
contribution to the SISB Community  Foundation (the Foundation) of $25.8 million
($13.8  million net of taxes).  The  Foundation  was  established as part of the
Conversion to enhance the Company's visibility and reputation in the communities
that it serves. The Foundation  continues the Bank's demonstrated  commitment to
the housing, civic and special needs of the community.  The Company's net income
for 1998  represents a $15.9  million or 56.0%  increase over 1997 net income as
adjusted to exclude the effect of the contribution to the Foundation.

  The increase in net income for the year ended  December 31, 1998 was primarily
due to an increase in net interest income of $34.3 million and a decrease in the
provision  for loan losses of $4.4  million,  which was  partially  offset by an
increase  of $13.0  million in total  other  expenses  and an  increase of $12.7
million in the  provision  for income taxes  exclusive  of related  deferred tax
benefit from the  contribution  to the Foundation.  These and other  significant
fluctuations in the Company's results of operations are discussed below.

  Interest Income. The increase in interest income of $62.3 million for the year
ended December 31, 1998 was primarily due to an increase in the average  balance
of the  Company's  interest-earning  assets,  which  was  partially  offset by a
decrease in the average yield on loans and  securities.  The average  balance of
the loan portfolio  increased $231.6 million or 22.49% to $1.3 billion primarily
as a result of  increased  loan demand and the  Company's  continued  efforts to
expand its lending  activity  including the purchase of assets from Ivy Mortgage
in the fourth quarter of 1998. The average  balance of the Company's  securities
portfolio  increased $809.0 million or 98.41% to $1.6 billion for 1998 primarily
as a result of the use of the net proceeds from the Conversion and the Company's
leveraging strategy.  These increases were partially offset by a decrease in the
average balance of other interest-earning assets of $89.6 million or 70.96%. The
average yield earned on the Company's  loan  portfolio  decreased  from 8.16% in
1997 to 8.02% in 1998.  This decrease in the average yield on the loan portfolio
was a result of declining interest rates during the year resulting in the payoff
of higher  yielding loans and the  origination of loans at market interest rates
which were lower  than the  average  yield on the  Bank's  loan  portfolio.  The
average  yield was also reduced by downward  pricing of certain of the Company's
adjustable-rate  loans. The yield on the securities portfolio decreased 31 basis
points  to  6.50% in 1998  from  6.81% in 1997.  The  decrease  was a result  of
declining  interest rates in 1998 and the accelerated  payoff of higher yielding
mortgage-backed securities.

                                                                              17
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

  Interest  Expense.  The Company recorded interest expense of $88.1 million for
the year ended  December 31, 1998  compared to $60.1  million for the year ended
December 31, 1997, an increase of $28.0 million or 46.64%.  Interest on borrowed
funds  increased  $32.4 million due to a $583.8 million  increase in the average
balance of borrowings in 1998. The increase in the average balance of borrowings
reflects the Bank's  leveraging  strategy  which was  instituted in 1997 to fund
asset growth  through  borrowings  at  acceptable  spreads.  The average cost of
borrowings  decreased  30  basis  points  from  5.88%  in 1997 to  5.58% in 1998
primarily due to the declining  interest rate environment and the use of certain
callable borrowings.  The average balance of interest-bearing deposits decreased
$157.8 million as a result of the withdrawal of temporary deposits in the fourth
quarter of 1997 in anticipation of the Bank's  mutual-to-stock  conversion.  The
average cost of  interest-bearing  deposits increased to 3.57% due to the change
in the mix of the interest-bearing deposit base.


  Net Interest Income. Net interest income was $121.1 million for the year ended
December  31, 1998  compared to $86.8  million for the year ended  December  31,
1997. This represents an increase of $34.3 million or 39.56%. The increase was a
result of a $62.3 million increase in interest income which was partially offset
by a $28.0 million increase in interest expense. The increase in interest income
was the  result of an  increase  of $951.0  million  in the  average  balance of
interest-earning  assets which was partially offset by a decrease in the average
yield of interest-earning  assets of 27 basis points from 7.41% in 1997 to 7.14%
in 1998.  Interest  expense  increased due to a $426.0  million  increase in the
average balance of interest-bearing liabilities and a 61 basis point increase in
the  average  cost  from  3.60% in 1997 to 4.21% in 1998 due to a change  in the
composition of the Company's interest-bearing liabilities and the respective
costs of the funding  sources found within the mix. The net interest rate spread
and margin  decreased  to 2.93% and 4.13%,  respectively,  for the period  ended
December 31, 1998 from 3.82% and 4.39%,  respectively,  as of December 31, 1997.
Such decreases were primarily due to the Bank's  continued use of borrowed funds
to  leverage  the  balance  sheet  coupled  with  the  declining  interest  rate
environment during most of 1998 which resulted in lower  interest-earning  asset
yields in 1998 compared to 1997.

  Provision for Loan Losses.  For the year ended December 31, 1998 the provision
for loan losses was $1.6  million  compared  to $6.0  million for the year ended
December 31, 1997. The provision in 1997 included a non-recurring amount of $4.0
million based on management's  review of the risk elements in the loan portfolio
and  also  the  longer-than-anticipated   workout  periods  for  the  commercial
portfolio  that  was  acquired  from  the  commercial  bank  acquired  in  1995.
Management  determined that, in certain  circumstances,  more aggressive workout
procedures  for such  non-performing  loans  would  be  warranted,  which  could
increase  the risk of loss with respect to such loans.  As a result,  management
decided to increase the reserve  levels in 1997. The provision in 1998 was based
on  management's  continuing  review of the risk  elements  in the  Bank's  loan
portfolio and past history related to charge-offs and recoveries. In particular,
management considered the continued growth in the loan portfolio, as well as the
decrease in its non-performing loans in determining the level of the provision
in 1998.

  Other Income.  Other income amounted to $10.4 million and $7.5 million for the
years ended  December  31,  1998 and 1997,  respectively.  The  increase of $2.9
million or 39.27% in 1998  compared to 1997 was  primarily due to an increase of
$2.3 million in service and fee income and a $0.6 million  increase in net gains
on  securities.  The  increase  in  service  and fee  income was due to the fees
generated by the operations of Ivy Mortgage, increased fees due to the growth of
checking  accounts and related  transactions  and increased gains related to the
disposition of other real estate owned ("ORE")  properties.  The increase in net
gains on security  transactions  reflect  management's  decision to sell certain
available for sale securities as market conditions  warrant in the normal course
of business.


18
<PAGE>
Other  Expenses.  Other expenses for the year ended December 31, 1998 were $55.8
million or 30.30% more than other  expenses of $42.9  million for the year ended
December  31,  1997,   exclusive  of  the  $25.8  million  contribution  to  the
Foundation.  The  primary  reasons  for the  increase  in  other  expenses  were
increases in personnel  costs of $9.3  million,  data  processing  costs of $1.0
million,  professional  fees of $1.5 million and other expenses of $0.9 million.
The increase in personnel  costs was primarily due to the $7.1 million  non-cash
expense  generated  by the  allocation  and  appreciation  of shares held in the
Company's stock related benefit plans during the year and staff additions to the
Bank's  lending  operations in an effort to enhance  credit  administration  and
process the substantial increase in new loan originations.  The increase in data
processing  costs  was  primarily  due to  non-recurring  costs  related  to the
conversion to a new data  processing  system in the third  quarter of 1998.  The
increase in professional  fees was primarily due to the costs related to forming
a passive  real  estate  investment  trust  (REIT) and a New  Jersey  investment
company in connection  with certain of the  Company's  tax planning  strategies.
Professional  fees  also  increased  due  to  increased  audit  and  legal  fees
associated  with operating for a full year as a public  company.  Other expenses
increased  primarily as a result of additional  costs related to regulatory  and
reporting requirements as a public company.

  Provision for Income Taxes.  The provision for income taxes  amounted to $29.7
million for the year ended  December  31, 1998  compared to $4.9 million for the
year ended  December  31,  1997.  The Company in 1997  recorded a $12.0  million
deferred tax benefit from the $25.8 million contribution to the Foundation along
with a $2.6 million reversal of previously  deferred income taxes related to bad
debt reserves  accumulated for New York City purposes,  resulting in an adjusted
tax  provision  of $19.5  million.  The  effective  tax  rate in 1998 was  40.1%
compared to 43.1% in 1997.  The decrease in the effective tax rate was primarily
a result of the Bank's tax planning strategies put in place in 1998.

LIQUIDITY AND CAPITAL

  The  Company's  liquidity,  represented  by cash  and cash  equivalents,  is a
product of its  operating,  investing  and financing  activities.  The Company's
primary sources of funds are deposits, amortization,  prepayments and maturities
of outstanding loans and  mortgage-backed  securities,  maturities of investment
securities and other short-term  investments and funds provided from operations.
While scheduled  payments from the  amortization  of loans and  mortgage-related
securities and maturing  investment  securities and short-term  investments  are
relatively  predictable sources of funds, deposit flows and loan prepayments are
greatly   influenced  by  general  interest  rates,   economic   conditions  and
competition. In addition, the Company invests excess funds in federal funds sold
and other  short-term  interest-earning  assets which provide  liquidity to meet
lending  requirements.  Historically,  the Bank relied almost exclusively on its
deposits as a source of funds.  Commencing  in late 1997,  the  Company  began a
leveraging program whereby it uses borrowings, such as FHLB advances and reverse
repurchase  agreements as an additional  source of funds to fund asset growth at
acceptable spreads. This leveraging strategy continued throughout 1998 and 1999.
However,  it is  management's  intent to place less emphasis on this strategy in
the year 2000. At December 31, 1999, such borrowings amounted to $2.0 billion.
<PAGE>
  Liquidity  management  is both a daily  and  long-term  function  of  business
management.  Excess  liquidity is generally  invested in short-term  investments
such as federal funds sold or U.S. Treasury securities.  On a longer term basis,
the Company maintains a strategy of investing in various lending  products.  The
Company uses its sources of funds primarily to meet its ongoing commitments,  to
pay  maturing  certificates  of  deposit  and  savings  withdrawals,  fund  loan
commitments  and maintain a portfolio of  mortgage-backed  and  mortgage-related
securities and investment  securities.  At December 31, 1999, the total approved
loan origination  commitments  outstanding amounted to $302.8 million and unused
credit lines equaled $55.3 million.  At the same date, the unadvanced portion of
construction  loans totaled $27.1 million.  Certificates of deposit scheduled to
mature  in one  year  or less at  December  31,  1999  totaled  $469.8  million.
Investment  securities  scheduled  to mature in one year or less at December 31,
1999  totaled  $8.1  million  and  amortization  from  investments  and loans is
projected at $533.0 million for the year 2000.  Based on historical  experience,
the current  pricing  strategy,  and the strong core  deposit  base,  management
believes  that a significant  portion of maturing  deposits will remain with the
Company. The Company anticipates that it will continue to have sufficient funds,
together with borrowings, to meet its current commitments.

  At December 31, 1999 the Bank's  capital  ratios  exceeded all the  regulatory
requirements. Under OTS regulations, the Bank is required to comply with each of
three separate capital adequacy standards: tangible capital of $388.2 million or
8.93% of adjusted  assets compared to a requirement of $65.2 million or 1.50% of
adjusted  assets,  core  capital of $390.2  million or 8.97% of adjusted  assets
compared to a requirement of $174.0 million or 4% of adjusted  assets,  and risk
based capital of $404.5 million or 19.80% of risk weighted  assets compared to a
requirement of $163.4 million or 8% of risk-weighted assets.

                                                                              19
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)

IMPACT OF INFLATION AND CHANGING PRICES

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

Private Securities Litigation Reform Act
Safe Harbor Statement

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

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


20
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1999 and 1998                                                             1999            1998
-----------------------------------------------------------------------------------------------------------
<S>                                                                               <C>             <C>
ASSETS                                                                                    (000's omitted)
Assets:
Cash and due from  banks .....................................................    $    80,998     $   88,059
Federal  funds  sold .........................................................         20,400         45,050
Securities available for sale ................................................      1,963,954      2,029,041
Loans, net ...................................................................      2,150,039      1,457,058
Loans held for sale, net .....................................................         46,588         77,943
Accrued interest receivable ..................................................         23,621         19,389
Bank premises and equipment,  net ............................................         24,731         22,163
Intangible  assets,  net .....................................................         15,432         17,701
Other assets .................................................................        163,551         20,543
                                                                                  --------------------------
Total assets .................................................................    $ 4,489,314     $3,776,947
                                                                                  ===========================

Liabilities and Stockholders' Equity
Liabilities:
  Due depositors--
    Savings ..................................................................    $   737,794     $  730,614
    Time .....................................................................        573,043        537,154
    Money market .............................................................         89,004         82,360
    NOW accounts .............................................................         80,352         73,541
    Demand deposits ..........................................................        340,040        305,392
                                                                                  --------------------------
                                                                                    1,820,233      1,729,061
  Borrowed funds .............................................................      2,049,411      1,344,517
  Advances from borrowers for taxes and insurance ............................         10,805          7,091
  Accrued interest and other liabilities .....................................         37,488         27,236
                                                                                  --------------------------
      Total liabilities ......................................................      3,917,937      3,107,905
                                                                                  --------------------------
Commitments and Contingencies (Note 12)
Stockholders' Equity:
  Common  stock,  par  value  $.01 per  share, 100,000,000 shares  authorized,
  45,130,312 issued and 38,693,623 outstanding at December 31, 1999
  and 45,130,312 issued and 43,704,812 outstanding at December 31, 1998 ......            451            451
  Additional paid-in capital .................................................        536,539        534,464
  Retained earnings--substantially restricted ................................        251,315        215,414
  Unallocated common stock held by ESOP ......................................        (35,709)       (38,456)
  Unearned common stock held by RRP ..........................................        (25,439)       (30,873)
  Less--Treasury stock (6,436,689 and 1,425,500 shares at
  December 31, 1999 and 1998, respectively), at cost .........................       (121,149)       (27,480)
  Accumulated other comprehensive income (loss), net of taxes ................        (34,631)        15,522
                                                                                  --------------------------
      Total stockholders' equity .............................................        571,377        669,042
                                                                                  --------------------------
      Total liabilities and stockholders' equity .............................    $ 4,489,314     $ 3,776,947
                                                                                  ===========================
</TABLE>

The accompanying notes are an integral part of these statements

                                                                              21
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1999, 1998 and 1997                   1999          1998        1997
                                                                                (000's omitted)
--------------------------------------------------------------------------------------------------------
<S>                                                                  <C>          <C>          <C>
Interest Income:
  Loans .........................................................    $139,197     $101,175     $ 84,031
  Securities available for sale .................................     136,023      106,025       55,973
  Other earning assets ..........................................       2,253        1,941        6,808
                                                                     ----------------------------------
    Total interest income .......................................     277,473      209,141      146,812
                                                                     ----------------------------------
Interest Expense:
  Borrowed funds ................................................      89,719       37,127        4,767
  Time ..........................................................      26,477       26,875       27,185
  Savings and escrow ............................................      18,716       20,953       25,281
  Money market and NOW ..........................................       4,152        3,114        2,824
                                                                     ----------------------------------
    Total interest expense ......................................     139,064       88,069       60,057
                                                                     ----------------------------------
    Net interest income .........................................     138,409      121,072       86,755
Provision (Benefit) for Loan Losses .............................      (1,843)       1,594        6,003
                                                                     ----------------------------------
    Net interest income after provision (benefit) for loan losses     140,252      119,478       80,752
                                                                     ----------------------------------
Other Income (Loss):
  Service and fee income ........................................      32,291        9,856        7,539
  Defined benefit plan curtailment gain .........................       4,093         --           --
  Securities transactions .......................................      (5,531)         524         (85)
                                                                     ----------------------------------
    Total other income ..........................................      30,853       10,380        7,454
                                                                     ----------------------------------
Other Expenses:
  Personnel .....................................................      49,719       30,248       20,934
  Occupancy and equipment .......................................       7,912        6,150        5,666
  Data processing ...............................................       4,448        4,915        3,950
  Amortization of intangible assets .............................       2,236        2,089        2,076
  Professional fees .............................................       2,063        2,403          933
  Contribution to SISB Community Foundation .....................        --           --         25,817
  Other .........................................................      16,593       10,113        9,349
                                                                     ----------------------------------
    Total other expenses ........................................      82,971       55,918       68,725
                                                                     ----------------------------------
    Income before provision for income taxes ....................      88,134       73,940       19,481
Provision for Income Taxes ......................................      35,259       29,678        4,932
                                                                     ----------------------------------
    Net income ..................................................    $ 52,875     $ 44,262     $ 14,549
                                                                     ==================================
Earnings (Loss) per Share:
  Basic .........................................................    $   1.40     $   1.06      $  (.29)(1)
  Fully diluted .................................................    $   1.40     $   1.06      $  (.29)
</TABLE>
(1) Since conversion on December 22, 1997
The accompanying notes are an integral part of these statements.

22
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                                                           Unallocated   Unearned
                                                             Common       Common
For the Years Ended                           Additional     Stock         Stock                      Compre-
December 31, 1999,                 Common      Paid-in      Held by        Held by     Treasury      hensive
1998 and 1997                      Stock       Capital        ESOP           RRP         Stock        Income
---------------------------------------------------------------------------------------------------------------
                                                                 (000's omitted)
<S>                              <C>          <C>          <C>           <C>          <C>            <C>
Balance, January 1, 1997 ....    $    --      $    --      $    --       $    --      $      --      $    --
  Net proceeds from
  common stock issued
  in conversion .............          451      532,521         --            --             --           --
  Purchase of common
  stock by ESOP .............         --           --        (41,262)         --             --           --
  Change in net unrealized
  appreciation (depreciation)
  on securities, net of tax .         --           --           --            --             --          8,547
  Net income ................         --           --           --            --             --         14,549
                                 --------------------------------------------------------------------------------
  Comprehensive income ......                                                                          $23,096
                                                                                                       =======
Balance, December 31, 1997 ..          451      532,521      (41,262)         --             --           --
  Allocation of 233,843
  ESOP shares ...............         --          1,886        2,806          --             --           --
  Purchase of RRP shares ....         --           --           --       (31,397)            --           --
  Earned RRP shares .........         --             57         --           524             --           --
  Treasury stock (1,425,500
  shares), at cost ..........         --           --           --            --        (27,480)          --
  Dividends paid ............         --           --           --            --             --           --
  Change in unrealized
  appreciation
  (depreciation) on
  securities, net of tax ....         --           --           --            --             --          2,845
  Net income ................         --           --           --            --             --         44,262
                                 --------------------------------------------------------------------------------
  Comprehensive income ......                                                                          $47,107
                                                                                                       =======
Balance, December 31, 1998 ..          451      534,464      (38,456)      (30,873)     (27,480)
  Allocation of 228,904
  ESOP shares ...............         --          1,484        2,747          --             --           --
  Earned RRP shares .........         --            591         --           5,434           --           --
  Treasury stock
  (5,011,189 shares),
  at cost ...................         --           --           --            --        (93,669)          --
  Dividends paid ............         --           --           --            --            --            --
  Change in unrealized
  appreciation (depreciation)
  on securities, net of tax .         --           --           --            --            --         (50,153)
  Net income ................         --           --           --            --            --          52,875
                                 --------------------------------------------------------------------------------
  Comprehensive income ......                                                                        $   2,722
                                                                                                     =========
Balance, December 31, 1999 ..    $     451    $536,539     $ (35,709)    $ (25,439)   $(121,149)
                                 ==============================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                    Accumulated
                                                        Other
                                    Retained       Comprehensive
                                     Earnings     Income (Loss), Net           Total
                                     --------     ------------------           -----
<S>                                 <C>              <C>                       <C>
Balance, January 1, 1997 ....       $166,950         $  4,130                  $171,080
  Net proceeds from
  common stock issued
  in conversion .............            --                --                   532,972
  Purchase of common
  stock by ESOP .............            --                --                   (41,262)
  Change in net unrealized
  appreciation (depreciation)
  on securities, net of tax .            --             8,547                     8,547
  Net income ................         14,549               --                    14,549
                                    ---------------------------------------------------
  Comprehensive income ......
Balance, December 31, 1997 ..        181,499            12,677                  685,886
  Allocation of 233,843
  ESOP shares ...............           --                 --                     4,692
  Purchase of RRP shares ....           --                 --                   (31,397)
  Earned RRP shares .........           --                 --                       581
  Treasury stock (1,425,500
  shares), at cost ..........           --                 --                   (27,480)
  Dividends paid ............        (10,347)              --                   (10,347)
  Change in unrealized
  appreciation
  (depreciation) on
  securities, net of tax ....           --               2,845                    2,845
  Net income ................          44,262              --                    44,262
                                    ---------------------------------------------------
  Comprehensive income ......

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

Balance, December 31, 1999 ..       $ 251,315         $(34,631)               $ 571,377
                                    ===========     ============          =============
</TABLE>

The accompanying notes are an integral part of these statements.

                                                                              23
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998 and 1997                        1999                   1998             1997
-------------------------------------------------------------------------------------------------------------------------
                                                                                              (000's omitted)
<S>                                                                    <C>                    <C>             <C>
Cash Flows from Operating Activities:
  Net income ......................................................    $    52,875            $    44,262     $    14,549
  Adjustments to reconcile net income to net cash
  (used in) provided by operating activities--
      Charitable contribution to SISB Community Foundation ........           --                     --            25,817
      Depreciation and amortization ...............................          2,543                  1,983           1,724
      (Accretion) and amortization of bond and mortgage premiums ..          4,715                 (1,258)         (1,772)
      Amortization of intangible assets ...........................          2,236                  2,089           2,076
      Realized loss (gain) on sale of available for sale securities         (3,539)                  (524)             85
      Expense charge relating to allocation and earned portions
         of employee benefit plans ................................          8,790                  7,583            --
      Other non-cash expense ......................................         (1,439)                (2,374)         (2,707)
      Provision (benefit) for loan losses .........................         (1,843)                 1,594           6,003
      Increase in deferred loan fees ..............................          1,512                  1,477              74
      (Increase) in accrued interest receivable ...................         (4,232)                (3,682)         (3,969)
      (Increase) in other assets ..................................        (90,479)                (5,528)         (4,691)
      (Decrease) increase in accrued interest and other liabilities         12,103                (55,611)         62,337
      (Increase) decrease in deferred income taxes ................          4,691                 (6,769)        (13,327)
      Recoveries of loans .........................................          1,161                  1,337           1,047
                                                                       --------------------------------------------------
        Net cash (used  in) provided by operating activities ......        (10,906)               (15,421)         87,246
                                                                       --------------------------------------------------
Cash Flows from Investing Activities:
  Maturities and amortization of available for sale securities ....        389,930                519,667         180,489
  Sales of available for sale securities ..........................         76,257                109,224          97,757
  Purchases of available for sale securities ......................       (517,115)            (1,304,385)       (910,305)
  Principal collected on loans ....................................        324,937                201,091         167,260
  Loans made to customers .........................................     (1,607,459)              (643,854)       (289,512)
  Purchase of loans ...............................................        (16,088)               (66,267)             --
  Sales of loans ..................................................        644,557                 57,577           4,289
  Capital expenditures ............................................         (4,961)                (4,392)        (2,786)
  Acquisition of Ivy Mortgage, net of cash acquired ...............           --                   (2,194)             --
                                                                       --------------------------------------------------
       Net cash used in investing activities .....................       (709,942)            (1,133,533)       (752,808)
                                                                       --------------------------------------------------
Cash Flows from Financing Activities:
  Net increase in deposit accounts ................................         94,886                107,877          45,964
  Borrowings ......................................................        704,894              1,094,475         249,988
  Issuance of common stock ........................................           --                     --           507,185
  Dividends paid ..................................................        (16,974)               (10,347)             --
  Purchase of shares for ESOP .....................................           --                     --           (41,262)
  Purchase of treasury stock ......................................        (93,669)               (27,480)             --
  Purchase of shares for RRP ......................................           --                  (31,397)             --
                                                                       --------------------------------------------------
        Net cash provided by financing activities .................        689,137              1,133,128         761,875
                                                                       --------------------------------------------------
        Net increase (decrease) in cash and cash equivalents ......        (31,711)               (15,826)         96,313
Cash and Cash Equivalents, beginning of year ......................        133,109                148,935          52,622
                                                                       --------------------------------------------------
Cash and Cash Equivalents, end of year ............................    $   101,398            $   133,109     $   148,935
                                                                       ==================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                    <C>                    <C>             <C>
Supplemental Disclosures of Cash Flow Information:
  Cash paid for--
    Interest ......................................................    $   131,043            $    80,540     $    60,054
    Income taxes ..................................................         31,300                 30,529          14,298
  Acquisition of Ivy Mortgage--
    Fair value of assets acquired .................................           --                   65,823            --
    Fair value of liabilities assumed .............................           --                   63,937            --
</TABLE>
The accompanying notes are an integral part of these statements.

24
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Basis of Presentation

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

  The SIB Mortgage Corp. was set up to acquire the operations of Ivy Mortgage as
discussed in Note 3. The Staten Island Funding  Corporation was set up as a real
estate investment  trust, SIB Investment  Corporation was set up to hold certain
Bank investments and American Construction Lending Services,  Inc. was set up to
originate residential construction loans throughout the country.

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

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

Cash and Cash Equivalents

  For purposes of reporting cash flows,  cash and cash equivalents  include cash
and due from banks,  money market  deposits and federal funds sold for the years
ended December 31, 1999, 1998 and 1997.

Securities Available for Sale

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

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

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

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

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

Loans Held for Sale

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

Allowance for Loan Losses

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

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

Bank  Premises and  Equipment

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


                                                                              25
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999, 1998 and 1997

Investments in Real Estate

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

Demand Deposits

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

Comprehensive Income

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

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

 Income Taxes

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

Earnings  Per Share

  Earnings per share are computed by dividing net income by the weighted average
number  of  shares  of  common  stock  and  dilutive  common  stock  equivalents
outstanding, adjusted for the unallocated portion of shares held by the Employee
Stock  Ownership  Plan ("ESOP") and  ungranted  Recognition  and Retention  Plan
("RRP")  in  accordance  with  the  American   Institute  of  Certified   Public
Accountants  Statement of Position  93-6.  For the year ended December 31, 1999,
the basic and fully  diluted  weighted  average  common  stock  outstanding  was
37,878,481  shares.  For the year ended  December 31, 1998,  the basic and fully
diluted weighted average common stock  outstanding was 41,567,051  shares.  From
the  conversion  on December 22, 1997 to December 31, 1997,  the basic and fully
diluted weighted average common stock outstanding was 41,691,812 shares.

Stock-Based Compensation

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

Treasury Stock

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

Bank Owned Life Insurance  (BOLI)

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

New Accounting Pronouncements

  In June 1998, the Financial  Accounting  Standards  Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." In June
1999, the FASB issued SFAS No. 137,  "Accounting for Derivative  Instruments and
Hedging  Activities  Deferral  of the  Effective  Date of SFAS No.  133,"  which
amended the  effective  date of SFAS No. 133.  SFAS No. 133 is now effective for
all fiscal  quarters of all fiscal  years  beginning  after June 15,  2000.  The
statement   established   accounting  and  reporting  standards  for  derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position and measure those  instruments  at fair value.  Management is currently
evaluating the impact SFAS Nos. 133 and 137 will have on the Company's financial
statements.

Reclassifications

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


26
<PAGE>
2. ORGANIZATION/FORM OF OWNERSHIP

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

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

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

  Additionally, the Bank established, in accordance with the requirements of the
OTS, a liquidation account for $183,947,000 which was equal to its capital as of
the date of the latest consolidated  statement of financial condition (September
30, 1997) appearing in the IPO prospectus supplement. The liquidation account is
reduced as and to the extent that  eligible  account  holders have reduced their
qualifying deposits. Subsequent increases in deposits do not restore an eligible
account holder's interest in the liquidation account. In the event of a complete
liquidation  of the Bank,  each  eligible  account  holder  will be  entitled to
receive a distribution from the liquidation  account in an amount  proportionate
to the adjusted  qualifying  balances for accounts then held. This account had a
balance of $58,589,000 at December 31, 1999.

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

3. ACQUISITIONS

  On November 20, 1998, SIB Mortgage Corp.  acquired the assets of Ivy Mortgage,
a New Jersey-based  mortgage loan originator which has branch offices  primarily
throughout the Northeastern United States. The acquisition by SIB Mortgage Corp.
was  funded  by the  Bank.  The  acquisition  has been  accounted  for using the
purchase  method of accounting  and,  accordingly,  the purchase  price has been
allocated to the assets acquired and the liabilities assumed based upon the fair
values at the date of  acquisition.  The excess of the  purchase  price over the
fair value of the net assets acquired was approximately $1,775,000 and has
<PAGE>
been  recorded  as  goodwill.  Included  as  part  of the  purchase  price  is a
noncompete  agreement (the  "Agreement")  with the sellers of Ivy Mortgage.  The
noncompete  agreement,  which is recorded as goodwill, is being amortized over 5
years on a  straight-line  basis and the remaining  goodwill is being  amortized
over 15  years  on a  straight-line  basis.  The  original  Agreement  contained
provision for payments which are  contingent  upon future  earnings.  In January
2000,  the  original  Agreement  was  amended to  relieve  the seller of certain
potential  obligations and to eliminate the provisions which provided for future
payments to the sellers contingent upon future earnings.  The amount of goodwill
amortization for 1999 is $160,000 and is included in other expenses.

  On January 14, 2000, the Company  acquired  First State  Bancorp,  the holding
company for First State Bank,  which operates six  full-service  branches in the
State of New  Jersey.  The asset size of First State  Bancorp was  approximately
$374.0 million and the cost of the acquisition was approximately  $84.5 million,
which was paid in cash. The transaction will be accounted for as a purchase with
the excess of cost over fair value of net assets acquired  (goodwill)  estimated
at $46.0  million,  which  will be  amortized  on a  straight-line  basis over a
15-year period.

4. REGULATORY MATTERS

  The Federal Deposit Insurance  Corporation  Improvement Act of 1991 ("FDICIA")
imposes  a  number  of  mandatory  supervisory  measures  on  banks  and  thrift
institutions.  One of the items  FDICIA  imposed  was  certain  minimum  capital
requirements or classifications.  Such  classifications are used by the FDIC and
other  bank  regulatory   agencies  to  determine   matters  ranging  from  each
institution's   semiannual  FDIC  deposit  insurance  premium  assessments,   to
approvals of applications  authorizing  institutions to grow their asset size or
otherwise expand business activities. Under OTS capital regulations, the Bank is
required to comply with each of three separate capital adequacy  standards.  Set
forth below is a summary of the Bank's


                                                                              27
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999, 1998 and 1997

compliance with OTS capital standards as of December 31, 1999 and 1998:
<TABLE>
<CAPTION>

                                                 December 31, 1999
                               ----------------------------------------------------
                                 Actual        Percent      Required        Percent
--------------------------------------------------------------------------------
                                                   (000's omitted)
<S>                            <C>               <C>        <C>               <C>
Staten Island Savings Bank:
  Tangible capital ........    $388,248          8.93%      $ 65,213          1.50%
  Core capital ............     390,192          8.97        173,980          4.00
  Risk-based capital ......     404,463         19.80        163,442          8.00
<CAPTION>

                                                 December 31, 1998
                               ----------------------------------------------------
                                 Actual        Percent      Required        Percent
--------------------------------------------------------------------------------
                                                   (000's omitted)
<S>                            <C>               <C>        <C>               <C>
Staten Island Savings Bank:
  Tangible capital ........    $402,472           11.31%    $ 53,355          1.50%
  Core capital ............     405,583           11.39      142,404          4.00
  Risk-based capital ......     422,512           26.04      129,794          8.00
<CAPTION>

                                                 December 31, 1999
                               ----------------------------------------------------
                                 Actual        Percent      Required        Percent
--------------------------------------------------------------------------------
                                                   (000's omitted)
<S>                            <C>               <C>        <C>               <C>
Staten Island Bancorp:
  Tangible capital ........    $585,976          13.01%     $ 67,559          1.50%
  Core capital ............     587,921          13.05       180,234          4.00
  Risk-based capital ......     602,191          25.58       188,340          8.00
<CAPTION>

                                                 December 31, 1998
                               ----------------------------------------------------
                                 Actual        Percent      Required        Percent
--------------------------------------------------------------------------------
                                                   (000's omitted)
<S>                            <C>               <C>        <C>               <C>
Staten Island Bancorp:
  Tangible capital ........    $629,519          16.84%     $ 56,061          1.50%
  Core capital ............     632,630          16.91       149,621          4.00
  Risk-based capital ......     649,247          35.93       144,565          8.00

</TABLE>
<PAGE>
5. INVESTMENT SECURITIES

Securities Available for Sale

  The amortized cost and  approximate  market value of securities  available for
sale are summarized as follows:

<TABLE>
<CAPTION>
                                                     December 31, 1999
                                 -----------------------------------------------------
                                                  Gross          Gross
                                   Amortized   Unrealized     Unrealized        Market
                                     Cost         Gains          Losses         Value
                                 -----------------------------------------------------
                                                 (000's omitted)
<S>                              <C>           <C>           <C>            <C>
Debt securities:
  U.S. Government
  and agencies ..............    $  164,236    $       63    $   (8,542)    $  155,757
  GNMA, FNMA and
  FHLMC mortgage
  participation
  certificates ..............       813,632         1,380       (21,401)       793,611
  Agency CMOs ...............       248,376            60        (9,819)       238,617
  Privately issued
    CMOs ....................       436,604             1       (18,403)       418,202
  Other .....................       163,357           628       (11,168)       152,817
                                 -----------------------------------------------------
                                  1,826,205         2,132       (69,333)     1,759,004
                                 -----------------------------------------------------
Marketable equity securities:
  Common stocks .............        97,787         9,201        (5,943)       101,046
  Preferred stocks ..........        79,870           604       (10,916)        69,558
  Mutual fund ...............        26,691         7,779          (123)        34,346
                                 -----------------------------------------------------
                                    204,348        17,584       (16,982)       204,950
                                 -----------------------------------------------------
      Total securities
  available
  for sale ..................    $2,030,553    $   19,716    $  (86,315)    $1,963,954
                                 =====================================================


</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                     December 31, 1998
                                 -----------------------------------------------------
                                                  Gross          Gross
                                   Amortized   Unrealized     Unrealized        Market
                                     Cost         Gains          Losses         Value
                                 -----------------------------------------------------
                                                 (000's omitted)
<S>                              <C>           <C>           <C>            <C>
Debt securities:
  U.S. Government
  and agencies ..............    $    75,310    $     1,032     $      --       $    76,342
  GNMA, FNMA and
  FHLMC mortgage
  participation
  certificates ..............        901,536         11,683            (198)        913,021
  Agency CMOs ...............        232,070          2,569              (1)        234,638
  Privately issued
  CMOs ......................        473,424          3,224            (319)        476,329
  Other .....................        151,219          1,695          (5,684)        147,230
                                 ----------------------------------------------------------
                                   1,833,559         20,203          (6,202)      1,847,560
                                 ----------------------------------------------------------
Marketable equity securities:
  Common stocks .............         58,995          7,695          (5,407)         61,283
  Preferred stocks ..........         79,010          2,040            (901)         80,149
  Mutual fund ...............         27,626         12,423              --          40,049
                                 ----------------------------------------------------------
                                     165,631         22,158          (6,308)        181,481
                                 ----------------------------------------------------------
      Total securities
  available
  for sale ..................    $ 1,999,190    $    42,361     $   (12,510)    $ 2,029,041
                                 ==========================================================
</TABLE>

The  amortized  cost and market value of debt  securities  available for sale at
December 31, 1999 and 1998, by contractual  maturity,  are shown below. Expected
maturities will differ from contractual  maturities  because  borrowers may have
the right to call or  prepay  obligations  with or  without  call or  prepayment
penalties.
<PAGE>
<TABLE>
<CAPTION>
                                 December 31, 1999          December 31, 1998
                            -----------------------     -----------------------

                               Amortized     Market      Amortized       Market
                                 Cost        Value         Cost          Value
                            ----------------------------------------------------
                                               (000's omitted)
<S>                         <C>           <C>           <C>           <C>
Due in one year
  or less ................. $    8,150    $    8,176    $   17,297    $   17,447
Due after one
  year through
five years ................     58,256        56,785        43,058        40,509
Due after five
  years through
ten years .................    132,988       125,979        56,479        56,889
Due after
  ten years ...............    564,803       535,836       583,119       585,056
                            ----------------------------------------------------
                               764,197       726,776       699,953       699,901
GNMA, FNMA
  and FHLMC
mortgage
participation
certificates
and agency
CMOs ......................  1,062,008     1,032,228     1,133,606     1,147,659
                            ----------------------------------------------------
                            $1,826,205    $1,759,004    $1,833,559    $1,847,560
                            ====================================================
</TABLE>


28
<PAGE>

  Proceeds  from sales of securities  available  for sale during 1999,  1998 and
1997 were $76,257,000, $109,224,000 and $97,957,000 with realized gross gains of
$8,876,000,  $2,374,000 and $945,000 and realized  gross losses of  $14,407,000,
$1,850,000  and   $1,030,000,   respectively.   Gross  losses  in  1999  include
write-downs of approximately $9,100,000 on securities whose decline in value was
deemed to be other than temporary.

6. LOANS

  A  significant  portion of the Bank's loans are to borrowers who are domiciled
on Staten Island.  The income of many of those customers is dependent on the New
York City  economy.  In addition,  most of the Bank's real estate loans  involve
mortgages on Staten  Island  properties.  Thus,  the majority of the Bank's loan
portfolio is susceptible to the economy of Staten Island,  a borough of New York
City,  which  is  its  primary  marketplace.  While  management  uses  available
information to provide for losses of value on loans and  foreclosed  properties,
future loss provisions may be necessary based on changes in economic conditions.
In addition,  the Bank's  regulators,  as an integral part of their  examination
process,  periodically  review the valuation of the Bank's loans and  foreclosed
properties.  Such regulators may require the Bank to recognize write-downs based
on judgments different from those of management.

  Loans, net consist of the following at December 31, 1999 and 1998:
<TABLE>
<CAPTION>

                                               1999                     1998
--------------------------------------------------------------------------------
                                                    (000's omitted)
<S>                                        <C>                      <C>
Loans secured by mortgages
  on real estate:
    1-4 family residential ...........     $ 1,737,913              $ 1,187,212
    Multifamily properties ...........          42,501                   33,328
    Commercial properties ............         223,809                  137,720
    Home equity ......................           5,390                    6,121
    Construction and land ............          60,105                   42,420
    Deferred origination costs (fees)
      and unearned income, net .......           5,537                     (717)
                                           ------------------------------------
        Net loans secured
          by mortgages on
          real estate ................       2,075,255                1,406,084
                                           ------------------------------------
Other loans:
  Student ............................             657                      940
  Passbook ...........................           5,357                    5,989
  Commercial .........................          33,646                   36,592
  Other ..............................          49,395                   24,070
                                           ------------------------------------
        Net other loans ..............          89,055                   67,591
                                           ------------------------------------
        Net loans before the
  allowance for
  loan losses ........................       2,164,310                1,473,675
Allowance for loan losses ............         (14,271)                 (16,617)
                                           ------------------------------------
        Net loans ....................     $ 2,150,039              $ 1,457,058
                                           ====================================
</TABLE>
<PAGE>
  A summary of  activity  in the  allowance  for loan losses for the years ended
December 31, 1999, 1998 and 1997, is as follows:

<TABLE>
<CAPTION>
                                          1999         1998             1997
                                       -----------------------------------------
                                                  (000's omitted)
<S>                                    <C>            <C>                <C>
Beginning balance .................    $ 16,617       $15,709            $ 9,977
  Increase as a result
  of acquisition ..................        --             96                --
  Provision (benefit) charged
  to operations ...................      (1,843)       1,594               6,003
  Charge-offs .....................      (1,665)      (2,119)             (1,318)
  Recoveries ......................       1,162        1,337               1,047
                                       -----------------------------------------
Ending balance ....................    $ 14,271      $16,617             $15,709
                                       =========================================
</TABLE>
  Non-accrual  loans  totaled  approximately  $12,474,000  at December 31, 1999,
which is also the Bank's recorded  investment in loans for which  impairment has
been  recognized in accordance  with SFAS No. 114 and SFAS No. 118.  Non-accrual
loans  totaled  approximately  $16,232,000  at December  31,  1998.  The loss of
interest income  associated with loans on non-accrual  status was  approximately
$746,000,  $794,000 and $899,000 for the years ended December 31, 1999, 1998 and
1997, respectively.

  At December 31, 1999 and 1998, the valuation allowance related to all impaired
loans totaled  $7,195,000 and $5,898,000,  respectively,  and is included in the
allowance  for loan losses shown on the  statement of financial  condition.  The
average  recorded  investment in impaired loans for the years ended December 31,
1999 and 1998, was approximately $13,342,000 and $18,693,000, respectively.

  At  December  31,  1999 and 1998,  the Bank has  other  real  estate  totaling
approximately $887,000 and $849,000,  respectively,  classified in other assets.
At  December  31, 1999 and 1998,  the Bank was  servicing  mortgages  for others
totaling approximately $122,589,000 and $140,748,000, respectively.

  At December 31, 1999 and 1998, the Bank has balances  outstanding from various
officers totaling approximately $3,944,000 and $2,999,000, respectively.

7. BANK PREMISES AND EQUIPMENT

  Bank premises and equipment at December 31, 1999 and 1998,  are  summarized as
follows:
<TABLE>
<CAPTION>

                                                    1999                 1998
                                                  --------              --------
                                                        (000's omitted)
                                                        ---------------
<S>                                               <C>                   <C>
Land, building and leasehold
  improvements ..............................     $ 22,821              $ 22,499
Furniture, fixtures and
  equipment .................................       19,561                14,922
                                                  ------------------------------
                                                    42,382                37,421
Less--Accumulated depreciation
  and amortization ..........................      (17,651)              (15,258)
                                                  ------------------------------
                                                  $ 24,731              $ 22,163
                                                  ==============================
</TABLE>
                                                                              29
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999, 1998 and 1997

8. DUE DEPOSITORS

  Scheduled  maturities of time deposits at December 31, 1999, are summarized as
follows:
<TABLE>
<CAPTION>

                                                                  Weighted
                                                      Amount   Average Rate
----------------------------------------------------------------------------
                                                        (000's omitted)
<S>                      <C>                       <C>                 <C>
                         2000                      $469,837            4.69%
                         2001                        72,984            5.14
                         2002                        12,245            5.33
                         2003                        10,746            5.34
                         2004                         6,807            5.26
                         2005 and thereafter            424            5.69
                                                   ------------------------
                                                   $573,043            4.78%
                                                   ========================
</TABLE>

The  aggregate   amounts  of  outstanding   time   certificates  of  deposit  in
denominations   of  $100,000  or  more  at  December  31,  1999  and  1998  were
approximately $161,603,000 and $122,166,000, respectively.

9. BORROWED FUNDS

The Bank was obligated for borrowings as follows:
<TABLE>
<CAPTION>

                                                  December 31,
                               -------------------------------------------------
                                        1999                      1998
                               -------------------------------------------------
                              Weighted                   Weighted
                              Average                    Average
                                Rate         Amount        Rate         Amount
--------------------------------------------------------------------------------
                                               (000's omitted)
<S>                             <C>        <C>              <C>       <C>
Reverse Repurchase
  Agreements
  Non-FHLB .............        5.56%      $  846,372       5.19%     $  773,477
Reverse Repurchase
  Agreements FHLB ......        5.38          318,000       5.30         571,000
FHLB Advances ..........        5.90          885,000         --              --
Mortgage payable .......       12.00               39      12.00              40
                               -------------------------------------------------
                                5.68%      $2,049,411       5.24%     $1,344,517
                               =================================================
</TABLE>
<PAGE>
  The average  balance of borrowings  for the years ended  December 31, 1999 and
1998 were  $1,674,990,000  and  $664,863,000,  respectively.  The  borrowings at
December 31, 1999 have contractual maturities as follows:
<TABLE>
<CAPTION>

                                                                 (000's omitted)
<S>                                                                <C>
2000                                                               $1,275,022
2001                                                                  171,600
2002                                                                   50,000
2003                                                                  161,500
2004                                                                   53,250
2008                                                                  303,000
2009                                                                   35,039
                                                                   ----------
                                                                   $2,049,411
                                                                   ==========
</TABLE>

  As of December 31, 1999,  $2,355,994,000 of investment securities were pledged
as collateral for these borrowed funds.

10. EMPLOYEE BENEFIT PLANS

Defined Benefit Plan

  Costs of the Bank's defined  benefit plan are accounted for in accordance with
SFAS No. 87. The following  table sets forth the change in benefit  obligations,
the  change in the plan  assets,  the  funded  status of the plan,  and  amounts
recognized in the accompanying consolidated financial statements at December 31,
1999  and  1998,  respectively,   based  upon  the  latest  available  actuarial
measurement dates of September 30, 1999 and 1998, respectively.
<TABLE>
<CAPTION>

                                                         1999             1998
                                                      -------------------------
                                                           (000's omitted)
<S>                                                    <C>              <C>
Projected benefit obligation,
  beginning of year ..........................         $22,483          $18,630
    Service cost .............................           1,355            1,172
    Interest cost ............................           1,457            1,350
    Benefits paid ............................          (1,203)            (919)
    Actuarial loss (gain) ....................          (2,599)           2,250
    Curtailment of future benefits ...........          (4,248)              --
                                                      -------------------------
Projected benefit obligation,
  end of year ................................        $ 17,245         $ 22,483
                                                      =========================
</TABLE>
<PAGE>
  The following table sets forth the Plan's change in plan assets:
<TABLE>
<CAPTION>

                                                         1999            1998
                                                       ------------------------
                                                          (000's omitted)
<S>                                                    <C>              <C>
Fair value of the plan assets,
  beginning of year ..........................         $22,507          $23,002
    Actual return on plan assets .............           6,938               21
    Employer contributions ...................            --                403
    Benefits paid ............................          (1,203)            (919)
                                                       ------------------------
Fair value of the plan assets,
  end of year ................................        $ 28,242         $ 22,507
                                                      =========================

Funded status ................................        $ 10,998         $     25
Unrecognized net asset .......................            --                (62)
Unrecognized prior service cost ..............            --                393
Unrecognized net actuarial
  loss (gain) ................................          (6,680)             871
                                                       ------------------------
      Prepaid cost ...........................         $ 4,318          $ 1,227
                                                       ========================
</TABLE>
The components of net pension expense are as follows:
<TABLE>
<CAPTION>
                                              1999         1998          1997
                                           -----------------------------------
                                                     (000's omitted)
<S>                                        <C>           <C>           <C>
Service cost-benefits earned
  during the year ....................     $ 1,355       $ 1,172       $   981
Interest cost on projected
  benefit obligation .................       1,457         1,350         1,243
Net amortization and deferral ........         (15)         (125)          (82)
Actual return on plan assets .........      (2,599)          (21)       (4,213)
Deferred investment gain (loss) ......         614        (1,799)        2,714
                                           -----------------------------------
      Net pension expense ............     $   812       $   577       $   643
                                           ===================================
</TABLE>
30
<PAGE>
Major assumptions utilized:
<TABLE>
<CAPTION>
                                              1999          1998          1997
                                           -----------------------------------
<S>                                           <C>           <C>           <C>
Weighted average discount rate .......        6.75%         6.50%         7.25%
Rate of increase in
  compensation levels ................        4.50          4.50          5.00
Expected long-term rate
  of return on assets ................        9.00          8.00          8.00
</TABLE>
  During  1999,  the Bank  amended the  defined  benefit  plan to freeze  future
benefit  accruals on December 31, 1999. In  connection  with the freezing of the
plan and the plan's  measurement  date of December 31, 1999, in accordance  with
SFAS No.  88, the Bank  recognized  a  curtailment  gain of  approximately  $4.1
million for the year ended December 31, 1999.

Postretirement Benefits

  The Bank provides  postretirement  benefits,  including  medical care and life
insurance, which cover substantially all active employees upon their retirement.
The Bank's postretirement  benefits are unfunded.  The following table shows the
components of the plan's accrued  postretirement  benefit cost included in other
liabilities on the consolidated statements of financial condition as of December
31, 1999 and 1998:
<TABLE>
<CAPTION>
                                                               1999        1998
                                                              ------------------
                                                               (000's omitted)
Accumulated postretirement benefit obligation:
<S>                                                           <C>         <C>
  Retirees .............................................      $1,522      $1,324
  Other fully eligible participants ....................       2,024       2,249
  Unrecognized gain (loss) .............................         399          50
  Unrecognized past service liability ..................         508         583
                                                              ------------------

    Accrued postretirement benefit cost ................      $4,453      $4,206
                                                              ==================
</TABLE>
  Net periodic  postretirement benefit cost for 1999, 1998 and 1997 included the
following components:
<TABLE>
<CAPTION>
                                                     1999     1998        1997
                                                    ---------------------------
                                                          (000's omitted)
<S>                                                 <C>        <C>        <C>
Service cost--benefits attributed to
  service during period .......................     $ 217      $ 173      $ 204
Interest cost on accumulated
  postretirement benefit obligation ...........       228        205        269
Amortization of:
    Unrecognized (gain) loss ..................      --          (13)        10
    Unrecognized past service liability .......       (75)       (75)       (75)
                                                    ---------------------------
      Net periodic postretirement
       benefit cost ...........................     $ 370      $ 290      $ 408
                                                    ===========================
</TABLE>
<PAGE>
  The average health care cost trend rate assumption  significantly  affects the
amounts  reported.  For example,  a 1% increase in this rate would  increase the
accumulated  benefit  obligation by $214,000,  $280,000 and $196,000 at December
31, 1999,  1998 and 1997,  respectively,  and increase the net periodic  cost by
$43,000,  $37,000 and $27,700 for the years ended  December 31,  1999,  1998 and
1997,  respectively.  The  postretirement  benefit cost components for 1999 were
calculated  assuming average health care cost trend rates ranging up to 6.5% and
grading to 5% in 2005 and thereafter.

401(k) Plan

  The Bank has a 401(k) plan (the "Plan") covering  substantially  all full-time
employees.  The Plan provides for employer matching  contributions  subject to a
specified maximum, and also contains a profit-sharing feature which provides for
contributions  at the  discretion of the Bank. The Plan expense in 1999 and 1998
was matched  through  stock  contributions  under the ESOP.  Amounts  charged to
operations  for  the  years  ended  December  31,  1999,   1998  and  1997  were
approximately $535,000, $514,000 and $1,266,000, respectively.

Employee Stock Ownership Plan

  The ESOP borrowed  $41,262,000 from the Company and used the funds to purchase
3,438,500  shares of the Company's stock issued in the conversion.  The loan has
an interest rate of 8.25% and will be repaid over a 15-year period. The loan was
issued on December 19, 1997. Shares purchased are held in a suspense account for
allocation among the participants as the loan is paid. Contributions to the ESOP
and shares released from the loan  collateral will be in an amount  proportional
to  repayment  of the ESOP  loan.  Shares  allocated  will first be used for the
employer  matching  contribution  for the 401(k) plan with the remaining  shares
allocated to the participants based on compensation as described in the plan, in
the year of  allocation.  The  vesting  schedule  will be the same as the Bank's
current 401(k) plan.  Forfeitures from the 401(k) matching contributions will be
used to reduce future employer 401(k) matching  contributions  while forfeitures
from  shares  allocated  to  the  participants   will  be  allocated  among  the
participants  the same as  contributions.  There were 228,904 and 233,843 shares
allocated  in 1999 and 1998,  respectively.  The Company  recorded  compensation
expense  of  $2,790,000,  $4,020,000  and $0 for the  ESOP for the  years  ended
December 31, 1999, 1998 and 1997 respectively.

Recognition and Retention Plan

  The Company  maintains the 1998 Recognition and Retention Plan ("RRP") for the
directors  and  officers  of the Bank which was  implemented  in July 1998.  The
objective of the RRP is to enable the Company to provide officers, key employees
and  directors  of the Bank with a  proprietary  interest  in the  Company as an
incentive to contribute to its success. During 1998, the RRP purchased 1,719,250
shares of the Company or 4% of the common  stock sold in the  Conversion  on the
open  market.  These  purchases  were  funded  by the  Bank.  On July 31,  1998,
1,501,675  shares were granted to the directors and officers of the Company at a
price of $20.25 per share.  On December 15, 1999,  18,200 shares were granted to
certain  officers  of the  Company at a price of $18.63 per share and during the
year 1999, 5,325 shares were forfeited. At year-end 1999, the plan holds 204,700
shares  which have not been  granted.  Awards vest at a rate of 20% per year for
directors  and  officers,  commencing  one year from the date of  award.  Awards
become 100% vested upon


                                                                              31
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999, 1998 and 1997

termination  of  employment  due to death  or  disability  or upon a  change  in
control. Pursuant to the plan 297,530 shares vested during the year. The Company
recorded  compensation  expense of $5,532,000 and $3,049,000 for the RRP for the
years ended  December  31, 1999 and 1998,  respectively.

Stock Option Plan

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

The  Company  has  chosen to  account  for  stock-based  compensation  using the
intrinsic value method  prescribed in APB No. 25. Since each option granted at a
price equal to the fair market value of one share of the Company's  stock on the
date of the grant, no compensation cost has been recognized. The following table
compares  reported  net income and earnings per share to net income and earnings
per  share  on a pro  forma  basis  assuming  that  the  Company  accounted  for
stock-based  compensation  under SFAS No. 123. The effects of applying  SFAS No.
123 in this pro forma disclosure are not indicative of future amounts.
<TABLE>
<CAPTION>
                                                     1999                 1998
--------------------------------------------------------------------------------
<S>                                              <C>                  <C>
Net income:
  As reported ........................           $   52,875           $   44,262
  Pro forma ..........................               47,341               40,108
Earnings per share:
  As reported--
    Basic ............................                 1.40                 1.06
    Diluted ..........................                 1.40                 1.06
  Pro forma--
    Basic ............................                 1.25                 0.97
    Diluted ..........................                 1.25                 0.97

</TABLE>
<PAGE>
Stock Option Activity

The following  table sets forth stock option  activity and the weighted  average
fair value of options granted.
<TABLE>
<CAPTION>
                                                           Year Ended
                                                        December 31, 1999
                                                    --------------------------
                                                                   Weighted
                                                                    Average
                                                    Shares      Exercise Price
                                                   ---------------------------
<S>                                                <C>           <C>
Outstanding as of January 1, 1998 ............     3,056,000     $    22.875
  Granted ....................................          --          --
  Exercised ..................................          --          --
  Forfeited ..................................          --          --
                                                   ---------
Outstanding as of January 1, 1999 ............     3,056,000          22.875

  Granted ....................................        91,000          18.625
  Exercised ..................................          --          --
                                                   ---------
  Forfeited ..................................      (101,000)         22.875
Outstanding as of
  December 31, 1999 ..........................     3,046,000     $    22.748
                                                   =========     ===========
Options exercisable as of
  December 31, 1999 ..........................       626,200
                                                   =========
Weighted average fair
  value of options granted ...................                   $     6.77
                                                                 ==========
</TABLE>
The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option  pricing  model  using  the  following  weighted  average
assumptions:  risk-free interest rates of 5.50%,  volatility of 29.92%, expected
dividend yield of 2.7% and expected life of six years.

Supplemental Executive Retirement Plan

In 1993,  the  Bank  adopted  a  Supplemental  Executive  Retirement  Plan  (the
"Executive  Plan") for certain  senior  officers that provides for payments upon
retirement,  death or disability. The annual benefit is based upon annual salary
(as defined) plus  interest.  Amounts  charged to operations for the years ended
December  31,  1999,  1998 and 1997 were  approximately  $458,000,  $436,000 and
$186,000, respectively.
<PAGE>
11. INCOME TAXES

The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
                                      1999              1998              1997
--------------------------------------------------------------------------------
                                               (000's omitted)
<S>                                <C>                <C>              <C>
Current:
  Federal ...............          $ 26,353           $21,299          $ 14,137
  State .................             2,778             2,610             3,150
  City ..................             2,776             2,676               227
                                   --------------------------------------------
                                     31,907            26,585            17,514
Deferred ................             3,352             3,093           (12,582)
                                   --------------------------------------------
                                   $ 35,259          $ 29,678          $  4,932
                                   ============================================
</TABLE>

32
<PAGE>
  The  following  table  reconciles  the  federal  statutory  rate to the Bank's
effective tax rate:
<TABLE>
<CAPTION>
                                                          December 31, 1999
                                                    -------------------------------
                                                                     Percentage of
                                                      Amount          Pretax Income
-----------------------------------------------------------------------------------
                                                            (000's omitted)
Federal tax at statutory rate ..............        $ 30,847                35.0%
State and local income taxes ...............           4,475                 5.0
Tax-exempt dividend income .................          (1,425)               (1.6)
Amortization of goodwill ...................             318                 0.4
Other ......................................           1,044                 1.2
                                                     ------------------------------
  Income tax provision .....................         $35,259                40.0%
                                                     ==============================
<CAPTION>
                                                          December 31, 1998
                                                    -------------------------------
                                                                     Percentage of
                                                      Amount          Pretax Income
-----------------------------------------------------------------------------------
                                                            (000's omitted)
<S>                                                 <C>                     <C>
Federal tax at statutory rate ..............        $ 25,879                35.0%
State and local income taxes ...............           2,837                 3.8
Tax-exempt dividend income .................            (436)               (0.6)
Amortization of goodwill ...................             318                 0.4
Other ......................................           1,080                 1.5
                                                     ------------------------------
  Income tax provision .....................         $29,678                40.1%
                                                     ==============================
<CAPTION>
                                                          December 31, 1997
                                                    -------------------------------
                                                                     Percentage of
                                                      Amount          Pretax Income
-----------------------------------------------------------------------------------
                                                            (000's omitted)
<S>                                                 <C>                     <C>
Federal tax at statutory rate ..............        $  6,818                35.0%
State and local income taxes ...............          (2,313)              (11.9)
Tax-exempt dividend income .................            (305)               (1.5)
Amortization of goodwill ...................             318                 1.6
Other ......................................             414                 2.1
                                                     -------                ----
  Income tax provision .....................         $ 4,932                25.3%
                                                     =======                ====

</TABLE>
<PAGE>
  The  following  is a summary  of the  income  tax  (liability)  receivable  at
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
                                                      1999                 1998
--------------------------------------------------------------------------------
                                                        (000's omitted)
<S>                                                <C>                  <C>
Current taxes .........................            $ (2,286)            $  1,257
Deferred taxes ........................              47,146                1,861
                                                   -----------------------------
                                                   $ 44,860             $  3,118
                                                   =============================
</TABLE>

  The components of the net deferred tax asset at December 31, 1999 and 1998 are
as follows:
<TABLE>
<CAPTION>

                                                            1999          1998
--------------------------------------------------------------------------------
                                                             (000's omitted)
<S>                                                       <C>            <C>
Assets:
  Contribution to Foundation .....................        $ 4,051        $ 6,571
  Allowance for loan losses ......................          5,991          7,005
  Postretirement benefit accrual .................          1,935          1,809
  Non-accrual loans ..............................            634            583
  Deferred compensation ..........................          1,088          1,031
  Investment in data processing entity ...........            381            381
  ESOP shares ....................................          1,053            565
  Unrealized loss on AFS securities ..............         30,764           --
  Deferred loan fees .............................           --              170
  Other ..........................................          6,151            832
                                                          ----------------------
    Gross deferred tax asset .....................         52,048         18,947
  Valuation Allowance ............................           --             --
                                                          ----------------------
    Total assets .................................         52,048         18,947
                                                          ----------------------
Liabilities:
  Bad debt recapture under Section 593 ...........          1,666          2,354
  Deposit premium ................................            817          1,009
  Unrealized gain on AFS securities ..............           --           12,537
  Pension plan ...................................            216            499
  Pension curtailment gain .......................          1,719           --
  Bond discounts .................................             51            303
  Other ..........................................            433            384
                                                          ----------------------
    Gross deferred tax liability .................          4,902         17,086
                                                          ----------------------
    Net deferred tax asset .......................        $47,146        $ 1,861
                                                          ======================
</TABLE>
At  December  31,  1999 and 1998,  the  deferred  tax asset is included in other
assets in the accompanying consolidated financial statements.

Bad Debt Deduction

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

                                                                              33
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999, 1998 and 1997

  Effective January 1, 1996, Section 593 was amended,  and the Bank is unable to
make  additions to its federal tax bad debt reserve,  is permitted to deduct bad
debts only as they occur and is  additionally  required to  recapture  (that is,
take into taxable  income)  over a six-year  period,  beginning  with the Bank's
taxable year  beginning on January 1, 1996, the excess of the balance of its bad
debt  reserves as of December  31, 1995 over the balance of such  reserves as of
December  31, 1987,  or over a lesser  amount if the Bank's loan  portfolio  has
decreased  since  December  31,  1987.  Such  recapture  requirements  have been
deferred for taxable years through  December 31, 1997, as the Bank  originated a
minimum  amount of  certain  residential  loans  based  upon the  average of the
principal  amounts of such loans  originated  by the Bank during its six taxable
years preceding January 1, 1996. The recapture  requirement  amount for the year
1999 was $1,190,000.

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

The New York  City  tax law was  amended  in the  first  quarter  of 1997 and is
similar to the New York State tax law  regarding  bad debt reserves and provides
for the indefinite  deferral of the recapture of bad debt reserves generated for
New York City  purposes.  The Bank  reversed  $2.6 million in 1997 of previously
deferred  income taxes related to the bad debt reserve  accumulated for New York
City purposes.  Prior to the tax law changes mentioned above, for New York State
and New York City  purposes,  the bad debt  deduction was equal to a multiple of
the federal bad debt deduction,  which is  approximately  four times the federal
amount.

State, Local and Other Taxes

  The Company files state and local tax returns on a calendar-year  basis. State
and local  taxes  imposed on the  Company  consist  primarily  of New York State
franchise tax, New York City Financial  Corporation tax, Delaware  franchise tax
and state taxes for an additional 22 states.  These  additional  state taxes are
attributable  to the operation of SIB Mortgage Corp.  which has offices in these

<PAGE>

additional locations.  The Company's annual liability for New York State and New
York City purposes is the greater of a tax on income or an alternative tax based
on a  specified  formula.  Liability  for other state  taxes are  determined  in
accordance  with the  applicable  local tax code.  The  Company's  liability for
Delaware  franchise  tax is based on the lesser of a tax based on an  authorized
shares  method or an  assumed  par value  capital  method,  however,  under each
method, the Company's total tax will not exceed $150,000.

12. COMMITMENTS AND CONTINGENCIES AND
    RELATED PARTY TRANSACTIONS

In the normal course of business,  there are various outstanding commitments and
contingent  liabilities,  such as standby  letters of credit and  commitments to
<PAGE>
extend  credit,  which  are  not  reflected  in  the  accompanying  consolidated
financial  statements.  The Bank uses the same policies in making commitments as
it does for on-balance sheet instruments.  No material losses are anticipated as
a result of these  transactions.  The Bank is contingently  liable under standby
letters of credit in the amount of  $4,811,000  and  $1,777,000  at December 31,
1999 and  1998,  respectively.  In  addition,  at  December  31,  1999 and 1998,
mortgage loan  commitments  and unused  balances  under  revolving  credit lines
approximated $390,479,000 and $297,000,000, respectively. Total operating rental
commitments  on bank  facilities,  which expire at various dates through  August
2010, exclusive of renewal options, are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                     (000's omitted)
<S>                                                       <C>
                   2000                                   $1,789
                   2001                                    1,674
                   2002                                    1,197
                   2003                                      751
                   2004 and thereafter                     1,410
                                                          ------
                                                          $6,821
                                                          ======
</TABLE>
  Rental  expense  included  in  the  statements  of  income  was  approximately
$1,648,000,  $768,000 and $702,000 for the years ended  December 31, 1999,  1998
and 1997, respectively.

  In October  1997,  the  Company  became the  primary  owner of an entity  that
provides data  processing  services to the Bank.  Based on its assessment of the
continuing  viability of this company, the Bank had earlier in 1997, written off
its entire investment of $969,000 which is reflected in data processing expense.
The Company  intends to liquidate  this  company with no material  effect on the
Company's financial statements. As a result, this data processing company is not
included in the consolidated  financial  statements of the Company. In 1998, the
Bank signed a  five-year  contract to  outsource  substantially  all of its data
processing to another data service  provider and, in August 1998,  converted its
data processing systems to this new provider.

34
<PAGE>
13. DISCLOSURES ABOUT FAIR VALUE OF
    FINANCIAL INSTRUMENTS

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

Cash and Due From Banks and Federal Funds Sold

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

Accrued Interest

  The carrying amount is a reasonable estimate of fair value.

Securities Available for Sale

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

Loans

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

Deposit Liabilities

  The fair value of demand  deposits,  savings accounts and certain money market
deposits is the amount  payable on demand at the reporting  date. The fair value
of fixed-maturity certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.  Demand deposits,  savings
accounts and certain money market  deposits are valued at their carrying  value.
In the  Bank's  opinion,  these  deposits  could be sold at a  premium  based on
management's  knowledge of the results of recent sales of financial institutions
in the New York City area.

Advances From Borrowers for Taxes and Insurance

  The carrying amount is a reasonable estimate of fair value.

Commitments to Extend Credit

  The fair value of commitments is estimated using the fees currently charged to
enter into similar  agreements,  taking into account the remaining  terms of the
agreements and the present creditworthiness of the counterparties. The estimated
fair values of the Bank's financial instruments are as follows:
<PAGE>
<TABLE>
<CAPTION>
                                                     December 31, 1999
                                            ------------------------------------
                                               Carrying                 Fair
                                                Amount                  Value
                                                      (000's omitted)
--------------------------------------------------------------------------------
<S>                                         <C>                      <C>
Financial assets:
  Cash and due from banks .............     $    80,998              $    80,998
  Federal funds sold ..................          20,400                   20,400
  Securities available for sale .......       1,963,954                1,963,954
  Loans ...............................       2,210,898                2,111,761
  Less--Allowance for loan losses .....         (14,271)                 (14,271)
  Accrued interest receivable .........          24,731                   24,731
Financial liabilities:
  Savings and demand deposits .........       1,247,190                1,247,190
  Time deposits .......................         573,043                  573,230
  Borrowed funds ......................       2,049,411                2,049,411
  Advances from borrowers for
  taxes and insurance .................          10,805                   10,805
  Accrued interest payable ............          16,485                   16,485
Unrecognized financial instruments:
  Commitments to extend credit ........            --                        646

<CAPTION>
                                                     December 31, 1998
                                            ------------------------------------
                                               Carrying                 Fair
                                                Amount                  Value
                                                      (000's omitted)
--------------------------------------------------------------------------------
<S>                                         <C>                      <C>
Financial assets:
  Cash and due from banks .............     $    88,059              $    88,059
  Federal funds sold ..................          45,050                   45,050
  Securities available for sale .......       2,029,041                2,029,041
  Loans ...............................       1,551,618                1,567,486
  Less--Allowance for loan losses .....         (16,617)                 (16,617)
  Accrued interest receivable .........          19,389                   19,389
Financial liabilities:
  Savings and demand deposits .........       1,191,906                1,191,906
  Time deposits .......................         537,154                  540,144
  Borrowed funds ......................           1,345                    1,345
  Advances from borrowers for
  taxes and insurance .................           7,091                    7,091
  Accrued interest payable ............           8,464                    8,464
Unrecognized financial instruments:
  Commitments to extend credit ........            --                      1,257
</TABLE>
14. STATEN ISLAND BANCORP, INC.

  The following  condensed  statements of financial condition as of December 31,
1999 and 1998,  and condensed  statements of income and cash flows for the years
ended  December 31, 1999 and 1998  represent the parent  company-only  financial
information and should be read in conjunction  with the  consolidated  financial
statements and the notes thereto.

                                                                              35
<PAGE>
Staten Island Bancorp, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
December 31, 1999, and 1998
<TABLE>
<CAPTION>
Condensed Statements of Financial Condition
                                                          December 31,
                                              ---------------------------------
                                                  1999                   1998
--------------------------------------------------------------------------------
                                                       (000's omitted)
<S>                                           <C>                     <C>
Assets:
  Cash .................................      $   3,482               $  14,008
  Securities available for sale ........        145,332                 171,563
  Investment in Bank ...................        374,187                 435,258
  ESOP loan receivable
    from Bank ..........................         38,217                  39,801
  Other assets .........................         11,284                   9,524
                                              ---------------------------------
      Total assets .....................      $ 572,502               $ 670,154
                                              =================================
Liabilities:
  Accrued interest and
    other liabilities ..................      $   1,125               $   1,112
Stockholders' equity:
  Common stock .........................            451                     451
  Additional paid-in capital ...........        536,539                 534,464
  Retained earnings
    (substantially restricted) .........        251,315                 215,414
  Unallocated ESOP shares ..............        (35,709)                (38,456)
  Unearned RRP shares ..................        (25,439)                (30,873)
  Less--Treasury stock (6,436,689
  and 1,425,000 shares at
  December 31, 1999 and 1998,
  respectively), at cost ...............       (121,149)                (27,480)
  Accumulated other comprehensive
  income (loss), net of taxes ..........        (34,631)                 15,522
                                              ---------------------------------
      Total liabilities and
  stockholders' equity .................      $ 572,502               $ 670,154
                                              =================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Condensed Statements of Income
                                                          December 31,
                                              ---------------------------------
                                                  1999                   1998
--------------------------------------------------------------------------------
                                                       (000's omitted)
<S>                                             <C>                   <C>
Income:
  Investment income .....................       $12,222               $   7,810
  Other interest income .................           172                     287
  Interest income ESOP
     loan receivable ....................         3,236                   3,464
  Other Income ..........................            76                    --
  Loss on sale of investments ...........        (5,555)                   (646)
                                               ---------------------------------
                                                10,151                  10,915
Expenses:
  Interest expense ......................         1,675                     657
  Other expense .........................           483                     598
  Income before taxes and
  equity in undistributed
  earnings of subsidiary ................         7,993                   9,660
  Provision for income taxes ............         3,830                   3,107
                                              ---------------------------------
  Income before equity in
     undistributed earnings
     of Bank ............................         4,163                   6,553
Equity in undistributed
  earnings of Bank ......................        48,712                  37,709
                                              ---------------------------------
      Net income ........................     $  52,875               $  44,262
                                              ==================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
                                                          December 31,
                                              ---------------------------------
                                                  1999                   1998
--------------------------------------------------------------------------------
                                                       (000's omitted)
<S>                                             <C>                   <C>
Cash flows from operating activities:
  Net income ............................     $  52,875               $  44,262
  Adjustments to reconcile net
     income to net cash provided
     by operating activities--
     Undistributed earnings of Bank .....       (48,712)                (37,709)
  Amortization of bond and
     mortgage premium ...................            74                      28
  Loss on sale of available for
     sale securities ....................         1,737                     646
  Other non-cash expense (income) .......          --                       (51)
     Decrease (increase) in
     accrued interest receivable ........           171                    (683)
  Decrease in other assets ..............          --                     1,868
     (Decrease) increase in
     accrued interest payable ...........           (13)                  1,112
  Decrease in deferred income taxes .....         5,539                   1,684
                                              ---------------------------------
      Net cash provided by
  operating activities ..................        11,671                  11,157
                                              ---------------------------------
Cash flows from investing activities:
     (Increase) decrease in
     investment in subsidiary Bank ......        80,000                    --
  Maturities of available for
     sale securities ....................         7,428                    --
  Sales of available for
     sale securities ....................        66,205                  99,627
  Purchases of available for
     sale securities ....................       (66,771)               (272,711)
  Principal collected on loans ..........         1,584                   1,461
                                              ---------------------------------
      Net cash provided by (used in)
   investing activities .................        88,446                (171,623)
                                              ---------------------------------
Cash flows from financing activities:
  Cash dividends ........................       (16,974)                (10,347)
  Purchase of treasury stock ............       (93,669)                (27,480)
                                              ---------------------------------
      Net cash used in
  financing activities ..................      (110,643)                (37,827)
                                              ---------------------------------
      Net decrease in cash and
  cash equivalents ......................       (10,526)               (198,293)
Cash and cash equivalents,
  beginning of year .....................        14,008                 212,301
                                              ---------------------------------
Cash and cash equivalents,
  end of year ...........................     $   3,482               $  14,008
                                              =================================
</TABLE>
36
<PAGE>
15. QUARTERLY FINANCIAL DATA (UNAUDITED)

  Selected unaudited  quarterly  financial data for the years ended December 31,
1999 and 1998 is presented below:
<TABLE>
<CAPTION>
                                    Fourth       Third        Second     First
                                    Quarter      Quarter      Quarter    Quarter
--------------------------------------------------------------------------------
<S>                                <C>           <C>        <C>         <C>
1999:
  Interest income .............     $77,033      $70,856     $66,840     $62,744
  Interest expense ............      40,538       36,266      32,533      29,727
  Net interest income .........      36,495       34,590      34,307      33,017
  Provision (benefit) for
    loan losses ...............      (1,943)          30          11          59
  Service and
    fee Income ................       8,998        8,756       9,043       5,494
  Securities
     transactions .............      (6,452)         436         361         124
  Defined benefit plan
    curtailment gain ..........       4,093         --          --          --
  Non-interest expense ........      22,612       21,440      21,240      17,679
  Income before
    income taxes ..............      22,465       22,312      22,460      20,897
  Income taxes ................       8,813        8,740       9,129       8,577
  Net income ..................      13,652       13,572      13,331      12,320
  Earnings per share--
    Basic .....................         .38          .36         .35         .31
    Diluted ...................         .38          .36         .35         .31
    Dividends declared
     per common
     share ....................         .12          .11         .11         .10
    Stock price per
    common share--
      High ....................     20 3/16       18 7/8      19 1/4     19 15/16
      Low .....................     17 11/16      17 3/8      16 1/4     16 1/2
      Close ...................     18            18 13/16    18         17 3/16

</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                  Fourth       Third        Second     First
                                  Quarter      Quarter      Quarter    Quarter
--------------------------------------------------------------------------------
<S>                              <C>           <C>          <C>         <C>
1998:
Interest income ...........      $62,557       $54,068      $48,050      $44,466
Interest expense ..........       28,953        24,143       18,883       16,090
Net interest income .......       33,604        29,925       29,167       28,376
Provision for
    loan losses............           92           500          501          501
Service and
     fee income ...........        3,886         1,844        1,977        2,149
Securities
    transactions ..........         (223)           72           92          583
Non-interest expense ......       18,142        13,327       12,277       12,172
Income before
    income taxes ..........       19,033        18,014       18,458       18,435
Income taxes ..............        7,259         7,066        7,515        7,838
Net income ................       11,774        10,948       10,943       10,597
Earnings per share--
  Basic ...................          .28           .26          .27          .25
  Diluted .................          .28           .26          .27          .25
  Dividends declared
    per common
    share .................          .09           .08          .08          .07
Stock price per
common share--
    High ..................      21 3/4         23 1/8       23 5/8      21 1/8
    Low ...................      14 1/8         15 9/16      20 5/8      18 13/16
    Close .................      19 15/16       18           22 3/4      20 3/8

</TABLE>
<PAGE>
REPORT  OF  INDEPENDENT  PUBLIC  ACCOUNTANTS

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

  We  have  audited  the  accompanying   consolidated  statements  of  financial
condition of Staten Island  Bancorp,  Inc. and subsidiary  (the "Company") as of
December 31, 1999 and 1998, and the related  consolidated  statements of income,
changes  in  stockholders'  equity  and cash  flows for each of the years in the
three-year  period ended December 31, 1999.  These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

  In our  opinion,  the  consolidated  financial  statements  referred  to above
present  fairly,  in all material  respects,  the  financial  position of Staten
Island  Bancorp,  Inc. and  subsidiary as of December 31, 1999 and 1998, and the
results  of their  operations  and their cash flows for each of the years in the
three-year  period ended  December  31,  1999,  in  conformity  with  accounting
principles generally accepted in the United States.


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

New York, New York
January 21, 2000

                                                                              37
<PAGE>
Staten Island Bancorp, Inc. and Subsidiaries
CORPORATE INFORMATION
STATEN ISLAND BANCORP INC.

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

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

OFFICERS OF STATEN ISLAND
BANCORP INC.
Harry P. Doherty
  Chief Executive Officer
James R. Coyle
  Chief Operating Officer
Edward Klingele
  Chief Financial Officer
Patricia J. Villani
  Corporate Secretary

STATEN ISLAND SAVINGS BANK--
A Staten Island Bancorp Company
Senior Officers
Harry P. Doherty
  Chairman and Chief Executive Officer
James R. Coyle
  President and Chief Operating Officer
John P. Brady
  Executive Vice President
Frank J. Besignano
  Senior Vice President
Donald C. Fleming
  Senior Vice President
Edward Klingele
  Senior Vice President
Deborah Pagano
  Senior Vice President
Ira Hoberman
  President, First State Division
<PAGE>
SIB MORTGAGE CORPORATION--
d/b/a IVY MORTGAGE
Richard W. Payne
  President and Chief Executive Officer
Paul Heckman
  Executive Vice President
Ralph Picarillo
  Executive Vice President, Treasurer and
Chief Financial Officer

AMERICAN CONSTRUCTION
LENDING SERVICES, INC.
Robert M. Imperato
  President and Chief Executive Officer
Craig R. Peterson
  Executive Vice President

STATEN ISLAND INVESTMENT CORP.
Bernard Durnin
  President

CORPORATE OFFICE
15 Beach Street
Staten Island, New York 10304

ANNUAL MEETING
The annual meeting of stockholders  will be held on April 27, 2000 at 10:00 a.m.
at the Excelsior Grand,  2380 Hylan Boulevard,  Staten Island,  New York, 10306.
Notice  of the  meeting  and a proxy  form are  included  with this  mailing  to
shareholders of record as of March 17, 2000.

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

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

TRANSFER AGENT AND REGISTRAR

Inquiries regarding stock transfer, lost certificates, or changes in name and/or
address should be directed to
the stock and transfer agent and registrar:
Registrar and Transfer Company
Investor Relations
10 Commerce Drive
Cranford, New Jersey 07016
(800) 368-5948

STOCK LISTING
Staten  Island  Bancorp  Inc.'s  common  stock is traded  on the New York  Stock
Exchange (NYSE) under the symbol SIB.
<PAGE>
INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
<PAGE>
COUNSEL
The Law Firm of Hall & Hall
57 Beach Street
Staten Island, New York 10304

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

38